-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NMffK/FAHfC7nlKKOkDgqIOjFMTUgswdQ++K7GrAtFiO5Gm4j933PjhFE67/O/4M NmPkmRWMRZA8+WQL6f+t5g== 0000011860-00-000019.txt : 20000310 0000011860-00-000019.hdr.sgml : 20000310 ACCESSION NUMBER: 0000011860-00-000019 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BETHLEHEM STEEL CORP /DE/ CENTRAL INDEX KEY: 0000011860 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 240526133 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-01941 FILM NUMBER: 564550 BUSINESS ADDRESS: STREET 1: 1170 EIGHTH AVE CITY: BETHLEHEM STATE: PA ZIP: 18016-7699 BUSINESS PHONE: 6106942424 MAIL ADDRESS: STREET 1: 1170 EIGHTH AVE CITY: BETHLEHEM STATE: PA ZIP: 18016-7699 10-K 1 1999 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 F O R M 10-K (Mark One) x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange --- of 1934 For the Fiscal Year Ended December 31, 1999 Transition Report Pursuant to Section 13 or 15(d) of the Securities --- Exchange Act of 1934 Commission file number 1-1941 B E T H L E H E M S T E E L C O R P O R A T I O N (Exact name of registrant as specified in its charter) DELAWARE 24-0526133 (State of Incorporation) (I.R.S. Employer Identification No.) 1170 Eighth Avenue BETHLEHEM, PENNSYLVANIA 18016-7699 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (610) 694-2424 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ------------------- ------------------------ Common Stock--$1 par value per share New York Stock Exchange Chicago Stock Exchange Preference Stock Purchase Rights New York Stock Exchange Chicago Stock Exchange Preferred Stock -- $1 par value per share $5.00 Cumulative Convertible New York Stock Exchange (stated value $50.00 per share) $2.50 Cumulative Convertible New York Stock Exchange (stated value $25.00 per share) 8-3/8% Debentures. Due March 1, 2001 New York Stock Exchange 8.45% Debentures. Due March 1, 2005 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x --- Aggregate Market Value of Voting Stock held by Non-Affiliates: $773,237,742 The amount shown is based on the closing price of Bethlehem Common Stock on the New York Stock Exchange Composite Tape on March 3, 2000. Voting stock held by directors and executive officers of Bethlehem is not included in the computation. However, Bethlehem has made no determination that such individuals are "affiliates" within the meaning of Rule 405 under the Securities Act of 1933. Number of Shares of Common Stock outstanding as of March 3, 2000: 131,641,347 DOCUMENTS INCORPORATED BY REFERENCE: Selected portions of the 1999 Annual Report to Stockholders of Bethlehem Steel Corporation are incorporated by reference into Part I and Part II of this Report on Form 10-K. Selected portions of the 2000 Proxy Statement of Bethlehem Steel Corporation are incorporated by reference into Part III of this Report on Form 10-K. PART I ITEM 1. BUSINESS. Bethlehem(1) manufactures and sells a wide variety of steel mill products and produces and sells coke and iron ore. The following table shows the percentage of net sales by major classes of product:
1999 1998 1997 ---- ---- ---- Steel mill products: Hot rolled sheets.................................... 14.0% 13.3% 14.9% Cold rolled sheets................................... 19.0 16.8 17.2 Coated sheets........................................ 30.8 28.6 31.5 Tin mill products.................................... 7.2 6.7 7.4 Plates............................................... 20.9 22.3 15.2 Rail products ....................................... 2.7 4.4 4.3 Other steel mill products ........................... 2.6 4.5 5.5 Other products and services (including raw materials).. 2.8 3.4 5.0 ------ ------ ------ 100.0% 100.0% 100.0%
Operations Bethlehem produces a wide variety of steel mill products including hot rolled, cold rolled and coated sheets, tin mill products, carbon and alloy plates, rail, specialty blooms, carbon and alloy bars and large-diameter pipe. Bethlehem's operations include the Burns Harbor Division, the Sparrows Point Division, Bethlehem Lukens Plate and Pennsylvania Steel Technologies, Inc. Bethlehem also has iron ore operations (which provide raw materials to Bethlehem's steelmaking facilities or sell such materials to trade customers), railroad and trucking operations (which transport raw materials and semifinished steel products within various Bethlehem operations and serve other customers on their lines) and lake shipping operations (which primarily transport raw materials to the Burns Harbor Division). See "ITEM 2. PROPERTIES" of this Report for a description of the facilities of these business units and operations. - ---------------- 1 "Bethlehem" when used in this Report means Bethlehem Steel Corporation, a Delaware corporation, and where applicable includes its consolidated subsidiaries. Bethlehem was incorporated in Delaware in 1919. 1 The following table shows production information for Bethlehem and for the domestic steel industry. The information regarding the domestic steel industry is based on data from the American Iron and Steel Institute ("AISI"):
1999 1998 1997 ---- ---- ---- Domestic steel industry raw steel production capability (million of net tons) ............. 128.1 125.3 121.4 Domestic steel industry raw steel production (million of net tons)......................... 107.2* 108.8 108.6 Domestic steel industry average raw steel utilization rate.............................. 84% 87% 89% Bethlehem's raw steel production capability (million of net tons)......................... 11.3 10.9 10.5 Bethlehem's raw steel production (million of net tons)..................................... 9.4 10.2 9.6 Bethlehem's average raw steel utilization rate. 83% 93% 91% Bethlehem's production as a percent of the domestic steel industry....................... 8.8% 9.4% 8.9%
- -------------- * Preliminary Of Bethlehem's 1999 raw steel production, 86 percent was produced by basic oxygen furnaces and 14 percent by electric furnaces. Bethlehem's operations are subject to planned and unplanned outages due to required maintenance, equipment malfunctions, work stoppages, various hazards (including explosions, fires and severe weather conditions) and the availability of raw materials, supplies, utilities and other items needed for the production of steel. These outages could result in reduced production and increased costs. Markets The following table shows the percentage of the total net tons of steel mill products shipped by Bethlehem to each of its principal markets, including shipments to its own manufacturing operations:
1999 1998 1997 ---- ---- ---- Service Centers, Processors and Converters 49.7% 46.9% 46.9% Transportation (including automotive) 21.3 23.0 24.9 Construction 12.9 12.1 11.0 Containers 5.4 5.2 5.8 Machinery 4.2 4.9 4.7 Other 6.5 7.9 6.7 ------ ------ ------ 100.0% 100.0% 100.0% ====== ====== ======
Many of the markets Bethlehem supplies, such as automotive, machinery and construction, are highly cyclical and subject to downturns in the U.S. economy. Also, many of Bethlehem's customers and suppliers are subject to collective bargaining agreements, and their ability to operate could be impacted by a strike or work stoppage. 2 Bethlehem distributes steel products principally through its own sales organization, which has sales offices at various locations in the United States and Mexico, and through foreign sales agents. In addition to selling to customers who consume steel products directly, Bethlehem sells steel products to steel service centers, distributors, processors and converters. Export sales were 3 percent of total sales in 1999, 4 percent in 1998 and 2 percent in 1997. Trade orders on hand were about $1 billion at December 31, 1999, and $900 million at December 31, 1998. Substantially all of the orders on hand at December 31, 1999, are expected to be filled in 2000. Steel Price Sensitivity Bethlehem's financial results are significantly affected by relatively small (on a percentage basis) variations in the realized prices for its products. For example, Bethlehem shipped 8.4 million net tons of steel products and recorded net sales of $3.9 billion during 1999, implying an average realized price per ton of about $465. A one percent increase or decrease in this implied average realized price during 1999 would, on a pro forma basis, have resulted in an increase or decrease in net sales and pre-tax income of about $40 million. Competitive pressures in the steel industry are severe. These pressures could limit Bethlehem's ability to obtain price increases or could lead to a decline in prices, which could have a material adverse effect upon Bethlehem. Competition The domestic steel industry is highly competitive. This competition affects the prices that Bethlehem can charge for its products, the utilization of its production facilities, its ability to sell higher value products and ultimately its profitability. Capacity. There is excess world capacity for many of the products -------- produced by Bethlehem. Moreover, some foreign steel producers are owned, controlled or subsidized by foreign governments. Decisions by these foreign producers to continue marginal facilities may be influenced to a greater degree by political and economic policy considerations than by prevailing market conditions. In addition, overcapacity has been perpetuated by the continued operation, modernization and upgrading of marginal domestic facilities through bankruptcy reorganization proceedings and by the sale of marginal domestic facilities to new owners, which operate such facilities with a lower cost structure. Over the next several years, construction of additional production facilities could result in increased domestic capacity over 1999 levels. In particular, new domestic capacity in the plate and rail markets is expected to increase competition in these products where we now have a large domestic market share. Electric Furnace Producers. Domestic integrated producers, such as -------------------------- Bethlehem, have lost market share in recent years to domestic electric furnace producers. These companies are relatively efficient, low-cost producers that make steel from scrap in electric furnaces (which are less expensive to build than integrated facilities), have lower employment and environmental costs per ton shipped and target regional markets. Through the use of various higher quality raw materials and thin slab casting technology, electric furnace producers are increasingly able to compete directly with producers of higher value products, including cold rolled and coated sheets. Imports. Domestic steel producers also face significant competition ------- from foreign producers and have been, and may continue to be, adversely affected by unfairly traded imports. In certain cases, foreign producers may be pricing their products below their production costs. Imports of finished steel products accounted for about 22 percent of the domestic market in 1999, 27 percent in 1998 and 21 percent in 1997. 3 The following table, which is based on data reported by the AISI, shows the percentage of the domestic apparent consumption of steel mill products supplied by imports for various classes of products.
1999* 1998 1997 ---- ---- ---- Rail .............................. 36% 32% 26% Plates ............................ 17 29 21 Tin mill products ................. 20 16 15 Hot rolled and cold rolled sheets.. 22 31 22 Coated sheets ..................... 11 10 11 All products** .................... 26 30 24
- ------------------- * Preliminary ** Excludes steel imported in the form of manufactured goods, such as automobiles, but includes semifinished steel. Excluding semifinished steel, imports of steel mill products were about 27.1 million tons in 1999, 34.7 million tons in 1998 and 24.7 million tons in 1997. Antidumping and countervailing duty orders covering imports of corrosion-resistant sheet from six countries, cold rolled sheet from three countries and plates from 11 countries, which resulted from unfair trade cases filed by Bethlehem and 11 other companies in 1992, remain in place. Suspension agreements are also in place limiting the volume of cut-to-length plate from Russia, the Ukraine and the People's Republic of China and setting a price floor for South Africa for a five-year period from 1998. In July, 1999, the Commerce Department entered into five-year suspension agreements limiting the volume and setting a price floor for hot rolled sheet from Brazil and Russia. Russia also entered into a comprehensive agreement to limit the volume of exports of other steel products from Russia to essentially 1997 levels. In addition, an antidumping order covering hot rolled sheet from Japan went into effect in July, 1999, and antidumping and countervailing duty orders covering cut-to-length carbon steel plate from six additional countries went into effect in January, 2000. In January, 2000, the Department of Commerce announced substantial final antidumping margins in investigations covering cold rolled sheet from 12 countries. An antidumping investigation is also pending on tin mill products from Japan. For further information on trade-related matters, see "International Steel Trade" under the "Year in Review" in Bethlehem's 1999 Annual Report to Stockholders. The major restructuring of the domestic steel industry, which began in the late 1970s and early 1980s, has removed the steelmaking capacity that once existed to meet market demand during peak periods. During the last few years, domestic producers have met a portion of the demand that exceeded steelmaking capacity by importing semifinished slabs for rolling into finished products in their own mills. Substitute Materials. For many steel products, there is substantial -------------------- competition from manufacturers of products other than steel, including aluminum, ceramics, concrete, glass, plastic and wood. Changes to the relative competitiveness of these substitute materials and the emergence of additional substitute materials could adversely affect future prices and demand for Bethlehem's products. 4 Capital Expenditures Capital expenditures were $557 million in 1999 compared with $328 million in 1998 and $228 million in 1997. Capital expenditures for 2000 are currently estimated to be about $250 million. During 1998, Bethlehem started construction of Sparrows Point's new continuous cold rolling mill complex. This complex, which is scheduled to begin production early in 2000, is expected to lower costs, improve quality and enhance capabilities. About $350 million of capital expenditures were authorized in 1999. At December 31, 1999, the estimated cost of completing authorized capital expenditures was about $410 million compared with $610 million at December 31, 1998. Bethlehem expects to complete these authorized capital expenditures during 2000 to 2002. The domestic integrated steel industry is very capital intensive. As discussed under "ITEM 2. PROPERTIES -- General" of this Report, Bethlehem's principal operations and facilities are of varying ages, technologies and operating efficiencies. Bethlehem will need to continue to make significant capital expenditures in the future to maintain and improve the competitiveness of its operations and facilities. Environment Bethlehem is subject to various federal, state and local environmental laws and regulations concerning, among other things, air emissions, waste water discharges and solid and hazardous waste disposal. During the five years ended December 31, 1999, Bethlehem spent about $100 million for environmental control equipment. Expenditures for new environmental control equipment totaled approximately $11 million in 1999, $13 million in 1998 and $15 million in 1997. The costs incurred in 1999 to operate and maintain existing environmental control equipment were approximately $115 million (excluding interest costs but including depreciation charges of $14 million) compared with $114 million in 1998 and $112 million in 1997. In addition, Bethlehem has been required to pay various fines and penalties relating to violations or alleged violations of laws and regulations in the environmental control area. Bethlehem paid about $74,000 in 1999, $910,000 in 1998 and $830,000 in 1997 for such fines and penalties. Under the Clean Air Act, as amended, coke-making facilities will have to meet progressively more stringent standards over the next 25 years. Bethlehem currently operates coke-making facilities in Burns Harbor, Indiana and Lackawanna, New York. Bethlehem will continue to evaluate the impact of future emission control regulations on its Burns Harbor and Lackawanna operations but believes that these operations will be able to comply. Bethlehem and federal and state regulatory agencies conduct negotiations to resolve differences in interpretation of environmental control requirements. In some instances, those negotiations are held in connection with the resolution of pending environmental proceedings. Bethlehem believes there will not be any significant curtailment or interruptions of any of its important operations as a result of these proceedings and negotiations. Bethlehem cannot predict the future specific environmental control requirements. Based on existing and anticipated regulations under current legislation, Bethlehem estimates that capital expenditures for new environmental control equipment will average about $15 million per year over the next two years. However, estimates of future capital expenditures and operating costs required for environmental compliance are subject to numerous uncertainties, including the evolving nature of regulations, possible imposition of more stringent requirements, availability of new technologies and the timing of expenditures. 5 Under the Resource Conservation and Recovery Act, as amended ("RCRA"), the owners of certain facilities that managed hazardous waste after 1980 are required to investigate and, if appropriate, remediate certain historic environmental contamination found at the facility. All of Bethlehem's major facilities may be subject to this "Corrective Action Program", and Bethlehem has implemented or is currently implementing this program at its facilities located in Steelton, Pennsylvania; Lackawanna, New York; Burns Harbor, Indiana; and Sparrows Point, Maryland. At Steelton, Bethlehem completed a RCRA Facility Investigation ("RFI"), a Corrective Measures Study ("CMS") and a remediation program approved by the United States Environmental Protection Agency (the "EPA") and completed the remediation in 1994. At Lackawanna, Bethlehem is conducting an RFI. At Burns Harbor, Bethlehem is conducting an RFI in accordance with an EPA approved work plan that will require several years to complete. At Sparrows Point, Bethlehem, the EPA and the Maryland Department of the Environment have agreed to a phased RFI as part of a comprehensive multimedia pollution prevention agreement which was entered by the U. S. District Court for Maryland on October 8, 1997. The potential costs for possible remediation activities, if any, at Lackawanna, Burns Harbor and Sparrows Point and the timeframe for implementation of these activities cannot be reasonably estimated until the RFIs, and possibly the CMSs, have been completed and approved. At its former plant in Bethlehem, Pennsylvania, Bethlehem is conducting remedial investigations pursuant to the Pennsylvania Land Recycling ("Brownfields") Program in conjunction with comprehensive redevelopment plans. These investigations are being performed with input and oversight from both the Pennsylvania Department of Environmental Protection and the EPA Region III corrective action staff to ensure that the actions taken are acceptable to both state and federal regulatory authorities. Bethlehem does not believe that the operations it acquired as part of the Lukens merger in 1998 are subject to the RCRA Corrective Action Program and, therefore, any remediation associated with those facilities will be addressed as appropriate in the ongoing course of business. Bethlehem may have some residual liability for remediation associated with historic Lukens facilities or those that have been sold or shut down since the merger, but any such liabilities are not anticipated to be material. For example, the electric arc furnace flue dust disposal site at the Coatesville, Pennsylvania, facility that was discussed by Lukens in its 1997 Form 10-K is continuing to be investigated by Bethlehem for remediation pursuant to the Pennsylvania Brownfields program. Bethlehem does not have any information at this time suggesting that the $3 million liability that had been recognized by Lukens for that site is not appropriate. Under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA", also known as "Superfund"), the EPA can impose liability for site remediation on generators and transporters of waste, as well as past and present owners and operators of the sites where the waste was disposed of, regardless of fault or the legality of the disposal activities. Bethlehem is actively involved at 24 sites where it has been advised that it may be considered a potentially responsible party under CERCLA or corresponding State Superfund legislation. Based on its experience regarding site remediation and its knowledge of and extent of involvement in such sites, Bethlehem expects that its share of the costs for remediation of these sites will not be material. In its 1997 Form 10-K, Lukens discussed a CERCLA site (Douglassville) in which it was involved. Subsequent to that discussion, Lukens and Bethlehem were identified as separate de-minimis potentially responsible parties and were signatories to a consent decree which was entered by the U.S. District Court for the Eastern District of Pennsylvania on July 8, 1999. Within 60 days following entry of the consent decree, Bethlehem paid approximately $204,000 on behalf of Lukens and $125,000 on behalf of Bethlehem in full resolution of those liabilities. 6 Although it is possible that Bethlehem's future quarterly or annual results of operations could be materially affected by the future costs of environmental compliance, Bethlehem believes that the future costs of environmental compliance will not have a material adverse effect on its consolidated financial position or on its competitive position with respect to other integrated domestic steelmakers that are subject to the same environmental requirements. To the extent that competitors are not required to undertake equivalent costs, Bethlehem's competitive position could be adversely affected. Purchased Materials and Services Bethlehem purchases about $3 billion per year of raw materials, energy, equipment, goods and services from commercial sources in about 40 countries. Bethlehem's profitability could be affected by difficulties in obtaining these items and the prices paid for them. These difficulties could include such things as labor strikes, political instability and natural disasters. Bethlehem made significant progress in 1999 through its Strategic Sourcing initiatives and expects further progress in 2000. See "ITEM 2. PROPERTIES - Raw Material Properties and Interests" of this Report for a further description of the sources of raw materials essential to Bethlehem's steelmaking business. Technology Research and Development. Bethlehem performs research to improve ------------------------ existing products, develop new products and make operating processes more efficient. During 1999, 1998 and 1997, Bethlehem spent about $21 million, $23 million and $22 million, respectively, for research and development. Bethlehem owns a number of U.S. and foreign patents that relate to a wide variety of products and processes, has pending patent applications and is licensed under a number of patents. During 1999, seven U.S. patents covering a variety of new developments were awarded to Bethlehem. However, Bethlehem believes that no single patent or license or group of patents or licenses is of material importance to its overall business. Bethlehem also owns registered trademarks for certain of its products and service marks for certain of its services which, unlike patents and licenses, are renewable so long as they are continued in use and properly protected. Year 2000 Computer Issue. During the last five years, Bethlehem ------------------------ focused on potential problems associated with the once common programming practice of storing data information using only the last two digits to indicate the year. The scope of Bethlehem's year 2000 Program involved many areas including its business and manufacturing computing systems, the associated personal computing, communications and infrastructure elements and the year 2000 readiness of key suppliers and customers. The major elements of the program were inventory, risk assessment, remediation, testing and contingency planning. As a result of its well-planned approach, Bethlehem experienced a smooth transition to the year 2000. During 1999, Bethlehem completed the final phases of its year 2000 Program and established command centers at each business unit and its corporate office to monitor all of its computer systems. Bethlehem's employees in information technology and at the operations worked effectively with various providers to ensure that Bethlehem was prepared for the changeover. During the transition period, Bethlehem performed a thorough validation of all manufacturing and business systems. Following this systematic review, all facilities resumed operations as scheduled. Also, no material problems were encountered with Bethlehem's key suppliers and customers. The costs associated with this effort were approximately $7 million and were charged to normal operating expenses. Bethlehem achieved its objectives and continued to operate its business and manufacturing systems and to serve its customers with no adverse year 2000 impact. 7 Employment At the end of 1999, Bethlehem had about 15,500 employees, three-quarters of whom are covered by agreements with the United Steelworkers of America ("USWA"). On August 1, 1999, Bethlehem and the USWA entered into new five-year labor agreements covering USWA represented employees at Bethlehem's facilities in Burns Harbor, Indiana; Lackawanna, New York; Sparrows Point, Maryland; Coatesville, Pennsylvania; and Steelton, Pennsylvania. The Burns Harbor and Sparrows Point divisions continue to be covered by one agreement, while separate agreements were continued for PST and BLP's Coatesville facility. A strike or work stoppage could impact Bethlehem's ability to operate if it is unable to negotiate new agreements with its represented employees when the existing agreements expire. Also, Bethlehem's profitability could be adversely affected if increased costs associated with any future contract are not recoverable through productivity improvements or price increases. For further information on Bethlehem's employment-related matters, see "Employees and Employment Costs" under "Financial Review and Operating Analysis" in Bethlehem's 1999 Annual Report to Stockholders. Employee Postretirement Obligations At December 31, 1999, Bethlehem had recorded a liability of $410 million for pensions. For further discussion of Bethlehem's pension funding and obligations, see "Liquidity and Capital Structure" under "Financial Review and Operating Analysis" in Bethlehem's 1999 Annual Report to Stockholders. Bethlehem provides health care and life insurance benefits to most retirees and their dependents. Most of these future benefits have not been funded and, therefore, Bethlehem has substantial financial obligations on its balance sheet. At December 31, 1999, Bethlehem had recorded a liability of $1,820 million for postretirement benefits other than pensions. To the extent competitors do not have similar obligations, Bethlehem could be placed at a competitive disadvantage. Also, increases in health care costs could adversely affect Bethlehem's profitability. Joint Ventures, Partnerships, Facility Sharing Arrangements and Mergers Bethlehem has considered, and discussed with others, various opportunities for joint ventures, partnerships, facility sharing arrangements and mergers of all or part of Bethlehem. Bethlehem will continue to explore such opportunities. See "ITEM 2. PROPERTIES." of this Report for a description of joint ventures in which Bethlehem participates. Businesses Exited In recent years, Bethlehem has shut down or sold several facilities and operations. Since 1996, Bethlehem recorded net charges of $365 million in connection with these actions. On December 22, 1999, Bethlehem completed the sale of its Washington Steel Division facility in Washington, Pennsylvania, and on January 14, 2000, Bethlehem completed the sale of its stainless sheet operations in Massillon, Ohio. As a result, Bethlehem has now completed its planned divestiture of all of the stainless and distribution assets that were acquired as part of the Lukens acquisition. If it becomes necessary for Bethlehem to exit or reduce employment at additional businesses and operations in the future, it could incur substantial additional charges in the process. The charges for employees terminated as a result of facility shutdowns or sales vary depending upon the demographics of the workforce but could be $100,000 per employee. The 8 recording of these charges could have a material adverse impact on Bethlehem's financial condition because of the increase in recorded liabilities, decrease in stockholders' equity and possible increases in required contributions to the pension fund and retiree health care payments. Except as discussed above or previously announced, Bethlehem does not currently anticipate any additional facility shutdowns. Capital Structure Bethlehem's capital structure is highly leveraged. Although Bethlehem believes it has sufficient access to funds for the operation of its business, its existing obligations and below investment grade credit ratings may limit its ability to raise capital at reasonable cost and terms in the future. Forward-Looking Statements Bethlehem and its representatives may from time to time make forward-looking statements in reports filed with the Securities and Exchange Commission, reports to stockholders, press releases, other written documents and oral presentations. These forward-looking statements may include, among others, statements concerning projected levels of sales, shipments and income, pricing trends, cost-reduction strategies, product mix, anticipated capital expenditures and other future plans and strategies. As permitted by the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, Bethlehem is identifying in this Report important factors that could cause Bethlehem's actual results to differ materially from those projected in these forward-looking statements. These factors include, but are not necessarily limited to: - the effect of planned and unplanned outages on Bethlehem's operations; - the potential impact of strikes or work stoppages at facilities of Bethlehem's customers and suppliers; - the sensitivity of Bethlehem's results to relatively small changes in the prices obtained by Bethlehem for its products; - intense competition due to world steel overcapacity, new domestic capacity over the next several years, low- cost electric furnace facilities, imports (especially unfairly traded imports) and substitute materials; - the high capital requirements associated with integrated steel facilities; - the significant costs associated with environmental controls and remediation expenditures and the uncertainty of future environmental control requirements; - availability and prices associated with raw materials, supplies, utilities and other services and items required by Bethlehem's operations; - employment matters, including costs and uncertainties associated with Bethlehem's collective bargaining agreements, and employee postretirement obligations; - the effect of possible future closure or exit of businesses; - Bethlehem's highly leveraged capital structure; 9 - the effect of existing and possible future lawsuits filed against Bethlehem. "ITEM 1. BUSINESS" and "ITEM 3. LEGAL PROCEEDINGS" of this Report discuss these factors in more detail and are incorporated by reference into this section. Bethlehem does not undertake to update any forward-looking statements that may be made from time to time by Bethlehem or its representatives. ITEM 2. PROPERTIES. Burns Harbor Division Location: In Indiana, on Lake Michigan, about 50 miles southeast of -------- Chicago, Illinois. Principal products and markets: Hot rolled, cold rolled, ------------------------------ electrogalvanized, hot-dip galvanized and galvannealed sheet, coke and semifinished steel to Bethlehem Lukens Plate. Its principal markets include automotive, service centers, construction, machinery and appliance. Principal facilities: A sintering plant, a coke oven battery (Burns -------------------- Harbor operates a second coke oven battery for the battery's owner), two blast furnaces, including coal injection facilities, three basic oxygen furnaces with a combined annual raw steel production capability of about 5.6 million tons, a vacuum degassing facility, two continuous slab casters with a combined annual production capability of about 4 million tons, an 80-inch hot-strip mill, two continuous pickling lines, an 80- inch five-stand cold reducing mill, sheet finishing mills, a continuous heat treating line, batch annealing facilities and a 72-inch hot-dip galvanizing line. Burns Harbor operates a cold reducing mill, a continuous pickling line, a galvanizing line and two coke oven batteries in Lackawanna, New York. Burns Harbor continuously casts about 88 percent of its total production volume, with the remaining 12 percent being ingot cast. Ingot cast slabs are used primarily by Bethlehem to make steel plates. Burns Harbor's utilization of raw steel production capability was 95 percent during 1999. Sparrows Point Division Location: On the Chesapeake Bay, near Baltimore, Maryland. -------- Principal products and markets: Hot rolled, cold rolled, hot-dip ------------------------------ galvanized and Galvalume(R) sheet and tin mill products. Its principal markets include construction, containers and service centers. Principal facilities: A sintering plant, a large blast furnace, two -------------------- basic oxygen furnaces with an annual raw steel production capability of about 3.7 million tons, a two-strand continuous slab caster, a 68-inch hot-strip mill, three continuous pickling lines, three cold reducing mills (66-inch, 56-inch and 48-inch), continuous and batch annealing facilities, two galvanizing lines, a Galvalume(R) line, a 48-inch hot-dip galvanizing/ Galvalume(R) line and tin mill facilities that include tin and chrome plating lines. Sparrows Point continuously casts essentially 100 percent of its total production volume. Sparrows Point's utilization of raw steel production capability was 76 percent during 1999. Utilization was lower than in previous years because of the reline of the "L" Blast Furnace. 10 Bethlehem Lukens Plate ("BLP") Location: In Coatesville and Conshohocken, Pennsylvania; Burns -------- Harbor, Indiana. Principal products and markets: Carbon plate, high-strength, low ------------------------------ alloy plate, commercial alloy plate, military alloy plate, coiled and cut plate and clad plate. Its principal markets include service centers, transportation, infrastructure, machinery, equipment, environmental and engineering. Principal facilities: Coatesville: an electric arc furnace with an -------------------- annual raw steel production capability of about 900,000 tons, two plate mills (140-inch and 206-inch) and heat treating facilities. Conshohocken: a 110-inch Steckel mill, two reheat furnaces, a roughing mill, an in-line cooling and cut-to-length line, a quench and temper line and a batch heat-treating system. Burns Harbor: a 50 x 90-inch slabbing mill, a 110-inch sheared plate mill including two continuous reheat furnaces, a roughing mill, a finishing mill and a normalizing furnace, and a 160-inch sheared plate mill including two continuous reheat furnaces, four batch reheat furnaces, a roughing mill, a finishing mill, an in-line accelerated cooling facility, a quench and temper line and a batch normalizing furnace. Bethlehem Lukens Plates' utilization of raw steel production capability was 91 percent during 1999. During 2000, Bethlehem intends to consolidate Burns Harbor, Sparrows Point and BLP into two divisions. BLP's operations in Coatesville and Conshohocken will become part of Sparrows Point and BLP's facilities located at Burns Harbor will become part of that Division. Bethlehem will continue to market its plate products under the name Bethlehem Lukens Plate. Pennsylvania Steel Technologies, Inc. ("PST") Location: In Steelton, Pennsylvania, south of Harrisburg, -------- Pennsylvania. Principal products and markets: Railroad rails, specialty blooms and ------------------------------ flat bars. PST also produces large-diameter pipe for the oil and gas industries. Principal facilities: A DC electric arc furnace with an annual raw -------------------- steel production capability of about 1.1 million tons, a ladle furnace, a vacuum degassing facility, a continuous bloom caster, a 44-inch blooming mill, a 28-inch rail mill, in-line rail head-hardening facilities, finishing and shipping facilities for long-length (80-foot) rails, a 20-inch bar mill and an electric fusion welded pipe mill. PST's utilization of raw steel production capability was 42 percent during 1999. Joint Ventures Bethlehem participates in the following joint ventures: - Double G Coatings Company, L.P. (located near Jackson, Mississippi) -- operates a 270,000 ton per year sheet coating line that produces galvanized and Galvalume(R) coated sheets primarily for the construction market. Sparrows Point provides cold rolled coils for about half of Double G's annual capability and is responsible for marketing its share of the finished product. 11 - Columbus Coatings Company -- (located in Columbus, Ohio) -- a joint venture with The LTV Corporation. The coating facility is expected to begin operation by fourth quarter 2000 and will produce quality corrosion resistant steel sheets primarily for the automotive market. - Columbus Processing Company LLC. (located in Columbus, Ohio) -- Steel slitting and warehousing operation. - Steel Construction Systems (located in Orlando, Florida) -- a joint venture with CSR Rinker, the largest building materials company in Florida. Steel Construction Systems manufactures steel studs and joists for residential and light commercial buildings. - Walbridge Coatings (located in Walbridge, Ohio) -- owns and operates a 400,000 ton per year electrogalvanizing line. This facility produces corrosion-resistant sheet steel primarily for the automobile industry and other consumer durables markets. Burns Harbor provides cold rolled coils for 85 percent of Walbridge's annual capability and is responsible for marketing its share of the finished product. - Indiana Pickling and Processing Company (located in northern Indiana) -- operates a pickling line. - Chicago Cold Rolling, L.L.C. (located in northern Indiana) -- processes hot rolled sheet into cold rolled sheet products. - TWB Company (located in Michigan) -- operates the largest plant in North America producing laser-welded blanks for the automotive industry. - MetalSite (www.metalsite.net) -- Bethlehem is an equity partner in MetalSite, an internet metals marketplace where companies can buy or sell metal products or services. - Bethlehem Roll Technologies LLC (located in Sparrows Point, Maryland) -- operates a facility for grinding steel mill rolls for Bethlehem and others. - BethNova Tube, LLC (site location not yet determined) -- will produce tubes for use in hydroforming automobile and truck parts. Tube production is expected to begin in the first quarter of 2001. Bethlehem also has indirect equity interests in various iron ore properties. See "Raw Material Properties and Interests" below. Raw Material Properties and Interests Iron Ore. Bethlehem has indirect equity interests in various iron ore -------- operating properties, which (excluding tonnages applicable to interests owned by others) it estimates contained recoverable reserves at December 31, 1999, sufficient to produce at least 16 million tons of direct shipping iron ore from properties located in Brazil and 186 million tons of iron ore pellets from properties located in Minnesota. During 1997, Bethlehem sold its equity interest in Iron Ore Company of Canada ("IOC"). Bethlehem continues as a customer of IOC and purchases iron ore at prices which approximate market. In addition to the estimated reserves at operating properties, Bethlehem also has indirect equity interests in undeveloped or nonoperating iron ore properties, which (excluding tonnages applicable to interests owned by others) it estimates 12 contained recoverable reserves at December 31, 1999, sufficient to produce at least 11 million tons of direct shipping iron ore from properties located in Brazil and 128 million tons of iron ore pellets from properties located in Minnesota. The iron ore operating properties in which Bethlehem has interests have mining and processing facilities which can supply a majority of Bethlehem's current annual iron ore requirements. The location of Bethlehem's steel operations and the iron ore products best suited to these facilities determine when Bethlehem sells, exchanges or purchases iron ore. These purchases have been from various sources, including sources in which it has ownership interests, under a variety of arrangements. Bethlehem's share of the annual iron ore production by enterprises in which it has ownership interests, for Bethlehem's use or sale to trade customers, was 6.9 million tons in 1999 and 7.9 million tons in 1998. In addition to these sources, Bethlehem purchased 4 million tons of iron ore in 1999 and 5.1 million tons of iron ore in 1998 from sources in which it had no ownership interests. In 1999, Bethlehem obtained about 62 percent of its iron ore requirements from operations in which it had ownership interests compared with 58 percent in 1998. Iron ore trade sales commitments for 2000 are .3 million tons and no sales commitments exist beyond 2000. The interests in foreign iron ore properties described above are subject to the risks associated with investments in foreign countries, including the risk of nationalization. Coal and Coke. Bethlehem has sold all of its coal operating ------------- properties and purchases all of the coal it uses from commercial sources. Bethlehem owns undeveloped or nonoperating coal properties in Pennsylvania, which it estimates contained recoverable reserves at December 31, 1999, sufficient to produce at least 158 million tons of coal, of which about 91 percent and 9 percent, respectively, are metallurgical and steam coal. Bethlehem operates coke-making facilities at Burns Harbor, Indiana and Lackawanna, New York. Other Raw Materials. Bethlehem purchases its other raw material ------------------- requirements from commercial sources. Transportation Bethlehem owns nine subsidiary shortline railroads which transport raw materials and semifinished steel products within various Bethlehem operations and serve other customers on their lines. Bethlehem manages an interstate trucking company serving Bethlehem's operations and other facilities and manages a rail/truck intermodal facility in Bethlehem, Pennsylvania. The Burns Harbor Division operates two 1,000-foot ore vessels (one owned and one under long-term charter), which are used for the transportation of iron ore on the Great Lakes. General While Bethlehem's principal operations and facilities are adequately maintained, they are of varying ages, technologies and operating efficiencies. Bethlehem believes that most of its operations and facilities currently are competitive with the operations and facilities of its principal competitors. Bethlehem will continue to make capital expenditures to improve and maintain the competitiveness of its operations and facilities. See "ITEM 1. BUSINESS - Capital Expenditures" of this Report for a discussion of Bethlehem's capital expenditures. 13 Bethlehem owns all principal operations and facilities. During 1998, Bethlehem sold its No. 1 Coke Oven Battery at Burns Harbor to an affiliate of DTE Energy Services, Inc. Bethlehem operates the facility for the owner and purchases its output. Bethlehem financed the construction of two hot-dip galvanizing lines at its Burns Harbor and Sparrows Point Divisions. These two galvanizing lines are pledged as collateral for the borrowings. ITEM 3. LEGAL PROCEEDINGS. Bethlehem is a party to numerous legal proceedings incurred in the ordinary course of its business. Bethlehem cannot predict with any certainty the outcome of any legal proceedings to which it is a party. However, in the opinion of Bethlehem's management, adequate reserves have been recorded for losses which are likely to result from these proceedings. To the extent that such reserves prove to be inadequate, Bethlehem would incur a charge to earnings which could be material to its future results of operations in particular quarterly or annual periods. The outcome of these proceedings, however, is not currently expected to have a material adverse effect on Bethlehem's consolidated financial position. See "ITEM 1. BUSINESS - Environment" of this Report for a discussion of Bethlehem's potential responsibilities for environmental cleanup at certain sites under RCRA and CERCLA. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of security holders during the fourth quarter of 1999. __________ 14 Executive Officers of the Registrant. The executive officers of Bethlehem as of March 3, 2000, are as follows:
Name Age Position ---- --- -------- Curtis H. Barnette 65 Chairman and Chief Executive Officer Gary L. Millenbruch 62 Vice Chairman and Chief Financial Officer Duane R. Dunham 58 President and Chief Operating Officer Dr. Augustine E. Moffitt, Jr. 54 Executive Vice President (Administration) and Chief Administrative Officer Leonard M. Anthony 45 Treasurer Lonnie A. Arnett 54 Vice President (Accounting), Controller and Chief Accounting Officer Dr. Walter N. Bargeron 57 President, Burns Harbor Division David M. Beinner 60 Senior Vice President (Commercial) Thomas J. Conarty, Jr. 50 Vice President (Information Technology) and Chief Information Officer Stephen G. Donches 54 Vice President (Public Affairs) Andrew R. Futchko 57 President, Pennsylvania Steel Technologies, Inc. William H. Graham 54 Senior Vice President (Law), General Counsel and Secretary Carl W. Johnson 58 President, Sparrows Point Division John L. Kluttz 57 Vice President (Union Relations) Dr. Carl F. Meitzner 60 Vice President (Planning) Van R. Reiner 51 President, Bethlehem Lukens Plate Dr. Malcolm J. Roberts 57 Vice President (Technology) and Chief Technology Officer Robert A. Rudzki 46 Vice President (Purchasing and Transportation) and Chief Procurement Officer Dorothy L. Stephenson 50 Vice President (Human Resources) 15
All of the executive officers have held responsible management or professional positions with Bethlehem or its subsidiaries for more than the past five years. Bethlehem's By-laws provide that the Board of Directors annually chooses the officers and that each officer holds office until his or her successor is elected, or his or her death, resignation or removal. 16 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS. As of March 3, 2000, about 32,850 stockholders held 131,641,347 shares of Bethlehem Common Stock. The principal market for Bethlehem Common Stock is the New York Stock Exchange. Bethlehem Common Stock is also listed on the Chicago Stock Exchange. Dividends on Bethlehem Common Stock are paid quarterly when declared by Bethlehem's Board of Directors. Under the provisions of Bethlehem's 10-3/8% Senior Notes due 2003, Bethlehem's ability to pay dividends on its Common Stock is restricted. See Note J to the Consolidated Financial Statements. At December 31, 1999, about $280 million was available for the payment of Common Stock dividends under these provisions. Bethlehem has not paid a dividend on its Common Stock since the fourth quarter of 1991. Bethlehem's Board of Directors will determine whether to pay any future dividends (subject to any applicable restrictions) based on attained financial results and business outlook. The following table shows the high and low sales prices of Bethlehem Common Stock as reported in the consolidated transaction reporting system. The closing sale price of Bethlehem Common Stock on March 3, 2000, was $6.00.
1999 1998 ---- ---- Sales Prices Sales Prices ------------ ------------ Period High Low High Low ------ ---- --- ---- --- First Quarter.................. $10.688 $ 7.688 $15.500 $ 8.063 Second Quarter................. 10.938 7.375 17.125 11.063 Third Quarter.................. 8.688 6.750 13.438 7.000 Fourth Quarter................. 8.500 5.875 10.750 7.313
ITEM 6. SELECTED FINANCIAL DATA. The information required by this Item is incorporated by reference from page 31 of Bethlehem's 1999 Annual Report to Stockholders. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required by this Item is incorporated by reference from pages 2 to 9 and 12 to 15 of Bethlehem's 1999 Annual Report to Stockholders. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by this Item is incorporated by reference from pages 16 to 28 of Bethlehem's 1999 Annual Report to Stockholders. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 17 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. In addition to the information under the caption "Executive Officers of the Registrant" in Part I of this Report, the information required by this Item is incorporated by reference from the material under the heading "Item 1 - -- Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" of Bethlehem's Proxy Statement for the 2000 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission. ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item is incorporated by reference from the material under the heading "Executive Compensation" of Bethlehem's Proxy Statement for the 2000 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this Item is incorporated by reference from the material under the heading "Stock Ownership Information" of Bethlehem's Proxy Statement for the 2000 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this Item is incorporated by reference from the material under the heading "Certain Business Relationships and Related Transactions" and under the heading "Indemnification Assurance Agreements" of Bethlehem's Proxy Statement for the 2000 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission. Except for those items specifically incorporated by reference, you should not consider Bethlehem's 1999 Annual Report to Stockholders or Proxy Statement for the 2000 Annual Meeting of Stockholders to be part of this Report. 18 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Documents filed as part of this Report: The following is an index of the financial statements, schedules and exhibits included in this Report or incorporated herein by reference. (1) Financial Statements. BETHLEHEM STEEL CORPORATION AND CONSOLIDATED SUBSIDIARIES
Page ---- Consolidated Statements of Income for years 1999, 1998 and 1997................ * Consolidated Balance Sheets as of December 31, 1999 and 1998 .................. * Consolidated Statements of Cash Flows for the years 1999, 1998 and 1997........ * Notes to Consolidated Financial Statements (Including Quarterly Financial Data). * (2) Consolidated Financial Statement Schedules. Report of Independent Auditors On Consolidated Financial Statement Schedule.... F-1 II -- Valuation and Qualifying Accounts and Reserves, years ended December 31, 1999, 1998 and 1997................................. F-3
* Incorporated by reference from pages 16 to 28 of Bethlehem's 1999 Annual Report to Stockholders. The Consolidated Financial Statements, together with the report of PricewaterhouseCoopers LLP dated January 26, 2000, on pages 16 to 29 of Bethlehem's 1999 Annual Report to Stockholders are incorporated by reference in this Form 10-K Annual Report. With the exception of those pages, you should not consider Bethlehem's 1999 Annual Report to Stockholders as a part of this Report for this Item. The Schedule listed above should be read in conjunction with the consolidated financial statements in such 1999 Annual Report to Stockholders. Schedules not included have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes. Separate financial statements of subsidiaries not consolidated and 50 percent or less owned persons accounted for by the equity method have been omitted because considered in the aggregate as a single subsidiary they do not constitute a significant subsidiary. (3) Exhibits. The following is an index of the exhibits included in this Report or incorporated herein by reference. (3)(a) Second Restated Certificate of Incorporation (Incorporated by reference from Exhibit 3(a) to Bethlehem's Annual Report on Form 10-K for the year ended December 31, 1998). 19 (b) Amendment to Second Restated Certificate of Incorporation (Incorporated by reference from Exhibit 3(i) to Bethlehem's quarterly report on Form 10-Q for the quarter ended June 30, 1995). (c) By-laws of Bethlehem Steel Corporation, as amended October 1, 1999 (Incorporated by reference from Exhibit 4 to Bethlehem's quarterly report on Form 10-Q for the quarter ended September 30, 1999). (4)(a) Rights Agreement, dated as of July 29, 1998, between Bethlehem Steel Corporation and First Chicago Trust Company of New York (Incorporated by reference from Bethlehem's Report on Form 8-K filed August 5, 1998). (b) Amendment No. 1 to the Rights Agreement, dated as of March 17, 1999, between Bethlehem Steel Corporation and First Chicago Trust Company of New York (Incorporated by reference from Bethlehem's Amended Registration Statement on Form 8-A/A filed March 19, 1999). (c) Amendment No. 2 to Rights Agreement, dated as of December 30, 1999, between Bethlehem Steel Corporation and First Chicago Trust Company of New York (Incorporated by reference from Bethlehem's Amended Registration Statement on Form 8-A/A filed December 30, 1999). (d) Inventory Credit Agreement, dated as of September 12, 1995, as amended and restated on June 5, 1997, June 19, 1998, and June 17, 1999. (e) Receivables Purchase Agreement, dated as of September 12, 1995, as amended and restated on June 5, 1997, June 19, 1998, and June 17, 1999. (f) Bethlehem is a party to certain long-term debt agreements where the amount involved does not exceed 10 percent of Bethlehem's total consolidated assets. Bethlehem agrees to furnish a copy of any such agreement to the Commission upon request. *(10)(a) Excess Benefit Plan of Bethlehem Steel Corporation and Subsidiary Companies, as amended September 20, 1995 (Incorporated by reference from Exhibit 10 to Bethlehem's Annual Report on Form 10-K for the fiscal year ended December 31, 1997). *(b) 1988 Stock Incentive Plan of Bethlehem Steel Corporation (Incorporated by reference from Exhibit 10 to Bethlehem's Annual Report on Form 10-K for the fiscal year ended December 31, 1997). *(c) 1994 Stock Incentive Plan of Bethlehem Steel Corporation (Incorporated by reference from Exhibit 10(c) to Bethlehem's Annual Report on Form 10-K for the year ended December 31, 1998). *(d) 1994 Non-Employee Directors Stock Plan of Bethlehem Steel Corporation (Incorporated by reference from Exhibit 10(d) to Bethlehem's Annual Report on Form 10-K for the year ended December 31, 1998). *(e) 1998 Stock Incentive Plan of Bethlehem Steel Corporation (Incorporated by reference from Exhibit 1 to Bethlehem's Proxy Statement in connection with its Annual Meeting of Shareholders held on April 28, 1998). *(f) Special Incentive Compensation Plan of Bethlehem Steel Corporation, which is contained in Article Seven of the Second Restated Certificate of Incorporation referred to in Exhibit 3(a) to this Report. 20 *(g) Supplemental Benefits Plan of Bethlehem Steel Corporation and Subsidiary Companies, as amended September 20, 1995 (Incorporated by reference from Exhibit 10 to Bethlehem's Annual Report on Form 10-K for the fiscal year ended December 31, 1997). *(h) Post-Retirement Retainer Plan for Non-Officer Directors (Incorporated by reference from Exhibit 10 to Bethlehem's Annual Report on Form 10-K for the fiscal year ended December 31, 1997). (i) Form of Indemnification Assurance Agreement between Bethlehem Steel Corporation and each of its directors and executive officers listed on Schedule A thereto. (j) Form of Agreement between Bethlehem Steel Corporation and eight executive officers. Additional agreements have been entered into between Bethlehem Steel Corporation and twelve other executive officers and employees. These additional agreements are substantially in the form of said Agreement except: (i) the amount of compensation upon termination is two rather than three times annual salary and bonus and (ii) the additional agreements do not permit the recipient to terminate for any reason during the 30-day period following the first anniversary of the change in control (Incorporated by reference from Exhibit 10 to Bethlehem's quarterly report on Form 10-Q for the quarter ended September 30, 1998). (k) Consulting Agreement and Covenant not to Compete, as amended, between Bethlehem Steel Corporation and Curtis H. Barnette. (l) Consulting Agreement and Covenant not to Compete, as amended, between Bethlehem Steel Corporation and Roger P. Penny. (13) Those portions of Bethlehem's 1999 Annual Report to Stockholders which are incorporated by reference into this Form 10-K Annual Report. (23) Consent of Independent Auditors (included on page F-2 of this Report). (24) Power of Attorney. (27) Financial Data Schedule for period ended December 31, 1999. - ----------------- * Compensatory plans in which Bethlehem's directors and executive officers participate. (b) Reports on Form 8-K. Bethlehem filed a report on Form 8-K on December 30, 1999, disclosing the adoption of Amendment No. 2 to its Rights Agreement with First Chicago Trust Company of New York. The Amendment is listed as Exhibit 4(c) to this Report on Form 10-K. 21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, Bethlehem Steel Corporation has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 9th day of March, 2000. BETHLEHEM STEEL CORPORATION, By: /s/ Lonnie A. Arnett ------------------------------ Lonnie A. Arnett Vice President and Controller Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of Bethlehem Steel Corporation and in the capacities indicated on the 9th day of March, 2000.
/s/ Curtis H. Barnette /s/ Duane R. Dunham - ------------------------------ ------------------------------ Curtis H. Barnette Duane R. Dunham Chairman and Director Director (principal executive officer) /s/ Gary L. Millenbruch /s/ Harry P. Kamen - ------------------------------ ------------------------------ Gary L. Millenbruch Harry P. Kamen Vice Chairman and Director Director (principal financial officer) /s/ Lonnie A. Arnett /s/ William M. Landuyt - ------------------------------ ------------------------------ Lonnie A. Arnett William M. Landuyt Vice President and Controller Director (principal accounting officer) /s/ Benjamin R. Civiletti /s/ Robert McClements, Jr. - ------------------------------ ------------------------------ Benjamin R. Civiletti Robert McClements, Jr. Director Director 22 /s/ Worley H. Clark /s/ Shirley D. Peterson - ------------------------------ ------------------------------ Worley H. Clark Shirley D. Peterson Director Director /s/ John B. Curcio /s/ Dean P. Phypers - ------------------------------ ------------------------------ John B. Curcio Dean P. Phypers Director Director /s/ Lewis B. Kaden /s/ John F. Ruffle - ------------------------------ ------------------------------ Lewis B. Kaden John F. Ruffle Director Director
23 Report of Independent Auditors on Financial Statement Schedule To the Board of Directors of Bethlehem Steel Corporation Our audits of the consolidated financial statements referred to in our report dated January 26, 2000 appearing in the 1999 Annual Report to Stockholders of Bethlehem Steel Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ PricewaterhouseCoopers LLP - ------------------------------ New York, New York January 26, 2000 F-1 CONSENT OF INDEPENDENT AUDITORS ------------------------------- We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 2-90795, No. 2-71699, No. 2-53880, No. 2-90796, No. 2-67314, No. 33- 23516, No. 33-23688, No. 33-52267, No. 33-58019, No. 33-58021, No. 33-60507, No. 333-53895, No. 333-57157 and No. 333-91941) of Bethlehem Steel Corporation of our report dated January 26, 2000 relating to the financial statements, which appears in the 1999 Annual Report to Stockholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated January 26, 2000 relating to the Financial Statement Schedule, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP - ------------------------------ New York, New York March 9, 2000 F-2 BETHLEHEM STEEL CORPORATION 10-K SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES ($ in Millions)
Charged Balance at (Credited) Balance at 12/31/98 to Income Deductions Other 12/31/99 ---------- ---------- ---------- ----- --------- Classification - -------------- Doubtful Receivables & Returns $20.0 $0.8 ($1.2)(a) - $19.6 Deferred Income Tax Asset 320.0 39.0 (19.0)(b) - 340.0 Charged Balance at (Credited) Balance at 12/31/97 to Income Deductions Other 12/31/98 ---------- ---------- ---------- ----- ---------- Classification - -------------- Doubtful Receivables & Returns $18.8 ($0.4) $1.6 (a) - $20.0 Long-term Receivables 2.0 - - (2.0)(c) - Deferred Income Tax Asset 350.0 (22.0) - (8.0)(d) 320.0 Charged Balance at (Credited) Balance at 12/31/96 to Income Deductions Other 12/31/97 ---------- ---------- ---------- ----- ---------- Classification - -------------- Doubtful Receivables & Returns $20.8 ($2.8) $0.8 (a) - $18.8 Long-term Receivables 4.4 - (2.4)(a) - 2.0 Deferred Income Tax Asset 410.0 (60.0) - - 350.0
(a) Amounts written-off less collections and reinstatements. (b) Expiration of NOL carryforward and other tax adjustments. (c) The property for which this receivable relates to was forclosed on by Bethlehem and the receivable and related allowance was included in the basis of the property. (d) Allowance on taxable temporary differences acquired through Bethlehem's purchase of Lukens. F-3 EX-4 2 Exhibit 4(d) [CONFORMED COPY] $200,000,000 INVENTORY CREDIT AGREEMENT dated as of September 12, 1995 among BETHLEHEM STEEL CORPORATION, THE LENDERS LISTED HEREIN, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent and J.P. MORGAN DELAWARE, as Structuring and Collateral Agent TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS 1.1. Definitions .............................................. 1 1.2. UCC Terms ................................................ 21 1.3. Accounting Terms and Determinations ...................... 21 ARTICLE 2 THE CREDITS 2.1. Commitments to Lend ...................................... 22 2.2. Letters of Credit ........................................ 23 2.3. Method of Borrowing ...................................... 33 2.4. Notes .................................................... 35 2.5. Maturity of Loans ........................................ 35 2.6. Method of Electing Interest Rates ........................ 35 2.7. Interest Rates ........................................... 37 2.8. Fees ..................................................... 42 2.9. Optional Termination or Reduction of Commitments ......... 43 2.10. Mandatory Termination of Commitments .................... 43 2.11. Optional Prepayments .................................... 44 2.12. Mandatory Prepayments ................................... 44 2.13. General Provisions as to Payments ....................... 46 2.14. Funding Losses .......................................... 47 2.15. Computation of Interest and Fees ........................ 47 ARTICLE 3 CONDITIONS TO BORROWINGS AND ISSUANCES 3.1. Closing .................................................. 48 3.2. All Borrowings and Issuances ............................. 50 ARTICLE 4 REPRESENTATIONS AND WARRANTIES 4.1. Corporate Existence and Power ............................ 51 4.2. Corporate and Governmental Authorization; No Contravention 51 4.3. Binding Effect ........................................... 52 4.4. Financial Information .................................... 52 4.5. Litigation ............................................... 53 i 4.6. Compliance with ERISA .................................... 53 4.7. Taxes .................................................... 53 4.8. Environmental Compliance ................................. 54 4.9. Full Disclosure .......................................... 55 ARTICLE 5 COVENANTS 5.1. Information .............................................. 56 5.2. Maintenance of Property; Insurance ....................... 60 5.3. Compliance with Laws ..................................... 61 5.4. Inspection of Property, Books and Records ................ 62 5.5. Compliance with Certain Covenants in the Indenture ....... 62 5.6. Minimum Adjusted Consolidated Tangible Net Worth ......... 63 5.7. Sale of Borrower's Collateral ............................ 63 5.8. Use of Proceeds .......................................... 64 5.9. Mergers and Sales of Assets .............................. 64 5.10. Environmental Matters ................................... 64 ARTICLE 6 DEFAULTS 6.1. Events of Default ........................................ 65 6.2. Notice of Default ........................................ 69 ARTICLE 7 THE ADMINISTRATIVE AGENT 7.1. Appointment and Authorization ............................ 69 7.2. Administrative Agent and Affiliates ...................... 70 7.3. Action by Administrative Agent ........................... 70 7.4. Consultation with Experts ................................ 70 7.5. Liability of Administrative Agent ........................ 70 7.6. Indemnification .......................................... 71 7.7. Credit Decision .......................................... 71 7.8. Successor Administrative Agent ........................... 71 ARTICLE 8 CHANGE IN CIRCUMSTANCES 8.1. Basis for Determining Interest Rate Inadequate or Unfair . 72 8.2. Illegality ............................................... 73 8.3. Increased Cost and Reduced Return ........................ 74 8.4. Taxes .................................................... 77 8.5. Base Rate Loans Substituted for Affected Fixed Rate Loans. 81 ARTICLE 9 ii MISCELLANEOUS 9.1. Notices .................................................. 82 9.2. No Waivers ............................................... 82 9.3. Expenses; Indemnification ................................ 83 9.4. Sharing of Set-Offs ...................................... 85 9.5. Amendments and Waivers ................................... 85 9.6. Successors and Assigns ................................... 86 9.7. Margin Stock Collateral .................................. 89 9.8. Confidentiality .......................................... 89 9.9. Governing Law; Submission to Jurisdiction ................ 89 9.10. Counterparts; Integration; Effectiveness ................ 90 9.11. Termination of Existing Credit Agreement................. 90 9.12. WAIVER OF JURY TRIAL .................................... 91 1 AGREEMENT dated as of September 12, 1995 among BETHLEHEM STEEL CORPORATION, the LENDERS listed on the signature pages hereof, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent and J.P. MORGAN DELAWARE, as Structuring and Collateral Agent. RECITALS WHEREAS, subject to the terms and conditions of this Agreement, the Borrower desires to borrow Loans and to have Letters of Credit issued for its account, all in an aggregate amount not to exceed $200,000,000; WHEREAS, the obligations of the Borrower with respect to such Borrowings and such Letters of Credit will be secured by a security interest in substantially all of the Borrower's Inventories, the Pledged Securities and the Pledged Interests (as defined in the Inventory Security Agreement); WHEREAS, the Lenders are willing to make Loans to the Borrower and to issue Letters of Credit and participate in Letters of Credit issued for the account of the Borrower or any Subsidiary, all on the terms and conditions set forth herein; and WHEREAS, Morgan Guaranty has been requested and is willing to act as the Administrative Agent and J.P. Morgan Delaware has been requested and is willing to act as the Structuring and Collateral Agent; NOW, THEREFORE, the parties hereto hereby agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.1. Definitions. The following terms, as used herein, have the following meanings: "Adjusted CD Rate" has the meaning set forth in Section. "Adjusted Consolidated Tangible Net Worth" means, at any date of determination, Consolidated Tangible Net Worth adjusted upward by the amount of any material non-recurring charges to income (without deduction for any related income tax effect) resulting from discontinuance of operations after December 31, 1994, all determined as of such date of determination. 2 "Adjusted London Interbank Offered Rate" has the meaning set forth in Section . "Administrative Agent" means Morgan Guaranty in its capacity as administrative agent for the Lenders, and its successors and assigns in such capacity. "Administrative Questionnaire" means, with respect to each Lender or L/C Issuing Bank, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Lender or L/C Issuing Bank. "Affiliate" means (i) any Person that directly, or indirectly through one or more intermediaries, controls the Borrower (a "Controlling Person") or (ii) any Person (other than the Borrower or a Subsidiary) which is controlled by or is under common control with a Controlling Person. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Agent" means the Administrative Agent or the Collateral Agent and "Agents" means the Administrative Agent and the Collateral Agent. "Aggregate Letter of Credit Amount" means, at any time, the sum of (i) the then aggregate outstanding face amount of the Letters of Credit issued pursuant to Section 2.2 hereof and (ii) the then aggregate outstanding face amount of letters of credit issued pursuant to Section 2.9 of the Receivables Purchase Agreement. "Agreement" means this Inventory Credit Agreement, as amended from time to time. "Applicable Lending Office" means, with respect to any Lender, (i) in the case of its Domestic Loans, its Domestic Lending Office and (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office. "Applicable Percentage" means (i) 100%, if no Increased Coverage Event has occurred, or (ii) 105%, if an Increased Coverage Event has occurred; provided that if the Secured Principal Amount does not exceed 85% of the Borrowing Base for a period of six consecutive months beginning at any time after the occurrence of the most recent Increased Coverage Event, the Applicable Percentage shall be decreased at the end of such six month period to 100% (unless and until another Increased Coverage Event occurs). "Assessment Rate" has the meaning set forth in Section. "Assignee" has the meaning set forth in Section. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. 3 "Base Rate Loan" means a loan which bears interest at the Base Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate Election or the provisions of Section 2.6(c) or Article 8". "Base Rate Margin" means a rate per annum determined in accordance with the Pricing Schedule. "Benefit Arrangement" means at any time an "employee benefit plan" within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained, or otherwise contributed to, by any member of the ERISA Group. "Borrower" means Bethlehem Steel Corporation, a Delaware corporation, and its successors. "Borrower's 1994 Form 10-K" means the Borrower's annual report on Form 10-K for 1994, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Borrowers Latest Form 10-Q" means the Borrower's quarterly report on Form 10-Q for the quarter ended June 30, 1995, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Borrowing" means a borrowing hereunder consisting of Loans made to the Borrower on the same day pursuant to Article 2, all of which Loans are of the same type (subject to Article 8") and, except in the case of Base Rate Loans, have the same initial Interest Period. A Borrowing is a "Domestic Borrowing" if such Loans are Domestic Loans or a "Euro-Dollar Borrowing" if such Loans are Euro-Dollar Loans. A Domestic Borrowing is a "CD Borrowing" if such Domestic Loans are CD Loans or a "Base Rate Borrowing" if such Domestic Loans are Base Rate Loans. "Borrowing Base" means, at any date, an amount equal to the sum of (i) 55% of the aggregate amount of Eligible Inventories which are Finished and Semifinished Inventories at such date, and (ii) 25% of the aggregate amount of Eligible Inventories which are Raw Materials Inventories at such date; provided that (x) the Borrowing Base shall at no time exceed the Receivables Maximum Purchase Price at such time and (y) if an Event of Default specified in clause (l) of Section 6.1 shall have been waived pursuant to Section 9.5, the Borrowing Base shall be reduced by the aggregate amount of claims secured by Federal Liens (or by such lesser amount as the Required Lenders may agree). "Borrowing Base Certificate" means a certificate duly executed by the Chief Financial Officer, the Treasurer or the Controller of the Borrower, appropriately completed and substantially in the form of Exhibit F hereto. "BSF" means Bethlehem Steel Funding, LLC, a Maryland limited liability company. "CD Base Rate" has the meaning set forth in Section. 4 "CD Loan" means a loan which bears interest at a CD Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate Election. "CD Margin" means a rate per annum determined in accordance with the Pricing Schedule. "CD Rate" means a rate of interest determined pursuant to Section on the basis of an Adjusted CD Rate. "CD Reference Banks" means Chemical Bank, The Long-Term Credit Bank of Japan, Ltd. and Morgan Guaranty and each such other bank as may be appointed pursuant to Section 9.6(d). "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and regulations promulgated thereunder. "Closing Date" means the date on or after the Effective Date on which the conditions set forth in Section 3.1 shall have been satisfied. "Collateral" has the meaning set forth in Section 1 of the Inventory Security Agreement. "Collateral Agent" means J.P. Morgan Delaware as Structuring and Collateral Agent for the Lenders, and its successors and assigns in such capacity. "Collateral Report" means a report of the Collateral Agent with respect to the Inventories included in the Borrowing Base calculation by the Borrower referred to in such report. Such report will state that it is based upon a review (but not an audit) by the Collateral Agent of information supplied by the Borrower relating to the Inventories (including information as to the cost, market price, location and respective categories thereof). "Commitment" means (i) with respect to each Lender, the amount set forth opposite the name of such Lender on the signature pages hereof, or (ii) with respect to any Assignee, the amount of the transferor Lenders's Commitment assigned to such Assignee pursuant to Section 9.6(c), in each case as such amount may be reduced from time to time pursuant to Section 2.9! or changed as a result of an assignment pursuant to Section 9.6(c). "Commitment Fee" has the meaning set forth in Section 2.8. "Consolidated Subsidiary" means, at any date, any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements if its consolidated financial statements were prepared as of such date. "Consolidated Tangible Net Worth" means, at any date, the consolidated stockholders' equity of the Borrower and its Consolidated Subsidiaries less their consolidated Intangible Assets, all determined as of such date. For purposes of this definition "Intangible Assets" means the amount (to the extent reflected in 5 determining such consolidated stockholders' equity) of (i) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of assets of a going concern business made within twelve months after the acquisition of such business) subsequent to December 31, 1994 in the book value of any asset owned by the Borrower or a Consolidated Subsidiary, and (ii) all unamortized debt discount and expense, unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, organization or developmental expenses and other intangible assets (but not including any deferred income tax asset or any pension asset). "Debt" of any Person means, at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all non-contingent obligations of such Person to reimburse or repay any lender or other Person in respect of amounts paid under a letter of credit, banker's acceptance or similar instrument, and (vi) all Debt secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or passage of time or both would, unless cured or waived, become an Event of Default. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, as to each Lender, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Lender may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent; provided that any Lender may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Lender shall be deemed to refer to either or both of such offices, as the context may require. "Dollar" and "$" means lawful currency of the United States. "Domestic Loan" means a CD Loan or a Base Rate Loan and "Domestic Loans" means CD Loans or Base Rate Loans or both. "Domestic Reserve Percentage" has the meaning set forth in Section . "EDS" means Electronic Data Systems Corporation, a Texas corporation, and its successors and assigns. 6 "Effective Date" means the date on which this Agreement becomes effective in accordance with Section 9.10(. "Eligible Inventories" means, at any date, the value (determined at the lower of cost or market on a basis consistent with the balance sheet as at December 31, 1994 referred to in Section 4.4(a)) at such date of all Inventories which are (a) owned by the Borrower free of all Liens, other than Permitted Liens (as defined in the Inventory Security Agreement), (b) in the possession of the Borrower (i) on premises owned (or, in the case of the premises leased from Twincast Property Leasing, Inc. at Burns Harbor and Sparrows Point, leased) by the Borrower at its Burns Harbor, Sparrows Point, Bethlehem, Steelton and Lackawanna facilities; provided that in the case of leased premises the Collateral Agent has received evidence satisfactory to it (including landlord waivers satisfactory to it) that it may enter such leased premises for the purposes specified in Section 8(C) of the Inventory Security Agreement, (ii) on premises leased by the Borrower at any of the locations listed on Exhibit B hereto; provided that the Collateral Agent has received evidence satisfactory to it (including landlord waivers satisfactory to it) that it may enter such premises for the purposes specified in Section 8(C) of the Inventory Security Agreement, (iii) at such other premises, owned or leased by the Borrower, as the Required Lenders may approve, or (iv) at such other premises listed on Exhibit C-1 hereto and maintained by processors or warehouses (the "Bailees") or as the Required Lenders may approve; provided that (i) the Inventories at such premises are (x) reflected on the Borrower's books and records, (y) audited by the Borrower or the Borrower's external auditors on a basis approved by the Collateral Agent, and (z) appropriately identified and monitored by the Borrower's Outside Processing Inventory Control System or any successor system satisfactory to the Collateral Agent, (ii) upon transfer or sale of such Inventory, such Inventory is delivered on behalf of and for the account of the Borrower, (iii) the form of the Inventory is not fundamentally altered, and (iv) the Bailee has entered into a Collateral Access Agreement substantially in the form of Exhibit C-2 hereto; (c) as to which appropriate UCC financing statements have been filed naming the Borrower as "debtor" and the Collateral Agent as "secured party"; provided that Eligible Inventories shall not include (i) any Inventories which have been shipped to a customer of the Borrower, even on a consignment basis; (ii) any Inventories which are not Raw Materials Inventories or Finished and Semifinished Inventories; (iii) any Inventories held by the Borrower for sale, 7 lease or other disposition, or to be furnished by the Borrower under a contract for services, or to be used or consumed by the Borrower, in the Borrower's marine construction business; (iv) all Finished and Semifinished Inventories in any product account at a facility of the Borrower (a "Facility Product Account") included in any category or subcategory of Finished and Semifinished Inventories set forth on Exhibit D if such Facility Product Account has an Inventory Turnover Rate lower than the rate for such category or subcategory set forth on Exhibit D; and (v) any Inventories which the Required Lenders reasonably determine in good faith to be unmarketable. For purposes of this definition, "Inventory Turnover Rate" means, with respect to any category or subcategory of Finished and Semifinished Inventories and at any date, the quotient obtained by dividing (a) the average of the amount of Eligible Inventories in such category or subcategory sold or consumed by the Borrower during each of the three calendar months ending immediately prior to such date, expressed on an annualized basis, by (b) the average of the amount of Eligible Inventories in such category or subcategory at the end of each of the three calendar months ending immediately prior to such date. The amount of Eligible Inventories in any such category or subcategory shall be determined on the basis of the tonnage of such Eligible Inventories. "Environmental Laws" means any and all federal, state and local statutes, laws (including case law), regulations, ordinances, rules, judgments, orders, decrees, codes, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and governmental restrictions, whether now or hereafter in effect, relating to the environment, to the effect of the environment on human health or the Release of pollutants, contaminants, Hazardous Substances, wastes or any other materials into the environment or the clean-up or other remediation thereof. "Environmental Liabilities" means all liabilities of the Borrower and any of its Subsidiaries, whether vested or unvested, contingent or fixed, actual or potential, known or unknown, which arise under or relate to matters covered by Environmental Laws. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in Dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Lender, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Lender as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent. 8 "Euro-Dollar Loan" means a loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate Election. "Euro-Dollar Margin" means a rate per annum determined in accordance with the Pricing Schedule. "Euro-Dollar Rate" means a rate of interest determined pursuant to Section on the basis of an Adjusted London Interbank Offered Rate. "Euro-Dollar Reference Banks" means the principal London offices of Chemical Bank, The Long-Term Credit Bank of Japan, Ltd. and Morgan Guaranty and each such other bank as may be appointed pursuant to Section 9.6(d). "Euro-Dollar Reserve Percentage" has the meaning set forth in Section. "Event of Default" has the meaning set forth in Section 6.1. "Existing Credit Agreement" means the Credit Agreement dated as of December 15, 1987 among the Borrower, the lenders party thereto and Morgan Guaranty, as agent, as amended to the date hereof. "Existing Letters of Credit" means the letters of credit issued before the Closing Date and listed on Schedule 1 hereto. "Existing Security Agreement" means the Security Agreement dated as of December 15, 1987 among the Borrower, J.P. Morgan Delaware, as security agent and Morgan Guaranty, as concentration bank and loan agent, as amended to the date hereof. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day; provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Morgan Guaranty on such day on such transactions as determined by the Administrative Agent. "Federal Lien" has the meaning set forth in Section 6.1(l). "Fees" means the Commitment Fee and the Letter of Credit Fees. "Financing Documents" means this Agreement (including the Schedules and Exhibits hereto), the Notes and the Inventory Security Agreement. 9 "Finished and Semifinished Inventories" means, at any date, all assets of the Borrower which were or would have been classified as finished and semifinished products (including contract work in progress less billings), in the Borrower's consolidated balance sheets referred to in Section 4.4(a), except for tool steel, foundry products and bolts, nuts, rivets and spikes. "Fixed Rate Borrowing" means a CD Borrowing or a Euro-Dollar Borrowing. "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or both. "Group of Loans" means at any time a group of Loans consisting of (i) all Loans which are Base Rate Loans at such time, (ii) all Euro-Dollar Loans having the same Interest Period at such time or (iii) all CD Loans having the same Interest Period at such time; provided that, if a Loan of any particular Lender is converted to or made as a Base Rate Loan pursuant to Article 8", such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the holder of such Debt of the payment thereof or to protect such holder against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Hazardous Substances" means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics, whether or not regulated under Environmental Laws. "Increased Coverage Event" means any one of the following three events or conditions: (i) the maturity of Debt of the Borrower and its Subsidiaries exceeding $10,000,000 in aggregate principal amount is accelerated, (ii) the maturity of Debt Guaranteed by the Borrower or any Subsidiary is accelerated and the aggregate principal amount which the Borrower and its Subsidiaries become obligated to pay under their Guarantees of such Debt by reason of such acceleration exceeds $10,000,000 in any twelve month period or an aggregate of $30,000,000 at any time prior to the Termination Date, or 10 (iii) one or more defaults occur under any agreement or agreements in respect of Debt Guaranteed by the Borrower or any Subsidiary and the aggregate principal amount of such Guaranteed Debt exceeds $10,000,000 and as a consequence of such default or defaults the Borrower or any of its Subsidiaries shall make any payment or give or agree to give any consideration or benefit of any kind (including, without limitation, any increased compensation, prepayment, shortening of maturities, security or other credit support) to the holders of such Guaranteed Debt and such payment, consideration or benefit is determined by the Required Lenders, after taking into account any payment, consideration or benefit paid, given or agreed to be given by such holders to the Borrower or any of its Subsidiaries (other than a waiver of such default), to be a material benefit to the holders of such Guaranteed Debt. "Indemnitee" has the meaning set forth in Section 9.3(c). "Initial Commitment" means, with respect to any Lender, such Lender's initial commitment under this Agreement, as reflected in such Lender's commitment letter delivered to the Borrower, with a copy to the Administrative Agent. "Interest Period" means: (i) with respect to each Euro-Dollar Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; (ii) with respect to each CD Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending 30, 60 or 90 days thereafter, as the Borrower may elect in the applicable notice; provided that: 11 (a) any Interest Period (other than an Interest Period determined pursuant to clause (b) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Inventories" means, whether now owned or hereafter acquired by the Borrower, all "inventory" (as defined in the UCC), wherever located, and shall also mean and include, without limitation, all raw materials and other materials and supplies, work-in-process and finished goods and any products made or processed therefrom and all substances, if any, commingled therewith or added thereto, or which, in accordance with generally accepted accounting principles, would be included in inventories on the Borrower's balance sheets, (excluding, however, any of the foregoing which (i) is located outside the United States, (ii) is held at the Borrower's marine construction facilities at Sparrows Point, Maryland or Port Arthur, Texas for sale or other disposition, or to be furnished by the Borrower under a contract for services, or to be used or consumed by the Borrower, in the Borrower's marine construction business or (iii) has been returned to or repossessed by the Borrower or stopped in transit (including all additions and accessions thereto and replacements thereof)). "Inventory Information Memorandum" means the Bethlehem Steel Corporation Inventory Financing Facility Overview of Structure and Collateral dated as of July 1995. "Inventory Security Agreement" means the Inventory Security and Pledge Agreement dated as of September 12, 1995 among the Borrower, the Special Purpose Members, the Collateral Agent and the Administrative Agent, substantially in the form of Exhibit E hereto, as amended from time to time. "Issuance" means the issuance of a Letter of Credit pursuant to Section 2.2. "L/C Fee Rate" means a rate per annum determined in accordance with the Pricing Schedule. "L/C Issuing Bank" means each of Morgan Guaranty, Chemical Bank and The Long-Term Credit Bank of Japan, Ltd., each in its capacity as issuing bank for the Letters of Credit hereunder, or all of them, as the context may require, and their respective successors and each such other bank as may be appointed pursuant to Section 2.2(j); provided that when used with respect to any Syndicated Letter of Credit, "L/C Issuing Bank" shall mean Morgan Guaranty, and when used with respect to any Participated Letter of Credit, "L/C Issuing Bank" shall mean whichever of Morgan Guaranty, Chemical Bank, The Long- 12 Term Credit Bank of Japan, Ltd. and such other Lender as may be appointed pursuant to Section 2.2 (j) shall have issued such Participated Letter of Credit. "L/C Issuing Bank Letter of Credit Fee" has the meaning set forth in Section 2.2(g). "Lender" means each lender listed on the signature pages hereof, each Assignee which becomes a Lender pursuant to Section , and their respective successors. "Letter of Credit Fees" means the Letter of Credit Participation Fee and the L/C Issuing Bank Letter of Credit Fee. "Letter of Credit Participation Fee" has the meaning set forth in Section 2.2(g). "Letters of Credit" has the meaning set forth in Section 2.2(a)!. "Lien" means, with respect to any asset, any mortgage, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, including, without limitation, any conditional sale, capital lease or title retention arrangement in respect of such asset. "Loan" means a Domestic Loan or a Euro-Dollar Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or both. "London Interbank Offered Rate" has the meaning set forth in Section . "Maximum Letter of Credit Amount" means at any time $150,000,000. "Morgan Guaranty" means Morgan Guaranty Trust Company of New York, a New York State banking corporation. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" has the meaning set forth in Section 2.3(a)#. "Notice of Interest Rate Election" has the meaning set forth in Section 2.6(a)". 13 "Notice of Issuance" has the meaning set forth in Section 2.2(b). "Parent" means, with respect to any Lender, any Person controlling such Lender. "Participant" has the meaning set forth in Section . "Participated Letter of Credit" has the meaning set forth in Section 2.2(a)(ii). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) for purposes of Section 6.1(j) only, has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group, if any member of the ERISA Group would be subject to liability pursuant to Section 4069(a) of ERISA or any other provision of Title IV of ERISA relating to treatment of transactions to evade liability with respect to such plan. "Pricing Schedule" means the Schedule attached hereto identified as such. "Prime Rate" means the rate of interest publicly announced by Morgan Guaranty in New York City from time to time as its prime rate. "Quarterly Date" means each March 31, June 30, September 30 and December 31. "Raw Materials Inventories" means, at any date, all assets of the Borrower which were or would have been classified by the Borrower as raw materials and supplies in the Borrower's consolidated financial statements referred to in Section 4.4(a), except for stores supplies, foundry products and supplies, initial complement of maintenance spare parts, brick, lubrication oils and greases, paint, cleaning mixture (including acids), bolts, nuts, rivets and tool steel. "Receivables Commitment" means at any time with respect to each financial institution which is a party to the Receivables Purchase Agreement, the 14 commitment of such financial institution under the Receivables Purchase Agreement. "Receivables Documents" means the Receivables Purchase Agreement and such other agreements, documents or instruments entered into and delivered by BSF or the Borrower in connection with the transactions contemplated by the Receivables Purchase Agreement. "Receivables Facility" means the receivables facility established pursuant to the Receivables Documents. "Receivables Maximum Purchase Price" means, at any date, the level of the Adjusted Aggregate Net Investment (as defined in the Receivables Purchase Agreement) under the Receivables Facility which would give rise at such date to an Adjusted Buyers' Interest of 100% under the Receivables Facility. "Receivables Purchase Agreement" means the Receivables Purchase Agreement dated as of September 12, 1995 among BSF, the Special Purpose Members, the Borrower, as servicer, the financial institutions party thereto, Morgan Guaranty, as administrative agent and J.P. Morgan Delaware, as structuring and collateral agent, substantially in the form delivered to the Lenders prior to the date hereof, and as amended from time to time. "Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may require, and "Reference Bank" means any one of such Reference Banks. "Regulated Activity" means any generation, treatment, storage, recycling, transportation or disposal of any Hazardous Substance. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Reimbursement Obligation" means an obligation of the Borrower to reimburse the L/C Issuing Banks or the Lenders, as the case may be, pursuant to Section 2.2 for the amount of a drawing under a Letter of Credit. "Release" means any discharge, emission or release, including a Release as defined in CERCLA at 42 U.S.C. Section 9601(22). The term "Released" has a corresponding meaning. "Required Lenders" means, at any time, Lenders having at least 66 2/3% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, having at least 66 2/3% of the aggregate Total Exposure of all the Lenders. "Revolving Credit Period" means the period from and including the Closing Date to but not including the Termination Date. 15 "S&P" means Standard & Poor's Ratings Group, together with its successors. "Secured Principal Amount" means, at any time, the sum of (i) the aggregate principal amount of the Loans then outstanding, (ii) the aggregate undrawn amount which is then, or may thereafter become, available for drawing under outstanding Letters of Credit, (iii) the aggregate amount of all unpaid Reimbursement Obligations for drawings theretofore made under Letters of Credit and (iv) the aggregate principal amount of Secured Tax Exempt Debt then outstanding. "Secured Tax Exempt Debt" means all obligations (whether contingent or non-contingent) of the Borrower arising under the Reimbursement Agreement dated as of October 1, 1994 between the Borrower and NBD Bank and the Tender Agent Agreement dated as of October 1, 1994 between the Borrower and NBD Bank and all documents and instruments executed in connection with the foregoing and all renewals, extensions and amendments thereof; provided that the aggregate principal amount of such Secured Tax Exempt Debt shall not at any time exceed $3,000,000. "Security Interests" means the security interests in the Collateral granted under the Inventory Security Agreement to secure the Secured Obligations and Guaranties (as defined therein). "Significant Subsidiary" means at any time any Subsidiary, except Subsidiaries which at such time have been designated by the Borrower (by notice to the Administrative Agent, which may be amended from time to time) as nonmaterial and which, if aggregated and considered as a single subsidiary, would not meet the definition of a "significant subsidiary" contained as of the date hereof in Regulation S-X of the Securities and Exchange Commission. "Special Purpose Member" means Bethlehem Steel Credit Affiliate One, Inc., a Maryland corporation, or Bethlehem Steel Credit Affiliate Two, Inc., a Maryland corporation, and "Special Purpose Members" means both Bethlehem Steel Credit Affiliate One, Inc., a Maryland corporation and Bethlehem Steel Credit Affiliate Two, Inc., a Maryland corporation. "Subsidiary" means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person; unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower. "Syndicated Letter of Credit" has the meaning set forth in Section 2.2(a)!(i). "Termination Date" means September 12, 2000, or, if such day is not a Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the Termination Date shall be the next preceding Euro-Dollar Business Day. 16 "Total Exposure" means, with respect to any Lender at any time, the sum of (i) the aggregate principal amount of its Loans then outstanding, (ii) its share of the undrawn amount which is then, or may thereafter become, available for drawing under each outstanding Letter of Credit and (iii) its share of the amount of each unpaid Reimbursement Obligation for drawings theretofore made under any Letter of Credit. "UCC" means the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided that if, by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the Security Interests in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, "UCC" means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. "Undrawn L/C Amount" shall mean, with respect to each Letter of Credit at any date of determination thereof, the undrawn amount of such Letter of Credit on such date. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. SECTION 1.2. UCC Terms. With respect to the Security Interests, terms not otherwise defined herein which are defined in the UCC shall, unless the context otherwise requires, have the meanings set forth therein. SECTION 1.3. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Lenders; provided that, if any change in generally accepted accounting principles after June 30, 1995 in itself materially affects Adjusted Consolidated Tangible Net Worth, the Borrower may by notice to the Administrative Agent, or the Administrative Agent (at the request of the Required Lenders) may by notice to the Borrower, require that Adjusted Consolidated Tangible Net Worth thereafter be calculated in accordance with generally accepted accounting principles as in effect, and applied by the Borrower, immediately before such change in generally accepted accounting principles occurs. If such notice is given, 17 the compliance certificates delivered pursuant to Section 5.1(c) after such change occurs shall be accompanied by reconciliations of the difference between the calculation set forth therein and a calculation made in accordance with generally accepted accounting principles as in effect from time to time after such change occurs. ARTICLE 2 THE CREDITS SECTION 2.1. Commitments to Lend. During the Revolving Credit Period, each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Loans to the Borrower from time to time; provided that, immediately after each such Loan is made, such Lender's Total Exposure shall not exceed the amount of its Commitment. Each Borrowing under this Section shall be in an aggregate principal amount of $20,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount of the unused Commitments) and shall be made from the several Lenders ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this Section, prepay Loans to the extent permitted by Section 2.11" and reborrow at any time during the Revolving Credit Period under this Section. SECTION 2.2. Letters of Credit. (a) Commitment to Issue Letters of Credit. ------------------------------------- (i) The Borrower may from time to time request that (A) the Lenders, acting through the L/C Issuing Bank in accordance with subsection (iii) below, issue a letter of credit (a "Syndicated Letter of Credit") pursuant to which the Lenders shall be severally obligated to the beneficiary to pay any drawings made thereunder ratably in proportion to their respective Commitments or (B) an L/C Issuing Bank issue a letter of credit (a "Participated Letter of Credit") pursuant to which such L/C Issuing Bank shall be obligated to the beneficiary to pay any drawings made thereunder and the Lenders shall be obligated to the L/C Issuing Bank to participate ratably in such drawings in proportion to their respective Commitments as hereinafter provided. Syndicated Letters of Credit and Participated Letters of Credit are collectively referred to herein as "Letters of Credit". (ii) On the Closing Date, each L/C Issuing Bank that has issued an Existing Letter of Credit shall be deemed, without further action by any party hereto, to have issued a Participated Letter of Credit hereunder, and each Lender 18 shall be deemed, without further action by any party hereto, to have agreed to participate ratably in proportion to its Commitment in any drawings made under such Existing Letter of Credit. The Borrower and the Lenders party hereto that are also party to the Existing Credit Agreement agree that, concurrently with such issuance hereunder, the participations in the Existing Letters of Credit under the Existing Credit Agreement shall be automatically canceled without further action by any of the parties thereto. On and after the Closing Date each Existing Letter of Credit shall be deemed issued hereunder and shall thereupon be a Letter of Credit hereunder. (iii) Subject to subsection (v) below, and in accordance with its customary procedures (to the extent such procedures are not inconsistent with the terms of this Agreement), the L/C Issuing Bank agrees, on the terms and conditions set forth in this Agreement and at the request of the Borrower, to execute and deliver Syndicated Letters of Credit on behalf of each of the Lenders (and not as sole issuer) for the account of the Borrower or any Subsidiary from time to time from and including the Effective Date to but excluding the Termination Date; provided that no Syndicated Letter of Credit shall be issued, extended or renewed if such L/C Issuing Bank has been notified in writing by the Borrower, the Administrative Agent or the Required Lenders that any condition set forth in Section 3.2 is not satisfied on the date such Syndicated Letter of Credit is to be issued, extended or renewed; provided further that if any Syndicated Letter of Credit contains a provision pursuant to which it is deemed extended unless notice of termination is given by the L/C Issuing Bank, the L/C Issuing Bank shall give such notice of termination on behalf of each of the Lenders if it has been notified as provided in the immediately preceding proviso. The terms of each such Syndicated Letter of Credit shall provide that each Lender is obligated, severally and not jointly, to pay any drawings under such Letter of Credit ratably in proportion to such Lender's Commitment as in effect when such Letter of Credit is issued. Upon receipt of a Notice of Issuance pursuant to subsection (b) of this Section with respect to a Syndicated Letter of Credit, the L/C Issuing Bank shall prepare such Letter of Credit in a form customarily issued by it for its own account as issuing bank, but with such changes as the L/C Issuing Bank deems necessary or appropriate to reflect the fact that such Letter of Credit is a Syndicated Letter of Credit. Each Lender authorizes the L/C Issuing Bank to execute and issue such Syndicated Letter of Credit on its behalf as its attorney in fact; provided that such Syndicated Letter of Credit is issued in compliance with the provisions of this Section and within the limitations set forth in subsection (v) below. Promptly after issuance of any Syndicated Letter of Credit, the L/C Issuing Bank will send to each of the Lenders a copy of such Letter of Credit in the form in which it was issued. (iv) Subject to subsection (v) below, and in accordance with its customary procedures (to the extent such procedures are not inconsistent with the terms of this Agreement), the L/C Issuing Bank agrees, on the terms and conditions set forth in this Agreement and at the request of the Borrower, to issue Participated Letters of Credit as sole issuing bank for the account of the Borrower or any Subsidiary from time to time from and including the Effective Date to but excluding the Termination Date; provided that no Participated Letter of Credit shall be issued, extended or renewed if such L/C Issuing Bank has been notified in writing by the Borrower, the Administrative Agent or the Required Lenders that any condition set forth in Section 3.2 is not satisfied on the date such Participated. 19 Letter of Credit is to be issued, extended or renewed; provided further that if any Participated Letter of Credit contains a provision pursuant to which it is deemed extended unless notice of termination is given by the L/C Issuing Bank, the L/C Issuing Bank shall give such notice of termination if it has been notified as provided in the immediately preceding proviso. Each Lender agrees to participate ratably in proportion to its Commitment in any drawings made under each Participated Letter of Credit. (v) The obligations of the Lenders and the L/C Issuing Banks to issue Letters of Credit pursuant to clauses (iii) and (iv) above are subject to the following additional conditions: (A) no Letter of Credit shall be issued (or extended or renewed) if, immediately after the issuance thereof, any Lender's Total Exposure would exceed the amount of its Commitment; (B) no Letter of Credit shall be issued (or extended or renewed) if, immediately after the issuance thereof, the Aggregate Letter of Credit Amount would exceed the Maximum Letter of Credit Amount; (C) no Letter of Credit shall expire more than 18 months after its date of issuance; provided that a Letter of Credit may contain a provision pursuant to which it is deemed to be extended on an annual basis unless notice of termination is given by the L/C Issuing Bank; provided further that no Letter of Credit shall have an expiry date later than seven Domestic Business Days prior to the Termination Date; (D) without the approval of the Required Lenders (and in the case of Participated Letters of Credit, the L/C Issuing Bank), no Letter of Credit shall be issued (x) to support the obligations of the Borrower or any Subsidiary with respect to any Debt or Guarantee, or (y) to finance the export or import of weapons; (E) the Borrower shall have used its reasonable best efforts to cause, to the extent practicable, the aggregate face amount of all outstanding Participated Letters of Credit issued by each L/C Issuing Bank to be equal to the aggregate face amount of all outstanding Participated Letters of Credit issued by each other L/C Issuing Bank; and (F) the aggregate face amount of all outstanding Participated Letters of Credit issued by any one L/C Issuing Bank shall not exceed $80,000,000. (vi) The L/C Issuing Banks and the Lenders shall not be obligated to issue any Letter of Credit in connection with the financing of imports into or exports from the United States if the L/C Issuing Bank believes that the issuance of such Letter of Credit would not meet the criteria (with regard to goods shipped, nationality of beneficiary, country of origin, or other similar considerations) customarily applied by it when considering a request to issue such letters of credit. 20 (b) Notice of Issuance. The Borrower shall give, at least ------------------ three Domestic Business Days before each Letter of Credit is to be issued, notice (a "Notice of Issuance") to (x) the Administrative Agent and (y) to the L/C Issuing Bank issuing such Letter of Credit (which, in the case of a Participated Letter of Credit, shall, subject to Section 2.2(a), be the L/C Issuing Bank selected by the Borrower) specifying: (A) the date of issuance and expiry date of such Letter of Credit, (B) if Morgan Guaranty is the L/C Issuing Bank, whether such Letter of Credit is to be a Syndicated Letter of Credit or a Participated Letter of Credit, (C) the proposed terms of such Letter of Credit, including the face amount thereof, and (D) the transaction that is to be supported or financed by such Letter of Credit. The Administrative Agent shall, upon receipt of a Notice of Issuance, promptly notify each Lender of the contents thereof and of the amount of such Lender's ratable share of or participation in such Letter of Credit and such Notice of Issuance shall not thereafter be revocable by the Borrower. (c) Undrawn L/C Amounts. Any increase in the Undrawn L/C ------------------- Amount with respect to any outstanding Letter of Credit may be by amendment or replacement of such Letter of Credit, but in either event such increase shall be deemed to constitute the issuance of a new Letters of Credit and, therefore, subject to the satisfaction of the conditions set forth in Section 3.2. Reductions in the Undrawn L/C Amounts of outstanding Letters of Credit (other than by drawings thereunder) may occur by the terms thereof or by amendment or replacement of such Letters of Credit, in which event such reduction shall be effective at the time of such amendment or exchange. (d) Drawings under Letters of Credit. -------------------------------- (i) Upon receipt from the beneficiary of any Letter of Credit of demand for payment under such Letter of Credit, the L/C Issuing Bank shall promptly notify the Borrower and the Administrative Agent of such request for payment and shall determine in accordance with the terms of such Letter of Credit whether such request for payment should be honored. (ii) If the L/C Issuing Bank determines that a demand for payment by the beneficiary of a Syndicated Letter of Credit should be honored, the L/C Issuing Bank shall promptly notify the Borrower, the Administrative Agent and each Lender of the aggregate amount to be paid as a result of such demand and shall notify each Lender of its share of such amount. Each Lender shall make available its share of the amount so demanded in accordance with the terms of such Syndicated Letter of Credit, in Federal or other funds immediately available in New York City, to the L/C Issuing Bank at the L/C Issuing Bank's address specified in or pursuant to Section 9.1. The L/C Issuing Bank will make the funds so received from the Lenders available to the beneficiary at the L/C Issuing Bank's aforesaid address in accordance with the terms of such Syndicated Letter of Credit. (iii) If the L/C Issuing Bank determines that a demand for payment by the beneficiary of a Participated Letter of Credit should be honored, the L/C Issuing Bank shall make available to the beneficiary in 21 accordance with the terms of such Participated Letter of Credit the amount of the drawing under such Participated Letter of Credit. The L/C Issuing Bank shall thereupon notify the Borrower, the Administrative Agent and each Lender of the amount of such drawing paid by it and the amount of each Lender's participation therein. (e) Reimbursement and Other Payments by the Borrower. ------------------------------------------------ (i) If any amount is drawn under any Letter of Credit, the Borrower agrees to reimburse (A) the Administrative Agent for the account of each Lender, in the case of a Syndicated Letter of Credit, and (B) the L/C Issuing Bank, in the case of a Participated Letter of Credit, for all amounts paid by such Lender or the L/C Issuing Bank (as the case may be) upon such drawing, together with any and all reasonable charges and expenses which any Lender or the L/C Issuing Bank may pay or incur relative to such drawing and (x) interest on the amount drawn at the average rate charged to the L/C Issuing Bank on overnight Federal funds transactions for each day from and including the date such amount is drawn to but excluding the date such reimbursement payment is due and payable and (y) interest on any and all amounts unpaid by the Borrower when due hereunder with respect to a Letter of Credit from the date when due until such amount is paid in full, whether before or after judgment, payable on demand, at a rate per annum equal to the sum of 2% plus the Base Rate. Such reimbursement payment shall be due and payable (x) on the date the L/C Issuing Bank notifies the Borrower of such drawing, if such notice is given at or before 12:00 Noon (New York City time), or (y) if such notice is given after 12:00 Noon (New York City time), then not later than 10:00 A.M. (New York City time) on the first Domestic Business Day succeeding the date such notice is given. Promptly upon receipt of a reimbursement payment with respect to a Syndicated Letter of Credit, the Administrative Agent shall distribute to each Lender its pro rata share thereof, including interest, to the extent received by the Administrative Agent. (ii) In addition, the Borrower agrees to pay to each Lender (in the case of a Syndicated Letter of Credit) and the L/C Issuing Bank (in the case of a Participated Letter of Credit) upon each transfer of any Letter of Credit in accordance with its terms, a sum equal to such amount as shall be necessary to cover the reasonable costs and expenses of such Lender or the L/C Issuing Bank (as the case may be) incurred in connection with such transfer. (f) Payments by Lenders with Respect to Participated Letters -------------------------------------------------------- of Credit. - --------- (i) Each Lender shall make available an amount equal to its ratable share of any drawing under a Participated Letter of Credit, in Federal or other funds immediately available in New York City, to the L/C Issuing Bank by 3:00 P.M. (New York City time) on the Domestic Business Day following such drawing, together with interest on such amount at the average rate charged to the L/C Issuing Bank on overnight Federal funds transactions on the date of such drawing as determined by the L/C Issuing Bank, at the L/C Issuing Bank's address specified in or pursuant to Section 9.1; provided that each Lender's obligation shall be reduced by its pro rata share of any reimbursement by the Borrower in respect of such drawing pursuant to Section 2.2(e)(i); provided further that no Lender shall be obligated to make any payment under this Section with respect to. 22 any Participat ed Letter of Credit issued, extended or renewed if such L/C Issuing Bank had been notified in writing by the Borrower, the Administra tive Agent or the Required Lenders that any condition set forth in Section 3.2 was not satisfied on the date such Participat ed Letter of Credit was issued, extended or renewed. The L/C Issuing Bank shall notify each Lender and the Administra tive Agent of the amount of such Lender's obligation in respect of any drawing under a Participat ed Letter of Credit not later than 10:00 A.M. (New York City time) on the day such payment by such Lender is due. Each Lender shall be subrogated to the rights of the L/C Issuing Bank against the Borrower to the extent of all amounts paid by such Lender to the L/C Issuing Bank, plus interest thereon, from and including the day such amount is paid by such Lender to the L/C Issuing Bank to but excluding the day the Borrower makes payment to the L/C Issuing Bank pursuant to subsection (d) above, whether before or after judgment, at a rate per annum equal to the sum of 2% plus the Base Rate. (ii) If any Lender fails to pay any amount required pursuant to clause (i) of this subsection on the date on which such payment is due, interest shall accrue on such Lender's obligation to make such payment from and including the date such payment is due to but excluding the day such Lender makes such payment, whether before or after judgment, at a rate per annum equal to (A) in the case of the day such payment is due to and including the first succeeding Domestic Business Day (and any intervening days) following the day on which notice of such Lender's obligation in respect of any drawing was given, the average rate charged to the L/C Issuing Bank on overnight Federal funds transactions for each such day as determined by the L/C Issuing Bank and (B) thereafter, the sum of 2% plus the Base Rate. Any payment made by any Lender after 3:00 P.M., New York City time, on any Domestic Business Day shall be deemed for purposes of the preceding sentence to have been made on the next succeeding Domestic Business Day. (iii) The obligation of each Lender to pay to the L/C Issuing Bank its proportionate share of each drawing under a Participated Letter of Credit and the obligation of the Borrower to reimburse the Lenders or the L/C Issuing Banks for payments pursuant to this Section, shall be irrevocable, shall not be subject to any qualification or exception whatsoever and shall be binding in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, the following circumstances: (A) any lack of validity or enforceability of this Agreement; (B) the existence of any claim, set-off, defense or other right which the Borrower or any Lender may have at any time against a beneficiary of any Letter of Credit or any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), any L/C Issuing Bank, any Lender or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions; (C) any draft, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient. 23 in any respect or any statement therein being untrue or inaccurate in any respect; (D) the surrender or impairment of any security for the performance or observance of any of the terms of this Agreement; or (E) the occurrence or continuance of any Default or Event of Default. (g) Letter of Credit Fees. The Borrower agrees to pay to the --------------------- Administrative Agent for the account of each Lender a letter of credit fee (the "Letter of Credit Participation Fee") with respect to each Letter of Credit, computed for each day from and including the date of issuance of such Letter of Credit until the last day a drawing is available under such Letter of Credit, at the L/C Fee Rate on the Undrawn L/C Amount. The Borrower also agrees to pay to each L/C Issuing Bank, for its own account, a fee (the "L/C Issuing Bank Letter of Credit Fee"), computed with respect to the Undrawn L/C Amount of each Participated Letter of Credit issued by such L/C Issuing Bank as set forth in the preceding sentence, at a rate per annum equal to 1/4 of 1%. Such Letter of Credit Fees shall be payable quarterly in arrears on each Quarterly Date and on the Termination Date. (h) Payment upon Acceleration. If the Commitments shall be ------------------------- terminated or the principal of the Notes shall become immediately due and payable pursuant to Section 2.10 or 6.1, but the Administrative Agent shall not have given an Enforcement Notice (as defined in the Inventory Security Agreement) as provided in Section 6.1, the Borrower shall pay to the L/C Issuing Bank for application to drawings under any then outstanding Letters of Credit an amount equal to the aggregate amount which is then, or may thereafter become, available for drawing under such Letters of Credit. The L/C Issuing Bank shall invest such amount in Liquid Investments (as defined in the Inventory Security Agreement) at the direction of the Administrative Agent. If the Administrative Agent subsequently gives an Enforcement Notice or an event specified in clause (h) or (i) of Section 6.1 shall have occurred and be continuing with respect to the Borrower, the L/C Issuing Bank shall pay all amounts held by it pursuant to this subsection to the Collateral Agent for application pursuant to the Inventory Security Agreement. If an Enforcement Notice is not then in effect and no event specified in clause (h) or (i) of Section 6.1 shall have occurred and be continuing with respect to the Borrower, any amount so paid by the Borrower to the L/C Issuing Bank with respect to a Letter of Credit and not applied to a drawing thereunder shall be repaid to the Borrower, with interest or other income (to the extent received by the L/C Issuing Bank on the related Liquid Investments), as promptly as practicable after such Letter of Credit expires or is fully drawn. (i) Limited Liability of the L/C Issuing Bank. The Borrower ----------------------------------------- assumes all risks of the acts or omissions of any beneficiary and any transferee of any Letter of Credit with respect to its use of such Letter of Credit. The Lenders, the L/C Issuing Banks and their respective officers and directors shall not be liable or responsible for: (i) the use which may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (ii) the validity, sufficiency or genuineness of documents presented under any Letter of Credit, or of any endorsements thereon, even if such documents should in fact. 24 prove to be in any or all respects invalid, insufficient, fraudulent or forged; (iii) payment by the L/C Issuing Bank or, in the case of a Syndicated Letter of Credit, any Lender against presentation of documents to the L/C Issuing Bank which do not comply with the terms of any Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (iv) any other circumstances whatsoever in making or failing to make or notifying or failing to notify any Lender that it is required to make any payment under any Letter of Credit. Notwithstanding the foregoing, the Borrower shall have a claim against the L/C Issuing Bank and, in the case of clause (ii)(B) of this sentence, against any Lender, and the L/C Issuing Bank or a Lender, as the case may be, shall be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential, damages suffered by the Borrower which were caused by (i) the L/C Issuing Bank's willful misconduct or gross negligence in determining whether documents presented under any Letter of Credit comply with the terms thereof or (ii) (A) the L/C Issuing Bank's willful failure to pay, or to notify any Lender that it is required to pay, or, (B) in the case of Syndicated Letters of Credit, a Lender's willful failure to pay, after receipt of notice from the L/C Issuing Bank pursuant to Section 2.2(d)(ii) , under any Letter of Credit after the presentation to the L/C Issuing Bank by any beneficiary (or a successor beneficiary to whom such Letter of Credit has been transferred in accordance with its terms) of documents strictly complying with the terms and conditions of such Letter of Credit; provided that this clause (ii) shall not apply to any failure by the L/C Issuing Bank or Lender to pay under any Letter of Credit to the extent that such payment is prevented by injunction or other similar court order. Subject to the preceding sentence, the L/C Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary unless any beneficiary (or a successor beneficiary to whom such Letter of Credit has been transferred in accordance with its terms) and the Borrower shall have notified the L/C Issuing Bank that such documents do not comply with the terms and conditions of such Letter of Credit. Each Lender shall, ratably in accordance with its Commitment , indemnify the L/C Issuing Bank (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from the L/C Issuing Bank's gross negligence or willful misconduct ) that the L/C Issuing Bank may suffer or incur in connection with this Agreement or any action taken or omitted by the L/C Issuing Bank hereunder. (j) Appointment of L/C Issuing Bank. The Borrower and the ------------------------------- Administrative Agent may, by one or more written instruments acceptable to and executed by each of them, appoint one or more Lenders to perform all or any portion of the functions of an L/C Issuing Bank with respect to Participated Letters of Credit under this Agreement. SECTION 2.3. Method of Borrowing. (a) The Borrower shall ------------------- give the Administrative Agent notice (a "Notice of Borrowing") not later than (x) 10:30 A.M. (New York City time) on the date of each Base Rate Borrowing, (y) 12:00 Noon (New York City time) on the second Domestic Business Day before each CD Borrowing and (z) 12:00 Noon (New York City time) on the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: 25 (i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing; (ii) the aggregate amount of such Borrowing; (iii) whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate, a CD Rate or a Euro-Dollar Rate; and (iv) in the case of a Fixed Rate Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. A Notice of Borrowing shall not be required in connection with a conversion pursuant to the second sentence of Section 2.6(c) or a borrowing of Base Rate Loans pursuant to Section 8.1 or Section 8.2. (b) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Lender of the contents thereof and of such Lender's ratable share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (c) Not later than 12:00 Noon (New York City time) on the date of each Borrowing, each Lender shall make available its ratable share of such Borrowing, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address referred to in Section 9.1. Unless the Administrative Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Administrative Agent will make the funds so received from the Lenders available to the Borrower at the Administrative Agent's aforesaid address. (d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsection (c) of this Section and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such share available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.7 and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Loan included in such Borrowing for purposes of this Agreement. 26 SECTION 2.4. Notes. (a) The Loans of each Lender shall be ----- evidenced by a single Note payable to the order of such Lender for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Lender's Loans. (b) Each Lender may, by notice to the Borrower and the Administrative Agent, request that its Loans of a particular type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to the "Note" of such Lender shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Lender's Note pursuant to Section , the Administrative Agent shall forward such Note to such Lender. Each Lender shall record the date, amount and type of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and may, if such Lender so elects in connection with any transfer or enforcement of its Note, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Lender is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.5. Maturity of Loans. Each Loan shall mature, and ----------------- the principal amount thereof shall be due and payable, on the Termination Date. SECTION 2.6. Method of Electing Interest Rates. (a) The --------------------------------- Loans included in each Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article 8"), as follows: (i) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to CD Loans or Euro-Dollar Loans; (ii) if such Loans are CD Loans, the Borrower may elect to convert such Loans to Base Rate Loans or Euro-Dollar Loans or elect to continue such Loans as CD Loans for an additional Interest Period, subject to Section 2.14 in the case of any such conversion or continuation effective on any day other than the last day of the then current Interest Period applicable to such Loans; and (iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans or CD Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, subject to Section 2.14 in the case of any such conversion or 27 continuation effective on any day other than the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Administrative Agent not later than 10:00 A.M. (New York City time) on the third Euro-Dollar Business Day before the conversion or continuation selected in such notice is to be effective (unless the relevant Loans are Domestic Loans to be converted to Domestic Loans of the other type or are CD Rate Loans to be continued as CD Rate Loans for an additional Interest Period, in which case such notice shall be delivered to the Administrative Agent not later than 10:00 A.M. (New York City time) on the second Domestic Business Day before such conversion or continuation is to be effective). A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each $20,000,000 or any larger multiple of $1,000,000. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection (a) above; (iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if the Loans being converted are to be Fixed Rate Loans, the duration of the next succeeding Interest Period applicable thereto; and (iv) if such Loans are to be continued as CD Loans or Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period. (c) Upon receipt of a Notice of Interest Rate Election from the Borrower pursuant to subsection (a) above, the Administrative Agent shall promptly notify each Lender of the contents thereof and such notice shall not thereafter be revocable by the Borrower. If the Administrative Agent does not receive a Notice of Interest Period Election for Fixed Rate Loans pursuant to subsection (a) of this Section within the applicable time limit specified therein prior to the last day of the current Interest Period applicable to such Loans, and the Borrower has not 28 delivered a notice of prepayment relating to such Loans, then the Borrower shall be deemed to have elected that such Loans be converted to Base Rate Loans on the last day of such Interest Period. (d) An election by the Borrower to change or continue the rate of interest applicable to any Group of Loans pursuant to this Section shall not constitute a "Borrowing" subject to the provisions of Section 3.2. SECTION 2.7. Interest Rates. (a) Each Base Rate Loan shall -------------- bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the sum of the Base Rate Margin for such day plus the Base Rate for such day. Such interest shall be payable quarterly on each Quarterly Date and on the Termination Date, commencing on the first such date after such Base Rate Loan is made and, with respect to the principal amount of any Base Rate Loan converted to a CD Loan or a Euro-Dollar Loan, on each date a Base Rate Loan is so converted. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate Loans for such day. (b) Each CD Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin for such day plus the Adjusted CD Rate applicable to such Interest Period; provided that if any CD Loan shall, as a result of clause (ii)(b) of the definition of Interest Period, have an Interest Period of less than 30 days, such CD Loan shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. Such interest shall be payable for each Interest Period on the last day thereof and, with respect to the principal amount of any CD Loan converted or continued pursuant to Section 2.6 on a day other than the last day of the Interest Period applicable thereto, on the date of such conversion or continuation. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the higher of (i) the rate applicable to Base Rate Loans for such day and (ii) the sum of the CD Margin plus the Adjusted CD Rate applicable to such Loan at the date such payment was due. The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ] 1 ACDR = [ ------- ] + AR [ 1.00 - DRP ] ACDR = Adjusted CD Rate CDBR = CD Base Rate - --------------------- 1 The amount in brackets being rounded upward, if necessary, to the next higher 1/100 of 1%. 29 DRP = Domestic Reserve Percentage AR = Assessment Rate. The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Administrative Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any day the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. Sec 327.4(a) (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate. (c) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the Adjusted London Interbank Offered Rate applicable to such Interest Period; provided that, if any Euro-Dollar Loan shall, as a result of clause (i)(c) of the definition of Interest Period, have an Interest Period of less than one month, such Euro-Dollar Loan shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof and, with respect to the principal amount of any Euro-Dollar Loan converted or continued pursuant to Section 2.6 on a day other than the last day of the Interest Period applicable thereto, on the date of such conversion or continuation. 30 The "Adjusted London Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in Dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Lender to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage. (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such day plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than three months as the Administrative Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Euro-Dollar Reference Banks are offered to such Euro-Dollar Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.1" shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate Loans for such day) and (ii) the sum of 2% plus the Euro-Dollar Margin for such day plus the Adjusted London Interbank Offered Rate applicable to such Loan at the date such payment was due. (e) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the participating Lenders of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. 31 (f) Each Reference Bank agrees to use its best efforts to furnish quotations to the Administrative Agent as contemplated by this Section. If any Reference Bank does not furnish a timely quotation, the Administrative Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.1" shall apply. SECTION 2.8. Fees. (a) Subject to subsection (b) below, the Borrower shall pay to the Administrative Agent for the account of each Lender a commitment fee (the "Commitment Fee") calculated at the Commitment Fee Rate (determined daily in accordance with the Pricing Schedule) on the excess of such Lender's Commitment over such Lender's Total Exposure. (b) Commitment Fees shall accrue from and including the Closing Date to but excluding the date of termination of the Commitments in their entirety and shall be payable on each Quarterly Date prior to the Termination Date with respect to the three month period ending one month prior to such Quarterly Date, and on the Termination Date. Commitment Fees which are payable on the Termination Date or on any other date on which the termination of the Commitments in their entirety is effective (the "Final Fee Payment Date") shall be calculated with respect to the period from the most recent date with respect to which such fees have been paid pursuant to this Section to the Final Fee Payment Date. The aggregate amount of Commitment Fees payable to the Administrative Agent for the account of each Lender on each Quarterly Date shall be reduced by an amount determined by the Borrower and such Lender to be equal to the product of (i) the amount of Net Free Balances (if any) maintained by the Borrower and its Subsidiaries with such Lender during the three month period ending two months prior to such Quarterly Date and (ii) the Average Credit Balance Rate for the three month period ending two months prior to such Quarterly Date; provided that the portion of any payment of Commitment Fees due on the Final Fee Payment Date that relates to a period that is more recent than two months prior to such date shall not be reduced on account of any Net Free Balances. Upon making each payment of such Commitment Fees to the Administrative Agent, the Borrower shall advise the Administrative Agent as to the portion thereof to be paid for the account of each Lender, and the Administrative Agent shall distribute such payment in accordance with such advice. For purposes of this Section 2.8, "Net Free Balances" for any Lender during any period means the daily average amount of collected balances maintained by the Borrower and its Subsidiaries in non-interest bearing accounts with such Lender during such period that the Borrower and such Lender have agreed do not support credit or operational services performed by such Lender (other than pursuant to this Agreement) for the Borrower and its Subsidiaries, and "Average Credit Balance Rate" means for any period the average of the 90-day U.S. Treasury Bill rate as of the end of each week or portion thereof during such period as calculated by the Administrative Agent, such calculation to be conclusive in the absence of manifest error. (c) On the Closing Date, the Borrower shall pay to the Agents, for their own accounts, such fees and compensation in such amounts as are set forth in the letter dated July 24, 1995. 32 (d) On the Closing Date, the Borrower shall pay to the Administrative Agent for the account of each Lender, a fee equal to (w) 5/8 of 1% of such Lender's Commitment, if such Lender's Initial Commitment was at least $30,000,000, (x) 1/2 of 1% of such Lender's Commitment, if such Lender's Initial Commitment was at least $20,000,000 but less than $30,000,000, (y) G of 1% of such Lender's Commitment, if such Lender's Initial Commitment was at least $10,000,000 but less than $20,000,000, and (z) 1/4 of 1% of such Lender's Commitment, if such Lender's Initial Commitment was at least $6,000,000 but less than $10,000,000. SECTION 2.9. Optional Termination or Reduction of ------------------------------------ Commitments. During the Revolving Credit Period, the Borrower may, - ----------- upon at least three Domestic Business Days' notice to the Administrative Agent, (i) terminate the Commitments at any time, if no Loans, Letters of Credit or Reimbursement Obligations are then outstanding or (ii) reduce the Commitments from time to time by an aggregate amount of $25,000,000 or any multiple of $5,000,000 in excess thereof; provided that, in connection with each such reduction of the Commitments, (x) the amounts by which the Commitments of the several Lenders are reduced shall be in proportion to the amounts shown on the signature pages hereof as their respective Commitments and (y) after giving effect to such reduction, the Total Exposure of each Lender shall not exceed the amount of its Commitment as so reduced. If the Commitments are reduced, any accrued Commitment Fees applicable to the amount by which the Commitments were so reduced shall be due and payable one month after the effective date of such reduction. If the Commitments are terminated in their entirety, all accrued Commitment Fees shall be payable on the effective date of such termination. SECTION 2.10. Mandatory Termination of Commitments. The ------------------------------------ Commitments shall terminate on the earliest of (i) the Termination Date, (ii) the date on which commitments are terminated under the Receivables Purchase Agreement, and (iii) the date on which Commitments are terminated in accordance with this Agreement, and, in any case, any Loans then outstanding (together with accrued interest thereon) shall be due and payable on such date and any Letters of Credit then outstanding shall be cash collateralized on such date in accordance with Section 2.2(h). SECTION 2.11. Optional Prepayments. (a) Subject in the case -------------------- of any Fixed Rate Borrowing to Section 2.14, the Borrower may, (i) upon notice delivered to the Administrative Agent not later than 10:00 A.M. (New York City time) on the day of any prepayment, prepay the Group of Base Rate Loans, (ii) upon notice delivered to the Administrative Agent not later than 12:00 Noon (New York City time) on the second Domestic Business Day before the day of prepayment, prepay any Group of CD Loans, and (iii) upon notice delivered to the Administrative Agent not later than 12:00 Noon (New York City time) on the third Euro-Dollar Business Day before the day of prepayment, prepay any Group of Euro-Dollar Loans, in each case, in whole at any time, or from time to time in part in amounts aggregating $20,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with interest accrued thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Lenders included in such Group. 33 (b) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Lender of the contents thereof and of such Lender's ratable share of such prepayment and such notice shall not thereafter be revocable by the Borrower. SECTION 2.12. Mandatory Prepayments. (a) If on the date of --------------------- delivery of any Borrowing Base Certificate pursuant to Section 5.1(e)(ii), 5.1(f), 5.1(g) or 5.1(k) or on the date of any closing referred to in any certificate delivered pursuant to Section 5.7(ii), the Applicable Percentage of the Secured Principal Amount shall exceed the Borrowing Base reflected in the applicable certificate, the Borrower shall prepay the Loans (together with interest accrued thereon) to the extent required so that the Applicable Percentage of the Secured Principal Amount on such date does not exceed the Borrowing Base so reflected. (b) Each prepayment of Loans required by subsection (a) of this Section shall be made with respect to such Group or Groups of Loans as the Borrower may specify by notice to the Administrative Agent at or before the time of such prepayment and shall be applied to prepay the Loans comprising each such Group pro rata; provided that, if no such timely specification is given by the Borrower, such payment shall be allocated to such Group or Groups as the Administrative Agent may determine. (c) If after all Loans have been repaid pursuant to subsection (a) of this Section the Total Exposure of any Lender still exceeds the amount of such Lender's Commitment or the Applicable Percentage of the Secured Principal Amount still exceeds the Borrowing Base, the Borrower shall pay to the L/C Issuing Bank for application to future drawings under any then outstanding Letters of Credit an amount equal to such excess (or such lesser amount as the Lenders agree is sufficient to cover such future drawings). Any amounts paid to Morgan Guaranty in its capacity as L/C Issuing Bank with respect to any Syndicated Letter of Credit shall be held and invested by Morgan Guaranty on behalf of each of the Lenders. The L/C Issuing Bank shall invest such amount in Liquid Investments (as defined in the Inventory Security Agreement) at the direction of the Administrative Agent, and shall apply such amount to drawings in the order in which such drawings are made. To the extent not applied to drawings under any Letter of Credit, such amount shall be repaid to the Borrower with interest in the manner provided in Section 2.2(h) as promptly as practicable after the earlier of (i) the date on which all outstanding Letters of Credit have expired or been fully drawn and (ii) the date ("Delivery Date") the Collateral Agent delivers a Collateral Report, if the Borrowing Base on each date for which the Borrower has been required to calculate the Borrowing Base pursuant to Section 5.1(e) since the date of payment by the Borrower of such amount and on any other date for which an estimate has been made during the thirty-day period preceding the Delivery Date exceeds the Applicable Percentage of the Secured Principal Amount on such date. If the Administrative Agent gives an Enforcement Notice (as defined in the Inventory Security Agreement), the L/C Issuing Bank shall pay all amounts held by it pursuant to this subsection to the Collateral Agent for application pursuant to the Inventory Security Agreement. (d) At any time the Borrower is required to make a payment to the L/C Issuing Banks pursuant to subsection (c), the Collateral Agent, if requested by the 34 Required Lenders, shall prepare and deliver a Collateral Report to the Lenders, the L/C Issuing Banks, the Administrative Agent and the Borrower. The Borrower will, promptly upon notice of such request, provide to the Collateral Agent all information and evidence reasonably requested concerning the Inventory to enable the Collateral Agent to prepare the Collateral Report. SECTION 2.13. General Provisions as to Payments. (a) The --------------------------------- Borrower shall make each payment of principal of, and interest on, the Loans and of Fees and other amounts payable hereunder, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address referred to in Section 9.1. The Administrative Agent shall promptly distribute to each Lender its ratable share of each such payment received by the Administrative Agent for the account of the Lenders. Whenever any payment of principal of, or interest on, the Domestic Loans or of Fees or other amounts payable hereunder shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent that the Borrower shall not have so made such payment, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate. SECTION 2.14. Funding Losses. If the Borrower makes any -------------- payment of principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted or continued (pursuant to Article 2, 6, 8" or otherwise) on any day other than the last day of an Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section , or if the Borrower fails to borrow, prepay, convert or continue any Fixed Rate Loans after notice has been given to any Lender in accordance with Section , 2.6 or the Borrower shall reimburse each Lender within 15 days after demand for any resulting loss or expense incurred by it (or by any existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment, conversion or continuation or failure to borrow, prepay, convert or continue; provided that such Lender shall have delivered to the Borrower a 35 certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.15. Computation of Interest and Fees. Interest -------------------------------- based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and Commitment Fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). Letter of Credit Fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed, calculated for the relevant period (including the first day and including the last day). ARTICLE 3 CONDITIONS TO BORROWINGS AND ISSUANCES SECTION 3.1. Closing. The closing hereunder shall occur ------- upon receipt by the Agents of the following, all of which shall be in form and substance acceptable to the Agents: (a) a duly executed Note for the account of each Lender dated on or before the Closing Date complying with the provisions of Section 2.4; (b) an opinion dated the Closing Date of the Assistant General Counsel of the Borrower in substantially the form of Exhibit G hereto and covering such other matters as the Administrative Agent may reasonably request; (c) an opinion dated the Closing Date of Davis Polk & Wardwell, special counsel for the Agents in substantially the form of Exhibit H hereto and covering such other matters as the Administrative Agent may reasonably request; (d) evidence satisfactory to the Administrative Agent that the commitments under the Existing Credit Agreement have terminated, all loans thereunder have been repaid in full (all Lenders hereunder which are also lenders under the Existing Credit Agreement hereby agreeing that such repayment may be made, whether at the end of interest periods under the Existing Credit Agreement or not), all accrued fees and other amounts payable thereunder (including, without limitation, any funding costs payable pursuant to the Existing Credit Agreement) have been paid in full and that all letters of credit issued thereunder (other than those listed on Schedule 1 and those deemed to be issued under the Receivables Purchase Agreement) have been returned to the issuers thereof (or to the Administrative Agent) for cancellation; 36 (e) a Borrowing Base Certificate dated the Closing Date setting forth the Borrowing Base as of August 31, 1995; (f) a duly executed copy of the Inventory Security Agreement, a duly executed copy of the Perfection Certificate (as defined in the Inventory Security Agreement); all Pledged Instruments (as defined in the Inventory Security Agreement) delivered to the Collateral Agent and endorsed to the order of the Collateral Agent; and all certificates representing Pledged Stock or Pledged Interests (in each case as defined in the Inventory Security Agreement), accompanied by duly executed instruments of transfer or assignment in blank, delivered to the Collateral Agent; (g) acknowledgement copies of proper financing statements (Form UCC-1) naming the Borrower as the debtor and the Collateral Agent, on behalf of the Lenders, as the secured party, or other similar instruments or documents as may be necessary or, in the opinion of the Collateral Agent or its counsel, desirable under the UCC of all appropriate jurisdictions to evidence and perfect the Lenders' Security Interests in the Borrower's Collateral (as defined in the Inventory Security Agreement); (h) acknowledgement copies of proper financing statements (Form UCC-1) naming the Special Purpose Members as the debtors and the Collateral Agent, on behalf of the Lenders, as the secured party, or other similar instruments or documents as may be necessary or, in the opinion of the Collateral Agent or its counsel, desirable under the UCC of all appropriate jurisdictions to evidence and perfect the Lenders' Security Interests in the Special Purpose Members' Collateral (as defined in the Inventory Security Agreement); (i) executed financing statements (Form UCC-3) necessary to release all security interests and other rights of any Person previously granted by the Borrower in the Borrower's Collateral; (j) (i) requests for information or copies (Form UCC-11) (or a similar search report certified by parties acceptable to the Collateral Agent or its counsel) dated a date reasonably near the Closing Date listing all effective financing statements which name the Borrower (under its present name and any previous name) as debtor, together with copies of such financing statements (none of which, unless subject to a release referred to in clause (h) above, shall cover any Collateral) and (ii) requests for information dated a date reasonably near the Closing Date regarding tax liens against the Borrower in the relevant offices in the States of Indiana, Maryland, New York and Pennsylvania; (k) from NBD Bank a certificate of an authorized officer of NBD Bank attaching a true and correct copy of the instrument or instruments evidencing the Secured Tax Exempt Debt; (l) a certificate as to insurance coverage as required by Section 5.2(b); (m) a certificate signed by the Chief Financial Officer, Treasurer or Controller of the Borrower that the representations and warranties of the Borrower contained in this Agreement shall be true on and as of the Closing Date; 37 (n) the fees described in Section 2.8(c) and (d); (o) evidence satisfactory to the Administrative Agent of the satisfaction of all the conditions to the closing of the Receivables Facility on the Closing Date, and that all transactions contemplated by the Receivables Documents to be consummated on the Closing Date will take place prior to or contemporaneously with the closing contemplated hereunder; and (p) all documents the Agents may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of the Financing Documents, and any other matters relevant hereto, all in form and substance satisfactory to the Agents. The Administrative Agent shall promptly notify the Borrower and the Lenders of the date on which the foregoing conditions have been satisfied, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.2. All Borrowings and Issuances. The obligation ---------------------------- of each Lender to make a Loan on the occasion of each Borrowing and the obligation of the L/C Issuing Bank to issue each Letter of Credit are subject to the satisfaction of the following conditions: (a) (i) receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.3(a)# or (ii) receipt by the L/C Issuing Bank of a Notice of Issuance as required by Section 2.2, as the case may be; (b) receipt by the Administrative Agent of a certificate dated the date of such Borrowing or Issuance and signed by the Chief Financial Officer, the Treasurer or the Controller of the Borrower certifying that: (i) immediately before and after such Borrowing or Issuance, no Default or Potential Termination Event or Termination Event (as such terms are defined in the Receivables Purchase Agreement) shall have occurred and be continuing; and (ii) the representations and warranties of the Borrower contained in this Agreement (other than the representation and warranty set forth in Section 4.4(c)) and the other Financing Documents shall be true on and as of the date of such Borrowing; (c) the fact that immediately after such Borrowing or Issuance the Applicable Percentage of the Secured Principal Amount shall not exceed the lesser of (i) the Borrowing Base reflected in the most recent Borrowing Base Certificate delivered to the Administrative Agent and (ii) the Receivables Maximum Purchase Price; and 38 (d) the fact that no Federal Lien shall have been filed against the Borrower which covers or may cover any Collateral (as defined in the Inventory Security Agreement) and such Federal Lien remains undischarged. ARTICLE 4 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.1. Corporate Existence and Power. The Borrower is ----------------------------- a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.2. Corporate and Governmental Authorization; No -------------------------------------------- Contravention. The execution, delivery and performance by the - ------------- Borrower of the Financing Documents are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official (except as contemplated by the Inventory Security Agreement) and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries (except the Security Interests). SECTION 4.3. Binding Effect. This Agreement and the -------------- Inventory Security Agreement constitute valid and binding agreements of the Borrower and each Note, when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Borrower, in each case enforceable in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization or moratorium or other similar laws relating to the enforcement of creditors' rights generally and by general equitable principles. SECTION 4.4. Financial Information. (a) The consolidated --------------------- balance sheets of the Borrower and its Consolidated Subsidiaries as of December 31, 1994 and the related consolidated statements of income and cash flows for the fiscal year then ended, reported on by Price Waterhouse LLP and set forth in the Borrower's 1994 Form 10-K, a copy of which has been delivered to each of the Lenders, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its 39 Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of June 30, 1995 and the related unaudited consolidated statements of income and cash flows for the six months then ended, set forth in the Borrower's quarterly report for the fiscal quarter ended June 30, 1995 as filed with the Securities and Exchange Commission on the Borrower's Latest Form 10-Q, a copy of which has been delivered to each of the Lenders, fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the financial statements referred to in paragraph (a) of this Section 4.4 (except that the notes to such quarterly financial statements are abbreviated as permitted by the Securities and Exchange Commission in its regulations relating to interim financial statements), the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such six month period (subject to normal year-end adjustments). (c) Since June 30, 1995, there has been no material adverse change in the business or financial position of the Borrower and its Consolidated Subsidiaries, considered as a whole. SECTION 4.5. Litigation. There is no action, suit or ---------- proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision (i) which could materially adversely affect the ability of the Borrower to perform its obligations under any of the Financing Documents, or (ii) which would in any material respect draw into question the validity of any of the Financing Documents. SECTION 4.6. Compliance with ERISA. Each member of the --------------------- ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan, and has not incurred any liability under Title IV of ERISA (i) to the PBGC other than a liability to the PBGC for premiums under Section 4007 of ERISA or (ii) in respect of a Multiemployer Plan which has not been discharged in full when due. SECTION 4.7. Taxes. United States Federal income tax ----- returns of the Borrower and the members of its "affiliated group" (as defined in Section 1504(a) of the Internal Revenue Code) have been examined through the taxable year ended December 31, 1987 and are closed through the taxable year ended December 31, 1986. The Borrower and the members of its "affiliated group" (as so defined) have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes stated to be due in such returns or pursuant to any assessment received by them, except for taxes the amount, applicability or validity of which is being contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes or other similar 40 governmental charges, additions to taxes and any penalties and interest thereon are, in the opinion of the Borrower, adequate. SECTION 4.8. Environmental Compliance. (a) Except as disclosed on Schedule 4.8, (i) the Borrower and its Subsidiaries have obtained, or made timely application for, all permits, certificates, licenses, approvals, registrations and other authorizations (collectively "Permits") which are required under all applicable Environmental Laws and are necessary for their operations and are in compliance with the terms and conditions of all such Permits, except where the failure to obtain such Permits or to comply with their terms would not have, individually or in the aggregate, a material adverse effect on the Borrower and its Consolidated Subsidiaries, considered as a whole; (ii) no notice, notification, demand, request for information, citation, summons, complaint or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending, or to the Borrower's knowledge, threatened by any governmental entity or other Person with respect to any (A) alleged violation by the Borrower or any Subsidiary of any Environmental Law, (B) alleged failure by the Borrower or any Subsidiary to have any Permits required in connection with the conduct of its business or to comply with the terms and conditions thereof, (C) Regulated Activity or (D) Release of Hazardous Substances, except where such event or events would not have, individually or in the aggregate, a material adverse effect on the Borrower and its Consolidated Subsidiaries, considered as a whole; (iii) to the knowledge of the Borrower, all oral or written notifications of a Release of a Hazardous Substance required to be filed under any applicable Environmental Law have been filed or are in the process of being filed by or on behalf of the Borrower or any Subsidiary; (iv) no property now owned or coal mining operation or steel facility which is now leased by the Borrower or any Subsidiary and, to the knowledge of the Borrower, no such property previously owned or leased or any property to which the Borrower or any Subsidiary has, directly or indirectly, transported or arranged for the transportation of any Hazardous Substances is listed or, to the Borrower's knowledge, proposed for listing, on the National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or any similar state list or is the subject of federal, state or local enforcement actions or, to the knowledge of the Borrower, other investigations which may lead to claims against the Borrower or any Subsidiary for clean-up costs, remedial work, damage to natural resources or personal injury claims, including, but not limited to, claims under CERCLA, except where such listings or investigations would not have, 41 individually or in the aggregate, a material adverse effect on the Borrower and its Consolidated Subsidiaries, considered as a whole; and (v) there are no Liens under or pursuant to any applicable Environmental Laws on any real property or other assets owned or leased by the Borrower or any Subsidiary, and no government actions have been taken or, to the knowledge of the Borrower, are in process which could subject any of such properties or assets to such Liens. (b) For purposes of this Section, the terms "Borrower" and "Subsidiary" shall include any business or business entity (including a corporation) which is a predecessor, in whole or in part, of the Borrower or any Subsidiary. SECTION 4.9. Full Disclosure. All information, including --------------- the Inventory Information Memorandum, furnished by the Borrower to the Agents or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, taken as whole and in light of the circumstances under which such information is furnished, true and accurate in all material respects on the date as of which such information is stated or certified. It is understood that the foregoing is limited to the extent that (i) information relating to the steel industry generally is to the best of the Borrower's knowledge, (ii) projections have been made in good faith by the management of the Borrower and in the view of the Borrower's management are reasonable in light of all information known to management as of the Closing Date, and (iii) no representation or warranty is made as to whether the projected results will be realized. The Borrower has disclosed to the Lenders in writing any and all facts which materially and adversely affect or may so affect (to the extent that the Borrower can now reasonably foresee), the business, operations or financial condition of the Borrower and its Consolidated Subsidiaries, taken as a whole, or the ability of the Borrower to perform its obligations under any of the Financing Documents. ARTICLE 5 COVENANTS The Borrower agrees that, as long as any Lender has any Commitment hereunder or any Letter of Credit remains outstanding or any amount payable under any Note or any Reimbursement Obligation remains unpaid: SECTION 5.1. Information. The Borrower will deliver to each ----------- of the Lenders: 42 (a) as soon as available and in any event within 95 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by Price Waterhouse LLP or other independent public accountants of nationally recognized standing (the Borrower being permitted to satisfy the requirements of this clause (a) by delivery of its annual report on Form 10-K (or any successor form), and all supplements or amendments thereto, as filed with the Securities and Exchange Commission); (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, consolidated balance sheets of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income for such quarter and for the portion of the Borrower's fiscal year ended at the end of such quarter and statements of cash flow for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in each case, in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency (except for the notes to such quarterly statements, which may be abbreviated as permitted by the Securities and Exchange Commission in its regulations relating to interim financial statements) by the Chief Financial Officer, the Treasurer or the Controller of the Borrower (the Borrower being permitted to satisfy the requirements of this clause (b) by delivery of its quarterly report on Form 10-Q (or any successor form), and all supplements or amendments thereto, as filed with the Securities and Exchange Commission); (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the Chief Financial Officer, the Treasurer or the Controller of the Borrower (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Section 5.6 on the date of such financial statements and (ii) stating whether any Default or Increased Coverage Event exists on the date of such certificate and, if any Default or Increased Coverage Event then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto and (iii) in the case of the certificate delivered simultaneously with each set of financial statements referred to in clause (a) above, showing in reasonable detail the amount of insurance coverage for the Borrower and its Subsidiaries then in effect; (d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements (i) whether anything has come to their attention relating to accounting matters in the course of their audit to cause them to believe that any Default or Increased Coverage Event existed on the date of such statements and (ii) confirming the calculations required by clause (c)(i) above and set forth in the officer's certificate delivered simultaneously therewith pursuant to clause (c) above; 43 (e) within 20 days after the end of each month, (i) a Borrowing Base Certificate (the "Monthly Borrowing Base Certificate") setting forth a calculation of the Borrowing Base as of the end of such month and (ii) if the Applicable Percentage of the Secured Principal Amount at the time of the delivery of the Monthly Borrowing Base Certificate exceeds the Borrowing Base as set forth in such certificate, simultaneously with the delivery of such certificate a certificate of the Chief Financial Officer, the Treasurer or the Controller of the Borrower dated as of one Domestic Business Day prior to the delivery of the Monthly Borrowing Base Certificate setting forth in the form of the Borrowing Base Certificate the Borrowing Base as of the close of business on such date and specifying whether the Borrower is required to take any action to comply with Section 2.12; (f) if on any date any officer of the Borrower becomes aware that the Applicable Percentage of the Secured Principal Amount exceeds the Borrowing Base on such date, a Borrowing Base Certificate, to be dated as of and delivered to the Administrative Agent one Domestic Business Day after such date, setting forth the Borrower's good faith estimate as to the calculation of the Borrowing Base as of the close of business on such date; (g) promptly, but in no event later than five Domestic Business Days after any officer of the Borrower becomes aware of any occurrence which such officer knows to constitute a Default or an Increased Coverage Event, a certificate of the Chief Financial Officer, the Treasurer or the Controller of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto and, in the case of an Increased Coverage Event, setting forth in the form of the Borrowing Base Certificate the Borrower's good faith estimate as to the calculation of the Borrowing Base as of the close of business on the Domestic Business Day prior to the date of delivery of such certificate; (h) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (i) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission; (j) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the 44 minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice under Section 4063(a) of ERISA of withdrawal from any Plan as described in Section 4063 of ERISA, a copy of such notice; (vii) fails to make any payment or contribution to any Plan which results in the imposition of a Lien, notice of such failure; or (viii) makes any amendment to any Plan which requires posting a bond or other security under Section 307 of ERISA, a copy of the notice required under Section 307(e) of ERISA; and (k) from time to time such additional information regarding the Borrowing Base or the financial position or business of the Borrower as the Required Lenders may reasonably request, which may include a Borrowing Base Certificate, to be dated as of and delivered to the Administrative Agent one Domestic Business Day after the date on which such request is effective, setting forth the Borrower's good faith estimate as to the calculation of the Borrowing Base as of the close of business on the date of such request. SECTION 5.2. Maintenance of Property; Insurance. (a) The ---------------------------------- Borrower will keep, and will cause each Significant Subsidiary to keep, all property useful and necessary in its business as then conducted in good working order and condition, ordinary wear and tear excepted. (b) The Borrower will maintain, to the extent commercially available, (i) physical damage insurance on substantially all its real and personal property in the United States (including all Inventories and books and records relating to any proceeds of Inventories) on an "All Risks" form subject to normal exclusions (including the perils of flood and quake) on a repair and replacement cost basis (or, in the case of idle properties, actual cash value basis) for all such property in an amount not less than $90,000,000 (subject to a deductible amount or retention not to exceed $10,000,000) and consequential loss coverage for extra expense, (ii) public liability insurance (including products liability coverage) in an amount not less than $50,000,000 (subject to a deductible amount or retention not to exceed $10,000,000), and (iii) such other insurance coverage in such amounts and with respect to such risks relating to the Borrower's Collateral as the Required Lenders may reasonably request. All such insurance shall be provided by insurers having an A.M. Best policyholders rating of not less than A- or by the insurers set forth in Exhibit I hereto, as such exhibit may be modified from time to time by the Administrative Agent (with the consent of the Required Lenders). Prior to the Closing Date, the Borrower will cause the Collateral Agent to be named as an insured party and loss payee, on behalf of the Secured Parties, on each insurance policy covering risks relating to any of its Inventories and books and records relating to any proceeds of Inventories. Each such insurance policy in effect during the term of this Agreement shall include effective waivers by the insurer of all claims for insurance premiums against the Collateral Agent or any other Secured Party, provide that all insurance proceeds in excess of deductible amounts or retentions which are payable in respect of losses relating to Inventories and books and records shall be adjusted with and payable to the Collateral Agent, and provide that no cancellation or termination thereof shall be effective until at least 30 days (or, if such cancellation or termination is for non-payment of premiums, 10 days) after receipt by the Collateral Agent of written notice thereof. The 45 Collateral Agent will consult with the Borrower before agreeing to any adjustment of insurance proceeds covered by the preceding sentence. If, in the opinion of the Borrower, commercially available insurance is not available on reasonable terms, the Borrower shall so notify the Agents and the Lenders and, with the consent of the Required Lenders (which consent shall not be unreasonably withheld), may elect not to purchase such insurance; provided that if the Borrower shall not have received notice of disapproval from the Required Lenders within 60 days of receipt by the Lenders of such notice from the Borrower, the Lenders shall be deemed to have consented, for purposes of this Section 5.2(b), to the election not to purchase such insurance. The Borrower will deliver to the Lenders (i) on the date of the first Borrowing or Issuance hereunder and within 95 days after the end of each fiscal year of the Borrower, a certificate dated such date showing the total amount of insurance coverage as of such date, (ii) from time to time true and complete copies of such insurance policies of the Borrower (or, if the Borrower does not have such insurance policies in its possession, evidence thereof) relating to such insurance coverage as the Required Lenders through the Administrative Agent may request, (iii) within 15 days of receipt of notice from any insurer, a copy of any notice of cancellation or material adverse change in coverage from that existing on the date of this Agreement and (iv) within 15 days of any cancellation or nonrenewal of coverage by the Borrower, notice of such cancellation or nonrenewal. SECTION 5.3. Compliance with Laws. The Borrower will -------------------- comply, and cause each Significant Subsidiary to comply, with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder) except where failure to comply would not have a material adverse effect on the Borrower and its Significant Subsidiaries, considered as a whole, or where the necessity of compliance therewith is being contested in good faith by appropriate proceedings. SECTION 5.4. Inspection of Property, Books and Records. The ----------------------------------------- Borrower will keep, and will cause each Subsidiary to keep, proper books of record and account reflecting its business and activities; and will permit, and will cause each Subsidiary to permit, representatives of any Lender at such Lender's expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records (including those books and records, whether or not located on its property, which are under the control of or in the possession of EDS) and to discuss their respective affairs, finances and accounts with their respective officers, employees, independent public accountants and with EDS, all during normal business hours and as often as may reasonably be desired; provided that the Borrower may, at its option, have one or more employees or representatives present at any such inspection, examination or discussion. SECTION 5.5. Compliance with Certain Covenants in the ---------------------------------------- Indenture. The Borrower will fully comply with the terms and - --------- provisions of Sections 5.04, 5.05 and 5.07 of the Indenture dated March 1, 1976 between the Borrower and Chemical Bank, as Trustee, relating to the Borrower's 8 3/8% Debentures due March 1, 2001, as in effect on the date hereof (the "Indenture"). The definitions contained in the Indenture of any and all terms or words employed. 46 in the above enumerated provisions of the Indenture shall be fully applicable for purposes of this Section 5.5 except that: (i) the reference to the "Corporation" in Sections 5.04, 5.05 and 5.07 shall be read as the "Borrower"; (ii) the reference to the "Indenture" in Section 5.04 shall be read as "Agreement"; and (iii) the references to "Debentures" in Sections 5.04 and 5.07 shall be read as "Secured Obligations (as defined in the Inventory Security Agreement)". The foregoing covenant shall continue in full force and effect as though the above-enumerated provisions of the Indenture were set forth in full herein notwithstanding any waiver of performance thereof pursuant to the Indenture or any modification, amendment or termination of such provisions or the redemption, retirement or repayment in full of the 8 3/8% Debentures issued under the Indenture or the satisfaction and discharge of the Indenture pursuant to Article Ten thereof or otherwise. SECTION 5.6. Minimum Adjusted Consolidated Tangible Net ------------------------------------------ Worth. Adjusted Consolidated Tangible Net Worth will not be, at the - ----- end of any calendar quarter, less than the sum of (i) $600,000,000 and (ii) 50% of consolidated net income (if positive) of the Borrower and its Consolidated Subsidiaries for each fiscal quarter of the Borrower, commencing with the fiscal quarter ended June 30, 1995. SECTION 5.7. Sale of Borrower's Collateral. From and after ----------------------------- the date of the first Borrowing, the Borrower will not sell or otherwise transfer any Borrower's Collateral without the consent of all of the Lenders, which consent shall not be unreasonably withheld, unless (i) no Enforcement Notice or Automatic Release Termination (as defined in the Inventory Security Agreement) is in effect and no event specified in clause (h) or (i) of Section 6.1 has occurred and is continuing with respect to the Borrower; (ii) (A) such sale or transfer is of Inventories in the ordinary course of business or (B) if such sale occurs in connection with the disposition by the Borrower of all or any significant portion of a facility at which, or a business in connection with which, Inventories are held, such sale is of such Inventories, and the Borrower has delivered to the Administrative Agent prior to, but no more than three Domestic Business Days before, the date of closing of such sale or transfer a 47 certificate signed by the Chief Financial Officer, the Treasurer or the Controller of the Borrower certifying: (x) that immediately after such closing the Applicable Percentage of the Secured Principal Amount will not exceed the attached good faith projection of the Borrowing Base (set forth in the form of the Borrowing Base Certificate) on the date of such closing, adjusted to exclude the Borrower's Collateral being sold or transferred, (y) the amount, if any, by which the Secured Principal Amount will have to be reduced in order for such certificate to be true and correct and the arrangements that have been made for such reduction, and (z) that attached is a true and correct copy of the portion of the contract of sale or transfer which contains as a condition to closing a condition that the Borrower shall have complied with this Section; and (iii) in the case of a sale or transfer described in clause (ii)(B) above, immediately after the closing referred to therein the Applicable Percentage of the Secured Principal Amount will not exceed the Borrowing Base. SECTION 5.8. Use of Proceeds. The proceeds of the Loans --------------- made under this Agreement will be used by the Borrower for general corporate purposes. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U. SECTION 5.9. Mergers and Sales of Assets. The Borrower will --------------------------- not (i) consolidate or merge with or into any other Person or (ii) except as permitted by Section 5.7, sell, lease or otherwise transfer, directly or indirectly, all or substantially all of the assets of the Borrower and its Subsidiaries, taken as a whole, to any other Person; provided that the Borrower may merge with another Person (other than the Special Purpose Members) if the Borrower is the corporation surviving such merger and after giving effect to such merger, no Default shall have occurred and be continuing. SECTION 5.10. Environmental Matters. The Borrower will --------------------- promptly give to the Lenders notice in writing of any complaint, order, citation or notice of violation with respect to, or if the Borrower becomes aware of, (i) the existence or alleged existence of a violation of any applicable Environmental Law, (ii) any Release into the environment, (iii) the commencement of any cleanup pursuant to or in accordance with any applicable Environmental Law of any Hazardous Substances, (iv) any pending legislative or threatened proceeding for the termination, suspension or non-renewal of any permit required under any applicable Environmental Law, (v) any property of the Borrower or any 48 Subsidiary that is or will be subject to a Lien imposed pursuant to any Environmental Law, (vi) any pending legislative changes to existing Environmental Laws, and (vii) any proposed acquisitions or leasing of property, which, in each of cases (i) through (vii) above, individually or in the aggregate, could have a material adverse effect on the Borrower and its Consolidated Subsidiaries, considered as a whole. ARTICLE 6 DEFAULTS SECTION 6.1. Events of Default. If one or more of the ----------------- following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay (i) any principal of any Loan or any Reimbursement Obligation when due, (ii) any interest on any Loan or Reimbursement Obligation or any Letter of Credit Fees within two Domestic Business Days after the due date thereof, (iii) any Commitment Fees within five Domestic Business Days after the due date thereof or (iv) any other amount payable hereunder within five Domestic Business Days after the later of the due date thereof and the date on which the Borrower is notified of the amount thereof; or (b) the Borrower shall fail to observe or perform any covenant contained in Section 5.1(e), 5.1(f), 5.6, 5.7 or 5.9, or shall fail to deliver a Borrowing Base Certificate pursuant to Section 5.1(g) or 5.1(k); or (c) the Borrower shall fail to observe or perform any covenant contained in Section 5.5 for 60 days after written notice thereof has been given to the Borrower by the Administrative Agent at the request of any Lender; or (d) the Borrower shall fail to observe or perform any covenant or agreement contained in any of the Financing Documents (other than those covered by clause (a), (b) or (c) above) for 30 days after written notice thereof has been given to the Borrower by the Administrative Agent at the request of any Lender; or (e) any representation, warranty, certification or statement made by the Borrower in any of the Financing Documents or in any certificate, financial statement or other document delivered pursuant to the Financing Documents shall prove to have been incorrect in any material respect when made; or 49 (f) the Borrower and its Subsidiaries shall fail to pay when due, or within any applicable grace period, (i) any payment in respect of Secured Tax Exempt Debt or (ii) payments aggregating more than $1,000,000 in respect of Debt of the Borrower or any of its Subsidiaries (other than the Loans, the Reimbursement Obligations and Secured Tax Exempt Debt) and Guarantees by the Borrower or any of its Subsidiaries; or (g) one or more events or conditions shall occur which result in a default under any agreement or agreements in respect of Debt of the Borrower or any Subsidiary and the aggregate principal amount of such Debt exceeds $10,000,000 and as a consequence of such default or defaults the Borrower or any of its Subsidiaries shall make any payment or give or agree to give any consideration or benefit of any kind (including, without limitation, any increased compensation, prepayment, shortening of maturities, security or other credit support) to the holders of such Debt and such payment, consideration or benefit is determined by the Required Lenders, after taking into account any payment, consideration or benefit made, given or agreed to be given by such holders to the Borrower or any of its Subsidiaries (other than a waiver of such default), to be a material benefit to the holders of such Debt; or (h) the Borrower or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or (i) an involuntary case or other proceeding shall be commenced against the Borrower or any Significant Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Significant Subsidiary under the federal bankruptcy laws as now or hereafter in effect; or (j) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $5,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Liabilities in excess of $10,000,000 (collectively, a "Material Plan") shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan; or a "default", within the meaning of Section 4219(c)(5) of ERISA, shall occur with respect to one or more Multiemployer Plans which could cause one or more members of the 50 ERISA Group to incur an immediate payment obligation under Title IV of ERISA for an amount or amounts aggregating in excess of $5,000,000; or any applicable law, rule or regulation is adopted, changed or interpreted, or the interpretation or administration thereof is changed, in each case after the date hereof, by any governmental authority or agency or by any court (a "Change in Law"), or, as a result of a Change in Law, an event occurs following a Change in Law, with respect to or otherwise affecting one or more Plans, Multiemployer Plans or Benefit Arrangements, which in the reasonable opinion of the Required Lenders, would have a material adverse effect on the priority of the Security Interests; or (k) a judgment or order for the payment of money in excess of $5,000,000 shall be entered by a court of record against the Borrower or any Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 10 days (or such other period of time as may be provided under applicable state law for obtaining a stay of judgment); or (l) a federal tax lien under Section 6321 of the Internal Revenue Code or a Lien under Title I or Title IV of ERISA or Section 412 of the Internal Revenue Code shall have arisen against any member of the ERISA Group (a "Federal Lien") and the aggregate amount secured by Federal Liens exceeds $500,000; or (m) the Lien created by the Inventory Security Agreement shall at any time and for any reason not constitute a valid and perfected Lien subject to no prior or equal Lien (other than Permitted Liens) or the Borrower shall so assert in writing; then, and in every such event, the Administrative Agent shall (i) if requested by Lenders having more than 66 2/3% in aggregate amount of the Commitments, by notice to the Borrower terminate the Commitments and they shall thereupon terminate and (ii) if requested by Lenders holding Notes evidencing more than 66 2/3% in aggregate principal amount of the Loans, by notice to the Borrower declare the Notes (and any Reimbursement Obligations together with accrued interest thereon and all Fees and other amounts payable by the Borrower hereunder) to be, and the same shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in clause (h) or (i) above with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Lenders, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon and all Fees and other amounts payable by the Borrower hereunder) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. If any Event of Default shall occur and be continuing or Commitments are terminated pursuant to Section 2.10(ii) and, in each case, any Loans, Letters of Credit or Reimbursement Obligations are then outstanding, the Administrative Agent shall, upon written request of the Required Lenders, give an Enforcement Notice (as defined in the Inventory Security 51 Agreement) pursuant to the Inventory Security Agreement. The Borrower shall comply with Section 2.2(h) with respect to Letters of Credit. Whether or not Commitments are terminated, the Administrative Agent shall, upon written request of the Required Lenders, instruct the L/C Issuing Banks to timely give notice that outstanding Letters of Credit having automatic renewal provisions will not be renewed. The Administrative Agent shall promptly advise the Borrower, each Lender, Morgan Guaranty, as administrative agent and J.P. Morgan Delaware, as structuring and collateral agent under the Receivable Purchase Agreement of the giving of such Enforcement Notice. SECTION 6.2. Notice of Default. The Administrative Agent ----------------- shall give notice to the Borrower under Section 6.1(c) or (d) promptly upon being requested to do so by any Lender and shall thereupon notify all the Lenders thereof. ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.1. Appointment and Authorization. Each Lender ----------------------------- irrevocably appoints and authorizes the Agents to take such action as agent on its behalf and to exercise such powers under the Financing Documents as are delegated to the Agents by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. Each Lender hereby irrevocably grants the Collateral Agent or its designated agent, if any, an irrevocable power of attorney, with full power of substitution, coupled with an interest, at any time and from time to time, to take in the name of such Lender all actions with respect to any Collateral which the Collateral Agent may deem necessary or advisable to realize upon the Security Interest in any Collateral. Each Lender hereby agrees to be bound by the provisions of the Inventory Security Agreement. SECTION 7.2. Administrative Agent and Affiliates. Morgan ----------------------------------- Guaranty shall have the same rights and powers under this Agreement as any other Lender and may exercise or refrain from exercising the same as though it were not the Administrative Agent, and Morgan Guaranty and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if it were not the Administrative Agent. SECTION 7.3. Action by Administrative Agent. The ------------------------------ obligations of the Administrative Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Administrative Agent shall 52 not be required to take any action with respect to any Default, except as expressly provided in Article 6. SECTION 7.4. Consultation with Experts. The Administrative ------------------------- Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.5. Liability of Administrative Agent. Neither the --------------------------------- Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Lenders (or, where required by the terms hereof, the Lenders) or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents, affiliates or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any Borrowing hereunder or in connection with any of the other Financing Documents; (ii) the performance or observance of any of the covenants or agreements of the Borrower herein or in any of the other Financing Documents; (iii) the satisfaction of any condition specified in Article 3 or in any of the other Financing Documents, except receipt of items required to be delivered to the Administrative Agent; (iv) the validity, effectiveness or genuineness of any of the Financing Documents or any other instrument or writing furnished in connection herewith; or (v) the existence, genuineness or value of any of the Collateral or the validity, perfection, priority or enforceability of the Security Interests. The Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telecopy or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.6. Indemnification. Each Lender shall, ratably in --------------- accordance with its Commitment, indemnify the Administrative Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with the Financing Documents or any action taken or omitted by such indemnitees hereunder. SECTION 7.7. Credit Decision. Each Lender acknowledges that --------------- it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under any of the Financing Documents. 53 SECTION 7.8. Successor Administrative Agent. The ------------------------------ Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right, after consultation with the Borrower, to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $100,000,000. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor Administrative Agent and not before, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent. ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.1. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any CD Loan or Euro-Dollar Loan: (a) the Administrative Agent is advised by the Reference Lenders that deposits in Dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) Lenders having 50% or more of the aggregate principal amount of the affected Loans advise the Administrative Agent that the Adjusted CD Rate or the Adjusted London Interbank Offered Rate, as the case may be, as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Lenders of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, 54 the Administrative Agent shall forthwith give notice thereof to the Borrower and the Lenders, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Lenders to make CD Loans or Euro-Dollar Loans, as the case may be, or to continue or convert outstanding Loans as or into CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended and (ii) the Borrower shall repay in full the then outstanding principal amount of each CD Loan or Euro-Dollar Loan, as the case may be, together with accrued interest thereon, on the last day of the then current Interest Period applicable to such Loan. Concurrently with repaying each such Fixed Rate Loan of each Lender pursuant to this Section, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Lender, and such Lender shall make such a Base Rate Loan, unless the Borrower notifies the Administrative Agent at least two Domestic Business Days before the date of such repayment that it elects not to borrow any Base Rate Loans on such date. Unless the Borrower notifies the Administrative Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Base Rate Borrowing. SECTION 8.2. Illegality. If, after the date of this ---------- Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Lender (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Lender shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Lenders and the Borrower, whereupon until such Lender notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make Euro-Dollar Loans, or to convert outstanding Loans into Euro-Dollar Loans, shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Lender shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. If such Lender shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower shall immediately repay in full the then outstanding principal amount of each such Euro-Dollar Loan, together with accrued interest thereon. Concurrently with repaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Lender (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Lenders), and such Lender shall make such a Base Rate Loan. SECTION 8.3. Increased Cost and Reduced Return. (a) If --------------------------------- after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or 55 administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (i) with respect to any CD Loan any such requirement included in the applicable Domestic Reserve Percentage and (ii) with respect to any Euro-Dollar Loan any such requirement included in the applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment (excluding, with respect to any CD Loan, any such requirement reflected in the applicable Assessment Rate) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (or its Applicable Lending Office) or shall impose on any Lender (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Lender to be material, then, within 15 days after demand by such Lender (with a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction. (b) If, after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the L/C Issuing Bank or any Lender with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall either (i) impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System) against letters of credit issued by the L/C Issuing Bank or any Lender, or participations in letters of credit by any Lender or (ii) impose on the L/C Issuing Bank or any Lender any other condition (including, without limitation, any assessment for Federal deposit insurance) regarding any Letter of Credit or the L/C Issuing Bank's or any Lender's obligation to issue, maintain or fund any Letter of Credit, and the result of any event referred to in clause (i) or (ii) of this subsection (b) is to increase the cost to the L/C Issuing Bank or such Lender of issuing, maintaining, participating in or funding any Letter of Credit (which increase in cost shall be determined on the basis of the L/C Issuing Bank's or such Lender's reasonable allocation of the aggregate of such cost increases resulting from such events), then, within 15 days after demand by the L/C Issuing Bank or such Lender (with a copy to the Administrative Agent), the Borrower shall pay to the L/C Issuing Bank or such Lender such additional amount or amounts as will compensate the L/C Issuing Bank or such Lender for such increased cost. 56 (c) If any Lender or L/C Issuing Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or L/C Issuing Bank (or its Applicable Lending Office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Lender or L/C Issuing Bank (or its Parent) as a consequence of such Lender's or L/C Issuing Bank's obligations hereunder to a level below that which such Lender or L/C Issuing Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Lender or L/C Issuing Bank to be material, then from time to time, within 15 days after demand by such Lender or L/C Issuing Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Lender or L/C Issuing Bank such additional amount or amounts as will compensate such Lender or L/C Issuing Bank (or its Parent) for such reduction. (d) Each L/C Issuing Bank and each Lender will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender or L/C Issuing Bank to compensation pursuant to this Section and will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate of an L/C Issuing Bank or a Lender claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such L/C Issuing Bank or Lender may use any reasonable averaging and attribution methods. (e) If any Lender demands compensation under this Section with respect to a Fixed Rate Loan, the Borrower may at any time, upon at least five Euro-Dollar Business Days' prior notice to such Lender through the Administrative Agent, repay in full, without premium (other than as provided in Section 2.14) or penalty, the then outstanding CD Loans or Euro-Dollar Loans, as the case may be, of such Lender, together with interest accrued thereon to the date of repayment. Concurrently with repaying such Fixed Rate Loans of such Lender, the Borrower shall borrow from such Lender a Base Rate Loan in an amount equal to the aggregate principal amount of such Fixed Rate Loans, and such Lender shall make such a Base Rate Loan. SECTION 8.4. Taxes. (a) For the purposes of this Section , ----- the following terms have the following meanings: "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings imposed with respect to or imposed on any payment by the Borrower pursuant to this Agreement or under any Note, any penalties, fines, additions to tax or interest thereon, and the reasonable costs of defending against the same 57 excluding (i) in the case of each Lender, each L/C Issuing Bank and the Agents, taxes imposed on its net income, and franchise, capital or doing business taxes (other than taxes imposed by a jurisdiction solely as a result of the Borrower's connection with such jurisdiction), (ii) in the case of each Lender or L/C Issuing Bank, any United States withholding tax imposed on such payments except to the extent of any United States withholding tax imposed as a result of a change of law (including a change in any tax treaty to which the United States is a party) after the later of the date of this Agreement and the date such person shall become a Lender or L/C Issuing Bank and (iii) in the case of each Lender, each L/C Issuing Bank and the Agents, any taxes imposed by a jurisdiction under the laws of which such Lender, L/C Issuing Bank or the Agents (as the case may be) is organized or in which its principal executive office is located or, in the case of each Lender or L/C Issuing Bank, in which its Applicable Lending Office is located. "Other Taxes" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or from the execution or delivery of, or otherwise with respect to, this Agreement, the other Financing Documents, and any penalties, fines, additions to tax or interest thereon, and the reasonable costs and expenses in defending against the same, whether arising by reason of the acts to be performed by the Borrower hereunder or imposed against the Borrower, any Affiliate of the Borrower, the property involved or otherwise. (b) Any and all payments by the Borrower to or for the account of any Lender, any L/C Issuing Bank or the Agents hereunder or under any Note shall be made without deduction for any Taxes or Other Taxes; provided that, if the Borrower shall be required by law to withhold or deduct any Taxes or Other Taxes from any such payments, (i) the sum payable shall be increased as necessary so that after making all required withholdings or deductions (including withholdings or deductions applicable to additional sums payable under this Section) such Lender, L/C Issuing Bank or the Agents (as the case may be) receives an amount equal to the sum it would have received had no such withholdings or deductions been made, (ii) the Borrower shall make such withholdings or deductions, (iii) the Borrower shall pay the full amount withheld or deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 9.1, the original or a certified copy of a receipt evidencing payment thereof. (c) The Borrower agrees to indemnify each Lender, each L/C Issuing Bank and each Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.4) paid by such Lender, L/C Issuing Bank or such Agent (as the case may be). This indemnification shall be paid within 15 days after such Lender, L/C Issuing Bank or such Agent (as the case may be) makes written demand therefor; provided that the Borrower shall not 58 be required to make any payment pursuant to this Section 8.4(c) more than five days prior to the due date of the Taxes or Other Taxes indemnified against hereunder. If a Lender, L/C Issuing Bank or Agent (as the case may be) shall become aware that it is entitled to claim a refund (or refund in the form of a credit) (each a "Refund") from a taxing authority of such Taxes or Other Taxes for which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts, pursuant to this Section 8.4, it shall promptly notify the Borrower of the availability of such Refund and shall, or if it shall be furnished by the Borrower with an opinion of counsel selected by the Borrower and reasonably acceptable to it to the effect that there is a strong likelihood such a Refund is obtainable it shall, within 15 days after receipt of a written request by the Borrower, make a claim to such taxing authority for such Refund at the Borrower's expense if the expected financial costs to such Lender, L/C Issuing Bank or Agent (as the case may be) of making such claim will not be substantial taking into account any reimbursement of such costs by the Borrower; provided that nothing in this subsection (c) shall be construed to require any Lender, L/C Issuing Bank or Agent to institute any administrative proceeding (other than the filing of a claim for any such Refund) or judicial proceeding to obtain any such Refund. If a Lender, L/C Issuing Bank or Agent (as the case may be) receives a Refund from a taxing authority of any such Taxes or Other Taxes for which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts, pursuant to this Section 8.4, it shall promptly pay to the Borrower the amount so received (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 8.4 with respect to the Taxes or Other Taxes giving rise to such Refund), net of all reasonable out-of-pocket expenses (including the net amount of taxes, if any, imposed on such Lender, L/C Issuing Bank or such Agent with respect to such Refund and the making of such payment) of such Lender, L/C Issuing Bank or such Agent, and without interest (other than interest paid by the relevant taxing authority with respect to such Refund); provided that the Borrower upon the request of such Lender, L/C Issuing Bank or such Agent, agrees to repay the amount paid over to the Borrower (plus penalties, interest or other charges) to such Lender, L/C Issuing Bank or such Agent in the event such Lender, L/C Issuing Bank or such Agent is required to repay such Refund to such taxing authority. Nothing contained in this Section 8.4 shall require any Lender, L/C Issuing Bank or Agent to make available any of its tax returns (or any other information that it deems to be confidential or proprietary). (d) Each Lender or L/C Issuing Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Lender or L/C Issuing Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Lender or L/C Issuing Bank in the case of each other Lender or L/C Issuing Bank, and from time to time thereafter if requested in writing by the Borrower (but only so long as such Lender or L/C Issuing Bank remains lawfully able to do so), shall provide the Borrower and the Administrative Agent with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender or L/C Issuing Bank is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Lender or the L/C Issuing Bank from United States withholding tax or reduces the rate of withholding tax on payments of interest for 59 the account of such Lender or L/C Issuing Bank or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. (e) For any period with respect to which a Lender or L/C Issuing Bank has failed to provide the Borrower or the Administrative Agent with the appropriate form pursuant to Section 8.4(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which such form originally was required to be provided), such Lender or L/C Issuing Bank shall not be entitled to indemnification under Section 8.4(b) or (c) with respect to Taxes imposed by the United States; provided that if a Lender or L/C Issuing Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender or L/C Issuing Bank shall reasonably request to assist such Lender or L/C Issuing Bank to recover such Taxes. (f) Notwithstanding anything to the contrary in this Section 8.4, if the Internal Revenue Service determines that any Lender, L/C Issuing Bank or Agent is a conduit entity participating in a conduit financing arrangement as defined in Section 7701(1) of the Internal Revenue Code and any current or future regulation thereunder (a "Conduit Financing Arrangement") with respect to the Loans or the Letters of Credit, without the involvement of the Borrower or any of its Affiliates, then the Borrower shall have no obligation under this Section 8.4 to pay additional amounts or indemnify any Lender, L/C Issuing Bank or Agent for any Taxes or Other Taxes to the extent the amount of such additional amounts, Taxes or Other Taxes exceeds the amount that would otherwise have been payable, withheld or deducted had the Internal Revenue Service not made such a determination. Each Lender, L/C Issuing Bank and Agent hereby represents that it is not a conduit entity participating in a Conduit Financing Arrangement with respect to the Loans or the Letters of Credit. (g) If the Borrower is required to pay any indemnification or additional amounts to, with respect to or for the account of any Lender, L/C Issuing Bank or Agent pursuant to this Article, then such Borrower, L/C Issuing Bank or Agent will change the jurisdiction of its Applicable Lending office or take other appropriate steps if, in the judgment of such Lender, L/C Issuing Bank or Agent, such change or steps (i) will eliminate or reduce any such indemnification or additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Lender, L/C Issuing Bank or Agent. If such Lender, L/C Issuing Bank or Agent does not change its Applicable Lending Office or take other appropriate steps, the Borrower may replace such Lender, L/C Issuing Bank or Agent; provided that the Borrower has paid to such Lender, L/C Issuing Bank or Agent any amounts accrued under this Section 8.4. SECTION 8.5. Base Rate Loans Substituted for Affected Fixed ---------------------------------------------- Rate Loans. If (i) the obligation of any Lender to make, or convert - ---------- outstanding Loans to, Euro-Dollar Loans has been suspended pursuant to Section 8.2 or (ii) any Lender has demanded compensation under Section 8.3 or 8.4 with respect to its CD Loans or Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Lender through the 60 Administrative Agent, have elected that the provisions of this Section shall apply to such Lender, then, unless and until such Lender notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist: (a) all Loans which would otherwise be made by such Lender as (or continued as or converted into) CD Loans or Euro-Dollar Loans, as the case may be, shall instead be Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Lenders); and (b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, has been repaid (or converted to a Base Rate Loan), all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead. If such Lender notifies the Borrower that the circumstances giving rise to such notice no longer apply, the Borrower shall have the option to borrow a CD Loan or a Euro-Dollar Loan, as the case may be, from such Lender on the first day of the next succeeding Interest Period applicable to each related Borrowing in the amount of the Fixed Rate Loan which would have been outstanding from such Lender as part of such Borrowing if the provisions of Section 8.2, 8.3 or 8.4 had never applied, and concurrently with each such Borrowing shall repay an equal principal amount of such Lender's outstanding Base Rate Loans. ARTICLE 9 MISCELLANEOUS SECTION 9.1. Notices. All notices, requests and other ------- communications to any party hereunder shall be in writing (including bank wire, facsimile transmission or similar writing) and shall be given to such party: (a) in the case of the Borrower or either Agent, at its address or facsimile number set forth on the signature pages hereof, (b) in the case of any L/C Issuing Bank or any Lender, at its address or facsimile number set forth in its Administrative Questionnaire or (c) in the case of any party, such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or 61 (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article 2 or Article 8" shall not be effective until received. SECTION 9.2. No Waivers. No failure or delay by either ---------- Agent, any L/C Issuing Bank or any Lender in exercising any right, power or privilege hereunder or under any other Financing Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies of the Agents, the L/C Issuing Banks and the Lenders under the Financing Documents are cumulative and not exclusive of any rights or remedies which the Agents, the L/C Issuing Bank and the Lenders would otherwise have. SECTION 9.3. Expenses; Indemnification. (a) The Borrower ------------------------- shall pay (i) all reasonable out-of-pocket expenses of the Agents, including fees and disbursements of special counsel for the Agents, in connection with the preparation and interpretation of this Agreement and the other Financing Documents, any waiver or consent hereunder or thereunder or any amendment hereof or thereof, any Default or alleged Default hereunder or any Increased Coverage Event or alleged Increased Coverage Event and (ii) if an Event of Default occurs, all reasonable out-of-pocket expenses incurred by the Agents, each L/C Issuing Bank and each Lender, including (without duplication) the fees and disbursements of outside counsel and the allocated cost of inside counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom, including out-of-pocket expenses incurred in enforcing any of the Financing Documents. (b) The Borrower shall pay the Collateral Agent upon demand for all amounts arising out of (i) the preparation of Collateral Reports, if any, and (ii) the preparation of analyses, if any, of the current market value of the Inventories included in the Borrowing Base as of the end of each quarter of the Borrower's fiscal year. (c) The Borrower agrees to indemnify and hold harmless, the Agents, the L/C Issuing Banks and each Lender and each of their respective directors, officers, affiliates, shareholders, employees, agents and each legal entity, if any, who controls any such Person (each, an "Indemnitee") forthwith on demand, from and against any and all losses, claims, damages, liabilities, costs and expenses (including, without limitation, all reasonable fees and disbursements of counsel, expenses incurred by their respective credit recovery groups, expenses of settlement or litigation or preparation therefor and the reasonable expenses of investigation by engineers, environmental consultants and similar technical personnel) which any Indemnitee may incur or which may be asserted against any Indemnitee by any Person in connection with any investigative, administrative or judicial notice or proceeding (whether or not such Indemnitee shall be a designated party thereto) relating to, arising out of or in connection with (i) any of the Financing Documents or any actual or proposed use of Letters of Credit issued pursuant hereto or of proceeds of Loans hereunder or (ii) any and all Environmental Liabilities; provided that no Indemnitee shall have the right to be indemnified hereunder for (x) its own gross negligence or willful misconduct as determined by a court of competent jurisdiction, (y) any breach of its obligations 62 hereunder or (z) any liabilities or expenses for which the Borrower is obligated to make any payment to such Indemnitee under any other provision of this Agreement or any of the other Financing Documents; and provided further that the Borrower shall not be liable for any settlements entered into by any Indemnitee without its consent. Without limiting the generality of the foregoing, the Borrower hereby waives all rights for contribution or any other rights of recovery with respect to liabilities, losses, damages, costs and expenses arising under or related to Environmental Laws that it might have by statute or otherwise against any Lender by reason of its being a signatory Lender under this Agreement. Promptly after receipt by an Indemnitee of notice of the commencement of any action, such Indemnitee shall, if a claim in respect thereof is to be made against the Borrower under this subsection (c), notify the Borrower of the commencement thereof. In case any such action is brought against any Indemnitee and it notifies the Borrower of the commencement thereof, the Borrower shall be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnitee, and after notice from the Borrower to such Indemnitee of its election so to assume the defense thereof, the Borrower shall not be liable to such Indemnitee under this subsection (c) for any legal or other expenses subsequently incurred by such Indemnitee in connection with the defense thereof other than reasonable costs of investigation; provided that if the named parties in any such action include both the Borrower and any Indemnitee and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them then the Indemnitees shall have the right to separate counsel (the fees and expenses of which shall be at the expense of the Borrower) and the Borrower shall not have the right to assume the defense of any such action. It is understood that the Borrower shall not in connection with any action or related actions be liable for the fees and expenses of more than one separate firm for all Indemnitees. SECTION 9.4. Sharing of Set-Offs. Each Lender agrees that ------------------- if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount then due to it with respect to the principal of and interest on the Notes held by it and its participation in the Reimbursement Obligations and interest (if any) thereon or Commitment or Letter of Credit Participation Fees (collectively, its "Relevant Obligations") which is greater than the proportion received by any other Lender in respect of the Relevant Obligations of such other Lender, the Lender receiving such proportionately greater payment shall purchase such participations in the Relevant Obligations held by or owing to the other Lenders, and such other adjustments shall be made, as may be required so that all such payments with respect to the Relevant Obligations of the Lenders shall be shared by the Lenders pro rata; provided that nothing in this Section shall impair the right of any Lender to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its Relevant Obligations. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note or Letter of Credit, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such 63 participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. SECTION 9.5. Amendments and Waivers. Any provision of this ---------------------- Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Lenders (and, if the rights or duties of either Agent or any L/C Issuing Bank are affected thereby, by such Person); provided that no such amendment or waiver shall, unless signed by all the Lenders, (i) increase or decrease the Commitment of any Lender (except for a ratable decrease in the Commitments of all Lenders) or subject any Lender to any additional obligation, except as provided in Section 9.6, (ii) reduce the principal of or rate of interest on any Loan or any Fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any Fees hereunder, (iv) change the definition of "Borrowing Base", "Eligible Inventories", "Finished and Semifinished Inventories", "Inventories", "Raw Materials Inventories", "Applicable Percentage", "Secured Principal Amount" or change Section 2.12, (v) extend the Termination Date or (vi) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Section or any other provision of this Agreement. SECTION 9.6. Successors and Assigns. (a) The provisions of ---------------------- this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Lenders. (b) Any Lender may at any time grant to one or more lenders or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Lender of a participating interest to a Participant, whether or not upon notice to the Borrower and the Administrative Agent, such Lender shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement pursuant to which any Lender may grant such a participating interest shall provide that such Lender shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Lender will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii), (iii) or (v) of Section 9.5# without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8" with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (e) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). In the event of any such grant by a Lender of a participating interest to a Participant, the Lender shall give notice of such participation to the Borrower and the Administrative Agent. 64 (c) Any Lender may at any time assign to one or more lenders, institutions or Persons (each an "Assignee") all, or a proportionate part of all (such portion to comprise a Commitment and Receivables Commitment of not less than $5,000,000 and to be for an equal percentage of such Lender's Commitment hereunder and its Receivables Commitment under the Receivables Purchase Agreement and after giving effect to such assignment, the aggregate Commitment and Receivables Commitment retained by the assigning Lender shall be in an aggregate amount of not less than $5,000,000) of its rights and obligations under this Agreement and the Receivables Purchase Agreement and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit J hereto executed by such Assignee and such transferor Lender, with (and subject to) the subscribed consent of the Borrower, which shall not be unreasonably withheld, the Administrative Agent and the L/C Issuing Banks; provided that if (i) an Assignee is a creditworthy affiliate of such transferor Lender or was a Lender immediately prior to such assignment, or (ii) an Event of Default has occurred and is continuing and the Commitments have been terminated in their entirety, and, such Assignee is not substantially engaged in the manufacture or sale of steel or steel products, either directly or through a Subsidiary or Affiliate then, in each such case, no consent of the Borrower shall be required. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Lender of an amount equal to the purchase price agreed between such transferor Lender and such Assignee, such Assignee shall be a Lender party to this Agreement and shall have all the rights and obligations of a Lender with a Commitment as set forth in such instrument of assumption, and the transferor Lender shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required; provided that, if at the time of such assignment, any Syndicated Letter of Credit is then outstanding, then the transferor Lender, Morgan Guaranty, in its capacity as L/C Issuing Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that (i) a new Syndicated Letter of Credit (a "Replacement Letter of Credit") is issued by Morgan Guaranty, in its capacity as L/C Issuing Bank, providing that the Assignee and the transferor Lender, to the extent of its retained Commitment hereunder, if any, are severally obligated to the beneficiary to pay any drawings thereunder ratably in proportion to their respective Commitments (their respective "Percentages"), or (ii) in the event that a Replacement Letter of Credit is not issued, the Assignee shall agree in writing with the transferor Lender and the Borrower that, upon any draw under a Syndicated Letter of Credit, the Assignee shall pay to the transferor Lender the Assignee's Percentage of such draw. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Lender, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee. In connection with any such assignment, the transferor Lender shall pay to the Administrative Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States or a state thereof, it shall deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States Federal income taxes in accordance with Section 8.4. Each Lender may furnish any confidential information concerning the Borrower in the possession of such Lender from time to time to Assignees and Participants (including prospective Assignees and Participants) 65 which have agreed in a writing delivered to the Borrower to be bound by the provisions of Section 9.8 hereof. (d) If any Reference Bank assigns its Notes to an unaffiliated institution, the Administrative Agent shall in consultation with the Borrower and with the consent of the Required Lenders, appoint another bank to act as a Reference Bank hereunder. (e) Any Lender may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Lender from its obligations hereunder. (f) No Assignee, Participant or other transferee of any Lender's rights shall be entitled to receive any greater payment under Section 8.3 or 8.4 than such Lender would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.2, 8.3 or 8.4 requiring such Lender to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. SECTION 9.7. Margin Stock Collateral. Each of the Lenders ----------------------- represents to the Administrative Agent and each of the other Lenders that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.8. Confidentiality. The Agents and each Lender --------------- agree for the benefit of the Borrower to keep confidential any proprietary or financial information obtained by the Agents or such Lender, as the case may be, based on a review of the books and records of the Borrower or any Subsidiary pursuant to Section 5.4 and any other information to the extent such information has been stated by the Borrower to be confidential; provided that nothing herein shall prevent the Agents or any Lender from disclosing such information (i) to the Agents or any other Lender in connection with the transactions contemplated by the Financing Documents, (ii) to its officers, directors, employees, agents, attorneys and accountants who have a need to know such information in accordance with customary banking practices and to any of its Affiliates who need to know such information in connection with administering the transactions contemplated by the Financing Documents and, in any case, who receive such information having been made aware of the restrictions set forth in this Section, (iii) upon the order of any court or administrative agency, (iv) upon the request or demand of any regulatory agency or authority having jurisdiction over such party, (v) which has been publicly disclosed, (vi) which has been obtained from any Person other than the Borrower and its Affiliates; provided that such Person is not known to it to be bound by a confidentiality agreement with the Borrower or its Affiliates or known to it to be otherwise prohibited from transmitting the information to it by a contractual, legal or fiduciary obligation, (vii) in connection with the exercise of any remedy hereunder or under any of the other Financing Documents, (viii) to S&P or (ix) to any prospective Assignee or Participant which has agreed in a writing delivered to the Borrower to be bound by this Section. 66 SECTION 9.9. Governing Law; Submission to Jurisdiction. ----------------------------------------- This Agreement, each Note and each Letter of Credit (except Letters of Credit to the extent therein stated to be governed by the Uniform Customs and Practice for Documentary Credits issued by the International Chamber of Commerce) shall be governed by and construed in accordance with the laws of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 9.10. Counterparts; Integration; Effectiveness. ---------------------------------------- This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective upon receipt by the Administrative Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to it of telegraphic, facsimile or other written confirmation from such party of execution of a counterpart hereof by such party). SECTION 9.11. Termination of Existing Credit Agreement. ---------------------------------------- Each party hereto agrees that effective as of the Closing Date the Existing Credit Agreement and Existing Security Agreement shall terminate (and hereby waives any requirement of separate notice of such termination) and the security interests created by the Existing Security Agreement shall be released; provided that expense and indemnity provisions (but not letter of credit reimbursement obligations) contained in the Existing Credit Agreement shall survive in respect of periods prior to the Closing Date. The Lenders party hereto expressly instruct Morgan Guaranty and/or J.P. Morgan Delaware to take all actions necessary to release the security interests under the Existing Credit Agreement effective as of the Closing Date. SECTION 9.12. WAIVER OF JURY TRIAL. EACH OF THE PARTIES -------------------- HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 67 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. BETHLEHEM STEEL CORPORATION By /s/ Gary L. Millenbruch --------------------------------- Title: Executive Vice President, Chief Financial Officer and Treasurer 1170 Eighth Avenue Bethlehem, PA 18016 Telephone: 610-694-4581 Facsimile: 610-694-3356 Attention: Edmund P. Reybitz 68 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By /s/ Laura Reim --------------------------------- Title: Vice President 60 Wall Street New York, NY 10260 Telephone: 212-648-6793 Facsimile: 212-648-5336 Attention: Laura E. Reim J. P. MORGAN DELAWARE, as Structuring and Collateral Agent By /s/ Robert S. Jones --------------------------------- Title: Associate 902 Market Street Wilmington, DE 19801 Telephone: 302-651-2402 Facsimile: 302-652-7416 Attention: Robert J. Henchey 69 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as L/C Issuing Bank By /s/ Laura Reim --------------------------------- Title: Vice President CHEMICAL BANK, as L/C Issuing Bank By /s/ James H. Ramage --------------------------------- Title: Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as L/C Issuing Bank By /s/ Noboru Kubota --------------------------------- Title: Deputy General Manager 70 LENDERS: Commitment: $34,000,000 J.P. MORGAN DELAWARE By /s/ Robert S. Jones --------------------------------- Title: Associate Commitment: $26,000,000 CHEMICAL BANK By /s/ James H. Ramage --------------------------------- Title: Vice President Commitment: $26,000,000 THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By /s/ Noboru Kubota --------------------------------- Title: Deputy General Manager Commitment: $16,000,000 THE BANK OF NEW YORK By /s/ Peter H. Abdill --------------------------------- Title: Vice President 71 Commitment: $16,000,000 NATIONSBANK, N.A. (CAROLINAS) By /s/ Michael D. Monte --------------------------------- Title: Vice President 72 Commitment: $14,000,000 BANK OF AMERICA ILLINOIS By /s/ Donald J. Chin --------------------------------- Title: Authorized Officer Commitment: $8,000,000 BANK AUSTRIA AKTIENGESELLSCHAFT By /s/ Robert Tenhave --------------------------------- Title: Senior Vice President By /s/ Amy Rick --------------------------------- Title: Vice President Commitment: $8,000,000 CORESTATES BANK, N.A. By /s/ Joseph M. Finley --------------------------------- Title: Vice President Commitment: $8,000,000 THE FIRST NATIONAL BANK OF CHICAGO By /s/ Amy R. Howatt --------------------------------- Title: Vice President 73 Commitment: $8,000,000 THE FUJI BANK, LIMITED By /s/ Yoshihiko Shiotsugu --------------------------------- Title: Vice President & Manager Commitment: $8,000,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED By /s/ Robert W. Ramage, Jr. --------------------------------- Title: Senior Vice President Commitment: $8,000,000 MERIDIAN BANK By /s/ Barbara T. Lampe --------------------------------- Title: Vice President Corporate Banking Commitment: $8,000,000 THE SUMITOMO BANK, LIMITED NEW YORK BRANCH By /s/ Yoshinori Kawamura --------------------------------- Title: Joint General Manager 74 Commitment: $6,000,000 FIRST VALLEY BANK By /s/ David B. Kennedy --------------------------------- Title: Regional Vice President 75 Commitment: $6,000,000 NBD BANK By /s/ Nancy L. Russell --------------------------------- Title: Vice President TOTAL COMMITMENTS: $200,000,000 76 PRICING SCHEDULE Each of "Euro-Dollar Margin", "CD Margin", "Base Rate Margin", "Commitment Fee Rate" and "L/C Fee Rate" means, for any date, the rates set forth below in the row opposite such term and in the column corresponding to the "Pricing Level" that applies at such date: Level I Level II Level III Level IV Level V CD Margin 1.2 1.52 1.825 2.12 2 25% 5% % 5% .625% Euro-Dollar 1.1 1.40 1.70% 2.0% 2 Margin 0% % .5% Base Rate .10 .40% .70% 1.0% 1 Margin % .5% Commitment .31 .375 .3750 .50% Fee Rate 25% 0% % 6250% L/C Fee 1.1 1.40 1.70% 2.0% 2 Rate 0% % % For purposes of this Schedule, the following terms have the following meanings: "Level I Pricing" applies at any date if, at such date, the Borrower's long-term debt is rated BB+ or higher by S&P and Ba1 or higher by Moody's. "Level II Pricing" applies at any date if, at such date, (i) the Borrower's long-term debt is rated BB or higher by S&P and Ba2 or higher by Moody's and (ii) Level I Pricing does not apply. "Level III Pricing" applies at any date if, at such date, (i) the Borrower's long-term debt is rated BB- or higher by S&P and Ba3 or higher by Moody's and (ii) neither Level I Pricing nor Level II Pricing applies. "Level IV Pricing" applies at any date if, at such date, (i) the Borrower's long-term debt is rated B+ or higher by S&P and B1 or higher by Moody's and (ii) none of Level I Pricing, Level II Pricing and Level III Pricing applies. 77 "Level V Pricing" applies at any date if, at such date, no other Pricing Level applies. "Pricing Level" refers to the determination of which of Level I, Level II, Level III, Level IV or Level V applies at any date. The credit ratings to be utilized for purposes of this Schedule are those assigned to the senior unsecured long-term debt securities of the Borrower without third-party credit enhancement, and any rating assigned to any other debt security of the Borrower shall be disregarded. The rating in effect at any date is that in effect at the close of business on such date. 78 Schedule 1 Existing Letter of Credit Beneficiary Amount None 79 Schedule 4.8 Environmental Matters None 80 EXHIBIT A NOTE New York, New York September 12, 1995 For value received, Bethlehem Steel Corporation, a Delaware corporation (the "Borrower"), promises to pay to the order of ______________________ (the " Lender"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Lender to the Borrower pursuant to the Inventory Credit Agreement referred to below on the maturity date provided for in the Inventory Credit Agreement and at the other times provided in the Inventory Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Inventory Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New York. All Loans made by the Lender, the respective types thereof and all repayments of the principal thereof shall be recorded by the Lender and, if the Lender so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Lender on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Inventory Credit Agreement. 1 The Loans evidenced hereby are secured as provided in the Inventory Security and Pledge Agreement dated as of September 12, 1995 among the Borrower, the Special Purpose Members, J.P. Morgan Delaware, as Structuring and Collateral Agent and Morgan Guaranty Trust Company of New York, as Administrative Agent. This note is one of the Notes referred to in the Inventory Credit Agreement dated as of September 12, 1995 among the Borrower, the lenders listed on the signature pages thereof, Morgan Guaranty Trust Company of New York, as Administrative Agent and J.P. Morgan Delaware, as Structuring and Collateral Agent (as the same may be amended from time to time, the "Inventory Credit Agreement"). Terms defined in the Inventory Credit Agreement are used herein with the same meanings. Reference is made to the Inventory Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. Bethlehem Steel Corporation By ________________________________ Name: Title: 2 LOANS AND PAYMENTS OF PRINCIPAL ____________________________________________________________________ Amount Amount of of Principal Notation Date Loan Repaid Made By ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ 3 _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 4 _______________________________________________________________________ _______________________________________________________________________ 6 EXHIBIT B Leased Premises None 6 EXHIBIT C-1 Approved Sites Name Location - ---- -------- Double G. Coatings, L.P. Jackson, Mississippi Walbridge Coatings, an Illinois Partnership Walbridge, Ohio Indiana Pickling and Processing Portage, Indiana HS Processing LP Baltimore, Maryland Metal Coaters of Georgia, Inc. Marietta, Georgia DoubleCote, L.L.C. Jackson, Mississippi Metro Metals Corporation Portage, Indiana 7 Roll & Hold Warehouse & Distribution Corp. Indianapolis, Indiana 8 EXHIBIT C-2 [Form of Collateral Access Agreement] This Collateral Access Agreement (the " Agreement") is made by and between [Name of Warehouse/Processor] (the "Bailee") and J.P. Morgan Delaware, as Structuring and Collateral Agent (the "Collateral Agent"); R E C I T A L S WHEREAS, the Bailee presently holds Inventory (as defined below) of the Company (as defined below) and may in the future hold Inventory, in each case, at the facility located at the address set forth below (the " Facility"); WHEREAS, the Company has entered into an Inventory Credit Agreement (the "Inventory Credit Agreement") dated as of September 12, 1995 among Bethlehem Steel Corporation (the "Company"), the lenders listed on the signature pages thereof (the "Lenders"), Morgan Guaranty Trust Company of New York, as Administrative Agent and J.P. Morgan Delaware, as Collateral Agent, and, as a condition to the loans and other financial accommodations to the Company, the Lenders require, among other things, liens on the Company's present and future inventory (the "Inventory"), including all inventory held by the Bailee and all inventory which may be shipped to and handled by the Bailee from time to time in the future; and WHEREAS, the Collateral Agent, on behalf of the Lenders, and the Bailee desire to enter into an agreement in order to establish the rights and obligations respecting the Inventory as between the Collateral Agent and the Bailee, in order to assure mutual cooperation and protection of their respective interests; 9 NOW, THEREFORE, in consideration of the premises hereof and mutual promises and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Representations and Warranties. The Bailee represents and warrants that: (i) its correct legal name and address are set forth on the signature page hereof; (ii) it does not have title to any of the Company's Inventory, nor does it have any claim to or lien upon any of the Company's Inventory (other than for customary [warehousing] [processing] charges); (iii) none of the Company's Inventory is reflected on its books and records as an asset; and (iv) the only receivables of the Bailee from the Company relating to the Company's Inventory have been or will be originated solely as a result of the services provided by the Bailee with respect to the Inventory. 2. Covenants. The Bailee agrees that: (i) in the future, if it changes the legal form in which it does business (for example, changes from a sole proprietorship to a partnership, a partnership to a corporation, or forms a new corporation) or changes its business name, the Bailee will give the Collateral Agent prompt written notice of the change so that the Collateral Agent can update its records and, if necessary, correct and refile any security documents; (ii) it will allow the Collateral Agent, its auditors and its other designees, access to the Facility, upon reasonable prior notice, during ordinary business hours in order to inspect the Company's Inventory and verify the amount. In addition, if the Collateral Agent elects to remove the Company's Inventory from the Facility itself, the Bailee will grant the Collateral Agent access to the Facility, upon reasonable prior notice, during ordinary business hours to do so and will not hinder the Collateral Agent's actions in removing the Inventory, but the Collateral Agent shall have no 10 obligation to remove any Inventory from the Facility or, having commenced such removal, to complete such removal. The Collateral Agent will not interfere with the Bailee's business operations and all costs of inspection, verification and removal shall be for the account of the Lenders; (iii) if the Collateral Agent notifies the Bailee in writing that an event of default has occurred under the Inventory Credit Agreement, then, without any responsibility on the Bailee's part to verify the existence of such default, it will release the Inventory to the Collateral Agent on demand; provided that the Collateral Agent tenders payment of any unpaid [warehousing] [processing] charges on the Inventory being released; (iv) if the Company defaults under any agreement it has with the Bailee, the Bailee agrees not to exercise any remedy under such agreement or applicable law or in equity, unless it shall have provided the Collateral Agent written notice of such default and given the Collateral Agent 20 business days to cure a monetary default and 60 business days to cure a non-monetary default and during such time, the Bailee will allow the Collateral Agent to enter the Facility and remove the Inventory as set forth in Section 2(ii) above. If any default is cured during the applicable period, the Bailee agrees to rescind the notice of default, but the Collateral Agent shall have no obligation to cure any default of the Company or, having commenced such cure, to complete such cure. Notwithstanding the foregoing, the Bailee's failure to provide such notice shall not render the Bailee liable to the Collateral Agent in any manner or diminish or otherwise affect the Bailee's rights under any such agreement with the Company or with respect to the Inventory; and (v) the Collateral Agent, on behalf of the secured parties, has a perfected security interest in the Company's Inventory now or in the future located at the Facility. 3. Notices. All notices, requests and other communications to either party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party at its address, facsimile number or telex number set forth on the signature pages hereof. Each such notice, request or other communication shall be effective (i) if given by telex, when 11 such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (iii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iv) if given by any other means, when delivered at the address specified in this Section. 4. Amendments. The agreements contained herein may not be ---------- modified or terminated orally and shall be binding upon and inure to the benefit of parties and their respective successors or assigns. 5. Term of Agreement. This Agreement shall continue in full ----------------- force and effect until the date on which the Collateral Agent has confirmed in writing that all of the Company's obligations and liabilities to the secured parties are paid and satisfied in full and all financing arrangements between the secured parties and the Company have been terminated. 6. Company's Obligations. All of the Bailee's charges to --------------------- the Company of any nature whatsoever shall continue to be charged to and paid by the Company in accordance with the agreements under which such charges arose. The Collateral Agent shall not be directly or indirectly liable or responsible for any of said charges whether due or to become due. The arrangement and instructions outlined herein shall continue without any change or modification until the Collateral Agent has given written notification to the contrary to the Bailee at the address set forth below, which notification need only be signed by the Collateral Agent. Upon delivery of any such written notification, the Bailee agrees to take the Collateral Agent's instructions as to any processing, holding or delivery of the Inventory. 7. Agreement of the Company. The Company has signed below ------------------------ to indicate its confirmation of and agreement with the foregoing. 12 Executed and delivered as of the ____ day of _____, 199_. [NAME OF BAILEE] By____________________________ Name: Title: Address: Telex: Facsimile: J.P. MORGAN DELAWARE, as Structuring and Collateral Agent By____________________________ Name: Title: Address: Telex: Facsimile: Acknowledged and Agreed to: BETHLEHEM STEEL CORPORATION 13 By____________________________ Name: 14 EXHIBIT D INVENTORY TURNOVER RATES FOR FINISHED AND SEMIFINISHED INVENTORIES CATEGORY OR SUBCATEGORY DESCRIPTION INVENTORY TURNOVER RATE* - ----------- ----------- --------- -------------- Group#30 Ingots 4.0 31 Slabs, Blooms & Billets 2.0 32 Structural 2.0 33 Plates 2.0 34 Bars Subcategories: Alloy Bars 3.0 Carbon Bars 2.5 36 Rails & Accessories 2.0 38 Pipe 2.0 39 Sheet & Strip Subcategories: Hot Rolled Sheet 2.0 15 Cold Rolled Sheet 2.5 Coated Sheet 2.0 40 Tin Coated Sheet and Strip1 .5 __________ *The Inventory Turnover Rate applicable to each category and subcategory of Finished and Semifinished Inventories set forth above shall be the rate set forth opposite such category and subcategory or such other rate as the Borrower and the Administrative Agent (with the consent of the Required Lenders) may agree. The Borrower may request that the rate be adjusted or that its application be waived in the event of a strike or fire or other event beyond the Borrower's control or while a facility is closed for periodic maintenance work such as the relining of a blast furnace or for any other reason..27009/075/CA/agt.inventory.conf 16 EXHIBIT E INVENTORY SECURITY AND PLEDGE AGREEMENT dated as of September 12, 1995 among BETHLEHEM STEEL CORPORATION, BETHLEHEM STEEL CREDIT AFFILIATE ONE, INC., BETHLEHEM STEEL CREDIT AFFILIATE TWO, INC. J.P. MORGAN DELAWARE, as Structuring and Collateral Agent and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent 2 INVENTORY SECURITY AND PLEDGE AGREEMENT AGREEMENT dated as of September 12, 1995 among BETHLEHEM STEEL CORPORATION (with its successors, the "Borrower"), BETHLEHEM STEEL CREDIT AFFILIATE ONE, INC., BETHLEHEM STEEL CREDIT AFFILIATE TWO, INC., J.P. MORGAN DELAWARE, as Structuring and Collateral Agent, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent. W I T N E S E T H : - - - - - - - - - WHEREAS, the Borrower, certain lenders (with their successors and assigns, the "Lenders"), Morgan Guaranty Trust Company of New York, as administrative agent for such lenders (with its successors and assigns in such capacity, the "Administrative Agent") and J.P. Morgan Delaware, as structuring and collateral agent (with its successors and assigns in such capacity, the "Collateral Agent") are parties to an Inventory Credit Agreement of even date herewith (as the same may be amended from time to time, the "Inventory Credit Agreement"), pursuant to which the Borrower may incur obligations with respect to Borrowings and Letters of Credit; and WHEREAS, in order to induce the Lenders, the Agents and the L/C Issuing Banks to enter into the Inventory Credit Agreement, (i) the Borrower has agreed to grant a continuing security interest in and to the Borrower's Collateral (as hereafter defined) to secure (x) its obligations under the Inventory Credit Agreement, the Notes issued pursuant thereto and any Reimbursement Obligations and (y) certain other obligations as described herein and in the Inventory Credit Agreement; and (ii) the Special Purpose Members have agreed to grant a continuing security interest in and to the Special Purpose Members' Collateral to secure their obligations under the Guaranties; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 3 SECTION 1. Definitions ----------- Terms defined in the Inventory Credit Agreement and not otherwise defined herein have, as used herein, the respective meanings provided for therein. The following additional terms, as used herein, have the following respective meanings: "Agreement" means this Inventory Security and Pledge Agreement as amended from time to time. "Automatic Release Termination" has the meaning set forth in Section 5(C). "Borrower's Collateral" means the collateral described in Section 3(A). "BSF" means Bethlehem Steel Funding, LLC, a Maryland limited liability company. "BSF Note" means the note of BSF payable to the Borrower in connection with the Receivables Facility. "Collateral" means the Borrower's Collateral and the Special Purpose Members' Collateral. "Documents" means all "documents" (as defined in the UCC) or other receipts covering, evidencing or representing Inventories, now owned or hereafter acquired by the Borrower. "Enforcement Notice" means a written notice delivered by the Administrative Agent to the Collateral Agent stating that it is an Enforcement Notice (as defined in this Agreement) and that the Required Lenders have instructed the Administrative Agent to deliver such notice. "Grantors" means the Borrower and the Special Purpose Members. "Guaranties" has the meaning set forth in Section 15. "Instruments" means all "instruments", "chattel paper" or "letters of credit" (each as defined in the UCC) evidencing, representing, arising from or existing in respect of, relating to, securing or otherwise supporting 4 the payment of, any accounts receivable, including (but not limited to) promissory notes, drafts, bills of exchange and trade acceptances, now owned or hereafter acquired by the Borrower. "Letter of Credit Obligation" means at any time any Reimbursement Obligation or other obligation of the Borrower to make a payment in connection with a Letter of Credit, including contingent obligations with respect to amounts which are then, or may thereafter become, available for drawing under Letters of Credit then outstanding. "Liquid Investment" means (i) direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof, (ii) commercial paper rated in the highest grade by a nationally recognized credit rating agency or (iii) time deposits with, including certificates of deposit issued by, any Lender or any other bank or trust company which is organized under the laws of the United States or any state thereof, which bank or trust company has, or the holding company of which bank or trust company together with its consolidated subsidiaries has, (A) capital, surplus and undivided profits aggregating at least $500,000,000 and (B) publicly traded debt securities outstanding which are rated in one of the four highest rating categories by a nationally recognized credit rating agency; provided in each case that (x) such Liquid Investment matures within 90 days from the date of acquisition thereof and (y) in order to provide the Collateral Agent, for the benefit of the Secured Parties, with a perfected security interest therein, such Liquid Investment is either: (1) evidenced by a certificate or instrument which is negotiable, or if non-negotiable is issued in the name of the Collateral Agent, and which (together with any appropriate instruments of transfer) is delivered to, and held by, the Collateral Agent or an agent thereof (which shall not be the Borrower or any of its Affiliates) in the State of New York; or (2) in book-entry form and issued by the United States and subject to pledge under applicable state law and Treasury regulations and as to which (in the written opinion of counsel to the Borrower, which counsel shall be satisfactory to the Collateral Agent) appropriate measures shall have been taken to perfect the Security Interests. 5 "Operating Agreement" means the Operating Agreement of BSF. "Perfection Certificate" means a certificate substantially in the form of Annex A, completed and supplemented with the schedules and attachments contemplated thereby to the satisfaction of the Collateral Agent, and duly executed by the chief financial officer and the chief accounting officer of the Borrower. "Permitted Liens" means the Security Interests and Liens (including mechanics' and warehousemens' liens) which (i) arise by operation of law in the ordinary course of the conduct of the Borrower's business or the ownership of its assets, (ii) do not secure Debt and (iii) either (x) secure amounts not yet due and payable or (y) secure amounts being contested in good faith by appropriate proceedings so long as enforcement thereof is effectively stayed and reserves therefor are maintained in accordance with generally accepted accounting principles (it being understood that Permitted Liens do not include Federal Liens to the extent such Federal Liens give rise to an Event of Default (as defined in the Inventory Credit Agreement)). "Pledged Interest" means, with respect to each Grantor, such Grantor's (i) interest in BSF, (ii) right to inspect the books and records of BSF, (iii) right to participate in the management of and vote on matters coming before BSF, and (iv) unless otherwise provided, right to act for BSF in accordance with Section 5.1 of the Operating Agreement. "Pledged Instruments" means (i) the BSF Note and (ii) any Instrument required to be pledged to the Collateral Agent pursuant to Section 4(B). "Pledged Securities" means the Pledged Instruments and the Pledged Stock. "Pledged Stock" means (i) the Subsidiary Shares and (ii) any other interests required to be pledged to the Collateral Agent pursuant to Section 4(B). 6 "Proceeds" means all cash and other proceeds of, and all other profits, rentals or receipts, in whatever form, arising from the collection, sale, lease, exchange, assignment, licensing or other disposition of, or other realization upon, Collateral, including without limitation all claims of the Borrower or either Special Purpose Member against third parties for loss of, damage to or destruction of, or for proceeds payable under, or unearned premiums with respect to, policies of insurance in respect of, any Collateral, and any condemnation or requisition payments with respect to any Collateral, in each case whether now existing or hereafter arising. "Required Secured Parties" means the Required Lenders; provided that, at any time when an Automatic Release Termination is in effect, "Required Secured Parties" shall mean Persons holding obligations which represent at least 66 2/3% of the Secured Principal Amount. "Secured Obligations" means, whether now outstanding or hereafter arising, (i) all principal of and interest on any Loan made under, or any Note issued pursuant to, the Inventory Credit Agreement, (ii) all Letter of Credit Obligations, (iii) all other amounts payable by the Borrower hereunder or under the Inventory Credit Agreement, (iv) all amounts payable by the Borrower under or in respect of Secured Tax Exempt Debt and (v) any renewals or extensions of the foregoing. The Secured Obligations shall include, without limitation, any interest, costs, fees and expenses which accrue on or with respect to any of the foregoing, whether before or after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Borrower; provided that, for the purposes of payments and allocations pursuant to Section 10 after the commencement of any case, action or other proceeding relating to the bankruptcy, insolvency or reorganization of the Borrower, each Secured Obligation shall be deemed to include interest accrued thereon after the commencement of such proceeding only to the extent that such interest is allowed in such proceeding (pursuant to Section 506(b) of the United States Bankruptcy Code or otherwise). "Secured Parties" means the Lenders, the L/C Issuing Banks, the Administrative Agent, the Collateral Agent and the holder of the Secured Tax Exempt Debt. "Special Purpose Members' Collateral" means the collateral described in Section 3(B). 7 "Subsidiary Shares" means the shares of capital stock of the Special Purpose Members owned by the Borrower. "UCC" means the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the Security Interests in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, "UCC" means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. SECTION 2. Representations and Warranties ------------------------------ (A) The Borrower represents and warrants as follows: (i) The Borrower has good and marketable title to all of the Borrower's Collateral, free and clear of any Liens other than Permitted Liens. (ii) Neither the Borrower nor any of its Subsidiaries has performed or will perform any acts which might prevent the Collateral Agent from enforcing any of the terms of this Agreement or which would limit the Collateral Agent in any such enforcement. Other than (x) financing statements on file with respect to the Existing Credit Agreement (which will be terminated in accordance with the provisions of Section 3.1 of the Inventory Credit Agreement) and (y) financing statements or other similar or equivalent documents or instruments with respect to the Security Interests and Permitted Liens, no financing statement, mortgage, security agreement or similar or equivalent document or instrument covering all or any part of the Collateral is on file or of record in any jurisdiction in which such filing or recording would be effective to perfect a Lien on such Collateral. None of the Borrower's Collateral is in the possession of any Person (other than the Borrower) asserting any claim thereto or security interest therein, except that the Collateral Agent or its designee may have possession of Collateral as contemplated hereby and warehousemen, carriers or other bailees may from time to time assert claims to or security interests in Inventory in their possession. (iii) Not less than five Domestic Business Days prior to the Closing Date under the Inventory Credit Agreement, the Borrower shall deliver the Perfection Certificate to the 8 Collateral Agent. The information set forth therein shall be correct and complete. Not later than 60 days following the Closing Date, the Borrower shall furnish to the Collateral Agent certified file search reports on file in each UCC filing office set forth in Schedule 7 to the Perfection Certificate confirming the filing information set forth in such Schedule. (iv) The Security Interests constitute valid security interests under the UCC securing the Secured Obligations. When UCC financing statements in the form specified in the Perfection Certificate or pursuant to Section 4(F) shall have been filed in the offices specified in the Perfection Certificate or pursuant to Section 4(F), the Security Interests shall constitute perfected security interests in the Collateral (except Inventory in transit) to the extent that a security interest therein may be perfected by filing pursuant to the UCC, prior to all other Liens and rights of others therein except for Permitted Liens. (v) The Inventory is insured in accordance with the requirements of the Inventory Credit Agreement. (vi) All Inventories produced by the Borrower have or will have been produced in compliance with the applicable requirements of (i) the Fair Labor Standards Act, as amended, and (ii) where the failure to comply would subject any of the Secured Parties to any obligation or liability or affect the priority or existence of the Security Interests, all applicable federal and state environmental and waste disposal laws. (vii) The Borrower owns all of the Pledged Stock, free and clear of any Liens other than the Security Interests. The Pledged Stock includes all of the issued and outstanding capital stock of the Special Purpose Members. The Pledged Stock has been duly authorized and validly issued, and is fully paid and non-assessable, and is subject to no options to purchase or similar rights of any Person. (viii) Upon the delivery of the Pledged Instruments, and certificates representing the Pledged Stock to the Collateral Agent in accordance with Section 4(A) hereof, the Collateral Agent will have valid and perfected security interests in the Pledged Securities subject to no prior Lien. 9 (B) Each Grantor represents and warrants as follows: (i)The Grantor owns all of its Pledged Interest, free and clear of any Liens other than Permitted Liens. The Grantor is not and will not become a party to or otherwise bound by any agreement, other than this Agreement, which restricts in any manner the rights of any present or future holder of any of the Pledged Interests with respect thereto. (ii) Upon the execution of this Agreement by the parties hereto, the delivery to the Collateral Agent of certficates representing the Pledged Interests and the filing of financing statements on Form UCC-1 in substantially the form of Schedule 2(B)(ii) hereto in the jurisdiction identified in or pursuant to Section 16, the Collateral Agent, on behalf of the Lenders, will have valid and perfected security interests in the Pledged Interests prior to all other Liens and rights of others therein except for Permitted Liens. Except for the financing statements referred to above, no registration, recordation or filing with any governmental body, agency or official is required in connection with the execution or delivery of this Agreement or is necessary for the validity or enforceability hereof or for the perfection or enforcement of the Security Interests in the Pledged Interests. The Grantor has not performed and will not perform any acts which might prevent the Collateral Agent from enforcing any of the terms and conditions of this Agreement or which would limit the Collateral Agent in any such enforcement. (iii) The chief executive office of the Grantor is located at its address set forth in or pursuant to Section 16. SECTION 3. The Security Interests ---------------------- (A) In order to secure the full and punctual payment of the Secured Obligations in accordance with the terms thereof, and to secure the performance of all of the obligations of the Borrower hereunder, under the Inventory Credit Agreement and under the agreements and other instruments evidencing Secured Tax Exempt Debt, the Borrower hereby grants to the Collateral Agent for the ratable benefit of the Secured Parties a continuing security interest in and to all of the following property of the 10 Borrower, whether now owned or existing or hereafter acquired or arising and regardless of where located: (1) Inventories; (2) Documents; (3) all books and records (including, without limitation, customer lists, credit files, computer programs, printouts and other computer materials and records) of the Borrower pertaining to any of the Borrower's Collateral; (4) the Liquid Investments and other monies and property of any kind of the Borrower in the possession or under the control of the Collateral Agent; (5)the Pledged Securities, and all of the Borrower's rights and privileges with respect to the Pledged Securities, and all income and profits thereon, and all interest, dividends and other payments and distributions with respect thereto; (6) its Pledged Interest and all of its rights and privileges with respect thereto (including, without limitation, all rights under the Operating Agreement) and all certificates evidencing its Pledged Interest; and (7) all Proceeds of all or any of the Borrower's Collateral described in Clauses 1 through 6 hereof; provided that Collateral shall not include any of the Borrower's Collateral released pursuant to Section 5 hereof. (B) In order to secure the full and punctual payment of the Guaranties in accordance with the terms thereof, and to secure the performance of all of the obligations of such Special Purpose Member hereunder, each Special Purpose Member hereby grants to the Collateral Agent for the ratable benefit of the Secured Parties a continuing security interest in and to all of the following property of such Special Purpose Member, whether now owned or existing or hereafter acquired or arising and regardless of where located: (1) its Pledged Interest and all of its rights and privileges with respect thereto (including, without 11 limitation, all rights under the Operating Agreement) and all certificates evidencing its Pledged Interest; and (2) all Proceeds of all or any of the Special Purpose Member's Collateral described in Clause 1 hereof. (C) The Security Interests are granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or transfer or in any way affect or modify, any obligation or liability of the Grantors with respect to any of the Collateral or any transaction in connection therewith. SECTION 4. Pledged Securities and Pledged Interests ---------------------------------------- (A)All Pledged Instruments shall be delivered to the Collateral Agent by the Borrower pursuant hereto indorsed to the order of the Collateral Agent, and accompanied by any required transfer tax stamps, all in form and substance satisfactory to the Collateral Agent. All certificates representing Pledged Stock and Pledged Interests shall be delivered to the Collateral Agent by the applicable Grantor pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, with signatures appropriately guaranteed, and accompanied by any required transfer tax stamps, all in form and substance satisfactory to the Collateral Agent. (B) In the event that either Special Purpose Member at any time issues any additional or substitute shares of capital stock of any class or any note, or owes any Debt, to the Borrower, the Borrower will immediately pledge and deposit with the Collateral Agent certificates representing all such shares and such note, or an instrument evidencing such Debt, as additional security for the Secured Obligations. All such shares, notes and instruments constitute Pledged Securities and are subject to all provisions of this Agreement. In the event that BSF at any time issues any substitute note or owes any other Debt to the Borrower, the Borrower will immediately pledge and deposit with the Collateral Agent such notes or other instrument evidencing such other debt as additional security for the Secured Obligations. 12 (C) If directed to do so by the Required Lenders, the Collateral Agent shall cause any or all of the Pledged Stock and/or the Pledged Interests to be transferred of record into the name of the Collateral Agent or its nominee. The applicable Grantor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Stock and/or Pledged Interests registered in the name of such Grantor and the Collateral Agent will promptly give to the applicable Grantor copies of any notices and communications received by the Collateral Agent with respect to Pledged Stock and/or Pledged Interests registered in the name of the Collateral Agent or its nominee. (D) (i) Unless an Enforcement Notice is in effect, the relevant Grantor shall be entitled to receive and retain all dividends, interest and other payments and distributions made upon or with respect to the Pledged Securities or Pledged Interests; provided that (x) dividends, interest and other distributions paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Securities or Pledged Interests; and (y) dividends and other distributions paid or payable in cash in respect of any Pledged Securities or Pledged Interests in connection with a partial or total liquidation or dissolution; shall be received in trust for the benefit of the Secured Parties, shall be segregated from other funds of the relevant Grantor and shall be paid over to the Collateral Agent as Collateral in the same form as received (with any necessary endorsement). (ii) If an Enforcement Notice is in effect, (x) all rights of any Grantor to receive dividends, interest and other payments and distributions which it would otherwise be authorized to receive and retain pursuant to subsection (D)(i) shall cease, and all such rights shall thereupon become vested in the Collateral Agent who shall thereupon have the sole right to receive and hold as Collateral such dividends, interest and other payments and distributions; and 13 (y) all dividends, interest and other payments and distributions which are received by any Grantor shall be received in trust for the benefit of the Secured Parties, shall be segregated from other funds of such Grantor and shall be paid over to the Collateral Agent as Collateral in the same form as received (with any necessary endorsement). After an Enforcement Notice has been canceled, the Collateral Agent's right to retain dividends, interest and other payments and distributions under this subsection 4(D)(ii) shall cease and the Collateral Agent shall pay over to the relevant Grantor any such Collateral retained by it while such Enforcement Notice was in effect. (E) Unless an Enforcement Notice is in effect, the Borrower shall have the right, from time to time, to vote and to give consents, ratifications and waivers with respect to the Pledged Stock, and the Collateral Agent shall, upon receiving a written request from the Borrower accompanied by a certificate signed by its principal financial officer stating that no Event of Default has occurred and is continuing, deliver to the Borrower or as specified in such request such proxies, powers of attorney, consents, ratifications and waivers in respect of any of the Pledged Stock which is registered in the name of the Collateral Agent or its nominee as shall be specified in such request and be in form and substance satisfactory to the Collateral Agent. If an Enforcement Notice is in effect, the Collateral Agent shall have the right to the extent permitted by law and the Borrower shall take all such action as may be necessary or appropriate to give effect to such right, to vote and to give consents, ratifications and waivers, and take any other action with respect to any or all of the Pledged Stock with the same force and effect as if the Collateral Agent were the absolute and sole owner thereof. (F) Each Grantor agrees that it will, at its expense and in such manner and form as the Collateral Agent may require, execute, deliver, file and record any financing statement, specific assignment or other paper and take any other action that may be necessary or desirable, or that the Collateral Agent may reasonably request, in order to create, preserve, perfect or validate any Security Interest in the Pledged Interests or to enable the Collateral Agent to exercise and enforce its rights hereunder with respect to any of the Pledged Interests. To the extent permitted by applicable law, each Grantor hereby authorizes the Collateral Agent to execute and file Uniform Commercial Code 14 financing statements (which may be carbon, photographic, photostatic or other reproductions of this Agreement or of a financing statement relating to this Agreement) which the Collateral Agent in its sole discretion may deem necessary or appropriate to further perfect the Security Interests in the Pledged Interests. In furtherance of the foregoing, each Grantor hereby constitutes and appoints the Collateral Agent its true and lawful attorney, with full power of substitution, in the name of such Grantor, to execute and file financing statements and continuation statements. (G)Each Special Purpose Member agrees that it will not change (i) its name, identity or corporate structure in any manner or (ii) the location of its chief executive office or chief place of business unless it shall have given (x) the Collateral Agent not less than 30 days' prior notice thereof and (y) delivered an opinion of counsel with respect thereto in accordance with Section 6(I). (H)Unless an Enforcement Notice is in effect, each Grantor shall have all rights to vote and to give consents, ratifications and waivers with respect to the Pledged Interests as and to the extent provided in the Operating Agreement. If an Enforcement Notice is in effect, the Collateral Agent shall have the right to the extent permitted by law and the Grantors shall take all such action as may be necessary or appropriate to give effect to such right, to vote and to give consents, ratifications and waivers, and take any other action with respect to any or all of the Pledged Interests with the same force and effect as if the Collateral Agent were the absolute and sole owner thereof. (I) In the event that BSF issues any additional or substitute limited liability company interests of any class or type to any Grantor, such Grantor will immediately pledge and deposit with the Collateral Agent certificates representing all such interests, as additional security for the Guaranties. All such interests constitute Pledged Interests and are subject to all provisions of this Agreement. SECTION 5. Releases of Collateral ---------------------- (A) At any time and from time to time prior to the termination of the Security Interests pursuant to Section 14, the Collateral Agent (i) may release any of the 15 Collateral with the prior written consent of all of the Lenders, which consent shall not be unreasonably withheld, and (ii) shall release Inventory which is being sold or transferred by the Borrower if the Borrower has complied with the provisions of clauses (i), (ii) and (if required) (iii) of Section 5.7 of the Inventory Credit Agreement with respect to such sale or transfer. Upon any such release of Collateral, the Collateral Agent will, at the expense of the applicable Grantor, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence the release of the Collateral. (B) Subject to the provisions of Section 5(C) of this Agreement, the Proceeds of Inventory, including accounts receivable arising from the sale thereof (and any books and records of the Borrower pertaining to such accounts receivable), shall automatically be released without the need for any action on the part of the Collateral Agent, upon the sale of such Inventory by the Borrower. (C) Upon the occurrence of either of the Events of Default specified in clauses (h) or (i) of Section 6.1 of the Inventory Credit Agreement with respect to the Borrower (and without any further act or notice) or the giving by the Collateral Agent of an Enforcement Notice to the Borrower, the automatic release set forth in Section 5(B) of this Agreement shall terminate (an "Automatic Release Termination") with respect to all Proceeds from (i) the sale of Inventory subsequent to the second Domestic Business Day after the day on which the Enforcement Notice is given or, if an Event of Default specified in clause (h) or (i) of Section 6.1 of the Inventory Credit Agreement has occurred, subsequent to the day after which such Event of Default occurs, and (ii) the sale of Inventory during the period after the day on which the Enforcement Notice is given to and including the second Domestic Business Day after the day on which the Enforcement Notice is given to the extent the aggregate amount of sales of Inventory during such period are not made in the ordinary course of business of the Borrower or exceed 10% of the Borrowing Base as of the date the Automatic Release Termination occurs. SECTION 6. Further Assurances; Covenants ----------------------------- (A) The Borrower will not change (i) the location of its chief executive office or chief place of business or (ii) the locations where it keeps or holds any of the Borrower's Collateral, other than Inventories or books and records relating to any Borrower's Collateral, from the 16 applicable locations described in the Perfection Certificate unless it shall have (a) given the Collateral Agent not less than 30 days' prior notice thereof and (b) delivered an opinion of counsel with respect thereto in accordance with Section 6(I). Not later than 90 days after the Borrower changes any location where it keeps or holds Inventories or books and records relating to any Borrower's Collateral from a location described in the Perfection Certificate to a location not described in the Perfection Certificate, the Borrower will (a) give the Collateral Agent notice thereof and (b) deliver an opinion of counsel with respect thereto in accordance with Section 6(I); provided that if all such Inventories are sold during such 90 day period then no such notice or opinion need be delivered with respect to such Inventories. No Grantor shall in any event change the location of any Collateral if such change would cause the Security Interests in such Collateral to lapse or cease to be perfected. (B) The Borrower will not change its name, identity or corporate structure (as the terms "identity" and "corporate structure" are used in Section 9-402(7) of the UCC) in any manner unless it shall have (i) given the Collateral Agent not less than 30 days' prior notice thereof and (ii) if the Collateral Agent so requests, delivered an opinion of counsel with respect thereto in accordance with Section 6(I). (C) The Borrower will, from time to time, at its expense, execute, deliver, file and record any statement, assignment, instrument, document, agreement or other paper and take any other action (including, without limitation, any filings of financing or continuation statements under the UCC) that from time to time may be necessary or desirable, or that the Collateral Agent may request, in order to create, preserve, perfect, confirm or validate the Security Interests or to enable the Collateral Agent and the other Secured Parties to obtain the full benefits of this Agreement, or to enable the Collateral Agent to exercise and enforce any of its rights, powers and remedies hereunder with respect to any of the Borrower's Collateral. To the extent permitted by applicable law, the Borrower hereby authorizes the Collateral Agent to execute and file financing statements or continuation statements without the Borrower's signature appearing thereon. In furtherance of the foregoing, the Borrower hereby constitutes and appoints the Collateral Agent its true and lawful attorney, with full power of substitution, in the name of the Borrower, to execute and file financing statements and continuation statements. The Borrower agrees that a carbon, photographic, photostatic or other reproduction of this Agreement or of a 17 financing statement is sufficient as a financing statement. The Borrower shall pay the costs of, or incidental to, any recording or filing of any financing or continuation statements concerning the Borrower's Collateral. (D) If any Borrower's Collateral is at any time in the possession or control of any warehouseman, bailee or any of the Borrower's agents or processors, the Borrower shall, if requested to do so by the Collateral Agent, notify such warehouseman, bailee, agent or processor of the Security Interests created hereby and instruct such warehouseman, bailee, agent or processor to hold all such Borrower's Collateral for the Collateral Agent's account subject to the Collateral Agent's instructions. (E) The Borrower shall keep full and accurate books and records relating to the Borrower's Collateral, and stamp or otherwise mark such books and records in such manner as the Required Lenders may reasonably require in order to reflect the Security Interests. (F) (i) Without the prior written consent of the Required Lenders, no Grantor will create, incur or suffer to exist any Lien with respect to any Collateral, except for Permitted Liens, and (ii) without the prior written consent of the Lenders, which consent shall not be unreasonably withheld, no Grantor will sell, lease, exchange, assign or otherwise dispose of, or grant any option with respect to, any Collateral unless the Security Interests created hereby in such Collateral have been released pursuant to Section 5 or Section 14. (G) The Borrower will maintain insurance policies in accordance with the terms of the Inventory Credit Agreement and all insurance proceeds shall be paid in accordance with the terms of the Inventory Credit Agreement. (H) Each Grantor will, promptly upon request, provide to the Collateral Agent all information and evidence it may reasonably request concerning the Collateral to enable the Collateral Agent to enforce the provisions of this Agreement and, if the Collateral Agent has been requested to do so by the Required Lenders, to prepare a Collateral Report. Each Grantor will permit the representatives of the Collateral Agent to call at its places of business at any time and from time to time during ordinary business hours, without hindrance or delay, and will, at such Grantor's cost and expense but without undue interference with its operations, permit such representatives to inspect the Collateral and to inspect, audit, check and make extracts from and copies of the books, records, journals, orders, receipts and 18 correspondence which relate to the Collateral. Each Grantor will provide each Secured Party with such information as to the Collateral as such Secured Party may reasonably request. Each Secured Party shall have the right to observe the annual physical inventory of Inventories performed by the Borrower's independent public accountants and the semi-annual physical inventory performed by the Borrower's audit staff at each plant location. Any proprietary or financial information provided pursuant to this subsection shall be kept confidential in accordance with Section 9.8 of the Inventory Credit Agreement. (I) (i) Not more than six months nor less than 30 days prior to (or, in the case of any action contemplated by the second sentence of Section 6(A), more than 90 days after) each date on which the Borrower proposes to take any action contemplated by Section 6(A) or (B) or a Special Purpose Member prepares to take any action contemplated by Section 4(G) and (ii) simultaneously with the delivery of each set of financial statements referred to in Section 5.1(a) of the Inventory Credit Agreement and in any event within 95 days after the end of each fiscal year of the Borrower during the term of this Agreement, the Grantors shall, at their cost and expense, jointly and severally, cause to be delivered to the Lenders an opinion of counsel, satisfactory to the Collateral Agent, substantially in the form of Annex B hereto, to the effect that all financing statements and amendments or supplements thereto, continuation statements and other documents required to be recorded or filed in order to perfect and protect the Security Interests for a period, specified in such opinion, continuing until a date not earlier than eighteen months after the date of such opinion, have been filed in each filing office necessary for such purpose and that all filing fees and taxes, if any, payable in connection with such filings have been paid in full. (J) From time to time upon request by the Collateral Agent, the Grantors shall, at their cost and expense, jointly and severally, cause to be delivered to the Lenders an opinion of counsel satisfactory to the Collateral Agent as to such matters relating to the transactions contemplated hereby as the Required Lenders may reasonably request. 19 SECTION 7. General Authority ----------------- Each Grantor hereby irrevocably appoints the Collateral Agent its true and lawful attorney, with full power of substitution, in the name of such Grantor, the other Secured Parties or otherwise, for the sole use and benefit of the Secured Parties, but at such Grantor's expense, to the extent permitted by law to exercise, at any time and from time to time, but only while an Enforcement Notice or Automatic Release Termination is in effect, all or any of the following powers with respect to all or any of the Collateral: (i) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due thereon or by virtue thereof, (ii) to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto, (iii) subject to Section 6 of the Operating Agreement, to sell, transfer, assign or otherwise deal in or with the same or the proceeds or avails thereof, as fully and effectually as if the Collateral Agent were the absolute owner thereof, and (iv) to extend the time of payment of any or all thereof and to make any allowance and other adjustments with reference thereto; provided that the Collateral Agent shall give each Grantor not less than ten days' prior notice of the time and place of any sale or other intended disposition of any of the Collateral, except any Collateral which is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market. The Collateral Agent and each Grantor agree that such notice constitutes "reasonable notification" within the meaning of Section 9-504(3) of the UCC. SECTION 8. Remedies Relating to Giving of Enforcement ------------------------------------------ Notice ------ (A) (i) The Administrative Agent shall give an Enforcement Notice to the Collateral Agent promptly after having been instructed to do so in accordance with Section 20 6.1 of the Inventory Credit Agreement. An Enforcement Notice delivered by the Administrative Agent must include a certification by the Administrative Agent of the principal amount (or, in the case of doubt, an estimate of such amount) of Secured Obligations outstanding under the Inventory Credit Agreement in respect of each Secured Party, but shall be effective notwithstanding any inaccuracies in such certification. (ii) Upon receipt of an Enforcement Notice pursuant to Section 8(A)(i), the Collateral Agent shall (i) forthwith notify each Grantor of the receipt and contents thereof and (ii) promptly thereafter, notify each other Secured Party thereof. The Collateral Agent's notice shall advise each Secured Party that, if it does not notify the Collateral Agent forthwith of the amount of its Secured Obligations (including the interest rate or rates applicable thereto), the Collateral Agent may rely on the information or documents (if any) supplied to it by (1) the Administrative Agent pursuant to Section 8(A)(i) and (2) the holder of Secured Tax Exempt Debt pursuant to Section 3.1(j) of the Inventory Credit Agreement in determining the amount of any distribution to such Secured Party with respect to the Collateral. So long as such Enforcement Notice or Automatic Release Termination is in effect, the Collateral Agent may exercise the rights and remedies provided in this Section. The Collateral Agent is not empowered to exercise any remedy under this Section unless an Enforcement Notice or Automatic Release Termination is in effect. (iii) An Enforcement Notice shall become effective when the Collateral Agent shall have received such Enforcement Notice. An Enforcement Notice, once effective, shall remain in effect unless and until it is canceled as provided in Section 8(A)(iv). (iv) If after an Enforcement Notice becomes effective the Borrower establishes to the satisfaction of the Required Secured Parties that no Event of Default is continuing, the Administrative Agent or the Required Secured Parties shall cancel such Enforcement Notice by delivering a written notice of cancellation to the Collateral Agent; provided that such notice is given (i) before the Collateral Agent takes any action to exercise any remedy with respect to the Collateral or (ii) thereafter, if the Collateral Agent believes that all actions it has taken to exercise any remedy or remedies with respect to the Collateral can be reversed without undue difficulty. A notice of cancellation shall become effective one Domestic Business Day after such notice is given as provided in this Section 8(A)(iv), it being understood that after receipt of a notice of 21 cancellation but before such notice becomes effective the Collateral Agent shall not enforce any remedy for the disposition of Collateral provided hereunder or make any distributions hereunder. The Collateral Agent shall promptly notify each Grantor and each other Secured Party of the cancellation of any Enforcement Notice. (B) If an Enforcement Notice or Automatic Release Termination is in effect, the Collateral Agent, at the request of the Required Secured Parties, may exercise on behalf of the Secured Parties (i) all rights of a secured party under the UCC (whether or not in effect in the jurisdiction where such rights are exercised) and (ii) all of the rights and remedies provided for in this Agreement. In addition, the Collateral Agent may, without being required to give any notice, except as herein provided or as may be required by mandatory provisions of law, (i) withdraw all Liquid Investments and apply such Liquid Investments and other cash, if any, then held by it as Collateral as specified in Section 10 and (ii) if there shall be no such monies, Liquid Investments or cash or if such monies, Liquid Investments or cash shall be insufficient to pay all the Secured Obligations in full, sell the Collateral or any part thereof at public or private sale, for cash, upon credit or for future delivery, and at such price or prices as the Collateral Agent may deem satisfactory; provided that the Collateral Agent shall not sell the BSF Note to any purchaser or purchasers unless the rating then assigned to the Buyers' Certificates (as defined in the Receivables Purchase Agreement) is reaffirmed by S&P if such Buyers' Certificates are then outstanding. The Collateral Agent or any other Secured Party may be the purchaser of any or all of the Collateral so sold at any public sale (or, if the Collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations, at any private sale). Subject to Section 6 of the Operating Agreement with respect to the Pledged Interests, the Collateral Agent is authorized in connection with any sale of the Pledged Securities or the Pledged Interests, if it deems it advisable so to do, (i) to restrict the prospective bidders on or purchasers of any of the Pledged Securities or Pledged Interests to a limited number of sophisticated investors who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or sale of any of such Pledged Securities or Pledged Interests, (ii) to cause to be placed on certificates for any or all of the Pledged Securities or Pledged Interests or on any other securities pledged hereunder a legend to the effect that such security has not been registered under the Securities Act of 1933 and may not be disposed of in violation of the 22 provision of said Act, and (iii) to impose such other limitations or conditions in connection with any such sale as the Collateral Agent reasonably deems necessary or advisable in order to comply with said Act or any other law. Each Grantor will execute and deliver such documents and take such other action as the Collateral Agent deems necessary or advisable in order that any such sale may be made in compliance with law. Upon any such sale the Collateral Agent shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral so sold. Each purchaser at any such sale shall hold the Collateral so sold to it absolutely free from any claim or right of whatsoever kind created by or through any Grantor, including any equity or right of redemption of any Grantor which may be waived, and each Grantor, to the extent permitted by law, hereby specifically waives all rights of redemption, stay or appraisal which it has or may have under any law now existing or hereafter adopted. The notice (if any) of such sale required by Section 7 shall (1) in case of a public sale, state the time and place fixed for such sale, (2) in the case of a private sale, state the day after which such sale may be consummated and (3) in the case of a sale at a broker's board or on a securities exchange, state the board or exchange at which such sale is to be made and the day on which the Collateral, or the portion thereof so being sold, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix in the notice of such sale. At any such sale the Collateral may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may determine. The Collateral Agent shall not be obligated to make any such sale pursuant to any such notice. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the selling price is paid by the purchaser thereof, but the Collateral Agent shall not incur any liability in case of the failure of such purchaser to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may again be sold upon like notice. The Collateral Agent, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose the Security Interests and sell the Collateral, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction. 23 (C) For the purpose of enforcing any and all rights and remedies under this Agreement, the Collateral Agent may (i) require the Borrower to, and the Borrower agrees that it will, at its expense and upon the request of the Collateral Agent, forthwith assemble all or any part of the Collateral as directed by the Collateral Agent and make it available at a place designated by the Collateral Agent which is, in its opinion, reasonably convenient to the Collateral Agent and the Borrower, whether at the premises of the Borrower or otherwise, (ii) to the extent permitted by applicable law, enter, with or without process of law and without breach of the peace, any premises where any of the Collateral is or may be located, and without charge or liability to it seize and remove such Collateral from such premises, (iii) have access to and use such Grantor's books and records relating to the Collateral and (iv) prior to the disposition of the Collateral, store or transfer it without charge in or by means of any storage or transportation facility owned or, to the extent the Borrower is permitted to use a leased facility, leased by the Borrower, process, repair or recondition it or otherwise prepare it for disposition in any manner and to the extent the Collateral Agent deems appropriate and, in connection with such preparation and disposition, use without charge any trademark, trade name, copyright, patent or technical process used by the Borrower, but only to the extent the Borrower is permitted to use such trademark, trade name, copyright, patent or technical process. SECTION 9. Limitation on Duty of Collateral Agent in ----------------------------------------- Respect of Collateral --------------------- Beyond the exercise of reasonable care in the custody thereof, the Collateral Agent shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. The Collateral Agent shall be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property, and shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehouseman, carrier, forwarding agency, consignee or other agent or bailee selected by the Collateral Agent in good faith. 24 SECTION 10. Application of Proceeds ----------------------- (A) If an Enforcement Notice or an Automatic Release Termination is in effect, the proceeds of any sale of, or other realization upon, all or any part of the Collateral and any cash otherwise held by the Collateral Agent pursuant to this Agreement shall be applied by the Collateral Agent in the following order of priorities: first, to payment of the expenses of such sale or other ----- realization, including reasonable compensation to agents and counsel for the Collateral Agent, and all expenses, liabilities and advances incurred or made by the Collateral Agent in connection therewith, and any other unreimbursed expenses for which the Collateral Agent, the Administrative Agent, or any Lender is to be reimbursed pursuant to Section 13 hereof and unpaid fees owing to the Collateral Agent under Section 13 hereof; second, to the ratable payment of accrued but unpaid ------ interest, calculated from the interest payment date immediately preceding the giving of the Enforcement Notice or the effectiveness of the Automatic Release Termination, or such other date as shall have been notified to the Collateral Agent, on all amounts included in the Secured Principal Amount; third, subject to the next to the last sentence of this ----- subsection (A), to the ratable payment of all amounts included in the Secured Principal Amount; fourth, to the ratable payment of all other Secured Obligations, until all Secured Obligations shall have been paid in full; and finally, to payment to the relevant Grantor or Grantors or ------- such Grantor's successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. The Collateral Agent may make distributions hereunder in cash or in kind or, on a ratable basis, in any combination thereof. If at any time any monies collected or received by the Collateral Agent are distributable pursuant to this Section in respect of a Letter of Credit Obligation or Secured Tax Exempt Debt, and if the Administrative Agent or the holder of such Secured Tax Exempt Debt shall notify the Collateral Agent that no provision is made under the relevant agreement or other instrument for the application 25 of such moneys (whether because such Letter of Credit Obligation is contingent or such Secured Tax Exempt Debt has not become due and payable or otherwise), then the Collateral Agent shall invest such amounts in Liquid Investments at the direction of the Administrative Agent or such holder and shall hold all such amounts so distributable and all such investments and the net proceeds thereof in trust until such time as the Administrative Agent or such holder shall request the delivery thereof by the Collateral Agent for application to amounts payable with respect to such Letter of Credit Obligation or Secured Tax Exempt Debt. If the Collateral Agent holds any amounts which were distributable in respect of a Letter of Credit Obligation or any Secured Tax Exempt Debt after the relevant obligation has terminated or matured and all amounts payable with respect thereto have been paid, such amounts shall be applied by the Collateral Agent in the order of priorities set forth in this subsection (A). (B) In making the determinations and allocations required by this Section, the Collateral Agent shall have no liability to any of the Secured Parties for actions taken in reliance on information supplied by the Secured Parties as to the amounts of the Secured Obligations held by them. All distributions made by the Collateral Agent pursuant to this Section shall be final and the Collateral Agent shall have no duty to inquire as to the application by the Secured Parties of any amount distributed to them. However, if at any time the Collateral Agent determines that an allocation or distribution previously made pursuant to this Section was based on a mistake of fact (including, without limiting the generality of the foregoing, mistakes based on an assumption that principal or interest has been paid by payments which are subsequently recovered from the recipient thereof through the operation of any bankruptcy, reorganization, insolvency or other laws or otherwise), the Collateral Agent may in its discretion, but shall not be obligated to, adjust subsequent allocations and distributions hereunder so that, on a cumulative basis, the Secured Parties receive the distributions to which they would have been entitled if such mistake of fact had not been made. SECTION 11. Concerning the Collateral Agent ------------------------------- (A) The Collateral Agent is authorized to take all such action as is provided to be taken by it as Collateral Agent hereunder and all other action reasonably incidental thereto. As to any matters not expressly provided for herein (including, without limitation, the timing and 26 methods of realization upon the Collateral) the Collateral Agent shall act or refrain from acting in accordance with written instructions from the Required Secured Parties or, in the absence of such instructions, in accordance with its discretion; provided that the Collateral Agent shall not be required to act (i) if upon advice of counsel the Collateral Agent concludes that any such action creates potential liability on its part or constitutes a violation of law or (ii) the Collateral Agent shall not be indemnified to its satisfaction in advance in respect of its costs and expenses in connection therewith. (B) J.P. Morgan Delaware and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if it were not the Collateral Agent hereunder. (C) The obligations of the Collateral Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Collateral Agent shall not be required to take any action with respect to any Enforcement Notice or Automatic Release Termination, except as expressly provided herein. (D) The Collateral Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. (E) Neither the Collateral Agent nor any director, officer, agent, or employee of the Collateral Agent shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Secured Parties (or, where required by the terms hereof, the Lenders) or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Collateral Agent nor any director, officer, agent or employee of the Collateral Agent shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement; (ii) the performance or observance of any of the covenants or agreements of any Grantor herein; or (iii) the validity, effectiveness or genuineness of this Agreement or any instrument or writing furnished in connection herewith. The Collateral Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, facsimile or similar writing) believed by it to be genuine 27 or to be signed by the proper party or parties. The Collateral Agent shall not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Security Interests in any of the Collateral, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder. The Collateral Agent shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Agreement by any Grantor. (F) The Lenders shall, ratably in accordance with their respective shares of the Secured Principal Amount on the relevant Determination Date (as defined below), indemnify the Collateral Agent (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from the Collateral Agent's gross negligence or willful misconduct) that the Collateral Agent may suffer or incur in connection with this Agreement or any action taken or omitted by the Collateral Agent hereunder or thereunder. The Determination Date for any such indemnification shall be the earliest date (as determined by the Collateral Agent) on which any of the acts, omissions or other events giving rise to the relevant cost, expense, claim, demand, action, loss or liability occurred. (G) The Collateral Agent may resign at any time (and, if so requested by the Required Lenders after refusing to act on behalf of the relevant Grantor pursuant to the first sentence of Section 13(B), shall resign) by giving written notice thereof to the other Secured Parties and the Borrower. Upon any such resignation, the Required Lenders shall have the right, after consultation with the Borrower, to appoint a successor Collateral Agent. If no successor Collateral Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Collateral Agent gives such notice of resignation, then the retiring Collateral Agent may, on behalf of the other Secured Parties, appoint a successor Collateral Agent, which shall be a bank organized under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $200,000,000. Upon the acceptance of its appointment as Collateral Agent hereunder by a successor Collateral Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations hereunder. After any retiring Collateral Agent's 28 resignation hereunder as Collateral Agent, the provisions of this Section shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent. SECTION 12. Appointment of Co-Agents ------------------------ At any time or times, in order to comply with any legal requirement in any jurisdiction or, with the consent of the Borrower, for any other reason, the Collateral Agent may appoint another bank or trust company or one or more other persons, either to act as co-agent or co-agents, jointly with the Collateral Agent, or to act as separate agent or agents on behalf of the Secured Parties with such power and authority as may be necessary for the effectual operation of the provisions hereof and may be specified in the instrument of appointment (which may, in the discretion of the Collateral Agent, include provisions for the protection of such co-agent or separate agent similar to the provisions of Sections 11 and 13). SECTION 13. Collateral Agent's Fee; Expenses -------------------------------- (A) The Borrower shall pay to the Collateral Agent, as compensation for its services hereunder, from time to time a fee in the amount previously agreed between the Borrower and the Collateral Agent. (B) If any Grantor fails to comply with the provisions of the Inventory Credit Agreement or this Agreement, such that the value of any Collateral or the validity, perfection, rank or value of any Security Interest is thereby diminished or potentially diminished or put at risk, the Collateral Agent, if requested by the Required Lenders, may, but shall not be required to, effect such compliance on behalf of such Grantor, and such Grantor shall reimburse the Collateral Agent for the costs thereof on demand. All insurance expenses and all expenses of protecting, storing, warehousing, appraising, insuring, handling, maintaining and shipping the Collateral and any and all excise, property, sales and use taxes imposed by any state, federal, or local authority on any of the Collateral, or in respect of periodic appraisals (if an Enforcement Notice or Automatic Release Termination is in effect) and inspections of the Collateral to the extent the same may be reasonably requested by the Required Lenders from time to time, or in respect of the sale or other disposition thereof, shall be 29 borne and paid by such Grantor; and if such Grantor fails to promptly pay any portion thereof when due, the Collateral Agent or any other Secured Party may, at its option, but shall not be required to, pay the same and charge such Grantor's account therefor, and such Grantor agrees to reimburse the Collateral Agent or such other Secured Party therefor on demand. All sums so paid or incurred by the Collateral Agent or any other Secured Party for any of the foregoing and any and all other sums for which such Grantor may become liable hereunder and all costs and expenses (including attorneys' fees, legal expenses and court costs) reasonably incurred by the Collateral Agent or any other Secured Party in enforcing or protecting the Security Interests or any of their rights or remedies under this Agreement, shall, together with interest thereon until paid at the rate applicable to Base Rate Loans under the Inventory Credit Agreement, be additional Secured Obligations hereunder. SECTION 14. Termination of Security Interests; Release ------------------------------------------ of Collateral ------------- The Security Interests shall terminate upon (i) the repayment in full of (x) all principal of and interest on any Loan made under, or any Note issued pursuant to, the Inventory Credit Agreement, (y) all Reimbursement Obligations and (z) all other amounts payable by the Borrower hereunder or under the Inventory Credit Agreement, (ii) the expiration of all Letters of Credit and (iii) the termination of the Commitments under the Inventory Credit Agreement; provided that, if any Secured Tax Exempt Debt is outstanding on the date of such termination, the Borrower shall grant to the holders of such Secured Tax Exempt Debt a first priority security interest (x) in Liquid Investments (or caused to be issued by a bank acceptable to such holders a letter of credit naming such holders as beneficiaries) in an amount exceeding 115% of the amount of Secured Tax Exempt Debt outstanding on the date of such termination, or (y) in other collateral, with a fair market value (as determined by such holders) exceeding 125% of the amount of Secured Tax Exempt Debt outstanding on the date of such termination, in each case on the terms and conditions and pursuant to documentation reasonably satisfactory to such holders. When the Security Interests terminate, all rights to any remaining Collateral shall revert to the relevant Grantor. Prior to such termination of the Security Interests, Collateral may be released pursuant to Section 5. Upon any such termination of the Security Interests, the Collateral Agent will, at the expense of the relevant Grantor, execute 30 and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence the termination of the Security Interests. SECTION 15. Guaranties ---------- (A)The Special Purpose Members, jointly and severally, unconditionally guarantee the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the Secured Obligations (the "Guaranties"). Upon failure by the Borrower to pay punctually any such amount, the Grantors shall forthwith on demand pay the amount not so paid at the place and in the manner specified in this Agreement. (B) The obligations of the Special Purpose Members hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Borrower under this Agreement, the Inventory Credit Agreement or any Secured Obligation, by operation of law or otherwise; (ii) any modification or amendment of or supplement to this Agreement, the Inventory Credit Agreement or any Secured Obligation; (iii) any release, impairment, non-perfection or invalidity of any direct or indirect security for any obligation of the Borrower under this Agreement, the Inventory Credit Agreement or any Secured Obligation; (iv) any change in the corporate existence, structure or ownership of the Borrower, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or its assets or any resulting release or discharge of any obligation of the Borrower contained in this Agreement, the Inventory Credit Agreement or any Secured Obligation; (v) the existence of any claim, set-off or other rights which the Special Purpose Member may have at any time against the Borrower, the Agents, the L/C Issuing Banks or any Lender or any other corporation or person, whether in 31 connection herewith or any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (vi) any invalidity or unenforceability relating to or against the Borrower for any reason of this Agreement, the Inventory Credit Agreement or any Secured Obligation, or any provision of applicable law or regulation purporting to prohibit the payment by the Borrower of any Secured Obligation; or (vii) any other act or omission to act or delay of any kind by the Borrower, the Agents, the L/C Issuing Banks or any Lender or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of or defense to the Special Purpose Members' obligations hereunder. (C) The Special Purpose Members' obligations hereunder shall remain in full force and effect until the Commitments shall have terminated and all Secured Obligations have been paid in full. If at any time any payment of any Secured Obligation is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, the Special Purpose Members' obligations hereunder with respect to such payment shall be reinstated as though such payment had been due but not made at such time. (D) The Special Purpose Members irrevocably waive acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against any Borrower or any other person. (E) Upon making any payment with respect to the Borrower hereunder, each Special Purpose Member shall be subrogated to the rights of the payee against the Borrower with respect to such payment; provided that such Special Purpose Member shall not enforce any payment by way of subrogation until all Secured Obligations have been paid in full. (F) If acceleration of the time for payment of any amount payable by the Borrower under this Agreement, the Inventory Credit Agreement or the Secured Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Borrower, all such amounts otherwise subject to acceleration under the terms of the Inventory Credit Agreement shall nonetheless be payable by the Special 32 Purpose Member hereunder forthwith on demand by the Administrative Agent made at the request of the Required Lenders. (G) Notwithstanding any other provision of this Section 15, recourse against the Special Purpose Members in respect of the Guaranties shall be limited to the Special Purpose Members' Collateral. SECTION 16. Notices ------- All notices, communications and distributions hereunder shall be given (i) in the case of the Borrower, the Agents, the L/C Issuing Banks and the Lenders, in accordance with Section 9.1 of the Inventory Credit Agreement, and (ii) in the case of each Special Purpose Member, at its address or facsimile number set forth on the signature pages hereof. SECTION 17. Waivers, Non-Exclusive Remedies ------------------------------- No failure on the part of the Collateral Agent to exercise, and no delay in exercising and no course of dealing with respect to, any right under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise by the Collateral Agent of any right under this Agreement preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies in this Agreement shall be cumulative and are not exclusive of any other remedies provided by law. SECTION 18. Successors and Assigns ---------------------- This Agreement is for the benefit of the Secured Parties and their successors and assigns, and in the event of an assignment of all or any of the Secured Obligations, the rights of the assignor hereunder, to the extent applicable to the indebtedness so assigned, shall automatically be transferred with such indebtedness. This Agreement shall be binding on each Grantor and its successors and assigns. 33 SECTION 19. Changes in Writing ------------------ Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only by one or more writings signed by each Grantor and by the Collateral Agent with the consent of the Required Lenders (and, if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent); provided that (i) the allocations and priorities set forth in Section 10 may only be changed with the consent of each Secured Party adversely affected thereby, and (ii) the definition of "Secured Obligations", Section 5, Section 14, Section 15 and the percentage of the Commitments or the aggregate unpaid principal amount of the Notes or the Secured Principal Amount which shall be required for the Lenders or any of them to take any action under this Section or any other provision of this Agreement may only be changed with the consent of all the Lenders. SECTION 20. New York Law ------------ This Agreement shall be construed in accordance with and governed by the laws of the State of New York, except as otherwise required by mandatory provisions of law and except to the extent that remedies provided by the laws of any jurisdiction other than New York are governed by the laws of such jurisdiction. SECTION 21. Severability ------------ If any provision hereof is invalid or unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Secured Parties in order to carry out the intentions of the parties hereto as nearly as may be possible; and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. 34 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. BETHLEHEM STEEL CORPORATION By___________________________ Name: Title: BETHLEHEM STEEL CREDITAFFILIATE ONE, INC. By___________________________ Name: Title: 5111 North Point Boulevard Sparrows Point, MD 21219-1014 Telephone: 410-388-7781 Facsimile: 410-388-7783 Attention: Edmund P. Reybitz BETHLEHEM STEEL CREDITAFFILIATE TWO, INC. By___________________________ Name: Title: 5111 North Point Boulevard Sparrows Point, MD 21219-1014 Telephone: 410-388-7782 35 Facsimile: 410-388-7783 Attention: Edmund P. Reybitz 36 J.P. MORGAN DELAWARE, as Structuring and Collateral Agent By___________________________ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By___________________________ Name: Title: 37 Schedule 2(B)(ii) Description of Collateral [Bethlehem Steel Credit Affiliate One, Inc.] [Bethlehem Steel Credit Affiliate Two, Inc.], as Debtor, J.P. Morgan Delaware, as Structuring and Collateral Agent. All of the debtors' right, title and interest in and to the limited liability company interest in Bethlehem Steel Funding, LLC, a Maryland limited liability company, and its successors, now owned or hereafter acquired by debtor, and all of debtor's rights and privileges with respect thereto (including, without limitation, all rights under the Operating Agreement of Bethlehem Steel Funding, LLC), all certificates evidencing any limited liability company interest, and all income and profits thereon, and all payments and distributions with respect thereto, and all proceeds of the foregoing, including all cash proceeds and all accounts, chattel paper, contract rights, general intangibles, inventory and documents constituting noncash proceeds, in each case now owned or hereafter acquired and wherever located. ANNEX A to EXHIBIT E PERFECTION CERTIFICATE The undersigned, the chief financial officer and chief accounting officer of Bethlehem Steel Corporation, a Delaware corporation (the "Borrower"), hereby certify with reference to the Inventory Security and Pledge Agreement dated as of September 12, 1995 among the Borrower, the Special Purpose Members, J.P. Morgan Delaware, as Structuring and Collateral Agent and Morgan Guaranty Trust Company of New York, as Administrative Agent (terms defined therein being used herein as therein defined), to the Structuring and Collateral Agent, the Administrative Agent and each Lender as follows: 1. Names. (a) The exact corporate name of the Borrower as it appears in its restated certificate of incorporation is as follows: Bethlehem Steel Corporation (b) The following is a list of all other names (including trade names or similar appellations) used by the Borrower or any of its divisions or other unincorporated business units which produce or have produced goods which would be included in the definition of Inventories at any time during the past five years: 2. Current Locations. (a) The chief executive office of the Borrower is located at the following address: Mailing Address County State ------- ------ ----- (b) The following are all the locations where the Borrower maintains any Inventories in the United States not identified above: Mailing Address County State ------- ------ ----- (c) The following are the names and addresses of all Persons other than the Borrower which have possession of any of the Borrower's Inventories in the United States: Mailing Address County State ------- ------ ----- (d) The following are all the places of business of the Borrower not identified above which are located in states in which the chief executive office of the Borrower or any Inventories are located: Mailing Address County State ------- ------ ----- 2 3. Prior Locations. (a) Set forth below is the information required by subparagraphs (a) and (d) of paragraph 2 with respect to each location or place ofbusiness not identified in paragraph 2 and maintained by the Borrower at any time during the past five years in a state in which it has maintained a location or place of business during the past four months: (b) Set forth below is the information required by subparagraphs (b) and (c) of paragraph 2 with respect to each location or bailee where or with whom Inventories have been lodged at any time during the past four months: 4. Unusual Transactions. All Inventories of the Borrower have been acquired by the Borrower in the ordinary course of its business. 5. File Search Reports. Attached hereto as Schedule 5(A) is a true copy of a file search report from the Uniform Commercial Code filing officer in each jurisdiction identified in paragraph 2 or 3 above with respect to each name set forth in paragraph 1 above. Attached hereto as Schedule 5(B) is a true copy of each financing statement or other filing identified in such file search reports. 6. UCC Filings. A duly signed financing statement on Form UCC-1 in substantially the form of Schedule 6(A) hereto has been duly filed in the Uniform Commercial Code filing office in each jurisdiction identified in paragraph 2 hereof. Attached hereto as Schedule 6(B) is a true copy of each such filing duly acknowledged by the filing officer. 7. Schedule of Filings. Attached hereto as Schedule 7 is a schedule setting forth filing information with respect to the filings described in paragraph 6 above. 3 8. Filing Fees. All filing fees and taxes payable in connection with the filings described in paragraph 6 above have been paid. 4 IN WITNESS WHEREOF, we have hereunto set our hands this ___ day of September, 1995. _______________________________ Title: ________________________________ Title: 5 SCHEDULE 6(A) Description of Collateral ------------------------- All (i) Inventories and documents, books and records pertaining to Inventories, documents and proceeds thereof, in each case, whether now owned or hereafter acquired or arising and wherever located, and the proceeds of the foregoing, (ii) shares of capital stock and debt instruments issued by Bethlehem Steel Credit Affiliate One, Inc. and Bethlehem Steel Credit Affiliate Two, Inc., and each of their successors to the debtor, now owned or hereafter acquired, and all rights and privileges with respect thereto, and all income and profits thereon, and all dividends, interest and other payments and distributions with respect thereto, and all proceeds of the foregoing, including, without limitation, all cash proceeds and all accounts, chattel paper, contract rights, general intangibles, inventory and documents constituting noncash proceeds of the foregoing, in each case now owned or hereafter acquired and wherever located, and (iii) of the debtor's right, title and interest in and to the limited liability company interest in, and debt instruments issued by, Bethlehem Steel Funding, LLC, a Maryland limited liability company, and its successors, now owned or hereafter acquired, and all rights and privileges with respect thereto (including, without limitation, all rights under the Operating Agreement of Bethlehem Steel Funding, LLC), all certificates evidencing any limited liability company interest, and all income and profits thereon, and all payments, distributions, interest and other payments with respect to the limited liability company interest or the debt instruments, and all proceeds of the foregoing, including, without limitation, all cash proceeds and all accounts, chattel paper, contract rights, general intangibles, inventory and documents constituting noncash 1 proceeds of the foregoing, in each case now owned or hereafter acquired and wherever located. "Inventories" means now owned or hereafter acquired by the debtor, all "inventory" (as defined in the UCC), wherever located, and shall also mean and include, without limitation, all raw materials and other materials and supplies, work-in-process and finished goods and any products made or processed therefrom and all substances, if any, commingled therewith or added thereto, or which, in accordance with generally accepted accounting principles, would be included in inventories on the debtor's balance sheet, (excluding, however, any of the foregoing which (i) is located outside the United States of America, (ii) is held at the debtor's marine construction facilities at Sparrows Point, Maryland or Port Arthur, Texas for sale or other disposition, or to be furnished by the debtor under a contract for services, or to be used or consumed by the debtor, in the debtor's marine construction business or (iii) has been returned to or repossessed or stopped in transit by the debtor (including all additions and accessions thereto and replacements thereof)). 2 SCHEDULE 7 SCHEDULE OF FILINGS Debtor Filing Officer File NumberDate of Filing* - ------ -------------- ------------------------- _______________ * Indicate lapse date, if other than fifth anniversary. ANNEX B TO EXHIBIT E FORM OF OPINION OF COUNSEL FOR BORROWER -------------------- 1. The Inventory Security and Pledge Agreement creates a valid security interest, for the benefit of the Secured Parties, in all the Grantors' right, title and interest in all Collateral to the extent the UCC is applicable thereto (the "Security Interest"). 2. UCC financing statements and amendments thereto (collectively, the "Financing Statements") have been filed in the filing offices in the jurisdictions listed in Schedule 7 to the Perfection Certificate (the " Filing Jurisdictions") and in the jurisdiction identified in or pursuant to Section 16 of the Inventory Security Agreement, which are all of the offices in which filings are required to perfect the Security Interest, to the extent the Security Interest may be perfected by filing under the UCC, and no further filing or recording of any document or instrument or other action will be required so to perfect the Security Interest, except that (i) continuation statements with respect to each Financing Statement must be filed within the respective time periods set forth on Schedule 7 to the Perfection Certificate; (ii) additional filings may be necessary if any Grantor changes its name, identity or corporate structure or the jurisdiction in which its places of business, its chief executive office or the Collateral are located; and (iii) I express no opinion on the perfection of, or need for further filing or recording to perfect, the Security Interest in Collateral now or hereafter located in any jurisdiction other than the Filing Jurisdictions. 3. There are (i) based solely on information provided to us by [Access Information Services, Inc.] through the dates of searches in each of the respective filing offices as set forth in Schedule A hereto and made a part hereof, no UCC financing statements which name the Borrower as debtor or seller and cover any of the Collateral, other than the Financing Statements, listed in the available records in the UCC filing offices set forth in such filing offices, which include all of the offices prescribed under the UCC as the offices in which filings should have been made to perfect security interests in the Collateral; and (ii) no notices of the filing of any federal tax lien (arising under Section 6321 of the Internal Revenue Code) or any lien of the Pension Benefit Guaranty Corporation (arising under ERISA) covering any of the Collateral listed in the available records in the offices listed in Schedule B attached hereto and made a part hereof, which include all of the offices having files which must be searched in order to fully determine the existence of notices of the filing of federal tax liens (arising under Section 6321 of the Internal Revenue Code) and liens of the Pension Benefit Guaranty Corporation (arising under ERISA) on the Collateral. 4. The Security Interest validly secures the payment of all future Loans made by the Lenders to the Borrower and all Reimbursement Obligations arising in connection with Letters of Credit issued by the L/C Issuing Banks, whether or not at the time such Loans are made or Letters of Credit are issued an Event of Default or other event not within the control of the Lenders or the L/C Issuing Banks has relieved or may relieve the Lenders from their obligations to make such Loans or the L/C Issuing Banks from their obligations to issue Letters of Credit, and is perfected to the extent set forth in paragraph 2 above with respect to such future Loans and Reimbursement Obligations. Except for (i) Instruments (and money) which must be in the possession of the Collateral Agent in order to perfect the Security Interest therein, (ii) Liquid Investments in book-entry form, as to which the Inventory Security Agreement requires an opinion of counsel that appropriate measures have been taken to perfect the Security Interest therein and (iii) Proceeds (other than Proceeds in which the Security Interest is perfected by reason of Section 9-306 of the UCC), I am not aware of the existence of any Collateral as to which the Security Interest cannot be perfected by filing under the UCC. Insofar as the priority thereof is governed by the UCC, the Security Interest has the same priority with respect to future Loans and Reimbursement Obligations on the date such Loans are made and such Reimbursement Obligations are incurred as it will have on such date with respect to Loans made and Letters of Credit issued on the date hereof. I call to your attention that notwithstanding the priorities 2 governed by the UCC, the Security Interest may not have priority in certain circumstances over a Federal Lien. To the extent the Security Interest secures Loans, (i) the Security Interest in Collateral acquired after the filing of a Federal Lien has priority over such Federal Lien only with respect to Collateral that is commercial financing security under Section 6323(c)(2)(C) of the Internal Revenue Code acquired by the Borrower in the ordinary course of its trade or business before the 46th day following such filing and (ii) the Security Interest has priority over such Federal Lien to the extent it secures Loans made after the date of filing of such Federal Lien only if such future Loans are made before the earlier of the 46th day after such Federal Lien is filed or the time that the relevant Lender or Lenders have actual notice or knowledge, within the meaning of Section 6323(i)(1) of the Internal Revenue Code, that such Federal Lien was filed. To the extent the Security Interest secures Reimbursement Obligations arising in connection with Letters of Credit, (i) the Security Interest in Collateral acquired after the filing of a Federal Lien may have priority over such Federal Lien only with respect to Collateral whose acquisition is directly traceable to a disbursement under such Letters of Credit and (ii) the Security Interest may have priority over a Federal Lien only to the extent such Security Interest secures Reimbursement Obligations arising under irrevocable Letters of Credit issued prior to the filing of such Federal Lien for the benefit of a party not affiliated with the Borrower. 3 EXHIBIT F BORROWING BASE CERTIFICATE I, _________________, [Chief Financial Officer/Treasurer/Controller], for Bethlehem Steel Corporation (the "Borrower") DO HEREBY CERTIFY, in accordance with Section 5.1 of the Inventory Credit Agreement dated as of September 12, 1995 among the Borrower, the Lenders listed therein, Morgan Guaranty Trust Company of New York, as Administrative Agent, and J.P. Morgan Delaware, as Structuring and Collateral Agent (the " Credit Agreement", capitalized terms used herein and not otherwise defined herein having the meanings assigned to them in the Credit Agreement), that attached hereto is the Borrower's good faith estimate as to the calculation of the Borrowing Base as of _____________. IN WITNESS WHEREOF, I have signed this certificate as of this ______ day of ___________. __________________________ Name: Title: EXHIBIT G Form of Opinion of Counsel to Bethlehem Steel Corporation [Letterhead of Bethlehem Steel Corporation] September 12, 1995 Morgan Guaranty Trust Company of New York, as Administrative Agent 60 Wall Street New York, New York 10260 J.P. Morgan Delaware, as Structuring and Collateral Agent 902 Market Street Wilmington, Delaware 19801 The Lenders (as defined in the Inventory Credit Agreement as referred to below) Ladies and Gentlemen: I have acted as counsel for Bethlehem Steel Corporation (the "Borrower") in connection with (i) the Inventory Credit Agreement (the "Inventory Credit Agreement") dated as of September 12, 1995 among the Borrower, the lenders listed on the signature pages thereof (the "Lenders"), Morgan Guaranty Trust Company of New York, as Administrative Agent (the "Administrative Agent") and J.P. Morgan Delaware as Structuring and Collateral Agent (the " Collateral Agent"), (ii) the Notes and (iii) the Inventory Security and Pledge Agreement (the "Inventory Security Agreement") dated as of September 12, 1995 among the Borrower, the Special Purpose Members, J.P. Morgan Delaware, the Collateral Agent and the Administrative Agent (documents (i) through (iii) are referred to herein as the "Financing Documents"). Terms defined in the Inventory Credit Agreement are used herein as therein defined. This opinion is being rendered to you pursuant to Section 3.1 of the Inventory Credit Agreement. I have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, I am of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. 2. Each Special Purpose Member is a corporation duly incorporated, validly existing and in good standing under the laws of Maryland and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. 3. The execution, delivery and performance by the Borrower of the Financing Documents are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official (except for the filing of UCC financing statements as contemplated by the Inventory Security Agreement) and do not contravene, or constitute a default under, any provision 2 of applicable law or regulation or of the certificate of incorporation or by-laws, as amended, of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower and known to me after due inquiry, or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries (except the Security Interest as hereinafter defined). 4. The execution, delivery and performance by each Special Purpose Member of the Inventory Security Agreement are within the such Member's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official (except for the filing of UCC financing statements as contemplated by the Inventory Security Agreement) and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the articles of incorporation or by-laws, as amended, of such Member or of any agreement, judgment, injunction, order, decree or other instrument binding upon such Member and known to me after due inquiry, or result in the creation or imposition of any Lien on any asset of such Member (except the Security Interest as hereinafter defined). 5. The Financing Documents constitute valid and binding agreements of the Borrower, enforceable against the Borrower in accordance with its terms, except to the extent that the (i) the enforceability thereof may be limited by bankruptcy, reorganization, insolvency, moratorium or other similar laws relating to the enforcement of creditors' rights generally from time to time in effect and by general equitable principles regardless of whether such enforceability is considered in a proceeding in equity or at law and (ii) certain of the remedial provisions of the Inventory Security Agreement may be limited by applicable law, although such limitations do not in my opinion make the remedies provided for therein (taken as a whole) inadequate for the practical realization of the benefits intended to be afforded thereby. 6. The Inventory Security Agreement constitutes a valid and binding agreement of each of the Special Purpose Members, enforceable against such Member in accordance with its terms, except to the extent that the (i) the enforceability thereof may be limited by bankruptcy, reorganization, insolvency, moratorium or other similar laws relating to the enforcement of creditors' rights generally from time to time in effect and by general equitable principles regardless of whether such enforceability is considered in a proceeding in equity or at law and (ii) certain of the remedial provisions may be limited by 3 applicable law, although such limitations do not in my opinion make the remedies provided for therein (taken as a whole) inadequate for the practical realization of the benefits intended to be afforded thereby. 7. To the best of my personal knowledge after due inquiry, there is no action, suit or proceeding pending against the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, in which there is a reasonable possibility of an adverse decision which could materially adversely affect the ability of the Borrower or such Subsidiary to perform its obligations under the Financing Documents or which in any manner draws into question the validity of the Financing Documents. 8. The Inventory Security Agreement creates a valid security interest, for the benefit of the Secured Parties, in all the Grantors' right, title and interest in all Collateral to the extent the UCC is applicable to the creation of a security interest therein (the " Security Interest"). 9. UCC financing statements (collectively, the "Financing Statements") have been filed in the filing offices in the jurisdictions listed in Schedule 7 to the Perfection Certificate dated as of the date hereof (the "Perfection Certificate") and delivered to you and in the jurisdiction identified in or pursuant to Section 16 of the Inventory Security Agreement (the "Filing Jurisdictions"), which are all of the offices in which filings are required so to perfect the Security Interest, to the extent the Security Interest may be perfected by any filing under the UCC, and no further filing or recording of any document or instrument or other action is currently required to perfect the Security Interest, except that (i) continuation statements with respect to each Financing Statement must be filed within the respective time periods set forth on Schedule 7 to the Perfection Certificate; (ii) additional filings may be necessary if any Grantor changes its name, identity or corporate structure or the jurisdiction in which its places of business, its chief executive office or the Collateral are located; and (iii) I express no opinion on the perfection of, or need for further filing or recording to perfect, the Security Interest in Collateral now or hereafter located in any jurisdiction other than the Filing Jurisdictions. 10.Assuming that each of the Collateral Agent and the Secured Parties is without notice of any adverse claim (as defined in Section 8-302 of the UCC), the delivery to and 4 continued possession by the Collateral Agent in the State of New York of the certificates, related stock powers executed in blank and the BSF Note representing the Pledged Securities (as defined in the Inventory Security Agreement) is effective to create in favor of the Collateral Agent for the benefit of the secured parties named therein a perfected and first priority security interest in the Pledged Securities under the Uniform Commercial Code as in effect in the State of New York prior to any other security interest that must be perfected by possession or filing under the UCC. No registration, recordation or filing with any governmental body, agency or official is required in connection with the execution or delivery of the Inventory Security Agreement with respect to the Pledged Securities or necessary for the validity or enforceability thereof or for the perfection of the security interest in the Pledged Securities. 11.Assuming that each of the Collateral Agent and the Secured Parties is without notice of any adverse claim (as defined in Section 8-302 of the UCC), the delivery to and continued possession by the Collateral Agent in the State of New York of the certificates representing the Pledged Interests (as defined in the Inventory Security Agreement) and filing of Financing Statements in the jurisdiction identified in or pursuant to Section 16 of the Inventory Security Agreement is effective to create in favor of the Collateral Agent for the benefit of the secured parties named therein a perfected and first priority security interest in the Pledged Interests under the Uniform Commercial Code prior to any other security interest that must be perfected by possession or filing under the UCC. 12. There are (i) based solely on information provided to us by Access Information Services, Inc. through the dates of searches in each of the respective filing offices as set forth in Schedule A hereto and made a part hereof, other than financing statements on file with respect to the Existing Credit Agreement (which will be terminated in accordance with the provisions of Section 3.1 of the Inventory Credit Agreement), no UCC financing statements which name the Borrower as debtor or seller and cover any of the Collateral, other than the Financing Statements, listed in the available records in the UCC filing offices set forth in such filing offices, which include all of the offices prescribed under the UCC as the offices in which filings should have been made to perfect security interests in the 5 Collateral to the extent Security Interests may be perfected by filing; and (ii) no notices of the filing of any federal tax lien (arising under Section 6321 of the Internal Revenue Code) or any lien of the Pension Benefit Guaranty Corporation (arising under ERISA) covering any of the Collateral listed in the available records in the offices listed in Schedule B attached hereto and made a part hereof, which include all of the offices having files which must be searched in order to fully determine the existence of notices of the filing of federal tax liens (arising under Section 6321 of the Internal Revenue Code) and liens of the Pension Benefit Guaranty Corporation (arising under ERISA) on the Collateral. 13. The Security Interest validly secures the payment of all future Loans made by the Lenders to the Borrower and all Reimbursement Obligations arising in connection with Letters of Credit issued by the L/C Issuing Banks, whether or not at the time such Loans are made or Letters of Credit are issued an Event of Default or other event not within the control of the Lenders or the L/C Issuing Banks has relieved or may relieve the Lenders from their obligations to make such Loans or the L/C Issuing Banks from their obligations to issue Letters of Credit, and is perfected to the extent set forth in paragraph 9 above with respect to such future Loans and Reimbursement Obligations. Except for (i) Pledged Securities, Instruments (and money) which must be in the possession of the Collateral Agent in order to perfect the Security Interest therein, (ii) Liquid Investments in book-entry form, as to which the Inventory Security Agreement requires an opinion of counsel that appropriate measures have been taken to perfect the Security Interest therein and (iii) Proceeds (other than Proceeds in which the Security Interest is perfected by reason of Section 9-306 of the UCC), I am not aware of the existence of any Collateral as to which the Security Interest cannot be perfected by filing under the UCC. Insofar as the priority thereof is governed by the UCC, the Security Interest has the same priority with respect to future Loans and Reimbursement Obligations on the date such Loans are made and such Reimbursement Obligations are incurred as it will have on such date with respect to Loans made and Letters of Credit issued on the date hereof. I call to your attention that notwithstanding the priorities governed by the UCC, the Security Interest may not have priority in certain circumstances over a Federal Lien. To the extent the Security Interest secures Loans, (i) the Security Interest 6 in Collateral acquired after the filing of a Federal Lien has priority over such Federal Lien only with respect to Collateral that is commercial financing security under Section 6323(c)(2)(C) of the Internal Revenue Code acquired by the Borrower in the ordinary course of its trade or business before the 46th day following such filing and (ii) the Security Interest has priority over such Federal Lien to the extent it secures Loans made after the date of filing of such Federal Lien only if such future Loans are made before the earlier of the 46th day after such Federal Lien is filed or the time that the relevant Lender or Lenders have actual notice or knowledge, within the meaning of Section 6323(i)(1) of the Internal Revenue Code, that such Federal Lien was filed. To the extent the Security Interest secures Reimbursement Obligations arising in connection with Letters of Credit, (i) the Security Interest in Collateral acquired after the filing of a Federal Lien may have priority over such Federal Lien only with respect to Collateral whose acquisition is directly traceable to a disbursement under such Letters of Credit and (ii) the Security Interest may have priority over a Federal Lien only to the extent such Security Interest secures Reimbursement Obligations arising under irrevocable Letters of Credit issued prior to the filing of such Federal Lien for the benefit of a party not affiliated with the Borrower. I am a member of the bar of the Commonwealth of Pennsylvania and I express no opinion as to any matters governed by any laws other than the General Corporation Law of the State of Delaware, the laws of the Commonwealth of Pennsylvania and the Federal laws of the United States of America. I have made no independent examination of Indiana, Maryland or New York law, and have retained special counsel in Maryland, Pennsylvania and New York with respect to certain matters relating to the Security Interest. In giving the opinions in paragraphs 2, 4, 5, 6, 8, 9, 10, 11, 12 and 13 hereof I have relied upon the opinions, each dated of even date herewith, of Cravath, Swaine & Moore, Pepper, Hamilton & Scheetz, Venable, Baetjer and Howard, LLP and Barnes & Thornburg, respectively. In giving the opinion expressed in paragraphs 9 and 12(i) hereof with respect to states other than Indiana, Maryland, Pennsylvania and New York, I have relied solely upon a review of Part 4 (or the equivalent provisions) of the Uniform Commercial Code in effect in each such state. Very truly yours, EXHIBIT H Form of Opinion of Davis Polk & Wardwell, Special Counsel for the Agents [Letterhead of Davis Polk & Wardwell] September 12, 1995 Morgan Guaranty Trust Company of New York, as Administrative Agent 60 Wall Street New York, New York 10260 J.P. Morgan Delaware, as Structuring and Collateral Agent 902 Market Street Wilmington, Delaware 19801 The Lenders (as defined in the Inventory Credit Agreement as referred to below) Ladies and Gentlemen: We have participated in the preparation of the Inventory Credit Agreement (the "Inventory Credit Agreement") dated as of September 12, 1995 among Bethlehem Steel Corporation (the "Borrower"), the lenders listed on the signature pages thereof, as Lenders, Morgan Guaranty Trust Company of New York, as Administrative Agent and J.P. Morgan Delaware, as Structuring and Collateral Agent. Terms defined in the Agreement and not otherwise defined herein are used in this opinion with the meanings so defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Borrower of the Inventory Credit Agreement and the Notes are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action. 2. The Inventory Credit Agreement constitutes a valid and binding agreement of the Borrower and each Note constitutes a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York, the federal laws of the United States of America and the General Corporation Law of the State of Delaware. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Lender is located which limits the rate of interest that such Lender may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent. Very truly yours, 2 EXHIBIT I ACCEPTABLE INSURERS X.L. Insurance Company, Ltd. EXHIBIT J ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _________, 19__ among [NAME OF ASSIGNOR] (the "Assignor"), [NAME OF ASSIGNEE] (the "Assignee"), BETHLEHEM STEEL CORPORATION (the " Borrower") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (the "Administrative Agent"). WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Inventory Credit Agreement dated as of September 12, 1995 among the Borrower, the Assignor and the other Lenders party thereto, as Lenders, the Administrative Agent and J.P. Morgan Delaware, as Structuring and Collateral Agent (the " Inventory Credit Agreement"); WHEREAS, as provided under the Inventory Credit Agreement, the Assignor has a Commitment to make Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed $__________; WHEREAS, Loans made to the Borrower by the Assignor under the Inventory Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Inventory Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; and WHEREAS, the Assignor concurrently proposes to assign all of the rights of the Assignor under the Receivables Purchase Agreement in respect of a portion of its Commitment thereunder, together with a corresponding portion of its pro rata share of the Aggregate Net Investment. NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise ----------- defined herein shall have the respective meanings set forth in the Inventory Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and ---------- sells to the Assignee all of the rights of the Assignor under the Inventory Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Inventory Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, and if required pursuant to Section 4, the Borrower and the Administrative Agent, and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Lender under the Inventory Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Inventory Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment -------- and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in 2 Federal funds the amount heretofore agreed between them.(1) It is understood that commitment and/or facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Inventory Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION 4. Consent of the Borrower and the Administrative Agent. This Agreement is conditioned upon the consent of the Borrower and the Administrative Agent pursuant to Section 9.6(c) of the Inventory Credit Agreement. The execution of this Agreement by the Borrower and the Administrative Agent is evidence of this consent. Pursuant to Section 9.6(c), the Borrower agrees to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein. SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Borrower, or the validity and enforceability of the obligations of the Borrower in respect of the Inventory Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower. SECTION 5. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. - --------------- (1) Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. 3 SECTION 6. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [NAME OF ASSIGNOR] By_________________________ Name: Title: [NAME OF ASSIGNEE] By__________________________ Name: Title: [BETHLEHEM STEEL CORPORATION By__________________________ Name: Title:] MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By__________________________ Name: 4 Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as L/C Issuing Bank By___________________________ Name: Title: CHEMICAL BANK, as L/C Issuing Bank By___________________________ Name: Title: THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as L/C Issuing Bank By___________________________ Name: Title: EX-4 3 Exhibit 4(d) AMENDED AND RESTATED INVENTORY CREDIT AGREEMENT AMENDED AND RESTATED INVENTORY CREDIT AGREEMENT dated as of June 5, 1997 among BETHLEHEM STEEL CORPORATION, the Lenders listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent and Structuring and Collateral Agent. W I T N E S S E T H : WHEREAS, the parties hereto have heretofore entered into a Inventory Credit Agreement (the "Agreement") dated as of September 12, 1995, and WHEREAS, the parties hereto desire to amend the Agreement as set forth herein and to restate the Agreement in its entirety to read as set forth in the Agreement with the amendments specified below; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Definitions; References. Unless otherwise ----------------------- specifically defined herein, each capitalized term used herein which is defined in the Agreement shall have the meaning assigned to such term in the Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Agreement shall from and after the effective date hereof refer to the Agreement as amended and restated hereby. SECTION 2. Amendments to Definitions. Section 1.1 of the ------------------------- Agreement is amended as follows: (a) The definition of "Adjusted Consolidated Tangible Net Worth" is amended by replacing "December 31, 1994" with "March 31, 1997". (b) The definition of "Borrower's 1994 Form 10-K" is amended by replacing "1994" in each place where it appears with "1996". (c) The definition of "Borrower's Latest Form 10-Q" is amended by replacing "June 30, 1995" with "March 31, 1997" (d) The definition of "Collateral Agent" is amended by replacing "J.P. Morgan Delaware" with "Morgan Guaranty". (e) The definition of "Consolidated Tangible Net Worth" is amended by replacing "December 31, 1994" with "March 31, 1997". (f) The definition of "Eligible Inventories" is amended by replacing "1994" with "1996". (g) The definition of "Termination Date" is amended by replacing the date "September 12, 2000" with the date "September 12, 2002". (h) Each reference to "Chemical Bank" in the definitions "CD Reference Banks", "Euro-Dollar Reference Banks" and "L/C Issuing Bank" is changed to "The Chase Manhattan Bank". SECTION 3. Updated Representations. (a) Each reference to ----------------------- "1994" in Section 4.4 of the Agreement is changed to "1996". (b) Each reference to "June 30, 1995" in Section 4.4 of the Agreement is changed to "March 31, 1997". (c) Each reference to "six" in Section 4.4(b) of the Agreement is changed to "three". (d) The references in Section 4.7 of the Agreement to "December 31, 1987" and "December 31, 1986" are changed to "December 31, 1990" and "December 31, 1987", respectively. SECTION 4. Amendment of Section 5.6 of the Agreement. The ----------------------------------------- reference to "$600,000,000" in Section 5.6 is changed to "$450,000,000" and the reference to "June 30, 1995" in Section 5.6 is changed to "June 30, 1997". SECTION 5. New Pricing Schedule. The Pricing Schedule to -------------------- the Agreement is deleted and replaced by the Pricing Schedule attached hereto. SECTION 6. Addition of Approved Sites. Exhibit C-1 to the -------------------------- Agreement is deleted and replaced by Exhibit C-1 attached hereto. SECTION 7. Changes in Commitments. With effect from and ---------------------- including the date this Amendment and Restatement becomes effective in accordance with Section 10, (i) each Person listed on the signature pages hereof which is not a party to the Agreement (the "New Bank") shall become a Bank party to the 2 Agreement and (ii) the Commitment of each Bank shall be the amount set forth opposite the name of such Bank on the signature pages hereof. Any Bank whose Commitment is changed to zero shall upon such effectiveness cease to be a Bank party to the Agreement, and all accrued fees and other amounts (other than principal and interest) payable under the Agreement for the account of such Bank shall be due and payable on such date; provided that the provisions of Sections 8.3, 8.4 and 9.3 of the Agreement shall continue to inure to the benefit of each such Bank , provided further that such Bank shall continue to be bound by Section 9.8 of the Agreement with respect to information provided to it prior to such date. If Loans are outstanding on such date and, as a result of changes in the Commitments of the Banks, such Loans are not held by the continuing Banks ratably in proportion to their Commitments, the Banks shall, as appropriate, buy and sell such Loans such that, after giving effect to such purchases, such Loans are held ratably, and Section 2.14 of the Agreement shall apply to any such purchases. SECTION 8. Representations and Warranties. The Borrower ------------------------------ hereby represents and warrants that as of the effective date hereof (after giving effect hereto): (a) no Default has occurred and is continuing; and (b) each representation and warranty of the Borrower set forth in the Agreement after giving effect to this Amendment and Restatement is true and correct. SECTION 9. Governing Law. This Amendment and Restatement ------------- shall be governed by and construed in accordance with the laws of the State of New York. SECTION 10. Counterparts; Effectiveness. This Amendment and --------------------------- Restatement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment and Restatement shall become effective as of the date hereof if each of the following conditions shall have been satisfied not later than June 30, 1997: (i) receipt by the Administrative Agent of duly executed counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, the Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); 3 (ii) receipt by the Administrative Agent of an opinion of the Assistant General Counsel of the Borrower (or such other counsel for the Borrower as may be acceptable to the Administrative Agent), substantially to the effect of paragraphs 1-8 of Exhibit G to the Agreement with reference to this Amendment and Restatement and the Agreement as amended and restated hereby; (iii) receipt by the Administrative Agent for the several accounts of the Banks of fees equal to (w) .225% of such Lender's Commitment, if such Lender's initial commitment for this facility and under the Amendment and Restatement of the Receivables Purchase Agreement (the "facilities") was at least $75,000,000, (x) .1875% of such Lender's Commitment, if such Lender's initial commitment for the facilities was at least $50,000,000 but less than $75,000,000, (y) .15% of such Lender's Commitment, if such Lenders's initial commitment for the facilities was at least $25,000,000 but less than $50,000,000, and (z) .125% of such Lender's Commitment, if such Lender's initial commitment for the facilities was at least $15,000,000 but less than $25,000,000; (iv) the Borrower shall have paid to the Agents, for their own accounts, such fees and compensation in such amounts as are set forth in the letter dated May 8, 1997; and (v) the Amendment and Restatement dated as of June 5, 1997 of the Receivables Purchase Agreement shall have become effective; The Administrative Agent shall promptly notify the Borrower and the Banks of the effectiveness of this Amendment and Restatement, and such notice shall be conclusive and binding on all parties hereto. 4 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. BETHLEHEM STEEL CORPORATION By ------------------------------ Name: Title: 1170 Eighth Avenue Bethlehem, PA 18016 Telephone: 610-694-4581 Facsimile: 610-694-3356 Attention: Edmund P. Reybitz, Assistant Treasurer 5 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent, Structuring and Collateral Agent, and L/C Issuing Bank By ------------------------------ Name: Title: 60 Wall Street New York, NY 10260 Telephone: 212-648-6793 Facsimile: 212-648-5336 Attention: Laura E. Reim THE CHASE MANHATTAN BANK, as L/C Issuing Bank By ------------------------------ Name: Title: THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as L/C Issuing Bank By ------------------------------ Name: Title: 6 LENDERS: Commitment: $37,821,428.58 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By ------------------------------ Name: Title: Commitment: $29,142,857.14 THE CHASE MANHATTAN BANK, By ------------------------------ Name: Title: Commitment: $29,142,857.14 THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By ------------------------------ Name: Title: Commitment: $18,000,000.00 THE BANK OF NEW YORK By ------------------------------ Name: Title: 7 Commitment: $18,000,000.00 NATIONSBANK, N.A. (CAROLINAS) By ------------------------------ Name: Title: Commitment: $18,000,000.00 CORESTATES BANK, N.A. By ------------------------------ Name: Title: Commitment: $15,750,000.00 BANK OF AMERICA ILLINOIS By ------------------------------ Name: Title: Commitment: $15,857,142.86 THE FIRST NATIONAL BANK OF CHICAGO By ------------------------------ Name: Title: Commitment: $9,000,000.00 THE FUJI BANK, LIMITED By ------------------------------ Name: Title: 8 Commitment: $9,000,000.00 THE INDUSTRIAL BANK OF JAPAN, LIMITED By ------------------------------ Name: Title: Commitment: $9,000,000.00 THE SUMITOMO BANK, LIMITED NEW YORK BRANCH By ------------------------------ Name: Title: Commitment: $8,571,428.57 BANK AUSTRIA AKTIENGESELLSCHAFT By ------------------------------ Name: Title: By ------------------------------ Name: Title: 9 Commitment: $7,714,285.71 SUMMIT BANK By ------------------------------ Name: Title: TOTAL COMMITMENTS: $225,000,000 10 EXHIBIT C-1 Approved Sites Name Location - ---- -------- Double G. Coatings, L.P. Jackson, Mississippi Walbridge Coatings, an Illinois Walbridge, Ohio Partnership Indiana Pickling and Processing Portage, Indiana HS Processing LP Baltimore, Maryland Metal Coaters of Georgia, Inc. Marietta, Georgia DoubleCote, L.L.C. Jackson, Mississippi Metro Metals Corporation Portage, Indiana Roll & Hold Warehouse & Indianapolis, Indiana Distribution Corp. Roll & Hold Warehouse & Macedonia, Ohio Distribution Corp. Roll & Hold Warehouse & Hammond, Indiana Distribution Corp. Roll & Hold Warehouse & Davenport, Iowa Distribution Corp. Dearborn Steel Center, Inc. Dearborn, Michigan EX-4 4 Exhibit 4(d) CONFORMED COPY AMENDED AND RESTATED INVENTORY CREDIT AGREEMENT AMENDED AND RESTATED INVENTORY CREDIT AGREEMENT dated as of June 19, 1998 among BETHLEHEM STEEL CORPORATION, the Lenders listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent and Structuring and Collateral Agent. W I T N E S S E T H : WHEREAS, the parties hereto have heretofore entered into an Inventory Credit Agreement dated as of September 12, 1995, which was amended and restated by an Amended and Restated Inventory Credit Agreement dated as of June 5, 1997 (as so amended and restated, the "Agreement"), and WHEREAS, the parties hereto desire to amend the Agreement to increase the aggregate Commitments (as defined in the Agreement) from $225,000,000 to $260,000,000 and otherwise as set forth herein and to restate the Agreement in its entirety to read as set forth in the Agreement with the amendments specified below; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Definitions; References. Unless otherwise ----------------------- specifically defined herein, each capitalized term used herein which is defined in the Agreement shall have the meaning assigned to such term in the Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Agreement shall from and after the effective date hereof refer to the Agreement as amended and restated hereby. SECTION 2. Amendments to Definitions. (a) Section 1.1 of ------------------------- the Agreement is amended as follows: (i) The definition of "Borrower's 1996 Form 10-K" is amended by replacing "1996" in each place where it appears with "1997". (ii) The definition of "Borrower's Latest Form 10-Q" is amended by replacing "1997" with "1998". (iii) Clause (i) of the definition of "Commitment" is superceded by the provisions of Section 5 of this Amendment and Restatement. (iv) The definition of "Eligible Inventories" is amended as follows: (A) by replacing "1996" with "1997", (B) by redesignating subclause (ii) in clause (b) as subclause "(iii)" and adding the following new subclause (ii): "(ii) on the premises of a Lukens Facility, but only for so long as such premises remain owned or leased by the Borrower or Lukens, provided that, in the case of leased premises or premises owned by Lukens, the Collateral Agent has received evidence satisfactory to it (including landlord waivers satisfactory to it) that it may enter such premises for the purposes specified in Section 8 (C) of the Inventory Security Agreement;" and (C) adding a further proviso at the end of the last ------- proviso therein reading as follows: ------- "and provided further that before any Inventory of the -------- ------- category described in subclause (b)(ii) of this definition may be first included in Eligible Inventories (and without prejudice to any other provision of the Financing Documents that may thereafter be applicable), the Borrower shall have (i) furnished to the Collateral Agent (and the Collateral Agent in its reasonable discretion shall be satisfied with) information (x) as to such procedures being established and agreed to by the Borrower and Lukens that will enable the Collateral Agent to distinguish such Inventory from similar property at such Lukens Facility, if any, that remains owned by Lukens and (y) otherwise with respect to such Inventory comparable to information that would be provided in a Perfection Certificate (as defined in the Inventory Security Agreement) and (ii) delivered to the Collateral Agent and the Lenders such opinions of counsel (substantially in the form 2 of Annex B to Exhibit E), instruments and other information requested by the Collateral Agent as may be necessary or desirable to evidence that the Lenders' Security Interest in such Inventory is perfected subject to no prior Lien except as permitted by the Financing Documents." (v) The definition of "Inventories" is amended by changing subclause (iii) in the parenthetical to (iv) and adding the following as subclause (iii): "following the sale of the No. 1 coke oven battery at the coke oven facility at the Borrower's Burns Harbor facility, is coal inventories located at such facility" (vi) The definition of "Termination Date" is amended by replacing the date "September 12, 2002" with "June 19, 2003". (vii) The definition of "Inventory Information Memorandum" is amended in its entirety to read as follows: "Inventory Information Memorandum" means the Bethlehem Steel Corporation Inventory Credit Agreement Inventory Review dated May 1998. (b) Section 1.1 of the Agreement is further amended by adding the following new definitions in alphabetical order: "Lukens" means Lukens Steel Company, a Pennsylvania corporation. "Lukens Facilities" means the Conshohocken, Coatesville and Piedmont facilities operated as of the date hereof by Lukens. "Lukens Merger" means the merger of Lukens Acquisition Corporation into Lukens Inc., which occurred on May 29, 1998 pursuant to the Lukens Merger Agreement. "Lukens Merger Agreement" means the Agreement and Plan of Merger, dated as of December 15, 1997 and as amended as of January 4, 1998, among the Borrower, Lukens Acquisition Corporation and Lukens Inc., as further amended from time to time. "1998 Effective Date" means the date upon which the conditions to effectiveness of this Amended and Restated Inventory Credit Agreement dated as of June 19, 1998 are satisfied. 3 SECTION 3. Updated Representations. (a) Each reference to ----------------------- "1996" in Section 4.4(a) of the Agreement is changed to "1997". (b) Each reference to "March 31, 1997" in Section 4.4 of the Agreement is changed to "March 31, 1998". (c) The reference in Section 4.7 of the Agreement to "December 31, 1990" is changed to "December 31, 1994". SECTION 4. Sale of No. 1 Coke Oven Battery at Burns Harbor. ------------------------------------------------ (a) Section 5.7 of the Agreement is amended by amending subclause (B) of clause (ii) by (x) inserting the following at the beginning of such subclause: "(a) if such sale is of coal inventories located at the coke oven facility at the Borrower's Burns Harbor facility in connection with the sale of the No. 1 coke oven battery at such facility (which will cause the release of all coal inventories at such facility from Collateral pursuant to Section 9.13 of this Agreement) or (b)"; and (y) inserting following "such sale is of such Inventories" the words "or such coal inventories in connection with the sale of the No. 1 coke oven battery". (b) The following is added as SECTION 9.13 to the Agreement: SECTION 9.13 Release of Coal Inventories from Collateral ------------------------------------------- upon Sale of No. 1 Coke Oven Battery at Burns Harbor. Upon ----------------------------------------------------- the sale of the No. 1 coke oven battery together with any coal inventories located at the coke oven facility at the Borrower's Burns Harbor facility, all coal inventories at such facility will be excluded from the Borrowing Base, will be released as Collateral pursuant to Section 5(A) of the Inventory Security Agreement and will no longer be considered to be part of Inventories under this Agreement. SECTION 5. Changes in Commitments. With effect from and ---------------------- including the 1998 Effective Date, (i) each Person listed on the signature pages hereof that is not a party to the Agreement (a "New Lender") shall become a Lender party to the Agreement and (ii) the Commitment of each Lender shall be the amount set forth opposite the name of such Lender on the signature pages hereof. Any Lender whose Commitment is changed to zero (an "Exiting Lender") shall upon the 1998 Effective Date cease to be a Lender party to the Agreement (and, without omitting the generality of the foregoing, its participation in any outstanding Participated 4 Letter of Credit shall automatically be canceled without any further action), and all accrued Fees and other amounts (other than principal and interest) payable under the Agreement for the account of an Exiting Lender to the 1998 Effective Date shall, notwithstanding the provisions of Article 2 of the Agreement, be due and payable for the account of such Exiting Lender on the 1998 Effective Date; provided that the provisions of Sections 8.3, 8.4 and 9.3 of the Agreement shall continue to inure to the benefit of each Exiting Lender and, provided further that each Exiting Lender shall continue to be bound - -------- ------- by Section 9.8 of the Agreement with respect to information provided to it prior to such date. The calculation of accrued Fees payable to each continuing Lender on the first Quarterly Date or other date after the 1998 Effective Date on which Fees are payable shall reflect any changes in the Commitments of such Lenders made pursuant to this Section 5 and, notwithstanding the provisions of Section 2.13 of the Agreement, shall be paid to each such Lender accordingly. If Loans are outstanding on the 1998 Effective Date and, as a result of changes in the Commitments of the Lenders, such Loans are not held by the continuing Lenders ratably in proportion to their Commitments, the Lenders (including New Lenders and Exiting Lenders) shall, as appropriate, buy and sell such Loans such that, after giving effect to such purchases, such Loans are held ratably, and Section 2.14 of the Agreement shall apply to any such purchases. SECTION 6. Representations and Warranties. The Borrower ------------------------------ hereby represents and warrants that as of the 1998 Effective Date (after giving effect hereto): (a) no Default, Increased Coverage Event or Potential Termination Event or Termination Event (as such latter two terms are defined in the Receivables Purchase Agreement) will have occurred and be continuing; and (b) each representation and warranty of the Borrower set forth in the Agreement, after giving effect to this Amendment and Restatement, will be true and correct. SECTION 7. Assignment. (a) Section 1.1 of the Agreement is ---------- amended by adding the following new definition: "Combined Commitment" means at any time with respect to each Lender the sum of (x) such Lender's Commitment hereunder and (y) such Lender's Receivables Commitment under the Receivables Purchase Agreement. (b) Section 9.6(c) of the Agreement is amended by amending the second parenthetical therein to read as follows: 5 (such portion to comprise a Combined Commitment of not less than $5,000,000; provided that after giving effect to such assignment, (x) the percentage of any Lender's Commitment hereunder be no less than 30% and no greater than 60% of its Combined Commitment and the percentage of any Lender's Receivables Commitment under the Receivables Purchase Agreement be no less than 40% and no greater than 70% of its Combined Commitment and (y) the Combined Commitment retained by the assigning Lender shall be in an aggregate amount of not less than $5,000,000) (c) Section 9.6(c) of the Agreement is further amended by deleting the clause ",which shall not be unreasonably withheld" which appears immediately following the words "consent of the Borrower" and inserting the clause ",which in each case shall not be unreasonably withheld" after the words "the Administrative Agent and the L/C Issuing Banks." SECTION 8. Governing Law. This Amendment and Restatement ------------- shall be governed by and construed in accordance with the laws of the State of New York. SECTION 9. Counterparts; Effectiveness. This Amendment and --------------------------- Restatement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment and Restatement shall become effective as of the date (the "1998 Effective Date", which must be not later than June 26, 1998) on which each of the following conditions shall have been satisfied: (i) receipt by the Administrative Agent of duly executed counterparts hereof signed by each of the parties hereto (or, in the case of any Lender as to which an executed counterpart shall not have been received, the Agent shall have received telegraphic, telex or other written confirmation from such Lender of execution of a counterpart hereof by such Lender) with the endorsed acknowledgment and agreement of each Special Purpose Member, as provided on the signature pages hereof; (ii) receipt by the Administrative Agent of new Notes for the Lenders; (iii) receipt by the Administrative Agent of (x) a certificate of the secretary or an assistant secretary of the Borrower certifying as of the 1998 Effective Date (A) as to no amendments to the certificate of incorporation of the Borrower; (B) as to no liquidation or dissolution proceeding; (C) as to the occurrence of the Lukens Merger; and (D) a copy of the By-laws of the Borrower; (y) the certificate of incorporation of the Borrower certified as of a date reasonably near the 1998 Effective Date by the Secretary of 6 State of the State of Delaware; and (z) a good standing certificate for the Borrower issued by the Secretary of State of the State of Delaware, dated a date reasonably near the 1998 Effective Date; (iv) receipt by the Administrative Agent of an opinion of the Assistant General Counsel of the Borrower (or such other counsel for the Borrower as may be acceptable to the Administrative Agent), dated the 1998 Effective Date and substantially to the effect of paragraphs 1, 3, 5, and 7 of Exhibit G to the Agreement with reference to this Amendment and Restatement and the Agreement as amended and restated hereby; (v) The Borrower shall have paid to the Administrative Agent, for the several accounts of the Lenders, such participation fees as are set forth in the attached Schedule I; (vi) the Borrower shall have paid to the Administrative Agent, for its own account as Administrative Agent and Structuring and Collateral Agent and the account of J.P. Morgan Securities Inc. as Arranger, such fees as are agreed to between the Borrower and the Administrative Agent in a separate letter; (vii) receipt by the Administrative Agent of a certificate dated the 1998 Effective Date signed by the Chief Financial Officer, Treasurer or Controller of the Borrower as to the accuracy of the representations and warranties set forth in Section 6 of this Amendment and Restatement; and (viii) the Amendment and Restatement dated as of June 19, 1998 of the Receivables Purchase Agreement shall have become, or concurrently shall become, effective. The Administrative Agent shall promptly notify the Borrower and the Lenders of the effectiveness of this Amendment and Restatement, and such notice shall be conclusive and binding on all parties hereto. 7 IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Restatement to be duly executed by their respective authorized officers as of the day and year first above written. BETHLEHEM STEEL CORPORATION By: /s/ Gary L. Millenbruch ------------------------------- Title: EVP, Chief Financial Officer and Treasurer 1170 Eighth Avenue Bethlehem, PA 18016 Telephone: (610) 694-2603 Facsimile: (610) 694-1258 Attention: Leonard M. Anthony ACKNOWLEDGED AND AGREED: BETHLEHEM STEEL CREDIT AFFILIATE ONE, INC. By /s/ Gary L. Millenbruch ------------------------ Title: Authorized Agent 5111 North Point Boulevard Sparrows Point, MD 21219-1014 Telephone: 410-388-7781 Facsimile: 410-388-7783 Attention: D.K. Schoenen, President BETHLEHEM STEEL CREDIT AFFILIATE TWO, INC. By /s/ Gary L. Millenbruch ----------------------- Title: Authorized Agent 5111 North Point Boulevard Sparrows Point, MD 21219-1014 Telephone: 410-388-7781 Facsimile: 410-388-7783 Attention: D.K. Schoenen, President 8 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent, Structuring and Collateral Agent, and L/C Issuing Bank By: /s/ Robert Bottamedi ----------------------------- Title: Vice President 60 Wall Street New York, NY 10260 Telephone: Facsimile: Attention: THE CHASE MANHATTAN BANK, as L/C Issuing Bank By: /s/ James H. Ramage ----------------------------- Title: Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as L/C Issuing Bank By: /s/ Gregory L. Hong ----------------------------- Title: Deputy General Manager 9 LENDERS: Commitment: $34,666,666.67 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Robert Bottamedi ----------------------------- Title: Vice President Commitment: $28,166,666.67 THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By: /s/ Gregory L. Hong ----------------------------- Title: Deputy General Manager Commitment: $26,000,000.00 THE CHASE MANHATTAN BANK By: /s/ James H. Ramage ----------------------------- Title: Vice President Commitment: $21,666,666.67 CORESTATES BANK, N.A. (Corestates Bank, N.A. has merged into First Union National Bank) By: /s/ Jane Greenfield ----------------------------- Title: Vice President 10 Commitment: $21,666,666.67 THE BANK OF NEW YORK By: /s/ Peter H. Abdill ----------------------------- Title: Vice President Commitment: $21,666,666.67 UNION BANK OF SWITZERLAND NEW YORK BRANCH By: /s/ Paula Mueller ----------------------------- Title: Vice President Structured Finance By: /s/ Lawrence M. Charleson ----------------------------- Title: Managing Director Commitment: $19,5000,000.00 THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Robert McMillan ----------------------------- Title: Corporate Banking Officer Commitment: $17,333,333.33 BANK OF AMERICA NT & SA By: /s/ Dale Matson ----------------------------- Title: Vice President 11 Commitment: $17,333,333.33 NATIONSBANK, N.A. By: /s/ Philip S. Durand ----------------------------- Title: Vice President Commitment: $10,833,333.33 BANK AUSTRIA AKTIENGESELLSCHAFT By: /s/ J. Anthony Seay ----------------------------- Title: First Vice Preisdent Bank Austria, AG By: /s/ C. Miller ----------------------------- Title: Assistant Vice President Commitment: $10,833,333.33 SUMMIT BANK By: /s/ David B. Kennedy ----------------------------- Title: Regional Vice President 12 Commitment: $10,833,333.33 THE SUMITOMO BANK, LIMITED NEW YORK BRANCH By: /s/ Kazuyoshi Ogawa ----------------------------- Title: Joint General Manager Commitment: $10,833,333.33 WILMINGTON TRUST By: /s/ Joseph M. Finley ----------------------------- Title: Vice President Commitment: $8,666,666.67 THE INDUSTRIAL BANK OF JAPAN, LIMITED By: /s/ John Dippo ----------------------------- Title: Senior Vice President TOTAL COMMITMENTS: $260,000,000 13 EX-4 5 Exhibit 4(d) CONFORMED COPY AMENDED AND RESTATED INVENTORY CREDIT AGREEMENT AMENDED AND RESTATED INVENTORY CREDIT AGREEMENT dated as of June 17, 1999 among BETHLEHEM STEEL CORPORATION, the Lenders listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent and Structuring and Collateral Agent. W I T N E S S E T H : WHEREAS, the parties hereto have heretofore entered into an Inventory Credit Agreement dated as of September 12, 1995, which was amended and restated by an Amended and Restated Inventory Credit Agreement dated as of June 5, 1997 and an Amended and Restated Inventory Credit Agreement dated as of June 19, 1998 (as so amended and restated, the "Agreement"), and WHEREAS, the parties hereto desire to amend the Agreement to increase the aggregate Commitments (as defined in the Agreement) from $260,000,000 to $320,000,00 and to restate the Agreement in its entirety to read as set forth in the Agreement with the amendments specified below; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Definitions; References. Unless otherwise ----------------------- specifically defined herein, each capitalized term used herein which is defined in the Agreement shall have the meaning assigned to such term in the Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Agreement shall from and after the effective date hereof refer to the Agreement as amended and restated hereby. SECTION 2. Amendments to Definitions. Section 1.1 of the ------------------------- Agreement is amended as follows: (i) The definition of "Borrower's 1997 Form 10-K" is amended by replacing "1997" in each place where it appears with "1998". (ii) The definition of "Borrower's Latest Form 10-Q" is amended by replacing "1998" with "1999". (iii) The definition of "Eligible Inventories" is amended by replacing "1997" with "1998". (iv) The definition of "Borrowing Base" is amended by changing clause (x) therein to read as follows: "(x) the Borrowing Base shall at no time exceed an amount equal to the product of 1.4 times the Receivables Maximum Purchase Price at such time." (v) Clause (i) of the definition of "Commitment" is superceded by the provisions of Section 5 of this Amendment and Restatement. SECTION 3. Amendment to Conditions to Borrowings. Section ------------------------------------- 3.2(c) of the Agreement is amended by changing clause (ii) therein to read as follows: "(ii) the product of 1.4 times the Receivables Maximum Purchase Price;" SECTION 4. Updated and Amended Representations. (a) Each ----------------------------------- reference to "1997" in Section 4.4(a) of the Agreement is changed to "1998". (b) Each reference to "March 31, 1998" in Section 4.4 of the Agreement is changed to "March 31, 1999". (c) Article 4 of the Agreement is amended by adding thereto a new Section 4.10 reading as follows: Section 4.10. Year 2000. The Borrower represents and warrants that the computer applications of the Borrower material to the conduct of its businesses and operations, considered as a whole, recognize and perform date sensitive functions involving dates prior to and after December 31, 1999. 2 SECTION 5. Changes in Commitments. With effect from and ---------------------- including the 1999 Effective Date (as defined in Section 8 of this Amendment and Restatement), (i) each Person listed on the signature pages hereof that is not a party to the Agreement (a "New Lender") shall become a Lender party to the Agreement and (ii) the Commitment of each Lender shall be the amount set forth opposite the name of such Lender on the signature pages hereof. The calculation of accrued Fees payable to each Lender on the first Quarterly Date or other date after the 1999 Effective Date on which Fees are payable shall reflect any additions to and changes in the Commitments of the Lenders made pursuant to this Section 5 and, notwithstanding the provisions of Section 2.13 of the Agreement, shall be paid to each Lender accordingly. If Loans are outstanding on the 1999 Effective Date and, as a result of additions to and changes in the Commitments of the Lenders, such Loans are not held by the Lenders ratably in proportion to their Commitments, the Lenders (including New Lenders) shall, as appropriate, buy and sell such Loans such that, after giving effect to such purchases, such Loans are held ratably, and Section 2.14 of the Agreement shall apply to any such purchases. SECTION 6. Representations and Warranties. The Borrower ------------------------------ hereby represents and warrants that as of the 1999 Effective Date (after giving effect hereto): (a) no Default, Increased Coverage Event or Potential Termination Event or Termination Event (as such latter two terms are defined in the Receivables Purchase Agreement) will have occurred and be continuing;and (b) each representation and warranty of the Borrower set forth in the Agreement, after giving effect to this Amendment and Restatement, will be true and correct. SECTION 7. Governing Law. This Amendment and Restatement ------------- shall be governed by and construed in accordance with the laws of the State of New York. SECTION 8. Counterparts; Effectiveness. This Amendment and --------------------------- Restatement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment and Restatement shall become effective as of the date (the "1999 Effective Date", which must be not later than June 30, 1999) on which each of the following conditions shall have been satisfied: (i) receipt by the Administrative Agent of duly executed counterparts hereof signed by each of the parties hereto (or, in the case of any Lender as to which an executed counterpart shall not have been 3 received, the Agent shall have received telegraphic, telex or other written confirmation from such Lender of execution of a counterpart hereof by such Lender) with the endorsed acknowledgment and agreement of each Special Purpose Member, as provided on the signature pages hereof; (ii) receipt by the Administrative Agent of Notes for the New Lenders; (iii) receipt by the Administrative Agent of (x) a certificate of the secretary or an assistant secretary of the Borrower certifying as of the 1999 Effective Date (A) as to no amendments to the certificate of incorporation or By-laws of the Borrower and (B) as to no liquidation or dissolution proceeding; (y) the certificate of incorporation of the Borrower certified as of a date reasonably near the 1999 Effective Date by the Secretary of State of the State of Delaware; and (z) a good standing certificate for the Borrower issued by the Secretary of State of the State of Delaware, dated a date reasonably near the 1999 Effective Date; (iv) receipt by the Administrative Agent of opinions of counsel reasonably satisfactory to the Administrative Agent; (v) receipt by the Administrative Agent of a certificate dated the 1999 Effective Date signed by the Chief Financial Officer, Treasurer or Controller of the Borrower as to the accuracy of the representations and warranties set forth in Section 6 of this Amendment and Restatement; (vi) receipt by the Administrative Agent for the account of each Lender of an amendment fee in an amount equal to 0.1% of such Lender's Commitment as set forth on the signature pages hereto; and (vii) the Amendment and Restatement dated as of June 17, 1999 of the Receivables Purchase Agreement shall have become, or concurrently shall become, effective. The Administrative Agent shall promptly notify the Borrower and the Lenders of the effectiveness of this Amendment and Restatement, and such notice shall be conclusive and binding on all parties hereto. 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Restatement to be duly executed by their respective authorized officers as of the day and year first above written. BETHLEHEM STEEL CORPORATION By: /s/ Gary L. Millenbruch ----------------------------------- Title: EVP, Chief Financial Officer and Treasurer 1170 Eighth Avenue Bethlehem, PA 18016 Telephone: (610) 694-2603 Facsimile: (610) 694-1258 Attention: Leonard M. Anthony ACKNOWLEDGED AND AGREED: BETHLEHEM STEEL CREDIT AFFILIATE ONE, INC. By /s/ Gary L. Millenbruch ------------------------------------ Title: Authorized Agent 5111 North Point Boulevard Sparrows Point, MD 21219-1014 Telephone: 410-388-7781 Facsimile: 410-388-7783 Attention: D.K. Schoenen, President BETHLEHEM STEEL CREDIT AFFILIATE TWO, INC. By /s/ Gary L. Millenbruch -------------------------------------- Title: Authorized Agent 5111 North Point Boulevard Sparrows Point, MD 21219-1014 Telephone: 410-388-7781 Facsimile: 410-388-7783 Attention: D.K. Schoenen, President 5 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent, Structuring and Collateral Agent, and L/C Issuing Bank By: /s/ Robert S. Jones ------------------------------- Title: Vice President 60 Wall Street New York, NY 10260 Telephone: Facsimile: Attention: 6 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement THE CHASE MANHATTAN BANK, as L/C Issuing Bank By: /s/ James H. Ramage -------------------------- Title: Vice President 7 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as L/C Issuing Bank By: /s/ Gregory L. Hong -------------------------- Title: Deputy General Manager 8 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement Commitment: $38,787,878.79 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Robert S. Jones -------------------------- Title: Vice President 9 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement Commitment: $28,166,666.67 THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By: /s/ Gregory L. Hong -------------------------- Title: Deputy General Manager 10 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement Commitment: $29,090,909.09 THE CHASE MANHATTAN BANK By: /s/ James H. Ramage -------------------------- Title: Vice President 11 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement Commitment: $24,242,424.24 FIRST UNION NATIONAL BANK (successor to Corestates Bank, N.A. ) By: /s/ William M. Hogan ------------------------------- Title: Vice President 12 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement Commitment: $24,242,424.24 THE BANK OF NEW YORK By: /s/ Walter C. Parelli -------------------------- Title: Vice President 13 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement Commitment: $24,242,424.24 UBS AG, Stamford Branch By: /s/ Philippe R. Sandmeier -------------------------- Title: Director By: /s/ Paula Mueller -------------------------- Title: 14 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement Commitment: $21,818,181.81 THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Jeffrey Lubatkin -------------------------- Title: Vice President 15 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement Commitment: $38,787,878.79 BANK OF AMERICA NT & SA By: /s/ Thomas Blake -------------------------- Title: Senior Vice President 16 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement Commitment: $17,893,939.40 SALOMON BROTHERS HOLDING COMPANY INC. By: /s/ Timothy L. Freeman -------------------------- Title: Managing Director 17 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement Commitment: $14,545,454.55 CIETE GENERALE By: /s/Joseph A. Philbin -------------------------- Title: Director 18 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement Commitment: $12,121,212.12 BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. (as assignee from Bank Austria AG) By: /s/ Amy Rick -------------------------- Title: Vice President By: /s/ Frederic W. Hall -------------------------- Title: Vice President 19 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement Commitment: $12,121,212.12 SUMMIT BANK By: /s/ David B. Kennedy -------------------------- Title: Regional Vice President 20 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement Commitment: $12,121,212.12 THE SUMITOMO BANK, LIMITED NEW YORK BRANCH By: /s/ C. Michael Garrido -------------------------- Title: Senior Vice President 21 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement Commitment: $12,121,212.12 WILMINGTON TRUST By: /s/ Joseph M. Finley -------------------------- Title: Vice President 22 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Inventory Credit Agreement Commitment: $9,696,969.70 THE INDUSTRIAL BANK OF JAPAN, LIMITED By: /s/ John Dippo -------------------------- Title: Senior Vice President 23 EX-4 6 Exhibit 4(e) [CONFORMED COPY] RECEIVABLES PURCHASE AGREEMENT dated as of September 12, 1995 among BETHLEHEM STEEL FUNDING, LLC, BETHLEHEM STEEL CORPORATION, as Servicer, BETHLEHEM STEEL CREDIT AFFILIATE ONE, INC., BETHLEHEM STEEL CREDIT AFFILIATE TWO, INC., THE FINANCIAL INSTITUTIONS LISTED HEREIN, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent and J.P. MORGAN DELAWARE, as Structuring and Collateral Agent TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS 1.1. Definitions ........................................ 1 1.2. UCC Terms .......................................... 34 1.3. Accounting Terms and Determinations ................ 34 ARTICLE 2 PURCHASES 2.1. Sale and Assignment ................................ 35 2.2. Incremental Purchases .............................. 35 2.3. Tranches; Yield Accrual Periods; Yield Rates ....... 37 2.4. Fees ............................................... 38 2.5. Optional Termination or Reduction of Commitments ... 39 2.6. Payments under Certain Circumstances ............... 39 2.7. General Provisions as to Payments .................. 40 2.8. Funding Losses ..................................... 41 2.9. Letters of Credit .................................. 41 ARTICLE 3 ASSIGNMENT; COLLECTION AND ADMINISTRATION OF RECEIVABLES 3.1. Assignment. ........................................ 51 3.2. Accounts and Collections ........................... 53 3.3. Administration of Receivables ...................... 55 3.4. Servicer's Compensation............................. 56 3.5. Servicing Transfer ................................. 57 3.6. Protection of Purchased Interest ................... 57 3.7. Pre-Termination Procedures; Reinvestment ........... 59 3.8. Post-Termination Procedures ........................ 64 3.9. Payments under Certain Circumstances ............... 67 i ARTICLE 4 CONDITIONS 4.1. Closing ............................................ 68 4.2. Conditions to Each Incremental Purchase ............ 73 4.3. Conditions to Each Purchase ........................ 74 ARTICLE 5 REPRESENTATIONS AND WARRANTIES 5.1. Existence and Power ................................ 74 5.2. Governmental Authorization; No Contravention ....... 75 5.3. Binding Effect ..................................... 75 5.4. Material Adverse Change ............................ 75 5.5. Litigation ......................................... 75 5.6. Compliance with ERISA .............................. 75 5.7. Environmental Matters .............................. 76 5.8. Taxes .............................................. 76 5.9. Regulatory Restriction ............................. 76 5.10. Full Disclosure ................................... 76 5.11. Location .......................................... 77 ARTICLE 6 COVENANTS 6.1. General Information ................................ 77 6.2. Information Regarding the Receivables .............. 80 6.3. Preservation of Existence .......................... 82 6.4. Compliance with Laws ............................... 82 6.5. No Adverse Interests ............................... 82 6.6. No Merger .......................................... 82 6.7. Limitations on Activities of BSF ................... 83 6.8. Waivers and Amendments of Documents ................ 84 6.9. Maintenance of Property ............................ 84 6.10. Payment of Taxes .................................. 84 6.11. Accounting Treatment .............................. 84 ii ARTICLE 7 REPRESENTATIONS, WARRANTIES AND COVENANTS OF MEMBERS 7.1. Representations and Warranties of the Special Purpose Members. ............................................. 85 7.2. Covenants of the Special Purpose Members.............. 85 7.3. Limitations on Activities of Special Purpose Members . 87 7.4. No Bankruptcy Petition ............................... 88 ARTICLE 8 TERMINATION EVENTS 8.1. Termination Events ................................... 88 8.2. Consequences of a Termination Event .................. 92 ARTICLE 9 THE AGENTS 9.1. Appointment and Authorization ........................ 93 9.2. Agents and Affiliates ................................ 94 9.3. Action by Agents ..................................... 94 9.4. Consultation with Experts ............................ 94 9.5. Liability of Agents .................................. 94 9.6. Indemnification ...................................... 95 9.7. Purchase Decision .................................... 95 9.8. Successor Agent ...................................... 95 9.9. Direction by Required Buyers ......................... 96 ARTICLE 10 CHANGE IN CIRCUMSTANCES 10.1. Change in Circumstances ............................. 96 10.2. Illegality .......................................... 97 10.3. Indemnity for Changes in Law ........................ 97 10.4. Taxes .............................................. 100 iii ARTICLE 11 MISCELLANEOUS 11.1. Notices ............................................ 104 11.2. No Waivers ......................................... 105 11.3. Expenses; Indemnification .......................... 105 11.4. Sharing of Set-Offs ................................ 108 11.5. Amendments and Waivers ............................. 108 11.6. Successors and Assigns ............................. 109 11.7. Confidentiality .................................... 112 11.8. Financial Accommodation ............................ 112 11.9. No Bankruptcy Petition Against BSF ................. 113 11.10. Limitation of Liability ........................... 113 11.11. Notices to Standard & Poor's ...................... 113 11.12. Governing Law; Submission to Jurisdiction ......... 113 11.13. Counterparts; Integration; Effectiveness .......... 114 11.14. Termination of Existing Credit Agreement........... 114 11.15. WAIVER OF JURY TRIAL............................... 115 iv PURCHASE AND SALE AGREEMENT PURCHASE AND SALE AGREEMENT, dated as of September 12, 1995, between BETHLEHEM STEEL CORPORATION, a Delaware corporation, as seller, and BETHLEHEM STEEL FUNDING, LLC, a Maryland limited liability company, as purchaser. RECITALS WHEREAS, in the ordinary course of its business the Seller generates trade receivables from the sale of goods and services; and WHEREAS, the Seller and BSF wish to set forth the terms pursuant to which receivables are to be sold by the Seller to BSF; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I CERTAIN DEFINITIONS ------------------- 1.01 Certain Definitions. Terms not defined in this ------------------- Agreement shall have the meanings set forth in the Receivables Purchase Agreement. As used in this Agreement, the following terms shall, unless the context otherwise requires, have the following meanings: "Agreement" means this Purchase and Sale Agreement, as amended from time to time. "Bankruptcy Suspension Period" means, with respect to BSC, the period beginning on the day on which an involuntary case or other proceeding against BSC seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of BSC or any substantial part of its property is commenced and ending on the day such proceeding is dismissed; provided that if such proceeding is not controverted within 10 days of commencement and dismissed within 60 days of commencement then such commencement shall become an Event of Bankruptcy (and the provisions of Section 8.2 of the Receivables Purchase Agreement shall apply) on the earlier of 11 days from the day of commencement (in the case of controversion) or 61 days from the day of commencement (in the case of dismissal). "Consolidated Subsidiary" means, at any date, any Subsidiary or other entity the accounts of which would be consolidated with those of the Seller in its consolidated financial statements if its consolidated financial statements were prepared as of such date. "Eligibility Criteria" means the requirements of paragraph (a) of the definition of "Eligible Receivable" in the Receivables Purchase Agreement. "Final Purchase Date" means the earliest of (i) the date specified by either party hereto, upon not less than 30 days' prior written notice to the other party hereto, as the last day on which Receivables are to be purchased hereunder, (ii) the Business Day on which Commitments terminate pursuant to Section 8.2 of the Receivables Purchase Agreement, and (iii) the Business day preceding the day on which any Bankruptcy Event occurs with respect to the Seller or BSF. "Purchase Price" means, with respect to a Receivable or Receivables, the price paid by BSF to the Seller in consideration of the sale of such Receivable or Receivables pursuant to Section 2.01(c) of this Agreement. "Receivables Purchase Agreement" means the Receivables Purchase Agreement, dated as of September 12, 1995, among BSF, Bethlehem Steel Credit Affiliate One, Inc., Bethlehem Steel Credit Affiliate Two, Inc., BSC, as Servicer, the financial institutions party thereto, as Buyers, Morgan Guaranty, as Administrative Agent, and J.P. Morgan Delaware, as Structuring and Collateral Agent, as amended from time to time. "Seller's 1994 Form 10-K" means the Seller's annual report on Form 10-K for 1994, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Seller's Latest Form 10-Q" means the Seller's quarterly report on Form 10- Q for the quarter ended June 30, 1995, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. ARTICLE II PURCHASE AND SALE OF RECEIVABLES -------------------------------- 2.01 Purchase and Sale. ----------------- (a) General. Pursuant and subject to the terms and conditions hereof, the Seller hereby agrees to sell to BSF, and BSF hereby agrees to purchase from the Seller, all of the Seller's right, title and interest in, to and under (i) each and every Receivable outstanding as of the Closing Date and thereafter arising through the close of business on the Final Purchase Date, (ii) all Related Security with respect to each such Receivable, (iii) all Collections with respect thereto 2 and (iv) all proceeds of the foregoing; provided that the Seller shall not sell to BSF, and BSF shall not purchase from the Seller, any Receivables (or any Related Security, Collections and proceeds with respect thereto) arising during a Bankruptcy Suspension Period; provided further that on the Closing Date the Seller may make a capital contribution of $380,000 in the form of Receivables to each of the Special Purpose Members. (b) Sale Without Recourse. Subject only to the provisions of --------------------- Section 2.02, the sale of Receivables by the Seller hereunder shall be without recourse. (c) Purchase Price. In consideration of the sale of -------------- Receivables by the Seller to BSF pursuant to this Agreement, BSF shall pay to Seller, on the Closing Date and each Business Day thereafter, a Purchase Price for all Receivables first booked on such Business Day (or, in the case of the purchase on the Closing Date, all outstanding Receivables) in an amount equal to the outstanding face amount of all such Receivables which the Seller has certified meet the Eligibility Criteria, less adjustments for (i) an interest component, taking into account the maturity of such Receivables, (ii) an amount representing the historical losses on similar Receivables and (iii) an amount representing a servicing fee, such Purchase Price to be calculated in accordance with Appendix I hereto. The parties hereto represent that the Purchase Price so calculated constitutes and represents an arm's-length fair market value price for the Receivables sold. Receivables transferred from the Seller to BSF which do not meet the Eligibility Criteria on the date of transfer shall be deemed contributed to the capital of BSF. At the request of the Seller, BSF agrees to cause the Buyers to make Incremental Purchases pursuant to the Receivables Purchase Agreement which Purchase Price for such Incremental Purchase shall be payable in Dollars or the issuance of Letters of Credit as set forth below. The Purchase Price for each Receivable shall, be payable (x) to the extent of cash available to BSF, in Dollars (or in the case of the purchase of Receivables outstanding on the Closing Date, by crediting BSC with a capital contribution of $37,240,000 (which capital contribution may be in the form of Receivables)) or (y) to the extent cash is not so available, by a deemed advance under the BSC Note. In addition, at the request of the Seller, BSF agrees to procure the issuance of Letters of Credit pursuant to the Receivables Purchase Agreement, such Letters of Credit to be as specified by BSC. The amount of any drawing under any Letter of Credit shall be credited against the outstanding balance under the BSC Note, and the amount of Letter of Credit Fees paid under the Receivables Purchase Agreement shall be credited against interest accruing under the BSC Note. (d) True Sale. The Seller and BSF intend the sales of the --------- Receivables hereunder to be true sales of all of the Seller's right, title and interest in, to and under such Receivables, providing BSF with the full benefits of ownership of the same, and the Seller and BSF do not intend this transaction to be, or for any purpose to be characterized as, a loan secured by such Receivables. If despite such intention, a court characterizes the sale of Receivables to BSF hereunder as a loan rather than a true sale, then the Seller hereby grants to BSF a first priority perfected security interest in, to and under all of the Seller's right, title and interest in, to and under each and every Receivable outstanding on the Closing Date or arising on and after the Closing Date through the close of business on the Final Purchase Date, together with all Related Security with respect thereto, all Collections with respect thereto and all proceeds of the foregoing, for the purpose of securing the rights of BSF under this Agreement. 2.02 Purchase Price Adjustment; Repurchase. ------------------------------------- (a) The Seller hereby agrees that if (x) the Seller's representation and warranty made pursuant to Section 5.01 is incorrect when made at the time of the purchase of a Receivable, (and the provisions of subsection (c) below do not apply) or (y) a Receivable certified as meeting the 3 Eligibility Criteria on the date of purchase thereafter becomes evidenced in a form (such as a promissory note) as to which filing is not the appropriate method of perfection under the UCC, the Seller shall, within two Business Days of discovery by or notice to the Seller of such fact, make payment to BSF, or credit the Purchase Price otherwise payable by BSF hereunder on such day, in an amount equal to the then Outstanding Balance of such Receivable. Such Receivable shall not be reconveyed to the Seller but an amount equal to Collections subsequently received in respect thereof shall be paid over promptly to the Seller after receipt. (b) If on any day the Outstanding Balance of a Receivable certified as meeting the Eligibility Criteria on the date of purchase (and not subsequently the subject of an adjustment under subsection (a) above) is reduced or canceled as a result of any Dilution Factor, the Seller shall, on such day (or, if such day is not a Business Day, the next succeeding Business Day), make payment to BSF, or credit the Purchase Price otherwise payable by BSF hereunder on such day, in the amount of such reduction or cancellation. (c) If at any time,(x) BSF does not (except due to circumstances described in clause (y) of subsection (a) above) have a perfected ownership interest in any Receivable certified as meeting the Eligibility Criteria on the date of purchase, free and clear of any Adverse Interest, or (y) in the event of a default under any Receivable with respect to which any statutory rights relating to such Receivable or the goods which gave rise to such Receivable may only be enforced by the Seller, as owner of such Receivable, then, in each case, the Seller shall purchase such Receivable from BSF for an amount equal to the aggregate then Outstanding Balance thereof within two Business Days of discovery by or notice to the Seller of such fact. With respect to all Receivables repurchased by the Seller, BSF shall, against receipt of the purchase price therefor, assign, without recourse, representation or warranty, to the Seller all of BSF's right, title and interest in and to such Receivables. BSF shall execute such documents and instruments of transfer and assignment prepared by the Seller and take such other actions as shall be reasonably requested by the Seller to effect the reconveyance of such Receivables. The Seller shall thereafter assure that Collections with respect to such Receivables shall not be commingled with the Collections on the Receivables continued to be owned by it. ARTICLE III ADMINISTRATION OF RECEIVABLES 3.01 Administration of Receivables. ----------------------------- (a) Consistent with BSF's ownership of the Receivables, BSF shall be responsible for servicing, administering and collecting the Receivables, and the Seller, as seller, shall have no obligation whatsoever in this regard; provided that nothing shall prevent BSF from engaging the services of any Person, including BSC, to service, administer and collect the Receivables as Servicer. The Seller hereby grants to BSF an irrevocable power of attorney, with full power of substitution, coupled with an interest, to take in the name of the Seller all steps necessary or desirable, as determined by BSF, to collect all amounts due under any Receivable, including, without limitation, endorsing the name of the Seller on checks and other instruments representing 4 Collections, enforcing such Receivables and the related Contracts, and adjusting, settling or compromising the amount or payment thereof, in the same manner and to the same extent as the Seller would have been entitled. (b) Upon BSF's request, the Seller shall promptly deliver or make available to BSF all records relating to the Receivables, and, in either case, shall hold all such records in trust for BSF. The Seller will clearly indicate in its corporate records that Receivables are owned by BSF or otherwise mark its records relating to Receivables with a legend evidencing that BSF has purchased and owns such Receivables. (c) The Seller shall hold in trust for the benefit of the Buyers any Collections received directly by the Seller with respect to any Receivables and shall deposit such Collections in the Collection Account within two Business Days of the receipt thereof. 3.02 Further Assurances. ------------------ (a) The Seller shall, from time to time at its own expense, do and perform any and all acts and execute and deliver any and all instruments and documents (including, without limitation any amendment, supplement or continuation of any financing statements and continuation statements under the UCC, the execution of any instrument of transfer, the giving of notice of the sale of Receivables hereunder to any Obligor and the making of notations in the records) as may be necessary, or as may be reasonably requested by BSF, in order to perfect, protect or more fully evidence the purchase of Receivables by BSF pursuant to this Agreement and to protect the interests of BSF in the Receivables against all Persons whomsoever. To the fullest extent permitted by applicable law, BSF shall be permitted to sign and file financing and continuation statements with respect to the Receivables and amendments thereto without the Seller's execution thereof. In furtherance of the foregoing, the Seller hereby constitutes and appoints BSF its true and lawful attorney, with full power of substitution, in the name of the Seller, to execute and file financing and continuation statements. (b) The Seller shall not change its name, identity, corporate structure (within the meaning of Section 9-402(7) of the UCC) or relocate its chief executive office or any office where records are kept unless it shall have (i) given BSF at least 30 days' prior written notice thereof and (ii) delivered an opinion of counsel (which counsel and which opinion shall be satisfactory to BSF) to the effect that all financing statements and amendments or supplements thereto, continuation statements and other documents required to be recorded or filed in order to perfect and protect the interest of BSF in the Receivables, for the period specified in such opinion, against all creditors of and purchasers from the Seller have been filed in each filing office necessary for such purpose and that all filing fees and taxes, if any, payable in connection with such filings have been paid in full. The Seller shall at all times maintain its chief executive office within the jurisdiction of the United States in which Article 9 of the Uniform Commercial Code (1972 or later revision) is in effect. (c) The Seller agrees that, subject to applicable laws, BSF shall have the right, if the Seller fails to do so, to do all such acts and things as it may deem necessary to protect the interests of BSF, including, without limitation, confirmation and verification of the existence, amount and status of the Receivables and collection and enforcement of the Receivables, and that the Seller shall cooperate fully to give effect to the foregoing. 5 ARTICLE IV REPRESENTATIONS AND WARRANTIES 4.01 Representations and Warranties of BSF. ------------------------------------- BSF hereby makes the representations and warranties set forth in Sections 5.1 through 5.3 of the Receivables Purchase Agreement. 4.02 Representations and Warranties of the Seller. -------------------------------------------- The Seller hereby represents and warrants that: (a) Corporate Existence and Power. The Seller is a ----------------------------- corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. (b) Corporate and Governmental Authorization; No ---------------------------------------- Contravention. The execution, delivery and performance by the Seller of the Program Documents to which it is a party are within the corporate powers of the Seller, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official (except as contemplated by the Program Documents) and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Seller or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Seller or result in the creation or imposition of any Lien on any asset of the Seller (except as contemplated by the Program Documents). (c) Binding Effect. Each of the Program Documents to which -------------- the Seller is a party constitutes a valid and binding agreement of the Seller enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization or moratorium or other similar laws relating to the enforcement of creditors' rights generally and by general equitable principles. (d) Financial Information. (i) The consolidated balance --------------------- sheet of the Seller and its Consolidated Subsidiaries as of December 31, 1994 and the related consolidated statements of income and changes in financial position for the year then ended, reported on by Price Waterhouse LLP and set forth in the Seller's 1994 Form 10-K, a copy of which has been delivered to BSF and each of the Buyers, fairly present, in conformity with GAAP, the consolidated financial position of the Seller and its Consolidated Subsidiaries as of such date and their consolidated results of operations and changes in financial position for such year. (ii) The unaudited consolidated balance sheet of the Seller and its Consolidated Subsidiaries as of June 30, 1995 and the related unaudited consolidated statements of income and cash flows for the six months then ended, set forth in the Seller's quarterly report for the fiscal quarter ended June 30, 1995 as filed with the Securities and Exchange Commission on the Seller's Latest Form 10-Q, a copy of which has been delivered to BSF and each of the Buyers, fairly present, in conformity with GAAP applied on a basis consistent with the financial statements referred to in paragraph (i) of this subsection (d) (except that the notes to such 6 quarterly financial statements are abbreviated as permitted by the Securities and Exchange Commission in its regulations relating to interim financial statements), the consolidated financial position of the Seller and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such six month period (subject to normal year-end adjustments). (iii) Since June 30, 1995, there has been no material adverse change in the business or financial position of the Seller and its Consolidated Subsidiaries, considered as a whole, or in its ability to perform its obligations under the Program Documents. (e) Litigation. There is no action, suit or proceeding ---------- pending against, or to the knowledge of the Seller threatened against or affecting, the Seller or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision (i) which could materially adversely affect the ability of the Seller to perform its obligations under the Program Documents or (ii) which would in any material respect draw into question the validity of the Program Documents or the collectibility of the Receivables. (f) Environmental Compliance. (i) Except as disclosed on ------------------------ Schedule 4.02(f), (1) the Seller and its Subsidiaries have obtained, or made timely application for, all permits, certificates, licenses, approvals, registrations and other authorizations (collectively "Permits") which are required under all applicable Environmental Laws and are necessary for their operations and are in compliance with the terms and conditions of all such Permits, except where the failure to obtain such Permits or to comply with their terms would not have, individually or in the aggregate, a material adverse effect on the Seller and its Consolidated Subsidiaries, considered as a whole; (2) no notice, notification, demand, request for information, citation, summons, complaint or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending, or to the Seller's knowledge, threatened by any governmental entity or other Person with respect to any (A) alleged violation by the Seller or any of its Subsidiaries of any Environmental Law, (B) alleged failure by the Seller or any of its Subsidiaries to have any Permits required in connection with the conduct of its business or to comply with the terms and conditions thereof, (C) Regulated Activity or (D) Release of Hazardous Substances, except where such event or events would not have, individually or in the aggregate, a material adverse effect on the Seller and its Consolidated Subsidiaries, considered as a whole; (3) to the knowledge of the Seller, all oral or written notifications of a Release of a Hazardous Substance required to be filed under any applicable Environmental Law have been filed or are in the process of being filed by or on behalf of the Seller or any of its Subsidiaries; (4) no property now owned or coal mining operation or steel facility which is now leased by the Seller or any of its Subsidiaries and, to the knowledge of the Seller, no such property previously owned or leased or any property to which the Seller or any of its Subsidiaries has, directly or indirectly, transported or arranged for the transportation of any Hazardous Substances is listed or, to the Seller's knowledge, 7 proposed for listing, on the National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or any similar state list or is the subject of federal, state or local enforcement actions or, to the knowledge of the Seller, other investigations which may lead to claims against the Seller or any of its Subsidiaries for clean-up costs, remedial work, damage to natural resources or personal injury claims, including, but not limited to, claims under CERCLA, except where such listings or investigations would not have, individually or in the aggregate, a material adverse effect on the Seller and its Consolidated Subsidiaries, considered as a whole; and (5) there are no Liens under or pursuant to any applicable Environmental Laws on any real property or other assets owned or leased by the Seller or any of its Subsidiaries, and no government actions have been taken or, to the knowledge of the Seller, are in process which could subject any of such properties or assets to such Liens. (ii) For purposes of this Section, the terms "Seller" and "Subsidiary" shall include any business or business entity (including a corporation) which is a predecessor, in whole or in part, of the Seller or any Subsidiary of the Seller. (g) Compliance with ERISA. Each member of the ERISA Group --------------------- has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan, and has not incurred any liability under Title IV of ERISA (i) to the PBGC other than a liability to the PBGC for premiums under Section 4007 of ERISA or (ii) in respect of a Multiemployer Plan which has not been discharged in full when due. (h) Taxes. United States Federal income tax returns of the ----- Seller and the members of its "affiliated group" (as such term is defined in Section 1504(a) of the Internal Revenue Code) have been examined through the taxable year ended December 31, 1987 and are closed through the taxable year ended December 31, 1986. The Sellers and the members of its "affiliated group" (as so defined) have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes stated to be due in such returns or pursuant to any assessment received by them, except for taxes the amount, applicability or validity of which is being contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Seller and its Subsidiaries in respect of taxes or other similar governmental charges, additions to taxes and any penalties and interest thereon are in the opinion of the Seller, adequately reserved for in accordance with GAAP. (i) Investment Company Act. It is not an "investment ---------------------- company" or a company controlled by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (j) Perfection Information. As of the Closing Date: (i) the ---------------------- information set forth regarding the Seller in the Perfection Certificate attached as Exhibit M to the Receivables Purchase Agreement is true and correct, and (ii) no Receivables arise from the sale of goods by any Subsidiary or other Affiliate of the Seller or any other Person other than the Seller. (k) Receivables Information. All information, including the ----------------------- Receivables Information Memorandum, furnished by the Seller or the Servicer (to the extent that the Servicer, if not the 8 Seller, is an Affiliate of the Seller) to the Agents or any Buyer for purposes of or in connection with this Agreement or any of the other Program Documents or any transaction contemplated hereby is, taken as whole and in light of the circumstances under which such information is furnished, true and accurate in all material respects on the date as of which such information is stated or certified. It is understood that the foregoing is limited to the extent that (i) information relating to the steel industry generally is to the best of the Seller's knowledge, (ii) projections have been made in good faith by the management of the Seller and in the view of the Seller's management are reasonable in light of all information known to management as of the Closing Date, and (iii) no representation or warranty is made as to whether the projected results will be realized. (l) Margin Regulations. None of the funds provided by BSF ------------------ hereunder will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System. (m) Solvency. The Seller is not insolvent and will not be -------- insolvent following the consummation of the transactions contemplated by this Agreement. BSF will have given reasonably equivalent and fair value to the Seller in consideration for the transfer to BSF of each Receivable, and such transfer will not have been made for or on account of an antecedent debt owed by the Seller to BSF. (n) Location. The principal place of business and chief -------- executive office of the Seller are located at its address set forth in the Perfection Certificate attached as Exhibit M to the Receivables Purchase Agreement or at such other address as changed in accordance with Section 3.02(b). ARTICLE V CONDITIONS TO PURCHASE ---------------------- 5.01 Conditions to BSF's Obligation to Purchase. The obligation of BSF to purchase Receivables on any date pursuant to Section 2.01 is subject to the condition that the Seller shall have certified to BSF the Outstanding Balance of all Receivables to be purchased on such date which meet the Eligibility Criteria on and as of such date (such certificate to constitute a representation and warranty by the Seller to such effect). ARTICLE VI 9 COVENANTS OF THE SELLER ----------------------- The Seller covenants that: 6.01 General Information. Promptly upon becoming aware ------------------- thereof, the Seller shall give BSF notice of any event or condition which could reasonably be expected to have a material adverse effect on the collectibility of a material amount of the Receivables or the ability of the Servicer to service such Receivables or the ability of the Seller to perform its obligations under the Program Documents. In order to verify compliance with this Section and otherwise verify compliance with this Agreement, the Seller shall furnish the following to BSF: (a) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Seller, consolidated balance sheets of the Seller and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of the Seller's fiscal year ended at the end of such quarter and changes in financial position for the portion of the Seller's fiscal year ended at the end of such quarter, setting forth in each case, in comparative form the figures for the corresponding quarter and the corresponding portion of the Seller's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, GAAP and consistency (except for the notes to such quarterly statements, which may be abbreviated as permitted by the Securities and Exchange Commission in its regulations relating to interim financial statements) by the Chief Financial Officer, the Treasurer or the Controller of the Seller (the Seller being permitted to satisfy the requirements of this clause (a) by delivery of its quarterly report on Form 10-Q (or any successor form), and all supplements or amendments thereto, as filed with the Securities and Exchange Commission); (b) as soon as available and in any event within 95 days after the end of each fiscal year of the Seller, consolidated balance sheets of the Seller and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by Price Waterhouse LLP or other independent public accountants of nationally recognized standing (the Seller being permitted to satisfy the requirements of this clause (b) by delivery of its annual report on Form 10-K (or any successor form), and all supplements or amendments thereto, as filed with the Securities and Exchange Commission); (c) together with the financial statements required in clauses (a) and (b) above, a certificate of its Chief Financial Officer, Chief Accounting Officer, Treasurer or Controller stating that, as of the date of the relevant financial statements, no Termination Event or Potential Termination Event exists, or if any Termination Event or Potential Termination Event exists, stating the nature and status thereof; (d) as soon as possible, and in any event within five Business Days of its knowledge thereof, notice of any litigation or proceeding against it which may exist at any time which, in its reasonable judgment, could have a material adverse effect on 10 the collectibility of the Receivables or its ability to perform its obligations under Program Documents; (e) promptly upon any officer of the Seller becoming aware of any occurrence which such officer knows to constitute a Termination Event or Potential Termination Event, a certificate of the Chief Financial Officer, Chief Accounting Officer, Treasurer or Controller setting forth the details thereof and the action which the Seller is taking or proposes to take with respect thereto; (f) not later than one Business Day after receiving notice thereof, notice of any reduction, suspension or withdrawal of the rating assigned by S&P to the Buyers' Certificates; (g) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice under Section 4063(a) of ERISA of withdrawal from any Plan described in Section 4063 of ERISA, a copy of such notice; (vii) fails to make any payment or contribution to any Plan which results in the imposition of a Lien, notice of such failure; or (viii) makes any amendment to any Plan which requires posting a bond or other security under Section 307 of ERISA, a copy of the notice required under Section 307(e) of ERISA; and (h) promptly upon the occurrence of an Automatic Release Termination (as such term is defined in the Inventory Security Agreement) pursuant to Section 5(C) of the Inventory Security Agreement, notice thereof. 6.02 Information Regarding the Receivables. The Seller shall ------------------------------------- furnish to BSF such information with respect to the Receivables as BSF may request. 6.03 Books and Records. The Seller will keep proper books of ----------------- record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities. 6.04 Accounting Treatment. For accounting purposes, the -------------------- Seller shall treat each purchase made hereunder as a sale of the Receivables subject thereto. 6.05 Disclosure. The Seller agrees that it shall make clear ---------- disclosure in its financial statements (or in the footnotes thereto) that it has sold the Receivables to BSF. 11 6.06 Compliance with Laws. The Seller shall comply in all -------------------- material respects with all laws applicable to it except (A) where the failure so to comply would not reasonably be expected to have a material adverse effect on (i) the interests of BSF hereunder or the Buyers under the Receivables Purchase Agreement or (ii) its ability to perform its obligations under the Program Documents or (B) where the necessity of compliance therewith is being contested in good faith by appropriate proceedings. 6.07 No Adverse Interests. The Seller will not cause or -------------------- permit any of the Receivables, or any Related Security, any Collections thereon or any proceeds of the foregoing or any Lockbox or Lockbox Account or the Collection Account to be sold, pledged, assigned or transferred or to be subject to an Adverse Interest. 6.08 No Modification of Receivables. The Seller shall not do ------------------------------ anything to modify the terms of any Receivable, except in accordance with the Credit and Collection Policy, if such modification would materially adversely affect BSF or cause a Termination Event, or otherwise impair the rights of BSF hereunder or the Buyers under the Receivables Purchase Agreement; provided that (i) the Seller may grant, or permit to be granted, to the Obligor under any Receivable, any Dilution Factor which the Seller in good faith believes is justified, subject to the provisions of Section 3.9(c) of the Receivables Purchase Agreement and Section 2.02 hereunder, and (ii) the Seller may take or permit to be taken such action to collect Receivables as it may deem advisable, including resale of any repossessed, returned or rejected goods and rescheduling through extension or otherwise of payments due under any Receivable so long as such action is consistent with the Servicer's historical collection practices as modified from time to time in accordance with Section 6.09. 6.09 No Change in Business or Policy. The Seller shall not ------------------------------- change the fundamental nature of its business or the Credit and Collection Policy in a manner that would materially adversely affect BSF or materially impair the collectibility of any Receivables (it being understood that the Seller may amend the Credit and Collection Policy as long as such amendment does not materially adversely affect BSF or materially impair the collectibility of the Receivables). 6.10 Preservation of Corporate Existence. Except as ----------------------------------- permitted pursuant to Section 6.11 hereof, the Seller shall preserve and maintain its corporate existence and good standing in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where the failure to preserve and maintain such existence, rights, franchises, privileges and qualification would materially adversely affect (i) the interests of BSF hereunder or (ii) its ability to perform its obligations under the Program Documents. 6.11 No Mergers. The Seller will not (i) consolidate or ---------- merge with or into any other corporation or (ii) except as permitted by Section 5.7 of the Inventory Credit Agreement, sell, lease or otherwise transfer, directly or indirectly, all or substantially all of its assets; provided that the Seller may merge with another corporation if (x) such corporation is not a Special Purpose Member and none of the capital stock of such corporation is owned by BSF, (y) the Seller is the surviving corporation in such merger and (z) after giving effect to such merger, no Termination Event or Potential Termination Event shall have occurred and be continuing. 6.12 Lockbox Accounts. The Seller agrees that it shall ---------------- direct Obligors with respect to the Receivables to cause all Collections to be either (i) mailed directly to a Lockbox with a Qualified Bank which has entered into a Lockbox Agreement governing such Lockbox and the related Lockbox Account (which shall be a separate and segregated account) pursuant to the 12 Receivables Purchase Agreement or (ii) electronically transferred to a Lockbox Account or the Collection Account. 6.13 Payment of Taxes. The Seller will promptly pay and ---------------- discharge all Federal and state taxes, assessments and governmental charges or levies imposed upon it or upon its income or profit or upon any property belonging to it, unless such tax, assessment, charge or levy shall not at the time be due and payable or can be paid thereafter without penalty, or if the amount, applicability or validity thereof shall be currently contested in good faith by appropriate proceedings and adequate reserves with respect to such tax, assessment, charge or levy shall have been established in accordance with GAAP. 6.14 Covenants of BSF. The Seller agrees, as relevant, that ---------------- it shall comply with, and to cause BSF to comply with, Section 3.3 of the Receivables Purchase Agreement. ARTICLE VII MISCELLANEOUS ------------- 7.01 Indemnity. --------- (a) The Seller agrees to indemnify, defend and save harmless BSF and its directors, officers, employees and agents (each an "indemnitee"), other than for the indemnitee's own gross negligence or willful misconduct, forthwith on demand, from and against any and all losses, claims, damages, liabilities, costs and expenses (including, without limitation, all reasonable attorneys' fees and expenses and expenses of settlement, litigation or preparation therefor) which such indemnitee may incur or which may be asserted against such indemnitee by any Person (including, without limitation, any Obligor) arising from or incurred in connection with: (i) any breach of a representation, warranty or covenant by the Seller made or deemed made hereunder or in connection herewith or the transactions contemplated hereby, (ii) any action taken or, if the Seller is otherwise obligated to take action, failed to be taken, by the Seller with respect to the Receivables or any of its obligations hereunder, including, without limitation, the Seller's failure to comply with an applicable law or regulation, (iii) any failure attributable to the Seller to vest and maintain vested in BSF an ownership interest in the Receivables, free and clear of all Adverse Interests, (iv) any products liability claim arising out of or relating to the Receivables or the related Contracts, 13 (v) any failure to pay when due any taxes required to be paid by the Seller or BSF, including without limitation any income tax, sales tax, excise tax or other tax or charge payable in connection with the Receivables and their creation or satisfaction, (vi) any dispute, suit, action, claim, proceeding or governmental investigation, pending or threatened, whether based on statute, regulation or order (including any such suit, action, claim or proceeding alleging a violation of any Federal or state securities laws, on tort, on contract or otherwise) before any court, arbitral panel, or other tribunal which arises out of or relates to the Receivables or related contracts, or the use of the proceeds of the sale of the Receivables pursuant hereto, (vii) any Environmental Liabilities, or (viii) any amount required to be paid by BSF pursuant to Section 2.4 of the Receivables Purchase Agreement or any indemnity required to be paid by BSF pursuant to Section 10.3, 10.4 and 11.3 of the Receivables Purchase Agreement. It is expressly agreed and understood by the parties hereto that such indemnification is not intended to constitute a guarantee of the collectibility or payment of the Receivables purchased hereunder. 7.02 Amendment and Waiver. -------------------- Subject to Section 7.09, this Agreement may be amended, or the provisions hereof waived, from time to time by a written amendment or waiver duly executed and delivered by the Seller and BSF. 7.03 No Implied Waivers; Cumulative Remedies. --------------------------------------- No course of dealing and no delay or failure of BSF in exercising any right, power or privilege under the Program Documents shall affect any other or future exercise thereof or the exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of BSF under the Program Documents are cumulative and not exclusive of any rights or remedies which BSF would otherwise have. 7.04 Notices. ------- All communications and notices pursuant hereto to either party shall be given in accordance with Section 11.1 of the Receivables Purchase Agreement. 7.05 Costs and Expenses. ------------------ The Seller will pay all expenses incident to the performance of its obligations under this Agreement and the Seller agrees to pay all reasonable out-of-pocket costs and expenses of BSF in connection with the perfection as against third parties of BSF's right, title and interest in and to the Receivables and the enforcement of any obligation of the Seller hereunder. 7.06 Survival. -------- 14 This Agreement shall continue in full force and effect so long as any Receivables remain outstanding; provided that Section 7.01 shall survive termination of this Agreement. 7.07 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 7.08 No Bankruptcy Petition. ---------------------- The Seller hereby covenants and agrees that, prior to the date which is one year and one day after the Final Payment Date, it will not institute against, or join any other Person in instituting against, BSF any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other similar proceeding under the laws of the United States or any State of the United States. 7.09 Assignment. ---------- (a) The Seller acknowledges that BSF will, pursuant to the Receivables Purchase Agreement, convey an ownership interest in the Receivables to the Buyers and assign all of its rights and remedies under this Agreement to the Collateral Agent as security for its obligations under the Receivables Purchase Agreement, and that, without limiting the generality of the foregoing, the representations and warranties contained in this Agreement and the rights of BSF under Section 2.02 hereof and the indemnification provisions of Section 7.01 hereof are intended to benefit the Agents, the L/C Issuing Banks and the Buyers. The Seller hereby consents to such conveyances and such assignment and to the terms of the Receivables Purchase Agreement and further acknowledges that pursuant to the Receivables Purchase Agreement the consent of the Required Buyers and reaffirmation by S&P of the rating then assigned to the Buyers' Certificates is required in respect of amendments hereof and waivers by BSF of its rights hereunder. (b) The Seller shall not assign any of its rights or obligations hereunder. 7.10 Governing Law. ------------- THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. The Seller and BSF each hereby submits to the non-exclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Seller and BSF each waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 7.11 Counterparts. This Agreement may be executed in any ------------ number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. 15 IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date and year first above written. BETHLEHEM STEEL CORPORATION By____________________________ Name: Title: BETHLEHEM STEEL FUNDING, LLC By__________________________ Name: Title: SCHEDULE 4.02(f) ENVIRONMENTAL MATTERS --------------------- None APPENDIX I NET PURCHASE PRICE OF RECEIVABLES --------------------------------- For each Business Day A. Face amount of new Receivables meeting the Eligibility Criteria 0.00 B. A X Average Loss to Liquidation Ratio for the last 12 months X 1.25 0.00 C. A - B 0.00 D. C X Yield Rate X 3 month average Days ------------------------------------- Sales Outstanding X 1.25 ------------------------ 360 (1) 0.00 E. C - D 0.00 F. C X 1.5% X Days Sales Outstanding X 1.10 ------------------------------------ 360 0.00 G. E - F [Purchase Price of New Receivables] 0.00 H. Less - credits under Section 2.02 of PSA 0.00 - ------------- (1) Yield Rate = LIBOR (one month), as it appears in Bloomberg at 11:00 A.M. (New York City time) on the prior Business Day, plus the Prime Rate, as printed in the Wall Street Journal on such Business Day, divided by 2. I. G - H [Net Purchase Price of New Receivables] 0.00 APPENDIX II DAILY RECONCILIATION OF INTERCOMPANY TRANSACTIONS ------------------------- A. Net Purchase Price of New Receivables 0.00 B. Collections available for reinvestment 0.00 C. Proceeds of new dollar funding 0.00 D. Lesser of A and (B + C) paid to BSC 0.00 E. If A less than (B + C), the difference to be: - held at BSF 0.00 - paid on BSC 0.00 note - paid as a 0.00 distribution F. If (B + C) less than A, the difference drawn on BSC note 0.00 EXHIBIT J [Form of BSC Note] PROMISSORY NOTE [$___________] New York, New York September 12, 1995 For value received, Bethlehem Steel Funding, LLC, a Maryland limited liability company ("BSF"), promises to pay (but only on a subordinated basis as hereinafter described), to Bethlehem Steel Corporation, a Delaware corporation (including permitted successors, "BSC"), the principal sum of [$___________] (the "Maximum Amount"), or such lesser amount as indicated on the schedule attached hereto, on the date which is 366 days following the Final Payment Date (as defined in the Receivables Purchase Agreement referred to below). The principal amount of this Note is not subject to acceleration but may be prepaid (subject to the Subordination Provisions set forth below) in whole or in part at any time or from time to time, whether before, on or after the Final Payment Date. Capitalized terms used herein without definition shall have the meanings set forth in the Receivables Purchase Agreement (as the same may from time to time be amended, supplemented or otherwise modified, the "Receivables Purchase Agreement"), dated as of September 12, 1995, among BSF, Bethlehem Steel Credit Affiliate One, Inc., Bethlehem Steel Credit Affiliate Two, Inc., BSC, as Servicer, the financial institutions listed on the signature pages thereof, as Buyers, Morgan Guaranty Trust Company of New York, as Administrative Agent and J.P. Morgan Delaware, as Structuring and Collateral Agent. BSF further promises to pay interest on the unpaid principal hereof from time to time outstanding (subject to the Subordination Provisions set forth below) from the dates specified in the schedule attached hereto, said interest to be payable on each Settlement Date and at maturity, until such principal shall have been paid in full, at a fluctuating rate per annum equal to the Prime Rate of Morgan Guaranty Trust Company of New York. BSC agrees that it shall not sell, transfer, assign, negotiate or pledge this Note (or any of its rights hereunder) except as provided in the Inventory Security Agreement. BSC is hereby irrevocably authorized to endorse on the schedule attached hereto an appropriate notation evidencing the date and amount of each advance of principal hereunder and of each payment of principal with respect thereto; provided that the failure to make any such endorsement shall not affect the obligations of BSF to make a payment when due of any amount owing hereunder. Subject to the other provisions of this Note (including the Subordination Provisions set forth below), during the period prior to the Final Payment Date, BSF may borrow, repay and reborrow up to the Maximum Amount. SUBORDINATION PROVISIONS ------------------------ 1. BSF, for itself and its successors, agrees, and BSC and each holder of this Note by its acceptance hereof agrees that the rights of the holder of this Note are hereby expressly subordinated as a claim against BSF or any of its assets, whether such claim be (a) in the ordinary course of business, (b) in the event of any distribution of the assets of BSF upon any voluntary or involuntary dissolution, winding-up, total or partial liquidation or reorganization, or bankruptcy, insolvency, receivership or other statutory or common law proceedings or arrangements involving BSF or other adjustment of BSF's liabilities or any assignment for the benefit of creditors or any marshalling of the assets or liabilities of BSF or (c) otherwise, to the prior claims and rights of the Agents, the L/C Issuing Banks and the Buyers against BSF, including the right to receive payment in full of all Aggregate Unpaids due the Agents, the L/C Issuing Banks and the Buyers (including Yield accruing after the commencement of any proceedings, whether or not allowed or allowable as a claim in such proceedings) prior to the payment of any amounts due to the holder of this Note, and that these Subordination Provisions are for the benefit of the Agents, the L/C Issuing Banks and the Buyers; provided that notwithstanding the foregoing, the principal of and interest on this Note may be paid from amounts distributed to BSF from time to time pursuant to Sections 3.7 and 3.8 of the Receivables Purchase Agreement (and, prior to the Final Payment Date, from only such amounts and only if no Termination Event and no Potential Termination Event has occurred and is then continuing). 2. If any payment or distribution of any assets of BSF of any kind or character shall be received by set-off or otherwise by the holder of this Note (other than from amounts distributed to BSF from time to time pursuant to Sections 3.7 and 3.8 of the Receivables Purchase Agreement), such payment or distribution and the amount of any such set-off shall be held in trust for and paid over to the Collateral Agent on behalf of and for the benefit of the Agents, the L/C Issuing Banks and the Buyers. 3. The holder of this Note shall not be entitled to enforce any right or receive any payment arising out of any right of subrogation which it may have or be entitled to, by operation of law or otherwise, as a result of payments or forbearance by such holder hereunder or pursuant hereto, unless and until all amounts payable to the Agents, the L/C Issuing Banks and the Buyers shall have paid in full. BSC hereby covenants and agrees that, prior to the date which is one year and one day after the Final Payment Date, it will not institute against, or join any other Person in instituting against, BSF any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other similar proceeding under the laws of the United States or any State of the United States. 4. This Note shall be amended or modified only in accordance with the Receivables Purchase Agreement. * * * * * * * * * * * * * * * * * 2 THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, BSF has caused this Note to be duly executed on the date first above written. BETHLEHEM STEEL FUNDING, LLC By_______________________________ Name: Title: BETHLEHEM STEEL CORPORATION By: ______________________ Name: Title: Schedule I to Promissory Note SUBORDINATED PROMISSORY NOTE ADVANCES AND PAYMENTS OF PRINCIPAL Amount Amount of of Principal Notation Date Advance Repaid Made By - ---- ------- --------- -------- EXHIBIT K-1 BETHLEHEM STEEL FUNDING, LLC ARTICLES OF ORGANIZATION ------------------------ BETHLEHEM STEEL FUNDING, LLC (the "LLC") hereby certifies: 1. Recital. The members of the LLC have designated Neal D. ------- Borden as an "authorized person" as that term is defined in Section 4A-101 (C) of the Corporations and Associations Article of the Maryland General Corporation Law, for purposes of executing and filing these Articles of Organization, and any other documents or certificates that may be required to be filed on behalf of the LLC with the State Department of Assessments and Taxation of Maryland from time to time. 2. Name. The name of the LLC is: ---- BETHLEHEM STEEL FUNDING, LLC 3. Purpose. The purpose of the LLC is to engage exclusively ------- in the purchase of receivables originated in connection with the sale of goods or the provision of services by Bethlehem Steel Corporation, and the financing of such purchases pursuant to the Receivables Purchase Agreement among the LLC, Bethlehem Steel Credit Affiliate One, Inc., Bethlehem Steel Credit Affiliate Two, Inc., Bethlehem Steel Corporation, as Servicer, the financial institutions from time to time party thereto as Buyers, Morgan Guaranty Trust Company of New York, as Administrative Agent and J.P. Morgan Delaware, as Structuring and Collateral Agent, as the same may from time to time be amended or extended (capitalized terms used in this Article having the meanings given thereto in such Receivables Purchase Agreement) and the related documents contemplated thereby, and the taking of any and all actions and the doing of any and all things necessary or appropriate to accomplish the foregoing. The LLC may not incur any Debt other than pursuant to or as contemplated by the aforesaid Receivables Purchase Agreement unless (x) such Debt is rated the same by Standard & Poor*s Ratings Group or its successors (hereinafter referred to as "S&P") as the Buyers' Certificates, or (y) is fully subordinated to the Buyers' Certificates; is nonrecourse other than with respect to proceeds in excess of the proceeds necessary to pay the Buyers' Certificates ("excess proceeds"); and does not constitute a claim against the LLC to the extent that excess proceeds are insufficient to pay such Debt or (z) such incurrence will not result in a reduction of the then existing rating by S&P of the Buyers' Certificates. 4. Principal Office and Resident Agent. The address of the ----------------------------------- principal office of the LLC is 5111 North Point Boulevard, Sparrows Point, Maryland 21219-1014. The name and address of the resident agent of the LLC is Corporation Trust, Inc., First Maryland Building, 32 South Street, Baltimore, Maryland 21202. 5. Dissolution. The latest date upon which the LLC is to ----------- dissolve is December 29, 2005. 6. Bankruptcy. The LLC shall not, without the affirmative ---------- vote of all of its members, institute proceedings to be adjudicated bankrupt or insolvent; or consent to the institution of bankruptcy or insolvency proceedings against it; or file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the LLC or a substantial part of its property; or make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; or take any other action in furtherance of any such action. 7. Interests of Creditors. Members of the LLC shall take ---------------------- into account the interests of the creditors of the LLC, as well as the interests of the LLC (notwithstanding the fact that the LLC is not then insolvent), when acting on any matter subject to the vote of the members. 2 8. Amendments. The LLC reserves the right to amend these ---------- Articles of Organization in any manner permitted by the Maryland General Corporation Law and all rights and powers conferred herein on members, if any, are subject to this reserved power; provided that the LLC shall not, without the prior written reaffirmation by S&P of the rating then assigned to the Buyers* Certificates, amend, alter, change or repeal Articles 3, 5, 6, 7 or this Article 8 of these Articles of Organization. IN WITNESS WHEREOF, the undersigned has executed these Articles of Organization on this 12th day of September, 1995. ________________________________ Neal D. Borden 3 EXHIBIT K-2 BETHLEHEM STEEL FUNDING, LLC OPERATING AGREEMENT This Operating Agreement (this "Agreement") is entered into this 12th day of September, 1995 by and among Bethlehem Steel Corporation, of Bethlehem, Pennsylvania; Bethlehem Steel Credit Affiliate One, Inc., of Sparrows Point, Maryland; and Bethlehem Steel Credit Affiliate Two, Inc., of Sparrows Point, Maryland. Explanatory Statement --------------------- The parties have agreed to organize and operate a limited liability company in accordance with the terms of, and subject to the conditions set forth in, this Agreement. NOW, THEREFORE, for good and valuable consideration, the parties, intending legally to be bound, agree as follows: SECTION I Defined Terms ------------- The following capitalized terms shall have the meanings specified in this Section I (any capitalized terms not defined herein shall have the meanings given thereto in the Rated Receivables Purchase Facility, as defined hereinbelow): "Act" means the Maryland Limited Liability Company Act, as amended from time to time. "Adjusted Capital Account Deficit" means, with respect to any Interest Holder, the deficit balance, if any, in the Interest Holder's Capital Account as of the end of the relevant taxable year, after giving effect to the following adjustments: (i) the deficit shall be decreased by the amounts which the Interest Holder is deemed obligated to restore pursuant to Regulation Section 1.704-1(b)(2)(ii)(c); and (ii) the deficit shall be increased by the items described in Regulation Section 1.704-1(b)(2)(ii)-(d)(4), (5), and (6). "Adjusted Capital Balance" means, with respect to any Member, the Member's total Capital Contribution then paid to the Company less all amounts actually distributed to such Member pursuant to Section 4.2.3, provided that the Adjusted Capital Balance of any Member shall not be less than zero. If a Member transfers all or any portion of his Interest in accordance with the terms of this Agreement, his transferee shall succeed to the Adjusted Capital Balance of the transferor to the extent it relates to the Interest transferred. "Affiliate" means any entity other than the Company (i) which owns beneficially, directly or indirectly, more than 50 percent of the total of the Capital Accounts of the Company or which is otherwise in control of the Company, (ii) of which more than 50 percent of the outstanding voting securities are owned beneficially, directly or indirectly, by any entity described in clause (i) above, or (iii) which is controlled by any entity described in clause (i) above; provided that for the purposes of this definition the terms "control" and "controlled by" shall have the meanings assigned to them in Rule 405 under the Securities Act of 1933, as amended. "Agent" means an officer, director, employee or agent of a Member. "Agreement" means this Agreement, as amended from time to time. "Capital Account" means the account maintained by the Company for each Interest Holder in accordance with the following provisions: (i) an Interest Holder's Capital Account shall be credited with the Interest Holder's Capital Contributions, the amount of any Company liabilities assumed by the Interest Holder (or which are secured by Company property distributed to the Interest Holder), the Interest Holder's distributive share of Profit and any item in the nature of income or gain specially allocated to such Interest Holder pursuant to the provisions of Section IV (other than Section 4.3.3); and (ii) an Interest Holder's Capital Account shall be debited with the amount of money and the fair market value of any Company property distributed to the Interest Holder, the amount of any liabilities of the Interest Holder assumed by the Company (or which are secured by property contributed by the Interest Holder to the Company), the Interest Holder's distributive share of Loss and any item in the nature of expenses or losses specially allocated to the Interest Holder pursuant to the provisions of Section IV (other than Section 4.3.3). If any Interest is transferred pursuant to the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent the Capital Account is attributable to the transferred Interest. If the book value of Company property is adjusted pursuant to Section 4.3.3, the Capital Account of each Interest Holder shall be adjusted to reflect the aggregate adjustment in the same manner as if the Company had recognized gain or loss equal to the amount of such aggregate adjustment. It is intended that the Capital Accounts of all Interest Holders shall be maintained in compliance with the provisions of Regulation Section 1.704-1(b), and all provisions of this Agreement relating to the maintenance of Capital Accounts shall be interpreted and applied in a manner consistent with that Regulation. 2 "Capital Contribution" means the total amount of cash and the fair market value of other assets contributed (or deemed contributed under Regulation Section 1.704-1(b)(2)(iv)(d)) to the Company by a Member, net of liabilities assumed or to which the assets are subject. "Capital Proceeds" means the net amount of cash received by the Company from a Capital Transaction after payment of all expenses associated with the Capital Transaction. "Capital Transaction" means any transaction not in the ordinary course of business which results in the Company's receipt of cash or other consideration other than Capital Contributions, including without limitation, proceeds of sales or exchanges or other dispositions of property not in the ordinary course of business, financings, refinancings, condemnations, recoveries of damage awards, and insurance proceeds. "Cash Flow" means all cash funds derived from operations of the Company (including interest received on reserves), without reduction for any non-cash charges, but less cash funds used to pay current operating expenses and to pay or establish reasonable reserves for future expenses, debt payments, capital improvements, and replacements as determined by the Members. Cash Flow shall not include Capital Proceeds but shall be increased by the reduction of any reserves previously established. "Code" means the Internal Revenue Code of 1986, as amended, or any corresponding provision of any succeeding law. "Company" means the limited liability company organized in accordance with this Agreement. "Interest" means a Person's share of the Profits and Losses of, and the right to receive distributions from, the Company. "Interest Holder" means any Person who holds an Interest, whether as a Member or as an unadmitted assignee of a Member. "Involuntary Withdrawal" means, with respect to any Member, the occurrence of any of the events set forth in Act Sections 4A-606(3) through (9). "Member" means each Person signing this Agreement and any Person who subsequently is admitted as a member of the Company. "Member Loan Nonrecourse Deductions" means any Company deductions that would be Nonrecourse Deductions if they were not attributable to a loan made or guaranteed by a Member within the meaning of Regulation Section 1.704-2(i). "Membership Rights" means all of the rights of a Member in the Company, including a Member's: (i) Interest; (ii) right to inspect the Company's books and records; (iii) right to participate in the management of and vote on matters coming before the Company; and (iv) unless this Agreement or the Articles of Organization provide to the contrary, right to act as an agent of the Company. "Minimum Gain" has the meaning set forth in Regulation Section 1.704-2(d). Minimum Gain shall be computed separately for each Interest Holder in a manner consistent with the Regulations under Code Section 704(b). 3 "Negative Capital Account" means a Capital Account with a balance of less than zero. "Nonrecourse Deductions" has the meaning set forth in Regulation Section 1.704- 2(b)(1). The amount of Nonrecourse Deductions for a taxable year of the Company equals the net increase, if any, in the amount of Minimum Gain during that taxable year, determined according to the provisions of Regulation Section 1.704-2(c). "Nonrecourse Liability" means any liability of the Company with respect to which no Member has personal liability determined in accordance with Code Section 752 and the Regulations promulgated thereunder. "Percentage" means, as to a Member, the percentage set forth after the Member's name on Exhibit A, as amended from time to time, and as to an Interest Holder who is not a Member, the Percentage of the Member whose Interest has been acquired by such Interest Holder, to the extent the Interest Holder has succeeded to that Member's Interest. "Person" means and includes a corporation, partnership, association, limited liability company, trust, or other entity. "Positive Capital Account" means a Capital Account with a balance greater than zero. "Profit" and "Loss" means, for each taxable year of the Company (or other period for which Profit and Loss must be computed) the Company's taxable income or loss determined in accordance with Code Section 703(a), with the following adjustments: (i) all items of income, gain, loss, deduction, or credit required to be stated separately pursuant to Code Section 703(a)(1) shall be included in computing taxable income or loss; (ii) any tax-exempt income of the Company, not otherwise taken into account in computing Profit or Loss, shall be included in computing taxable income or loss; (iii) any expenditures of the Company described in Code Section 705(a)(2)(B) (or treated as such pursuant to Regulation Section 1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in computing Profit or Loss, shall be subtracted from taxable income or loss; (iv) gain or loss resulting from any taxable disposition of Company property shall be computed by reference to the adjusted book value of the property disposed of, notwithstanding the fact that the adjusted book value differs from the adjusted basis of the property for federal income tax purposes; (v) in lieu of the depreciation, amortization or cost recovery deductions allowable in computing taxable income or loss, there shall be taken into account the depreciation computed based upon the adjusted book value of the asset; and (vi) notwithstanding any other provision of this definition, any items which are specially allocated pursuant to Section 4.3 hereof shall not be taken into account in computing Profit or Loss. "Rated Receivables Purchase Facility" and "Facility" means the receivables facility established pursuant to the Receivables Purchase Agreement dated as of September 12, 1995, 4 among the Company, Bethlehem Steel Credit Affiliate One, Inc., Bethlehem Steel Credit Affiliate Two, Inc., Bethlehem Steel Corporation, as Servicer, the financial institutions listed therein, Morgan Guaranty Trust Company of New York, as Administrative Agent, and J.P.Morgan Delaware, as Structuring and Collateral Agent, and such other agreements, documents and instruments contemplated by the Receivables Purchase Agreement. "Regulation" means the income tax regulations, including any temporary regulations, from time to time promulgated under the Code. "SDAT" means the State Department of Assessments and Taxation of Maryland. "Transfer" means, when used as a noun, any voluntary sale, hypothecation, pledge, assignment, attachment, or other transfer, and, when used as a verb, means voluntarily to sell, hypothecate, pledge, assign, or otherwise transfer. "Voluntary Withdrawal" means a Member's dissociation with the Company by means other than a Transfer or an Involuntary Withdrawal. SECTION II Formation and Name; Office; Purpose; Term ----------------------------------------- 2.1 Organization. The parties hereby organize a limited ------------ liability company pursuant to the Act and the provisions of this Agreement and, for that purpose, have caused Articles of Organization to be prepared, executed and filed with SDAT on September 12, 1995. 2.2 Name of the Company. The name of the Company shall be ------------------- "BETHLEHEM STEEL FUNDING, LLC." The Company may do business under that name and under any other name or names upon which the Members agree. If the Company does business under a name other than that set forth in its Articles of Organization, the Company shall file a trade name certificate as required by law. 2.3 Purpose. The purpose of the Company is to engage ------- exclusively in the purchase of receivables originated in connection with the sale of goods or the provision of services by Bethlehem Steel Corporation, and the financing of such purchases pursuant to the Rated Receivables Purchase Facility, as the same may from time to time be amended or extended, and the related documents contemplated thereby, and the taking of any and all actions and the doing of any and all things necessary or appropriate to accomplish the foregoing. The Company may not incur any Debt other than pursuant to or as contemplated by the aforesaid Facility unless (x) such Debt is rated the same by S&P as the Buyers' Certificates, or (y) is fully subordinated to the Buyers' Certificates; is nonrecourse other than with respect to proceeds in excess of the proceeds necessary to pay the Buyers' Certificates ("excess proceeds"); and does not constitute a claim against the LLC to the extent that excess proceeds are insufficient to pay such Debt or (z) such incurrence will not result in a reduction of the then existing rating by S&P of the Buyers' Certificates. 2.4 Separateness Covenants. ---------------------- 5 2.4.1. Office. The Company shall maintain its principal ------ executive office separate from that of any Affiliate other than Bethlehem Steel Credit Affiliate One, Inc. and Bethlehem Steel Credit Affiliate Two, Inc. and shall conspicuously identify such office as its office. 2.4.2. Financial Statements. The Company shall maintain its -------------------- financial statements, accounting records and other documents separate from those of any Affiliate or any other entity. The Company shall prepare unaudited quarterly and audited annual financial statements, and the Company's financial statements shall comply with GAAP. The Company shall maintain its own bank accounts, payroll and correct, complete and separate books of account. The Company shall retain as its accountants a nationally recognized firm of independent certified public accountants, provided that such accountants may also serve as accountants of any Affiliate. 2.4.3. Separate Identity. The Company shall at all times ----------------- hold itself out to the public (including any Affiliate's creditors) under the Company's own name and as a separate and distinct entity. Communications on behalf of the Company shall be made in its own name, and the Company shall maintain its own separate telephone number and stationery and other business forms. 2.4.4. Formalities. All customary formalities regarding the ----------- proper existence of the Company, including holding meetings of or obtaining the consent of its Members, as appropriate, and maintaining current and accurate minute books, shall be observed. 2.4.5. Separate Action. Except for servicing activities to --------------- be performed with respect to the receivables owned by the Company (which may be performed by Bethlehem Steel Corporation (or a subsidiary thereof)), the Company shall act solely in its own name and through its own duly authorized officers and agents. Except for servicing activities to be performed by Bethlehem Steel Corporation (or a subsidiary thereof) with respect to the receivables owned by the Company, no Affiliate shall act as an agent of the Company (provided that an employee, officer or director of an Affiliate may also serve as an employee, officer or director of the Company). Investments shall be made directly by the Company or on its behalf by brokers or agents engaged and paid by the Company or its agents. 2.4.6. Affiliate Transactions. All business transactions ---------------------- entered into by the Company with any Affiliate shall be on terms and conditions that are not more or less favorable to the Company than terms and conditions available at the time to the Company for comparable transactions with unaffiliated persons and must be approved by all of the Members. The Company shall not guarantee or assume or hold itself out or permit itself to be held out as having guaranteed or assumed any liabilities or obligations of any Affiliate, other than the endorsement of checks for collection or deposit in the ordinary course of business. 2.4.7. Liabilities. The Company shall pay its own ----------- liabilities, indebtedness and obligations of any kind, including all administrative expenses, from its own separate assets. 2.4.8. Segregation of Assets. Assets of the Company shall --------------------- be separately identified, maintained and segregated. Except as otherwise provided in the Program Documents, the Company's funds shall not be commingled with those of any other corporate or natural person. The Company's assets shall at all times be held by or on behalf of the Company and, if held on behalf of the Company by another entity, shall at all times be kept identifiable (in accordance with customary usages) as assets owned by the Company. Except for servicing activities to be performed by Bethlehem Steel Corporation (or a subsidiary thereof) with respect. 6 to the receivables owned by the Company, in no event shall any of the Company's assets be held on its behalf by any Affiliate. 2.4.9. Investment Company Status. The Company shall ------------------------- not take any action if, as a result of such action, the Company would be required to register as an investment company under the Investment Company Act of 1940, as amended. 2.5 Term. The term of the Company began upon the acceptance ---- of the Articles of Organization by SDAT and shall continue in existence until December 29, 2005, unless its existence is sooner terminated pursuant to Section VII of this Agreement. 2.6 Principal Office. The principal office of the Company in ---------------- the State of Maryland shall be located at 5111 North Point Boulevard, Sparrows Point, Maryland 21219-1014 or at any other place within the State of Maryland upon which the Members agree. 2.7 Resident Agent. The name and address of the Company's -------------- resident agent in the State of Maryland shall be Corporation Trust, Inc., First Maryland Building, 32 South Street, Baltimore, Maryland 21202. 2.8 Members. The name, present mailing address, taxpayer ------- identification number and Percentage of each Member are set forth on Exhibit A. SECTION III Members; Capital; Capital Accounts ---------------------------------- 3.1 Initial Capital Contributions. Upon the execution of ----------------------------- this Agreement, the Members shall contribute to the Company accounts receivable with a fair market value of the amounts respectively set forth on Exhibit A. 3.2 No Other Capital Contributions. No Member shall be ------------------------------ required to contribute any additional capital to the Company, and except as set forth in the Act, no Member shall have any liability for any obligations of the Company. 3.3 No Interest on Capital Contributions. Interest Holders ------------------------------------ shall not be paid interest on their Capital Contributions. 3.4 Return of Capital Contributions. Except as otherwise ------------------------------- provided in this Agreement, no Interest Holder shall have the right to receive the return of any Capital Contribution. 3.5 Form of Return of Capital. If an Interest Holder is ------------------------- entitled to receive a return of a Capital Contribution, the Company may distribute accounts receivable, cash, notes, property, or a combination thereof to the Interest Holder in return of the Capital Contribution. 7 3.6 Capital Accounts. A separate Capital Account shall be ---------------- maintained for each Interest Holder. SECTION IV Profit, Loss, and Distributions 4.1 Distributions of Cash Flow and Allocations of Profit or ------------------------------------------------------- Loss Other Than From Capital Transactions. - ----------------------------------------- 4.1.1. Profit or Loss Other Than from a Capital ---------------------------------------- Transaction. After giving effect to the special allocations set forth - ----------- in Section 4.3, for any taxable year of the Company, Profit or Loss (other than Profit or Loss resulting from a Capital Transaction, which Profit or Loss shall be allocated in accordance with the provisions of Sections 4.2) shall be allocated to the Interest Holders in proportion to their Percentages. 4.1.2. Cash Flow. Subject to the limitations imposed --------- by the Facility, Cash Flow for each taxable year of the Company shall be distributed to the Interest Holders in proportion to their Percentages no later than seventy-five (75) days after the end of the taxable year. 4.2. Distributions of Capital Proceeds and Allocation of --------------------------------------------------- Profit or Loss from Capital Transactions. - ---------------------------------------- 4.2.1. Profit. After giving effect to the special ------ allocations set forth in Section 4.3, Profit from a Capital Transaction shall be allocated as follows: 4.2.1.1. If one or more Interest Holders has a Negative Capital Account, to those Interest Holders, in proportion to their Negative Capital Accounts, until all of those Negative Capital Accounts have been reduced to zero. 4.2.1.2. Any Profit not allocated pursuant to Section 4.2.1.1 shall be allocated to the Interest Holders in proportion to, and to the extent of, the amounts distributable to them pursuant to Section 4.2.3.4.1 and 4.2.3.4.2. 4.2.1.3. Any Profit in excess of the foregoing allocations shall be allocated to the Interest Holders in proportion to their Percentages. 4.2.2. Loss. After giving effect to the special ---- allocations set forth in Section 4.3, Loss from a Capital Transaction shall be allocated as follows: 4.2.2.1. If one or more Interest Holders has a Positive Capital Account, to those Interest Holders, in proportion to their Positive Capital Accounts, until all Positive Capital Accounts have been reduced to zero. 8 4.2.2.2. Any Loss not allocated to reduce Positive Capital Accounts to zero pursuant to Section 4.2.2.1 shall be allocated to the Interest Holders in proportion to their Percentages. 4.2.3. Capital Proceeds. Capital Proceeds shall be ---------------- distributed and applied by the Company in the following order and priority: 4.2.3.1. to the payment of all expenses of the Company incident to the Capital Transaction; then 4.2.3.2. to the payment of debts and liabilities of the Company then due and outstanding (including all debts due to any Interest Holder); then 4.2.3.3. to the establishment of any reserves which the Members deem necessary for liabilities or obligations of the Company; then 4.2.3.4. the balance shall be distributed as follows: 4.2.3.4.1. to the Interest Holders in proportion to their Adjusted Capital Balances, until their remaining Adjusted Capital Balances have been paid in full; 4.2.3.4.2. if any Interest Holder has a Positive Capital Account after the distributions made pursuant to Section 4.2.3.4.1 and before any further allocation of Profit pursuant to Section 4.2.1.3, to those Interest Holders in proportion to their Positive Capital Accounts; then 4.2.3.4.3. the balance, to the Interest Holders in proportion to their Percentages. 4.3 Regulatory Allocations. ---------------------- 4.3.1. Qualified Income Offset. No Interest Holder ----------------------- shall be allocated Losses or deductions if the allocation causes an Interest Holder to have an Adjusted Capital Account Deficit. If an Interest Holder receives (1) an allocation of Loss or deduction (or item thereof) or (2) any distribution which causes the Interest Holder to have an Adjusted Capital Account Deficit at the end of any taxable year, then all items of income and gain of the Company (consisting of a pro rata portion of each item of Company income, including gross income and gain) for that taxable year shall be allocated to that Interest Holder before any other allocation is made of Company items for that taxable year, in the amount and in proportions required to eliminate the excess as quickly as possible. This Section 4.3.1 is intended to comply with, and shall be interpreted consistently with, the "qualified income offset" provisions of the Regulations promulgated under Code Section 704(b). 4.3.2. Minimum Gain Chargeback. Except as set forth in ----------------------- Regulations Section 1.704-2(f)(2), (3), and (4), if, during any taxable year, there is a net decrease in Minimum Gain, each Interest Holder, prior to any other allocation pursuant to this Section IV, shall be specially allocated items of gross income and gain for such taxable year (and, if necessary, subsequent taxable years) in an amount equal to that Interest Holder's share of the net decrease of Minimum Gain, computed in accordance with Regulation Section 1.704-2(g). Allocations of gross income and gain pursuant to this Section 4.3.2 shall be made first from gain recognized from the disposition of Company assets subject to nonrecourse liabilities (within the meaning of the 9 Regulations promulgated under Code Section 752), to the extent of the Minimum Gain attributable to those assets, and thereafter, from a pro rata portion of the Company's other items of income and gain for the taxable year. It is the intent of the parties hereto that any allocation pursuant to this Section 4.3.2 shall constitute a "minimum gain chargeback" under Regulation Section 1.704-2(f). 4.3.3. Contributed Property and Book-Ups. In accordance --------------------------------- with Code Section 704(c) and the Regulations thereunder, as well as Regulation Section 1.704-1(b)(2)(iv)(d)(3), income, gain, loss, and deduction with respect to any property contributed (or deemed contributed) to the Company shall, solely for tax purposes, be allocated among the Interest Holders so as to take account of any variation between the adjusted basis of the property to the Company for federal income tax purposes and its fair market value at the date of contribution (or deemed contribution). If the adjusted book value of any Company asset is adjusted as provided herein, subsequent allocations of income, gain, loss, and deduction with respect to the asset shall take account of any variation between the adjusted basis of the asset for federal income tax purposes and its adjusted book value in the manner required under Code Section 704(c) and the Regulations thereunder. 4.3.4. Contributed Property and Book-Ups. In accordance --------------------------------- with Code Section 704(c) and the Regulations thereunder, as well as Regulation Section 1.704-1(b)(2)(iv)(d)(3), income, gain, loss, and deduction with respect to any property contributed (or deemed contributed) to the Company shall, solely for tax purposes, be allocated among the Interest Holders so as to take account of any variation between the adjusted basis of the property to the Company for federal income tax purposes and its fair market value at the date of contribution (or deemed contribution). If the adjusted book value of any Company asset is adjusted as provided herein, subsequent allocations of income, gain, loss, and deduction with respect to the asset shall take account of any variation between the adjusted basis of the asset for federal income tax purposes and its adjusted book value in the manner required under Code Section 704(c) and the Regulations thereunder. 4.3.5. Code Section 754 Adjustment. To the extent an --------------------------- adjustment to the tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of the adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases basis), and the gain or loss shall be specially allocated to the Interest Holders in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to that Section of the Regulations. 4.3.6. Nonrecourse Deductions. Nonrecourse Deductions for a ---------------------- taxable year or other period shall be specially allocated among the Interest Holders in proportion to their Percentages. 4.3.7. Member Loan Nonrecourse Deductions. Any Member Loan ---------------------------------- Nonrecourse Deduction for any taxable year or other period shall be specially allocated to the Interest Holder who bears the risk of loss with respect to the loan to which the Member Loan Nonrecourse Deduction is attributable in accordance with Regulation Section 1.704-2(b). 4.3.8. Guaranteed Payments. To the extent any compensation ------------------- paid to any Member by the Company, including any fees payable to any Member pursuant to Section 5.3 hereof, is determined by the Internal Revenue Service not to be a guaranteed payment under 10 Code Section 707(c) or is not paid to the Member other than in the Person's capacity as a Member within the meaning of Code Section 707(a), the Member shall be specially allocated gross income of the Company in an amount equal to the amount of that compensation, and the Member's Capital Account shall be adjusted to reflect the payment of that compensation. 4.3.9. Unrealized Receivables. If an Interest Holder's ---------------------- Interest is reduced (provided the reduction does not result in a complete termination of the Interest Holder's Interest), the Interest Holder's share of the Company's "unrealized receivables" and "substantially appreciated inventory" (within the meaning of Code Section 751) shall not be reduced, so that, notwithstanding any other provision of this Agreement to the contrary, that portion of the Profit otherwise allocable upon a liquidation or dissolution of the Company pursuant to Section 4.4 hereof which is taxable as ordinary income (recaptured) for federal income tax purposes shall, to the extent possible without increasing the total gain to the Company or to any Interest Holder, be specially allocated among the Interest Holders in proportion to the deductions (or basis reductions treated as deductions) giving rise to such recapture. 4.3.10. Withholding. All amounts required to be ----------- withheld pursuant to Code Section 1446 or any other provision of federal, state, or local tax law shall be treated as amounts actually distributed to the affected Interest Holders for all purposes under this Agreement. 4.4 Liquidation and Dissolution. --------------------------- 4.4.1. If the Company is liquidated, the assets of the Company shall be distributed to the Interest Holders in accordance with the balances in their respective Capital Accounts, after taking into account the allocations of Profit or Loss pursuant to Sections 4.1 or 4.2, if any, and distributions, if any, of cash or property, pursuant to Sections 4.1 and 4.2.3. 4.4.2. No Interest Holder shall be obligated to restore a Negative Capital Account. 4.5 General. ------- 4.5.1. Except as otherwise provided in this Agreement, the timing and amount of all distributions shall be determined by the Members. 4.5.2. If any assets of the Company are distributed in kind to the Interest Holders, those assets shall be valued on the basis of their fair market value, and any Interest Holder entitled to any interest in those assets shall receive that interest as a tenant-in-common with all other Interest Holders so entitled. Unless the Members otherwise agree, the fair market value of the assets shall be determined by an independent appraiser who shall be selected by the Members. The Profit or Loss for each unsold asset shall be determined as if the asset had been sold at its fair market value, and the Profit or Loss shall be allocated as provided in Section 4.2 and shall be properly credited or charged to the Capital Accounts of the Interest Holders prior to the distribution of the assets in liquidation pursuant to Section 4.4. 4.5.3. All Profit and Loss shall be allocated, and all distributions shall be made, to the Persons shown on the records of the Company to have been Interest Holders as of the last day of the taxable year for which the allocation or distribution is to be made. Notwithstanding the foregoing, unless the Company's taxable year is separated into segments, if there is a Transfer or an Involuntary Withdrawal during the taxable year, the Profit or Loss shall be allocated 11 between the original Interest Holder and the successor on the basis of the number of days each was an Interest Holder during the taxable year; provided, however, the Company's taxable year shall be segregated into two or more segments in order to account for Profit, Loss, or proceeds attributable to any extraordinary non-recurring items of the Company. 4.5.4. The Members are hereby authorized, upon the advice of the Company's tax counsel, to amend this Article IV, as necessary from time to time, to comply with the Code and the Regulations promulgated under Code Section 704(b), provided however, that no amendment shall materially affect distributions to an Interest Holder without the Interest Holder's prior written consent. SECTION V Management: Rights, Powers, Duties and Limitations --------------------------------------------------- 5.1 Management. The Company shall be managed by the Members. ---------- Except as otherwise provided in this Agreement, each Member shall have the right to act for and bind the Company in the ordinary course of its business. 5.2 Meetings of and Voting by Members. --------------------------------- 5.2.1. A meeting of the Members may be called at any time by any Member. Meetings of Members shall be held at the Company's principal place of business or at any other place in Baltimore County, Maryland designated by the Member calling the meeting. Not less than ten (10) nor more than ninety (90) days before each meeting, the Member calling the meeting shall give written notice of the meeting to each Member. The notice shall state the time, place, and purpose of the meeting. Notwithstanding the foregoing provisions, each Member waives notice if before or after the meeting the Member signs a waiver of the notice which is filed with the records of Members' meetings, or is present at the meeting in person or by proxy. At a meeting of Members, the presence in person or by proxy of all of the Members shall be required to constitute a quorum. A Member may vote either in person or by written proxy signed by the Member or by the Member's duly authorized attorney in fact. 5.2.2. The affirmative vote of all of the Members shall be required to approve any matter coming before the Members. 5.2.3. In lieu of holding a meeting, the Members may vote or otherwise take action by a written instrument indicating the consent of all of the Members. 5.2.4. Wherever the Act requires unanimous consent to approve or take any action, that consent shall be given in writing and, in all cases, shall mean the consent of all Members. 5.3 Member Services. No Member shall be required to perform --------------- services for the Company solely by virtue of being a Member. Unless approved by the Members or contemplated 12 by the Program Documents, no Member shall be entitled to compensation for services performed for the Company. However, upon substantiation of the amount and purpose thereof, the Members shall be entitled to reimbursement for expenses reasonably incurred by them or their respective Agents in connection with the activities of the Company. 5.4 Duties of Parties. ----------------- 5.4.1. Each Member shall cause one or more of its Agents to devote such time to the business and affairs of the Company as is necessary to carry out the Member's duties set forth in this Agreement. 5.4.2. Except as otherwise expressly provided in Section 5.4.3, nothing in this Agreement shall be deemed to restrict in any way the rights of any Member, or of any Affiliate of any Member, to conduct any other business or activity whatsoever, and no Member shall be accountable to the Company or to any other Member with respect to that business or activity. The organization of the Company shall be without prejudice to the Members' respective rights (or the rights of their respective Affiliates) to maintain, expand, or diversify such other interests and activities and to receive and enjoy profits or compensation therefrom. Each Member waives any rights the Member might otherwise have to share or participate in such other interests or activities of any other Member. 5.4.3. Each Member understands and acknowledges that the conduct of the Company's business may involve business dealings and undertakings with Members and their Affiliates. In any of those cases, those dealings and undertakings shall be at arm's length and on commercially reasonable terms. 5.5 Limitations on Debt. The Company may not incur any Debt ------------------- other than pursuant to or as contemplated by the Facility unless (x) such Debt is rated the same by S&P as the Buyers' Certificates, or (y) is fully subordinated to the Buyers' Certificates; is nonrecourse other than with respect to proceeds in excess of the proceeds necessary to pay the Buyers' Certificates ("excess proceeds"); and does not constitute a claim against the LLC to the extent that excess proceeds are insufficient to pay such Debt, or (z) such incurrence will not result in a reduction of the then existing rating by S&P of the Buyers' Certificates. 5.6 Liability and Indemnification. ----------------------------- 5.6.1. A Member shall not be liable, responsible, or accountable, in damages or otherwise, to any other Member or to the Company for any act performed by the Member with respect to Company matters, except for fraud, gross negligence, or an intentional breach of this Agreement. 5.6.2. The Company hereby indemnifies each Member and their respective Agents for any act performed by the Member or its Agent with respect to Company matters, except for any action or inaction which constitutes fraud, gross negligence, or an intentional breach of this Agreement, provided however, that any indemnity under this Section shall be provided out of and to the extent of the assets of the Company only. 5.6.3. Notwithstanding anything to the contrary contained in this Agreement, the right to indemnification (including any costs, charges and expenses with respect thereto), in this Section 5.6 is expressly subordinated as a claim against the Company or any of its assets to the prior claims and rights of the Buyers to receive payment under the Buyers* Certificates. 13 SECTION VI Transfer of Interests and Withdrawals of Members ------------------------------------------------ 6.1 Membership Certificates. The Membership Rights of each ----------------------- Member shall be evidenced by a Membership Certificate in the form attached as Exhibit B, executed by all of the Members. 6.2 Transfers. Subject to Section 6.5 hereinbelow, no Member --------- may Transfer all, or any portion of, or any interest or rights in, the Membership Rights owned by the Member, and no Interest Holder may Transfer all, or any portion of, or any interest or rights in, any Interest. Each Member hereby acknowledges the reasonableness of this prohibition in view of the purposes of the Company and the relationship of the Members. The Transfer of any Membership Rights or Interests in violation of the prohibition contained in Section 6.1 shall be deemed invalid, null and void, and of no force or effect. Any Person to whom Membership Rights are attempted to be transferred in violation of this Section 6.1 shall not be entitled to vote on matters coming before the Members, participate in the management of the Company, act as an agent of the Company, receive distributions from the Company, or have any other rights in or with respect to the Membership Rights. 6.3 Voluntary Withdrawal. No Member shall have the right or -------------------- power to Voluntarily Withdraw from the Company. 6.4 Involuntary Withdrawal. Immediately upon the occurrence ---------------------- of an Involuntary Withdrawal, the successor of the Withdrawn Member shall thereupon become an Interest Holder but shall not become a Member. If the Company is continued as provided in Section 7.1.3, the successor Interest Holder shall have all the rights of an Interest Holder but shall not be entitled to receive in liquidation of the Interest, pursuant to Section 4A-905(1)(ii) of the Act, the fair market value of the Member's Interest as of the date the Member involuntarily withdrew from the Company. 6.5 Pledge and Foreclosure of Membership Rights. No ------------------------------------------- provision of this Agreement is intended to prevent, or shall be interpreted as preventing (i) the pledge by the Members of their respective Membership Rights pursuant to the Inventory Security Agreement, or (ii) the full exercise by J.P. Morgan Delaware, as Structuring and Collateral Agent, of its rights of foreclosure under the Inventory Credit Agreement and Inventory Security Agreement upon the Membership Rights of the Members and the Transfer to J.P. Morgan Delaware or its designee, pursuant thereto, of the Membership Rights of each Member of the Company. Following any such Transfer, J.P. Morgan Delaware or its designee, as the case may be, shall have, and be entitled to exercise, all of the rights and privileges of a Member under this Agreement. SECTION VII 14 Dissolution, Liquidation, Bankruptcy and ---------------------------------------- Termination of the Company -------------------------- 7.1 Events of Dissolution. The Company shall be dissolved --------------------- upon the happening of any of the following events: 7.1.1. when the period fixed for its duration in Section 2.4 has expired; 7.1.2. upon the occurrence of an Involuntary Withdrawal, unless the remaining Members, within ninety (90) days after the occurrence of the Involuntary Withdrawal, unanimously elect to continue the business of the Company pursuant to the terms of this Agreement. 7.2 Procedure for Winding Up and Dissolution. If the Company ---------------------------------------- is dissolved, the remaining Members shall wind up its affairs. On winding up of the Company, the assets of the Company shall be distributed, first to creditors of the Company, including Interest Holders who are creditors, in satisfaction of the liabilities of the Company, and then to the Interest Holders in accordance with Section 4.4. Any such distribution of assets shall in all events be subject to the prior claims and rights of the Buyers to receive payment under the Buyers* Certificates. 7.3 Filing of Articles of Cancellation. If the Company is ---------------------------------- dissolved, the Members shall promptly file Articles of Cancellation with SDAT. If there are no remaining Members, the Articles shall be filed by the last Person to be a Member; if there are no remaining Members, or a Person who last was a Member, the Articles shall be filed by the legal representatives of the Person who last was a Member. 7.4 Filing of Voluntary Bankruptcy. The Company shall not, ------------------------------ without the prior unanimous consent of the Members pursuant to unanimous action of the board of directors of each Member, file a voluntary bankruptcy petition under the U.S. Bankruptcy Code (Title 11 of the U. S. Code) or under any similar statute of the United States or any state for the relief or reorganization of a debtor. SECTION VIII Books, Records, Accounting, and Tax Elections --------------------------------------------- 8.1 Bank Accounts. All funds of the Company shall be ------------- deposited in a bank account or accounts opened in the Company's name. The Members shall determine the institution or institutions at which the accounts will be opened and maintained, the types of accounts, and the Persons who will have authority with respect to the accounts and the funds therein. 8.2 Books and Records. The Members shall keep or cause to be ----------------- kept complete and accurate books and records of the Company and supporting documentation of the transactions with respect to the conduct of the Company's business. The books and records shall be 15 maintained in accordance with sound accounting principles and practices and shall be available at the Company's principal office for examination by any Member or the Member's duly authorized representative at any and all reasonable times during normal business hours. 8.3 Annual Accounting Period. The annual accounting period ------------------------ of the Company shall be its taxable year. The Company's taxable year shall be selected by the Members, subject to the requirements and limitations of the Code. 8.4 Reports. Within seventy-five (75) days after the end of ------- each taxable year of the Company, the Members shall cause to be sent to each Person who was a Member at any time during the taxable year then ended a complete accounting of the affairs of the Company for the taxable year then ended. In addition, within seventy-five (75) days after the end of each taxable year of the Company, the Members shall cause to be sent to each Person who was an Interest Holder at any time during the taxable year then ended, the tax information concerning the Company which is necessary for preparing the Interest Holder's income tax returns for that year. At the request of any Member, and at the Member's expense, the Members shall cause an audit of the Company's books and records to be prepared by independent accountants for the period requested by the Member. SECTION IX General Provisions ------------------ 9.1 Assurances. Each Member shall execute all such ---------- certificates and other documents and shall do all such filing, recording, publishing, and other acts as the Members deem appropriate to comply with the requirements of law for the formation and operation of the Company and to comply with any laws, rules, and regulations relating to the acquisition, operation, or holding of the property of the Company. 9.2 Notifications. Any notice, demand, consent, election, ------------- offer, approval, request, or other communication (collectively, a "notice") required or permitted under this Agreement must be in writing and delivered personally, sent by certified or registered mail, postage prepaid, return receipt requested, or sent by courier service that provides evidence of delivery. A notice must be addressed to an Interest Holder at the Interest Holder's last known address on the records of the Company. A notice to the Company must be addressed to the Company's principal office. A notice delivered personally will be deemed given only when acknowledged in writing by the person to whom it is delivered. A notice that is sent by mail will be deemed given three (3) business days after it is mailed. Any party may designate, by notice to all of the others, substitute addresses or addressees for notices; and, thereafter, notices are to be directed to those substitute addresses or addressees. 9.3 Specific Performance. The parties recognize that -------------------- irreparable injury will result from a breach of any provision of this Agreement and that money damages will be inadequate to fully remedy the injury. Accordingly, in the event of a breach or threatened breach of one or more of the provisions of this Agreement, any party who may be injured (in addition to any other 16 remedies which may be available to that party) shall be entitled to one or more preliminary or permanent orders (i) restraining and enjoining any act which would constitute a breach or (ii) compelling the performance of any obligation which, if not performed, would constitute a breach. 9.4 Complete Agreement. Except as expressly provided ------------------ otherwise herein, this Agreement may not be amended without the written consent of all of the Members and, as to any amendment to Sections 2.3, 2.4, 6.5, 7.1, 7.4 or this section 9.4, the prior reaffirmation by S&P of the rating then assigned to the Buyers* Certificates. 9.5 Applicable Law. All questions concerning the -------------- construction, validity, and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by the laws of the State of Maryland, without regard to principles of conflict of laws. 9.6 Section Titles. The headings herein are inserted as a -------------- matter of convenience only, and do not define, limit, or describe the scope of this Agreement or the intent of the provisions hereof. 9.7 Binding Provisions. This Agreement is binding upon and ------------------ shall inure to the benefit of the parties hereto and their respective legal representatives, successors, and permitted assigns. 9.8 Terms. Common nouns and pronouns shall be deemed to ----- refer to the masculine, feminine, neuter, singular and plural, as the identity of the Person may in the context require. 9.9 Separability of Provisions. Each provision of this -------------------------- Agreement shall be considered separable. If, for any reason, any provision or provisions herein are determined to be invalid and contrary to any existing of future law, such invalidity shall not impair the operation of or affect those portions of this Agreement which are valid. 9.10 Counterparts. This Agreement may be executed ------------ simultaneously in two or more counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same document. The signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart. 17 IN WITNESS WHEREOF, the parties have executed, or caused this Agreement to be executed, under seal, as of the date set forth above. ATTEST: MEMBERS Bethlehem Steel Corporation _________________________ By:_______________________(SEAL) Bethlehem Steel Credit Affiliate One, Inc. ________________________ By:_______________________(SEAL) E.P. Reybitz Bethlehem Steel Credit Affiliate Two, Inc. ________________________ By:_______________________(SEAL) E.P. Reybitz 18 Bethlehem Steel Funding, LLC Operating Agreement EXHIBIT A List of Members, Capital, and Percentages ----------------------------------------- Name, Address, and Taxpayer Value of Capital I.D. Number Contribution Percentage - -------------- ------------ ---------- Bethlehem Steel Corporation $37,240,000 98% 5111 North Point Boulevard Sparrows Point, MD 21219-1014 24-0526033 Bethlehem Steel Credit Affiliate One, Inc. $ 380,000 1% 5111 North Point Boulevard Sparrows Point, MD 21219-1014 52-1941312 19 Bethlehem Steel Credit Affiliate Two, Inc. $ 380,000 1% 5111 North Point Boulevard Sparrows Point, MD 21219-1014 52-1941315 20 21 Bethlehem Steel Funding, LLC Operating Agreement EXHIBIT B --------- MEMBERSHIP CERTIFICATE ---------------------- BETHLEHEM STEEL FUNDING, LLC A MARYLAND LIMITED LIABILITY COMPANY CERTIFICATE OF MEMBERSHIP This certifies that BETHLEHEM STEEL CORPORATION 21 is the registered holder of a Ninety-Eight Percent (98%) Membership Interest in BETHLEHEM STEEL FUNDING, LLC, a limited liability company organized under the laws of the State of Maryland. This Membership Interest is not transferable except in accordance with the provisions of the Operating Agreement of Bethlehem Steel Funding, LLC. DATED: September 12, 1995 BETHLEHEM STEEL FUNDING, LLC By:______________________________ E.P. Reybitz, Authorized Agent EXHIBIT L-1 ARTICLES OF INCORPORATION OF SPECIAL PURPOSE MEMBERS ARTICLE I INCORPORATOR The undersigned, Neal D. Borden, Esquire, whose post office address is 1800 Mercantile Bank and Trust Building, 2 Hopkins Plaza, Baltimore, Maryland 21201, being over eighteen years of age and acting as incorporator, hereby forms a corporation under the Maryland General Corporation Law. ARTICLE II NAME The name of the corporation (which is hereinafter called the "Corporation") is: [BETHLEHEM STEEL CREDIT AFFILIATE ONE, INC.] [BETHLEHEM STEEL CREDIT AFFILIATE TWO, INC.] ARTICLE III PURPOSE FOR WHICH CORPORATION FORMED The purpose for which the Corporation is formed is as follows: To hold an interest in Bethlehem Steel Funding, LLC, a limited liability company organized under the laws of the State of Maryland, the purpose of which is to engage exclusively in the purchase of receivables originated in connection with the sale of goods or the provision of services by Bethlehem Steel Corporation, and the financing of such purchases pursuant to the Receivables Purchase Agreement among the Corporation, Bethlehem Steel Credit Affiliate [Number], Inc., Bethlehem Steel Funding, LLC, Bethlehem Steel Corporation, as Servicer, the financial institutions from time to time party thereto as Buyers, Morgan Guaranty Trust Company of New York, as Administrative Agent, and J.P. Morgan Delaware, as Structuring and Collateral Agent, as the same may from time to time be amended or extended (capitalized terms used in these Articles having the meanings given thereto in such Receivables Purchase Agreement) and the related documents contemplated thereby, and the taking of any and all actions and the doing of any and all things necessary or appropriate to accomplish the foregoing. The Corporation may not permit Bethlehem Steel Funding, LLC to incur any Debt other than pursuant to or as contemplated by the aforesaid Receivables Purchase Agreement unless (x) such Debt is rated the same by Standard &Poor*s Ratings Group or its successors (hereinafter referred to as "S&P") as the Buyers' Certificates, or (y) is fully subordinated to the Buyers' Certificates; is nonrecourse other than with respect to proceeds in excess of the proceeds necessary to pay the Buyers' Certificates ("excess proceeds"); and does not constitute a claim against Bethlehem Steel Funding, LLC to the extent that excess proceeds are insufficient to pay such Debt or (z) such incurrence will not result in a reduction of the then existing rating by S&P of the Buyers' Certificates. In connection with the foregoing purpose, the Corporation may carry on any and all business, transactions and activities permitted by the Maryland General Corporation Law which may be deemed desirable by the Board of Directors of the Corporation, as well as all activities and things necessary and incidental thereto, to the full extent empowered by such laws. ARTICLE IV RESIDENT AGENT AND PRINCIPAL OFFICE The post office address of the principal office of the Corporation in this State is 5111 North Point Boulevard, Sparrows Point, Maryland 21219-1014. The resident agent of the Corporation in this State is Corporation Trust, Inc., whose post office address is First Maryland Building, 32 South Street, Baltimore, Maryland 21202. Said resident agent is a citizen of the State of Maryland, and actually resides therein. ARTICLE V AUTHORIZED STOCK The total number of shares of stock of all classes which the Corporation has authority to issue is One Thousand (1000) shares, of the par value of One Dollar ($1.00) each, all of which shares are of one class and are designated Common Stock. The aggregate par value of all shares having par value is One Thousand Dollars ($1,000.00). 2 ARTICLE VI BOARD OF DIRECTORS Section 1. Number of Directors. The Corporation shall have seven (7) directors, which number may be increased or decreased pursuant to the Bylaws, but the number of directors shall not be less than the lesser of three (3) or the number of stockholders. Section 2. Initial Directors. James A. Flick, Jr., William R. Latham III, G. L. Millenbruch, L. A. Arnett, E. P. Reybitz, D. K. Schoenen and S. J. Selden shall act as the initial directors of the Corporation until the first annual meeting and until their successors are duly chosen and qualified. At all times, two (2) of the directors of the Corporation (the "Independent Directors") shall be persons who are not, and have not been, an officer, director, employee or one percent (1%) or more shareholder of any Affiliate (as defined hereinbelow). Section 3. Board Authorization of Stock Issuance. The Board of Directors of the Corporation is hereby empowered to authorize the issuance from time to time of shares of its stock of any class, whether now or hereafter authorized, and securities convertible into shares of its stock, of any class or classes, whether now or hereafter authorized, for such consideration as the Board of Directors may deem advisable. Section 4. Classification of Stock. The Board of Directors shall have the power to classify or reclassify any unissued stock, whether now or hereafter authorized, by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption of such stock. Section 5. Definition of Affiliate. In these Articles of Incorporation, "Affiliate" shall mean any entity other than the Corporation (i) which owns beneficially, directly or indirectly, more than fifty percent (50%) of the outstanding shares of the Common Stock or which is otherwise in control of the Corporation or of Bethlehem Steel Funding, LLC, (ii) of which more than fifty percent (50%) of the outstanding voting securities are owned beneficially, directly or indirectly, by any entity described in clause (i) above, or (iii) which is controlled by any entity described in clause (i) above; provided that for the purposes of this definition, the terms "control" and "controlled by" shall have the meanings assigned to them in Rule 405 under the Securities Act of 1933, as amended. Section 6. Conflict of Interest. No contract or other transaction between this Corporation and any other corporation, partnership, limited liability company, individual or other entity, and no act of this Corporation, 3 shall in any way be affected or invalidated by the fact that any of the directors of this Corporation are directors, principals, partners or officers of such other entity, or are pecuniarily or otherwise interested in such contract, transaction or act; provided that (i) the existence of such relationship or such interest shall be disclosed or known to the Board of Directors (or to a committee of the Board of Directors, if the matter involves a committee decision), and the contract, transaction or act shall be authorized, approved or ratified by a majority of disinterested directors on the Board or on such committee, as the case may be, even if the number of disinterested directors constitutes less than a quorum; or (ii) the contract, transaction or act shall be authorized, ratified or approved in any other manner permitted by the Maryland General Corporation Law. Section 7. Bankruptcy. The Corporation shall not, without the affirmative vote of one hundred percent (100%) of the Board of Directors (including the Independent Directors), institute proceedings to be adjudicated bankrupt or insolvent; or consent to the institution of bankruptcy or insolvency proceedings against it; or file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Corporation or a substantial part of its property; or make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; or take any corporate action in furtherance of any such action. Section 8. Bankruptcy of Bethlehem Steel Funding, LLC. The Corporation shall not, without the affirmative vote of one hundred percent (100%) of the Board of Directors (including the Independent Directors), participate in or institute proceedings by which Bethlehem Steel Funding, LLC would be adjudicated bankrupt or insolvent; or consent to the institution of bankruptcy or insolvency proceedings against Bethlehem Steel Funding, LLC; or file a petition seeking, or consent to, the reorganization of Bethlehem Steel Funding, LLC or its relief under any applicable federal or state law relating to bankruptcy; or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of Bethlehem Steel Funding, LLC or a substantial part of its property; or allow Bethlehem Steel Funding, LLC to make any assignment for the benefit of creditors or admit in writing its inability to pay its debts generally as they become due; or take any corporate action in furtherance of any such action. Section 9. Independent Directors. No Independent Director shall, with regard to any act, or failure to act, in connection with any matter referred to in Section 7 of this Article VI owe a fiduciary duty or other obligation to the stockholders (except as may specifically be required by the statutory or case law of any applicable jurisdiction); instead, each Independent Director's fiduciary duty or other obligations with regard to such act, or failure to act, in connection with any matter referred to in Section 7 of this Article VI shall be owed to the Corporation including, without limitation, the creditors of the Corporation. Every stockholder shall be deemed to have consented to the foregoing by virtue of such stockholder's purchase of shares of capital stock of the Corporation, no further act or deed of any stockholder being required to evidence such consent. 4 ARTICLE VII PROVISIONS CONCERNING CERTAIN RIGHTS OF THE CORPORATION AND THE SHAREHOLDERS Section 1. Right to Amend Charter. The Corporation reserves the right to amend these Articles of Incorporation in any manner permitted by the Maryland General Corporation Law and, subject to the provisions of Article VIII, all rights and powers conferred herein on stockholders, directors and officers, if any, are subject to this reserved power; provided that the Corporation shall not, without the prior reaffirmation by S&P of the rating then assigned to the Buyers* Certificates, amend, alter, change or repeal Articles III, VI, VIII, or this Article VII of these Articles of Incorporation. Section 2. Elimination of Preemptive Rights. Unless otherwise provided by the Board of Directors, no holder of stock of any class shall be entitled to preemptive rights to subscribe for or purchase or receive any part of any new or additional issue of stock of any class of the Corporation or securities convertible into stock of any class of the Corporation. Section 3. Required Stockholder Vote. Notwithstanding any provision of law requiring any action to be taken or authorized by the affirmative vote of the holders of a greater proportion of the votes of all classes or of any class of stock of the Corporation, such action shall be effective and valid if taken or authorized by the affirmative vote of a majority of the total number of votes entitled to be cast thereon, except as otherwise provided in this charter. Section 4. Applicability of the Maryland Control Share and Business Combination Statutes. The Corporation elects not to be governed by Subtitle 6 of Title 3 of the Maryland General Corporation Law with respect to any "business combination" as defined in such Subtitle. In addition, any acquisition of any shares of stock of the Corporation, including any acquisition of voting rights or other interests in any such stock, shall be exempt from the provisions of Title 3, Subtitle 7 of the Maryland General Corporation Law. Accordingly, the provisions of Title 3, Subtitle 6 (Business Combination) and Subtitle 7 (Control Share) of the Maryland General Corporation Law shall not apply to this Corporation. Section 5. Separateness Covenants. 5 5.1. Office. The Corporation shall maintain a principal ------ executive office and conspicuously identify such office as its office. 5.2. Financial Statements. The Corporation shall maintain -------------------- its financial statements, accounting records and other documents separate from those of any Affiliate or any other entity. The Corporation shall prepare unaudited quarterly and audited annual financial statements, and the Corporation's financial statements shall comply with GAAP. The Corporation shall maintain its own bank accounts, payroll and correct, complete and separate books of account. The Corporation shall retain as its accountants a nationally recognized firm of independent certified public accountants, provided that such accountants may also serve as accountants of any Affiliate. 5.3. Separate Identity. The Corporation shall at all times ----------------- hold itself out to the public (including any Affiliate's creditors) under the Corporation's own name and as a separate and distinct entity. Communications on behalf of the Corporation shall be made in its own name, and the Corporation shall maintain its own separate telephone number and stationery and other business forms. 5.4. Formalities. All customary formalities regarding the ----------- proper existence of the Corporation, including holding meetings of or obtaining the consent of its directors and shareholders, as appropriate, and maintaining current and accurate corporate minute books, shall be observed. 5.5. Separate Action. The Corporation shall act solely in --------------- its own name and through its own duly authorized officers and agents. No Affiliate shall act as an agent of the Corporation (provided that an employee, officer or director of an Affiliate may also serve as an employee, officer or director of the Corporation). Investments shall be made directly by the Corporation or on its behalf by brokers or agents engaged and paid by the Corporation or its agents. 5.6. Affiliate Transactions. All business transactions ---------------------- entered into by the Corporation with any Affiliate shall be on terms and conditions that are not more or less favorable to the Corporation than terms and conditions available at the time to the Corporation for comparable transactions with unaffiliated persons and must be approved by all of the Members. Except for its obligations under Sections 4(G), 15 and other applicable provisions of a certain Inventory Security and Pledge Agreement dated September 12, 1995, among the Corporation, Bethlehem Steel Corporation, Bethlehem Steel Credit Affiliate [Number], Inc., J.P. Morgan Delaware, as Structuring and Collateral Agent, and Morgan Guaranty Trust Company of New York, as Administrative Agent, the Corporation shall not guarantee or assume or hold itself out or permit itself to be held out as having guaranteed or assumed any liabilities or obligations of any Affiliate, other than the endorsement of checks for collection or deposit in the ordinary course of business. 5.7. Liabilities. The Corporation shall pay its own ----------- liabilities, indebtedness and obligations of any kind, including all administrative expenses, from its own separate assets. 5.8. Segregation of Assets. Assets of the Corporation shall --------------------- be separately identified, maintained and segregated. Except as otherwise provided in the Program Documents, the Corporation's funds shall not be commingled with those of any other corporate or natural person. The Corporation's assets shall at all times be held by or on behalf of the Corporation and, if held on behalf of the Corporation by another entity, shall at all times be kept identifiable (in 6 accordance with customary usages) as assets owned by the Corporation. In no event shall any of the Corporation's assets be held on its behalf by any Affiliate. 5.9. Investment Company Status. The Corporation shall not take any action if, as a result of such action, the Corporation would be required to register as an investment company under the Investment Company Act of 1940, as amended. ARTICLE VIII INDEMNIFICATION AND LIMITATION OF LIABILITY Section 1. Mandatory Indemnification. The Corporation shall indemnify its currently acting and its former directors against any and all liabilities and expenses incurred in connection with their services in such capacities to the maximum extent permitted by the Maryland General Corporation Law, as from time to time amended. Section 2. Discretionary Indemnification. If approved by the Board of Directors, the Corporation may indemnify its officers, employees, agents and persons who serve and have served at its request as a director, officer, partner, trustee, employee or agent of another corporation, partnership, limited liability company, joint venture or other enterprise or employee benefit plan to the extent determined to be appropriate by the Board of Directors. Section 3. Advancing Expenses Prior to a Decision. The Corporation shall advance expenses to its directors entitled to mandatory indemnification to the maximum extent permitted by the Maryland General Corporation Law and may in the discretion of the Board of Directors advance expenses to officers, employees, agents and others who may be granted indemnification. Section 4. Other Provisions for Indemnification. The Board of Directors may, by bylaw, resolution or agreement, make further provision for indemnification of directors, officers, employees and agents. The right to indemnification in this Article VIII is expressly subordinated as a claim against the Corporation, Bethlehem Steel Funding, LLC, or any of their assets to the prior claims and rights of the Buyers to receive payment under the Buyers' Certificates. The rights and authority conferred in this Article VIII shall not be exclusive of any other right which any person may otherwise have or hereafter acquire. Section 5. Insurance. 7 The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss incurred by such person in any such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the Maryland General Corporation Law. Section 6. Limitation of Liability of Directors. To the maximum extent that limitations on the liability of directors are permitted by the Maryland General Corporation Law, as from time to time amended, no director of the Corporation shall have any liability to the Corporation, its creditors, or its stockholders for money damages. This limitation on liability applies to events occurring at the time a person serves as a director of the Corporation, whether or not such person is a director at the time of any proceeding in which liability is asserted. Section 7. Effect of Amendment or Repeal. No amendment or repeal of any section of this Article, or the adoption of any provision of the Corporation's charter inconsistent with this Article, shall apply to or affect in any respect the rights to indemnification or limitation of liability of any director of the Corporation with respect to any alleged act or omission which occurred prior to such amendment, repeal or adoption. IN WITNESS WHEREOF, I have signed these Articles of Incorporation on the 12th day of September, 1995, and have acknowledged such Articles to be my act. ____________________________ Neal D. Borden, Incorporator 8 EXHIBIT L-2 BYLAWS OF SPECIAL PURPOSE MEMBERS ARTICLE I. ---------- Stockholders ------------ Section 1. Annual Meetings. ---------------------------- The annual meeting of the stockholders of the Corporation shall be held on such date within the month of April as may be fixed from time to time by the Board of Directors. Not less than ten nor more than 90 days' written or printed notice stating the place, day and hour of each annual meeting shall be given in the manner provided in Section 1 of Article IX hereof. The business to be transacted at the annual meetings shall include the election of directors, consideration and action upon the reports of officers and directors, and any other business within the power of the Corporation. All annual meetings shall be general meetings at which any business may be considered without being specified as a purpose in the notice unless otherwise required by law. Section 2. Special Meetings Called by Chairman of the Board, ------------------------------------------------------------- President or Board of Directors. - ------------------------------- At any time in the interval between annual meetings, special meetings of stockholders may be called by the Chairman of the Board, or by the President, or by the Board of Directors. Not less than ten days' nor more than 90 days' written notice stating the place, day and hour of such meeting and the matters proposed to be acted on thereat shall be given in the manner provided in Section 1 of Article IX. No business shall be transacted at any special meeting except that specified in the notice. Section 3. Special Meeting Called by Stockholders. -------------------------------------------------- Upon the request in writing delivered to the Secretary by the stockholders entitled to cast at least 25% of all the votes entitled to be cast at the meeting, it shall be the duty of the Secretary to call forthwith a special meeting of the stockholders. Such request shall state the purpose of such meeting and the matters proposed to be acted on thereat, and no other business shall be transacted at any such special meeting. The Secretary shall inform such stockholders of the reasonably estimated costs of preparing and mailing the notice of the meeting, and upon payment to the Corporation of such costs, the Secretary shall give not less than ten nor more than 90 days' notice of the time, place and purpose of the meeting in the manner provided in Section 1 of Article IX. If, upon payment of such costs the Secretary shall fail to issue a call for such meeting within ten days after the receipt of such payment (unless such failure is excused by law), then the stockholders entitled to cast 25% or more of the outstanding shares entitled to vote may do so upon giving not less than ten days' nor more than 90 days' notice of the time, place and purpose of the meeting in the manner provided in Section 1 of Article IX. Section 4. Place of Meetings. ----------------------------- All meetings of stockholders shall be held at the principal office of the Corporation in the State of Maryland or at such other place within the State of Maryland as may be fixed from time to time by the Board of Directors and designated in the notice. Section 5. Quorum. ------------------ At any meeting of stockholders the presence in person or by proxy of stockholders entitled to cast a majority of the votes thereat shall constitute a quorum. In the absence of a quorum, the stockholders present in person or by proxy, by majority vote and without notice other than by announcement, may adjourn the meeting from time to time, but not for a period exceeding 120 days after the original record date, until a quorum shall attend. Section 6. Adjourned Meetings. ------------------------------ A meeting of stockholders convened on the date for which it was called (including one adjourned to achieve a quorum as above provided in Section 5 of this Article) may be adjourned from time to time without further notice to a date not more than 120 days after the original record date, and any business may be transacted at any adjourned meeting which could have been transacted at the meeting as originally called. Section 7. Voting. ------------------ A plurality of all the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to elect a director. Each share of stock may be voted for as 2 many individuals as there are directors to be elected and for whose election the share is entitled to be voted. A majority of the votes cast at a meeting of stockholders, duly called and at which a quorum is present, shall be sufficient to take or authorize action upon any other matter which may properly come before the meeting, unless more than a majority of votes cast is required by statute or by the Articles of Incorporation. The Board of Directors may fix the record date for the determination of stockholders entitled to vote in the manner provided in Article VIII, Section 3 of these Bylaws. Unless otherwise provided in the Articles of Incorporation, each outstanding share of stock, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders. Section 8. Proxies. ------------------- A stockholder may vote the shares owned of record either in person or by proxy. The proxy shall be in writing and shall be signed by the stockholder or by the stockholder*s duly authorized attorney-in-fact or be in such other form as may be permitted by the Maryland General Corporation Law, including documents conveyed by electronic transmission. A copy, facsimile transmission or other reproduction of the writing or transmission may be substituted for the original writing or transmission for any purpose for which the original transmission could be used. Every proxy shall be dated, but need not be sealed, witnessed or acknowledged. No proxy shall be valid after 11 months from its date, unless otherwise provided in the proxy. In the case of stock held of record by more than one person, any co-owner or co-fiduciary may execute the proxy without the joinder of the co-owner(s) or co-fiduciary(ies), unless the Secretary of the Corporation is notified in writing by any co-owner or co-fiduciary that the joinder of more than one is to be required. At all meetings of stockholders, the proxies shall be filed with and verified by the Secretary of the Corporation, or, if the meeting shall so decide, by the Secretary of the meeting. Section 9. Order of Business. ----------------------------- At all meetings of stockholders, any stockholder present and entitled to vote in person or by proxy shall be entitled to require, by written request to the Chairman of the meeting, that the order of business shall be as follows: (1) Organization. (2) Proof of notice of meeting or of waivers thereof. (The certificate of the Secretary of the Corporation, or the affidavit of any other person who mailed or published the notice or caused the same to be mailed or published, shall be proof of service of notice.) (3) Submission by Secretary of the Corporation of a list of the stockholders entitled to vote, present in person or by proxy. (4) A reading of unapproved minutes of preceding meetings and action thereon. (5) Reports. 3 (6) If an annual meeting, or a special meeting called for that purpose, the election of directors. (7) Unfinished business. (8) New business. (9) Adjournment. Section 10. Removal of Directors. --------------------------------- At any properly called annual or special stockholders* meeting, the stockholders, by the affirmative vote of a majority of all the votes entitled to be cast for the election of directors, may remove any director or directors from office, with or without cause, and may elect a successor or successors to fill any resulting vacancies for the remainder of the term. Section 11. Informal Action by Stockholders. -------------------------------------------- Any action required or permitted to be taken at any meeting of stockholders may be taken without a meeting if a consent in writing setting forth such action is signed by all the stockholders entitled to vote thereon and such consent is filed with the records of stockholders' meetings. ARTICLE II. ----------- Directors --------- Section 1. Powers. ------------------ The business and affairs of the Corporation shall be managed under the direction of its Board of Directors. All powers of the Corporation may be exercised by or under the authority of the Board of Directors except as conferred on or reserved to the stockholders by law, by the Articles of Incorporation or by these Bylaws. A director need not be a stockholder. The Board of Directors shall keep minutes of its meetings and full and fair accounts of its transactions. Section 2. Number; Term of Office; Removal. ------------------------------------------- The number of directors of the Corporation shall be not less than three or the same number as the number of stockholders (or one if there is no stockholder), whichever is less; 4 provided, however, that such number may be increased and thereafter decreased from time to time by vote of a majority of the entire Board of Directors. The number of directors shall not exceed seven. The first directors of the Corporation shall hold their office until the first annual meeting of the Corporation, or until their successors are elected and qualify, and thereafter the directors shall hold office for the term of one year, or until their successors are elected and qualify. A director may be removed from office as provided in Article I, Section 10 of these Bylaws. Section 3. Independent Directors. --------------------------------- At all times two of the directors shall be persons who are not, and have not been, an officer, director, employee or one percent (1%) or more stockholder of any Affiliate (the "Independent Directors"). For the purposes of this Section 3, "Affiliate" shall have the same meaning as in Article VI of the Articles of Incorporation of the Corporation. Section 4. Annual Meeting; Regular Meetings. -------------------------------------------- As soon as practicable after each annual meeting of stockholders, the Board of Directors shall meet for the purpose of organization and the transaction of other business. No notice of the annual meeting of the Board of Directors need be given if it is held immediately following the annual meeting of stockholders and at the same place. Other regular meetings of the Board of Directors may be held at such times and at such places within the State of Maryland as shall be designated in the notice for such meeting by the party making the call. All annual and regular meetings shall be general meetings, and any business may be transacted thereat. Section 5. Special Meetings. ---------------------------- Special meetings of the Board of Directors may be called by the Chairman of the Board or the President, or by a majority of the directors. Section 6. Quorum; Voting. -------------------------- A majority of the Board of Directors shall constitute a quorum for the transaction of business at every meeting of the Board of Directors; but, if at any meeting there be less than a quorum present, a majority of those present may adjourn the meeting from time to time, but not for a period exceeding ten days at any one time or 60 days in all, without notice other than by announcement at the meeting, until a quorum shall attend. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally called. Except 5 as hereinafter provided or as otherwise provided by the Articles of Incorporation or by law, directors shall act by a vote of a majority of those members in attendance at a meeting at which a quorum is present. Section 7. Notice of Meetings. ------------------------------ Notice of the time and place of every regular and special meeting of the Board of Directors shall be given to each director in the manner provided in Section 2 of Article IX hereof. Subsequent to each Board meeting, and as soon as practicable thereafter, each director shall be furnished with a copy of the minutes of said meeting. At least 24 hours' notice shall be given of all meetings. The purpose of any meeting of the Board of Directors need not be stated in the notice. Section 8. Vacancies. --------------------- (a) If the office of a director becomes vacant for any reason other than removal or increase in the size of the Board, such vacancy may be filled by the Board by a vote of a majority of directors then in office, although such majority is less than a quorum. (b) If the vacancy occurs as a result of the removal of a director, the stockholders may elect a successor or may delegate that authority to the Board of Directors. (c) If the vacancy occurs as a result of an increase in the number of directors, it may be filled by vote of a majority of the entire Board of Directors holding office prior to the increase. (d) If the entire Board of Directors shall become vacant, any stockholder may call a special meeting in the same manner that the Chairman of the Board or the President may call such meeting, and directors for the unexpired term may be elected at such special meeting in the manner provided for their election at annual meetings. (e) A director elected by the Board of Directors to fill a vacancy shall serve until the next annual meeting of stockholders and until a successor is elected and qualifies. A director elected by the stockholders to fill a vacancy shall serve for the unexpired term and until a successor is elected and qualifies. Section 9. Rules and Regulations. --------------------------------- The Board of Directors may adopt such rules and regulations for the conduct of its meetings and the management of the affairs of the Corporation as it may deem proper and not inconsistent with the laws of the State of Maryland, these Bylaws and the Articles of Incorporation. 6 Section 10. Executive Committee. -------------------------------- The Board of Directors may constitute an Executive Committee, composed of at least two directors, from among its members. The Executive Committee shall hold office at the pleasure of the Board of Directors. Between sessions of the Board of Directors, such Committee shall have all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, except those powers specifically denied by law. If any position on the Executive Committee becomes vacant, or if the number of members is increased, such vacancy may be filled by the Board of Directors. The taking of any action by the Executive Committee shall be conclusive evidence that the Board of Directors was not in session at the time of such action. The Executive Committee shall hold formal meetings and keep minutes of all of its proceedings. A copy of such minutes shall, after approval by the members of the Committee, be sent to all directors as a matter of information. Any action taken by the Executive Committee within the limits permitted by law shall have the force and effect of Board action unless and until revised or altered by the Board. The presence of not less than a majority of the Committee shall be necessary to constitute a quorum. Action may be taken without a meeting if a unanimous written consent is signed by all of the members of the Committee, and if such consent is filed with the records of the Committee. The Executive Committee shall have the power to elect one of its members to serve as its Chairman unless the Board of Directors shall have designated such Chairman. Section 11. Compensation. ------------------------- The directors may receive a stated salary or an attendance fee for each meeting of the Board of Directors or any committee thereof attended, plus reimbursement of reasonable expenses of attendance. The amount of the salary or attendance fee and any entitlement to reimbursement of expenses shall be determined by resolution of the Board; provided, however, that nothing herein contained shall be construed as precluding a director from serving the Corporation in any other capacity and receiving compensation therefor. Section 12. Place of Meetings. ------------------------------ Regular or special meetings of the Board may be held at such location within the State of Maryland, as the Board may from time to time determine. The time and place of meeting may be fixed by the party calling the meeting. Section 13. Informal Action by the Directors. --------------------------------------------- Any action required or permitted to be taken at any meeting of the Board may be taken without a meeting, if a written consent to such action is signed by all members of the Board and such consent is filed with the minutes of the Board. 7 Section 14. Telephone Conference. --------------------------------- Members of the Board of Directors or any committee thereof may participate in a meeting of the Board or such committee initiated in Maryland by means of a conference telephone or similar communications equipment, by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at the meeting. Section 15. Interested Directors and Officers. ---------------------------------------------- (a) No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of the Corporation's directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose if such contract or transaction complies with Article VI of the Articles of Incorporation and: (1) The material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) The material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. (b) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. Section 16. Bankruptcy Petition; Bankruptcy of Bethlehem ---------------------------------------------------------- Steel Funding, LLC. - ------------------ The Corporation shall not, without an affirmative unanimous vote of the Board of Directors (including the Independent Directors), institute proceedings to be adjudicated bankrupt or insolvent; or consent to the institution of bankruptcy or insolvency proceedings against it; or file a petition seeking, or consent to, reorganization or relief 8 under any applicable federal or state law relating to bankruptcy; or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Corporation or a substantial part of its property; or make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; or take any corporate action in furtherance of any such action. The Corporation shall not, without an affirmative unanimous vote of the Board of Directors (including the Independent Directors), participate in or institute proceedings by which Bethlehem Steel Funding, LLC would be adjudicated bankrupt or insolvent; or consent to the institution of bankruptcy or insolvency proceedings against Bethlehem Steel Funding, LLC; or file a petition seeking, or consent to, the reorganization of Bethlehem Steel Funding, LLC or its relief under any applicable federal or state law relating to bankruptcy; or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of Bethlehem Steel Funding, LLC or a substantial part of its property; or allow Bethlehem Steel Funding, LLC to make any assignment for the benefit of creditors or admit in writing its inability to pay its debts generally as they become due; or take any corporate action in furtherance of any such action. ARTICLE III. ------------ Officers -------- Section 1. In General. ---------------------- The Board of Directors may choose a Chairman of the Board from among the directors. The Board of Directors shall elect a President, a Treasurer, and a Secretary, and may elect one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers as the Board may from time to time deem appropriate. All officers shall hold office only during the pleasure of the Board or until their successors are chosen and qualify. Any two of the above offices, except those of President and Vice President, may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity when such instrument is required to be executed, acknowledged or verified by any two or more officers. The Board of Directors may from time to time appoint such other agents and employees with such powers and duties as the Board may deem proper. In its discretion, the Board of Directors may leave unfilled any offices except those of President, Treasurer and Secretary. Section 2. Chairman of the Board. --------------------------------- The Chairman of the Board, if one is elected, shall have the responsibility for the implementation of the policies determined by the Board of Directors and for the administration of the business affairs of the Corporation. The Chairman shall preside 9 over the meetings of the Board and of the stockholders if present at the meeting. The Chairman shall be the Chief Executive Officer of the Corporation if so designated by resolution of the Board. Section 3. President. --------------------- The President shall have the responsibility for the active management of the business and general supervision and direction of all of the affairs of the Corporation. In the absence of a Chairman of the Board, the President shall preside over the meetings of the Board and of the stockholders if present at the meeting, and shall perform such other duties as may be assigned by the Board of Directors or the Executive Committee. The President shall have the authority on the Corporation's behalf to endorse securities owned by the Corporation and to execute any documents requiring the signature of an executive officer. The President shall perform such other duties as the Board of Directors may direct and shall be the Chief Executive Officer of the Corporation unless the Chairman of the Board is so designated by resolution of the Board. Section 4. Vice Presidents. The Vice Presidents, if any, in the order of priority designated by the Board of Directors, shall be vested with all the power and may perform all the duties of the President in the latter's absence. They may perform such other duties as may be prescribed by the Board of Directors, the Executive Committee or the President. Section 5. Treasurer. --------------------- The Treasurer shall have general supervision over the Corporation*s finances, and shall perform such other duties as may be assigned by the Board of Directors or the President. Unless the Board designates another officer, the Treasurer shall be the Chief Financial Officer of the Corporation. If required by resolution of the Board, the Treasurer shall furnish a bond (which may be a blanket bond) with such surety and in such penalty for the faithful performance of duty as the Board of Directors may from time to time require, the cost of such bond to be paid by the Corporation. Section 6. Secretary. --------------------- The Secretary shall keep the minutes of the meetings of the stockholders and of the Board of Directors and shall attend to the giving and serving of all notices of the Corporation required by law or these Bylaws. The Secretary shall maintain at all times in the principal office of the Corporation at least one copy of the Bylaws with all amendments to date, and shall make the same, together with the minutes of the meeting of the stockholders, the annual statement of affairs of the Corporation and any voting trust or other stockholders agreement on file at the office of the Corporation, available for 10 inspection by any officer, director or stockholder during reasonable business hours. The Secretary shall perform such other duties as may be assigned by the Board of Directors. Section 7. Assistant Treasurer and Secretary. --------------------------------------------- The Board of Directors may designate from time to time Assistant Treasurers and Secretaries, who shall perform such duties as may from time to time be assigned to them by the Board of Directors or the President. Section 8. Compensation; Removal; Vacancies. -------------------------------------------- The Board of Directors shall have power to fix the compensation of all officers of the Corporation. It may authorize any committee or officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the compensation of such subordinate officers. The Board of Directors shall have the power at any regular or special meeting to remove any officer if, in the judgment of the Board, the best interests of the Corporation will be served by such removal. The Board of Directors may authorize any officer to remove subordinate officers. The Board of Directors may authorize the Corporation's employment of an officer for a period in excess of the term of the Board. The Board of Directors at any regular or special meeting shall have power to fill a vacancy occurring in any office for the unexpired portion of the term. Section 9. Substitutes. ----------------------- The Board of Directors may, from time to time in the absence of any one of its officers or at any other time, designate any other person or persons on behalf of the Corporation to sign any contracts, deeds, notes or other instruments in the place or stead of any of such officers, and may designate any person to fill any one of said offices, temporarily or for any particular purpose; and any instruments so signed in accordance with a resolution of the Board shall be the valid act of the Corporation as fully as if executed by any regular officer. ARTICLE IV ---------- Resignation ----------- Any director or officer may resign from office at any time. Such resignation shall be made in writing and shall take effect from the time of its receipt by the Corporation, unless some time be fixed in the resignation, and then from that date. The acceptance of a resignation shall not be required to make it effective. 11 ARTICLE V. ---------- Commercial Paper, Etc. ---------------------- All bills, notes, checks, drafts and commercial paper of all kinds to be executed by the Corporation as maker, acceptor, endorser or otherwise, and all assignments and transfers of stock, contracts, or written obligations of the Corporation, and all negotiable instruments, shall be made in the name of the Corporation and shall be signed by any one or more of the following officers as the Board of Directors may from time to time designate: the Chairman of the Board, the President, any Vice President, or the Treasurer, or such other person or persons as the Board of Directors or Executive Committee may from time to time designate. ARTICLE VI. ----------- Fiscal Year ----------- The fiscal year of the Corporation shall cover such period of 12 months as the Board of Directors may determine. In the absence of any such determination, the accounts of the Corporation shall be kept on a calendar year basis. ARTICLE VII. ------------ Seal ---- The seal of the Corporation shall be in the form of two concentric circles inscribed with the name of the Corporation and the year and State in which it is incorporated. The Secretary or Treasurer, or any Assistant Secretary or Assistant Treasurer, shall have the right and power to attest to the corporate seal. In lieu of affixing the corporate seal to any document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a corporate seal to affix the word "(SEAL)" adjacent to the signature of the person authorized to sign the document on behalf of the Corporation. ARTICLE VIII. ------------- 12 Stock ----- Section 1. Issue. ----------------- Each stockholder shall be entitled to a certificate or certificates which shall represent and certify the number and class of shares of stock owned in the Corporation. Each certificate shall be signed by the Chairman of the Board, the President or any Vice President and be countersigned by the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer. The signatures of the Corporation's officers and its corporate seal appearing on stock certificates may be facsimiles if each such certificate is authenticated by the manual signature of an officer of a duly authorized transfer agent. Stock certificates shall be in such form, not inconsistent with law and the Articles of Incorporation, as shall be approved by the Board of Directors. In case any officer of the Corporation who has signed any certificate ceases to be an officer of the Corporation, whether by reason of death, resignation or otherwise, before such certificate is issued, then the certificate may nevertheless be issued by the Corporation with the same effect as if the officer had not ceased to be such officer as of the date of such issuance. Section 2. Transfers. --------------------- The Board of Directors shall have power and authority to make all such rules and regulations as the Board may deem expedient concerning the issue, transfer and registration of stock certificates. The Board of Directors may appoint one or more transfer agents and/or registrars for its outstanding stock, and their duties may be combined. No transfer of stock shall be recognized or binding upon the Corporation until recorded on the books of the Corporation, or, as the case may be, of its transfer agent and/or of its registrar, upon surrender and cancellation of a certificate or certificates for a like number of shares. Section 3. Record Dates for Dividends and Stockholders* -------------------------------------------------------- Meeting. - ------- The Board of Directors may fix a date not exceeding 90 days preceding the date of any meeting of stockholders, any dividend payment date or any date for the allotment of rights, as a record date for the determination of the stockholders entitled to notice of and to vote at such meeting, or entitled to receive such dividends or rights, as the case may be, and only stockholders of record on such date shall be entitled to notice of and to vote at such meeting or to receive such dividends or rights, as the case may be. In the case of a meeting of stockholders, the record date shall be fixed not less than ten days prior to the date of the meeting. Section 4. New Certificates. ---------------------------- 13 In case any certificate of stock is lost, stolen, mutilated or destroyed, the Board of Directors may authorize the issuance of a new certificate in place thereof upon such indemnity to the Corporation against loss and such other terms and conditions as it may deem advisable. The Board of Directors may delegate such power to any officer or officers of the Corporation or to any transfer agent or registrar of the Corporation; but the Board of Directors, such officer or officers or such transfer agent or registrar may, in their discretion, refuse to issue such new certificate save upon the order of some court having jurisdiction. ARTICLE IX. ----------- Notice ------ Section 1. Notice to Stockholders. ---------------------------------- Whenever by law or these Bylaws notice is required to be given to any stockholder, such notice shall be in writing and may be given to each stockholder by personal delivery or at the stockholder's residence or usual place of business, or by mailing it, postage prepaid, and addressed to the stockholder at the address appearing on the books of the Corporation or its transfer agent. Such leaving or mailing of notice shall be deemed the time of giving such notice. Section 2. Notice to Directors and Officers. -------------------------------------------- Whenever by law or these Bylaws notice is required to be given to any director or officer, such notice may be given in any one of the following ways: by personal delivery to such director or officer, by telephone communication with such director or officer personally or by telephone facsimile transmission, by telegram, cablegram, radiogram, first class mail or by delivery service providing confirmation of delivery, addressed to such director or officer at the address appearing on the books of the Corporation. The time when such notice shall be consigned to a communication company for delivery shall be deemed to be the time of the giving of such notice; if mailed, such notice shall be deemed given 48 hours after the time it is deposited in the mail, postage prepaid. Section 3. Waiver of Notice. ---------------------------- Notice to any stockholder or director of the time, place and/or purpose of any meeting of stockholders or directors required by these Bylaws may be dispensed with if such stockholder shall either attend in person or by proxy, or if such director shall attend 14 in person, or if such absent stockholder or director shall, in writing filed with the records of the meeting either before or after the holding thereof, waive such notice. ARTICLE X. ---------- Voting of Stock in Other Corporations ------------------------------------- Any stock in other corporations, which may from time to time be held by the Corporation, may be represented and voted at any meeting of stockholders of such other corporations by the President or a Vice-President or by proxy or proxies appointed by the President or a Vice-President, or otherwise pursuant to authorization thereunto given by a resolution of the Board of Directors adopted by a vote of a majority of the directors. ARTICLE XI. ----------- Indemnification of Directors and Officers ----------------------------------------- Section 1. In General. ---------------------- The Corporation shall indemnify any person who was or is a party or a witness or is threatened to be made a party or a witness to any threatened, pending or completed action, suit, investigation (including internal investigations) or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was or has agreed to become a director, officer, employee, fiduciary, trustee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee, fiduciary, trustee or agent of another corporation, partnership, joint venture, trust, pension plan, employee benefit or other similar plan or any other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges, expenses (including attorneys' fees), judgments, fines, penalties, excise taxes and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit, investigation or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, investigation or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. 15 Section 2. The Corporation shall indemnify any person who --------- was or is a party or a witness or is threatened to be made a party or a witness to any threatened, pending or completed action, suit, investigation (including internal investigations) or proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was or has agreed to become a director, officer, employee, fiduciary, trustee of agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee, fiduciary, trustee or agent of another corporation, partnership, joint venture, trust, pension plan, employee benefit or other similar plan or any other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection with the defense or settlement of such action, suit, investigation or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such costs, charges and expenses which the court shall deem proper. Section 3. Notwithstanding the other provisions of these --------- By-laws, to the extent that a director, officer, employee, fiduciary, trustee or agent of the Corporation has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit, investigation or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against all costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection therewith. Section 4. Any indemnification under Sections 1 and 2 of --------- this Article (unless ordered by a court) shall be paid by the Corporation unless a determination is made (a) by the Board of Directors in accordance with these By-laws, provided that the quorum consists of directors who were not parties to such action, suit, investigation or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders, that indemnification of the director, officer, employee, fiduciary, trustee or agent is not proper in the circumstances because he has not met the applicable standard of conduct set forth in Sections 1 and 2 of this Article. Section 5. Costs, charges and expenses (including attorney's --------- fees) incurred by a person referred to in Sections 1 and 2 of the Article in defending a civil or criminal action, suit, investigation or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit, investigation or proceeding; provided, however, that the payment of such costs, charges and expenses incurred by a director or officer of the Corporation in his capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer) in advance of the final disposition of such action, suit, investigation or proceeding shall be made only upon receipt of a written undertaking (in the form of an unsecured promissory note) by or on behalf of the director or officer to repay all amounts so advanced in the event that it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Corporation as authorized in these By-laws. Such costs, charges and expenses incurred by other employees, fiduciaries, trustees and agents may be so paid in advance upon such terms and conditions, if 16 any, as the Board of Directors deems appropriate. The Board of Directors may, in the manner set forth above, and upon approval of such director, officer, employee, fiduciary, trustee or agent of the Corporation, authorize the Corporation's counsel to represent such person, in any action, suit, investigation or proceeding, whether or not the Corporation is a party to such action, suit, investigation or proceeding. Section 6. Any indemnification under Sections 1, 2 and 3, or --------- advance of costs, charges and expenses under Section 5 of this Article, shall be made promptly, and in any event within sixty (60) days, upon the written request of the director, officer, employee, fiduciary, trustee or agent. The right to indemnification or advances as granted by these By-laws shall be specifically enforceable by the director, officer, employee, fiduciary, trustee or agent in any court of competent jurisdiction, if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within sixty (60) days. Such person's costs and expenses incurred in connection with successfully establishing his right to indemnification or advances, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 5 of this Article where the required undertaking, if any, has been received by the Corporation) that the claimant has not met the standard of conduct set forth in Sections 1 and 2 of this Article, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 1 or 2 of this Article, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 7. The rights to indemnification and advances --------- provided by these By-laws shall be construed so as to mandate indemnification and advancement of expenses to the fullest extent permitted by applicable law and such indemnification and advancement of expenses shall be made unless expressly prohibited by applicable law. Indemnification and advancement of expenses hereunder shall not be deemed exclusive of any rights to which a person seeking indemnification and/or advances may be entitled under the Corporation's Articles of Incorporation (as amended or restated), any law (common or statutory), agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office or while employed by or acting as an agent for the Corporation, and shall continue as to a person who has ceased to be a director, officer, employee, fiduciary, trustee or agent, and shall inure to the benefit of the estate, heirs, executors and administrators of such person. All rights to indemnification and advances under these By-laws shall be deemed to be a contract between the Corporation and each director, officer, employee, fiduciary, trustee or agent of the Corporation who serves or served in such capacity at any time while these indemnification provisions of the By-laws are in effect. Any repeal or modification of these indemnification provisions of the By-laws or any repeal or modification of relevant provisions of the applicable corporation or other laws shall not in any way diminish any rights to indemnification and/or advances of such director, officer, employee, fiduciary, trustee or agent or the obligations of the Corporation arising hereunder. 17 Section 8. The Corporation shall have the authority to --------- purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director, officer, employee, fiduciary, trustee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, fiduciary, trustee or agent of another corporation, partnership, joint venture, trust, pension plan, employee benefit or other similar plan or other enterprise against any liability asserted against him and incurred by him or on his behalf in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of these By-laws. Section 9. If these indemnification provisions of the --------- By-laws or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify and provide advances to each director, officer, employee, fiduciary, trustee and agent of the Corporation as to costs, charges and expenses (including attorneys' fees), judgments, fines, penalties, excise taxes and amounts paid in settlement with respect to any action, suit, investigation or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the full extent permitted by any applicable portion of these By-laws that shall not have been invalidated and to the full extent permitted by applicable law. The phrase "to the full extent permitted" contained in this paragraph shall be construed so as to mandate indemnification and advancement of expenses unless expressly prohibited by applicable law. Section 10. For the purposes of these By-laws, any person ---------- who is or was a director, officer, employee, fiduciary, trustee or agent of another corporation, partnership, joint venture, trust, pension plan, employee benefit or other similar plan or any other enterprise in which the Corporation owns or controls or at the time owned or controlled, directly or indirectly, fifty percent (50%) or more of the ownership interests shall be conclusively presumed to be serving or to have served in such capacity at the request of the Corporation. Section 11. Notwithstanding anything to the contrary ---------- contained in this Article XI, the right to indemnification (including any costs, charges and expenses with respect thereto) in this Article XI is expressly subordinated as a claim against the Corporation or any of its assets to the prior claims and rights of the Buyers to receive payment under the Buyers' Certificates (as those terms are defined in the Articles of Incorporation of the Corporation). ARTICLE XII. ------------ Amendments ---------- These Bylaws may be added to, altered, amended, repealed or suspended only by a vote of a majority of the Board of Directors, including the unanimous vote of the Independent Directors, at any regular or special meeting of the Board. 18 EXHIBIT M PERFECTION CERTIFICATE The undersigned, the chief financial officer and chief accounting officer of Bethlehem Steel Corporation, a Delaware corporation (the "Seller"), hereby certify with reference to the Purchase and Sale Agreement dated as of September 12, 1995 between the Seller and Bethlehem Steel Funding, LLC, a Maryland limited liability company ("BSF"): 1. Names. (a)(i) The exact corporate name of the Seller as ----- it appears in its certificate of incorporation and (ii) the exact name of BSF as it appears in its articles of organization, is as follows: Seller: Bethlehem Steel Corporation BSF: Bethlehem Steel Funding, LLC (b) The following is a list of all other names (including trade names or similar appellations) used by the Seller or any of its divisions or other unincorporated business units which produce or have produced goods which have given rise to accounts receivable at any time during the past five years: 2. Current Locations. (a) The chief executive offices of ----------------- each of the Seller and BSF are located at the following address: Seller Mailing Address County State - --------------- ------ ----- BSF Mailing Address County State - --------------- ------ ----- (b) The following are all the locations in the United States of America where the Seller or BSF maintain any books or records relating to any accounts receivable: Seller Seller Mailing Address County State - --------------- ------ ----- BSF Mailing Address County State - --------------- ------ ----- (c) The following are all the places of business of the Seller not identified above which are located in states in which the chief executive office of the Seller or any books or records relating to accounts receivable are located: Mailing Name Address County State - ------- ------- ------ ----- 3. Prior Locations. Set forth below is the information --------------- required by subparagraphs (a), (b) and (c) of paragraph 2 with respect to each location or place of business not identified 2 in Paragraph 2 and maintained by the Seller at any time during the past five years in a state in which it maintained a location or place of business during the past four months: Mailing Address County State - --------------- ------ ----- 4. Origination of Receivables. All accounts receivable of -------------------------- the Seller have been originated by the Seller (and not by any of its subsidiaries or affiliates) in the ordinary course of the Seller's business. 5. File Search Reports. Attached hereto as Schedule 5(A) is ------------------- a true copy of a file search report from the Uniform Commercial Code filing officer in each jurisdiction identified in paragraph 2 or 3 above with respect to each name set forth in paragraph 1 above. Attached hereto as Schedule 5(B) is a true copy of each financing statement or other filing identified in such file search reports. 6. UCC Filings. A duly signed financing statement on Form ----------- UCC-1 in substantially the form of Schedule 6(A), with respect to the Seller, or 6(B), with respect to BSF, has been duly filed in the Uniform Commercial Code filing office in each jurisdiction identified in paragraph 2(a) and 2(b) hereof with respect to the Seller or BSF, as relevant. Attached hereto as Schedule 6(C) is a true copy of each such filing acknowledged by the filing officer. 7. Schedule of Filings. Attached hereto as Schedule 7 is a ------------------- schedule setting forth filing information with respect to the filings described in paragraph 6 above. 8. Filing Fees. All filing fees and taxes payable in ----------- connection with the filings described in paragraph 6 above have been paid. IN WITNESS WHEREOF, we have hereunto set our hands this ___ day of September, 1995. ____________________________ Title: 3 ____________________________ Title: 4 SCHEDULE 6(A) Description of Collateral: ------------------------- Bethlehem Steel Corporation as Debtor; Bethlehem Steel Funding, LLC, as Secured Party; J.P. Morgan Delaware as Structuring and Collateral Agent, Assignee of the Secured Party. All accounts, contract rights, instruments, chattel paper and general intangibles related thereto and all such other collateral as is described below, in each case whether now owned or hereafter acquired or arising and wherever located: (i) All receivables originated in connection with the sale of goods or the provision of services by Bethlehem Steel Corporation, whether such receivables constitute accounts, contract rights, instruments, chattel paper or general intangibles related thereto; (ii) with respect to each such receivable, (x) all of the interest, if any, of Bethlehem Steel Corporation in the goods (including returned goods) the sale of which by Bethlehem Steel Corporation gave rise to such receivable, (y) all other security interests or liens and property subject thereto from time to time, if any, securing payment of such receivable, and (z) all guarantees, letters of credit, insurance or other agreements or arrangements of any kind from time to time supporting or securing payment of such receivable; (iii) with respect to each such receivable, (y) all amounts, whether in the form of cash, checks, drafts, other instruments or electronic funds transfer, received in any lockbox, lockbox account or collection account in payment of such receivable, including without limitation, all amounts received on account of finance charges and fees with respect to such receivable, and (z) all cash proceeds of the collateral referred to in clause (ii) above with respect to such receivable; (iv) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any and all of the foregoing; and (v) all substitutions for and proceeds of any of the foregoing (whether such proceeds constitute accounts, contract rights, instruments, chattel paper, inventory, equipment, documents or general intangibles) and, to the extent not otherwise included, all payments under insurance or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing. SCHEDULE 6(B) Description of Collateral: ------------------------- Bethlehem Steel Funding, LLC as Debtor; J.P. Morgan Delaware as Structuring and Collateral Agent, as Secured Party. All accounts, contract rights, instruments, chattel paper and general intangibles related thereto and all such other collateral as is described below, in each case whether now owned or hereafter acquired or arising and wherever located: (i) all receivables originated in connection with the sale of goods or the provision of services by Bethlehem Steel Corporation, whether such receivables constitute accounts, contract rights, instruments, chattel paper or general intangibles related thereto; (ii) with respect to each such receivable, (x) all of the interest, if any, of Bethlehem Steel Corporation in the goods (including returned goods) the sale of which by Bethlehem Steel Corporation gave rise to such receivable, (y) all other security interests or liens and property subject thereto from time to time, if any, securing payment of such receivable, and (z) all guarantees, letters of credit, insurance or other agreements or arrangements of any kind from time to time supporting or securing payment of such receivable; (iii) with respect to each such receivable, (w) all amounts, whether in the form of cash, checks, drafts, other instruments or electronic funds transfer, received in any lockbox, lockbox account or collection account in payment of such receivable, including without limitation, all amounts received on account of finance charges and fees with respect to such receivable, (x) all cash proceeds of the collateral referred to in clause (ii) above with respect to such receivable, (y) all amounts paid with respect to such receivable pursuant to the Receivables Purchase Agreement referred to below and (z) any amounts paid or credited by Bethlehem Steel Corporation to Bethlehem Steel Funding, LLC in respect of such receivable pursuant to the Purchase and Sale Agreement between Bethlehem Steel Corporation, as Seller, and Bethlehem Steel Funding, LLC, as Purchaser, as the same may be amended from time to time; (iv) all bank accounts of Bethlehem Steel Funding, LLC, including (a) the Cash Collateral Account maintained pursuant to the Receivables Purchase Agreement among Bethlehem Steel Funding, LLC, Bethlehem Steel Credit Affiliate One, Inc., Bethlehem Steel Credit Affiliate Two, Inc., Bethlehem Steel Corporation, as Servicer, the financial institutions listed therein, as Buyers, Morgan Guaranty Trust Company of New York, as Administrative Agent and J.P. Morgan Delaware, as Structuring and Collateral Agent, as the same may be amended from time to time (the "Receivables Purchase Agreement") and all funds held therein, all income from the investment of funds in such Cash Collateral Account and all certificates and instruments, if any, from time to time representing or evidencing such Cash Collateral Account or such investments; (b) the Collection Account maintained pursuant to the Receivables Purchase Agreement and all funds held therein, all income from the investment of funds in such Collection Account and all certificates and instruments, if any, from time to time representing or evidencing such Collection Account or such investments; and (c) all lockboxes, all lockbox accounts and all funds held therein, all income from the investment of funds in the lockbox accounts and all certificates and instruments, if any, from time to time in such lockboxes or representing or evidencing lockbox accounts; (v) all right, title and interest of Bethlehem Steel Funding, LLC in, to and under the aforesaid Purchase and Sale Agreement, including all monies due and to become due to Bethlehem Steel Funding, LLC under or in connection therewith, whether as receivables or fees, expenses, costs, indemnities, insurance recoveries, damages for breach or otherwise, and all rights, remedies, powers, privileges and claims of Bethlehem Steel Funding, LLC under or with respect to the aforesaid Purchase and Sale Agreement (whether arising pursuant to the terms of such agreement or otherwise available at law or in equity); (vi) all right, title and interest of Bethlehem Steel Funding, LLC in, to and under each of the other agreements, documents and instruments (excluding the aforesaid Receivables Purchase Agreement) (whether as an original party thereto, as assignee or otherwise) as may be entered into and delivered in connection with the transactions contemplated by the aforesaid Receivables Purchase Agreement or the aforesaid Purchase and Sale Agreement, including all monies due and to become due to Bethlehem Steel Funding, LLC under or in connection with such agreements, documents and instruments, and all rights, remedies, powers, privileges, benefits and claims of Bethlehem Steel Funding, LLC under or with respect to such agreements, documents and instruments (whether arising pursuant to the terms of such agreements, documents and instruments or otherwise available at law or in equity); (vii) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any and all of the foregoing; and (viii) all substitutions for and proceeds of any of the foregoing (including, without limitation, accounts, contract rights, instruments, chattel paper, inventory, documents or general intangibles) and, to the extent not otherwise included, all payments under insurance or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing. 2 SCHEDULE 7 SCHEDULE OF FILINGS Debtor Filing Officer File Number Date of Filing* - ------ -------------- ----------- -------------- _______________ * Indicate lapse date, if other than fifth anniversary. EXHIBIT N [Letterhead of Bethlehem Steel Corporation] September 12, 1995 Electronic Data Systems Corporation 7171 Forest Lane Dallas, Texas 75230 Ladies and Gentlemen: We refer to our Information Technology Partnership Agreement (the "Agreement") dated as of December 21, 1992. In connection with a receivables facility pursuant to which we are selling substantially all of our accounts receivable, J.P. Morgan Delaware, as Collateral Agent, on behalf of the financial institutions participating in such receivables facility, has requested your consent to an assignment of certain portions of the Agreement under certain circumstances. Accordingly, if the Collateral Agent notifies you that we are no longer responsible for servicing, administering and collecting accounts receivable under the receivables facility, in order for the appropriate parties to have access to necessary information with regards to accounts receivable or the collection thereof, notwithstanding anything to the contrary contained in the Agreement, you hereby consent to our assignment of any portion of the Agreement in respect of Services (as defined in the Agreement) relating to accounts receivable or the collection thereof to a successor servicer engaged by the Collateral Agent. This consent may not be terminated or modified without the prior written consent of the Collateral Agent. Please acknowledge your consent by signing the two copies of this letter enclosed herewith in the space provided below and returning the signed copies to us. Very truly yours, BETHLEHEM STEEL CORPORATION By:______________________ Name:____________________ Title:___________________ Acknowledged and consented to: ELECTRONIC DATA SYSTEMS CORPORATION By:______________________ Name:____________________ Title:___________________ 2 EXHIBIT O Form of Concentration Limit Amendment Notice [Letterhead of Bethlehem Steel Funding, LLC] [Date] Morgan Guaranty Trust Company of New York, as Administrative Agent 60 Wall Street New York, New York 10260 J.P. Morgan Delaware, as Structuring and Collateral Agent 902 Market Street Wilmington, Delaware 19801 The Buyers (as defined in the Receivables Purchase Agreement as referred to below) Standard & Poor's Ratings Group 26 Broadway New York, New York 10004 Attn: Asset-Backed Surveillance Ladies and Gentlemen: This Concentration Limit Amendment Notice is being delivered to you pursuant to Section 11.5 of the Receivables Purchase Agreement dated as of September 12, 1995 (the "Agreement") among Bethlehem Steel Funding, LLC ("BSF"), Bethlehem Steel Credit Affiliate One, Inc., Bethlehem Steel Credit Affiliate Two, Inc., Bethlehem Steel Corporation (the "Seller"), as Servicer, the financial institutions listed on the signature pages thereof, as Buyers, Morgan Guaranty Trust Company of New York, as Administrative Agent and J.P. Morgan Delaware, as Structuring and Collateral Agent. Terms defined in the Agreement and not otherwise defined herein are used herein with the meanings so defined. Section 1.1 of the Agreement is amended by [set forth changes to the definition of Concentration Limit (including any changes to Schedule 2)]. This amendment shall be governed by and construed in accordance with the laws of the State of New York. This amendment may be signed in any number of counterparts, each of which shall be an original with the same effect as if the signatures thereto and hereto were upon the same instrument. This amendment shall become effective the later of (i) the date on which the Administrative Agent shall have received duly executed counterparts hereof signed by the Required Buyers, and (ii) the date on which the Administrative Agent receives evidence satisfactory to it that the rating then assigned to the Buyers' Certificates has been reaffirmed by S&P. Very truly yours, BETHLEHEM STEEL FUNDING, LLC By ----------------------- Title: Acknowledged and Agreed to: [BUYERS] 2 By: Title: ---------------------- 3 EXHIBIT P ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _________, 19__ among [NAME OF ASSIGNOR] (the "Assignor"), [NAME OF ASSIGNEE] (the "Assignee"), BETHLEHEM STEEL FUNDING, LLC ("BSF"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (the "Administrative Agent") and the L/C Issuing Banks listed on the signature pages hereof. WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Receivables Purchase Agreement dated as of September 12, 1995 among BSF, Bethlehem Steel Credit Affiliate One, Inc., Bethlehem Steel Credit Affiliate Two, Inc., Bethlehem Steel Corporation, as Servicer, the Assignor and the other financial institutions party thereto, as Buyers, the Administrative Agent and J.P. Morgan Delaware, as Structuring and Collateral Agent (the "Receivables Purchase Agreement"); WHEREAS, as provided under the Receivables Purchase Agreement, the Assignor has a Commitment to participate in Purchases from BSF in an aggregate amount at any time not to exceed $__________; WHEREAS, on the date hereof, the Assignor's pro rata share of the Aggregate Net Investment under the Receivables Purchase Agreement is in the aggregate amount of $__________; WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Receivables Purchase Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________, together with a corresponding portion of its pro rata share of the Aggregate Net Investment (the "Assigned Amount"), and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; and WHEREAS, the Assignor concurrently proposes to assign all of the rights of the Assignor under the Inventory Credit Agreement in respect of a portion of its Inventory Commitment thereunder, together with a corresponding portion of its outstanding loans thereunder. NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: 4 SECTION 1. Definitions. All capitalized terms not otherwise ----------- defined herein shall have the respective meanings set forth in the Receivables Purchase Agreement. SECTION 2. Assignment. The Assignor hereby assigns and ---------- sells to the Assignee all of the rights of the Assignor under the Receivables Purchase Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Receivables Purchase Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the Assignor's pro rata share of the Aggregate Net Investment at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the L/C Issuing Banks, and if required pursuant to Section 4, BSF and the Administrative Agent, and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Buyer under the Receivables Purchase Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Receivables Purchase Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment -------- and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them. It is understood that commitment and/or facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Receivables Purchase Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION 4. Consent of BSF and the Administrative Agent. ------------------------------------------- This Agreement is conditioned upon the consent of BSF, if required, the Administrative Agent and each L/C Issuing Bank pursuant to Section 11.6(c) of the Receivables Purchase Agreement. The execution of this Agreement by BSF, the Administrative Agent and each L/C Issuing Bank is evidence of this consent. Pursuant to Section 11.6(c), BSF agrees to execute and deliver a Buyer's Certificate to the Assignee to evidence the assignment and assumption provided for herein. SECTION 5. Non-Reliance on Assignor. The Assignor makes no ------------------------ representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of BSF, or the validity and enforceability of the obligations of BSF in respect of the Receivables Purchase Agreement. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own purchase analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of BSF. 5 SECTION 6. Governing Law. This Agreement shall be governed ------------- by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in ------------ any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 6 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [NAME OF ASSIGNOR] By ---------------------------- Name: Title: [NAME OF ASSIGNEE] By ---------------------------- Name: Title: [BETHLEHEM STEEL FUNDING, LLC By ----------------------------] Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By ---------------------------- Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as L/C Issuing Bank 7 By ---------------------------- Name: Title: CHEMICAL BANK, as L/C Issuing Bank By ---------------------------- Name: Title: THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as L/C Issuing Bank By ---------------------------- Name: Title: 8 EX-4 7 Exhibit 4(e) AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT dated as of June 5, 1997 among BETHLEHEM STEEL FUNDING, LLC, BETHLEHEM STEEL CREDIT AFFILIATE ONE, INC., BETHLEHEM STEEL CREDIT AFFILIATE TWO, INC., BETHLEHEM STEEL CORPORATION, as Servicer, the financial institutions listed on the signature pages hereof, as Buyers and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent and Structuring and Collateral Agent. W I T N E S S E T H : WHEREAS, the parties hereto have heretofore entered into a Receivables Purchase Agreement (the "Agreement") dated as of September 12, 1995, and WHEREAS, the parties hereto desire to amend the Agreement as set forth herein and to restate the Agreement in its entirety to read as set forth in the Agreement with the amendments specified below; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Definitions; References. Unless otherwise specifically ----------------------- defined herein, each capitalized term used herein which is defined in the Agreement shall have the meaning assigned to such term in the Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Agreement shall from and after the effective date hereof refer to the Agreement as amended and restated hereby. SECTION 2. Amendments to Definitions. Section 1.1 of the Agreement ------------------------- is amended as follows: (a) The definition of "Business Day" is amended by deleting the reference to "Wilmington, Delaware". (b) The definition of "Collateral Agent" is amended by replacing "J.P. Morgan Delaware" with "Morgan Guaranty". (c) The definition of "Commitment Fee" is amended by replacing ".1875%" with ".15%". (d) The definition of "Euro-Dollar Rate" is amended by replacing ".50%" in each place where it appears with ".375%". (e) The definition of "Expiry Date" is amended by replacing "September 12, 2000" with the date "September 12, 2002". (f) The definition of "Fixed CD Rate" is amended by replacing ".625%" in each place where it appears with ".50%". (g) The definition of "Receivables Information Memorandum" is amended by replacing "July 1995" with "May 1997". (h) Each reference to "Chemical Bank" in the definitions "CD Reference Banks", "Euro-Dollar Reference Banks" and "L/C Issuing Bank" is changed to "The Chase Manhattan Bank". SECTION 3. Amendment of Section 2.9 of the Agreement. Section 2.9(g) ----------------------------------------- of the Agreement is amended by replacing "1/2 of 1%" with ".375%". SECTION 4. Amendment of Section 5.10 of the Agreement. Section 5.10 ------------------------------------------ of the Agreement is amended by replacing "Closing Date" with "June 5, 1997". SECTION 5. Amendment of Section 9.2 of the Agreement. Section 9.2 of ----------------------------------------- the Agreement is amended by deleting the references to "J.P. Morgan Delaware". SECTION 6. Changes in Commitments. With effect from and including ---------------------- the date this Amendment and Restatement becomes effective in accordance with Section 9, (i) the Person listed on the signature pages hereof which is not a party to the Agreement (the "New Buyer") shall become a Buyer party to the Agreement and (ii) the Commitment of each Buyer shall be the amount set forth opposite the name of such Buyer on the signature pages hereof. Any Buyer whose Commitment is changed to zero shall upon such effectiveness cease to be a Buyer party to the Agreement, and all accrued fees and other amounts (other than such Buyer's interest in the Aggregate Net Investment) payable under the Agreement for the account of such Buyer shall be due and payable on such date; provided that the provisions of Sections 10.3, 10.4 and 11.3 of the Agreement shall continue to inure to the benefit of each such Buyer, provided further that such -------- Bank shall continue to be bound by Section 11.7 of the Agreement with respect to 2 information provided to it prior to such date. If any Tranches are outstanding on such date and, as a result of changes in the Commitments of the Banks, the interests in such Tranches are not held by the continuing Banks ratably in proportion to their Commitments, such Tranches shall continue to be held on a non-pro rata basis until the next Yield Accrual Period therefor starts, at which time the Banks shall, as appropriate, buy and sell the interests in such Tranches such that, after giving effect to such purchases, the interests in such Tranches are held ratably. SECTION 7. Representations and Warranties. BSF hereby represents and ------------------------------ warrants that as of the effective date hereof (after giving effect hereto): (a) no Termination Event or Potential Termination Event has occurred and is continuing; and (b) each representation and warranty of BSF set forth in the Agreement after giving effect to this Amendment and Restatement is true and correct. SECTION 8. Governing Law. This Amendment and Restatement shall be ------------- governed by and construed in accordance with the laws of the State of New York. SECTION 9. Counterparts; Effectiveness. This Amendment and --------------------------- Restatement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment and Restatement shall become effective as of the date hereof if each of the following condition sshall have been satisfied: (i) receipt by the Administrative Agent of duly executed counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, the Administrative Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (ii) the Administrative Agent shall have received for the several accounts of the Buyers fees equal to (w) .225% of such Buyer's Commitment, if such Buyer's initial commitment for this facility and under the Amendment and Restatement of the Inventory Credit Agreement (the "facilities") was at least $75,000,000, (x) .1875% of such Buyer's Commitment, if such Buyer's initial commitment for the facilities was at least $50,000,000 but less than $75,000,000, (y) .15% of such Buyer's initial Commitment, if such Buyer's initial commitment for the facilities was at least $25,000,000 but less than $50,000,000, and (z) .125% of such 3 Buyer's Commitment, if such Buyer's initial commitment for the facilities was at least $15,000,000 but less than $25,000,000; (iii) BSF shall have paid any fees and expenses of S&P in connection with the rating of the Buyers' Certificates; (iv) an amendment to the Purchase and Sale Agreement in the form of Annex I hereto shall have been executed; and (v) the Amendment and Restatement dated as of June 5, 1997 of the Inventory Credit Agreement shall have become effective. The Administrative Agent shall promptly notify the parties hereto of the effectiveness of this Amendment and Restatement, and such notice shall be conclusive and binding on all parties hereto. 4 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. BETHLEHEM STEEL FUNDING, LLC By ----------------------------- Authorized Agent 5111 North Point Boulevard Sparrows Point, MD 21219-1014 Telephone: 410-388-7780 Facsimile: 410-388-7783 Attention: D.K. Schoenen, Authorized Agent BETHLEHEM STEEL CREDIT AFFILIATE ONE, INC. By --------------------------- Title: 5111 North Point Boulevard Sparrows Point, MD 21219-1014 Telephone: 410-388-7781 Facsimile: 410-388-7783 Attention: D.K. Schoenen, President 5 BETHLEHEM STEEL CREDIT AFFILIATE TWO, INC. By --------------------------- Title: 5111 North Point Boulevard Sparrows Point, MD 21219-1014 Telephone: 410-388-7782 Facsimile: 410-388-7783 Attention: D.K. Schoenen, President BETHLEHEM STEEL CORPORATION, as Servicer By -------------------------- Title: 1170 Eighth Avenue Bethlehem, PA 18016 Telephone: 610-694-4581 Facsimile: 610-694-3356 Attention: Edmund P. Reybitz, Assistant Treasurer 6 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent, Structuring and Collateral Agent and L/C Issuing Bank By -------------------------- Title: 60 Wall Street New York, NY 10260 Telephone: 212-648-6793 Facsimile: 212-648-5336 Attention: Laura E. Reim THE CHASE MANHATTAN BANK, as L/C Issuing Bank By -------------------------- Title: THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as L/C Issuing Bank By -------------------------- Title: 7 LENDERS: Commitment: $50,428,571.42 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By -------------------------- Title: Commitment: $38,857,142.86 THE CHASE MANHATTAN BANK, By -------------------------- Title: Commitment: $38,857,142.86 THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By -------------------------- Title: Commitment: $24,000,000.00 THE BANK OF NEW YORK By -------------------------- Title: Commitment: $24,000,000.00 NATIONSBANK, N.A. (CAROLINAS) By -------------------------- Title: 8 Commitment: $24,000,000.00 CORESTATES BANK, N.A. By -------------------------- Title: Commitment: $21,000,000.00 BANK OF AMERICA NT & SA By -------------------------- Title: Commitment: $21,142,857.14 THE FIRST NATIONAL BANK OF CHICAGO By -------------------------- Title: Commitment: $12,000,000.00 THE FUJI BANK, LIMITED By -------------------------- Title: Commitment: $12,000,000.00 THE INDUSTRIAL BANK OF JAPAN, INC. By -------------------------- Title: 9 Commitment: $12,000,000.00 THE SUMITOMO BANK, LIMITED NEW YORK BRANCH By -------------------------- Title: Commitment: $11,428,571.43 BANK AUSTRIA AKTIENGESELLSCHAFT By -------------------------- Title: By -------------------------- Title: Commitment: $10,285,714.29 SUMMIT BANK By -------------------------- Title: TOTAL COMMITMENTS: $300,000,000 EX-4 8 Exhibit 4(e) CONFORMED COPY AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT dated as of June 19, 1998 among BETHLEHEM STEEL FUNDING, LLC, BETHLEHEM STEEL CREDIT AFFILIATE ONE, INC., BETHLEHEM STEEL CREDIT AFFILIATE TWO, INC., BETHLEHEM STEEL CORPORATION, as Servicer, the financial institutions listed on the signature pages hereof, as Buyers, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent and Structuring and Collateral Agent. W I T N E S S E T H : WHEREAS, the parties hereto have heretofore entered into a Receivables Purchase Agreement dated as of September 12, 1995, which was amended and restated by an Amended and Restated Receivables Purchase Agreement dated as of June 5, 1997 (as so amended and restated, the "Agreement"), WHEREAS, the Lukens Merger has been consummated, BSC has entered into the BSC-Lukens Purchase and Sale Agreement and the parties hereto desire to amend the Agreement to include the Lukens Receivables, and WHEREAS, the parties hereto desire to amend the Agreement to increase the aggregate Commitments (as defined in the Agreement) from $300,000,000 to $340,000,000 and otherwise as set forth herein and to restate the Agreement in its entirety to read as set forth in the Agreement with the amendments specified below; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Definitions; References. Unless otherwise ----------------------- specifically defined herein, each capitalized term used herein which is defined in the Agreement shall have the meaning assigned to such term in the Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Agreement shall from and after the effective date hereof refer to the Agreement as amended and restated hereby. SECTION 2. Definitions. (a) Section 1.1 of the Agreement is ----------- amended by adding the following new definitions in alphabetical order: "BSC-Lukens Purchase and Sale Agreement" means the Purchase and Sale Agreement No. 1 dated as of June 19, 1998 between Lukens, as Seller, and BSC, as purchaser, substantially in the form of Exhibit Q hereto, as amended from time to time. "Lukens" means Lukens Steel Company, a Pennsylvania corporation. "Lukens Merger" means the merger of Lukens Acquisition Corporation into Lukens Inc., which occurred on May 29, 1998, pursuant to the Lukens Merger Agreement. "Lukens Merger Agreement" means the Agreement and Plan of Merger, dated as of December 15, 1997 and as amended as of January 4, 1998, among BSC, Lukens Acquisition Corporation and Lukens Inc., as further amended from time to time. "Lukens Receivable" means a "Receivable", as defined in the BSC-Lukens Purchase and Sale Agreement. "1998 Effective Date" means the date upon which the conditions to effectiveness of this Amended and Restated Receivables Purchase Agreement dated as of June 19, 1998 are satisfied. (b) Section 1.1 of the Agreement is further amended as follows: (i) Clause (i) of the definition of "Commitment" is superceded by the provisions of Section 12 of this Amendment and Restatement. (ii) The definition of "Contract" is amended in its entirety to read as follows: "Contract" as it relates to any Receivable means the agreement between the Obligor and BSC or Lukens, as the case may be, giving rise thereto (including as evidenced by an invoice on an open account). (iii) The definition of "Credit and Collection Policy" is amended by inserting, after the words "Exhibit H hereto", the phrase ", subject to Section 2.10,". 2 (iv) Subparagraph (a)(iii) of the definition of "Eligible Receivable" is amended by adding after the phrase "originated in the name of the Seller" the words "or is a Lukens Receivable purchased by BSC pursuant to the BSC-Lukens Purchase and Sale Agreement". (v) Subparagraph (a)(iv) of the definition of "Eligible Receivable" is amended by adding after the reference to "the Purchase and Sale Agreement" the following: "and, in the case of a Lukens Receivable, immediately prior to its sale to BSC pursuant to the BSC-Lukens Purchase and Sale Agreement". (vi) Subparagraph (a)(viii) of the definition of "Eligible Receivable" is amended in its entirety to read as follows: (viii) all consents, licenses, approvals, or authorizations of, or registrations with, any governmental authority required to be obtained or given by the Seller or Lukens, as the case may be, in connection with the creation of such Receivable or the execution, delivery, creation and performance by the Seller or Lukens, as the case may be, of the related Contract, or in connection with the sale of such Receivable to BSF (and, in the case of a Lukens Receivable, the sale of such Receivable to the Seller), have been duly obtained or given and are in full force and effect and the sale of such Receivable to BSF (and, in the case of a Lukens Receivable, the sale of such Receivable to the Seller) complies with all applicable requirements of law; (vii) Subparagraph (a)(x) of the definition of "Eligible Receivable" is amended in its entirety to read as follows: (x) the transfer of such Receivable (A) under the Purchase and Sale Agreement constitutes a valid sale, transfer and assignment to BSF of all right, title and interest of the Seller in the Receivable, any Related Security, any Collections and any proceeds, enforceable against all creditors of and purchasers from the Seller and (B), in the case of any Lukens Receivable, under the BSC-Lukens Purchase and Sale Agreement constitutes a valid sale, transfer and assignment to the Seller of all right, title and interest of Lukens in the Receivable, any Related Security, any Collections and any proceeds, enforceable against all creditors or and purchasers from Lukens; 3 (viii) The definition of "Expiry Date" is amended by replacing "September 12, 2002" with "June 19, 2003". (ix) The definition of "Liquidation Yield" is amended by modifying "BR" to mean the following: BR = the rate determined under clause (i) of the definition of "Base Rate" multiplied by 1.2 plus 2%. (x) The definition of "Program Documents" is amended by (A) inserting after the first reference to "the Purchase and Sale Agreement" the words "the BSC-Lukens Purchase and Sale Agreement," and (B) inserting after the reference to "the Seller" the word "Lukens,". (xi) The definition of "Receivable" is amended by adding "or a Lukens Receivable purchased by BSC pursuant to the BSC-Lukens Purchase and Sale Agreement" following the words "in its normal course of business". (xii) The definition of "Receivables Information Memorandum" is amended in its entirety to read as follows: "Receivables Information Memorandum" means the Bethlehem Steel Funding, LLC Receivables Purchase Agreement Receivables Review dated as of May 1998." (xiii) The definition of "Related Security" is amended by (A) inserting after the first reference to "BSC" the words "and, in the case of a Lukens Receivable, Lukens" and (B) inserting after the second reference to "BSC" the words "or Lukens, as the case may be,". (xiv) The definition of "Termination Yield Rate" is amended by inserting after each reference to "BSC" the words "or Lukens". (xv) The definition of "Yield Accrual Period" is amended by, in clause (iii) of the proviso therein, inserting after ------- the reference to "BSC" the words "or Lukens". (xvi) The definition of "Yield Reserve" is amended by changing subclause (v)(y) from "1.5% times" to "1.0% times". SECTION 3. Underwriting Transition Period. The following is ------------------------------ added as Section 2.10 to the Agreement: 4 SECTION 2.10. Underwriting Transition Period. All ------------------------------ Lukens Receivables will be subject to the standards and procedures of the Credit and Collection Policy relating to billing, invoicing and collection activities and procedures, including lockbox arrangements. However, with respect to those Lukens Receivables that are invoiced during the period immediately following the Lukens Merger, the credit analysis, decisions to extend credit and credit terms of sale necessarily will have been conducted and established by Lukens prior to the Lukens Merger. BSC represents that any differences between the Credit and Collection Policy and Lukens' credit policies in effect immediately prior to the Lukens Merger are not material. In reliance upon such representation, Lukens Receivables that are invoiced during the period immediately following the Lukens Merger shall not fail to qualify as Eligible Receivables solely by reason of differences between the Credit and Collection Policy and such Lukens' credit policies. SECTION 4. Assignment; Addition of Servicer Representation and Warranty. (a) Section 3.1(a) of the Agreement is amended by (i) adding "all rights of BSF as assignee from BSC as purchaser under the BSC-Lukens Purchase and Sale Agreement" after the words "damages for breach or otherwise" in clause (iii) of the first sentence thereof , (ii) inserting in the last sentence thereof after the reference to "the Seller" the word "Lukens," and (iii) inserting in the last sentence thereof after the reference to "BSF under the Purchase and Sale Agreement" the words "or BSC under the BSC-Lukens Purchase and Sale Agreement,". (b) Section 3.1(b) of the Agreement is amended in its entirety to read as follows: (b) BSF shall monitor and require compliance by the Seller with its obligations under the Purchase and Sale Agreement and by Lukens under the BSC-Lukens Purchase and Sale Agreement, shall exercise its rights and remedies thereunder so as to be afforded the benefits intended to accrue to it (and, in the case of the BSC-Lukens Purchase and Sale Agreement, BSC) and shall, in the event of any default by the Seller or Lukens, as the case may be, in the performance of its obligations under the pertinent Agreement, exercise any and all of its rights and remedies thereunder (as assignee of BSC in the case of the BSC-Lukens Purchase and Sale Agreement) to the extent and in the manner directed by the Collateral Agent. (c) The following is added as SECTION 5.12 to the Agreement: 5 SECTION 5.12. Servicer's Representation and Warranty.BSC, a s Servicer, represents and warrants that the computer applications pertaining to the Receivables recognize and perform date sensitive functions involving dates prior to and after December 31, 1999. SECTION 5. Amendment of Section 4.2 of the Agreement. ----------------------------------------- Section 4.2 of the Agreement is amended by adding in clause (a) thereof, after the reference to "Articles 5 and 7 hereof" the following: ", Article IV of the BSC-Lukens Purchase and Sale Agreement". SECTION 6. Amendment of Section 5.10 of the Agreement. ------------------------------------------ Section 5.10 of the Agreement is amended by (i) inserting after the first reference therein to "the Seller" the words ", Lukens" and (ii) replacing "June 5, 1997" with "June 19, 1998". SECTION 7. Amendment of Section 6.1 of the Agreement. (a) ----------------------------------------- Section 6.1(a) of the Agreement is amended by (i) in the first sentence thereof, changing the reference to "BSF or BSC" to read "BSF, BSC or Lukens" and (ii) in clause (vii) of the second sentence thereof, inserting immediately after the words "the Purchase and Sale Agreement" the following: "(including any information pursuant to the BSC-Lukens Purchase and Sale Agreement as assignee pursuant to the Purchase and Sale Agreement of BSC's rights thereunder)". (b) Section 6.1(b) of the Agreement is amended by, in the first sentence thereof, changing the reference to "BSF or BSC" to read "BSF, BSC or Lukens". SECTION 8. Amendment of Section 6.2(c) of the Agreement. -------------------------------------------- Section 6.2(c) of the Agreement is amended by (i) in clause (i) thereof, inserting after the reference to "BSF's" the word ", Lukens'" and (ii) in clause (ii) thereof, inserting after the reference to "BSC" the word ", Lukens". SECTION 9. Amendment of Section 6.8 of the Agreement. ----------------------------------------- Section 6.8 of the Agreement is amended by inserting after the reference to "the Purchase and Sale Agreement" the words ", the BSC-Lukens Purchase and Sale Agreement". SECTION 10. Additional Termination Events and Consequences. ---------------------------------------------- (a) Section 8.1 of the Agreement is amended by (i) in clause (c), inserting after the reference to "the Servicer" the words ", Lukens", (ii) in clause (d), replacing the word "or" following the word "hereof" with a comma and adding to the end of such clause "or Section 2.02 of the BSC-Lukens Purchase and Sale Agreement" and (iii) in clauses (e), (g) and (i), inserting after each reference to "BSF" the words ", Lukens". 6 (b) Section 8.2(a) is amended by inserting after each reference to "Event of Bankruptcy with respect to BSF" the words ",Lukens". (c) Section 8.2(b) is amended by, in clause (a) thereof, (i) inserting after the first reference to "BSC" the words "or Lukens" and (ii) inserting after the second reference to "BSC" the words "and Lukens". SECTION 11. Amendment of Article 9 of the Agreement. Article 9 of the Agreement is amended by (i) in Section 9.4, inserting in the parenthetical phrase a reference to "Lukens" and (ii) in the second sentence of Section 9.5, inserting after the reference to "BSF" the word ",Lukens". SECTION 12. Changes in Commitments. With effect from and ---------------------- including the 1998 Effective Date, (i) each Person listed on the signature pages hereof that is not a party to the Agreement (a "New Buyer") shall become a Buyer party to the Agreement and (ii) the Commitment of each Buyer shall be the amount set forth opposite the name of such Buyer on the signature pages hereof. Any Buyer whose Commitment is changed to zero (an "Exiting Buyer") shall upon the 1998 Effective Date, but subject to the last sentence of this Section 12, cease to be a Buyer party to the Agreement (and, without omitting the generality of the foregoing, its participation in any outstanding Participated Letter of Credit shall automatically be canceled without any further action), and all accrued Fees and other amounts (other than such Buyer's interest in the Aggregate Net Investment) payable under the Agreement for the account of an Exiting Buyer to the 1998 Effective Date shall, notwithstanding the provisions of Article 2 of the Agreement, be due and payable for the account of such Exiting Buyer on the 1998 Effective Date; provided that the provisions of Sections 10.3, 10.4 and 11.3 of the Agreement shall continue to inure to the benefit of each Exiting Buyer and, provided further that each Exiting Buyer shall continue to be bound by Section 11.7 of the Agreement with respect to information provided to it prior to such date. The calculation of accrued Fees payable to each continuing Buyer on the first Quarterly Date or other date after the 1998 Effective Date on which Fees are payable shall reflect any changes in the Commitments of such Buyers made pursuant to this Section 12 and, notwithstanding the provisions of Section 2.7 of the Agreement, shall be paid to each such Buyer accordingly. If any Tranches are outstanding on the 1998 Effective Date and, as a result of changes in the Commitments of the Buyers, such Tranches are not held by the continuing Buyers ratably in proportion to their Commitments, such Tranches shall continue to be held on a non-pro-rata basis until the next Yield Accrual Period therefor starts, at which time the Buyers (including New Buyers and Exiting Buyers) shall, as appropriate, buy and sell such Tranches such that, after giving effect to such purchases, such Tranches are held ratably, and Section 2.8 of the Agreement shall apply to any such purchases. 7 SECTION 13. Representations and Warranties. BSF and BSC ------------------------------ each hereby represents and warrants that as of the 1998 Effective Date (after giving effect hereto): (a) no Termination Event or Potential Termination Event will have occurred and be continuing; and (b) the representations and warranties set forth in Articles 5 and 7 of the Agreement, Article IV of the Purchase and Sale Agreement and Article IV of the BSC-Lukens Purchase and Sale Agreement, after giving effect to this Amendment and Restatement, will be true and correct. SECTION 14. Amendment of Exhibits D and E. Each of Exhibit ----------------------------- D and E to the Agreement is amended to the extent necessary to conform to all changes made in this Amendment and Restatement. SECTION 15. New Exhibit. The form of Annex I hereto is ----------- added to the Agreement as Exhibit Q. SECTION 16. Assignment. (a) Section 1.1 of the Agreement is ---------- amended by adding the following new definition: "Combined Commitment" means at any time with respect to each Buyer the sum of (x) such Buyer's Commitment hereunder and (y) such Buyer's Inventory Commitment under the Inventory Credit Agreement. (b) Section 11.6(c) of the Agreement is amended by amending the second parenthetical therein to read as follows: (such portion to comprise a Combined Commitment of not less than $5,000,000; provided that after giving effect to such assignment, (x) the percentage of any Buyer's Commitment hereunder be no less than 40% and no greater than 70% of its Combined Commitment and the percentage of any Buyer's Inventory Commitment under the Inventory Credit Agreement be no less than 30% and no greater than 60% of its Combined Commitment and (y) the Combined Commitment retained by the assigning Buyer shall be in an aggregate amount of not less than $5,000,000) (c) Section 11.6(c) of the Agreement is further amended by deleting the clause ",which shall not be unreasonably withheld" which appears immediately following the words "consent of BSF" and inserting the clause ", which in each 8 case shall not be unreasonably withheld" after the words "the Administrative Agent and the L/C Issuing Banks." SECTION 17. Governing Law. This Amendment and Restatement ------------- shall be governed by and construed in accordance with the laws of the State of New York. SECTION 18. Counterparts; Effectiveness. This Amendment and --------------------------- Restatement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment and Restatement shall become effective as of the date (the "1998 Effective Date", which must be no later than June 26, 1998) on which each of the following conditions shall have been satisfied: (i) receipt by the Administrative Agent of duly executed counterparts hereof signed by each of the parties hereto (or, in the case of any Buyer as to which an executed counterpart shall not have been received, the Administrative Agent shall have received telegraphic, telex or other written confirmation from such Buyer of execution of a counterpart hereof by such Buyer); (ii) receipt by the Administrative Agent of new Buyer's Certificates for the Buyers; (iii) receipt by the Administrative Agent of (x) a certificate of the secretary or an assistant secretary of BSC certifying as of the 1998 Effective Date (A) as to no amendments to the certificate of incorporation of BSC; (B) as to no liquidation or dissolution proceeding; (C) as to the occurrence of the Lukens Merger; and (D) a copy of the By-laws of BSC; (y) the certificate of incorporation of BSC certified as of a date reasonably near the 1998 Effective Date by the Secretary of State of the State of Delaware; and (z) a good standing certificate for BSC issued by the Secretary of State of the State of Delaware, dated a date reasonably near the 1998 Effective Date; (iv) receipt by the Administrative Agent of (A) a good standing certificate for BSF issued by the State Department of Assessments and Taxation of Maryland dated a date reasonably near the 1998 Effective Date; (B) a certificate of the Members certifying as of the 1998 Effective Date (i) as to no amendments to the Articles of Organization of BSF (other than an amendment to incorporate Lukens Receivables); (ii) as to no 9 dissolution proceeding; and (iii) a copy of the Operating Agreement of BSF (with an amendment to incorporate Lukens Receivables); (C) a good standing certificate for each Special Purpose Member issued by the State Department of Assessments and Taxation of Maryland, dated a date reasonably near the 1998 Effective Date; (D) a certificate of the secretary or an assistant secretary of each Special Purpose Member certifying as of the 1998 Effective Date (i) as to no amendments to the Articles of Incorporation of such Special Purpose Member (other than an amendment to incorporate Lukens Receivables); (ii) as to no liquidation or dissolution proceeding; and (iii) a copy of the By-laws of such Special Purpose Member; (v) receipt by the Administrative Agent of (x) certified resolutions of the board of directors of BSC or a duly authorized committee thereof, authorizing the execution, delivery and performance by BSC of this Amendment and Restatement, the Purchase and Sale Agreement Amendment (as defined below) and the BSC-Lukens Purchase and Sale Agreement and (y) a certificate setting forth the name and specimen signature of each officer of BSC authorized on its behalf to execute such agreements; (vi) receipt by the Administrative Agent of certified resolutions of the Members of BSF, authorizing the execution, delivery and performance by BSF of this Amendment and Restatement and the Purchase and Sale Agreement Amendment; (vii) receipt by the Administrative Agent of (x) certified resolutions of the board of directors of each Special Purpose Member or a duly authorized committee thereof, authorizing the execution, delivery and performance by such Member of this Amendment and Restatement and the Purchase and Sale Agreement Amendment and (y) a certificate setting forth the name and specimen signature of each officer of such Member authorized on its behalf to execute such agreements; (viii) BSC shall have paid to the Administrative Agent for the several accounts of the Buyers such participation fees as are set forth in Schedule I attached to the Amendment and Restatement dated as of June 19, 1998 of the Inventory Credit Agreement; (ix) BSF shall have paid to the Administrative Agent, for its own account as Administrative Agent and Structuring and Collateral Agent and the account of J. P. Morgan Securities Inc. as Arranger, such fees as are agreed to between BSF and the Administrative Agent in a separate letter; 10 (x) receipt by the Administrative Agent of evidence satisfactory to it that S&P has confirmed the AAA rating of the Buyer's Certificates after giving effect to the transactions contemplated hereby and that BSF has paid any fees and expenses of S&P in connection with obtaining such confirmation; (xi) an amendment to the Purchase and Sale Agreement substantially in the form of Annex II hereto (the "Purchase and Sale Agreement Amendment") shall have been duly executed and delivered by each of the parties thereto, and the Administrative Agent shall have received an executed original thereof; (xii) the BSC-Lukens Purchase and Sale Agreement substantially in the form of Annex I hereto shall have been duly executed and delivered by each of the parties thereto, and the Administrative Agent shall have received an executed original thereof; (xiii) receipt by the Administrative Agent of (v) a certificate of the secretary or an assistant secretary of Lukens certifying as of the 1998 Effective Date (A) as to no amendments to the certificate of incorporation of Lukens; (B) as to no liquidation or dissolution proceeding; and (C) a copy of the By-laws of Lukens; (w) the certificate of incorporation of Lukens certified as of a date reasonably near the 1998 Effective Date by the Secretary of State of the Commonwealth of Pennsylvania; (x) a good standing certificate for Lukens issued by the Secretary of State of the Commonwealth of Pennsylvania, dated a date reasonably near the 1998 Effective Date;(y) certified resolutions of the board of directors of Lukens or a duly authorized committee thereof, authorizing the execution, delivery and performance by Lukens of the BSC-Lukens Purchase and Sale Agreement and (z) a certificate setting forth the name and specimen signature of each officer of Lukens authorized on its behalf to execute the BSC-Lukens Purchase and Sale Agreement; (xiv) receipt by the Administrative Agent of an executed and completed Perfection Certificate substantially in the form of Annex I to the BSC-Lukens Purchase and Sale Agreement, and such other information as the Administrative Agent may reasonably request with respect to the Lukens Receivables relevant to the transactions contemplated hereby; (xv) receipt by the Administrative Agent of copies of proper financing statements (Form UCC-1) naming Lukens as the seller of Lukens Receivables under the BSC-Lukens Purchase and Sale Agreement, BSC as initial purchaser thereof, BSF as the assignee of BSC and the 11 Collateral Agent as assignee of BSF, or other similar instruments or documents as may be necessary or, in the opinion of the Collateral Agent or its counsel, desirable for filing under the UCC of all appropriate jurisdictions to evidence and perfect BSF's ownership interest in such Lukens Receivables; (xvi) receipt by the Administrative Agent of executed financing statements (Form UCC-3) necessary (if any) to release all security interests and other rights of any Person previously granted by Lukens in the Lukens Receivables sold to BSC under the BSC-Lukens Purchase and Sale Agreement, related Contracts or goods the sale of which may give rise to a Lukens Receivable; (xvii) receipt by the Administrative Agent of requests for information or copies (Form UCC-11) (or a similar search report certified by parties acceptable to Collateral Agent or its counsel) dated a date reasonably near the 1998 Effective Date listing all effective financing statements which name Lukens (under its present name and any previous name) as debtor and which are filed in jurisdictions in which the filings were made pursuant to clause (xv) above, together with copies of such financing statements (none of which, unless subject to a release referred to in clause (xvi) above, shall cover any Lukens Receivables sold to BSC under the BSC-Lukens Purchase and Sale Agreement or Contracts relating thereto which, or goods the sale of which, may give rise to such a Lukens Receivable); (xviii) receipt by the Administrative Agent of copies of such additional financing statements (Form UCC-1) naming BSC and BSF as debtors or such amendments to existing financing statements (Form UCC-3) filed naming BSC and BSF as debtors or sellers as maybe necessary or, in the opinion of the Collateral Agent or its counsel, desirable for filing under the UCC of all appropriate jurisdictions on account of the amendments made by this Amendment and Restatement; (xix) receipt by the Administrative Agent of opinions of counsel reasonably satisfactory to the Administrative Agent; (xx) receipt by the Administrative Agent of a letter from BSC's independent auditor confirming the characterization of the transfer of Receivables from BSC to BSF as a sale under GAAP and the transfer of Lukens Receivables from Lukens to BSC as a sale under GAAP and a letter from BSF's independent auditor confirming the characterization of 12 each transfer of an interest in Receivables from BSF to the Buyers as a sale under GAAP; (xxi) receipt by the Administrative Agent of (A) a certificate dated the 1998 Effective Date signed by the Chief Financial Officer, Treasurer or Controller of BSC as to the accuracy of the representations and warranties set forth in Section 13 of this Amendment and Restatement and (B) a certificate dated the 1998 Effective Date executed by the Special Purpose Members as to the accuracy of the representation and warranties set forth in Section 13 of this Amendment and Restatement; (xxii) receipt by the Administrative Agent of a revised perfection certificate under the Purchase and Sale Agreement making the information set forth regarding BSC true and correct as of the 1998 Effective Date; and (xxiii) the Amendment and Restatement dated as of June 19, 1998 of the Inventory Credit Agreement shall have become, or concurrently shall become, effective. The Administrative Agent shall promptly notify the parties hereto of the effectiveness of this Amendment and Restatement, and such notice shall be conclusive and binding on all parties hereto. 13 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. BETHLEHEM STEEL CORPORATION By: /s/ G.L. Millenbruch -------------------------- Title: Authorized Agent 5111 North Point Boulevard Sparrows Point, MD 21219-1014 Telephone: 410-388-7781 Facsimile: 410-388-7783 Attention: D.K. Schoenen, Authorized Agent BETHLEHEM STEEL CREDIT AFFILIATE ONE, INC. By: /s/ G.L. Millenbruch -------------------------- Title: Authorized Agent 5111 North Point Boulevard Sparrows Point, MD 21219-1014 Telephone: 410-388-7781 Facsimile: 410-388-7783 Attention: D.K. Schoenen, President 14 BETHLEHEM STEEL CREDIT AFFILIATE TWO, INC. By: /s/ G.L. Millenbruch -------------------------- Title: Authorized Agent 5111 North Point Boulevard Sparrows Point, MD 21219-1014 Telephone: 410-388-7781 Facsimile: 410-388-7783 Attention: D.K. Schoenen, President BETHLEHEM STEEL CORPORATION, as Servicer By: /s/ Gary L. Millenbruch -------------------------- Title: EVP, Chief Financial Officer and Treasurer 1170 Eighth Avenue Bethlehem, PA 18016 Telephone: (610) 694-2603 Facsimile: (610) 694-1258 Attention: Leonard M. Anthony 15 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent, Structuring and Collateral Agent, and L/C Issuing Bank By: /s/ Robert Bottamedi -------------------------- Title: Vice President 60 Wall Street New York, NY 10260 Telephone: Facsimile: Attention: THE CHASE MANHATTAN BANK, as L/C Issuing Bank By: /s/ James H. Ramage -------------------------- Title: Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as L/C Issuing Bank By: /s/ Gregory L. Hong -------------------------- Title: Deputy General Manager 16 BUYERS: Commitment: $45,333,333.33 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Robert Bottamedi -------------------------- Title: Vice President Commitment: $36,833,333.33 THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By: /s/ Gregory L. Hong -------------------------- Title: Deputy General Manager Commitment: $34,000,000.00 THE CHASE MANHATTAN BANK By: /s/ James H. Ramage -------------------------- Title: Vice President Commitment: $28,333,333.33 CORESTATES BANK, N.A. (Corestates Bank, N.A. has merged into First Union National Bank) By: /s/ Jane Greenfield -------------------------- Title: Vice President 17 Commitment: $28,333,333.33 THE BANK OF NEW YORK By: /s/ Peter H. Abdill -------------------------- Title: Vice President Commitment: $28,333,333.33 UNION BANK OF SWITZERLAND NEW YORK BRANCH By: /s/ Paula Mueller -------------------------- Title: Vice President Structured Finance By: /s/ Lawrence M. Charleson -------------------------- Title: Managing Director Commitment: $25,500,000.00 THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Wanda Malone Harrison ------------------------- Title: Authorized Signor Commitment: $22,666,666.67 BANK OF AMERICA NT & SA By: /s/ Marianne Mihalik -------------------------- Title: Attorney-in-Fact.(NY) 18 Commitment: $22,666,666.67 NATIONSBANK, N.A. By: /s/ Philip S. Durand -------------------------- Title: Vice President Commitment: $14,166,666.67 BANK AUSTRIA AKTIENGESELLSCHAFT By: /s/ J. Anthony Seay ------------------------- Title: First Vice Preisdent Bank Austria, AG By: /s/ C. Miller -------------------------- Title: Assistant Vice President Commitment: $14,166,666.67 SUMMIT BANK By: /s/ David B. Kennedy -------------------------- Title: Regional Vice President Commitment: $14,166,666.67 THE SUMITOMO BANK, LIMITED NEW YORK BRANCH By: /s/ Kazuyoshi Ogawa -------------------------- Title: Joint General Manager 19 Commitment: $14,166,666.67 WILMINGTON TRUST By: /s/ Joseph M. Finley -------------------------- Title: Vice President Commitment: $11,333,333.33 THE INDUSTRIAL BANK OF LIMITED By: /s/ John Dippo -------------------------- Title: Senior Vice President TOTAL COMMITMENTS: $340,000,000 EX-4 9 Exhibit 4(e) CONFORMED COPY AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT dated as of June 17, 1999 among BETHLEHEM STEEL FUNDING, LLC, BETHLEHEM STEEL CREDIT AFFILIATE ONE, INC., BETHLEHEM STEEL CREDIT AFFILIATE TWO, INC., BETHLEHEM STEEL CORPORATION, as Servicer, the financial institutions listed on the signature pages hereof, as Buyers, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent and Structuring and Collateral Agent. W I T N E S S E T H : WHEREAS, the parties hereto have heretofore entered into a Receivables Purchase Agreement dated as of September 12, 1995, which was amended and restated by an Amended and Restated Receivables Purchase Agreement dated as of June 5, 1997 and an Amended and Restated Receivables Purchase Agreement dated as of June 19, 1998 (as so amended and restated, the "Agreement"), and WHEREAS, the parties hereto desire to amend the Agreement to add new Buyers and to adjust the Commitments (as defined in the Agreement) as set forth on the signature pages hereto and to restate the Agreement in its entirety to read as set forth in the Agreement with the amendments specified below; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Definitions; References. Unless otherwise ----------------------- specifically defined herein, each capitalized term used herein which is defined in the Agreement shall have the meaning assigned to such term in the Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Agreement shall from and after the effective date hereof refer to the Agreement as amended and restated hereby. SECTION 2. Definitions. ----------- Section 1.1 of the Agreement is amended as follows: Clause (i) of the definition of "Commitment" is superceded by the provisions of Section 3 of this Amendment and Restatement. SECTION 3. Changes in Commitments. With effect from and ---------------------- including the 1999 Effective Date (as defined in Section 6 of this Agreement and Restatement), (i) each Person listed on the signature pages hereof that is not a party to the Agreement (a "New Buyer") shall become a Buyer party to the Agreement and (ii) the Commitment of each Buyer shall be the amount set forth opposite the name of such Buyer on the signature pages hereof. The calculation of accrued Fees payable to each Buyer on the first Quarterly Date or other date after the 1999 Effective Date on which Fees are payable shall reflect any additions to and changes in the Commitments of the Buyers made pursuant to this Section 3 and, notwithstanding the provisions of Section 2.7 of the Agreement, shall be paid to each Buyer accordingly. If any Tranches are outstanding on the 1999 Effective Date and, as a result of additions to and changes in the Commitments of the Buyers, such Tranches are not held by the Buyers ratably in proportion to their Commitments, such Tranches shall continue to be held on a non-pro-rata basis until the next Yield Accrual Period therefor starts, at which time the Buyers (including New Buyers) shall, as appropriate, buy and sell such Tranches such that, after giving effect to such purchases, such Tranches are held ratably, and Section 2.8 of the Agreement shall apply to any such purchases. SECTION 4. Representations and Warranties. BSF and BSC each ------------------------------ hereby represents and warrants that as of the 1999 Effective Date (after giving effect hereto): (a) no Termination Event or Potential Termination Event will have occurred and be continuing; and (b) the representations and warranties set forth in Articles 5 and 7 of the Agreement, Article IV of the Purchase and Sale Agreement and Article IV of the BSC-Lukens Purchase and Sale Agreement, after giving effect to this Amendment and Restatement, will be true and correct. SECTION 5. Governing Law. This Amendment and Restatement ------------- shall be governed by and construed in accordance with the laws of the State of New York. SECTION 6. Counterparts; Effectiveness. This Amendment and --------------------------- Restatement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment and Restatement shall become effective as of the date (the "1999 Effective Date", which must be no later than June 30, 1999) on which each of the following conditions shall have been satisfied: 2 (i) receipt by the Administrative Agent of duly executed counterparts hereof signed by each of the parties hereto (or, in the case of any Buyer as to which an executed counterpart shall not have been received, the Administrative Agent shall have received telegraphic, telex or other written confirmation from such Buyer of execution of a counterpart hereof by such Buyer); (ii) receipt by the Administrative Agent of new Buyer's Certificates for the Buyers; (iii) receipt by the Administrative Agent of (x) a certificate of the secretary or an assistant secretary of BSC certifying as of the 1999 Effective Date (A) as to no amendments to the certificate of incorporation or By-laws of BSC and (B) as to no liquidation or dissolution proceeding; (y) the certificate of incorporation of BSC certified as of a date reasonably near the 1999 Effective Date by the Secretary of State of the State of Delaware; and (z) a good standing certificate for BSC issued by the Secretary of State of the State of Delaware, dated a date reasonably near the 1999 Effective Date; (iv) receipt by the Administrative Agent of (A) a good standing certificate for BSF issued by the State Department of Assessments and Taxation of Maryland dated a date reasonably near the 1999 Effective Date; (B) a certificate of the Members certifying as of the 1999 Effective Date (i) as to no amendments to the Articles of Organization or Operating Agreement of BSF and (ii) as to no dissolution proceeding; (C) a good standing certificate for each Special Purpose Member issued by the State Department of Assessments and Taxation of Maryland, dated a date reasonably near the 1999 Effective Date; (D) a certificate of the secretary or an assistant secretary of each Special Purpose Member certifying as of the 1999 Effective Date (i) as to no amendments to the Articles of Incorporation or By-laws of such Special Purpose Member and (ii) as to no liquidation or dissolution proceeding; (v) receipt by the Administrative Agent of certified resolutions of the Members of BSF, authorizing the execution, delivery and performance by BSF of this Amendment and Restatement; (vi) receipt by the Administrative Agent of (x) certified resolutions of the board of directors of each Special Purpose Member or a duly authorized committee thereof, authorizing the execution, delivery and performance by such Member of this Amendment and Restatement and (y) 3 a certificate setting forth the name and specimen signature of each officer of such Member authorized on its behalf to execute such agreements; (vii) receipt by the Administrative Agent of (A) a certificate dated the 1999 Effective Date signed by the Chief Financial Officer, Treasurer or Controller of BSC as to the accuracy of the representations and warranties set forth in Section 4 of this Amendment and Restatement and (B) a certificate dated the 1999 Effective Date executed by the Special Purpose Members as to the accuracy of the representation and warranties set forth in Section 4 of this Amendment and Restatement; (viii) receipt by the Administrative Agent for the account of each Buyer of an amendment fee in an amount equal to 0.1% of such Buyer's Commitment as set forth on the signature pages hereto; (ix) the Amendment and Restatement dated as of June 17, 1999 of the Inventory Credit Agreement shall have become, or concurrently shall become, effective; and (x) an amendment to the Purchase and Sale Agreement in the form of Annex I hereto shall have been duly executed and delivered by each of the parties thereto, and the Administrative Agent shall have received an executed original thereof. The Administrative Agent shall promptly notify the parties hereto of the effectiveness of this Amendment and Restatement, and such notice shall be conclusive and binding on all parties hereto. BSC hereby also agrees to deliver to the Administrative Agent no later than July 7, 1999: (x) certified resolutions of the board of directors of BSC or a duly authorized committee thereof, authorizing the execution, delivery and performance by BSC of this Amendment and Restatement and (y) a certificate setting forth the name and specimen signature of each officer of BSC authorized on its behalf to execute such agreements. 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Restatement to be duly executed by their respective authorized officers as of the day and year first above written. BETHLEHEM STEEL FUNDING, LLC By: /s/ Gary L. Millenbruch ---------------------------- Title: Authorized Agent 5111 North Point Boulevard Sparrows Point, MD 21219-1014 Telephone: 410-388-7780 Facsimile: 410-388-7783 Attention: D.K. Schoenen, Authorized Agent BETHLEHEM STEEL CREDIT AFFILIATE ONE, INC. By: /s/ Gary L. Millenbruch ---------------------------- Title: Authorized Agent 5111 North Point Boulevard Sparrows Point, MD 21219-1014 Telephone: 410-388-7781 Facsimile: 410-388-7783 Attention: D.K. Schoenen, President 5 BETHLEHEM STEEL CREDIT AFFILIATE TWO, INC. By: /s/ Gary L. Millenbruch ---------------------------- Title: Authorized Agent 5111 North Point Boulevard Sparrows Point, MD 21219-1014 Telephone: 410-388-7781 Facsimile: 410-388-7783 Attention: D.K. Schoenen, President BETHLEHEM STEEL CORPORATION, as Servicer By: /s/ Gary L. Millenbruch ----------------------------- Title: EVP, Chief Financial Officer and Treasurer 1170 Eighth Avenue Bethlehem, PA 18016 Telephone: (610) 694-2603 Facsimile: (610) 694-1258 Attention: Leonard M. Anthony 6 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent, Structuring and Collateral Agent, and L/C Issuing Bank By: /s/ Robert S. Jones --------------------------------- Title: Vice President 60 Wall Street New York, NY 10260 Telephone: Facsimile: Attention: 7 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement THE CHASE MANHATTAN BANK, as L/C Issuing Bank By: /s/ James H. Ramage -------------------------- Title: Vice President 8 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as L/C Issuing Bank By: /s/ Gregory L. Hong ----------------------------- Title: Deputy General Manager 9 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement Commitment: $41,212,121.21 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Robert S. Jones -------------------------- Title: Vice President 10 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement Commitment: $36,833,333.33 THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By: /s/ Gregory L. Hong ---------------------------- Title: Deputy General Manager 11 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement Commitment: $30,909,090.91 THE CHASE MANHATTAN BANK By: /s/ James H. Ramage ---------------------------- Title: Vice President 12 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement Commitment: $25,757,575.76 FIRST UNION NATIONAL BANK (successor to Corestates Bank, N.A.) By: /s/ William M. Hogan ---------------------------- Title: Vice President 13 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement Commitment: $25,757,575.76 THE BANK OF NEW YORK By: /s/ Walter C. Parelli ------------------------- Title: Vice President 14 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement Commitment: $25,757,575.76 UBS AG, Stamford Branch By: /s/ Philippe R. Sandmeier --------------------------- Title: Director By: /s/ Paula Mueller ---------------------------- Title: Director 15 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement Commitment: $23,181,818.19 THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Jeffrey Lubatkin ---------------------------- Title: Vice President 16 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement Commitment: $41,212,121.21 BANK OF AMERICA NT & SA By: /s/ Thomas Blake -------------------------------- Title: Senior Vice President 17 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement Commitment: $12,106,060.60 SALOMON BROTHERS HOLDING COMPANY INC. By: /s/ Timothy L. Freeman ------------------------------- Title: Attorney-in-Fact 18 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement Commitment: $15,454,545.45 SOCIETE GENERALE By: /s/ Joseph A. Philbin --------------------------------- Title: Director 19 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement Commitment: $12,878,787.88 BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. (as assignee from Bank Austria AG) By: /s/ Amy Rick ----------------------------- Title: Vice President By: /s/ Frederic W. Hall ----------------------------- Title: Vice President 20 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement Commitment: $12,878,787.88 SUMMIT BANK By: /s/ David B. Kennedy ------------------------------- Title: Regional Vice President 21 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement Commitment: $12,878,787.88 THE SUMITOMO BANK, LIMITED NEW YORK BRANCH By: /s/ C. Michael Garrido -------------------------------- Title: Senior Vice President 22 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement Commitment: $12,878,787.88 WILMINGTON TRUST By: /s/ Joseph M. Finley ----------------------------- Title: Vice President 23 Signature page to June 17, 1999 Bethlehem Steel Amended and Restated Receivables Purchase Agreement Commitment: $10,303,030.30 THE INDUSTRIAL BANK OF JAPAN LIMITED By: /s/ John Dippo ------------------------------ Title: Senior Vice President EX-10 10 Exhibit 10(i) FORM OF INDEMNIFICATION ASSURANCE AGREEMENT ------------------------------------------- [Bethlehem Steel Corporation] [Name and Address of Director or Officer] Dear : This letter will confirm the agreement and understanding between Bethlehem Steel Corporation (the "Company") and you regarding your service as a [Director/Officer] of the Company. It is and has been the policy of the Company to indemnify its officers and directors against any costs, expenses and other liabilities to which they may become subject by reason of their service to the Company, and to insure its directors and officers against such liabilities, as and to the extent permitted by applicable law and in accordance with the principles of good corporate governance. In this regard, the Company's By-laws (Article IX) require that the Company indemnify and advance costs and expenses to (collectively, "indemnify") its directors and officers as permitted by Delaware law. A copy of the relevant provisions of the Company's By-laws, as amended, is attached hereto. In consideration of your service as a [Director/Officer] of the Company, the Company shall indemnify you, and hereby confirms its agreement to indemnify you, to the full extent provided by applicable law and the By-laws of the Company as currently in effect. In particular, as provided by the By-laws, the Company shall make any necessary determination as to your entitlement to indemnification in respect of any liability within 60 days of receiving a written request from you for indemnification against such liability. You have agreed to provide the Company with such information or documentation as the Company may reasonably request to evidence the liabilities against which indemnification is sought or as may be necessary to permit the Company to submit a claim in respect thereof under any applicable directors and officers liability insurance or other liability insurance policy. You have further agreed to cooperate with the Company in the making of any determination regarding your entitlement to indemnification. If the Company does not make a determination within the required 60-day period, a favorable determination will be deemed to be made, and you shall be entitled to payment, subject only to your written agreement to refund such payment if a contrary determination is later made and the delay was by reason of the inability of the Company to make such determination within the 60-day period. In the event the Company shall determine that you are not entitled to indemnification, the Company shall give you written notice thereof specifying the reason therefor, including any determinations of fact or conclusions of law relied upon in reaching such determination. Notwithstanding any determination made by the Company that you are not entitled to indemnification, you shall be entitled to seek a de novo judicial determination of your right to indemnification under the By-laws and this agreement by commencing an appropriate action therefor within 180 days after the Company shall notify you of its determination. The Company shall not oppose any such action by reason of any prior determination made by it as to your right to indemnification or, except in good faith, raise any objection not specifically relating to the merits of your indemnification claim or not considered by the Company in making its own determination. In any such proceeding, the Company shall bear the burden of proof in showing that your conduct did not meet the applicable standard of conduct required by the By-laws or applicable law for indemnification. It is understood that, as provided in Section 4 of Article IX of the By-laws, any expenses incurred by you in any investigation or proceeding by the Company or before any court commenced for the purpose of making any such determination shall be reimbursed by the Company. No future amendment of the By-laws shall diminish your rights under this agreement, unless you shall have consented to such amendment. Your right to indemnification as aforesaid shall be in addition to any right to remuneration to which you may from time to time be entitled as a [Director/Officer]. It is understood and agreed that your right to indemnification shall not entitle you to continue in your present position with the Company or any future position to which you may be appointed or elected and that you shall be entitled to indemnification under the By-laws only in respect to liabilities arising out of acts or omissions or alleged acts or omissions by you as a [Director/Officer] or as otherwise provided by the By-laws, but you shall be entitled to such indemnification with respect to any such liability, whether incurred or arising during or after your service as a [Director/Officer] and whether before or after the date of this letter, in respect of any claim, cause, action, proceeding or investigation, whether commenced, accruing or arising during or after your service as a [Director/Officer] and whether before or after the date of this letter. In further consideration of your service as a [Director/Officer] of the Company, the Company in connection with its indemnification policy has arranged for the issuance of, and you shall be entitled to the benefits of, an "Irrevocable Straight Standby Letter of Credit" issued by Morgan Guaranty Trust Company of New York. Said letter of credit has been arranged for the purpose of assuring payment to you, certain other current and former directors and officers of the Company and future directors, officers and employees of the Company and its affiliates designated by the Board of Directors of the Company ("Indemnitees") of any amounts to which you and they may become entitled as indemnification pursuant to the By-laws in the event that, for any reason, the Company shall 2 fail promptly to pay to you, upon written request therefor, any such indemnification, said assurance for all Indemnitees being limited at any time to $5,000,000 in aggregate amount. The Company understands that there has been established an irrevocable trust, the Bethlehem Indemnification Trust, for which First Valley Bank, Bethlehem, Pennsylvania, acts as trustee, for the purpose, among other things, of administering the respective interests of the Indemnitees in said letter of credit, and the Company has consented to the issuance and delivery of said letter of credit to the Bethlehem Indemnification Trust. Unless renewed or replaced by a comparable letter of credit in the amount of $5,000,000, the full undrawn amount of said letter of credit may be drawn upon prior to the expiration thereof. Drawings on said letter of credit may be arranged through the Bethlehem Indemnification Trust, as provided by the trust agreement therefor, by contacting the First Valley Bank, One Bethlehem Plaza, Bethlehem, Pennsylvania 18018. You have agreed to repay to the Bethlehem Indemnification Trust any amount paid to you by such trust (i) if it shall ultimately be determined (by the Company and upon expiration of the 180-day period for commencement of a judicial proceeding for a de novo determination or by a final judicial determination) that you are not entitled under this agreement or otherwise to indemnification from Bethlehem in respect of the liability for which you shall have received payment or (ii) if you shall subsequently receive payment in respect of such liability from any liability insurer or from Bethlehem or any successor thereto. It is agreed that, in addition to the rights of any other person to do so, the Company shall have the right to compel any repayment to the Bethlehem Indemnification Trust so required. This agreement shall terminate upon the later of (i) the tenth anniversary of the date on which you shall cease to be a director or officer of the Company or (ii) the final termination or resolution of all actions, suits, proceedings or investigations commenced within such ten-year period and relating to the Company or any of its affiliates or your services thereto to which you may be or become a party and of all claims for indemnification by you under this agreement or against the Bethlehem Indemnification Trust asserted within such ten- year period. This agreement supersedes any and all prior agreements between the Company and you relating to the subject matter hereof. It is understood and agreed that this agreement is binding upon the Company and its successors and shall inure to your benefit and that of your heirs, distributees and legal representatives. This agreement, and the interpretation and enforcement hereof, shall be governed by the laws of the State of Delaware. In confirmation of the provisions of the Company's By-laws, the Company hereby agrees to pay, and you shall be held harmless from and indemnified against, any costs and expenses (including attorneys' fees) which you may reasonably incur in connection with any challenge to the validity of, or the performance and enforcement of, this agreement, in the same manner as provided by the Company's By-laws. 3 If the foregoing is in accordance with your understanding of our agreement, kindly countersign the enclosed copies of this letter, whereupon this letter shall become a binding agreement in accordance with the laws of the State of Delaware. Very truly yours, BETHLEHEM STEEL CORPORATION By: -------------------------- - ------------------------------- [Signature of Director/Officer] 4 EX-10 11 Schedule A ---------- 1. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and Curtis H. Barnette. 2. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and George P. Jenkins. 3. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and Reginald H. Jones. 4. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and Winthrop Knowlton. 5. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and Dean P. Phypers. 6. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and Walter F. Williams. 7. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and Lonnie A. Arnett. 8. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and D. Sheldon Arnot. 9. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and Robert W. Cooney. 10. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and George T. Fugere. 11. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and John A. Jordan, Jr. 12. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and James F. Kegg. 13. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and David H. Klinges. 14. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and Gary L. Millenbruch. 15. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and C. Adams Moore. 16. Indemnification Assurance Agreement dated December 29, 1986 between Bethlehem Steel Corporation and Larry L. Adams. 17. Indemnification Assurance Agreement dated December 29, 1986 between Bethlehem Steel Corporation and Benjamin C. Boylston. 18. Indemnification Assurance Agreement dated January 28, 1987 between Bethlehem Steel Corporation and Herman E. Collier. 19. Indemnification Assurance Agreement dated January 28, 1987 between Bethlehem Steel Corporation and Edwin A. Gee. 20. Indemnification Assurance Agreement dated January 28, 1987 between Bethlehem Steel Corporation and Thomas L. Holton. 21. Indemnification Assurance Agreement dated March 1, 1987 between Bethlehem Steel Corporation and Roger P. Penny. 22. Indemnification Assurance Agreement dated May 27, 1987 between Bethlehem Steel Corporation and Andrew M. Weller. 23. Indemnification Assurance Agreement dated January 27, 1988 between Bethlehem Steel Corporation and John B. Curcio. 24. Indemnification Assurance Agreement dated January 27, 1988 between Bethlehem Steel Corporation and William C. Hittinger. 25. Indemnification Assurance Agreement dated January 27, 1988 between Bethlehem Steel Corporation and William A. Pogue. 26. Indemnification Assurance Agreement dated September 27, 1989 between Bethlehem Steel Corporation and Robert McClements, Jr. 27. Indemnification Assurance Agreement dated September 27, 1989 between Bethlehem Steel Corporation and John L. Kluttz. 2 28. Indemnification Assurance Agreement dated June 27, 1990 between Bethlehem Steel Corporation and Duane R. Dunham. 29. Indemnification Assurance Agreement dated September 26, 1990 between Bethlehem Steel Corporation and John F. Ruffle. 30. Indemnification Assurance Agreement dated May 1, 1991 between Bethlehem Steel Corporation and Carl F. Meitzner. 31. Indemnification Assurance Agreement dated July 1, 1991 between Bethlehem Steel Corporation and Walter N. Bargeron. 32. Indemnification Assurance Agreement dated March 1, 1992 between Bethlehem Steel Corporation and David P. Post. 33. Indemnification Assurance Agreement dated November 1, 1992 between Bethlehem Steel Corporation and Stephen G. Donches. 34. Indemnification Assurance Agreement dated November 1, 1992 between Bethlehem Steel Corporation and William H. Graham. 35. Indemnification Assurance Agreement dated November 1, 1992 between Bethlehem Steel Corporation and G. Penn Holsenbeck. 36. Indemnification Assurance Agreement dated March 1, 1993 between Bethlehem Steel Corporation and Benjamin R. Civiletti. 37. Indemnification Assurance Agreement dated March 1, 1993 between Bethlehem Steel Corporation and Worley H. Clark. 38. Indemnification Assurance Agreement dated March 1, 1993 between Bethlehem Steel Corporation and Harry P. Kamen. 39. Indemnification Assurance Agreement dated April 28, 1993 between Bethlehem Steel Corporation and Joseph F. Emig. 40. Indemnification Assurance Agreement dated April 28, 1993 between Bethlehem Steel Corporation and Andrew R. Futchko. 3 41. Indemnification Assurance Agreement dated April 28, 1993 between Bethlehem Steel Corporation and Timothy Lewis. 42. Indemnification Assurance Agreement dated April 28, 1993 between Bethlehem Steel Corporation and William E. Wickert, Jr. 43. Indemnification Assurance Agreement dated March 1, 1994 between Bethlehem Steel Corporation and Augustine E. Moffitt, Jr. 44. Indemnification Assurance Agreement dated March 16, 1994 between Bethlehem Steel Corporation and Lewis B. Kaden. 45. Indemnification Assurance Agreement dated January 31, 1996 between Bethlehem Steel Corporation and Shirley D. Peterson. 46. Indemnification Assurance Agreement dated May 1, 1996 between Bethlehem Steel Corporation and Gregory F. Paolini. 47. Indemnification Assurance Agreement dated May 1, 1996 between Bethlehem Steel Corporation and Malcolm J. Roberts. 48. Indemnification Assurance Agreement dated May 1, 1996 between Bethlehem Steel Corporation and Robert A. Rudzki. 49. Indemnification Assurance Agreement dated May 1, 1996 between Bethlehem Steel Corporation and Dorothy L. Stephenson. 50. Indemnification Assurance Agreement dated June 5, 1998 between Bethlehem Steel Corporation and Van R. Reiner. 51. Indemnification Assurance Agreement dated June 17, 1998 between Bethlehem Steel Corporation and William M. Landuyt. 52. Indemnification Assurance Agreement dated February 19, 1999 between Bethlehem Steel Corporation and Carl W. Johnson. 53. Indemnification Assurance Agreement dated October 1, 1999 between Bethlehem Steel Corporation and Leonard M. Anthony. 54. Indemnification Assurance Agreement dated October 1, 1999 between 4 Bethlehem Steel Corporation and Thomas J. Conarty, Jr.. 55. Indemnification Assurance Agreement dated October 1, 1999 between Bethlehem Steel Corporation and David M. Beinner. 5 EX-10 12 Exhibit 10(k) AMENDED CONSULTING AGREEMENT AND COVENANT NOT TO COMPETE AMENDED AGREEMENT, made this 28th day of July, 1999, by and between BETHLEHEM STEEL CORPORATION, a Delaware corporation ("Bethlehem"), and Curtis H. Barnette, residing at 1112 prospect Avenue, Bethlehem, PA 18018 ("Consultant"). W I T N E S S E T H: ------------------- WHEREAS, in recognition of the continued value to Bethlehem of Consultant's extensive knowledge and expertise concerning the business of Bethlehem, Bethlehem desires to be able to retain the Consultant after his termination of employment to perform consulting services for Bethlehem, and the Consultant desires to accept such position all in accordance with the terms and conditions hereof; and WHEREAS, Bethlehem and the Consultant desire to amend the Agreement dated July 1, 1993 previously entered into by Bethlehem and the Consultant with respect to the matters covered herein to reflect the agreed upon compensation arrangement for the Consultant's services and certain other matters; NOW, THEREFORE, in consideration of the premises and of the covenants and conditions hereinafter set forth, the parties hereto agree as follows: 1. Retention of Consultant. Bethlehem agrees to retain Consultant to ----------------------- perform and Consultant agrees to perform, consulting services for Bethlehem upon the terms and conditions hereinafter set forth. 2 2. Term. The term of this Amended Agreement shall be effective on ---- the date of the Consultant's termination of employment and shall extend to the second anniversary of the date of the Consultant's termination of employment, and shall thereafter be extended on a year-to-year basis, subject to termination as provided in Section 9 of this Amended Agreement. Notwithstanding anything to the contrary stated herein, the rights and obligations of the parties provided in Section 7 of this Amended Agreement and other Sections of this Amended Agreement relating to said matters dealt with in Section 7 of this Amended Agreement shall not be affected by the termination of this Amended Agreement prior to the fifth anniversary of the Consultant's termination of employment and shall continue to be effective after such termination of this Amended Agreement until the fifth anniversary of the Consultant's termination of employment. 3. Duties and Extent of Services. Consultant agrees that during the ----------------------------- term hereof, he shall offer assistance to Bethlehem and his successor(s) as Chairman and Chief Executive Officer of Bethlehem during the transition period following his termination of employment and furnish consulting services to Bethlehem with respect to the operation of Bethlehem's businesses, including but not limited to services in the areas of corporate strategy, governance, international trade, governmental and public affairs, union relations, legal and community affairs, at such times as are reasonably requested by Bethlehem, but in no event shall such time exceed 45 hours per month unless the parties shall otherwise agree. Consultant agrees that he shall serve Bethlehem during the term hereof faithfully, diligently and to the best of his ability under the direction of the 3 Chairman and Board of Directors of Bethlehem, and he further agrees that he shall not, directly or indirectly, take any action or knowingly approve the taking of any action by any other person which would injure the business of Bethlehem or bring Bethlehem into disrepute. Consultant shall have the right, during the term hereof, to engage or participate in, or become employed by, or render advisory or other services in connection with, any and all other business activities, other than for a firm, corporation or business enterprise which then directly or indirectly competes with any of the business operations or activities of Bethlehem as provided in Section 7 of this Amended Agreement. Consultant will coordinate his activities hereunder with the Senior Vice President and Chief Administrative Officer unless otherwise designated by the Chairman or the Board. 4. Remuneration. Bethlehem agrees to pay Consultant, as full ------------ compensation for all of the services to be rendered by Consultant under and pursuant to this Amended Agreement, as follows: (a) Subject to Section 10, an annual retainer fee of $200,000, payable $50,000 quarterly in advance, shall be paid to Consultant during the term of this Amended Agreement commencing within thirty (30) days following the Consultant's termination of employment. No hourly fees or payments shall be payable in addition to such annual retainer fee(s) with respect to the Consultant's furnishing of services during the term of this Amended Agreement unless the parties shall otherwise agree. 4 (b) Bethlehem shall reimburse Consultant for all reasonable expenses properly incurred by him on behalf of Bethlehem in the performance of his duties hereunder, provided that proper vouchers are submitted to Bethlehem by Consultant evidencing such expenses and the purposes for which the same were incurred. 5. No Employment Relationship. Consultant shall be an independent -------------------------- contractor and shall have no power to bind Bethlehem or to assume or to create any obligation or responsibility, expressed or implied, on behalf of or in the name of Bethlehem. It is specifically acknowledged by the parties that Bethlehem shall not, with respect to Consultant's consultative services, exercise such control over him as would indicate or establish that a relationship of employer and employee exists between him and Bethlehem. 6. Confidentiality. Consultant agrees that during the period --------------- referred to in Section 7 of this Amended Agreement, or at any time thereafter, he will not disclose or reveal to anyone (other than persons within Bethlehem, including its subsidiaries and affiliates, and then only as required in the performance of his duties) any confidential information relating to the business, techniques, products, operations and affairs of Bethlehem, which is not generally known or recognized as standard practice. 7. Restrictive Covenant. Consultant agrees that, during the period -------------------- beginning on the date of the Consultant's termination of employment and ending on the later of (a) the fifth anniversary of the date of the Consultant's termination of employment or (b) the end of the term of this Amended Agreement, he shall not, without the prior written approval of the Board of Directors, directly or indirectly become an officer or 5 director of, or become employed by, or render advisory or other services to, or make any financial investment in, any firm, corporation or business enterprise directly or directly or indirectly competitive with any of the business operations or activities of Bethlehem as currently conducted. Consultant also agrees that, during the period this covenant is in effect and upon reasonable request by Bethlehem, he will disclose to Bethlehem the nature and extent of his business activities which disclosure shall be in sufficient detail to permit Bethlehem to make a reasonable determination that his activities are in conformance with his obligations under this Amended Agreement. Nothing contained in this Section 7 shall prohibit or restrict the Consultant from being employed by a law firm that may provide services to a client which is a competitor of Bethlehem provided that the Consultant shall not directly or indirectly assist in the providing of such services. Also, nothing contained in this Section 7 shall prohibit or restrict the Consultant from making any investment in a corporation or other entity whose securities are listed on a United States or Canadian securities exchange or actively traded in the over-the-counter market, so long as such investment does not give the Consultant the right to control or influence the policy decisions of any business operations or activities which are, directly or indirectly, in competition with any of the business operations or activities of Bethlehem. The geographical area to which this provision refers is the United States. It is intended that the foregoing provision shall be severable and shall apply separately and distinctly to each of the said states of the United States and within such states to each of the counties and municipalities therein with the same force and effect as though the said 6 covenant was separately expressed with respect to each state, country and municipality. The Consultant declares that the territorial and time limitations under this Amended Agreement are reasonable and are properly required for the adequate protection of Bethlehem. 8. Indemnification. Bethlehem shall indemnify and defend The --------------- Consultant against any and all claims, actions, expenses and liabilities related to or arising from services performed for Bethlehem by the Consultant under this Agreement. Bethlehem shall be responsible for the defense of any actual or threatened legal or administrative action, including any attorney's fees incurred by the Consultant, against the Consultant to which this indemnification provision applies, provided that the Consultant cooperates with the defense and resolution of the action. This indemnification provision shall be in addition to any other indemnification that may be available to the Consultant, and shall apply provided the Consultant has acted in good faith in what he reasonably believes to be in the best interests of Bethlehem and has not engaged in willful misconduct. 9. Notices. Any notices and other communications which are required ------- or permitted hereunder, shall be sufficiently given if in writing and personally delivered or sent by registered or certified mail, postage prepaid, return receipt requested, to the parties at their respective addresses, or to such other address or addresses as any party shall have given notice of pursuant hereto. 10. Termination. This Amended Agreement shall be subject to ----------- termination as follows: 7 (a) at any time, by the mutual consent of the parties, and (b) as of the second anniversary of the date of the Consultant's termination of employment or as of any succeeding anniversary date, by Bethlehem or the Consultant for any reason upon ninety (90) days prior written notice to the other party. In the case of termination date of this Amended Agreement, the annual retainer fee for such year of services shall be subject to pro-ration based on the ratio of (i) the period measured from the beginning of the year to the date of termination to (ii) the entire year. 11. Arbitration. Disputes arising out of or in connection with the ----------- interpretation and application of this Amended Agreement shall be discussed by the Consultant and Bethlehem in good faith negotiations for the purpose of reaching an amicable resolution. Any such disputes which cannot be settled amicably within thirty (30) days after written notice by one party to the other (or after such longer period agreed to in writing by the parties), shall thereafter be settled by binding arbitration in Bethlehem, Pennsylvania, to be conducted pursuant to the rules and procedures then obtaining of the American Arbitration Association and judgment on the award rendered in such arbitration may be entered in any court of competent jurisdiction. 12. Successors. This Amended Agreement shall inure to the benefit of ---------- and shall be binding upon Consultant's heirs, executors, administrators, successors and legal representatives, and shall inure to the benefit of and be binding upon Bethlehem and their successors, but Consultant's obligations may not be delegated and, except as otherwise provided herein, Consultant may not assign, transfer, pledge, encumber, 8 hypothecate or otherwise dispose of this Amended Agreement, or any of his rights hereunder (whether by operation of law or otherwise), and any such attempted delegation or disposition shall be null and void without effect. 13. Successor Corporations. It is understood and agreed by ---------------------- Consultant that in the event the business of Bethlehem shall be carried on by a successor to Bethlehem, this Amended Agreement shall apply to his consulting services for such successor corporation. 14. Severability. If at any time subsequent to the date hereof, any ------------ provision of this Amended Agreement shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall have no effect upon and shall not impair the enforceability of any other provision of this Amended Agreement. 15. General. This Amended Agreement has been made in the ------- Commonwealth of Pennsylvania and shall be governed by, construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania. This Amended Agreement contains the entire agreement among the parties hereto with respect to the transactions referred to herein or contemplated hereby and may be amended, modified or supplemented only by a written instrument signed by each of the parties. This Amended Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but all of which shall constitute but one and the same 9 instrument. The paragraph headings contained in this Amended Agreement are for convenience of reference only and shall not be a part of this Amended Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Amended Agreement as of the day and year first above written. BETHLEHEM STEEL CORPORATION By: /s/ A. E. Moffitt, Jr. ----------------------- CONSULTANT /s/ Curtis H. Barnette - ----------------------------- Exhibit 10(l) CONSULTING AGREEMENT AND COVENANT NOT TO COMPETE AGREEMENT, made this 31st day of January, 2000, by and between BETHLEHEM STEEL CORPORATION, a Delaware corporation ("Bethlehem"), and R. P. Penny, residing at 1666 Country Road, Bethlehem, Pennsylvania 18015 ("Consultant"). W I T N E S S E T H: ------------------- WHEREAS, in recognition of the continued value to Bethlehem, of Consultant's extensive knowledge and expertise concerning the business of Bethlehem, Bethlehem desires to be able to retain the Consultant after his termination of employment to perform consulting services for Bethlehem, and the Consultant desires to accept such position all in accordance with the terms and conditions hereof; NOW, THEREFORE, in consideration of the premises and of the covenants and conditions hereinafter set forth, the parties hereto agree as follows: 1. Retention of Consultant. Bethlehem agrees to retain Consultant to ----------------------- perform, and Consultant agrees to perform, consulting services for Bethlehem upon the terms and conditions hereinafter set forth. 2. Term. The retention of Consultant hereunder shall be effective on ---- the date of the Consultant's termination of employment and shall terminate on the fourth anniversary of the date of the Consultant's termination of employment, unless sooner terminated by mutual written consent of the parties. 2 3. Duties and Extent of Services. Consultant agrees that during the ----------------------------- term hereof, he shall furnish consulting services to Bethlehem with respect to the operation of Bethlehem's businesses at such times as are reasonably requested by Bethlehem, but in no event shall such time exceed 30 hours per month unless the parties shall otherwise agree. Consultant agrees that he shall serve Bethlehem during the term hereof faithfully, diligently and to the best of his ability under the direction of the Chairman and Board of Directors of Bethlehem, and he further agrees that he shall not, directly or indirectly, take any action or knowingly approve the taking of any action by any other person which would injure the business of Bethlehem or bring Bethlehem into disrepute. Consultant shall have the right, during the term hereof, to engage or participate in, or become employed by, or render advisory or other services in connection with, any and all other business activities, other than for a firm, corporation or business enterprise which then directly or indirectly competes with any of the business operations or activities of Bethlehem as provided in Section 7 of this Agreement. 4. Remuneration. Bethlehem agrees to pay Consultant, as full ------------ compensation for all of the services to be rendered by Consultant under and pursuant to this Agreement, on a monthly basis at the rate of $200 per hour worked after the third month following Consultant's termination of employment or on such other basis or at such other rate as the parties may mutually agree. Such payments by Bethlehem shall be paid to Consultant at the end of each month in which services are rendered. Bethlehem shall reimburse Consultant for all reasonable expenses properly incurred by him on behalf of Bethlehem in the performance of his duties hereunder, provided that proper vouchers are submitted to Bethlehem by Consultant evidencing such expenses 3 and the purposes for which the same were incurred. In addition, Bethlehem agrees to pay Consultant a retainer fee of $146,001 which shall be due and payable in three (3) equal installments of $48,667 each as follows: (1) at the end of the first month following Consultant's termination of employment, (2) at the end of the second month following Consultant's termination of employment, and (3) at the end of the third month following Consultant's termination of employment. 5. No Employment Relationship. Consultant shall be an independent -------------------------- contractor and shall have no power to bind Bethlehem or to assume or to create any obligation or responsibility, expressed or implied, on behalf of or in the name of Bethlehem. It is specifically acknowledged by the parties that Bethlehem shall not, with respect to Consultant's consultative services, exercise such control over him as would indicate or establish that a relationship of employer and employee exists between him and Bethlehem. 6. Confidentiality. Consultant agrees that during the term of this --------------- Agreement, or at any time thereafter, he will not disclose or reveal to anyone (other than persons within Bethlehem, including it subsidiaries and affiliates, and then only as required in the performance of his duties) any confidential information relating to the business, techniques, products, operations and affairs of Bethlehem, which is not generally known or recognized as standard practice. 7. Restrictive Covenant. Consultant agrees that, during the term of -------------------- this Agreement, he shall not, without the prior written approval of the Board of Directors, directly or indirectly become an officer or director of, or become employed by, or render advisory or other services to, or make any financial investment in, any firm, corporation or business enterprise directly or indirectly competitive with any of the business operations or activities of 4 Bethlehem. Consultant also agrees that, during the term of this Agreement and upon request by Bethlehem, disclose to Bethlehem the nature and extent of his business activities which disclosure shall be in sufficient detail to permit Bethlehem to make a reasonable determination that his activities are in conformance with his obligations under this Agreement. Nothing contained in this Section 7 shall prohibit or restrict the Consultant from making any investment in a corporation or other entity whose securities are listed on a United States or Canadian securities exchange or actively traded in the over-the-counter market, so long as such investment does not give the Consultant the right to control or influence the policy decisions of any business operations or activities which are, directly or indirectly, in competition with any of the business operations or activities of Bethlehem. The geographical area to which this provision refers is the United States. It is intended that the foregoing provision shall be severable and shall apply separately and distinctly to each of the said states of the United States and within such states to each of the counties and municipalities therein with the same force and effect as though the said covenant was separately expressed with respect to each state, county and municipality. The Consultant declares that the territorial and time limitations under this Agreement are reasonable and are properly required for the adequate protection of Bethlehem. 8. Notices. Any notices and other communications which are required ------- or permitted hereunder, shall be sufficiently given if in writing and personally delivered or sent by registered or certified mail, postage prepaid, return receipt requested, to the parties at their respective addresses, or to such other address or addresses as any party shall have given notice of pursuant hereto. 9. Arbitration. Disputes arising out of or in connection with the ----------- 5 interpretation and application of this Agreement shall be discussed by the Consultant and Bethlehem in good faith negotiations for the purpose of reaching an amicable resolution. Any such disputes which cannot be settled amicably within thirty (30) days after written notice by one party to the other (or after such longer period agreed to in writing by the parties), shall thereafter be settled by binding arbitration in Bethlehem, Pennsylvania, to be conducted pursuant to the rules and procedures then obtaining of the American Arbitration Association and judgment on the award rendered in such arbitration may be entered in any court of competent jurisdiction. 10. Successors. This Agreement shall inure to the benefit of and ---------- shall be binding upon Consultant's heirs, executors, administrators, successors and legal representatives, and shall inure to the benefit of and be binding upon Bethlehem and their successors, but Consultant's obligations may not be delegated and, except as otherwise provided herein, Consultant may not assign, transfer, pledge, encumber, hypothecate or otherwise dispose of this Agreement, or any of his rights hereunder (whether by operation of law or otherwise), and any such attempted delegation or disposition shall be null and void without effect. 11. Successor Corporations. It is understood and agreed by ---------------------- Consultant that in the event the business of Bethlehem shall be carried on by a successor to Bethlehem, this Agreement shall apply to his consulting services for such successor corporation. 12. Severability. If at any time subsequent to the date hereof, any ------------ provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall have no effect upon and shall not impair the 6 enforceability of any other provision of this Agreement. 13. General. This Agreement has been made in the Commonwealth of ------- Pennsylvania and shall be governed by, construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania. This Agreement contains the entire agreement among the parties hereto with respect to the transactions referred to herein or contemplated hereby and may be amended, modified or supplemented only by a written instrument signed by each of the parties. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but all of which shall constitute but one and the same instrument. The paragraph headings contained in this Agreement are for convenience of reference only and shall not be a part of this Agreement. 14. Prior Agreement. This Agreement cancels and supercedes the --------------- Agreement dated July 1, 1993, between the parties hereto. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. BETHLEHEM STEEL CORPORATION By: /s/ A. E. Moffitt, Jr. ------------------------ CONSULTANT: /s/ Roger P. Penny - ------------------------ Bethlehem Steel 1999 Annual Report Letter to Stockholders To Our Stockholders: Last year was difficult and challenging for Bethlehem, as it was for most companies in our industry. There were two principal reasons for our disappointing net loss of $183 million. First, we were seriously injured by unprecedented levels of dumped and subsidized steel imports. Second, we had higher operating costs related to outages taken for extensive planned modernization and related maintenance work, principally at our Sparrows Point Division. As a result of dumped and subsidized steel imports, shipments were reduced and prices depressed. Average steel prices for our products were down 9% from 1998 prices. Generally for Bethlehem, every 1% increase or decrease in the average realized price per ton for our products results in an increase or decrease in our net sales and pre-tax income of about $40 million. We took effective legal, governmental and public affairs actions to reduce unfair trade. As a result, after five consecutive quarters of price declines, we began to experience some price restoration in the fourth quarter of 1999 and the first quarter of 2000 and our order entry has been strengthening. During 1999, we also took steps to improve our long-term profitability and we made steady progress toward our Vision to Be the Premier Steel Company: . we completed the safest and most environmentally compliant year in the history of our Company; . we entered into new five-year labor agreements with the United Steelworkers of America that we believe to be fair, reasonable and in the interests of our employees and the Company; . we completed a number of very significant strategic projects at Sparrows Point, including the reline of the "L" Blast Furnace, and made substantial progress on construction of the new Cold Mill; . we completed the successful integration of the Bethlehem and Lukens plate businesses, and in January of this year completed our planned divestiture of Lukens' stainless businesses; . we increased the size of our revolving credit arrangement; . we received the General Motors Supplier of the Year Award for the fourth consecutive year and won similar awards from other customers; . we formed two joint-venture companies to help serve the automotive industry --Columbus Coatings Company and Columbus Processing Company; . we advanced e-business and e-commerce by becoming an equity partner in MetalSite, an Internet metals marketplace, and we became one of the first in the American steel industry to offer our customers "real-time" status of their orders on our website; and . we completed a successful transition to the year 2000 with no adverse computer issues. Since 1992, we have been transforming Bethlehem into a more competitive and modern steel company by focusing on value-added products; utilizing our superior capabilities in technology to provide value-added services to our customers; restructuring through the elimination of underperforming businesses; reorganizing through the establishment of individual business units; reducing our unfunded pension obligation; rebuilding our financial strength and improving our credit ratings; entering into joint ventures in key product lines; and investing in new facilities and modernizing our existing operations. Upon completion of Sparrows Point's Cold Mill in 2000 and other projects mentioned later in this report, Bethlehem will be well- positioned to achieve and sustain superior rates of return on the capital we have invested in our businesses, and to continue to rebuild our financial strength and achieve our objective of an investment-grade credit rating. Our investments in facilities and employee development will increase our productivity and help us to improve continuously in everything we do in order to be even more competitive. While we have made considerable progress in reshaping our company over the last few years, we face many challenges including excess steel capacity, restoring fair trade in steel and the rising cost of health care. Given the extremely competitive environment in which we operate, we must further increase the intensity of our cost-reduction efforts. We recently announced a series of aggressive actions to improve production and administrative efficiencies and to lower costs. Key changes include consolidating three of our major flat-rolled production divisions -- Burns Harbor, Sparrows Point and Bethlehem Lukens Plate (BLP) -- into two divisions, establishing a Shared Services unit and a smaller Corporate Center and reducing our salaried workforce company-wide. In consolidating our three business divisions, BLP's operations in Coatesville and Conshohocken will be part of the Sparrows Point Division and BLP's 110-inch and 160-inch plate mills located at Burns Harbor will be part of that Division. Our plate product customers recognize the value of the Bethlehem Lukens Plate name and, therefore, we will continue to market plate under that name. The Shared Services unit will consolidate various services that are now performed separately at the business divisions and at various corporate departments. We especially want to express our thanks to Roger Penny, former Vice Chairman and Director, who retired this year after 41 years of service with Bethlehem, and to Dean Phypers and Robert McClements, two of our Directors, who will be retiring in April of this year. We greatly appreciate the valuable and dedicated service they have provided to Bethlehem. Since 1992, I have been privileged to serve as your Chairman. Your management has taken significant actions since then to restructure and transform Bethlehem into a stronger company to compete in the global steel market. We are now completing an orderly transition to be effective April 25, 2000 to a new management team under the very able leadership of Duane Dunham, who will succeed me as Chairman and Chief Executive Officer. His extensive background in commercial matters, steel operations and general management provides him with the experience required to lead Bethlehem successfully into its Second Hundred Years. Duane and I share a common goal that all Bethlehem employees understand what is required to be consistently profitable and to take those daily actions that will give Bethlehem a competitive leadership position and provide you, our stockholders, with increased value. /s/ Curtis H. Barnette Curtis H. Barnette Chairman and Chief Executive Officer /s/ Duane R. Dunham Duane R. Dunham President and Chief Operating Officer January 26, 2000 Year in Review Operations During 1999, we took steps to further strengthen the competitive position of our four core steel businesses. Burns Harbor The Burns Harbor Division represents about 40% of our sales and ships flat- rolled sheet products, primarily to the automotive and service center markets. At Burns Harbor, we believe we have one of the most efficient producers of steel anywhere in the world. It has many competitive strengths, including its location and facility layout. Keeping Burns Harbor's leadership position as one of the best steel businesses in the world will require some continuing capital investments and productivity improvements that are currently in the planning stages. A major project currently under way to enhance the overall competitiveness of Burns Harbor is our recently formed Columbus Coatings Company, a 50-50 joint venture with The LTV Corporation, to serve the automotive industry's growing requirements for hot dip galvanized and galvannealed sheet steel. The new company will have an annual capacity of approximately 500,000 tons of premium corrosion-resistant steel for automotive applications. Construction of this state-of-the-art facility has started, and production is scheduled to begin during the fourth quarter of 2000. Burns Harbor sells about half of its finished product to the automotive industry, and this new coating line joint venture will further strengthen and grow Burns Harbor's position with the major automotive companies located in North America. Burns Harbor is already a supplier of choice to the very demanding automotive market. Its consistent and excellent performance with General Motors, its largest customer, has earned it the GM Supplier of the Year Award for four consecutive years, something no other steel company in the world has achieved. Sparrows Point The Sparrows Point Division represents about 30% of our sales and ships flat- rolled sheet products, primarily to the construction, service center and container markets. Sparrows Point has undergone the most significant transformation of all of our core businesses. Over the three-year period -- 1998 through 2000 -- Sparrows Point will have completed eight very significant strategic projects: . construction of a new cold sheet mill complex, . reline of its "L" Blast Furnace, . installation of pulverized coal injection for its blast furnace, . modernization of its basic oxygen furnace steelmaking shop, . construction of a new 30-acre scrap-processing yard, . installation of a new wide-slab caster, . renovations to its hot strip mill and . construction of a new roll grinding facility. The largest of these projects is the new, fully automated and continuous cold sheet mill complex, which is right on schedule. All of the buildings have been erected, cranes are operational and all six mill stands have been installed. Certain components of the mill, such as the hydrogen annealing line and the packaging and shipping facilities, have started. The pickler, skin pass mill, temper mill and tandem mill are all scheduled to start up in the first quarter of 2000, with full production expected to be achieved later in the year. We believe that these projects will result in significant improvements to Sparrows Point's competitiveness and return on capital employed. Of the eight projects at Sparrows Point, three of them -- the pulverized coal injection facility, the new scrap-processing yard and the new roll grinding facility -- are in partnership with third parties, and each of these projects has new and more flexible labor contracts covering them. Bethlehem Lukens Plate (BLP) The Bethlehem Lukens Plate Division represents about 20% of our sales and ships carbon and alloy plate products, primarily to the construction, machinery and energy markets. BLP was especially hard hit by the high levels of unfairly traded steel imports this past year. As a result, plate prices dropped precipitously to very low levels, and the Division took immediate steps to significantly reduce costs to help offset the adverse affect of these lower prices. We are just now beginning to see an improvement in plate market conditions, and we have recently achieved some modest restoration of plate prices. During this past year, we achieved the operating, administrative and other synergies that we had planned with the acquisition of Lukens. We also completed certain improvements to the Steckel plate mill in Conshohocken in accordance with our agreement to provide conversion services to Allegheny Ludlum Corporation. Additionally, with the sale of our stainless sheet operations in Massillon, Ohio in January 2000, we have completed the planned divestiture of the stainless and distribution assets that we acquired as part of the acquisition of Lukens. As discussed elsewhere in this report, we have announced that BLP will be consolidated into our Burns Harbor and Sparrows Point Divisions as part of a series of aggressive actions to improve production and administrative efficiencies and lower costs. Excess global plate capacity and new domestic capacity being built by competitors means we will continue to face a very challenging business environment in the coming years. As a result, we must continue to aggressively reduce costs while improving quality and service. We believe that we can become North America's premier plate supplier with the widest range of plate products on the continent. Pennsylvania Steel Technologies (PST) The Pennsylvania Steel Technologies business represents about 10% of our sales, and ships railroad rails, specialty blooms, flat bars and large-diameter pipe, primarily to the transportation, forging and energy markets. PST is one of only two domestic rail producers. This past year, PST's rail business was limited because of the sharp reduction in demand by the Class One railroads, caused in part by the mergers and acquisitions occurring in the railroad industry. As a result, rail demand declined significantly from 1998 levels. We anticipate a rebound in the rail market during 2000 to more normal levels. However, additional domestic capacity recently announced by a potential competitor means PST will continue to face intense competition. PST recently rolled an entirely new section of railroad rail that promises longer life through better wheel-to-rail contact. To be the first in the world to roll this new section underscores PST's dedication to new technology in the rail business. PST's other major product lines, including its specialty bloom and large- diameter pipe businesses, also suffered this past year. This was primarily because of weakness in energy-related markets. These markets have improved somewhat in recent months and our orders for specialty bloom products have been strengthening. Concentrating on Steel We believe that by concentrating on steel, with a focus on being a high-quality, low-cost producer, we will be among the most competitive producers for our products and the markets we serve. We also believe that stockholder value is inextricably linked to our ability to profitably serve our customers, promote partnerships among our employees, fully engage our suppliers and be a good corporate citizen. Customers We know that our long-term success depends on our customers' long-term success. We recognize that they have many choices of materials and steel suppliers, and that we will be their primary choice only by providing what they need, when they need it and at fair and competitive prices. Because steel users have many options in today's competitive global marketplace, our commercial team must be better informed, equipped and prepared to meet the needs of our customers. We have instituted our Customer Success Process, a cross-functional approach that involves multiple disciplines, to serve our customers. This dynamic process requires customer involvement and uses fact-based information and analysis. We expect significant benefits from this process in the years ahead. Employees While companies have many important assets, its employees are the most important. We will be successful only through the efforts of our employees working together as a team with a sense of common purpose and shared goals. We work hard every day at promoting partnerships among our employees by fostering trust, open and honest communications, ongoing education and training, and an acceptance of individual accountability and responsibility. We conducted a comprehensive review of our compensation, benefits, work environment and learning and development programs. The purpose of this review was to ensure that our programs reward employees for their contributions toward improving our performance. Bethlehem provides competitive pay and benefits, challenging work, learning opportunities and a safe work environment for its employees. At the same time, employees are responsible for helping us achieve our objectives, satisfy our customers, be flexible and partner with one another in their work. We began to train employees company-wide in Six Sigma, a disciplined methodology for reducing process variability. We will continue to expand implementation of Six Sigma for manufacturing and transactional processes to eliminate defects and reduce waste in everything we do, from entering purchase orders to manufacturing and delivering products. The Six Sigma methodology is one of our continuous improvement tools for making a significant impact on the bottom line of our business and satisfying our customers. We entered into five-year labor agreements with the United Steelworkers of America that cover represented employees at all of our locations. We believe that these are fair and competitive labor agreements. We established a new annual incentive plan that closely aligns our employees' interests with those of our stockholders. We believe that this supports our objective to have partnerships among employees, to have clear performance expectations, to effectively measure progress and to share the Company's success. Suppliers Suppliers represent a significant part of Bethlehem's business. They are an integral part of our success because their products and services result in high- quality, competitively priced products for our customers. Together with our suppliers, we are working aggressively to reduce the costs of the approximately $3 billion of goods and services purchased each year through the ongoing implementation of a process we refer to as Strategic Sourcing. The Strategic Sourcing effort began in late 1995 with a simple, easy-to- understand objective -- achieve significant, sustainable reductions in total costs of purchased goods and services. The process brings together employees from throughout the Company to take a well-coordinated and continuous look at the marketplace, the purchasing process and alternative suppliers, and we have achieved some very meaningful results. In 1998, we established a Supplier Awards Program that recognizes suppliers that meet or exceed demanding criteria of quality, performance and cost. The Awards Program emphasizes the value we place on suppliers that share our Vision. This past year, we selected 15 companies from the more than 7,000 worldwide providers of products and services. Their performances exemplify the standards we are working to develop with all of our suppliers. The following companies were recognized as Premier Suppliers of the Year for their performance in 1999: AMCI/Kepler, Alloy Sling Chain Industries, Ltd., Baker Refractories, Brandenburg Industrial Service Co., Considar, Inc., Elkem Metals Co. L.P., Ficel Transport, Inc., General Conservation Corporation, Koch Metals Division of Koch Carbon, Inc., Landstar Ligon, C.J. Langenfelder & Son, Inc., Motion Industries, Inc., A. Duie Pyle, Showa Denko Carbon, Inc. and Stauffer Manufacturing Co. Safety, Environment and Good Citizenship In last year's Annual Report, we reported that our safety and environmental performance for 1998 was the best ever recorded by our Company. We are especially proud to report that during 1999 we improved on those results and completed the safest and most environmentally compliant year in the history of our Company. Compared with 1998, our lost workday case incidence rate declined by 21%, our all-injury rate declined by 10% and our recordable case rate declined by 9%. Since 1994, when we began a joint safety performance improvement effort with the United Steelworkers of America, our lost workday case incidence rate declined by 67%, and our all-injury and recordable case rates declined by 53%. A major corporate objective is to have zero lost workdays. During 1999, we further improved on our excellent 1998 environmental performance. Compared with 1998, our Environmental Compliance Index, our corporate method of measuring environmental compliance, declined by 10%. Our corporate objective is zero environmental incidents. Achieving our objective of Being a Good Citizen is substantially enhanced through corporate leadership practices that improve the quality of life and help solve social problems in our communities. We focus on communities where we have an operating presence and, in a limited way, in other areas where our participation will help influence others to address quality of life issues. Our good citizenship approach emphasizes charitable contributions, volunteerism and economic development. Giving to the United Way at all of our facilities and individual volunteerism at educational, health services and other nonprofit organizations are regular practices of our employees. Our brownfields economic development initiatives involving almost 3,000 acres at former steel operating sites in Bethlehem and Johnstown, Pennsylvania and in Lackawanna, New York are industry-leading examples of the public-private partnerships that can help revitalize communities. In 1999, we were honored by Pennsylvania's Governor Tom Ridge with a Governor's Award for Environmental Excellence, recognizing our economic revitalization initiatives in Bethlehem, Pennsylvania as a national model for brownfields development. In 1999, Bethlehem became the first company to receive approval from both the U.S. Environmental Protection Agency and the Pennsylvania Department of Environmental Protection for a brownfields remediation plan developed under Pennsylvania's voluntary clean-up program. Technology Our research efforts are focused on achieving quality improvements and cost reductions in our operations and working closely with our major customers to identify and incorporate process and product technologies that will benefit our customers' manufacturing operations. For example, we are developing high- strength steels that are readily manufacturable in terms of weldability and formability and that allow automakers to produce cars that are lighter and more fuel-efficient, while maintaining superior crashworthiness. Similarly, we are supporting the production of high-performance plate for the bridge market. We recently developed as-rolled high-strength steels that are available in longer lengths than the conventional heat-treated grades and that help reduce customers' fabrication costs. We also provide welding guidelines and corrosion and welding data that demonstrate the excellent properties, and thus superior service performance, of these steels. As a result of a well-planned approach over the last five years, we achieved a smooth transition to the year 2000 and continued to operate our business and manufacturing systems and to serve our customers with no adverse computer issues. Also, of great importance, the costs associated with this Y2K effort were very low compared with competitor and industry norms and were charged to normal operating expenses. Electronic Business The emerging area of electronic business (e-business) has become increasingly important as we attempt to extend our efforts to reduce our costs and serve our customers. It involves enhanced interactions with our customers, improvements in the speed and efficiency of our manufacturing operations, additional effectiveness of our administrative processes and improved linkage and value from our entire supply chain. Internally, we have developed Internet web-based applications at bethsteel.com that provide customers access to order data that is important to their day-to-day operations. Cost of access, ease of use and timely availability of these data improve the effectiveness of our customer relationships and also reduce the total cost of doing business for both organizations. In addition, we are deploying intranet-based applications in such areas as production reporting, logistics and human resources. Externally, our recent equity investment in MetalSite, a business-to- business on-line metals marketplace, extends our leadership in the e-business and electronic data interchange (EDI) marketplace. MetalSite provides additional sales channels for our products, integrates order-to-delivery business processes and enables buyers and sellers to be brought together on a global basis. Our overall e-business strategy will continue to address these areas while specifically targeting improvements in customer satisfaction and the streamlining of business processes. Rebuilding Financial Strength We were disappointed this past year with our overall financial performance. Our net loss, combined with our high level of capital expenditures, caused us to incur additional debt and increase our financial leverage. Our objective is unchanged. We want to achieve a capital structure that will earn us an investment-grade credit rating. To do this, we know that we must further reduce our total debt, including our retiree obligations, and increase our stockholders' equity. We have made some progress during the past six years in improving our financial condition, especially in reducing our unfunded pension obligation. Our balance sheet pension liability at the end of 1999 was $410 million compared with $1.6 billion at the end of 1993. Additionally, we had a net unrecognized gain that is not reflected in the pension liability shown on the balance sheet. While accounting rules do not permit the immediate recognition of this net gain, the market value of our pension trust assets at year-end of over $6 billion was essentially equal to our projected benefit obligation. In other words, on this basis our pension obligation was essentially fully funded at the end of 1999. Our liquidity totaled $334 million at the end of last year. This consisted of about $100 million in cash and $235 million of available borrowings under our revolving credit arrangement. During 1999, we increased the size of our revolving credit arrangement by $60 million, to $660 million. We expect to maintain an adequate level of liquidity during 2000 primarily with cash provided from operations, further reductions in inventory, additional asset sales and available funds under our bank and other financing arrangements. International Steel Trade Unfairly traded imports continue to injure Bethlehem and the American steel industry. Both shipments and prices were depressed from pre-crisis levels. Average steel prices for domestic steel companies for all products in 1999 were down from average 1998 steel prices and represent the largest aggregate decline in nearly 20 years. Overall declines in steel prices for domestic steel companies were 8% for hot rolled, 7% for cold rolled and 14% for plate. Our trade position is simple and clear. We believe in: (1) open trade, (2) market-based trade, (3) rule-based trade and (4) enforcement of the rules when trade is unfair and injurious. We have continued to take appropriate legal, governmental affairs and public affairs actions. Our legal actions have included bringing appropriate trade cases. Our government affairs actions are centered on working closely with the Administration and Congress for the full and unyielding enforcement and strengthening of U.S. trade laws. Our public affairs activities have been coordinated with the United Steelworkers of America in the Stand Up for Steel Campaign. We will continue to take all appropriate actions and believe that they will in due course help to restore fair trade in steel. Financial Review and Operating Analysis Our net loss for 1999 was $183 million, or $1.72 per diluted share. Results for 1999 were especially depressed from record levels of unfairly traded steel imports and higher costs in connection with extensive outages and maintenance costs for planned modernization projects. Net income for 1998 was $120 million, or $.64 per diluted share, including an after-tax charge of $29 million related to closing our Sparrows Point plate mill. Net income for 1997 was $281 million, or $2.03 per diluted share, including an after-tax gain of $113 million related to the sale of our equity interest in Iron Ore Company of Canada (IOC). Excluding the effects of the charge and gain, net income for 1998 was $149 million ($.87 per diluted share) and net income for 1997 was $168 million ($1.11 per diluted share). Sales in 1999 were $3.9 billion compared with $4.5 billion in 1998 and $4.6 billion in 1997. Lukens Acquisition In May 1998, we acquired all of the outstanding stock of Lukens Inc. for about $560 million. See Note C, Acquisition of Lukens Inc., to the Consolidated Financial Statements for a description of the composition of the purchase price, assets acquired and method of accounting for the acquisition. The acquisition strengthened our position as the leading producer and supplier of carbon and alloy steel plate products. In addition, we acquired certain stainless steel plate and sheet manufacturing and distribution businesses that we intended to dispose of. Through January 2000, we have sold and liquidated stainless businesses, property and working capital generating net proceeds of about $316 million. During 1998, we completed the sale of certain stainless assets to Allegheny Ludlum Corporation (Allegheny) for $175 million. We also entered into agreements with Allegheny to provide it with conversion services to produce stainless steel slabs and coiled plate. We received $105 million in cash, and a non-interest- bearing note for the remaining $70 million that was paid in 1999. In 1999, we sold the stainless distribution business Washington Specialty Metals Corporation for about $70 million, and the stainless sheet operations in Washington, Pennsylvania for about $20 million. In January 2000, we completed our planned divestiture of Lukens' stainless businesses with the sale of the sheet operations in Massillon, Ohio. During this period, we liquidated substantially all stainless related working capital. During the fourth quarter of 1998, we closed the Sparrows Point 160-inch plate mill in order to more fully utilize plate facilities at Burns Harbor, Coatesville and Conshohocken to take advantage of the merged facilities' capabilities. In connection with the consolidation of our plate production, we recorded a charge of $35 million ($29 million after tax) during 1998 to write off the net book value of certain equipment and to recognize employee benefit- related costs. Operating Results Our loss from operations was $179 million for 1999 compared with income from operations of $225 million (excluding the $35 million charge related to the closing of the Sparrows Point plate mill) for 1998, and $239 million (excluding the $135 million gain related to the sale of our equity interest in IOC) for 1997. Operating results for 1999 declined precipitously from 1998 primarily due to (1) significantly lower realized prices and lower shipments from unprecedented levels of steel imports, especially for plate products, and (2) approximately $70 million of higher operating costs related to planned modernization and maintenance outages, and the temporary idling of our majority- owned iron ore operation located in Hibbing, Minnesota. Results declined in 1998 from 1997 primarily due to lower shipments and lower realized prices resulting from high levels of unfairly traded steel imports that flooded the market in the second half of 1998. The reduction of shipments and prices resulting from imports was partially offset by increased shipments resulting from our acquisition of Lukens and by lower costs. Costs improved principally from exiting underperforming businesses, reduced pension expense and improved operating performance at Pennsylvania Steel Technologies, Inc. (PST). The effects of changes in average realized steel prices, shipments and product mix on sales during the last two years were as follows: Increase (decrease) from prior year 1999 1998 - -------------------------------------------------------------------------------- Realized Prices (9)% (2)% Shipments (4) (1) Product Mix -- -- (13)% (3)% Raw steel production was 9.4 million tons in 1999, 10.2 million tons in 1998 and 9.6 million tons in 1997. The decrease in 1999 was due to the reline of our "L" Blast Furnace at Sparrows Point and was partially offset by the full-year impact of the acquisition of Lukens. The increase in 1998 was due to the acquisition of Lukens. The Burns Harbor Division shipped 3.7 million tons of sheet and strip products in 1999 compared with 3.6 million tons in 1998 and 3.9 million tons in 1997. Burns Harbor's 1999 operating results declined principally from significantly lower realized prices, caused primarily by unfairly traded steel imports, partially offset by lower costs. The Sparrows Point Division shipped 2.7 million tons of sheet and tin mill products in 1999, 2.6 million tons in 1998 and 2.8 million tons in 1997. Sparrows Point's 1999 operating results declined principally from lower realized prices caused primarily by unfairly traded steel imports. Sparrows Point also incurred approximately $60 million of higher operating costs in connection with the reline of its "L" Blast Furnace and certain other planned modernization and maintenance outages. Bethlehem Lukens Plate (BLP) shipped 1.7 million tons of plate products in 1999. Bethlehem shipped 1.7 million tons of plate products in 1998, including 425,000 tons from the Coatesville and Conshohocken facilities acquired in the Lukens acquisition, and 1.4 million tons in 1997. The operating profit of our plate products declined due to significantly lower realized prices principally from record levels of unfairly traded steel imports that started in the second half of 1998 and was partially offset by lower costs. Results declined slightly at PST in 1999 primarily due to lower rail shipments. Rail consumption was significantly lower in 1999 primarily due to the merger and acquisition activity among the domestic railroads. The adverse effect of lower shipments was almost completely offset by lower costs, which were primarily due to lower raw material scrap prices. Percentage of Bethlehem's Net Sales by Major Product 1999 1998 1997 Steel mill products: Hot rolled sheets 14.0% 13.3% 14.9% Cold rolled sheets 19.0 16.8 17.2 Coated sheets 30.8 28.6 31.5 Tin mill products 7.2 6.7 7.4 Plates 20.9 22.3 15.2 Rail products 2.7 4.4 4.3 Other steel mill products 2.6 4.5 4.5 Other products and services (including raw materials) 2.8 3.4 5.0 100.0% 100.0% 100.0% - -------------------------------------------------------------------------------- During 1999, our largest customer, General Motors Corporation, accounted for slightly more than 10% of our consolidated net sales. Percentage of Steel Mill Product Shipments by Principal Market (Based on tons shipped) 1999 1998 1997 - -------------------------------------------------------------------------------- Service Centers, Processors and Converters 49.7% 46.9% 46.9% Transportation (including automotive) 21.3 23.0 24.9 Construction 12.9 12.1 11.0 Containers 5.4 5.2 5.8 Machinery 4.2 4.9 4.7 Other 6.5 7.9 6.7 100.0% 100.0% 100.0% - -------------------------------------------------------------------------------- Liquidity and Capital Structure At December 31, 1999, total liquidity, comprising cash, cash equivalents and funds available under our credit arrangements, totaled $334 million compared with $479 million at December 31, 1998. At December 31, 1999, funds available under our credit arrangements totaled $235 million. Cash provided from operations before funding postretirement benefits in 1999 decreased to $202 million from $487 million in 1998 due to lower earnings, which was partially offset by changes in working capital, principally inventory. Net sales of accounts receivable under our bank credit agreement were $70 million in 1999 and $64 million in 1998. Cash provided from operations before funding postretirement benefits in 1998 decreased to $487 million from $551 million in 1997 due to lower earnings and changes in working capital, principally inventory. Other sources of cash in 1999 included new borrowings of $250 million and asset sales of $184 million. New borrowings included $160 million from our inventory credit agreement, a $60 million short-term loan arrangement for a portion of our Sparrows Point cold mill capital expenditures, and about $28 million of our $50 million construction financing arrangement for the wide-slab casting project at Sparrows Point. Asset sales consisted primarily of the sale of our stainless and distribution assets acquired from Lukens, including the collection of the $70 million note from Allegheny for its purchase of stainless assets in 1998. See Lukens Acquisition above. Principal uses of cash during 1999 included capital expenditures, debt payments and pension funding. We contributed $45 million to our pension fund in 1999 compared with $150 million in 1998. Our pension liability decreased to $410 million at December 31, 1999. Over the past six years, our pension liability has been reduced by about $1.2 billion from $1.6 billion at December 31, 1993. We have contributed amounts to our pension fund substantially in excess of amounts required under current law and regulations. Because of these contributions and better than expected earnings performance on our pension fund assets, we currently have a funding standard credit balance that would allow us to defer pension funding for several years, although we presently have no plans to do so. Major uses of cash for 2000 are expected to be capital expenditures of about $250 million, pension funding and debt payments. We expect to maintain an adequate level of liquidity during 2000, primarily with operating cash flow, further reductions in inventory, additional asset sales and available funds under our bank and other financing arrangements. Capital Expenditures Capital expenditures were $557 million in 1999 compared with $328 million in 1998 and $228 million in 1997. Capital expenditures for 1999 included several major projects at Sparrows Point including the reline of the "L" Blast Furnace, upgrades to the BOF shop, continuing construction of a new cold mill complex and preliminary work for the conversion of a continuous slab caster to a continuous wide-slab caster. Other capital expenditures included an investment in new joint ventures, Columbus Coatings Company and Columbus Processing Company, and an equity interest in MetalSite, an Internet marketplace where companies can buy and sell metal products and services. Capital expenditures also included certain improvements we made to the Steckel plate mill in Conshohocken in accordance with our agreement to provide conversion services to Allegheny. See Lukens Acquisition above. At December 31, 1999, the estimated cost of completing all authorized capital expenditures was about $410 million compared with $610 million at December 31, 1998. We expect all authorized capital expenditures to be completed during the 2000-2002 period. Derivative Financial Instruments and Related Market Risk We are exposed to certain risks associated with the change in foreign currency rates, interest rates and commodity prices. We seek to minimize the potential adverse impact of those market risks through the use of appropriate management techniques including derivative financial instruments. Our exposure to changes in the value of foreign currencies is minimal. We are exposed to interest rate risk arising from having certain variable rate financing arrangements, and we use interest rate swaps to fix a portion of the interest rates on these financings. The fair value of these swaps at December 31, 1999 was a liability of $1 million. We also use derivative financial instruments to manage the price risk for a portion of our annual requirements for natural gas and zinc and other metals. The fair value of these instruments at December 31, 1999 was an asset of $10 million. These instruments, which have maturity dates that coincide with our expected purchases of the commodities, allow us to establish our cost for the hedged portion of the commodity requirement, which reduces our exposure to future price volatility. To the extent we have not entered into derivative financial instruments, our cost will increase or decrease as the market prices for the commodities rise or fall. Common Stock Market and Dividend Information 1999 Prices* 1998 Prices* Period High Low High Low - -------------------------------------------------------------------------------- First Quarter $10.688 $7.688 $15.500 $ 8.063 Second Quarter 10.938 7.375 17.125 11.063 Third Quarter 8.688 6.750 13.438 7.000 Fourth Quarter 8.500 5.875 10.750 7.313 - -------------------------------------------------------------------------------- * The principal market for Bethlehem Common Stock is the New York Stock Exchange. Bethlehem Common Stock is also listed on the Chicago Stock Exchange. The high and low sales prices of Bethlehem Common Stock as reported in the consolidated transaction system are shown in the table. The trading symbol for Bethlehem Common Stock is BS. Bethlehem has not paid a dividend on its Common Stock since the fourth quarter of 1991. Employees and Employment Costs At the end of 1999, we had about 15,500 employees compared with about 17,000 employees at the end of 1998 and 15,600 employees at the end of 1997. In May of 1998, we acquired Lukens which had about 3,300 employees. About three-quarters of our employees are covered by our labor agreements with the United Steelworkers of America (USWA). On August 1, 1999, Bethlehem and the USWA entered into new five-year labor agreements covering USWA-represented employees at Bethlehem's facilities in Burns Harbor, Lackawanna, Sparrows Point, Coatesville and Steelton. The Burns Harbor and Sparrows Point Divisions continue to be covered by one agreement, while separate agreements were continued for PST and BLP's Coatesville facility. The main labor agreement, which expires August 1, 2004, provides for wage increases of $2 per hour over the life of the contract and improved pension benefits. The new contract also aligns profit sharing more closely with Bethlehem's overall financial performance. Under the profit sharing provisions of the new 1999 labor agreements, which become effective beginning with plan year 2000, most employees at our steel operations will participate in profit sharing based on 10% of adjusted consolidated annual income before taxes. Under the profit sharing provisions of our 1993 labor agreements, which were effective through plan year 1999, most employees at our steel operations participated in profit sharing based on 8% of adjusted consolidated annual income before taxes, unusual items and expenses applicable to the plan, plus 2% of adjusted profits of certain operations, payable in the following year. A minimum payment of 14 cents per hour worked was required but has been eliminated from the new plan. Profit sharing is also paid to non-represented employees based on specific Corporate and Business Unit plans and performance. Under other provisions of the labor agreements, we are required to pay "shortfall amounts" each year up to 10% of the first $100 million and 20% in excess of $100 million of consolidated income before taxes, unusual items and expenses applicable to the shortfall plan. Shortfall amounts, which recently have been averaging $6 million per year, arise when employees terminate employment and ESOP Preference Stock, held in trust for employees for certain wage and benefit payments in prior years, is converted into Common Stock and sold for amounts less than the stated value of the Preference Stock ($32 for Series A and $40 for Series B). We issued approximately 1,500 shares of Series B Preference Stock in 1999 and approximately 18,000 shares in 1998 to a trustee for the benefit of employees for 1998 and 1997. We expect to issue about 80,000 shares in early 2000 for the 1999 plan year. We paid about $37 million in 1999 for income-related bonus, profit sharing and shortfall amounts, and expect to pay about $700,000 in early 2000. Employment Cost Summary * (Dollars in millions) 1999 1998 1997 Salaries and Wages $ 857 $ 899 $ 914 - -------------------------------------------------------------------------------- Employee Benefits: Pension Plans: Actives 54 80 95 Retirees (14) 5 60 Medical and Insurance: Actives 129 122 135 Retirees 152 140 122 Payroll Taxes 73 74 74 Workers' Compensation 22 27 21 Savings Plan and Other 18 20 18 Total Benefit Costs 434 468 525 Total Employment Costs $1,291 $1,367 $1,439 - -------------------------------------------------------------------------------- * Excluding Discontinued Stainless Operations Environmental Matters We are subject to various federal, state and local environmental laws and regulations concerning, among other things, air emissions, waste water discharges and solid and hazardous waste disposal. During the five years ended December 31, 1999, we spent about $100 million for environmental control equipment. Expenditures for new environmental control equipment totaled approximately $11 million in 1999, $13 million in 1998 and $15 million in 1997. The costs incurred in 1999 to operate and maintain existing environmental control equipment were approximately $115 million (excluding interest costs but including depreciation charges of $14 million) compared with $114 million in 1998 and $112 million in 1997. Bethlehem and federal and state regulatory agencies conduct negotiations to resolve differences in interpretation of certain environmental control requirements. In some instances, those negotiations are held in connection with the resolution of pending environmental proceedings. We believe that there will not be any significant curtailment or interruptions of any of our important operations as a result of these proceedings and negotiations. We cannot predict the specific environmental control requirements that we will face in the future. Based on existing and anticipated regulations under present legislation, we currently estimate that capital expenditures for installation of new environmental control equipment will average about $15 million per year over the next two years. However, estimates of future capital expenditures and operating costs required for environmental compliance are subject to numerous uncertainties, including the evolving nature of regulations, possible imposition of more stringent requirements, availability of new technologies and the timing of expenditures. Although it is possible that our future results of operations, in particular quarterly or annual periods, could be materially affected by the future costs of environmental compliance, we believe that the future costs of environmental compliance will not have a material adverse effect on our consolidated financial position or on our competitive position with respect to other integrated domestic steelmakers that are subject to the same environmental requirements. Forward-looking Statements This Annual Report contains forward-looking statements. The use of the words "expect", "believe", "intent", "should", "plan" and similar words are intended to identify these statements as forward-looking. In accordance with provisions of the Private Securities Litigation Reform Act of 1995, reference is made to Item 1 of Bethlehem's 1999 Annual Report on Form 10-K, which will be filed before the end of March 2000, and to "Cautionary Statement" of Bethlehem's Registration Statement on Form S-4 filed with the Securities and Exchange Commission on April 24, 1998 for important factors that could cause actual results to differ materially from those projected. Prior to the filing of Bethlehem's 1999 Annual Report on Form 10-K, reference should be made to Bethlehem's 1998 Annual Report on Form 10-K for a discussion of these factors. Consolidated Statements of Income
Year Ended December 31 (Dollars in millions, except per share data) 1999 1998 1997 Net Sales $3,914.8 $4,477.8 $4,631.2 - ------------------------------------------------------------------------------------------------------ Costs and Expenses: Cost of sales 3,708.8 3,883.2 4,053.3 Depreciation and amortization (Note A) 257.5 246.5 231.0 Selling, administration and general expense 127.1 123.6 107.9 Estimated loss (gain) on exiting businesses (Note B) -- 35.0 (135.0) Total Costs and Expenses 4,093.4 4,288.3 4,257.2 - ------------------------------------------------------------------------------------------------------ Income (Loss) from Operations (178.6) 189.5 374.0 Financing Income (Expense): Interest and other financing costs (Note A) (51.9) (55.4) (47.5) Interest income 8.3 10.0 9.2 - ------------------------------------------------------------------------------------------------------ Income (Loss) Before Income Taxes (222.2) 144.1 335.7 Benefit (Provision) for Income Taxes (Note D) 39.0 (24.0) (55.0) - ------------------------------------------------------------------------------------------------------ Net Income (Loss) (183.2) 120.1 280.7 Dividends on Preferred and Preference Stock 41.2 41.7 41.6 Net Income (Loss) Applicable to Common Stock $ (224.4) $ 78.4 $ 239.1 - ------------------------------------------------------------------------------------------------------ Net Income (Loss) per Common Share (Note K): Basic $ (1.72) $ 0.64 $ 2.13 Diluted $ (1.72) $ 0.64 $ 2.03 - ------------------------------------------------------------------------------------------------------
The accompanying Notes are an integral part of the Consolidated Financial Statements. Consolidated Balance Sheets
December 31 (Dollars in millions, except per share data) 1999 1998 - -------------------------------------------------------------------------------------------------------- Assets Current Assets: Cash and cash equivalents (Note A) $ 99.4 $ 137.8 Receivables (Notes C and E) 235.0 307.2 Inventories (Notes A and E) Raw materials and supplies 292.3 319.9 Finished and semifinished products 572.5 720.7 - -------------------------------------------------------------------------------------------------------- Total inventories 864.8 1,040.6 Other current assets 10.2 9.2 - -------------------------------------------------------------------------------------------------------- Total Current Assets 1,209.4 1,494.8 Investments and Miscellaneous Assets 123.1 98.0 Property, Plant and Equipment, less accumulated depreciation of $4,263.6 and $4,119.4 (Note A) 2,899.7 2,655.7 Deferred Income Tax Asset - net (Note D) 960.0 920.0 Net Assets of Discontinued Stainless Operations (Note C) 3.0 100.0 Goodwill, less accumulated amortization of $19.0 and $7.0 (Notes A and C) 341.0 353.0 Total Assets $5,536.2 $5,621.5 - -------------------------------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $ 427.6 $ 417.9 Accrued employment costs 117.2 147.7 Other postretirement benefits (Note G) 175.0 160.0 Accrued taxes (Note D) 56.4 53.4 Debt and capital lease obligations (Note E) 110.0 44.4 Other current liabilities 147.2 161.8 - -------------------------------------------------------------------------------------------------------- Total Current Liabilities 1,033.4 985.2 Pension Liability (Notes B and G) 410.0 415.0 Other Postretirement Benefits (Notes B and G) 1,645.0 1,630.0 Long-term Debt and Capital Lease Obligations (Note E) 754.1 627.7 Deferred Gain (Note F) 117.4 136.0 Other Long-term Liabilities 299.2 338.1 Stockholders' Equity (Notes H, I and J): Preferred Stock - at $1 per share par value (aggregate liquidation preference of $481.2); Authorized 20,000,000 shares 11.6 11.6 Preference Stock - at $1 per share par value (aggregate liquidation preference of $69.4); Authorized 20,000,000 shares 2.0 2.2 Common Stock - at $1 per share par value; Authorized 250,000,000; Issued 133,588,922 and 132,227,787 shares 133.6 132.2 Common Stock - Held in treasury 2,118,615 and 2,080,799 shares at cost (60.6) (60.3) Additional Paid-in Capital 1,961.5 1,991.6 Accumulated Deficit (771.0) (587.8) Total Stockholders' Equity 1,277.1 1,489.5 Total Liabilities and Stockholders' Equity $5,536.2 $5,621.5 - --------------------------------------------------------------------------------------------------------
The accompanying Notes are an integral part of the Consolidated Financial Statements. Consolidated Statements of Cash Flows
Year Ended December 31 (Dollars in millions) 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------ Operating Activities: Net Income (Loss) $(183.2) $ 120.1 $ 280.7 Adjustments for items not affecting cash from operating activities: Depreciation and amortization (Note A) 257.5 246.5 231.0 Estimated loss (gain) on exiting businesses (Note B) -- 35.0 (135.0) Deferred income taxes (Note D) (39.0) 18.0 53.0 Other - net 0.6 16.1 28.2 Working capital (excluding investing and financing activities): Receivables - operating (65.7) 99.4 11.6 Receivables - net sold (Note E) 70.0 64.0 (6.0) Inventories 175.7 (59.0) 115.6 Accounts payable 10.8 (13.1) (24.5) Employment costs and other (24.7) (40.5) (3.7) Cash Provided from Operations Before Funding Postretirement Benefits 202.0 486.5 550.9 - ------------------------------------------------------------------------------------------------------------------------ Funding Postretirement Benefits (Note G): Pension funding more than expense (5.0) (65.0) (270.0) Retiree healthcare and life insurance benefit payments less than expense 20.0 10.0 -- Cash Provided from Continuing Operating Activities 217.0 431.5 280.9 Cash Provided from Operating Activities of Discontinued Stainless Operations (Note C) 9.6 22.2 -- - ------------------------------------------------------------------------------------------------------------------------ Investing Activities: Capital expenditures (557.0) (328.0) (228.2) Purchase of Lukens (Note C): Paid to Lukens stockholders, net of cash acquired -- (327.8) -- Transaction and other related payments (6.6) (41.4) -- Cash proceeds from asset sales and other 183.6 308.8 191.8 Cash Used for Investing Activities (380.0) (388.4) (36.4) - ------------------------------------------------------------------------------------------------------------------------ Financing Activities: Borrowings (Note E) 249.7 201.6 1.9 Debt and capital lease payments (Note E) (65.1) (290.4) (53.4) Cash dividends paid (Note J) (40.4) (40.4) (40.4) Other payments (29.2) (50.7) (36.8) Cash Provided from (Used for) Financing Activities 115.0 (179.9) (128.7) - ------------------------------------------------------------------------------------------------------------------------ Net Increase (Decrease) in Cash and Cash Equivalents (38.4) (114.6) 115.8 Cash and Cash Equivalents - Beginning of Period 137.8 252.4 136.6 - End of Period $ 99.4 $ 137.8 $ 252.4 - ------------------------------------------------------------------------------------------------------------------------ Supplemental Cash Flow Information: Interest paid, net of amount capitalized $ 46.1 $ 50.2 $ 52.6 Income taxes paid (received) - net (Note D) 0.7 (14.2) 7.6 Capital lease obligations incurred 7.9 -- -- - ------------------------------------------------------------------------------------------------------------------------
The accompanying Notes are an integral part of the Consolidated Financial Statements. Notes to Consolidated Financial Statements A. Accounting Policies Principles of Consolidation - The consolidated financial statements include the accounts of Bethlehem Steel Corporation and all majority-owned subsidiaries and joint ventures. Cash and Cash Equivalents - Cash equivalents consist primarily of overnight investments, certificates of deposit and other short-term, highly liquid instruments generally with original maturities at the time of acquisition of three months or less. Cash equivalents are stated at cost plus accrued interest, which approximates market. Inventories - Inventories are valued at the lower of cost (principally FIFO) or market. Property, Plant and Equipment - Property, plant and equipment is stated at cost. Maintenance, repairs and renewals that neither materially add to the value of the property nor appreciably prolong its life are charged to expense. Gains or losses on dispositions of property, plant and equipment are recognized in income. Interest is capitalized on significant construction projects and totaled $26 million in 1999 and $7 million in both 1998 and 1997. Our property, plant and equipment by major classification are as follows: December 31 (Dollars in millions) 1999 1998 - ------------------------------------------------------------------- Land (net of depletion) $ 39.9 $ 33.2 Buildings 651.0 649.2 Machinery and equipment 5,949.8 5,720.7 Accumulated depreciation (4,263.6) (4,119.4) - ------------------------------------------------------------------- 2,377.1 2,283.7 Construction-in-progress 522.6 372.0 Total $ 2,899.7 $ 2,655.7 - ------------------------------------------------------------------- Depreciation - Depreciation is based upon the estimated useful lives of each asset group. That life is 18 years for most steel producing assets. Steel producing assets, other than blast furnace linings, are depreciated on a straight-line basis adjusted by an activity factor. This factor is based on the ratio of production and shipments for the current year to the average production and shipments for the current and preceding four years at each operating location. Annual depreciation after adjustment for this activity factor is not less than 75% or more than 125% of straight-line depreciation. Depreciation after adjustment for this activity factor was $10 million less than straight- line in 1999, $1 million less than straight line in 1998 and $5 million more than straight-line in 1997. Through December 31, 1999, $5 million more accumulated depreciation has been recorded under this method than would have been recorded under straight-line depreciation. The cost of blast furnace linings is depreciated on a unit-of- production basis. Amortization - Goodwill, resulting from the acquisition of Lukens, is being amortized over a 30-year life using the straight-line method. Amortization was $12 million in 1999 and $7 million in 1998. See Note C, Acquisition of Lukens Inc. Asset Impairment - We periodically evaluate the carrying value of property, plant and equipment and goodwill when events and circumstances warrant such a review. Property, plant and equipment is considered impaired when the anticipated undiscounted future cash flows from a logical grouping of assets is less than its carrying value. In that event, we recognize a loss equal to the amount by which the carrying value exceeds the fair market value of assets (less estimated disposal costs, for assets to be disposed of). See Note B, Estimated (Loss) Gain on Exiting Businesses. Foreign Currency, Interest Rate and Commodity Price Risk Management - Periodically, we enter into financial contracts to manage risks. We use foreign currency exchange contracts to manage the cost of firm purchase commitments for capital equipment or other purchased goods and services denominated in a foreign currency. We use interest rate swap agreements to fix the interest rate on certain floating rate financings. We use commodity contracts to fix the cost of a portion of our annual requirements for natural gas, zinc and other metals. Generally, foreign currency and commodity contracts are for periods of less than a year. The gains or losses on these contracts are reflected in the cost of goods or services purchased when the contracts are settled. Net payments or receipts on interest rate swaps are reflected in interest expense. Gains or losses on swaps settled or terminated are deferred and amortized to interest expense over the life of the related debt. Beginning January 1, 2001, Financial Accounting Standards Board (FASB) Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, requires that we recognize all financial derivative contracts as either assets or liabilities on the balance sheet and measure them at fair value. At December 31, 1999, the fair value of all financial derivative contracts was an asset of $9 million (an asset of $10 million for natural gas and metal contracts, net of a $1 million liability for interest rate swaps). Gains or losses on these contracts, to the extent they have been effective as hedges, will continue to be recognized when they are settled. Gains or losses on interest rate swaps settled or terminated will no longer be deferred but recognized in income immediately. Adoption of Statement No. 133 is not expected to have a material impact on our operating results or financial position. Environmental Expenditures - Environmental expenditures that increase the life or efficiency of property, plant and equipment, or that will reduce or prevent future environmental contamination are capitalized. Expenditures that relate to existing conditions caused by past operations and have no significant future economic benefit are expensed. Environmental expenses are accrued at the time the expenditure becomes probable and the cost can be reasonably estimated. We do not discount any recorded obligations for future remediation expenditures to their present value nor do we record recoveries of environmental remediation costs from insurance carriers and other third parties, if any, as assets until their receipt is deemed probable. Revenue Recognition - We recognize substantially all revenues when products are shipped to customers and risks of ownership change. Use of Estimates - In preparing these financial statements, we make estimates and use assumptions that affect some of the reported amounts and disclosures. See, for example, Note D, Taxes; Note F, Commitments and Contingent Liabilities; and Note G, Postretirement Benefits. In the future, actual amounts received or paid could differ from those estimates. B. Estimated (Loss) Gain on Exiting Businesses In 1998, we recorded a $35 million ($29 million after-tax, or $.23 per diluted share) charge in connection with closing the Sparrows Point 160-inch plate mill. This loss included $25 million for the net book value of certain assets and $10 million for employee benefit related costs ($5 million for pensions, $2 million of postretirement benefits other than pensions, and $3 million for severance and other benefits). In 1997, we sold our 37.57 percent interest in the Iron Ore Company of Canada for about $145 million. This sale resulted in a gain of $135 million ($113 million after tax, or $.92 per diluted share). C. Acquisition of Lukens Inc. On May 29, 1998, Bethlehem acquired all of the outstanding capital stock of Lukens Inc. The aggregate purchase price of $560.6 million comprised cash of $327.8 million, the issuance of 15.1 million shares of Bethlehem Common Stock valued at $184.8 million, and transaction related costs of $48.0 million. The acquisition was accounted for as a purchase. Accordingly, Lukens' results are included in the Consolidated Financial Statements from the date of acquisition. The fair value (in millions) of the assets acquired and liabilities assumed is as follows: Current assets $ 187.8 Property, plant and equipment 265.1 Net assets of discontinued stainless and distribution businesses 316.0 Deferred tax asset, other 70.4 Goodwill 360.0 Current liabilities (110.0) Postretirement benefit liabilities (230.0) Debt (268.5) Other long-term liabilities (30.2) Purchase price, net of cash acquired $ 560.6 - ------------------------------------------------------------------------ Through January 2000, we have completed our planned divestiture of the stainless and distribution businesses acquired in the Lukens purchase for amounts essentially equal to $316 million. Since the date of acquisition, these operations were accounted for as discontinued operations and incurred operating losses of about $36 million. The net assets of these businesses are shown separately on the balance sheet and consist primarily of property, plant and equipment and working capital. The unaudited pro forma combined historical results (excluding stainless and distribution businesses) as if Lukens had been acquired at the beginning of 1997 are estimated to be: December 31 (Dollars in millions, except per share) 1998 1997 - ------------------------------------------------------------------------- Net Sales $4,717.5 $5,147.7 Income from Operations 200.1 404.3 Net Income 121.4 286.2 Net Income Per Share: Basic $ .62 $ 1.92 Diluted .62 1.86 - ------------------------------------------------------------------------- D. Taxes Our benefit (provision) for income taxes are as follows: (Dollars in millions) 1999 1998 1997 - ------------------------------------------------------------------------- Federal - deferred $ 39 $ (18) $ (53) Federal, state and foreign - current -- (6) (2) Total benefit (provision) $ 39 $ (24) $ (55) - ------------------------------------------------------------------------- The benefit (provision) for income taxes differs from the amount computed by applying the federal statutory rate to pre-tax income (loss). The computed amounts and the items comprising the total differences are as follows: (Dollars in millions) 1999 1998 1997 - ------------------------------------------------------------------------- Pre-tax income (loss): United States $(223) $ 142 $ 333 Foreign 1 2 3 Total $(222) $ 144 $ 336 - ------------------------------------------------------------------------- Computed amounts $ 78 $ (50) $ (118) Change in valuation allowance (39) 25 55 Percentage depletion 6 6 5 Goodwill amortization (4) (3) -- Dividend received deduction -- -- 3 Other differences - net (2) (2) -- Total benefit (provision) $ 39 $ (24) $ (55) - ------------------------------------------------------------------------- The components of our net deferred income tax asset are as follows: December 31 (Dollars in millions) 1999 1998 - ------------------------------------------------------------------------- Temporary differences: Employee benefits $ 865 $ 855 Depreciable assets (290) (315) Other 200 200 - ------------------------------------------------------------------------- Total 775 740 Operating loss carryforward 490 465 Alternative minimum tax credits 35 35 - ------------------------------------------------------------------------- Deferred income tax asset 1,300 1,240 Valuation allowance (340) (320) Deferred income tax asset - net $ 960 $ 920 - ------------------------------------------------------------------------- Temporary differences represent the cumulative taxable or deductible amounts recorded in our financial statements in different years than recognized in our tax returns. Our employee benefits temporary difference includes amounts expensed in our financial statements for postretirement pensions, health care and life insurance that become deductible in our tax return upon payment or funding in qualified trusts. The depreciable assets temporary difference represents principally cumulative tax depreciation in excess of financial statement depreciation. Other temporary differences represent principally various expenses accrued for financial reporting purposes that are not deductible for tax reporting purposes until paid. At December 31, 1999, we had regular tax net operating loss carryforwards of about $1.4 billion and alternative minimum tax loss carryforwards of about $600 million. A regular net operating loss of about $65 million is expected to expire when we file our 1999 federal tax return later in 2000. Regular federal tax net operating loss carry- forwards of about $145 million and $220 million will expire in 2000 and 2001, with the balance expiring in varying amounts from 2005 through 2019, if we are unable to use the amounts in the related federal income tax returns. Under certain conditions involving future changes in Bethlehem's ownership, Section 382 of the Internal Revenue Code could substantially reduce and limit the annual utilization of our net operating loss carryforwards. FASB Statement No. 109, Accounting for Income Taxes, requires that we record a valuation allowance when it is "more likely than not that some portion or all of the deferred tax assets will not be realized." It further states, "forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years." The ultimate realization of this deferred tax asset depends on our ability to generate sufficient taxable income in the future. Excluding estimated (losses) gains on exiting businesses, Bethlehem has reported net income for five of the past six years, and has undergone substantial restructuring and made strategic capital expenditures during the last several years. Also, we have tax planning opportunities that could affect taxable income including selection of depreciation methods and lives, sales of assets and timing of contributions to our pension trust fund. Based on our current outlook for 2000, 2001 and beyond, we believe that our deferred tax asset will be realized by future operating results together with tax planning opportunities. However, our significant net operating loss carryforwards and future tax deductions from temporary differences make it appropriate to record a valuation allowance. Accordingly, we have provided a valuation allowance equal to 50% of the deferred tax asset related to our operating loss carry-forward and certain temporary differences. We have provided a valuation allowance for other postretirement benefits, except for the temporary differences of $1,555 million as of January 1, 1992 (See Note G, Postretirement Benefits) and of $195 million assumed in connection with the acquisition of Lukens (See Note C, Acquisition of Lukens Inc.). If we have a tax loss in any year in which our tax deduction for other postretirement benefits exceeds our financial statement expense, the tax law currently provides for a 20-year carryforward of that loss against future taxable income. Because we should have sufficient time to realize these future tax benefits, we believe a valuation allowance is not appropriate for the deferred tax asset related to these temporary differences for other postretirement benefits. If we are unable to generate sufficient taxable income in the future through operating results or tax planning opportunities, we will be required to reduce our net deferred tax asset through a charge to income tax expense (reducing our stockholders' equity). On the other hand, if we achieve sufficient profitability to use all of our deferred income tax asset, we will reduce the valuation allowance through a reduction in income tax expense (increasing our stockholders' equity). In addition to income taxes, we incurred costs for certain other taxes as follows: (Dollars in millions) 1999 1998 1997 - ------------------------------------------------------------------------------ Employment taxes $ 73.3 $ 73.8 $ 74.0 Property taxes 34.2 34.4 26.5 State taxes and other 11.7 12.2 11.9 Total other taxes $119.2 $ 120.4 $112.4 - ------------------------------------------------------------------------------ E. Debt and Capital Lease Obligations December 31 (Dollars in millions) 1999 1998 - ------------------------------------------------------------------------------ Notes and loans: 5.69% - 5.99% Galvanizing lines financing $ 37.4 $ 74.9 10-3/8%, Due 2003 105.0 105.0 7-5/8%, Due 2004 150.0 150.0 6-1/2%, Due 2006 75.0 75.0 2% - 9.64%, Due 2000-2009 4.7 7.5 Cold mill financing, LIBOR plus 1.925%, Due 2000 60.0 -- Wide-slab caster financing, LIBOR plus 3%, Due 2000-2004 28.3 -- Inventory credit agreement, LIBOR plus 1.125%, Due 2003 140.0 -- Debentures: 6-7/8%, Due 1999 -- 4.0 8-3/8%, Due 2001 41.6 41.6 8.45%, Due 2005 90.2 90.8 Pollution control and industrial revenue bonds: 7-1/2% - 8%, Due 2015-2024 128.9 128.9 Capital lease obligations 7.6 -- Unamortized debt discount (4.6) (5.6) - ------------------------------------------------------------------------------ Total 864.1 672.1 Amounts due within one year (110.0) (44.4) Long-term $ 754.1 $627.7 - ------------------------------------------------------------------------------ Maturities and sinking fund requirements for the next five years are $110 million in 2000, $58 million in 2001, $20 million in 2002, $265 million in 2003, and $167 million in 2004. At December 31, 1999 and 1998, the estimated fair value of our debt was not materially different from the recorded amounts. The galvanizing lines financing is collateralized by such equipment at our Sparrows Point and Burns Harbor Divisions and will be repaid in 2000. The 10-3/8% Notes are senior in right of payment to all existing and future subordinated indebtedness of Bethlehem. As unsecured senior obligations, the Notes will effectively be subordinate to secured indebtedness of Bethlehem. These Notes contain covenants that impose certain limitations on our ability to incur or repay debt, to pay dividends and make other distributions on or redeem capital stock, or to sell, merge, transfer or encumber assets. See Note J, Stockholders' Equity. We have a credit arrangement, through June 2003, with a group of 15 domestic and international banks for $660 million, $150 million of which can be used for letters of credit. The arrangement consists of a $340 million receivables sale/purchase agreement through a wholly-owned special purpose subsidiary and a $320 million secured inventory credit agreement. As of December 31, 1999, we had sold to the banks an ownership interest in trade receivables of $288 million in exchange for $212 million in cash, $12 million in letters of credit and required reserves of $64 million. The receivables were sold at a discount, based on defined short-term, investment grade, interest rates and a fixed fee per annum for the letters of credit. The banks are required to pay us cash for the face amount of the letters of credit upon expiration. We pay a .15% per annum fee on the daily available commitment. Receivables from banks are for cash and required reserves that will be returned to us upon expiration of the letters of credit and liquidation of receivable ownership. Supplemental information on the receivable balances at December 31, 1999 and 1998 follows: December 31 (Dollars in millions) 1999 1998 - ------------------------------------------------------------------------------ Trade and other $178.1 $193.3 Notes 0.8 65.6 Banks 75.7 68.3 Allowances (19.6) (20.0) Total receivables - net $235.0 $307.2 - ------------------------------------------------------------------------------ Under the secured credit agreement, inventories are pledged as collateral for any borrowings and letters of credit. Borrowings under the agreement are subject to collateral coverage requirements and incur interest based on defined short- term interest rates. We had $140 million of borrowings outstanding under this agreement at December 31, 1999. We pay a .375% per annum fee on the daily available commitment. Our secured credit agreement and galvanizing lines financing agreements contain restrictive covenants that require Bethlehem to maintain a minimum adjusted consolidated tangible net worth. At December 31, 1999, our adjusted tangible net worth as defined by these agreements exceeded the more restrictive of these requirements by about $300 million. At December 31, 1999, outstanding interest rate swap agreements with notional amounts totaling $56 million effectively fix a portion of the interest rate on our floating rate financings at 5.75% to 8.70%. These interest rate swap agreements expire in 2000 and 2001. F. Commitments and Contingent Liabilities In July 1998, we sold the No. 1 Coke Oven Battery at Burns Harbor and entered into nine-year agreements to operate the facility and purchase about 800,000 tons of coke per year through year 2008. During 1999, we purchased 857,000 tons of coke at a cost of $103 million. The gain on the sale of about $160 million was deferred and is being recognized over the nine year life of the operating and purchase agreements. In 1999, $18 million of the gain was recognized as a reduction in cost of goods sold. In April 1997, we sold our interest in the Iron Ore Company of Canada (IOC) and entered into a 14-year agreement to purchase up to 1.8 million tons of iron ore per year through the year 2004 and about 500,000 tons in the years 2005 through 2011. In 1999, we purchased iron ore from IOC at a cost of $45 million. We, along with other parties, have guaranteed the debt of certain joint ventures totaling $85 million as of December 31, 1999. At December 31, 1999, we had outstanding approximately $40 million of purchase orders for additions and improvements to our properties. The domestic steel industry is subject to various environmental laws and regulations imposed by federal, state and local governments. Because of the continuing evolution of the specific regulatory requirements and available technology to comply with the requirements, we cannot reasonably estimate the future capital expenditures and operating costs required to comply with these laws and regulations. Although it is possible that our future operating results in a particular quarterly or annual period could be materially affected by the future costs of environmental compliance, we believe that such costs will not have a material adverse effect on our consolidated financial position or on our competitive position with respect to other integrated domestic steelmakers subject to the same environmental requirements. In the ordinary course of our business, we are involved in various pending or threatened legal actions. In our opinion, adequate reserves have been recorded for losses that are likely to result from these proceedings. If such reserves prove to be inadequate, however, we would incur a charge to earnings that could be material to the results of operations in a particular future quarterly or annual period. We believe that any ultimate liability arising from these actions will not have a material adverse effect on our consolidated financial position. Future minimum payments under noncancellable operating leases at December 31, 1999 were $27 million in 2000, $29 million in 2001, $25 million in 2002, $23 million in 2003, $22 million in 2004 and $106 million thereafter. Total rental expense under operating leases was $35 million, $41 million and $40 million in 1999, 1998 and 1997. G. Postretirement Benefits We have noncontributory defined benefit pension plans that provide postretirement benefits for substantially all our employees. Defined benefits are based on years of service and the five highest consecutive years of pensionable earnings during the last ten years prior to retirement or a minimum amount based on years of service. We fund annually the amount required under ERISA minimum funding standards plus additional amounts as appropriate. In addition, we currently provide other postretirement benefits for health care and life insurance to most employees and their dependents. The following sets forth the plans' funded status at our valuation date together with certain actuarial assumptions used and the amounts recognized in our consolidated balance sheets and income statements:
Pension Benefits Other Benefits (Dollars in millions) 1999 1998 1999 1998 - ---------------------------------------------------------------------------------------------------------------------- Change in benefit obligation: Projected benefit obligation - beginning of year $6,255 $5,495 $ 2,430 $2,055 Current service cost 60 55 11 9 Interest cost 405 407 158 153 Actuarial adjustments (254) 379 305 191 Lukens acquisition -- 460 11 195 1999 plan amendments 218 -- 20 -- Other -- 4 -- 2 Benefits / administration fees paid (569) (545) (185) (175) Projected benefit obligation - November 30 6,115 6,255 2,750 2,430 - ---------------------------------------------------------------------------------------------------------------------- Change in plan assets: Fair value of plan assets - beginning of year 5,915 4,930 120 120 Actual return on plan assets 709 959 -- 9 Lukens acquisition -- 425 -- 10 Employer contributions 42 153 -- -- Benefits / administration fees paid (576) (552) (20) (19) Fair value of plan assets - November 30 6,090 5,915 100 120 - ---------------------------------------------------------------------------------------------------------------------- Unfunded projected benefit obligation 25 340 2,650 2,310 Unrecognized: Net actuarial gain (loss) 785 315 (810) (520) Initial net obligation (71) (105) -- -- Prior service from plan amendments (329) (142) (20) -- December accruals / contributions - net -- 7 -- -- - ---------------------------------------------------------------------------------------------------------------------- Total recognized obligation at December 31 410 415 1,820 1,790 Current -- -- (175) (160) - ---------------------------------------------------------------------------------------------------------------------- Long-term $ 410 $ 415 $ 1,645 $1,630 Pension Benefits Other Benefits (Dollars in millions) 1999 1998 1997 1999 1998 1997 - ---------------------------------------------------------------------------------------------------------------------- Components of net expense: Current service cost $ 60 $ 55 $ 48 $ 11 $ 9 $ 7 Interest cost 405 407 395 158 153 148 Expected return on plan assets (496) (447) (375) (7) (9) (11) Amortizations: Initial net obligation 34 34 34 -- -- -- Plan amendments 29 29 29 -- -- -- Actuarial loss -- -- -- 23 12 6 PBGC, Multiemployer, other 8 7 24 15 15 15 - ---------------------------------------------------------------------------------------------------------------------- Net expense $ 40 $ 85 $ 155 $ 200 $ 180 $ 165 Assumptions: Expected return on plan assets 8.75% 9.00% 9.00% 6.75% 7.375% 9.00% Discount rate - expense 6.75% 7.375% 7.75% 6.75% 7.375% 7.75% Discount rate - projected obligation 8.00% 6.75% 7.375% 8.00% 6.75% 7.375% Rate of compensation increase 2.90% 3.10% 3.10% 2.90% 3.10% 3.10% Trend rate - beginning next year n/a n/a n/a 9.5% 5.0% 6.0% - ending rate n/a n/a n/a 4.5% 4.6% 4.6% - ending year n/a n/a n/a 2010 2001 2001
As a result of recent actuarial losses from trend rates, retirement ages and mortality and our 1999 agreement with the United Steelworkers of America that expires in 2004, we performed a detailed review of expected future retiree health care costs in 1999. This review resulted in changing our expected future health care trend rates, retirement ages and mortality at November 30, 1999. Based on the November 30, 1999 unfunded projected benefit obligations, we expect our 2000 expense for pensions to be about $55 million and other postretirement benefits to be about $264 million. A one percentage point change in assumed health care cost trend rates would have an effect of $20 million on total service and interest cost components of the 2000 other postretirement benefits expense and of $220 million on the November 30, 1999 projected benefit obligation for other postretirement benefits. H. Stockholder Rights Agreement We have a Stockholder Rights Agreement under which holders of Common Stock have rights to purchase a new series of Preference Stock or, under certain circumstances, additional shares of Common Stock. When exercisable under clause (1) of the following sentence, each right entitles the holder to purchase one one-hundredth of a share of Series A Junior Participating Preference Stock at an exercise price of $60 per unit, and when exercisable under clauses (2) or (3) of the following sentence, each right entitles the holder (other than the acquirer) to purchase, for the right's exercise price, a number of shares of Common Stock (or, in certain circumstances, other consideration) worth twice the right's exercise price. The rights will become exercisable if (1) a person or group commences a tender or exchange offer that would result in such person or group owning 15% or more of the Common Stock, (2) a person or group acquires 15% or more of Common Stock or (3) a person or group acquires 5% or more of Common Stock and makes a filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Subsequently, upon the occurrence of certain events, holders of rights will be entitled to purchase Common Stock of Bethlehem or a third-party acquirer worth twice the right's exercise price. We may redeem the rights under certain circumstances at one cent per right. If the rights are not redeemed or extended, they will expire in October 2008. I. Stock Options At December 31, 1999, we had options outstanding under Plans approved by our stockholders in 1988, 1994 and 1998. New options can be granted only under the 1998 Plan, which reserved 5,000,000 shares of Common Stock for such use. At December 31, 1999, options on 2,605,300 shares of Common Stock were available for granting. Under the plans, the option price is the fair market value of our Common Stock on the date the option is granted. Options issued under the 1998 Plan become exercisable one to four years after the date granted and expire ten years from the date granted. Exercisable options may be surrendered for the difference between the option price and the quoted market price of the Common Stock on the date of surrender. Depending on the circumstances, option holders receive either Common Stock, cash, or a combination of Common Stock and cash. Because of the surrender component in our options, related expense is recognized periodically based on the difference between the option price and current quoted market prices. Compensation expense recognized and weighted average fair value for the options granted in 1999, 1998 and 1997 were not material. At the time of our merger with Lukens, all outstanding and unexercised stock options of Lukens converted into options to purchase Bethlehem Common Stock and immediately vested. Changes in options outstanding during 1999, 1998 and 1997 were as follows: Weighted Number of Average Options Price - ---------------------------------------------------------------------------- Balance December 31, 1996 3,491,650 $17 Granted 656,200 8 Terminated or canceled (377,100) 17 - ---------------------------------------------------------------------------- Balance December 31, 1997 3,770,750 15 Granted 736,250 15 Assumed in Lukens acquisition 3,834,539 9 Terminated or canceled (240,576) 20 Surrendered or exercised (2,880,665) 9 - ---------------------------------------------------------------------------- Balance December 31, 1998 5,220,298 14 Granted 1,074,950 9 Terminated or canceled (318,506) 18 Surrendered or exercised (294,665) 9 Balance December 31, 1999 5,682,077 $13 - ---------------------------------------------------------------------------- Options exercisable at the end of 1999, 1998 and 1997 were 3,884,315; 3,379,823 and 2,083,250. Information on our stock options at December 31, 1999 follows:
Range of Number of Average Average Number of Average Exercise Options Exercise Contractual Options Exercise Prices Outstanding Price Life Exercisable Price - --------------------------------------------------------------------------------------------------------------- $6.41 - 8.61 1,131,534 $ 8 7 Years 807,834 $ 8 9.23 - 11.12 1,020,117 10 8 Years 250,167 10 12.38 - 14.53 1,643,093 14 5 Years 1,490,043 14 15.25 - 16.47 784,823 15 8 Years 233,761 15 17.625 - 20.375 1,102,510 19 3 Years 1,102,510 19 Total 5,682,077 13 6 Years 3,884,315 14 - ---------------------------------------------------------------------------------------------------------------
J. Stockholders' Equity
Preferred Stock Preference Stock Common Stock Common Stock Additional (Shares in thousands and dollars $1.00 Par Value $1.00 Par Value $1.00 Par Value Held in Treasury Paid-In Accumulated in millions, except per share data) Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit - ------------------------------------------------------------------------------------------------------------------------------------ Balance December 31, 1996 11,623 $11.6 2,518 $ 2.5 113,851 $113.9 2,018 $(59.7) $ 1,886.3 $(988.6) Net income for year 280.7 Dividends on Preferred Stock (40.4) Preference Stock: Stock dividend 124 0.1 (0.1) Issued 35 0.3 Converted (331) (0.3) 331 0.3 Common Stock: Acquired 39 (0.3) Issued 866 0.8 7.9 - ------------------------------------------------------------------------------------------------------------------------------------ Balance December 31, 1997 11,623 11.6 2,346 2.3 115,048 115.0 2,057 (60.0) 1,854.0 (707.9) Net income for year 120.1 Dividends on Preferred Stock (40.4) Preference Stock: Stock dividend 116 0.1 (0.1) Issued 18 0.1 0.1 Converted (305) (0.3) 305 0.3 Common Stock: Acquired 24 (0.3) Issued 16,875 16.9 178.0 Balance December 31, 1998 11,623 11.6 2,175 2.2 132,228 132.2 2,081 (60.3) 1,991.6 (587.8) Net loss for year (183.2) Dividends on Preferred Stock (40.4) Preference Stock: Stock dividend 108 0.1 (0.1) Issued 3 0.1 Converted (276) (0.3) 276 0.3 Common Stock: Acquired 38 (0.3) Issued 1,085 1.1 10.3 Balance December 31, 1999 11,623 $11.6 2,010 $ 2.0 133,589 $133.6 2,119 $(60.6) $ 1,961.5 $(771.0) - ------------------------------------------------------------------------------------------------------------------------------------
In all years presented, total non-owner changes in equity was the same as net income or loss. Preferred and Preference Stock issued and outstanding: December 31 (Shares in thousands) 1999 1998 - ---------------------------------------------------------------------------- Preferred Stock -Authorized 20,000 shares $5.00 Cumulative Convertible Preferred Stock 2,500 2,500 $2.50 Cumulative Convertible Preferred Stock 4,000 4,000 $3.50 Cumulative Convertible Preferred Stock 5,123 5,123 Preference Stock - Authorized 20,000 shares Series "A" 5% Cumulative Convertible Preference Stock 1,383 1,514 Series "B" 5% Cumulative Convertible Preference Stock 627 661 - ---------------------------------------------------------------------------- Each share of $3.50 Cumulative Convertible Preferred Stock issued in 1993 is convertible into 2.39 shares of Common Stock, subject to certain events. Each share of the $5.00 Cumulative Convertible Preferred Stock and the $2.50 Cumulative Convertible Preferred Stock issued in 1983 is convertible into 1.77 and .84 shares of Common Stock, subject to certain events. In accordance with our labor agreements, we issue Preference Stock to a trustee under the Employee Investment Program. Series "A" and Series "B" of Preference Stock have a cumulative dividend of 5% per annum payable at our option in cash, Common Stock or additional shares of Preference Stock. Each share of Preference Stock is entitled to vote with Common Stock on all matters and is convertible into one share of Common Stock. Under the covenants of our 10-3/8% Notes, we can pay future dividends on our Common Stock, among certain other restrictions, only if such cumulative dividends do not exceed the aggregate net cash proceeds from the sale of capital stock plus 50% of our consolidated net income and minus 100% of our consolidated net loss since the second quarter of 1993, excluding certain restructuring charges and other adjustments. The amount available at December 31, 1999 under this covenant was about $280 million. K. Earnings Per Share The following presents the details of our earnings per share calculations:
(Shares in thousands and dollars in millions, except per share data) 1999 1998 1997 - ------------------------------------------------------------------------------------------------------ Basic Earnings Per Share Net income (loss) $ (183.2) $ 120.1 $ 280.7 Less dividend requirements: $2.50 preferred dividend-cash (10.0) (10.0) (10.0) $5.00 preferred dividend-cash (12.5) (12.5) (12.5) $3.50 preferred dividend-cash (17.9) (17.9) (17.9) 5% preference dividend-stock (0.8) (1.3) (1.2) - ------------------------------------------------------------------------------------------------------ Total preferred and preference dividends (41.2) (41.7) (41.6) Net income (loss) applicable to Common Stock $ (224.4) $ 78.4 $ 239.1 Average Shares of Common Stock outstanding 130,199 122,585 112,439 Basic Earnings Per Share $ (1.72) $ 0.64 $ 2.13 - ------------------------------------------------------------------------------------------------------ (Shares in thousands and dollars in millions, except per share data) 1999 1998 1997 Diluted Earnings Per Share Net income (loss) $ (183.2) $ 120.1 $ 280.7 Less dividend requirements: $2.50 preferred dividend-cash (10.0) (10.0) (10.0) $5.00 preferred dividend-cash (12.5) (12.5) (12.5) $3.50 preferred dividend-cash (17.9) (17.9) -- 5% preference dividend-stock (0.8) -- -- Net income (loss) applicable to Common Stock $ (224.4) $ 79.7 $ 258.2 - ------------------------------------------------------------------------------------------------------ Average shares of Common Stock equivalents and other potentially dilutive securities outstanding: Common Stock 130,199 122,585 112,439 Stock Options * 429 -- $2.50 Preferred Stock * * * $5.00 Preferred Stock * * * $3.50 Preferred Stock * * 12,255 5% Preference Stock * 2,175 2,346 Total 130,199 125,189 127,040 Diluted Earnings Per Share $ (1.72) $ 0.64 $ 2.03 - ------------------------------------------------------------------------------------------------------
* Antidilutive L. Quarterly Financial Data (Unaudited)
(Dollars in millions, except per share data) 1999 1998 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q - ------------------------------------------------------------------------------------------------------------------------------------ Net sales $959.5 $984.8 $958.3 $1,012.2 $1,132.5 $1,189.7 $1,143.1 $1,012.5 Cost of sales 888.4 915.5 962.0 942.9 957.0 1,008.8 988.4 929.0 Net income (loss) (25.6) (29.7) (89.8) (38.1) 68.6 37.6 37.1 (23.2) Net income (loss) per Common Share - basic $(0.28) $(0.31) $(0.77) $ (0.37) $ 0.51 $ 0.23 $ 0.21 $ (0.26) - diluted $(0.28) $(0.31) $(0.77) $ (0.37) $ 0.49 $ 0.23 $ 0.21 $ (0.26) - ------------------------------------------------------------------------------------------------------------------------------------
Report of Independent Auditors To the Board of Directors and Stockholders of Bethlehem Steel Corporation In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income and of cash flows present fairly, in all material respects, the financial position of Bethlehem Steel Corporation and its subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. 1177 Avenue of the Americas New York, NY 10036 January 26, 2000 Five-Year Financial and Operating Summaries
(Dollars in millions, except per share data) 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------------- Earnings Statistics Net sales $ 3,914.8 $ 4,477.8 $ 4,631.2 $ 4,679.0 $ 4,867.5 Costs and Expenses: Employment costs 1,291.0 1,367.0 1,439.0 1,555.0 1,683.5 Materials and services 2,499.0 2,593.2 2,683.8 2,680.6 2,592.7 Depreciation and amortization 257.5 246.5 231.0 268.7 284.0 Taxes (other than employment and income taxes) 45.9 46.6 38.4 38.1 38.4 Estimated loss (gain) on exiting businesses -- 35.0 (135.0) 465.0 -- Total Costs and Expenses 4,093.4 4,288.3 4,257.2 5,007.4 4,598.6 - --------------------------------------------------------------------------------------------------------------------- Income (loss) from operations (178.6) 189.5 374.0 (328.4) 268.9 Financing income (expense): Interest and other financing costs (51.9) (55.4) (47.5) (53.3) (60.0) Interest income 8.3 10.0 9.2 5.9 7.7 Benefit (provision) for income taxes 39.0 (24.0) (55.0) 67.0 (37.0) - --------------------------------------------------------------------------------------------------------------------- Net income (loss) (183.2) 120.1 280.7 (308.8) 179.6 Dividends on Preferred and Preference Stock 41.2 41.7 41.6 41.9 42.4 Net income (loss) applicable to Common Stock $ (224.4) $ 78.4 $ 239.1 $ (350.7) $ 137.2 - --------------------------------------------------------------------------------------------------------------------- Net income (loss) per Common share - basic $ (1.72) $ 0.64 $ 2.13 $ (3.15) $ 1.24 - diluted $ (1.72) $ 0.64 $ 2.03 $ (3.15) $ 1.23 - --------------------------------------------------------------------------------------------------------------------- Balance Sheet Statistics Cash and cash equivalents $ 99.4 $ 137.8 $ 252.4 $ 136.6 $ 180.0 Receivables, inventories and other current assets 1,110.0 1,357.0 1,211.6 1,351.8 1,345.8 Current liabilities (1,033.4) (985.2) (910.8) (957.4) (1,049.6) - --------------------------------------------------------------------------------------------------------------------- Working capital $ 176.0 $ 509.6 $ 553.2 $ 531.0 $ 476.2 Current ratio 1.2 1.5 1.6 1.6 1.5 Property, plant and equipment - net $ 2,899.7 $ 2,655.7 $ 2,357.7 $ 2,419.8 $ 2,714.2 Total assets 5,536.2 5,621.5 4,802.6 5,109.9 5,700.3 Total debt and capital lease obligations 864.1 672.1 493.4 546.7 638.3 Stockholder's equity 1,277.1 1,489.5 1,215.0 966.0 1,238.3 Total debt as a percent of invested capital 40% 31% 29% 36% 34% - --------------------------------------------------------------------------------------------------------------------- Other Statistics Capital expenditures $ 557.0 $ 328.0 $ 228.2 $ 259.0 $ 266.8 Raw steel production capability at year end (net tons in thousands) 11,300 11,300 10,500 10,500 11,500 Raw steel production (net tons in thousands) 9,406 10,191 9,599 9,447 10,449 Steel products shipped (net tons in thousands) 8,416 8,683 8,802 8,782 8,986 Pensioners receiving benefits at year end 74,600 74,300 70,400 70,100 71,000 Average number of employees receiving pay (excluding stainless employees) 15,500 15,900 16,400 17,800 19,500 Common Stock outstanding at year end (shares in thousands) 131,027 129,490 112,991 111,834 110,708 Common stockholders at year end 33,000 35,000 35,000 37,000 39,000 - ---------------------------------------------------------------------------------------------------------------------
EX-24 13 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each of the undersigned directors and officers of Bethlehem Steel Corporation, a Delaware corporation, constitutes and appoints Curtis H. Barnette, Gary L. Millenbruch, and Lonnie A. Arnett, and each of them, with full power to act without the others, as his or her true and lawful attorney-in-fact and agent, with full and several power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign Bethlehem Steel Corporation's Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, including any amendments thereto, with the Securities and Exchange Commission under the provisions of the Securities and Exchange Act of 1934, as amended, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they or he might or could do in person, hereby ratifying and confirming all the said attorneys- in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals as of the 26th day of January, 2000. /s/ Curtis H. Barnette /s/ Gary L. Millenbruch - --------------------------------- -------------------------------------- Curtis H. Barnette Gary L. Millenbruch Chairman, Chief Executive Officer Vice Chairman, Chief Financial Officer (principal executive officer) (principal financial officer) and Director and Director /s/ Lonnie A. Arnett - --------------------------------- Lonnie A. Arnett Vice President and Controller (principal accounting officer) 2 /s/ Benjamin r. Civiletti /s/ William M. Landuyt - ----------------------------- ------------------------------ Benjamin R. Civiletti William M. Landuyt Director Director /s/ Worley H. Clark /s/ Robert McClements, Jr. - ----------------------------- ------------------------------ Worley H. Clark Robert McClements, Jr. Director Director /s/ John B. Curcio /s/ Roger P. Penny - ----------------------------- ------------------------------ John B. Curcio Roger P. Penny Director Director /s/ Duane R. Dunham /s/ Shirley D. Peterson - ----------------------------- ------------------------------ Duane R. Dunham Shirley D. Peterson Director Director /s/ Lewis B. Kaden /s/ Dean P. Phypers - ----------------------------- ------------------------------ Lewis B. Kaden Dean P. Phypers Director Director /s/ Harry P. Kamen /s/ John R. Ruffle - ----------------------------- ------------------------------ Harry P. Kamen John F. Ruffle Director Director EX-27 14
5 1000000 12-MOS DEC-31-1999 DEC-31-1999 99 0 255 20 865 1209 7164 4264 5536 1033 754 0 14 134 1129 5536 3915 3915 3709 4093 0 0 52 (222) 39 (183) 0 0 0 (183) (1.72) (1.72)
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