-----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, HuSDkyYwz1F32vvSLeptzkPC1INNUteZNbzjZr/nTgzjq153YR78yPA8kBCcGotp FHIvcg3RLrM1t65D61qxTg== 0000905722-01-500011.txt : 20010619 0000905722-01-500011.hdr.sgml : 20010619 ACCESSION NUMBER: 0000905722-01-500011 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010618 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNTCO INC CENTRAL INDEX KEY: 0000905722 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 431643751 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-13600 FILM NUMBER: 1662178 BUSINESS ADDRESS: STREET 1: 14323 SOUTH OUTER FORTY STREET 2: STE 600 N CITY: TOWN & COUNTRY STATE: MO ZIP: 63017 BUSINESS PHONE: 3148780155 MAIL ADDRESS: STREET 1: 14323 S OUTER FORTY STREET 2: STE 600N CITY: TOWN & COUNTRY STATE: MO ZIP: 63017 10-K 1 form10kt.txt FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 Commission File Number: 1-13600 HUNTCO INC. (Exact name of registrant as specified in its charter) MISSOURI 43-1643751 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 14323 SOUTH OUTER FORTY, SUITE 600N, TOWN & COUNTRY, MISSOURI 63017 (Address of principal executive offices) (Zip Code) (314) 878-0155 (Registrant's telephone number, including area code) Securities Registered pursuant to Section 12(b) of the Act: CLASS A COMMON STOCK, $0.01 PAR VALUE NEW YORK STOCK EXCHANGE (Title of class) (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: NONE (Title of class) 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. [ ] Aggregate market value of the voting common stock held by non-affiliates of the Registrant at May 10, 2001 was $4,398,955 (computed by reference to the closing price of the registrant's Class A common stock, as quoted by the New York Stock Exchange, Inc. on such date). All of the Company's Class B common stock, which is the only other voting common stock of the Company, is held by affiliates of the Company. As of May 10, 2001, the number of shares outstanding of each class of the Registrant's common stock was as follows: 5,292,000 shares of Class A common stock and 3,650,000 shares of Class B common stock. PART I ITEM 1. BUSINESS BACKGROUND Huntco Inc. ("Huntco" or "the Company"), a Missouri corporation incorporated in 1993, indirectly holds the common stock of Huntco Steel, Inc., a Delaware corporation ("Huntco Steel") and Midwest Products, Inc., a Missouri corporation ("Midwest"). The Company, through Huntco Steel, is a major intermediate steel processor, specializing in the processing of flat rolled carbon steel to specified close tolerances. Through Midwest, the Company is a leading manufacturer of (i) portable compressed air vessels for sale through mass merchandisers and to manufacturers of air compressors, and (ii) compressed air cylinders for use in tractor-trailer brake systems. The Company's products are delivered from facilities in Arkansas, Illinois, Kentucky, Missouri, Oklahoma, Tennessee, and Texas to approximately 1,500 customers located primarily in the midwestern and southern regions of the United States. The strategic location of the Company's steel processing plants, with access to major suppliers via the inland waterway system, allows the Company to take delivery of raw materials by barge, in addition to rail and truck, thereby minimizing inbound transportation costs. The Company's primary processed products include hot rolled, hot rolled pickled and oiled, hot rolled tempered and cold rolled steel, which is cut-to-length into sheets, plates, or custom blanks; or slit. In the case of tempered products, the Company may also sell master coils. Up until June 2001, the Company also produced pickled and oiled and cold rolled products, which it sold as master coils. RECENT DEVELOPMENTS Market for common shares: The New York Stock Exchange ("NYSE") suspended trading in the shares of Class A common stock of the Company on June 13, 2001, citing that the Company has not met the NYSE's continued listing criteria, in that its total market capitalization has been less than $15.0 million over an extended period of time. The NYSE has informed the Company that it intends to file an application with the Securities and Exchange Commission (the "SEC") required to obtain the SEC's approval to delist the Class A common stock with the NYSE. Even though delisted with the NYSE, the Class A common stock will continue to be registered with the SEC under the Securities Exchange Act of 1934 (the "Exchange Act"), and the Company intends to file with the SEC all reports required under the Exchange Act. Prior to entering into the Enron Transactions discussed below, the Company submitted a business plan to the NYSE's Listings and Compliance Committee for returning the Company to compliance with the NYSE's continued listing criteria no later than June 7, 2002. On March 24, 2001, the NYSE accepted the Company's plan, and began monitoring the Company's progress towards complying with its continued listing criteria, retaining the discretion to initiate suspension or delisting procedures with respect to a company that is not in compliance with its standards, including those that are subject to a previously-approved listing standards compliance plan. The NYSE requires that a $15.0 million market capitalization be maintained if a company has at least $50.0 million of total shareholders' equity. The NYSE further requires that if a company's total shareholders' equity is less than $50.0 million, then it must maintain a market capitalization of at least $50.0 million. In light of the Enron Transactions described below and the asset impairment charge taken during 2000, the Company's total shareholders' equity fell below $50.0 million. As a result, the Company would have been required to attain a $50.0 million market capitalization, rather than a $15.0 million market capitalization, in order to continue its NYSE listing. The Company's 30-day average market capitalization has been under $15.0 million since the fourth quarter of 2000, which fact resulted in the suspension. The Company expects that the SEC will accept the application to permanently delist the Class A common stock from the NYSE. As of June 13, 2001, the Company was assigned a new stock trading symbol of "HCOIA". Bid and ask quotes for over-the-counter trading of shares of the Company's Class A common stock are available in the Pink Sheets Electronic Quotation Service. The Company also plans to pursue quotation of its shares of Class A common stock by the OTC Bulletin Board once it has filed this Annual Report on Form 10-K and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. Enron Transactions: In June 2001, the Company entered into a series of transactions with Enron North America Corp. ("ENA"), EBF LLC ("EBF"), in which ENA is a member, and Enron Industrial Markets LLC ("EIM")(hereinafter ENA and EIM are collectively referred to as "Enron"). Following is a brief discussion of these different transactions: Sale of cold rolling and pickling assets: The Company sold its cold rolling and coil pickling operations to EBF in June 2001, and used the net sale proceeds to reduce its long-term debt, and to retire certain lease commitment obligations associated with operating leased equipment used in the operations sold. With this transaction, the Company no longer is in the business of producing cold rolled steel coils for its own account. The Company did retain ownership of its original coil pickling line in Blytheville, Arkansas, and is exploring opportunities to either redeploy or sell this asset. Operation and maintenance of cold rolling and coil pickling assets: In conjunction with the sale of the cold rolling and coil pickling assets, the Company further contracted to provide EBF with ongoing operating and maintenance assistance for these assets on a cost-plus reimbursement basis. As a result, the Company will continue to employ personnel to operate the assets sold to EBF in accordance with EBF's instructions, and as otherwise called for in the contractual arrangement. Under the Operation and Maintenance Agreement (the "O&M agreement"), the Company will provide production, maintenance, and administrative services to EBF for a variable fee, depending upon production levels, along with various production and yield incentives. The Company is also subject to penalties not to exceed the amount of the variable fees and incentives due from EBF for not achieving certain production and yield goals. The O&M agreement is for an initial three-year term, with renewal options and provisions for earlier termination at EBF's option. The Company also expects to have the ability to procure pickled and cold rolled steel coil products on a competitive basis in support of the flat rolled processing business of its other facilities stemming from its involvement with EBF in connection with the O&M agreement. Inventory supply and price risk management agreement: The Company entered into a fifteen-year inventory supply and price risk management agreement (the "Enron inventory agreements"), under which Enron will provide inventory to the Company for its use at then current market rates as defined in the agreement. This arrangement will result in steel coil inventory previously held as raw material on the Company's books to eventually be held by Enron for acquisition by the Company just prior to the time of processing and sale. To promptly respond to customer orders for its products, the Company has traditionally maintained a substantial inventory of steel coils in stock and on order. Prior to implementing the Enron inventory agreements, the Company's commitments for steel purchases were generally at prevailing market prices in effect at the time the Company placed its orders, which for imported material could be up to six to nine months prior to receipt at one of the Company's facilities. While the Company will continue to procure its steel coil products through its current supply channels, the Enron inventory agreements will allow the Company to generally acquire its inbound steel coil purchases from Enron at prevailing market prices at the time of processing and sale. As a result, the Company expects to be less susceptible to the negative effects of future steel coil price fluctuations. As prevailing market prices rise, causing the Company to pay more for steel purchases from Enron, it expects that it will be able to pass along such increases to its traditional spot market customer base. Conversely, as prevailing market prices decline, the Company's customers typically demand lower selling prices. Under the Enron inventory agreements, the Company expects to better maintain its margins in such a declining market environment due to the expected decline in the price at which it will acquire its steel coil requirements from Enron at the time of processing the customer's order. The Enron inventory agreements are also expected to improve the Company's liquidity. The Company's revolving credit agreement provides for borrowings of up to 65% of the value of the Company's inventories. Future purchases pursuant to the Enron inventory agreements will effectively provide the liquidity equivalent of an approximate 85% advance rate against the value of the Company's steel coil purchase needs. After full implementation of the Enron inventory agreements, the Company also expects to be able to reduce its average inventory holding periods from historical levels of 75-120 days to less than 30 days. Reference should be made to the caption "Implementation of inventory management agreements" found under the "Business Risk Factors" section of this Item 1 "Business," for a discussion of why actual results may differ materially from the forward-looking statements contained in these paragraphs. Newly issued $10.0 million debt to Enron: The Company obtained a new $10.0 million five-year term loan from Enron, which is generally secured by all of the assets of the Company, the security interests of Enron being subordinate to those of the Company's lender under its asset-based revolving credit agreement. Issuance of common stock warrants: The Company issued Enron a warrant for the issuance of up to 1.0 million shares of Huntco Inc. Class A common stock, exercisable within ten years from the date of grant with a strike price of $1.45 per Class A common share. INDUSTRY OVERVIEW Intermediate steel processors occupy a niche between the primary steel producers and industrial customers who need processed steel for their end- product manufacturing purposes. Intermediate steel processors are also positioned between the primary steel mill producers and general steel service centers and distributors who handle broad product lines of processed metal products, and who tend to specialize more in distribution than in processing. Intermediate steel processors specialize in value-added processing of steel coils, such as cutting-to-length, slitting, blanking, shape correction and surface improvement, pickling, cold reduction, annealing and tempering. These processes produce steel to specified lengths, widths, shapes and surface characteristics pursuant to specific customer orders. The processing techniques typically require specialized equipment and require high volume production in order to be performed economically. Intermediate steel processors typically have lower cost structures and provide better service in value-added processing than the primary producers. The intermediate steel processors are able to perform many of these processes more efficiently than steel service centers and distributors because the intermediate steel processors specialize in a narrower range of products and therefore are able to attract sufficient volume to justify the investment in specialized processing equipment. Primary steel producers historically have emphasized the sale of steel to large volume purchasers, and generally have viewed intermediate steel processors as an integral part of their customer base. Furthermore, end product manufacturers, service centers and distributors seek to purchase steel on shorter lead times and with more frequent and reliable deliveries than normally can be provided by the primary producers. Most manufacturers are not willing to commit to the investment in technology, equipment and inventory required to process steel for use in their own operations. These industry forces have created a market in which the success of an intermediate steel processor is based upon its ability to procure, process and deliver steel to the end user in a more efficient and cost effective manner than the end user could achieve in dealing directly with the primary producer of the steel or with another intermediate steel processor. PRODUCTS AND PROCESSING SERVICES The Company maintains a substantial inventory of flat rolled steel coils. This steel is in the form of a continuous sheet, typically 36 to 84 inches wide, between .015 and .500 inches thick, and rolled into 10 to 30-ton coils. Because of the size and weight of these coils and the equipment required to move and process them into smaller sizes, such coils do not meet the requirements, without further processing, of a majority of the Company's customers. By purchasing various kinds of steel in large quantities and at predetermined intervals, the Company attempts to purchase its raw materials at the lowest competitive price for the quality purchased. Customer orders are entered in a computerized order entry system, and appropriate inventory is then selected and scheduled for processing in accordance with the customer's specified delivery date. The Company attempts to maximize yield by combining customer orders for processing to use each purchased coil to the fullest extent practicable. The Company uses techniques such as tempering, cutting-to-length, slitting, and blanking to process steel to specified lengths, widths and shapes pursuant to specific customer orders. Tempering reduces the thickness of the steel by passing it through pressure reduction rolls, which also improves the surface characteristics of the steel being processed. Cutting-to-length involves cutting steel along the width of the coil. Slitting involves cutting steel to specified widths along the length of the coil. Blanking cuts the steel into close tolerance, specific shapes. Shape correction improves the physical appearance of the steel by removing edge wave, center buckle, crown or camber from the steel by a process known as elongation, which includes equalizing and tension leveling, and which achieves shape correction by stretching the fibers of the steel. Until June 2001, the Company also operated cold rolling, annealing, light gauge tempering and pickling assets. See the discussion found under the "Blytheville, Arkansas-cold rolling and pickling operations" heading within the "Review of Operations" caption of this "Item 1-Business" portion of Form 10-K concerning the Company's sale of these assets in June 2001. Cold rolling and tempering reduce the thickness of the steel by passing the steel through pressure reduction rolls, which also improves the surface characteristics of the steel being processed. Annealing involves heating the steel to soften it for further finishing after it has been cold reduced. Pickling cleans the mill scale from the steel by subjecting the steel to a series of hydrochloric acid baths. A portion of the steel that the Company pickled served as feedstock for the cold rolling mill. The Company also manufactures compressed air cylinders for tractor-trailer air brake systems, for air compressors, and portable compressed air vessels to inflate objects, such as automobile tires, which are sold to mass merchandisers and automotive specialty stores. The air cylinders are fabricated from components processed internally, including the stamped heads, legs and handles and the blanked wraps. The components are welded, painted, tested and packaged as required. REVIEW OF OPERATIONS The Company is intent on maintaining and fine tuning an efficient, responsive and low cost operating structure in order to service its diverse customer base. Following is a discussion of its operations at its various facilities: Huntco Steel: Chattanooga, Tennessee: Located in an industrial park on the Tennessee River, the Chattanooga, Tennessee facility opened in July 1994 with a heavy gauge, cut-to-length line. In April 1995 a new slitting line was added, and in June 1995 a new cut-to- length line was installed, both of which were designed to process lighter gauge cold rolled and pickled and oiled steel. The Chattanooga facility provides the Company access to markets in the southeastern United States, servicing customers such as service centers, appliance and furniture manufacturers, tube mills, and other end users of both hot rolled and cold rolled steel. Madison, Illinois: Located in the St. Louis metropolitan area with access to the Mississippi River, the Madison, Illinois facility commenced operations in 1983. The facility operates a cut-to-length line, acquired early in calendar 1996, to primarily process lighter gauge flat rolled steel products. The facility is also equipped with a coil slitting line primarily used to process cold rolled and pickled and oiled steel. During 1996, the Company expanded this location by constructing inside rail access to better facilitate the handling of cold rolled products. The facility provides processed steel products to a diverse group of customers, including metal fabricators, service centers and tube, consumer durable and transportation equipment manufacturers. Catoosa, Oklahoma: Located at the Port of Catoosa, near Tulsa, Oklahoma, the Catoosa facility is situated on the western edge of the inland waterway system on the Arkansas River. This facility opened in 1978, and houses a heavy gauge, cut-to-length line that was purchased in 1985, which line was upgraded in the second quarter of 2001 with the installation of a new heavy gauge plate leveler. An early 1996 expansion included the addition of a cut-to-length line to process cold rolled and pickled and oiled steel, as well as a doubling of the physical plant to allow for inside coil storage. The facility processes coils into sheets and plates, primarily for heavy equipment manufacturers, manufacturers of tanks for petroleum products and for wet and dry bulk storage, construction and metal building companies. Pasadena, Texas: Located on a 20-acre tract of land on the shipping channel in Pasadena, Texas, near Houston, this facility commenced operations in 1982. The facility is equipped with two heavy gauge cut-to-length lines. One of these lines was acquired in December 1994 and the second was added during 1998. The facility operates its own unloading facility and is capable of directly discharging barges. The physical plant was expanded in 1996, with the addition of a climate controlled warehouse used to store cold rolled and pickled and oiled steel master coils prior to final sale in this facility's market territory. The facility produces processed hot rolled sheets and plates for manufacturers of heavy farm and construction equipment, storage tanks, metal building companies, and various energy related concerns and distributes unprocessed master coils of cold rolled steel, primarily to manufacturers of metal drums. Gallatin County, Kentucky: This facility is situated in Gallatin County, Kentucky, on a 20-acre tract of land immediately adjacent to the Gallatin Steel mill, and with access to the Ohio River. The Company opened this location in May 1996 with a heavy gauge, sheet and plate cut-to-length line. The facility sells processed sheets and plates to manufacturers servicing the transportation and heavy machinery industries. Blytheville, Arkansas: Steel processing operations: The Blytheville, Arkansas facility, which has access to the Mississippi River, is located adjacent to Nucor Steel's Hickman, Arkansas flat rolled mini-mill. This location began operation in 1992 with a new, heavy gauge, cut-to-length line. In 1993, the Company added a new, heavy gauge, slitting line. These two processing lines serve customers such as service centers, pipe and tube manufacturers, and metal building companies. The Company also operates light gauge, close tolerance slitting and blanking equipment that was acquired new in 1996. This equipment is designed to process galvanized, cold rolled and pickled and oiled steel, all of which are readily available from the adjacent cold rolling and pickling operations that the Company sold to EBF in June 2001, or from Nucor in nearby Hickman, Arkansas. A two-high hot rolled steel tempering mill is also located at the Blytheville facility, which the Company acquired in 1997. The Company is looking to expand the use of this value-added processing service through sale to end users or via tolling arrangements. Cold rolling and pickling operations: The Company's cold rolling and coil pickling operations primarily focused on the production and processing of cold rolled master coils from hot rolled steel coil substrate acquired from the Company's various vendors. The Company operated cold rolling and pickling equipment at the Blytheville facility until the sale of these assets and operations in June 2001. Until the sale, the Company produced: (1) pickled and oiled coils, (2) full hard cold rolled coils, and (3) fully annealed and tempered cold rolled coils. Both cold rolling and tempering are processes whereby the thickness of the steel coil is reduced by passing it through pressure reduction rolls. Pickling removes mill scale from hot rolled steel by subjecting the coils to hydrochloric acid cleansing. The Company sold its master coil production to end users or transferred this material to other Company locations, where such coils could be converted into cut-to-length sheets or blanks, slit coils or stamped and fabricated parts prior to final sale. However, see the discussion above under "Recent Developments" concerning the Company's continued operation of these assets pursuant to the O&M agreement. Until the sale of these assets, the Company operated a four-high reversing mill, annealing furnaces, and a temper mill for processing of cold rolled coils up to 60 inches wide. These assets had the capacity to produce up to 360,000 tons of fully annealed cold rolled master coils on an annual basis, with additional capacity available to produce full hard cold rolled coils. Great emphasis was placed on enhancing the quality of cold rolled products produced since the cold rolling mill was opened in 1995. The Company operated a push-pull coil pickling line in Blytheville since 1994. A second coil pickling line with greater agitation and tension recoiling capabilities became operational during 1998, providing a higher quality feedstock for use on the reversing mill or for sale to customers. With this addition, the Company had the capacity to pickle and oil approximately 900,000 tons of steel annually. On April 30, 2001, the Company announced that its cold rolling and coil pickling operations would be closed prior to the sale of such operating assets during the second quarter of 2001. However, see the discussion above under "Recent Developments" concerning the Company's continued operation of these assets pursuant to the O&M agreement. In addition, the Company is exploring different alternatives concerning the redeployment or sale of the Company's .5"x72"x60,000# coil pickling line that was not sold to EBF. Midwest Products: Strafford, Missouri, is home for Midwest's cylinder operations. The Strafford facility produces approximately 1.0 million units annually. These products include air cylinders used in tractor-trailer brake systems and portable compressed air vessels used to fill inflatable objects such as automobile tires, and for construction compressors. The air cylinders are fabricated from pickled steel components, including stamped heads, legs, handles and blanked wraps, which have been processed at Midwest's Caraway, Arkansas location prior to delivery to Strafford for final assembly, welding and painting. Midwest installed an electrostatic, powder coating paint system at this facility during fiscal 1996, resulting in higher product quality and lower costs, as well as opening new markets for the Company. Midwest also operates a stand-alone leased facility in Caraway, Arkansas that houses the stamping equipment used to stamp components for Midwest's air cylinder operations. QUALITY CONTROL The procurement of high quality steel from suppliers on a consistent basis is critical to the Company's business. Historically, about 2% of raw materials have failed to conform to order specifications, with most of the nonconforming raw material being diverted to less critical applications. The Company has instituted quality control measures to attempt to assure that the quality of purchased raw material will allow the Company to meet the specifications of its customers and to reduce the costs and inefficiencies of production interruptions. Physical and chemical analyses are performed on selected raw materials to verify that their mechanical and dimensional properties, cleanliness and surface characteristics meet the Company's requirements. The Company believes that maintenance of high standards for accepting raw materials ultimately results in reduced return rates from its customers. Similar analyses are conducted on processed steel on a selected basis before delivery to the customer. The Company also uses statistical process control techniques to monitor its slitting process so management can document to customers that required tolerances have been continuously maintained throughout processing. The Company also maintains a test laboratory at its Blytheville facility to provide timely and economical testing and quality certifications. Certain of the Company's processing locations are ISO certified. The Chattanooga, Tennessee and Madison, Illinois flat rolled products facilities are ISO 9002 certified, as is the Strafford, Missouri air cylinder manufacturing operation of Midwest. Huntco Steel's custom blanking and slitting facility located in Blytheville, Arkansas became ISO 9002 certified on April 10, 2000. SUPPLIERS The Company purchases steel coils for processing at regular intervals from a number of primary steel producers including Gallatin Steel, National Steel Corporation, and Nucor Corporation, from various trading companies, and purchased from Trico prior to its shutdown in 2001. The Company orders steel to specified physical qualities and alloy content. By purchasing in large quantities at consistent predetermined intervals, the Company has attempted to purchase its raw materials at the lowest competitive prices for the quality purchased. The Company believes that it is not dependent on any one of its suppliers for raw materials. The Company executed a long-term inventory price risk management and supply agreement with Enron during the second quarter of 2001, which the Company believes will further solidify its relationships with its steel suppliers. See the discussion above under the caption "Recent Developments - Inventory supply and price risk management agreement" for a further discussion of this matter. MARKETING The Company's products and services are primarily sold by the Company's network of inside and outside sales personnel. The Company generally produces its processed steel products to specific customer orders rather than for inventory. The Company generally does not enter into fixed-price sales contracts with its steel processing customers with terms longer than three months. Many of the Company's customers commit to purchase on a quarterly basis with the customer notifying the Company of specific release dates, as they require the processed products. Customers typically notify the Company of release dates anywhere from a just-in-time basis up to approximately three weeks before the release date. The Company is therefore required to carry sufficient inventory of raw materials to meet the short lead-time and just-in- time delivery requirements of its customers. Beginning in 2001, the Company will be able to carry much of these inventory requirements by way of the Enron inventory agreements (see the discussion above under "Recent Developments"). Because the Company ships most steel processing orders on short lead-times, the amount of backlog at any point is not significant. CUSTOMERS AND DISTRIBUTION Huntco sells its processed steel products to approximately 1,500 customers in market areas reaching from the upper midwest, south to the Gulf of Mexico and from the southeastern coastline, west to the Rocky Mountains. The Company's customer base is diverse and includes service centers and metal fabricators as well as various storage tank, consumer durable, energy and transportation related manufacturers. The Company did not have any customers representing more than 10% of net sales for 2000. Steel service centers and distributors, which represent the Company's largest single customer group, accounted for over one-quarter of the Company's net sales for 2000. The large geographic area the Company services helps to minimize the adverse impact of regional economic changes. While the Company ships products throughout the United States, its customers are primarily located in the midwestern and southern regions of the United States. Most of its steel processing customers are located within a 250-mile radius of each of the Company's steel processing plants, facilitating an efficient delivery system capable of handling a high frequency of short lead- time orders. The Company transports a major portion of its products directly to customers via independent trucking firms, supplemented by rail and barge. The Company believes that its long-term relationships with many of its customers are a significant factor in its business and that pricing and service capabilities are the most critical factors in maintaining these relationships. COMPETITION Intermediate steel processing is a highly competitive industry in which companies compete based on price, service and their ability to process and deliver steel products based on short lead-time customer orders. The Company competes primarily with other intermediate steel processors. Geographic proximity to a customer is a significant factor. Specific, reliable data concerning the size of the market in products that the Company processes, by region, generally is not available. The Company believes that it is a significant competitor in all of the market areas it serves, and that it is one of the larger companies specializing in the processing of flat rolled carbon steel. The Company's largest competitors currently include Cargill, Inc., Feralloy Corp., FerroUnion, Heidtman Steel Products Inc., Metals USA, Inc., and Steel Warehouse. SEASONALITY Shipping volumes are lowest during the November and December holiday periods, and also tend to be slow during mid-summer as many of the Company's customers schedule plant shutdowns for vacations. These factors tend to result in lower net sales and operating results during these periods. Quarterly results can also be affected, either negatively or positively, by changing steel prices. However, the long-term inventory price risk management program entered into with Enron during the second quarter of 2001 is expected to counteract some portion of the steel price volatility risk faced by the Company. Reference should be made to the topic "Successful implementation of inventory management agreements" located within the "Business Risk Factors" portion of this Item 1, "Business" section of this Form 10-K. GOVERNMENTAL REGULATION The Company's processing centers and manufacturing facilities are subject to many federal, state and local requirements relating to the protection of the environment. The Company continually examines ways to reduce emissions and waste and to effect cost savings relating to environmental compliance. Management believes that it is in material compliance with all laws, does not anticipate any material expense to meet environmental requirements and generally believes that its processes and products do not present any unusual environmental concerns. Expenditures incurred in connection with compliance with federal, state and local environmental laws have not had, and are not expected to have during the current calendar year, a material adverse effect upon the capital expenditures, cash flows, earnings or competitive position of the Company or any of its subsidiaries. Laws and regulations relating to workplace safety and worker health, principally the Occupational Safety and Health Act and regulations thereunder which, among other requirements, establish noise and dust standards, also govern the Company's operations. Management believes that it is in material compliance with these laws and regulations and does not believe that future compliance with such laws and regulations will have a material adverse effect on its results of operations, cash flows, or financial condition. EMPLOYEES As of December 31, 2000, the Company employed 553 people. None of the Company's employees are covered by collective bargaining agreements. The Company has never experienced a significant work stoppage and considers its employee relations to be good. On April 30, 2001, the Company issued notices pursuant to the Worker Adjustment and Retraining Act of 1988 to approximately 100 employees of the Company's cold rolling and coil pickling operations, notifying such employees that the cold rolling and coil pickling operations would be closed prior to sale of such operating assets to Enron during the second quarter of 2001. However, in connection with June 2001 execution of the O&M agreement, the Company expects that less than 50 employees would now be affected, as the Company agreed to operate the cold rolling and pickling assets sold to Enron for the foreseeable future. See the discussion above under "Recent Developments" concerning the Company's continued operation of these assets pursuant to the O&M agreement. BUSINESS RISK FACTORS This Annual Report contains certain statements that are forward-looking and involve risks and uncertainties. Words such as "expects," "anticipates," "projects," "estimates," "plans," "believes," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are based on current expectations and projections concerning the Company's plans for 2001 and about the steel processing industry in general, as well as assumptions made by Company management and are not guarantees of future performance. Therefore, actual events, outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Achievement of these forward-looking results is dependent upon numerous factors, circumstances and contingencies, certain of which are beyond the control of the Company. Certain of the more important factors that the Company believes could cause actual results to differ materially from the forward-looking data presented include: Ability to procure steel products: The strain of volatile steel coil prices and other negative market factors faced by the Company and the flat rolled steel coil producing and processing industry over the last three years has left many industry participants, including the Company, in a weakened state. In light of the pressure to maintain the Company's operations during this volatile time period, the Company sought and was successful in obtaining extended terms from the majority of its primary steel vendors. The Company's ability to continue such extended terms in the face of a potentially shrinking supplier base, given the closure of certain of the Company's steel vendors and trade restrictions imposed on the import of hot rolled steel coils from a number of foreign countries, could restrict the Company's ability to procure sufficient amounts of steel coils at competitive prices to profitably sustain and/or grow its flat rolled steel processing operations. The existence of these market factors influenced the Company's decision to enter into the long-term inventory supply arrangement with Enron, as more fully discussed above, which the Company believes will serve to improve the Company's liquidity and ability to procure sufficient amounts of steel coils for processing and sale. Implementation of inventory management agreements: To promptly respond to customer orders for its products, the Company traditionally maintained a substantial inventory of steel coils in stock and on order. Prior to implementing the Enron inventory agreements during 2001, the Company's commitments for steel purchases were generally at prevailing market prices in effect at the time the Company placed its orders. While the Company will continue to procure its steel coil products through its current supply channels, the Enron inventory agreements will allow the Company to generally acquire its inbound steel coil purchases from Enron at prevailing market prices at the time of processing and sale. As a result, the Company expects to be less susceptible to the negative effects of future steel coil price fluctuations. The Company's exposure will reside in the reliability of the indices used to price the steel coil transactions between Enron and the Company, as specified in the Enron inventory agreements, to properly reflect the market. The Company will continue to be susceptible to the effects of volatile steel prices on the amount of inventory that it acquires from Enron prior to commitment to a sales order, as well as the material possessed prior to the complete phase in of the Enron inventory agreements during the second and third quarters of 2001. As such, no assurance can be given that volatility in steel prices will not again negatively impact the Company's results of operations with respect to such material. Competition: The principal markets served by the Company are highly competitive. The Company has different competitors within each of its product lines. Competition is based principally on price, service, production and delivery scheduling. Cyclical demand for Company products: Many of the Company's steel processing products are sold to industries that experience significant fluctuations in demand based on economic conditions, energy prices or other matters beyond the control of the Company. In light of these external market forces, no assurance can be given that the Company will be able to maintain or increase its level of tons shipped, especially in periods of economic stagnation or downturn. Therefore, the cyclical demand characteristics of certain of the industries to which the Company sells its products could frustrate the Company's attempt to return to profitability. Liquidation of working capital of disposed operations: The Company's ability to successfully liquidate the working capital associated with its former cold rolling and pickling operations could be negatively affected by the sale of these operations during the second quarter of 2001. The Company had approximately $10.0 million of accounts receivables and inventory related to these operations at the time of sale in June 2001. Financing and interest rates: As interest rates rise, the Company's interest expense will also rise, making it more expensive to run the Company's operations. Borrowings under virtually all of the Company's financing agreements are at interest rates that float generally with the prime rate or with LIBOR. The level of interest expense incurred by the Company under its financing agreements will therefore fluctuate in line with changes in these rates of interest and based upon the amount of credit extended to the Company under such agreements. The implementation of the Company's strategy is dependent upon its ability to access funds from its primary lenders at reasonable rates. The Company's asset-based revolving credit agreement is scheduled to expire in April 2002. Given the state of the flat rolled steel producing and processing sector, and the negative impact that certain steel industry bankruptcies have had on the lending community's view of the risk profile of industry participants, the Company perceives that more stringent lending requirements or higher borrowing rates may be required in the future. Although the Company is actively pursuing alternatives to extend, renew or refinance its long-term debt obligations, given the current economic environment in the steel consuming and manufacturing sector and the changes to the Company's operations that may be brought about from entering into the transactions with Enron in June 2001, the Company cannot be assured that it will be successful in negotiating extended, renewed or refinanced financing arrangements that are better than or comparable to its existing borrowing agreements with respect to the advance rates on its assets or the interest rate spreads required of such new loans, extensions or modifications. Market for common shares: The New York Stock Exchange ("NYSE") suspended trading in the shares of Class A common stock of the Company on June 13, 2001, citing that the Company had not met the NYSE's continued listing criteria, in that its total market capitalization has been less than $15.0 million over an extended period of time. The NYSE has informed the Company that it intends to file an application with the Securities and Exchange Commission (the "SEC") required to obtain the SEC's approval to delist the Class A common stock with the NYSE. Even though delisted with the NYSE, the Class A common stock will continue to be registered with the SEC under the Securities Exchange Act of 1934 (the "Exchange Act"), and the Company intends to file with the SEC all reports required under the Exchange Act. As of June 13, 2001, the Company was assigned a new stock-trading symbol of "HCOIA". Bid and ask quotes for over-the-counter trading of shares of the Company's Class A common stock are available in the Pink Sheets Electronic Quotation Service. The Company also plans to pursue quotation of its shares of Class A common stock by the OTC Bulletin Board once it has filed this Annual Report on Form 10-K and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. However, there can be no assurance that there will be transactions in the Class A common stock or that the Company will be successful in its efforts to have its Class A common stock quoted by the OTC Bulletin Board, or that a sufficient market will develop or be maintained to provide sufficient liquidity in the trading of the Company's common stock interests. ITEM 2. PROPERTIES Reference should be made to the "REVIEW OF OPERATIONS" information found within ITEM 1 (which is incorporated into this ITEM 2 by reference) for a further discussion of the Company's operating plant facilities. The Company also maintains ownership of a .5" x 72" x 60,000# push-pull coil pickling line that it may redeploy or sell, that was formerly operated by the Company at its Blytheville, Arkansas cold rolling and coil pickling operation that was sold to Enron in June 2001. The following sets forth certain additional information with respect to each of the Company's ongoing operating facilities: Square Utilization Footage Owned or leased HUNTCO STEEL, INC.: Chattanooga: Cutting-to-length 126,000 Owned. Slitting Tension leveling Coil storage Gauge verification & testing Pasadena: Cutting-to-length 45,000 Owned. Gauge verification and testing Humidity controlled coil storage 21,000 Owned. Barge unloading equipment Gallatin County: Cutting-to-length 65,000 Owned. Tension leveling Coil storage Gauge verification & testing Madison: Cutting-to-length 128,000 Owned. Slitting Tension leveling Coil storage Gauge verification & testing Catoosa: Cutting-to-length 80,000 Owned improvements on leased land Tension leveling Leased with fair value purchase option Coil storage Gauge verification & testing Blytheville: Cutting-to-length 80,000 Owned; $100 capital lease purchase Heavy gauge slitting option exercised in conjunction with Tension leveling, shape sale of cold rolling and related correction or elongation assets to EBF in June 2001. Gauge verification & testing Coil storage Cutting-to-length, blanking 152,000 and slitting Heavy gauge tempering 130,000 Leased facility and equipment, with Gauge verification & testing certain fair value purchase options. MIDWEST PRODUCTS, INC.: Strafford: Gauge verification & testing 100,000 Owned. Cylinder Assembly Welding Painting Caraway: 25,000 Leased facility, with renewal Stamping for cylinder assembly options. The above facilities are well maintained, in good operating condition, and are considered by the Company to be suitable and adequate to meet its steel processing and air vessel manufacturing needs for the foreseeable future. The Company has provided security interests and/or mortgages on the above- referenced property pursuant to its asset-based revolving credit facility, as well as under the Enron debt described above. With respect to capacity and utilization, most of the Company's facilities operate an average of 1.5-2 shifts per day on a five-day per week basis. ITEM 3. LEGAL PROCEEDINGS From time to time, the Company is named as a defendant in legal actions arising out of the normal course of business. The Company is not currently a party to any pending legal proceedings other than routine litigation incidental to the business. Management believes the resolution of such matters will not have a material adverse effect on the Company's results of operations, cash flows or financial condition. The Company maintains liability insurance against risks arising out of the normal course of business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to the security holders of the Company during the three months ended December 31, 2000. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Class A common stock of the Company was traded on the New York Stock Exchange ("NYSE"), under the symbol "HCO", through June 12, 2001. The NYSE suspended trading in the shares of Class A common stock of the Company on June 13, 2001, citing that the Company did not meet the NYSE's continued listing criteria, in that its total market capitalization has been less than $15.0 million over an extended period of time. The NYSE has informed the Company that it intends to file an application with the Securities and Exchange Commission (the "SEC") required to obtain the SEC's approval to delist the Class A common stock with the NYSE. Even though delisted with the NYSE, the Class A common stock will continue to be registered with the SEC under the Securities Exchange Act of 1934 (the "Exchange Act"), and the Company intends to file with the SEC all reports required under the Exchange Act. As of June 13, 2001, the Company was assigned a new stock-trading symbol of "HCOIA". Bid and ask quotes for over-the-counter trading of shares of the Company's Class A common stock are available in the Pink Sheets Electronic Quotation Service. The Company also plans to pursue quotation of its shares of Class A common stock by the OTC Bulletin Board once it has filed this Annual Report on Form 10-K and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. As of May 10, 2001, there were 66 holders of record of the Company's Class A common stock. The only other class of common equity authorized for issuance under the Company's Restated Articles of Incorporation (the "Articles") is Class B common stock (the "Class B Shares"). Huntco Acquisitions Holding, Inc. and Huntco Farms, Inc., corporations controlled by Mr. B. D. Hunter, the Company's Chairman of the Board, hold of record all of the Company's outstanding 3,650,000 Class B Shares. There is no established public trading market for the Class B Shares. The Articles provide that the Class B Shares are not transferable except: (i) upon conversion into Class A Shares; (ii) to the Company for cancellation; or (iii) to any "Hunter Affiliate" or any member of the "Hunter Group", as those terms are defined in the Articles. The table below shows the Company's quarterly high and low Class A common stock sales prices as reported by the New York Stock Exchange, and quarterly per share dividend amounts paid on the Class A common stock and the Class B common stock for the periods presented. High Low Dividends Quarter ended March 31, 1999 6.0000 2.5000 .035 Quarter ended June 30, 1999 4.4375 2.4375 - Quarter ended September 30, 1999 4.4375 2.7500 - Quarter ended December 31, 1999 3.5000 2.0625 - Quarter ended March 31, 2000 6.0000 2.8750 - Quarter ended June 30, 2000 5.1250 2.5000 - Quarter ended September 30, 2000 2.8125 1.3750 - Quarter ended December 31, 2000 1.8750 0.6250 - The Company's revolving credit agreement contains restrictions on the Company's ability to declare and pay common dividends. Pursuant to the terms of such revolving credit agreement, the Company has not been in a position to declare and pay common dividends since the first quarter of 1999. The Company is also required to pay any cumulative dividends that are in arrears with respect to its outstanding Series A preferred stock, prior to any payment of common dividends. As of December 31, 2000 and March 31, 2001, the Company was in arrears with respect to the payment of its Series A preferred stock dividends in the amounts of $50,000 and $100,000, respectively. In conjunction with obtaining the consent of the Company's senior lender to the Enron Transactions, the Company agreed to a restriction on its ability to pay dividends on its Series A preferred stock through the remaining term of the asset-based revolving credit agreement, which is set to expire on April 15, 2002. As a result, the Company will not be in a position to declare preferred or common dividends until April 15, 2002, absent a refinancing of its asset-based revolving credit facility that would not include this restriction. ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
STATEMENT OF OPERATIONS DATA (in thousands, except per share amounts): Eight months ended Year Ended Year ended December 31, December 31, April 30, 2000 1999 1998 1997(1) 1997 1996 ---- ---- ---- ------ ---- ---- Net sales $286,605 $349,947 $391,181 $246,324 $326,563 $264,087 Cost of sales 282,444 332,215 369,864 227,871 294,455 245,863 ------- ------- ------- ------- ------- ------- Gross profit 4,161 17,732 21,317 18,453 32,108 18,224 Selling, general and administrative expenses 18,439 19,062 19,939 11,757 15,383 13,147 Non-recurring loss on: sale of plant facility - 1,720(2) - - - - . asset impairments 54,206(3) - - - - - ------- ------- ------- ------- ------- ------- Income (loss) from operations (68,484) (3,050) 1,378 6,696 16,725 5,077 Interest, net (10,039) (10,140) (8,113) (5,194) (6,239) (3,268) ------- ------- ------- ------- ------- ------- Income (loss) before income taxes (78,523) (13,190) (6,735) 1,502 10,486 1,809 Provision (benefit) for income taxes (1,266) (4,687) (2,444) 486 3,997 701 ------- ------- ------- ------- ------- ------- Net income (loss) before extraordinary item (77,257) (8,503) (4,291) 1,016 6,489 1,108 Extraordinary item, net of tax - (2,644)(4) - - - - . ------- ------- ------- ------- ------- ------- Net income (loss) (77,257) (11,147) (4,291) 1,016 6,489 1,108 Preferred dividends 200 200 200 133 50 - . ------- ------- ------- ------- ------- ------- Net income (loss) available for common shareholders $(77,457) $(11,347) $(4,491) $ 883 $ 6,439 $ 1,108 ======= ======= ======= ======= ======= ======= Earnings (loss) per common share (basic and diluted): Net loss before extraordinary item $(8.66) $ (.97) $(.50) $ .10 $ .72 $ .12 Extraordinary item, net of tax - (.30)(4) - - - - ------- ------- ------- ------- ------- ------- Net earnings (loss) per common share $(8.66) $(1.27) $(.50) $ .10 $ .72 $ .12 ======= ======= ======= ======= ======= ======= Weighted average common shares outstanding: Basic 8,942 8,942 8,942 8,942 8,942 8,942 Diluted 8,942 8,942 8,942 8,951 8,942 8,948 Common cash dividends per share - $ .04 $ .11 $ .11 $ .14 $ .12 (1)On October 23, 1997, the Company filed a Form 8-K announcing that it had determined to change its fiscal year end from April 30 to a calendar year. As a result, the Company reported an eight-month transition period ended December 31, 1997, in order to change to a calendar year end. (2)On December 15, 1999, the Company sold its South Carolina steel processing facility and related inventory, resulting in a non-recurring loss on sale of plant facility. (3)Reflects the non-recurring, non-cash asset impairment charge recorded in the fourth quarter of 2000 to reduce the carrying value of the Company's cold rolling and coil pickling assets to their net realizable values. See Note 2 to the Consolidated Financial Statements for a further discussion. (4)Incurred in connection with the early retirement of the Company's previously outstanding long- term debt agreements on April 15, 1999.
BALANCE SHEET DATA (in thousands):
December 31, April 30, --------------------------------------- -------------- 2000 1999 1998 1997 1997 1996 ---- ---- ---- ---- ---- ---- Working capital $ 37,449 $ 76,277 $ 71,028 $ 84,182 $ 79,502 $ 62,305 Total assets 146,900 256,734 293,231 285,265 307,318 222,437 Short-term debt and current maturities 359 248 7,352 209 189 189 Long-term debt (net of current portion) 83,255 105,470 102,555 110,730 100,877 73,066 Preferred stock 4,500 4,500 4,500 4,500 4,500 - Common shareholders' equity 22,007 99,414 111,074 116,505 116,561 111,366
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW: Huntco Inc. ("Huntco" or the "Company") is a major intermediate steel processor, specializing in the processing of flat rolled carbon steel to specified close tolerances. The Company's primary products include hot rolled, hot rolled pickled and oiled, tempered and cold rolled steel, which are cut-to-length into sheets, plates, or custom blanks; slit; or in the case of pickled and oiled, cold rolled and tempered products, sold as master coils. The Company is also a leading manufacturer of compressed air vessels for sale through mass merchandisers and compressed air cylinders for use in tractor- trailer brake systems and compressors. Huntco's products are currently delivered from seven facilities to approximately 1,500 customers located primarily throughout the Midwestern and southern United States. In June 2001, the Company sold its cold rolling and certain of its coil pickling operations located in Blytheville, Arkansas to EBF LLC ("EBF"), of which Enron North America Corp. is a member. However, the Company contracted to continue to operate the cold rolling and pickling assets sold in June 2001 for EBF on a cost-plus reimbursement basis. The following discussion should be read in conjunction with Item 1. "Business - - Recent Developments", Item 6. "Selected Consolidated Financial Data" and the Company's Consolidated Financial Statements and related Notes thereto in Item 8, "Financial Statements and Supplementary Data." The Company's results of operations have been impacted by numerous external factors such as volatile flat rolled steel prices, general economic conditions, political decisions concerning steel import restrictions, changing interest rates, energy prices, and fierce competition. This section also contains statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. See the disclosures under the caption "Business Risk Factors" found within Item 1. "Business" of this Annual Report on Form 10-K for cautionary information with respect to such forward-looking statements. RESULTS OF OPERATIONS: 2000 COMPARED TO 1999: The most significant difference between the results of operations for 2000 and 1999 relates to the $54.2 million asset impairment charge recorded as a result of the June 2001 sale of the Company's cold rolling and coil pickling operation in Blytheville, Arkansas. See Note 2 to the Consolidated Financial Statements for a further discussion of the sale of the cold rolling and certain pickling operations. The Company committed significant capital and operating resources to the development of this line of business since the mid- 1990s, only to be faced with unexpected and unpredictable eroding spreads between hot rolled and cold rolled pricing that occurred since its decision to construct the cold mill and related assets in 1993. Erratic and volatile flat rolled steel coil pricing at both the hot rolled and cold rolled levels has been fed over the last few years by the heightened amount of steel imports, domestic overcapacity constructed at the producer levels for hot rolled, cold rolled, and galvanized steel coils, which producers of such products represented suppliers to, competitors of, and customers for the Company's cold rolling operations, respectively. The difficulties faced by the Company in supplying its cold rolling operations on an independent basis in competition with producing hot mills or against duty-free cold rolled imports were staggering in light of the significant volatility in hot rolled and cold rolled steel coil prices that impaired the Company's liquidity over the last three years. Import restrictions on hot rolled coils without commensurate restrictions on cold rolled products put pressure on the traditional spread between hot rolled and cold rolled steel prices. As a result, the Company was no longer able to generate sufficient margins on this business to justify any continued investment in these operations. Unfortunately, the hot rolled/cold rolled spreads that existed when the Company committed to construct its cold rolling facility in 1993 and when it started up these operations in 1995 deteriorated to the point that the Company concluded in late calendar 2000 that the best course of action was to divest itself of its cold rolling and pickling assets. The spread between hot rolled and cold rolled transaction prices according to Purchasing Magazine averaged just over $150 per ton in 1994 and 1995, as the Company was constructing and starting up its cold rolling operations. Unfortunately, the average spread between hot rolled and cold rolled transaction prices according to Purchasing Magazine declined to approximately $107 per ton over the course of 1998, 1999 and 2000. Beyond the deterioration in cold rolled transaction margins referred to above, in order for the Company to operate as an independent cold rolled producer, it had to acquire hot rolled coils in advance to ensure it could meet its customer demands. As a result, the Company was further exposed to deteriorating and volatile hot rolled steel prices due to its need to maintain an on-hand supply of hot rolled feedstock for its cold rolling operations. As the Company's cold rolling operations improved in quality, it also found that certain of its customers' orders were best met by using steel produced by integrated mills as this resulted in a higher quality cold rolled coil. However, the Company was not able to domestically source a sufficient quantity of such integrated hot rolled supply, as such integrated producers were also competitors of the Company's cold rolling mill. In addition, with Nucor's construction of a cold rolling and galvanizing plant immediately adjacent to the Company's cold rolling facility in Arkansas, sourcing of hot rolled material from Nucor for cold rolling purposes also dropped off. In order to meet the Company's feedstock requirements for the cold mill, it looked to import sources for much of its hot rolled coil needs. Importing such requirements required the Company to commit to hot rolled feedstock purchases at prices in effect as long as 6-9 months in advance of when the material would be available for use in its cold reduction process. The Company was not only exposed to the volatile nature of steel coil prices on such advance purchases, but also to the sizes it ordered in light of an evolving and changing customer order book given the competitive landscape that it faced. It was often necessary for the Company to order wider hot rolled coils than might have otherwise been called for (if the hot bands could have been ordered with shorter lead times and more visibility to the Company's sales order book), in order to ensure that it had a sufficient amount of feedstock available for cold rolling purposes. The result of this situation was that the mix of the Company's orders for specified finished cold rolled widths did not necessarily match up with its hot rolled feedstock sizes. As a result, the Company incurred increased yield loss (i.e., scrap) due to such longer lead time feedstock purchases, as it was often necessary to specify the width of the incoming hot rolled feedstock before actual orders were in hand. In addition to the factors relating to price volatility, transaction spreads and yields discussed above, subsequent to the Company's decision to develop its cold rolling capacity, competitors added over 3.0 million tons of additional new cold rolling capacity in the Company's market territories since it opened its cold mill in 1995. Unfortunately, the market could not absorb all of this additional capacity, as evidenced by the bankruptcy filing of Heartland Steel, Inc., an Indiana-based steel processor that commenced operations at a newly constructed cold rolling mill approximately two years ago and well after the Company's entry in the cold rolled market. The above-referenced situation manifested itself over the course of 1998, 1999 and 2000. During this time period, the average spread between the price of cold rolled steel for the current month versus the price of hot rolled steel as of six months earlier fell to $20-$25 per ton in the fourth quarter of 2000, and only averaged $78 and $87 per ton in 1999 and 2000, respectively. Given that the Company incurred production costs, inclusive of scrap and non- cash expenses such as depreciation, ranging from approximately $80 per ton during the first half of 2000 when capacity utilization was relatively high to in excess of $100 per ton as capacity utilization declined significantly in the second half of 2000 and the first quarter of 2001, to convert hot rolled coils into fully processed cold rolled coils, the deteriorated spreads referred to above rendered it virtually impossible for the Company to earn a return sufficient to cover its selling, overhead and financing costs associated with these operations. The Company also attempted to create a niche market for its cold rolling operations by selling more full hard cold rolled product to galvanizers for use as feedstock in the production of hot dipped galvanized coils. Unfortunately, overcapacity built in this industry sector also led to a drop in the spread between cold rolled and galvanized prices. Per Purchasing Magazine, the average per ton spread between cold rolled and galvanized prices declined from $112 in 1998, to $36 and $13 in 1999 and 2000, respectively, with certain months showing cold rolled prices either the same as or higher than hot dipped galvanized prices. The Company believes that these deteriorations in market fundamentals resulted in the idling of one of the Company's largest cold rolled customers, Galvpro, in the first quarter of 2001. Given this market environment, the Company's prospects of maintaining its independent cold rolling facility were greatly diminished. Net sales for the year ended December 31, 2000 were $286.6 million, a decrease of 18.1% in comparison to net sales of $349.9 million for the year ended December 31, 1999. The decrease in net sales for 2000 was attributable to a combination of the sale of the Company's former South Carolina facility, which sale took place on December 15, 1999, lower year-over-year shipping volumes at the Company's remaining operations, especially during the second half of 2000, and a lower mix of higher priced cold rolled sales volume in 2000 versus 1999. The former South Carolina facility contributed $31.7 million in net sales during 1999. Exclusive of the South Carolina facility sold in 1999, the Company processed and shipped 949,366 and 1,055,340 tons of steel in 2000 and 1999, respectively. Approximately 27.4% and 23.9% of the tons processed at the Company's remaining locations in 2000 and 1999, respectively, represented customer-owned material processed on a per ton, fee basis. Processing customer-owned material generally results in lower revenues per ton, but higher gross profit expressed as a percentage of net sales, in comparison to when the Company processes and sells its own steel inventory. The Company sold 200,016 and 255,346 tons of cold rolled products in 2000 and 1999, respectively, from its remaining locations. Higher average overall selling prices during the first half of 2000 somewhat offset the factors discussed above, with 2000 selling values averaging approximately 8.4% more than those realized in 1999. The effect of historically high imports of steel products into the United States during late 1998 and early 1999 had the effect of depressing selling values for much of 1999. Such selling values recovered in early 2000, only to decline precipitously during the second half of 2000, especially in the fourth quarter. Gross profit expressed as a percentage of net sales was 1.4% and 5.1% for 2000 and 1999, respectively. The lower gross profit margin realized in 2000 was due to falling prices and weaker demand across all product lines throughout the last three quarters of 2000. Hot band prices declined by over 30% from early year levels. The combination of interest rate hikes, higher energy costs, and higher cold rolled import levels encouraged by the decision of the International Trade Commission not to follow the Commerce Department's preliminary finding to impose duties on the import of cold rolled steel coils from twelve different countries, influenced the producing mills to lower their hot band prices to attract demand. However, the lower hot band prices had little impact in encouraging steel purchases. Rather, the prospect of lower prices in the market and the sufficient amount of steel inventory in the distribution channels prompted distributors, processors (such as the Company), and the Company's customers to reduce inventory positions in the face of such rapidly falling prices. These operating margin pressures continued throughout the latter half of 2000. The Company's gross profit was also negatively impacted by the recording of a $7.0 million lower of cost or market inventory adjustment. The Company took this charge in the fourth quarter of 2000, in light of the steep and steady industry-wide decline in flat rolled steel coil transaction prices, which was caused by the slowdown in the general economy and the oversupply of flat rolled products plaguing the Company's markets from both domestic overcapacity and excessive import concerns. Given the rapid decline in the price of flat rolled steel coil products during 2000, the Company was not able to turn over its entire inventory at the higher ordered prices for such material prior to granting price accommodations or sales order cancellations to its customers due to competitive market circumstances. Selling, general and administrative ("SG&A") expenses of $18.4 million for 2000 reflect a decrease of $.6 million from the prior year. This decrease is attributable to the elimination of SG&A costs incurred to operate the Company's former South Carolina facility, offset by the recording of approximately $1.0 million of incremental accounts receivable reserves due to collectibility concerns relating primarily to customer bankruptcies. SG&A expenses expressed as a percentage of net sales increased year over year from 5.4% during 1999 to 6.4% during 2000, reflective of the decline in net sales and the additional receivable reserve noted above. Absent the approximate $1.0 million charge for additional receivable reserves recorded during 2000, SG&A expenses expressed as a percentage of net sales would have been 6.1%. Certain of the Company's SG&A expenses are fixed and do not decline with a reduction in selling values or volumes. As discussed above, the Company's 2000 operating results were negatively impacted by the non-recurring asset impairment charge recorded in order to carry the Company's cold rolling and coil pickling assets at their net realizable value. See also Note 2 to the Consolidated Financial Statements for a further discussion. The Company's 1999 operating results were also negatively impacted by the non- recurring loss on the sale of the Company's former South Carolina steel processing facility. On December 15, 1999, the Company sold its South Carolina facility and related inventory to Feralloy Corporation. The Company recognized a non-recurring loss of $1.7 million, before income tax benefits, on the sale of its South Carolina facility, which loss included certain liabilities and contractual obligations incurred by the Company. The Company incurred a loss from operations of $68.5 million for 2000, which compares to 1999's loss from operations of $3.1 million. This change is the result of the factors discussed in the preceding paragraphs. Net interest expense of $10.0 million was incurred during 2000, versus $10.1 million for 1999. Higher 2000 versus 1999 interest rates have been offset by lower average corporate borrowings during 2000 versus 1999. The Company did not capitalize any interest costs during 1999 or 2000. The effective income tax benefit rates experienced by the Company were 1.6% and 35.5% for 2000 and 1999, respectively. The 1999 rate reflects the impact of non-deductible expenses, such as goodwill amortization, as well as the recognition of certain state income tax benefits. The low effective rate for 2000 is the result of the Company's decision to record a non-cash valuation allowance against its deferred tax assets. In evaluating the need for an allowance, the Company considered the likelihood of its ability to realize the benefit of its deferred tax assets given the continuing uncertainty of the domestic steel market. A portion of the valuation allowance was recorded against tax basis net operating loss carryforwards of $66.9 million and AMT credit carryforwards of $1.9 million that are available for the Company's use before expiration dates ranging from 2009 to 2020. The Company will continue to assess the valuation allowance and to the extent it is determined that it is not necessary; the allowance will be subsequently adjusted. During 1999, the Company incurred an extraordinary charge of $2.6 million, net of income tax benefits of approximately $1.4 million related to the early retirement of its primary long-term debt obligations on April 15, 1999. See LIQUIDITY AND CAPITAL RESOURCES below for a further discussion of this matter. During 2000 the Company incurred a net loss for common shareholders of $77.5 million, or $8.66 per share both basic and diluted, which compares to a 1999 net loss for common shareholders of $11.3 million, or $1.27 per share both basic and diluted. Excluding the impact of the $54.2 million asset impairment charge, the basic and diluted loss per share was $2.60 in 2000. Included in the 1999 net loss was an extraordinary charge of $2.6 million ($.30 per share both basic and diluted) incurred in connection with the early retirement of the Company's previously outstanding long-term debt agreements. The 1999 net loss also includes the non-recurring loss on the sale of the South Carolina facility of $.12 per share (both basic and diluted), net of related tax benefits, recognized by the Company during the fourth quarter of 1999. The remaining changes reflect the factors discussed in the preceding paragraphs. 1999 COMPARED TO 1998: Net sales for the year ended December 31, 1999 were $349.9 million, a decrease of 10.5% in comparison to net sales of $391.2 million for the year ended December 31, 1998. The Company's lower net sales are primarily the result of declining selling prices. The effect of historically high imports of steel products into the United States during late 1998 and early 1999 resulted in significant declines in selling values realized by the Company and the steel processing industry in general. The Company's average per ton selling values declined 9.2% for 1999 in comparison to 1998, although steel pricing slowly recovered after the first half of 1999. Also reflected in the lower net sales for 1999 were reduced direct sales volumes. Direct (i.e., non-tolling) sales volume measured in tons shipped decreased 2.1% for 1999. The Company processed and shipped 1,203,972 and 1,208,255 tons of steel in 1999 and 1998, respectively. Approximately 23.9% and 22.5% of the tons processed in 1999 and 1998, respectively, represented customer-owned material processed on a per ton, fee basis. The Company sold 257,780 and 261,914 tons of cold rolled products in 1999 and 1998, respectively. Gross profit, expressed as a percentage of net sales, was 5.1% and 5.5% for 1999 and 1998, respectively. The gross profit margin percentages realized by the Company steadily increased after bottoming out in the fourth quarter of 1998 and the first quarter of 1999, as steel pricing and sales and production volumes slowly recovered from the depressed levels of late 1998 and early 1999. The lower year-over-year gross profit percentage reflects the devastating impact that steel selling price declines had on the Company in early 1999, especially in cold rolled steel product pricing and volumes. Selling, general and administrative ("SG&A") expenses of $19.1 million for 1999 reflect a decrease of $0.8 million from the prior year. This decrease is the result of management's efforts to streamline its administrative efforts between 1998 and 1999. During 1999, the Company centralized certain of its management and administrative functions at its corporate office towards this end. SG&A expenses expressed as a percentage of net sales increased year over year from 5.1% during 1998 to 5.4% during 1999, primarily reflecting the decline in net sales noted above. Certain of the Company's SG&A expenses are fixed and do not decline with a drop in selling values or volumes. The Company's loss from operations was also negatively impacted during 1999 by the non-recurring loss on the sale of the Company's South Carolina steel processing facility discussed above, as well as losses incurred during the first six months of 1999 related to the operation of the Company's third-party metal stamping business conducted in Blytheville, Arkansas. The Company incurred operating losses of $1.0 million in its stamping operations prior to the disposition of related equipment in mid-1999. The Company does, however, continue to utilize certain stamping equipment in the production of components for its air cylinder operations. The Company recognized a $3.1 million loss from operations in 1999, which compares to 1998's income from operations of $1.4 million. This decrease reflects the factors discussed in the preceding paragraphs. Net interest expense of $10.1 million was incurred during 1999, an increase of $2.0 million over the prior year. This increase was the result of generally higher 1999 borrowings to support higher working capital levels, especially early in 1999, as well as lower capitalized interest during 1999 versus 1998, as substantially all of the Company's capital projects had been placed into service. The Company capitalized $1.2 million of interest costs to construction in progress in 1998, versus none for 1999. The effective income tax (benefit) rates experienced by the Company were (35.5)% and (36.3)% for 1999 and 1998, respectively. These rates reflect the impact of non-deductible expenses, such as goodwill amortization, as well as the recognition of certain state income tax benefits during both years. The Company incurred an extraordinary charge of $2.6 million, net of income tax benefits of approximately $1.4 million related to the early retirement of its primary long-term debt obligations on April 15, 1999. See LIQUIDITY AND CAPITAL RESOURCES below for a further discussion of this matter. During 1999 the Company incurred a net loss for common shareholders of $11.3 million, or $1.27 per share both basic and diluted, which compares to a 1998 net loss for common shareholders of $4.5 million, or $.50 per share both basic and diluted. Included in the 1999 net loss is an extraordinary charge of $2.6 million ($.30 per share both basic and diluted) incurred during the Company's second quarter in connection with the early retirement of the Company's previously outstanding long-term debt agreements. The 1999 net loss also includes the non-recurring loss on the sale of the South Carolina facility of $.12 per share (both basic and diluted), net of related tax benefits, recognized by the Company during the fourth quarter of 1999. The remaining changes reflect the factors discussed in the preceding paragraphs. LIQUIDITY AND CAPITAL RESOURCES: In June 2001, the Company sold its cold rolling and coil pickling operations located in Blytheville, Arkansas to EBF for $16.0 million, net of related transaction costs. This transaction was also used to ascertain and estimate the $54.2 million asset impairment charge recorded by the Company in the fourth quarter of 2000. In connection with this transaction, the Company also arranged for a newly issued $10.0 million five-year term loan from Enron, which bears interest at 3.0% over LIBOR. The Company utilized these net proceeds to retire certain of its operating lease obligations associated with assets formerly used in the cold rolling operation, to reduce the balance of the Company's asset-based revolving credit facility, and to fund a decrease in its balance of accounts payable. Also in June 2001, the Company entered into a fifteen-year inventory supply and price risk management agreement under which Enron will provide inventory to the Company for its use at then current market rates as defined in the agreement. The Company believes this arrangement will result in approximately $20.0-$25.0 million of the steel coil inventory previously held as raw material on the Company's books to eventually be held by Enron for acquisition by the Company just prior to the time of processing and sale. The Company agreed to pay Enron, in monthly installments, an annualized price risk management fee of approximately $2.0 million per year during the term of the agreement. The Company further agreed to pay Enron a transaction fee equal to the value of held material at a rate of 2.25% over LIBOR. In connection with the inventory management agreements, the Company also issued Enron a warrant for the issuance of up to 1.0 million shares of Huntco Inc. Class A common stock, exercisable within ten years from the date of grant at a strike price of $1.45 per share. The fair value of these warrants was approximately $.7 million, and will be amortized to expense over the fifteen-year life of the inventory management agreements. See Note 2 to the Consolidated Financial Statements for a further discussion. The Company believes that the Enron inventory agreements should improve the Company's liquidity. The Company's revolving credit agreement provides for borrowings of up to 65% of the value of the Company's inventories. Future purchases through Enron will effectively provide the liquidity equivalent of an approximate 85% advance rate against the value of the Company's steel coil purchase needs. After full implementation of the Enron inventory agreements, the Company expects to be able to reduce its average inventory holding periods from historical levels of 75-120 days to less than 30 days. In light of the second quarter 2001 transactions with Enron, the Company amended certain terms of its asset-based revolving credit facility. The Company exercised its right to reduce the size of the facility from $140.0 million to $90.0 million during April 2001. The Company committed to further reduce the size of the facility by an additional $30.0 million through October 31, 2001, as it reduces its borrowing needs with the sale of its cold rolling operations, receipt of the newly issued $10.0 million term loan, and the phase-in of the inventory management and supply arrangement with Enron as discussed above. The term of the facility continues until April 15, 2002. The Company intends to explore extension of the facility, as well as the possibility of obtaining additional financing associated with its property, plant and equipment during the balance of 2001. However, there can be no assurance that the Company will be successful in its efforts to obtain additional borrowings at what are deemed to be reasonable terms and financing rates. During 1999 and 2000, and continuing into the first quarter of 2001, the Company sought to reduce its steel coil inventory holdings with the goal of limiting the Company's exposure to rapid inventory price deflation. Company management focused on increasing inventory turns and better managing inventory levels, as evidenced by the $31.3 million and $14.4 million declines in inventory during 2000 and 1999. The Company believes that it has been successful in this effort, but believes the benefits to be derived from the inventory supply and price risk management agreement entered into with Enron during the second quarter of 2001 will significantly reduce the Company's exposure to future inventory deflationary pressures. Notwithstanding the negative impact on the Company's operating results from the dramatic decrease in steel prices which occurred in 2000 and the related slowdown in business activity levels, the Company was able to reduce the level of its long-term debt obligations by $22.2 million and the level of its trade account obligations by $8.2 million during 2000. This was primarily accomplished through improved working capital management. The Company experienced slower business activity over the last three quarters of 2000, and reacted by adjusting its purchasing pattern towards increasing product turns and reducing inventory levels. The Company generated $26.0 million, $1.6 million, and $8.8 million of cash from operating activities during 2000, 1999, and 1998. Over the past three years, investment in steel coil inventories and the associated payment terms offered by vendors materially influenced the Company's liquidity. Inventory levels have been heavily influenced by the source of the Company's raw material supply. Use of imported steel typically required the Company to maintain higher levels of inventory. Receipt of imported steel is normally by large ocean-going vessel, with longer lead times required and less predictable delivery schedules for such bulk import orders, as compared to the procurement process faced when purchasing steel coils from domestic producing mills. In addition, the timing of receipt of imported steel coils has significantly impacted the balance of the Company's inventories on any given day. In an effort to stay competitive from a raw material pricing perspective, during 1998 the Company shifted a major portion of its steel purchases to imported coils. Due to the use of imported coils and the resultant increase in inventory, the Company received extended payment terms, primarily from its import vendors. As a result, the Company was able to fund higher inventories with increased accounts payable during 1998. The years ended 2000 and 1999 saw the reverse with inventory decreases providing the liquidity to reduce the Company's accounts payable balance. The Company's investment in accounts receivable decreased by $15.9 million and $1.7 million during 2000 and 1999, respectively. The 2000 decrease was due to a combination of reduced selling values and lower shipping volumes late in 2000 caused by the general malaise affecting the manufacturing sector of the economy as a whole, as well as the more pronounced slowdown impacting the Company's cold rolling operations. The 1999 decline of $1.7 million is attributable to lower sales transaction prices in 1999 versus 1998. Accounts receivable increased in 1998 by $1.9 million consistent with the Company's sales growth that year. The Company used relatively limited amounts of funds for capital expenditures during 2000 and 1999, investing $2.7 million and $.9 million, respectively. During 1998, the $8.8 million of capital spending was concentrated on the Company's second coil pickling line and improvements to the cold rolling mill (both of which were sold to Enron in June 2001), as well as the acquisition and installation of a heavy gauge cut-to-length line for the Pasadena, Texas facility. The Company does not contemplate any further significant level of capital additions over the course of 2001. The Company generated $8.9 million in cash from investing activities during 1999, primarily related to the sale of the Company's South Carolina facility on December 15, 1999. The Company also generated approximately $.5 million of cash from the disposition of certain of its stamping assets from its Blytheville location during the summer of 1999. The proceeds from these 1999 asset sales were utilized to meet current obligations with trade creditors, and assisted in reducing the Company's long-term debt. See Note 3 to the Consolidated Financial Statements for further discussion. On April 15, 1999, the Company refinanced substantially all of its long-term debt obligations by entering into a new revolving credit facility with an asset-based lending institution. This asset-based financing provided the Company with credit at varying rates of interest set either below the prime rate for LIBOR-based loans or generally 0.5% above the prime rate for daily revolving credit advances, payable monthly. In connection with modifications agreed to in June 2001, the interest rates generally applicable to the revolver will increase to 1.0% over prime or 2.75% over LIBOR for the daily revolving credit advances on the line. The total size of the revolving credit facility stood at $140.0 million until April 2001, whereupon the Company exercised its right to reduce the size of the facility to $90.0 million. In June 2001, the Company further agreed to three separate $10.0 million line reductions, each subject to a 0.5% premium, such that the size of the asset- based revolver will stand at $60.0 million as of the end of October 2001. The Company and its senior lender also agreed to amend the asset-based revolver to eliminate a maintenance of net worth covenant which the Company was otherwise in violation of as of December 31, 2000 absent the amendment and waiver, and to replace this covenant with a fixed charge coverage covenant that becomes effective during the second half of 2001. In conjunction with the April 1999 refinancing, the Company retired early its $50.0 million of fixed-rate term notes. As a result of this early retirement, the Company incurred a prepayment penalty and related charges of approximately $4.1 million, before income tax benefits, which amount is reported as an extraordinary item in 1999. The Company also incurred approximately $1.6 million in costs during 1999 associated with this debt issuance. The Company used the proceeds of the incremental asset-based borrowings during 1999, net of the amounts required for debt retirement and transaction expenses, including the prepayment penalty, to reduce its obligations to trade vendors that were unusually high because of abnormally high inventory levels that existed in early 1999. Total borrowings under the Company's asset-based revolving credit facility were approximately $83.0 million at December 31, 2000. Security under the agreement consists of the accounts receivable, inventory, fixed assets and other assets of the Company. The maximum amount of borrowings available to the Company under the asset-based revolver is based upon percentages of eligible accounts receivable and inventory, as well as amounts attributable to selected fixed assets of the Company. Close attention is given to managing the liquidity afforded under the Company's asset-based revolver, which availability in excess of actual borrowings has been relatively limited throughout the term of the agreement. The Company has also accessed capital by way of off balance sheet financing arrangements. The Company entered into various operating leases with domestic commercial lenders for steel processing and other equipment at certain of its facilities. Annual operating lease payments are expected to be $2.7 million in 2001, and then fall to an annual rate of $1.7 million - $1.9 million for the three years thereafter, in light of the disposition of certain operating leased assets in connection with the sale of the Company's cold rolling and pickling operations in June 2001. Subsequent to the first quarter 1999 common dividend of $.3 million, the Company suspended further payment of common dividends. During 1998, the Company paid dividends of $.9 million, on its common stock. The Company's revolving credit agreement contains restrictions on the Company's ability to declare and pay common dividends. Pursuant to the terms of such revolving credit agreement, the Company has not been in a position to declare and pay common dividends since the first quarter of 1999. Dividends on the Company's Series A preferred stock are cumulative; were paid through the third quarter of 2000 and thereafter suspended. As a result, the scheduled December 1, 2000 quarterly payment of $50,000 was in arrears as of December 31, 2000. In conjunction with obtaining the consent of the Company's senior lender to the June 2001 transactions with Enron and EBF, the Company agreed to a restriction on its ability to pay dividends on its Series A preferred stock through the remaining term of the asset-based revolving credit agreement, which is set to expire on April 15, 2002. As a result, the Company will not be in a position to declare preferred or common dividends until April 15, 2002, absent a refinancing of its asset-based revolving credit facility that would not include this restriction. The Company's operations, unused borrowing capacity available under its asset- based revolving credit facility, off-balance sheet financing leverage available under the Enron inventory agreements, and access to additional operating lease financings are expected to generate sufficient funds to meet the Company's working capital commitments, debt service requirements, and necessary capital expenditures over the balance of 2001. The Company maintains the flexibility to issue additional equity in the form of Class A common stock or additional series of preferred stock junior to the Series A preferred stock if and when market circumstances should ever dictate. The Company, from time-to-time, also explores financing alternatives such as the possibility of issuing additional debt, entering into further operating lease financings, and pursuing strategic alternatives. The Company also continues to evaluate its business with the intent to streamline operations, improve productivity and reduce costs. QUARTERLY EFFECTS AND SEASONALITY: Shipping volumes are lowest during the November and December holiday periods and also tend to be lower during mid-summer, as many of the Company's customers schedule plant shutdowns for vacations. These factors tend to result in lower net sales and net income during these time periods. Quarterly results can also be affected, either negatively or positively, by changing steel prices, as described previously herein. INFLATION: The Company's operations have not been, nor are they expected to be, materially affected by inflation. However, the Company is affected by changes in the price of steel charged by the primary producers, which are not considered to be inflation-sensitive, but rather sensitive to changes in steel demand as the primary producers use pricing policy to attempt to control their order levels and backlog. NEW ACCOUNTING STANDARDS: In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended (FAS 133), which establishes accounting and reporting standards for derivative instruments and for hedging activities, and requires that all derivatives be recognized as either assets or liabilities in the statement of financial position and that such instruments be measured at fair value. The Company adopted FAS 133 on January 1, 2001. The adoption of this standard did not have a material impact on the Company's financial position or results of operations. The Company is currently completing its evaluation of the impact of FAS 133 on the Enron inventory agreements. However, the Company does not believe the impact, if any, will have a material impact on its future results of operations. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK INTEREST RATE RISK In the ordinary course of business, the Company is exposed to interest rate risks by way of changes in short-term interest rates. The Company has elected not to hedge the market risk associated with its floating rate debt. As of December 31, 2000, approximately $83.0 million of the Company's debt obligations bear interest at variable rates. Accordingly, the Company's earnings and cash flow are affected by changes in interest rates. Assuming the current level of borrowings at variable rates and assuming a one-half point increase in average interest rates under these borrowings, it is estimated that the Company's annual interest expense would increase by approximately $.4 million. In the event of an adverse change in interest rates, management would likely strive to take actions to mitigate the Company's exposure to interest rate risk; however, due to the uncertainty of the actions that would be taken and their possible effects, this analysis assumes no such action. Further, this analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment. OTHER RISKS The Company does not have any significant amount of export sales denominated in foreign currencies, and acquires its raw material supply needs in U.S. dollar denominated transactions. Therefore, the Company is not viewed as being exposed to foreign currency fluctuation market risks. Although the Company both acquires and sells carbon steel coils and products, prior to Enron's recent efforts, no formal commodity exchange existed that the Company could access to hedge its risk to carbon steel price fluctuations. The Company believes the Enron inventory agreements should serve to ameliorate the impacts of future inventory market price changes on the Company, as the Company will obtain its steel coil inventory requirements at market rates for the current processing of its traditional spot market-priced flat rolled steel orders. However, the Company may still be exposed to steel price changes during the time it holds and processes such material prior to sale to its customers. The Company has no material derivative financial instruments as of December 31, 2000, and does not enter into derivative financial instruments for trading purposes. The Company is currently completing its evaluation of the impact of FAS133 on the Enron inventory agreements. However, the Company does not believe the impact, if any, will have a material impact on its future results of operations. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA HUNTCO INC. CONSOLIDATED BALANCE SHEET (amounts in thousands) December 31, 2000 1999 -------- -------- ASSETS Current assets: Cash $ 1,322 $ 414 Accounts receivable, net 25,979 41,835 Inventories 46,517 77,832 Other current assets 769 2,380 ------- ------- 74,587 122,461 Property, plant and equipment, net 57,072 123,548 Assets held for sale (Note 2) 7,180 - Other assets 8,061 10,725 ------- ------- $146,900 $256,734 ======= ======= LIABILITIES & SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 35,109 $ 43,279 Accrued expenses 1,670 2,657 Current maturities of long-term debt 359 248 ------- ------- 37,138 46,184 ------- ------- Long-term debt 83,255 105,470 Deferred income taxes - 1,166 ------- ------- 83,255 106,636 ------- ------- Commitments and contingencies (Notes 2, 6, 7 and 10) - - Shareholders' equity: Series A preferred stock (stated at liquidation value) 4,500 4,500 Common stock: Class A (issued and outstanding, 5,292) 53 53 Class B (issued and outstanding, 3,650) 37 37 Additional paid-in-capital 86,530 86,530 Retained earnings (deficit) (64,613) 12,794 ------- ------- 26,507 103,914 ------- ------- $146,900 $256,734 ======= ======= See Accompanying Notes to Consolidated Financial Statements HUNTCO INC. CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share amounts) Year ended December 31, 2000 1999 1998 -------- -------- -------- Net sales $286,605 $349,947 $391,181 Cost of sales 282,444 332,215 369,864 ------- ------- -------- Gross profit 4,161 17,732 21,317 Selling, general and administrative expenses 18,439 19,062 19,939 Non-recurring loss on: sale of plant facility (Note 3) - 1,720 - asset impairments (Note 2) 54,206 - - ------- ------- ------- Income (loss) from operations (68,484) (3,050) 1,378 Interest, net (10,039) (10,140) (8,113) ------- ------- ------- Loss before income taxes (78,523) (13,190) (6,735) Income tax benefit (1,266) (4,687) (2,444) ------- ------- ------- Net loss before extraordinary item (77,257) (8,503) (4,291) Extraordinary item, net of tax - (2,644) - ------- ------- ------- Net loss (77,257) (11,147) (4,291) Preferred dividends paid and in arrears 200 200 200 ------- ------- ------- Net loss for common shareholders $(77,457) $(11,347) $ (4,491) ======= ======= ======= Loss per common share (basic and diluted): Net loss before extraordinary item $(8.66) $ (.97) $ (.50) Extraordinary item, net of tax - (.30) - ----- ----- ----- Net loss for common shareholders $(8.66) $(1.27) $ (.50) ===== ===== ===== Weighted average common shares outstanding (basic and diluted) 8,942 8,942 8,942 ===== ===== ===== See Accompanying Notes to Consolidated Financial Statements HUNTCO INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (amounts in thousands) Year ended December 31, 2000 1999 1998 ------ ------ ------ Series A preferred stock Balance at beginning of period $ 4,500 $ 4,500 $ 4,500 ------ ------ ------ Balance at end of period $ 4,500 $ 4,500 $ 4,500 ====== ====== ====== Class A common stock Balance at beginning of period $ 53 $ 53 $ 53 ------ ------ ------ Balance at end of period $ 53 $ 53 $ 53 ====== ====== ====== Class B common stock Balance at beginning of period $ 37 $ 37 $ 37 ------ ------ ------ Balance at end of period $ 37 $ 37 $ 37 ====== ====== ====== Additional paid-in-capital Balance at beginning of period $86,530 $86,530 $86,530 ------ ------ ------ Balance at end of period $86,530 $86,530 $86,530 ====== ====== ====== Retained earnings (deficit) Balance at beginning of period $12,794 $24,454 $29,885 Net loss (77,257) (11,147) (4,291) Dividends paid on: Common stock - (313) (940) Series A preferred stock (150) (200) (200) ------- ------ ------ Balance at end of period $(64,613) $12,794 $24,454 ======= ====== ====== See Accompanying Notes to Consolidated Financial Statements HUNTCO INC. CONSOLIDATED STATEMENT OF CASH FLOWS (amounts in thousands) Year ended December 31, 2000 1999 1998 ------- ------- ------- Cash flows from operating activities: Net loss $(77,257) $(11,147) $ (4,291) ------- ------- ------- Adjustments to reconcile net loss to net cash provided by operating activities: Asset impairments 54,206 - - Depreciation and amortization 10,417 11,395 10,265 Non-current deferred income taxes (1,166) (6,211) (2,039) Loss on early extinguishment of debt - 4,067 - Loss (gain) on property sales (220) 1,732 (65) Decrease (increase) in: accounts receivable 15,856 1,744 (1,936) inventories 31,315 14,409 (10,628) other current assets 1,611 534 2,101 other assets 413 (446) (1,049) Increase (decrease) in: accounts payable (8,170) (13,645) 16,896 accrued expenses (987) (795) (428) ------- ------- ------- Total adjustments 103,275 12,784 13,117 ------- ------- ------- Net cash provided by operations 26,018 1,637 8,826 ------- ------- ------- Cash flows from investing activities: Property, plant and equipment: Acquisitions (2,738) (904) (8,783) Proceeds from facility and asset sales 264 9,815 2,121 ------- ------- ------- Net cash provided (used) by investing activities (2,474) 8,911 (6,661) ------- ------- ------- Cash flows from financing activities: Net proceeds (repayments) on revolving credit facility (22,215) 46,661 978 other debt and capital lease payments (271) (849) (2,010) Payments for debt issuance costs - (1,638) - Retirement of long-term notes - (50,000) - Debt repurchase premiums - (3,816) - Preferred stock dividends paid (150) (200) (200) Common stock dividends paid - (313) (939) ------- ------- ------- Net cash used by financing activities (22,636) (10,155) (2,171) ------- ------- ------- Net increase (decrease) in cash 908 393 (6) Cash, beginning of period 414 21 27 ------- ------- ------- Cash, end of period $ 1,322 $ 414 $ 21 ======= ======= ======= See Accompanying Notes to Consolidated Financial Statements HUNTCO INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) 1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES The Company: Huntco Inc. ("Huntco" or "the Company") conducts its operations through its wholly-owned subsidiaries Huntco Steel, Inc. ("Huntco Steel") and Midwest Products, Inc. ("Midwest"). Huntco Steel operates six steel processing centers specializing in the processing and distribution of flat rolled carbon steel, and sells its processed steel products to a diverse group of industrial customers, steel service centers and distributors. See Notes 2 and 3 concerning the disposition of Huntco Steel's cold rolling and coil pickling operations in June 2001 and South Carolina facility in December 1999, respectively. Midwest is principally engaged in the manufacture of compressed air cylinders used in the transportation industry and sold through mass merchandisers. The Company entered into several transactions in June 2001. These transactions included the sale of Huntco Steel's cold rolling and coil pickling operations, the issuance of a $10.0 million five-year term note payable, the execution of various inventory management and warehouse service agreements, and the issuance of a warrant for the issuance of up to 1.0 million shares of Class A common stock (see Note 2). The Company also amended its revolving credit facility in connection with the transactions described in Note 2 (see Note 6). The Company believes these transactions will collectively allow the Company the ability to continue as a going concern, and the accompanying financial statements have been prepared on such a basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Principles of consolidation: The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Use of estimates: The policies utilized by the Company in the preparation of the financial statements conform to U.S. generally accepted accounting principles. Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Revenue recognition: Revenue from the sale of processed steel and compressed air cylinders is recognized upon shipment to the customer. Costs and related expenses to process steel and manufacture compressed air cylinders are recorded as cost of sales when the related revenue is recognized. Sales returns and allowances are treated as reductions to net sales. Cash and cash equivalents: For purposes of the consolidated statement of cash flows, the Company considers cash on hand and demand deposits with financial institutions with an original maturity of three months or less to be cash and cash equivalents. Concentration of credit risk: Huntco Steel sells its products to a wide variety of customers, including steel service centers and distributors, general fabricators and stampers, manufacturers of consumer durables, tank manufacturers and energy-related users, primarily in the midwestern and southern regions of the United States. Midwest sells its compressed air cylinders to customers in the transportation industry, to compressor manufacturers, as well as through mass merchandisers. Concentration of credit risk with respect to trade receivables is limited due to the size of the customer base and its dispersion. The Company performs on- going credit evaluations of its customers and generally does not require collateral. The Company maintains reserves for potential credit losses and such losses have been within management's expectations. As of December 31, 2000, 1999, and 1998, the Company's allowance for doubtful accounts balance was $1,261, $324, and $530, respectively. Relationships with suppliers: The Company procures raw materials from numerous primary steel producers. Management believes it is not dependent on any one of its suppliers for raw materials. Inventories: Inventories are valued at the lower of cost or market. Cost is determined using the specific identification method for steel processing inventories and on a first-in, first-out (FIFO) basis for its compressed air cylinder products. Property, plant and equipment: Property, plant and equipment is recorded at cost and is depreciated using the straight-line method over the estimated useful lives of the respective property, ranging from three to thirty years. Expenditures for repairs, maintenance and renewals are charged to income as incurred. Expenditures that improve an asset or extend its useful life are capitalized. When properties are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income. Leases meeting the criteria of a capital lease are recorded at the present value of the non-cancelable lease payments over the term of the lease. Properties held under capital leases are amortized over the estimated useful lives of the assets, ranging from five to twenty years. The interest portion of the respective capital lease payment is charged to operations. Impairment of long-lived assets: In the event that facts and circumstances indicate that the carrying amounts of long-lived assets may be impaired, an evaluation of the recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset or group of assets (the "assets") would be compared to the assets' carrying value to determine if a writedown is required. If this review indicates that the assets will not be recoverable, the carrying value of such assets would be reduced to their fair value. Environmental policy: Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the costs can be reasonably estimated. The Company has not been notified by regulatory authorities of any material non-compliance with any federal, state or local environmental law or regulation, nor is the Company aware of any such material non-compliance. Income taxes: Deferred income taxes are accounted for under the liability method, whereby deferred tax assets and liabilities are recognized based upon temporary differences between the financial statement and tax bases of assets and liabilities using presently enacted tax rates. Comprehensive income (loss): Comprehensive income (loss) is defined as the total of net income (loss) and all other non-owner changes in equity. The Company's comprehensive loss for all periods presented on the Consolidated Statement of Operations was equal to the net loss. Fair value of financial instruments: For purposes of financial reporting, the Company has determined that the fair value of financial instruments approximates their book value at December 31, 2000, based on terms currently available to the Company in financial markets. Earnings per common share: Earnings per common share is computed by dividing net income (loss) available for common shareholders by the weighted average number of common shares outstanding for basic earnings per common share, and by the weighted average number of common shares and share equivalents outstanding during the period for diluted earnings per common share. New accounting standards: In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended (FAS 133), which establishes accounting and reporting standards for derivative instruments and for hedging activities, and requires that all derivatives be recognized as either assets or liabilities in the statement of financial position and that such instruments be measured at fair value. The Company adopted FAS 133 on January 1, 2001. The adoption of this standard did not have a material impact on the Company's financial position or results of operations. The Company is currently completing its evaluation of the impact of FAS 133 on the Enron inventory agreements. However, the Company does not believe the impact, if any, will have a material impact on its future results of operations. 2. SUBSEQUENT EVENTS-ENRON TRANSACTIONS In June 2001, the Company entered into a series of different transactions with Enron North America Corp. ("ENA"), EBF LLC ("EBF"), in which ENA is a member, and Enron Industrial Markets LLC ("EIM")(hereinafter ENA and EIM are collectively referred to as "Enron"). Following is a discussion of these different transactions: Sale of cold rolling and pickling assets and related asset impairment: During the fourth quarter of 2000, the Company recorded an asset impairment charge of $54,206 to reduce the net book value of its cold rolling and coil pickling assets held for sale in accordance with FAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." FAS 121 requires long-lived tangible and intangible assets to be written down to fair market value when circumstances indicate that their carrying values are impaired. In June 2001, the Company sold its cold rolling and coil pickling operations to EBF. Proceeds from the sale were available to the Company for use in paying down its long-term debt, after use of over $8,000 to obtain title to operating leased equipment sold in the transaction, and to cover related transaction costs of $1,000. The Company separately reflected the $7,180 net realizable value of the assets held for sale on its December 31, 2000 balance sheet. With the early cancellation of the operating leases referred to above, the Company eliminated $135 of monthly lease payments as a result of the sale. This reduction has been reflected in the schedule of minimum operating lease commitments found in Note 10. Operation and maintenance of cold rolling and coil pickling assets: On April 30, 2001, the Company gave notice of its intent to permanently cease operation of its cold rolling and pickling assets in Blytheville, Arkansas, no later than June 30, 2001, which plant closure was expected to impact approximately 100 employees of the Company's Blytheville facility. However, in conjunction with the June 2001 sale of the cold rolling and coil pickling assets, pursuant to the Operation and Maintenance Agreement (the "O&M agreement"), the Company contracted to operate and maintain such assets for the purchaser. The O&M agreement allows the Company to earn a variable based, cost-plus fee, depending upon production levels, along with various production and yield incentives for operating the cold rolling and coil pickling assets for the purchaser. The Company is also subject to penalties not to exceed the amount of variable fees and incentives due from EBF for not achieving certain production and yield goals. The O&M agreement is for an initial three-year term, with renewal options and provisions for earlier termination at the purchaser's option. The Company also expects to have the ability to procure competitively priced cold rolled and pickled steel coil products in support of the flat rolled processing business of its other facilities stemming from its involvement with EBF in connection with the O&M agreement. As a result, the Company will continue to employ personnel to operate certain of the assets sold in accordance with the purchaser's instructions and as otherwise called for in the O&M agreement. The Company expects to incur operating losses relating to the wind down of its cold rolling and coil pickling operations and the liquidation of related working capital during the second quarter of 2001 due to the reduction of operations associated with the plant closure notice issued on April 30, 2001. Inventory supply and price risk management agreement: During the second quarter of 2001, the Company entered into a fifteen-year inventory supply and price risk management agreement under which Enron will provide inventory to the Company, generally at the time the steel is processed and sold, for its use at then current market rates as defined in the agreement. This arrangement will result in steel coil inventory previously held as raw material on the Company's books to eventually be held by Enron for acquisition by the Company just prior to the time of processing and sale. The Company agreed to pay Enron a transaction fee equal to the value of held material at a rate of 2.25% over LIBOR. The Company also agreed to pay Enron an annualized price risk management fee of approximately $2,000 during the term of the agreement, payable in installments of $167 per month. Newly issued $10,000 debt to Enron: In June 2001, the Company obtained a $10,000 five-year term loan from Enron (the "Enron term loan"), with interest payable quarterly at 3.0% over LIBOR. The Enron term loan provides for the payment of principal on a semi-annual basis beginning in June 2002, in the amounts of $250 for the first two installments and $500 thereafter, until the remaining balance of $6,500 comes due in June 2006. The Enron term loan may be prepaid without premium, and is generally secured by all of the assets of the Company, the security interests of Enron being subordinate to those of the Company's asset-based revolving credit agreement described further in Note 6. Issuance of common stock warrants: In June 2001, the Company issued Enron a warrant for the issuance of up to 1,000 shares of Huntco Inc. Class A common stock, exercisable within ten years from the date of grant at a strike price of $1.45 per share of Class A common stock. The fair value of these warrants was approximately $690, and will be amortized to expense over the fifteen-year term of the inventory management agreements that were also finalized with Enron in June 2001. 3. SALE OF SOUTH CAROLINA FACILITY On December 15, 1999, the Company sold its South Carolina steel processing facility and related inventory to Feralloy Corporation. The facility, which had been newly constructed and opened in early 1996, contained cut-to-length and slitting equipment, both of which processing lines were utilized pursuant to operating leases. The net proceeds from the sale were used to retire a short-term note payable to one of the Company's trade creditors, which represented all of the Company's short-term debt, with the balance of the proceeds being applied to reduce the Company's long-term, revolving credit facility. The Company retained the trade accounts receivable related to the facility's pre-closing sales. In connection with the sale, the Company was also relieved of its long-term operating lease commitments on the processing equipment installed at the South Carolina facility, totaling approximately $663 per year through 2003. The Company recognized a non-recurring loss of $1,720, before income tax benefits, on the sale of its South Carolina facility, which loss included certain liabilities and contractual obligations incurred by the Company. 4. INVENTORIES Inventories consisted of the following as of: December 31, 2000 1999 -------- -------- Raw materials $ 33,426 $ 57,013 Finished goods 13,091 20,819 -------- -------- $ 46,517 $ 77,832 ======== ======== The Company's investment in finished goods includes cold rolled steel coils produced at the Company's Blytheville, Arkansas facility. These cold rolled coils can either be sold as master coils, without further processing, or may be slit, blanked or cut-to-length by the Company prior to final sale. The Company's cost of sales and gross profit were negatively impacted during the year ended December 31, 2000, due to the recording of a $7,000 lower of cost or market inventory adjustment. The Company took this charge in the fourth quarter of 2000, in light of the unprecedented compressed devaluation in flat rolled steel coil transaction prices, which was caused by the slowdown in the general economy and the oversupply of flat rolled steel products plaguing the Company's markets from both domestic overcapacity and excessive imports. Given the rapid decline in the price of flat rolled steel coil products during 2000, the Company was not able to turn over its entire inventory at the higher ordered prices for such material prior to granting price accommodations or sales order cancellations to its customers due to competitive market circumstances. 5. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following as of the dates presented: December 31, 2000 1999 ------ ------- Land and improvements $ 2,727 $ 4,047 Buildings and improvements 32,631 55,989 Machinery and equipment 57,149 108,078 -------- -------- 92,507 168,114 Less accumulated depreciation 35,435 44,566 -------- -------- $ 57,072 $123,548 ======== ======== See Note 2 for a discussion of the assets held for sale and related asset impairment charges recorded as of December 31, 2000, related to the sale of the Company's cold rolling and coil pickling operations. 6. LONG-TERM DEBT On April 15, 1999, the Company refinanced substantially all of its long-term debt obligations by entering into a new revolving credit facility with an asset-based lending institution (the "asset-based revolver"). The asset-based revolver continues until April 15, 2002, and provided the Company with credit at varying rates of interest set either below the prime rate for LIBOR-based loans or generally 0.5% above the prime rate for daily revolving credit advances, payable monthly. In connection with modifications agreed to in June 2001, the Company agreed to increase the interest rates generally applicable to the revolver to 1.0% over prime or 2.75% over LIBOR for the daily revolving credit advances on the line. The total size of the revolving credit facility stood at $140.0 million until April 2001, whereupon the Company exercised its right to reduce the size of the facility to $90,000. In June 2001, the Company further agreed to three separate $10,000 line reductions, each subject to a .5% premium of $50 each, such that the size of the asset-based revolver will stand at $60,000 as of the end of October 2001. The Company intends to explore extension of the facility, as well as the possibility of obtaining additional financing associated with its property, plant and equipment during the balance of 2001. However, there can be no assurance that the Company will be successful in its efforts to obtain additional borrowings at what are deemed to be reasonable terms and financing rates. In conjunction with the April 15, 1999 refinancing, the Company satisfied its obligations under its former bank revolving credit agreement and retired early its $50,000 of fixed rate term notes, which term notes were due in installments through July 15, 2005. As a result of this early retirement, the Company incurred a prepayment penalty and related charges of approximately $4,067, before income tax benefits, which amount was reflected as an extraordinary item during 1999 within the Company's Statement of Operations. During 1999, the Company also incurred $1,638 in costs associated with the issuance of the asset-based revolver, which amount is being amortized over its three-year term. Entering into the asset-based revolver eliminated the limitation on the amount of debt that could be incurred by the Company. Under the Company's previous credit agreements, the Company's interest-bearing debt was limited to 50% of total capitalization (i.e., generally the sum of the Company's interest- bearing debt and total shareholders' equity). The Company used the proceeds of the incremental borrowings, net of the amounts required for debt retirement and transaction expenses, including the prepayment penalty, to reduce its obligations to trade vendors which were unusually high because of abnormally high inventory levels maintained by the Company in early 1999. The Company's inventory levels peaked near the end of the first quarter of 1999, and significantly decreased through the end of 1999. Security under the asset-based revolver consists of the accounts receivable, inventory, fixed assets and other assets of the Company. The maximum amount of borrowings available to the Company under the asset-based revolver is based upon percentages of eligible accounts receivable and inventory, as well as amounts attributable to selected fixed assets of the Company. Close attention is given to managing the liquidity afforded under the Company's asset-based revolving credit agreement, which availability in excess of actual borrowings has been relatively limited throughout the term of the agreement. In June 2001, the Company agreed to modifications to the asset-based revolver to include a new fixed charge coverage covenant that will become effective in July 2001. Beyond this financial earnings covenant, the asset-based revolver, as amended, does not require the maintenance of financial covenants and ratios beyond the maintenance of the Company's borrowing base. Principal payments due on the Company's long-term debt subsequent to December 31, 2000 come due as follows: 2001 ($359), 2002 ($83,224), and 2003 ($31), for a total of $83,614. Total cash paid for interest during 2000, 1999 and 1998 was $10,055, $10,226, and $9,392, respectively. Of the Company's total interest costs, it capitalized $1,189 to construction in progress during 1998. The Company did not capitalize interest during 1999 or 2000. 7. CAPITAL STOCK The Company is authorized to issue 5,000,000 shares of $.01 per share par value preferred stock. The Company is also authorized to issue two classes of common stock, both of which possess a par value of $.01 per share and have identical rights, preferences and powers, except the Class B common stock is entitled to ten votes per share. The Company has outstanding 225,000 shares of its $.01 par value Series A preferred stock (the "Series A Preferred"). Shares of Series A Preferred are cumulative and non-voting, and accrue dividends at the annual rate of $.888889 per share, payable quarterly. The Series A Preferred carries a liquidation preference of $20.00 per share. The Series A Preferred is convertible on a one-for-one basis into shares of Class A common stock at any time at the option of the holder, and at the option of the Company under certain circumstances, including if at any time the closing price of the Class A common stock is at least $25.00 per share for thirty consecutive trading days. Under the Company's Restated Articles of Incorporation, authorized but unissued preferred stock is issuable in series under such terms and conditions as the Company's Board of Directors may determine. However, the Company may issue no further shares of Series A Preferred. As of December 31, 2000, the Company was in arrears in the payment of dividends on the Series A preferred stock in the amount of $50. The Company is authorized to issue 25,000,000 shares of Class A common stock, of which 5,292,000 shares were issued as of December 31, 2000, 1999 and 1998. The Company is authorized to issue 10,000,000 shares of Class B common stock, of which 3,650,000 shares were issued as of December 31, 2000, 1999 and 1998. Shares of Class B common stock are not transferable to persons or entities unaffiliated with Mr. B. D. Hunter, Chairman of the Board and Chief Executive Officer of the Company, who is in control of all issued and outstanding shares of Class B common stock through his personal and family interests. All shares of Class B common stock are convertible into a like number of shares of Class A common stock at the sole discretion of the holder of such Class B common stock, with such conversion becoming mandatory at the date which follows ten years after the death of Mr. B. D. Hunter. In June 2001, the Company issued Enron a warrant for the issuance of up to 1,000 shares of Huntco Inc. Class A common stock, exercisable within ten years from the date of grant at a strike price of $1.45 per share. The New York Stock Exchange ("NYSE") suspended trading in the shares of Class A common stock of the Company on June 13, 2001, stating that the Company has not met the NYSE's continued listing criteria, in that its total market capitalization has been less than $15.0 million over an extended period of time. The NYSE has informed the Company that it intends to file an application with the Securities and Exchange Commission (the "SEC") required to obtain the SEC's approval to delist the Class A common stock with the NYSE. Even though delisted with the NYSE, the Class A common stock will continue to be registered with the SEC under the Securities Exchange Act of 1934 (the "Exchange Act"), and the Company intends to file with the SEC all reports required under the Exchange Act. As of June 13, 2001, the Company was assigned a new stock-trading symbol of "HCOIA". Bid and ask quotes for over-the-counter trading of shares of the Company's Class A common stock are available in the Pink Sheets Electronic Quotation Service. The Company also plans to pursue quotation of its shares of Class A common stock by the OTC Bulletin Board once it has filed this Annual Report on Form 10-K and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. 8. INCENTIVE STOCK PLAN The Company maintains an incentive stock plan, which provides for the grant of non-qualified stock options, incentive stock options, restricted shares and stock appreciation rights to officers and key employees, as well as directors, of the Company selected by a committee of the Board of Directors. A maximum of 900,000 shares of Class A common stock may be issued under the plan. Options issued under the plan may be exercised, subject to a ten-year maximum term, over periods determined by the committee. A summary of the status of the Company's stock option plan as of December 31, 2000, 1999, 1998, and changes during the periods ending on those dates, is as follows: Options Weighted Average Outstanding Exercise Price ----------- ---------------- Balance at December 31, 1997 846,250 $15.08 Options canceled or forfeited (113,750) $16.57 ------- Balance at December 31, 1998 732,500 $14.85 Options granted 390,000 $ 7.00 Options canceled or forfeited (445,500) $15.74 ------- Balance at December 31, 1999 677,000 $ 9.74 Options granted 225,000 $ 4.88 Options canceled or forfeited (208,500) $13.37 ------- Balance at December 31, 2000 693,500 $ 7.07 ======= The following table summarizes stock options outstanding and exercisable as of December 31, 2000: Outstanding Exercisable ---------------------------- --------------------- Remaining Average Average Exercise No. of Average Exercise No. of Exercise Price Range Options Life Price Options Price - ------------- ------- ------- ------- ------- -------- $4.88 225,000 4.1 yrs $ 4.88 112,500 $ 4.88 $7.00 379,750 3.1 yrs $ 7.00 312,313 $ 7.00 $12.50-$13.50 88,750 1.6 yrs $12.94 66,562 $12.94 ------- ------- 693,500 3.0 yrs $ 7.07 491,375 $ 7.32 ======= ======= No compensation expense has been recognized by the Company for its incentive stock plan in accordance with the Company's continued use of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees", as the exercise price of options granted has either been equivalent to or higher than the market price of the Company's stock on the date of grant. Had the fair value method of accounting contemplated by Statement of Financial Accounting Standards No. 123, "Accounting for Stock- Based Compensation," been applied to the Company's incentive stock plan, the Company's net income (loss) and earnings (loss) per common share would have been revised to the pro forma amounts indicated below: Years ended December 31, 2000 1999 1998 ------- ------- ------ Net loss for common shareholders: As reported $(77,457) $(11,347) $(4,491) Pro forma (77,807) (11,536) (4,766) Loss per common share (basic and diluted): As reported $(8.66) $(1.27) $(.50) Pro forma (8.70) (1.29) (.53) The pro forma impact only takes into account options granted since April 1996, and such impact is likely to increase in future years as additional options are granted and amortized ratably over the vesting period. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for options granted during the years ended December 31, 2000 and 1999, respectively: risk-free interest rates of 6.6% and 5.0%; no dividend yield; expected common stock market price volatility factor of 55.2% and 47.9%; and a weighted average expected life of the options of five years. The weighted average fair value of options granted for the year ended December 31, 2000 and 1999, respectively, were $2.68 and zero. 9. INCOME TAXES The components of the provision (benefit) for income taxes for 2000, 1999, and 1998, are as follows: Years ended December 31, 2000 1999 1998 ---- ---- ---- Current: Federal $(1,421) $ 1,011 $ 196 State 22 91 (58) ------ ------ ------ (1,399) 1,102 138 ------ ------ ------ Deferred (primarily Federal): Current 1,299 421 (543) Non-current (1,166) (6,210) (2,039) ------ ------ ------ 133 (5,789) (2,582) ------ ------ ------ Income tax benefit $(1,266) $(4,687) $(2,444) ====== ====== ====== The above amounts for 1999 do not include the $1,423 of tax benefits related to the extraordinary charge on debt refinancing described in Note 6. Deferred income taxes reflect the tax impact of temporary differences between the amount of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. The net deferred income tax liabilities of the Company are comprised of the following as of: December 31, 2000 1999 ------ ------ Deferred tax assets attributable to: Non-deductible liabilities and reserves $ 4,301 $ 1,299 Net operating loss and alternative minimum tax credit carryovers expiring through the year ending December 31, 2020 28,779 19,073 ------ ------ Gross deferred tax assets 33,080 20,373 Total deferred tax liabilities, primarily related to property basis differences and related effects, including accelerated tax depreciation 6,818 20,240 ------ ------ Net deferred tax assets 26,262 133 Valuation allowance 26,262 - ------ ------ Deferred tax assets after valuation allowance - 20,373 ------ ------ Net deferred tax assets, net of $ - and $1,299, respectively, reflected in other current assets $ - $ (133) ====== ====== A reconciliation of the provision (benefit) for income taxes to the maximum statutory Federal rate of 35% is as follows for the following periods: Year ended December 31, 2000 1999 1998 ---- ---- ---- Tax at statutory Federal rate $(27,483) $(4,617) $(2,357) Change in valuation allowance 26,262 - - State income taxes (benefits), net of federal tax benefit 4 (295) (347) Goodwill amortization 101 101 101 Other (150) 124 159 ------ ------ ----- $ (1,266) $(4,687) $(2,444) ====== ====== ===== Realization of the tax loss and credit carryforwards available to the Company is contingent on generating sufficient amounts of future taxable earnings in the jurisdictions in which the Company operates. In 2000, the Company recorded a full valuation allowance against its net deferred tax assets, consistent with the determination that it is "more likely than not" that all of the Company's net deferred tax assets will not be realized. The Company considered the recent losses incurred by the Company, as well as the difficult market environment faced by the flat rolled steel industry as a whole, in its assessment of the need for a valuation allowance. The Company will continue to assess the available positive and negative evidence surrounding the recoverability of its deferred tax assets and applies its judgment in estimating the amount of valuation allowance necessary under the circumstances. The Company continues to assess and evaluate strategies that might enable the carryforwards, or portion thereof, to be utilized, and will reduce the valuation allowance appropriately for each item at such time when it is determined that the "more likely than not" approach is satisfied. During 2000, 1999, and 1998, the Company made cash payments for income taxes of $59, $105, and $317, respectively. Of the amount paid during 1998, $200 was claimed as a Federal refund in January 1999. During 1998, the Company received Federal tax refunds totaling $2,097. 10. COMMITMENTS AND CONTINGENCIES The Company is a party to various claims and legal proceedings generally incidental to its business. Although the ultimate disposition of these proceedings is not presently determinable, management does not believe that adverse determination in any or all of such proceedings will have a material adverse effect upon the financial condition, cash flows, or the results of operations of the Company. The Company leases a variety of assets for use in its operations. With respect to operating leases of steel processing equipment and certain real property, the Company has negotiated purchase options that are effective prior to or at the end of the lease term of such operating lease agreements. With respect to the Company's operating lease commitments, net aggregate future lease payments as of December 31, 2000, adjusted in light of the June 2001 sale of the cold rolling and coil pickling assets to Enron discussed more fully in Note 2, are payable as follows: 2001--$2,677, 2002--$1,890, 2003-- $1,814, 2004--$1,715, 2005--$743, and thereafter--$2,455; for total operating lease commitments of $11,294. The Company is a party to certain severance and employment agreements with its executive officers and other members of senior management, which agreements provide termination and other benefits to such individuals. 11. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for the calendar years ended December 31, 2000 and 1999 follows:
First Second Third Fourth quarter quarter quarter quarter Year ------- ------- ------- ------- ------ Net sales: 2000 $85,860 $79,421 $66,313 $55,010 $286,605 1999 90,377 90,863 84,199 84,508 349,947 Gross profit: 2000 (a) 8,068 5,025 611 (9,543) 4,161 1999 2,147 3,588 5,610 6,387 17,732 Net income (loss) before extraordinary item: 2000 (a)(b)(c) 624 (1,219) (3,930) (72,732) (77,257) 1999 (d) (3,177) (3,048) (946) (1,332) (8,503) Net income (loss): 2000 (a)(b) 624 (1,219) (3,930) (72,732) (77,257) 1999 (d)(e) (3,177) (5,692) (946) (1,332) (11,147) Earnings (loss) per common share (basic and diluted): Net income (loss) before extraordinary item: 2000 (a)(b) .06 (.14) (.45) (8.13) (8.66) 1999 (d) (.36) (.35) (.11) (.15) (.97) Net income (loss): 2000 (a)(b) .06 (.14) (.45) (8.13) (8.66) 1999 (d)(e) (.36) (.65) (.11) (.15) (1.27) (a) In the fourth quarter of 2000, the Company recorded a $7.0 million reserve against the carrying value of its inventory due to market value declines and other issues associated with its intermediate steel processing business. (b) In the fourth quarter of 2000, the Company recorded an asset impairment charge of $54,206 against the carrying value of its cold rolling and coil pickling assets that are subject to disposition as more fully described in Note 2. (c) In the fourth quarter of 2000, the Company wrote-off its net deferred tax assets balance of $2,531 that existed as of September 30, 2000. No further deferred tax benefits were recorded in the fourth quarter associated with the Company's losses. (d) In the fourth quarter of 1999, the Company incurred a pre-tax non-recurring loss of $1,720 on the sale of its South Carolina facility as more fully described in Note 3. (e) In the second quarter of 1999, the Company incurred a net of tax extraordinary loss of $2,644 (or $.30 per common share, basic and diluted) on refinancing of the Company's long-term debt, as more fully described in Note 6.
REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Huntco Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of cash flows, and of changes in shareholders' equity present fairly, in all material respects, the financial position of Huntco Inc. and its subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. 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 of America, 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. PRICEWATERHOUSECOOPERS LLP /s/ PricewaterhouseCoopers LLP St. Louis, Missouri June 13, 2001 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Company's Restated Articles of Incorporation and the Bylaws as amended provide for a classified Board of Directors, with the Board divided into three classes whose terms expire at different times. The Company presently has five directors. One member is to be elected to the Board of Directors at the Annual Meeting to serve for a term of three years. The sole nominee of the Board of Directors' at the Annual Meeting, Mr. James J. Gavin, Jr., is currently a director of the Company.
Information as of May 10, 2001 Regarding the Board of Directors of the Company ------------------------------------------------------------------------------ Present Term Name Age Expires Business Experience - ---- --- ------- --------------------------------------------- B.D. Hunter 71 2002 Chairman of the Board of the Company since May 1993. Chief Executive Officer of the Company from May 1993 until May 2000. Chairman of the Board of Huntco Enterprises and of Acquisitions since 1986. Chairman of the Board of Farms since 1990, of Midwest Products, Inc. ("Midwest Products") since 1989, and of Huntco Steel, Inc. ("Huntco Steel") since 1986. Director of Service Corporation International for over five years and Vice Chairman since January 2000. Director of Cash America International, Inc. Resigned as Director of Celebrity, Inc. in November 2000. Robert J. Marischen 48 2002 Chief Executive Officer of the Company since May 2000. President of the Company since January, 1999; Vice Chairman of the Board of the Company since May 1993. Chief Financial Officer of the Company from May 1993 to October 1999. President, Chief Executive Officer and Director of Huntco Enterprises and Acquisitions since 1986 and of Farms since 1990. Director and President of Huntco Steel. Director of Midwest Products. Member of the Board of Governors of Cardinal Glennon Children's Hospital. James J. Gavin, Jr. 78 2001 Director of the Company since May 1993. Retired; Vice Chairman and Director of Borg- Warner Corporation ("Borg-Warner"), a publicly held, diversified manufacturing company, from 1985 until retirement in 1987; Senior Vice President of Finance of Borg- Warner until 1985. Donald E. Brandt 46 2003 Director of the Company since May 1993. Senior Vice President-Finance of Ameren Corporation, a public utility holding company, since January 1998. Senior Vice President-Finance and Corporate Services of Union Electric Company from July 1993 to January 1998; Senior Vice President-Finance and Accounting of Union Electric Company for the five-year period prior thereto. Michael M. McCarthy 62 2003 Director of the Company since May 1993. Chairman of the Board of McCarthy Holdings, Inc. ("McCarthy Holdings"), a large, privately-owned commercial construction company, since 1977. Chief Executive Officer of McCarthy Holdings from 1977 to 1999. Director of Firstar Bank of St. Louis.
Other Executive Officers: Anthony J. Verkruyse, 42, has been Chief Financial Officer of the Company since October 1999. Mr. Verkruyse, the only executive officer of the Company who is not a director, continues to serve as Vice President, Secretary and Treasurer of the Company, positions he has held since May 1993. Mr. Verkruyse plans to terminate his employment with the Company prior to the end of June 2001, in order to pursue other opportunities. Section 16(a) Beneficial Ownership Reporting Compliance: Section 16(a) of the Securities Act of 1934, as amended, requires the Company's executive officers, directors and persons who beneficially own more than 10% of a registered class of the Company's equity securities to file initial reports of ownership and reports of changes in ownership with the SEC. These persons are required by SEC regulations to furnish the Company with copies of all reports filed by them pursuant to Section 16(a). Based solely on a review of the copies of reports furnished to the Company and written representations that no other reports were required, the Company believes that, except as described below, all filing requirements applicable to its executive officers, directors and greater than 10% beneficial owners were complied with in a timely manner during Fiscal 2000. Robert Egizii failed to file his Form 3 on a timely basis. ITEM 11. EXECUTIVE COMPENSATION Directors' Fees: Neither Mr. Hunter nor Mr. Marischen, both of whom are employees and directors of the Company, received or receive retainers or fees for attendance at Board or Board committee meetings. Messrs. Brandt, Gavin and McCarthy received during 2000, and the Company anticipates that they will continue to receive during 2001, $1,000 each for attendance at every Board meeting they attend and $500 each for attendance at every meeting of those committees of the Board on which they serve. In addition, during 2000, Mr. Gavin was paid $2,500 quarterly for serving on the Executive Committee, and the Company anticipates that he will continue to receive this amount during 2001. During 2000, Messrs. Brandt, Gavin and McCarthy each were awarded options to purchase 1,500 Class A Shares of the Company under the 1993 Plan. The options have an exercise price equal to the market price of the Class A Shares on the date of grant, which was $4.875. Of the options to purchase 1,500 Class A Shares awarded to each of the non-employee directors, one-half were exercisable on the date of grant with the remaining options becoming exercisable in equal increments on the first two anniversaries of the date of grant. Summary Compensation Table:
Long Term Compensation Awards --------------------- Name and Annual Compensation Securities Underlying All Other Principal Position Year Salary($)(1) Bonus($) Options/SARs(#)(2) Compensation($)(3) - ------------------ ---- --------------------- -------------------- ------------------ B.D. Hunter, 2000 $350,000 $26,393 50,000(4) $3,400 Chairman 1999 $315,000 -- 60,000(5) $3,200 1998 $306,075 -- -- $3,200 Robert J. Marischen, 2000 $350,000 $26,393 50,000(4) $3,400 Vice Chairman, CEO 1999 $300,000 -- 160,000(6) $3,200 and President 1998 $278,250 -- -- $3,200 Anthony J. Verkruyse, 2000 $150,000 $11,311 25,000(4) $3,400 Chief Financial 1999 $130,000 $10,000 25,000(5) $2,600 Officer(7) (1) Amounts shown include cash compensation earned and received as well as compensation earned but deferred at the election of the executive officer. (2) This column represents grants made under the 1993 Plan. (3) Reflects matching contributions by the Company under the Retirement Savings Plan, which is a defined contribution plan. (4) These options awarded on February 3, 2000 represent non-qualified stock options exercisable at $4.875 per share, with 50% of the options exercisable at the grant date and an additional 25% become exercisable on the following two anniversary dates of the grant date. (5) These options awarded on February 15, 1999 represent non-qualified stock options exercisable at $7.00 per share, with 50% of the options exercisable at the grant date and an additional 25% become exercisable on the following two anniversary dates of the grant date. (6) All of these options were awarded on February 15, 1999; 110,000 represent non-qualified stock options exercisable at $7.00 per share that, at the option of the NEO, were granted to replace the 150,000 IPO Stock Options originally granted to the NEO exercisable at $17.00 per share. The remaining 50,000 non-qualified stock options are exercisable at $7.00, with 50% of the options exercisable at the grant date and an additional 25% exercisable on the following two anniversary dates of the grant date. (7) Mr. Verkruyse was elected as the Chief Financial Officer of the Company in October 1999. Prior to such election, he was not a NEO of the Company.
Option/SAR Grants in Last Fiscal Year:
Individual Grants --------------------------------------------------------------------------- Number of % of Total Potential Realizable Value Securities Options/SARs at Assumed Annual Rates Underlying Granted to Exercise of Stock Price Appreciation Options/ Employees or base Expira- for Option Term (1) SARs in Fiscal price tion -------------------------- Name Granted(#) Year(2) ($/Sh) Date 5%($) 10%($) - ---- ---------- -------- ------ ------ ---- ----- B.D. Hunter 50,000(3)(4) 22.2% $4.875 02/3/2005 $67,344 $148,812 Robert J. Marischen 50,000(3)(4) 22.2% $4.875 02/3/2005 $67,344 $148,812 Anthony J. Verkruyse 25,000(3)(4) 11.1% $4.875 02/3/2005 $33,672 $ 74,406 (1) The 5% and 10% rates are set by the SEC for this table and are not intended to forecast possible future appreciation, if any, of the stock price of the Company's Class A Shares. The Company did not use an alternative formula for a grant date valuation, as the Company is not aware of any formula that will determine with reasonable accuracy a present value based on future unknown or volatile factors. (2) Represents the percent that the number of stock options awarded during 2000 to the NEO is to all stock options awarded to eligible employees and directors during 2000. (3) No SARs were granted in tandem with the options. (4) These non-qualified stock options were awarded on February 3, 2000. One-half of the options granted were exercisable on the date of grant and an additional one-quarter become exercisable on each of the first and second anniversaries of the date of grant.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values:
Number of Securities Underlying Value of Unexercised In-the-Money Unexercised Options/SARs at FY-End(#) Options/SARs at FY-End($) Name Exercisable/Unexercisable Exercisable/Unexercisable - ---- ---------------------------- ------------------------- B.D. Hunter 77,500/42,500 0/0 Robert J. Marischen 180,000/40,000 0/0 Anthony J. Verkruyse 35,000/20,000 0/0
Severance Agreement and Employment Agreements: Description of Severance Agreement: Effective January 1, 2000, Mr. Hunter executed a severance agreement with the Company. If Mr. Hunter resigns his employment in conjunction with a change of control of the Company, then the severance agreement provides that Mr. Hunter will receive a payment equal to three times his base salary. The severance agreement also provides that Mr. Hunter will receive medical and dental benefits at the Company's expense for three years following his termination. In addition, the Company is responsible for paying any tax payable by Mr. Hunter imposed by Section 4999 of the Internal Revenue Code with respect to any excess parachute payments in connection with such resignation. The severance agreement also contains non-competition, non-interference and non- solicitation provisions that are effective for three years following Mr. Hunter's termination. Description of Employment Agreements: Messrs. Marischen and Verkruyse are parties to employment agreements with the Company. Effective January 1, 2000, the Company adopted a new form of employment agreement that was used in replacing prior agreements with Messrs. Marischen and Verkruyse, as well as with certain other non-executive officers of the Company or one of its subsidiaries. The initial term of employment agreements was for one year with automatic renewals on January 1 of each year, unless an agreement is terminated by the Company or by the employee, or if the employee dies or is permanently disabled. The employment agreements specify the officer's base salary and further provide that the Board of Directors or any authorized committee of the Board shall review overall compensation at least annually to determine its adequacy and to determine any incentive or performance bonus to which the officers may be entitled. For the year ended December 31, 2000, the employment agreements executed with Messrs. Marischen and Verkruyse provided for base salaries of $350,000 and $150,000, respectively. The employment agreements also provide that the officers are entitled to participate in all medical, disability, life and other insurance plans and all other employment benefits as are generally available to other employees of the Company. Messrs. Marischen and Verkruyse are entitled to certain severance payments under their employment agreements, except in the event of their termination by the Company for "cause" or upon their voluntary resignation not involving a "change of control". Generally, if their employment is terminated without cause, the Company will pay their annual base salaries for three years from the date of termination in the case of Mr. Marischen and for two years in the case of Mr. Verkruyse. Each would also be entitled to receive the bonus, if any, which they may have earned or which may have accrued during the quarter in which employment is terminated without cause but which had not yet been paid. The employment agreements also provide for severance payments if Messrs. Marischen or Verkruyse resign from their employment with the Company, or its successor, within twelve months following a "change of control" as that term is defined in their employment agreements. Mr. Marischen is entitled to a payment equal to three times his base salary, payable in a lump sum, if he resigns under any circumstances in the event of a change of control. Subject to certain restrictions, Mr. Verkruyse is entitled to a lump sum payment equal to two times his base salary if he resigns pursuant to a change of control. Messrs. Marischen or Verkruyse would also be entitled to payment of the bonus, if any, which they may have earned or which may have accrued on their behalf during the quarter in which their employment is terminated. In addition, Mr. Marischen is also entitled to remain on the Company's medical and dental insurance for three years following such resignation, and Mr. Verkruyse is entitled to remain on the Company's medical and dental insurance for two years following such resignation. In addition, the Company is responsible for paying any tax payable by its officers imposed by Section 4999 of the Internal Revenue Code with respect to any excess parachute payments in connection with such resignation. The Employment Agreements contain non-competition, non-interference and non- solicitation provisions that are effective for three years in the case of Mr. Marischen and two years in the case of Mr. Verkruyse, following their respective terminations for any reason. Compensation Committee Interlocks and Insider Participation: All Compensation Committee members are non-employee directors. Messrs. Hunter and Marischen consulted with the Compensation Committee regarding executive compensation and were present at the meeting of the Committee at which the remuneration for each of the Company's executive officers for 2000 was determined, including their own 2000 bonus. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Holdings of Management and Principal Shareholders: The table below indicates certain information as of May 10, 2001 regarding the beneficial ownership of the Class A Shares and the Class B Shares by (i) each director of the Company, including the nominee for election as director, (ii) each executive officer named in the Summary Compensation Table, (iii) companies controlled by the Company's Chairman of the Board, and (iv) all executive officers and directors of the Company as a group.
Percent of Total(1) Number of Number of ------------------- Class A Class B Percent of Total Percent of Total Name Shares Shares Class A Class B Voting Power(2) - ---- ------ ------ ------- ------- ---------------- B.D. Hunter(3)(4) 1,232,254(5) 3,650,000 22.8% 100.0% 90.1% Huntco Acquisitions Holding, Inc.(3)(4) - 3,145,000 - 86.2% 75.3% Huntco Farms, Inc.(3)(4) - 505,000 - 13.8% 12.1% Robert J. Marischen(4)(6) 258,808(7) - 4.7% - (8) Anthony J. Verkruyse(6) 56,462(9) - 1.1% - (8) Donald E. Brandt 8,285(10) - (8) - (8) James J. Gavin, Jr. 35,875(11) - (8) - (8) Michael M. McCarthy 64,375(12) - 1.2% - (8) All executive officers and directors as a group (6 persons) 1,619,059(13) 3,650,000 28.5% 100.0% 90.3% (1) The percent of ownership of Class A Shares and Class B Shares has been calculated in accordance with the rules promulgated by the Securities and Exchange Commission (the "SEC"). The numerator is comprised of the number of Class A Shares or Class B Shares, as appropriate, owned by the individual or entity (including, with respect to the Class A Shares, the number of Class A Shares issuable upon exercise of stock options granted under the Huntco Inc. 1993 Incentive Stock Plan (the "1993 Plan") which are currently exercisable or which will become exercisable within sixty days of May 10, 2001). The denominator is comprised of the number of shares represented by all of the issued and outstanding shares of that class (including, with respect to the Class A Shares, the number of Class A Shares issuable upon exercise of stock options granted under the 1993 Plan which are currently exercisable or will be exercisable within sixty days of May 10, 2001, awarded to such individual, but excluding the number of Class A Shares issuable upon exercise of options granted to any other individual). (2) The percent of total voting power has also been calculated in accordance with the rules promulgated by the SEC. The numerator is comprised of the number of votes appertaining to each share of Common Stock owned by the individual or entity (plus the number of votes represented by the Class A Shares issuable upon exercise of stock options granted under the 1993 Plan which are currently exercisable or which will become exercisable within sixty days of May 10, 2001). The denominator is comprised of the number of votes represented by all of the issued and outstanding shares of Common Stock (plus the number of votes represented by the Class A Shares issuable upon exercise of stock options granted under the 1993 Plan which are currently exercisable or which will become exercisable within sixty days of May 10, 2001 awarded to such individual, but excluding the votes represented by the Class A Shares issuable upon exercise of options granted to any other individual). (3) Mr. B. D. Hunter, the Company's Chairman of the Board, owns all of the outstanding preferred stock of Huntco Enterprises, Inc. ("Huntco Enterprises"), which, in conjunction with the shares of common stock of Huntco Enterprises over which he shares voting control as trustee of various Trusts (as defined below), gives him substantially all of the voting control of that entity. Huntco Enterprises is the ultimate parent company of Huntco Farms, Inc. ("Farms") and Huntco Acquisitions Holdings, Inc. ("Acquisitions"). Substantially all of the remaining shares of Farms and Acquisitions are owned by other persons or trusts with which Mr. Hunter is affiliated. Therefore, Mr. Hunter has or shares voting control with respect to substantially all of the Class B Shares owned by Acquisitions and Farms. In connection with loans made to Acquisitions and Farms by certain lenders, Acquisitions and Farms have pledged all 3,650,000 of the Class B Shares they own, along with other collateral, to those banks as security for the loans. If Acquisitions and Farms were to default under the loans, the banks could compel Acquisitions and Farms to convert the pledged Class B Shares into Class A Shares and the banks could thereafter foreclose on the shares and attempt to sell them. If this were to occur, it is possible that none of Mr. Hunter, Enterprises, the Trusts, the Grandchildren's Trusts, Acquisitions or Farms would possess voting control of the Company. The business addresses of Mr. Hunter, Farms and Acquisitions is 14323 S. Outer Forty, Suite 600 N., Town & Country, Missouri 63017. (4) Mr. B. D. Hunter and Mr. Robert J. Marischen are co-trustees of certain trusts created by Mr. Hunter for the benefit of his children (the "Trusts"). Mr. Marischen and another individual are co-trustees of certain trusts for the benefit of Mr. Hunter's grandchildren (the "Grandchildren's Trusts"). The Trusts and the Grandchildren's Trusts own substantially all of the common stock of Huntco Enterprises. Under the terms of the Trusts and the Grandchildren's Trusts, the co-trustees must approve the voting and investment decisions with respect to shares held by the Trusts and the Grandchildren's Trusts. Accordingly, Messrs. Hunter and Marischen share voting and investment power over the 3,650,000 Class B Shares owned by Farms and Acquisitions. Additionally, Mr. Hunter owns all of the outstanding preferred stock of Huntco Enterprises that, in conjunction with the shares of common stock of Huntco Enterprises over which he shares voting control as trustee of the Trusts, gives him substantially all of the voting control of that entity. Mr. Marischen disclaims beneficial ownership of the Class B Shares owned by Farms and Acquisitions, and these Class B Shares are not reflected in the table herein as being beneficially owned by Mr. Marischen. (5) Sole voting and investment power over 1,195,254 Class A Shares, which includes 107,500 Class A Shares issuable upon exercise of stock options granted under the 1993 Plan. Does not include 12,500 Class A Shares underlying stock options granted under the 1993 Plan that are not currently exercisable. Shared voting and investment power over 37,000 Class A Shares owned by a corporation of which Mr. Hunter is the owner of 49% of the issued and outstanding voting capital stock and of which Mr. Marischen is the owner of 51% of the issued and outstanding voting capital stock. Due to the nature of the professional relationship between Messrs. Hunter and Marischen, these 37,000 Class A Shares are deemed owned by each of them. (6) Mr. Marischen, Mr. Verkruyse and one other Company employee are co-trustees of a trust (the "401(k) Trust") established for the purpose of holding and investing assets of the Huntco Inc. 401(k) Retirement Savings Plan (the "Retirement Savings Plan"). The trustees make voting decisions with respect to the Class A Shares held by the 401(k) Trust. Therefore, Mr. Marischen and Mr. Verkruyse have shared voting power over a total of 82,976 Class A Shares owned by the 401(k) Trust, although they disclaim beneficial ownership of the Class A Shares owned by that trust except for the Class A Shares allocated to their own individual accounts in the Retirement Savings Plan as noted below. (7) Sole voting and investment power over 221,397 Class A Shares, which includes 207,500 Class A Shares issuable upon exercise of stock options granted to Mr. Marischen under the 1993 Plan. Does not include 12,500 Class A Shares underlying stock options granted under the 1993 Plan that are not currently exercisable. Shared voting and investment power over 37,411 Class A Shares. Of these Class A Shares, 37,000 are the Class A Shares owned by the company that is owned by Messrs. Marischen and Hunter described with more particularity in Note 5 above. Mr. Marischen maintains 3,753 Class A Shares in his account in the Retirement Savings Plan (8) Less than 1%. (9) Sole voting and investment power over 56,462 Class A Shares that includes 48,750 Class A Shares issuable upon exercise of stock options granted to Mr. Verkruyse under the 1993 Plan. Does not include 6,250 Class A Shares underlying stock options granted under the 1993 Plan that are not currently exercisable. Mr. Verkruyse maintains 2,137 Class A Shares in his account in the Retirement Savings Plan. (10) Includes 5,875 Class A Shares issuable upon exercise of stock options granted to this Director under the 1993 Plan. Does not include 1,125 Class A Shares underlying stock options granted under the 1993 Plan that are not currently exercisable. (11) Includes 10,000 Class A Shares held by a charitable foundation of which Mr. Gavin is president, but with respect to which Class A Shares Mr. Gavin disclaims beneficial ownership. (12) Mr. McCarthy disclaims beneficial ownership of 51,500 Class A Shares owned by companies with which he is affiliated. (13) Includes 381,375 Class A Shares issuable upon exercise of options granted to directors and executive officers under the 1993 Plan.
The following table sets forth information as of May 10, 2001 regarding all persons known to be the beneficial owners of more than five percent of the Company's Class A Shares who are not connected with the Company otherwise than through ownership of the Class A Shares:
Percent of Number of Class A Shares Name and Address Class A Shares Outstanding ---------------- -------------- ----------- Dimensional Fund Advisors Inc. 376,900(1) 7.1% 1299 Ocean Avenue, 11th Floor Santa Monica, California 90401 Stephen Watson 484,000(2) 9.2% 237 Park Avenue, Suite 801 New York, New York 10017 Robert Egizii 639,298(3) 12.1% 700 N. MacArthur Blvd. Springfield, Illinois 62702 (1) The information in this footnote is provided pursuant to Schedule 13G dated February 2, 2001 and filed with the SEC by Dimensional Fund Advisors Inc. ("Dimensional"), which reports that it is an investment adviser registered under the Investment Advisers Act of 1940, as amended. Dimensional reports that it furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, as amended, and serves as investment manager to certain other commingled group trusts and separate accounts. These investment companies, trusts and accounts are the "Funds." Dimensional further reports that in its role as investment adviser or manager, it possesses voting and/or investment power over the 376,900 Class A Shares owned by the Funds. Dimensional disclaims beneficial ownership of such Class A Shares. (2) The information in this footnote is provided pursuant to Schedule 13G dated February 14, 2001 and filed with the SEC by Stephen Watson, who reports that he is an individual with sole voting and investment power over all of the 484,000 Class A Shares owned by him. (3) The information in this footnote is provided pursuant to the Form 3 and the Form 4s filed with the SEC by Robert Egizii.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company and its wholly owned subsidiary, Huntco Steel, lease space for their executive offices located in Town & Country, Missouri, in an office building that was owned by Huntco Farms until April 30, 2001. Huntco Farms is and was controlled by Mr. B. D. Hunter. See footnote 3 of the first table under "Holdings of Management and Principal Shareholders" found under Item 12 above for a discussion of the relationship between Mr. Hunter and Huntco Farms. Market-based lease payments made by the Company and Huntco Steel totaled $135,300 to Huntco Farms in 2000. Five year lease commitments at market rates were executed effective September 1, 1999 for the above- referenced office space, which leases require payments totaling $135,300 during the first three years of the two leases, and annual payments totaling $148,760 in years four and five of the leases. The Company also leases a ranch facility in Colorado owned by Huntco Farms that the Company uses primarily for the entertainment of customers. During 2000, the Company made lease payments to Huntco Farms totaling $60,000 relating to its use of the property in Colorado. The Company intends to make similar payments for such leased facilities during 2001. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K (a) Documents filed as a part of this Report: (1) Financial Statements -- The Company's financial statements together with the report thereon of PricewaterhouseCoopers LLP dated June 13, 2001, are set forth herein under Item 8. (2) Financial Statement Schedules -- Omitted, not applicable. (3) Exhibits -- Exhibits attached are numbered in accordance with the Exhibit Table at Item 601 of Regulation S-K. For a listing of each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Report, see the Exhibits listed under Exhibit Nos. 10(iii)(A)(1) through 10(iii)(A)(11). The following Exhibits listed in the Exhibit Index are filed with this Report: 4(ii)(a)(3): Amendment No. 1 to Loan and Security Agreement dated June 8, 2001, by and among Congress Financial Corporation (Central), as Lender; Huntco Steel, Inc. and Midwest Products, Inc., as Borrowers; and Huntco Inc., Huntco Nevada, Inc., and HSI Aviation, Inc., as Guarantors. 4(ii)(a)(4): Pledge Agreement dated June 8, 2001, executed by Huntco Nevada, Inc., in favor of Congress Financial Corporation (Central), as Lender; similar pledge agreement executed in favor of Congress Financial Corporation (Central) by Huntco Inc. 4(ii)(b)(1): Loan Agreement by and among Enron North America Corp. as Lender, Huntco Steel, Inc. as Borrower, and Huntco Inc., Huntco Nevada, Inc., Midwest Products, Inc., and HSI Aviation, Inc. as additional obligors dated April 6, 2001. 4(ii)(b)(2): First Amendment to Loan Agreement by and among Enron North America Corp. as Lender, Huntco Steel, Inc. as Borrower, and Huntco Inc., Huntco Nevada, Inc., Midwest Products, Inc., and HSI Aviation, Inc. as additional obligors dated April 6, 2001. 4(ii)(b)(3): Security Agreement dated April 6, 2001, executed by Huntco Inc. in favor of Enron North America Corp., as Secured Party,; similar Security Agreements executed in favor of Enron North America Corp. by each of Huntco Nevada, Inc., Huntco Steel, Inc. and Midwest Products, Inc. 4(ii)(b)(4): Pledge Agreement dated April 6, 2001, executed by Huntco Inc., in favor of Enron North America Corp., as Lender; similar pledge agreement executed in favor of Enron North America Corp. by Huntco Nevada, Inc. 4(ii)(c): Intercreditor and Subordination Agreement dated June 8, 2001, by and among Congress Financial Corporation (Central) and Enron North America Corp., acknowledged by Huntco Steel, Inc., Huntco Inc., Huntco Nevada, Inc. and Midwest Products, Inc. 10(i)(a): Huntco Inc. Class A common stock warrant dated June 8, 2001. 10(i)(b): Registration Rights Agreement dated June 8, 2001, between the Company and Enron North America Corp. 10(ii)(B)(1): Master Steel Purchase and Sale Agreement between Huntco Steel, Inc. and Enron North America Corp. dated April 6, 2001. 10(ii)(B)(2): Inventory Management Agreement Phase I dated April 6, 2001, by and between Enron North America Corp. and Huntco Steel, Inc. 10(ii)(B)(3): Inventory Management Agreement Phase II dated April 6, 2001, by and between Enron North America Corp. and Huntco Steel, Inc. 10(ii)(C)(1): Asset Purchase Agreement dated as of April 30, 2001 by and among Huntco Steel, Inc., Huntco Inc., and Enron Industrial Markets LLC, with respect to the Company's sale of its cold rolling and coil pickling operations. 10(ii)(C)(2): First Amendment to Asset Purchase Agreement dated June 8, 2001, by and among Enron Industrial Markets LLC, Huntco Steel, Inc. and Huntco Inc., with respect to the Company's sale of its cold rolling and coil pickling operations. 10(ii)(C)(3): Assignment of Contract dated June 8, 2001, by and between Enron Industrial Markets LLC ("EIM") in favor of EBF LLC, whereby EIM assigned its rights pursuant to that certain Asset Purchase Agreement dated April 30, 2001, as amended on June 8, 2001, to EBF LLC; with Huntco Steel, Inc. and Huntco, Inc. acknowledging their consent to the Assignment. 10(iii)(A)(4): Description of Performance Bonus Arrangement for executive officers for the calendar year ending December 31, 2001. 23: Consent of PricewaterhouseCoopers LLP. 24: Powers of Attorney submitted by B. D. Hunter, Robert J. Marischen, Anthony J. Verkruyse, James J. Gavin, Jr., Donald E. Brandt and Michael M. McCarthy. (b) Reports on Form 8-K The Company filed a Form 8-K on October 23, 2000 that incorporated by reference into Item 5, "Other Events", and filed as an exhibit to such Form 8- K, the press release issued by the Company that discussed its earnings for the three and nine months ended September 30, 2000, and provided certain forward- looking data for the year ending December 31, 2000. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HUNTCO INC. (Registrant) Date: June 14, 2001 By:/s/ Anthony J. Verkruyse ------------------------ Anthony J. Verkruyse, Vice President and Chief Financial Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints B. D. Hunter, Robert J. Marischen and Anthony J. Verkruyse, and each of them (with full power to each of them to act alone), his true and lawful attorney-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign this report and any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, 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 he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, the following persons on behalf of the registrant and in the capacities and on the date indicated have signed this report below. /s/ B. D. Hunter Director, Chairman of the June 14, 2001 - --------------------------------- Board B. D. Hunter /s/ Robert J. Marischen Director, Vice Chairman of June 14, 2001 - --------------------------------- the Board, Chief Executive Robert J. Marischen Officer & President (Principal Executive Officer) /s/ Anthony J. Verkruyse Vice President and Chief June 14, 2001 - --------------------------------- Financial Officer Anthony J. Verkruyse (Principal Financial And Accounting Officer) /s/ Donald E. Brandt Director June 14, 2001 - --------------------------------- Donald E. Brandt /s/ James J. Gavin, Jr. Director June 14, 2001 - --------------------------------- James J. Gavin, Jr. /s/ Michael M. McCarthy Director June 14, 2001 - --------------------------------- Michael M. McCarthy EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K. Exhibit No. Exhibit Description - ----------- --------------------------------------------------------------------- 3(i): Restated Articles of Incorporation of Huntco Inc. incorporated by reference to Exhibit 3(i) of the Company's 1995 Annual Report on Form 10-K, filed on July 28, 1995. 3(ii): Amended and Restated Bylaws of Huntco Inc., incorporated by reference to Exhibit 3(ii) of the Company's Form 10-Q for the quarter ended October 31, 1997, filed on December 15, 1997. 4(i)(a): Reference is made to Articles III and VIII of the Restated Articles of Incorporation of Huntco Inc., incorporated by reference to Exhibit 3(i) of the Company's 1995 Annual Report on Form 10-K filed July 28, 1995. 4(i)(b): Certificate of Designation defining the terms and provisions of the Company's Series A Preferred Stock, incorporated by reference to Exhibit 4(v)(a) of the Company's Form 10-Q for the quarter ended January 31, 1997, filed on March 14, 1997. 4(i)(d): Reference is made to Articles III, IV, V, XI, XII, and XIII of the Amended and Restated Bylaws of Huntco Inc., incorporated by reference to Exhibit 3(ii) of the Company's Form 10-Q for the quarter ended October 31, 1997, filed on December 15, 1997. 4(ii)(a)(1): Loan and Security Agreement dated April 15, 1999, by and among Congress Financial Corporation (Central), as Lender; Huntco Steel, Inc. and Midwest Products, Inc., as Borrowers; and Huntco Inc., Huntco Nevada, Inc., and HSI Aviation, Inc., as Guarantors; incorporated by reference to Exhibit 4(ii)(a) of the Company's Form 10-Q for the quarter ended March 31, 1999, filed on May 14, 1999. 4(ii)(a)(2): Form of Security Agreement dated April 15, 1999, executed by each of Huntco Inc., Huntco Nevada, Inc., and HSI Aviation, Inc., in favor of Congress Financial Corporation, executed in connection with the Loan and Security Agreement dated April 15, 1999 by and among Congress Financial Corporation (Central), as Lender; Huntco Steel, Inc. and Midwest Products, Inc., as Borrowers; and Huntco Inc., Huntco Nevada, Inc., and HSI Aviation, Inc., as Guarantors; incorporated by reference to Exhibit 4(ii)(b) of the Company's Form 10-Q for the quarter ended March 31, 1999, filed on May 14, 1999. 4(ii)(a)(3): Amendment No. 1 to Loan and Security Agreement dated June 8, 2001, by and among Congress Financial Corporation (Central), as Lender; Huntco Steel, Inc. and Midwest Products, Inc., as Borrowers; and Huntco Inc., Huntco Nevada, Inc., and HSI Aviation, Inc., as Guarantors. 4(ii)(a)(4): Pledge Agreement dated June 8, 2001, executed by Huntco Nevada, Inc. in favor of Congress Financial Corporation (Central), as Lender; similar pledge agreement executed in favor of Congress Financial Corporation (Central) by Huntco Inc. 4(ii)(b)(1): Loan Agreement by and among Enron North America Corp., Lender, Huntco Steel, Inc., Borrower, and Huntco Inc., Huntco Nevada, Inc., Midwest Products, Inc., and HSI Aviation, Inc. as additional obligors dated April 6, 2001. 4(ii)(b)(2): First Amendment to Loan Agreement by and among Enron North America Corp. as Lender, Huntco Steel, Inc. as Borrower, and Huntco Inc., Huntco Nevada, Inc., Midwest Products, Inc., and HSI Aviation, Inc. as additional obligors dated April 6, 2001. 4(ii)(b)(3): Security Agreement dated April 6, 2001, executed by Huntco Inc. in favor of Enron North America Corp., as Secured Party; similar Security Agreements executed in favor of Enron North America Corp. by each of Huntco Nevada, Inc., Huntco Steel, Inc. and Midwest Products, Inc. 4(ii)(b)(4): Pledge Agreement dated April 6, 2001, executed by Huntco Inc., in favor of Enron North America Corp., as Lender; similar pledge agreement executed in favor of Enron North America Corp. by Huntco Nevada, Inc. 4(ii)(c): Intercreditor and Subordination Agreement dated June 8, 2001, by and among Congress Financial Corporation (Central) and Enron North America Corp., acknowledged by Huntco Steel, Inc., Huntco Inc., Huntco Nevada, Inc. and Midwest Products, Inc. 9: Omitted - not applicable. 10(i)(a): Huntco Inc. Class A common stock warrant dated June 8, 2001. 10(i)(b): Registration Rights Agreement dated June 8, 2001, between the Company and Enron North America Corp. 10(ii)(B)(1): Master Steel Purchase and Sale Agreement between Huntco Steel, Inc. and Enron North America Corp. dated April 6, 2001. 10(ii)(B)(2): Inventory Management Agreement Phase I dated April 6, 2001, by and between Enron North America Corp. and Huntco Steel, Inc. 10(ii)(B)(3): Inventory Management Agreement Phase II dated April 6, 2001, by and between Enron North America Corp. and Huntco Steel, Inc. 10(ii)(C)(1) Asset Purchase Agreement dated as of April 30, 2001 by and among Huntco Steel, Inc., Huntco Inc., and Enron Industrial Markets LLC, with respect to the Company's sale of its cold rolling and coil pickling operations. 10(ii)(C)(2): First Amendment to Asset Purchase Agreement dated June 8, 2001, by and among Enron Industrial Markets LLC, Huntco Steel, Inc. and Huntco Inc., with respect to the Company's sale of its cold rolling and coil pickling operations. 10(ii)(C)(3) Assignment of Contract dated June 8, 2001, by and among Enron Industrial Markets LLC ("EIM") in favor of EBF LLC, whereby EIM assigned its rights pursuant to that certain Asset Purchase Agreement dated April 30, 2001, as amended on June 8, 2001, to EBF LLC; with Huntco Steel, Inc. and Huntco, Inc. acknowledging their consent to the Assignment 10(iii)(A)(1): Severance Agreement dated as of January 1, 2000 executed by and between Huntco Inc. and B. D. Hunter, incorporated by reference to Exhibit 10 (iii)(A)(1) of the Company's 1999 Annual Report on Form 10-K, filed on March 30, 2000. 10(iii)(A)(2): Employment Agreement dated as of January 1, 2000 executed by and between Huntco Inc. and Robert J. Marischen, incorporated by reference to Exhibit 10 (iii)(A)(2) of the Company's 1999 Annual Report on Form 10-K, filed on March 30, 2000. 10(iii)(A)(3): Employment Agreement dated as of January 1, 2000 executed by and between Huntco Inc. and Anthony J. Verkruyse, incorporated by reference to Exhibit 10 (iii)(A)(3) of the Company's 1999 Annual Report on Form 10-K, filed on March 30, 2000. 10(iii)(A)(4): Description of Performance Bonus Arrangement for executive officers for the calendar year ending December 31, 2001. 10(iii)(A)(5): Description of Performance Bonus Arrangement for executive officers for the calendar year ending December 31, 2000, incorporated by reference to Exhibit 10 (iii)(A)(7) of the Company's 1999 Annual Report on Form 10-K, filed on March 30, 2000. 10(iii)(A)(6): Description of Performance Bonus Arrangement for executive officers for the calendar year ending December 31, 1999, incorporated herein by reference to Exhibit 10(iii)(A)(5) of the Company's Form 10-K filed on March 29, 1999. 10(iii)(A)(7): Description of Performance Bonus Arrangement for executive officers for the calendar year ending December 31, 1998, incorporated herein by reference to Exhibit 10(iii)(A)(7) of the Company's Form 10-K filed on March 30, 1998. 10(iii)(A)(8): Huntco Inc. 1993 Incentive Stock Plan, as Amended and Restated in 1996, incorporated herein by reference to Exhibit 10(iii)(A)(2) of the Company's Form 10-Q for the quarter ended July 31, 1996, filed on August 13, 1996. 10(iii)(A)(9): Form of Option Agreement for Awards of Options under the Amended and Restated 1993 Incentive Stock Plan, incorporated by reference to Exhibit 10 (iii)(A)(9) of the Company's 1999 Annual Report on Form 10-K, filed on March 30, 2000. 10(iii)(A)(10): Description of tax reimbursement arrangement between the Company and Mr. Robert J. Marischen, upon exercise of certain non-qualified stock options, incorporated by reference to Exhibit 10 (iii)(A)(10) of the Company's 1999 Annual Report on Form 10-K, filed on March 30, 2000. 10(iii)(A)(11): Severance Agreement and Release entered into by and between Huntco Inc. and Terry J. Heinz, dated as of March 8, 1999, incorporated herein by reference to Exhibit 10(iii)(A)(9) of the Company's Form 10-K filed on March 29, 1999. 11: Omitted - not applicable. 12: Omitted - not applicable. 13: Omitted - not applicable. 16: Omitted - not applicable. 18: Omitted - not applicable. 21: Subsidiaries of the Company, incorporated by reference to Exhibit 21 of the Company's fiscal 1997 Annual Report on Form 10-K, filed on July 25, 1997. 22: Omitted - not applicable. 23: Consent of PricewaterhouseCoopers LLP. 24: Powers of attorney contained on the signature page found herein. 99: Omitted - not applicable.
EX-4 2 amdloan.txt FIRST AMENDMENT TO LOAN AGREEMENT FIRST AMENDMENT TO LOAN AGREEMENT This First Amendment to Loan Agreement is entered into effective as of April 6, 2001 (this "Agreement"), is among Huntco Steel, Inc., HSI Aviation, Inc., Huntco Inc., Huntco Nevada, Inc. and Midwest Products, Inc. (the "Obligors") and Enron North America Corp. (the "Lender"). INTRODUCTION Reference is made to the Loan Agreement dated as of April 6, 2001 (as amended, the "Loan Agreement"), among the Obligors and the Lender, the defined terms of which are used herein unless otherwise defined herein. The Obligors and the Lender have agreed to (a) modify the subordination language on the first page of the Loan Agreement, (b) modify certain definitions used in the Loan Agreement and make appropriate conforming changes, (c) acknowledge Lender's Consent to HSI Aviation, Inc.'s dissolution and the proposed sale of Huntco Steel, Inc.'s Springfield, Missouri property, (d) replace the Exhibits and Schedules to the Loan Agreement with those attached to this Agreement, and (e) otherwise modify the Loan Agreement as more fully set forth below. THEREFORE, in connection with the foregoing and for other good and valuable consideration, the Obligors and the Lender hereby agree as follows: 1. Amendments and Consents. 1.1 The paragraph on the top of the cover page of the Loan Agreement is hereby replaced with the following: THE LIENS, RIGHTS, AND/OR OTHER OBLIGATIONS CREATED IN FAVOR OF ENRON NORTH AMERICA CORP. BY THIS AGREEMENT ARE SUBORDINATE TO THE LIENS, RIGHTS, AND/OR OTHER OBLIGATIONS IN FAVOR OF CONGRESS (AS SUCH TERM IS DEFINED IN THE CONGRESS INTERCREDITOR AGREEMENT DESCRIBED BELOW) AS PROVIDED IN THAT CERTAIN INTERCREDITOR AND SUBORDINATION AGREEMENT BETWEEN ENRON NORTH AMERICA CORP. AND CONGRESS FINANCIAL CORPORATION (CENTRAL) AS THE SAME NOW EXISTS OR MAY HEREAFTER BE AMENDED, SUPPLEMENTED, MODIFIED, RENEWED, RESTATED, OR REPLACED (THE "CONGRESS INTERCREDITOR AGREEMENT"). 1.2 Section 1.1 of the Loan Agreement is amended by adding the following definitions which, where applicable, replace the prior definition for the same term. "Blytheville Sale Agreement" means the Asset Purchase and Sale Agreement dated as of April 30, 2001, by and among Huntco Steel, Inc., a Delaware corporation, Huntco Inc., a Missouri corporation, and Enron Industrial Markets LLC, a Delaware limited liability company, as amended by that certain First Amendment to Asset Purchase Agreement dated as of June 8, 2001, with respect to the sale of the Blytheville Arkansas property. "Collateral" means, all of the following with respect to each Obligor: (a) Accounts; (b) all present and future contract rights, general intangibles (including tax and duty refunds, registered and unregistered patents, trademarks, service marks, copyrights, trade names, applications for the foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer lists, licenses, whether as licensor or licensee, chooses in action and other claims and existing and future leasehold interests in equipment, real estate and fixtures), chattel paper, documents, instruments, investment property, letters of credit, bankers' acceptances and guaranties; (c) all present and future monies, securities and other investment property, credit balances, deposits, deposit accounts and other property of Obligor now or hereafter held or received by or in transit to Lender or its Affiliates or at any other depository or other institution from or for the account of Obligor whether for safekeeping, pledge, custody, transmission, collection or otherwise, and all present and future Liens, security interests, rights, remedies, title and interest in, to and in respect of Accounts and other Collateral, including (i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (ii) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (iii) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Accounts or other Collateral, including returned, repossessed and reclaimed goods, and (iv) deposits by and property of account debtors or other persons securing the obligations of account debtors; (d) Inventory; (e) Equipment; (f) Records; (g) Real Property; and (h) all products and proceeds of the foregoing, in any form, including insurance proceeds and any claims against third parties for loss or damage to or destruction of any or all of the foregoing. "Intercreditor Agreement" means the Intercreditor and Subordination Agreement dated as of June 8, 2001, between Lender and Congress and agreed to and acknowledged by the Obligors as the same now exists or may hereafter be amended, modified, supplemented, renewed, restated or replaced. "Loan Obligations" means all principal, interest, fees, reimbursements, indemnifications, and other amounts now or hereafter owed by the Obligors to Lender under the Loan Documents. "Replacement Senior Loan Agreement" means the Senior Loan Agreement as amended, renewed, restated, replaced or restructured in a manner which is not prohibited by Section 5.23 hereto, and any loan agreement between Borrower and any lender thereto which, following receipt of consent from Congress, refinances or otherwise replaces the Senior Loan Agreement in a manner which is not prohibited under Section 5.23 hereto as such loan agreement may hereafter be amended, renewed, restated, replaced or restructured in a manner which is not prohibited by Section 5.23 hereto. "Senior Amendment No. 1" means the Amendment No. 1 to Loan and Security Agreement dated June 8, 2001, by and among Congress, as lender, Borrower and Midwest Products, Inc., as borrowers, and Huntco Inc., Huntco Nevada, Inc., and HSI Aviation, Inc., as guarantors that is attached to Exhibit B hereto, provided, that no amendment or modification to such documents shall amend the provisions of this Agreement unless specifically agreed to in writing by the parties hereto. "Senior Loan Agreement" means the Loan and Security Agreement dated April 15, 1999, by and among Congress, as lender, Borrower and Midwest Products, Inc., as borrowers, and Huntco Inc., Huntco Nevada, Inc., and HSI Aviation, Inc., as guarantors, as amended by Senior Amendment No. 1, that is attached to Exhibit B hereto, provided, that no amendment or modifications to such documents shall amend this Agreement unless specifically agreed to in writing by the parties hereto. 1.3 The first paragraph in Article 5 of the Loan Agreement is hereby replaced with the following: "Until Lender receives irrevocable payment of the Loan Obligations and has terminated this Agreement and each other Loan Document, each Obligor shall comply and cause compliance with the following covenants unless and to the extent the same are waived by Lender:" 1.4 Section 5.4 of the Loan Agreement is hereby replaced by the following: "5.4 Use of Proceeds. The proceeds of the Loan shall be used by Borrower only for the repayment of Debt to trade vendors and Senior Lender and to pay for transaction expenses incurred in connection with entering into the Transaction Documents and the Blytheville Sale Agreement. Borrower shall not, directly or indirectly, use any part of such proceeds for any purpose which violates applicable laws or regulations." 1.5 Section 5.9(b) of the Loan Agreement is hereby replaced by the following: "(b) sell, assign, lease, transfer, abandon or otherwise dispose of any Capital Stock or Debt to any other Person or any of its assets to any other Person except as permitted pursuant to (i) the terms of Section 2.6 of the Intercreditor Agreement or (ii) the terms of Section 9.7(b) of the Senior Loan Agreement, provided, that, in connection with such Section 9.7(b), Lender shall have the rights described in Section 5.22 hereof. 1.6 Section 5.12(b) of the Loan Agreement is hereby replaced by the following: "(b) At its option, Lender may apply any insurance proceeds received by Lender at any time to the cost of repairs or replacement of Collateral and/or to payment of the Loan Obligations, whether or not then due, in any order and in such manner as Lender may determine or hold such proceeds as cash collateral for the Loan Obligations, except that to the extent any Obligor has the right under Section 9.5(b) of the Senior Loan Agreement to require that insurance proceeds be applied to rebuilding a portion of the damaged Collateral such Obligor shall have identical rights under this Agreement as though such Section 9.5(b) of the Senior Loan Agreement were set forth in its entirety in this Agreement with all references to Senior Lender being treated as references to Lender under this Agreement." 1.7 Section 5.23 of the Loan Agreement is hereby replaced by the following: "5.23 Amendments of Senior Loan Agreements. Obligors shall not enter into any Replacement Senior Loan Agreement or effect any amendment, waiver, modification, or refinancing of the Senior Loan Agreement or of a Replacement Senior Loan Agreement that permits or causes there to be a new Senior Lender unless such new Senior Lender shall have entered into an intercreditor agreement with Lender that is substantially the same as the Intercreditor Agreement between Congress and Lender that was executed in connection with this Agreement. Additionally, Obligors shall not enter into any Replacement Senior Loan Agreement or effect any amendment, waiver, modification, or refinancing of the Senior Loan Agreement or of a Replacement Senior Loan Agreement in any manner that (a) causes the Maximum Credit or the aggregate outstanding principal amount of Indebtedness under such Agreements to exceed the Revolver Limit as such term is defined in the Intercreditor Agreement and (b) allows another party a lien on the Enron Inventory Collateral (as such term is defined in the Intercreditor Agreement). Each Obligor agrees to furnish Lender all notices or demands in connection with such Senior Loan Agreements, Replacement Senior Loan Agreements and any amendments or modifications thereto and to provide Lender with true and correct copies of Replacement Senior Loan Agreements and any amendments or modifications to the Senior Loan Agreement or Replacement Senior Loan Agreements." 1.8 Section 6.1(c) of the Loan Agreement is hereby replaced by the following: "Breach of Covenant. Any breach by an Obligor of (i) any of the covenants contained in Sections 5.1, 5.2, 5.14, 5.15, 5.16, 5.17, 5.18 and 5.20 of this Agreement and such failure is not cured within ten (10) days of the occurrence of such breach; provided, that, such ten (10) day cure period shall not apply in the case of: (A) any failure to observe any such covenant which is not capable of being cured at all or within such ten (10) day period or which has been the subject of a prior failure within a six (6) month period or (B) an intentional breach by any Obligor of any such covenant or (ii) any Obligor fails to perform any of the terms, covenants, conditions, or provisions contained in this Agreement or any of the other Loan Documents other than those described in Sections 6.1(c)(i);" 1.9 Section 6.3 of the Loan Agreement is hereby replaced by the following: "6.3 Acceleration of Loan Obligations. Upon the occurrence of any Bankruptcy Event of Default, the aggregate outstanding principal amount of all loans made hereunder, all accrued but unpaid interest thereon, and all other Loan Obligations shall immediately and automatically become due and payable. During the existence of any Event of Default, Lender may declare by written notice to Borrower the aggregate outstanding principal amount of all loans made hereunder, all accrued but unpaid interest thereon, and all other Loan Obligations to be immediately due and payable, whereupon the same shall immediately become due and payable. In connection with the foregoing, except for any express notice requirements in this Agreement, Borrower waives notice of any Default or Event of Default, notice of intent to accelerate, notice of acceleration, presentment for payment, demand for payment, notice of enforcement of remedies, and all other notices." 1.10 Section 6.4 of the Loan Agreement is hereby replaced by the following: "6.4 Default Interest. During the existence of an Event of Default under Section 6.1(a), whether by maturity, acceleration, or otherwise, Lender may declare by written notice to Borrower that the Loan Obligations specified in such notice shall bear interest beginning on the date specified in such notice (which may not be earlier than the date of such notice) until paid in full at the Default Rate, whereupon Borrower shall pay such interest to Lender upon demand." 1.11 The following is hereby added to the last sentence of Section 6.5 of the Loan Agreement: "For purposes of this Section 6.5, EBF LLC, a Delaware LLC, shall be deemed to not be an Affiliate of Lender." 1.12 Section 6.8(a) of the Loan Agreement is hereby replaced by the following: "(a) Prior to the existence of any Bankruptcy Event of Default or any Event of Default existing after the acceleration or maturity of the Loan Obligations, all payments made hereunder shall be applied to the Loan Obligations as directed by Borrower, subject to the rules regarding the application of payments to certain Loan Obligations provided for hereunder and in the other Loan Documents. If no direction is provided by Borrower, then applications shall be made as directed by Lender." 1.12 Huntco Steel, Inc., agrees that it shall not permit HSI Aviation, Inc., to engage in any activity or business operations other than the winding up of its business and its dissolution. On or before, June 30, 2001, Huntco Steel Inc., shall file articles of dissolution by voluntary action with the Secretary of State of Missouri with respect to the dissolution of HSI Aviation, Inc., and Lender hereby consents to such dissolution provided that (a) Huntco Steel, Inc., incurs no additional liabilities in connection with such dissolution, (b) all of HSI Aviation, Inc.'s assets become assets of Huntco Steel, Inc., in connection with such dissolution and (c) such dissolution otherwise complies with the requirements set forth in Section 5 of Senior Amendment No. 1. 1.13 Lender hereby consents to Huntco Steel, Inc.'s sale of its offices in Springfield Missouri provided that (a) such sale is completed on or before August 15, 2001, (b) $435,000 of the proceeds of such sale are used to pay amounts owed under the Senior Loan Agreement and (c) such sale otherwise complies with the requirements set forth in Section 9.7(b)(vi) of Senior Amendment No. 1. 1.14 The Exhibits and Schedules attached to the Loan Agreement are hereby replaced by Exhibit A, Exhibit B, and Schedules 4.7, 4.9, 4.12, 4.17, 4.18 and 5.7 which are attached hereto. 1.15 Lender consents to the sale of the property covered by and pursuant to the terms of the Blytheville Sale Agreement. 2. Representations and Warranties. Each Obligor represents and warrants that (a) the execution, delivery, and performance of this Agreement are within the corporate power and authority of such Obligor and have been duly authorized by appropriate proceedings, (b) this Agreement constitutes legal, valid, and binding obligations of such Obligor enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the rights of creditors generally and general principles of equity, and (c) no Event of Default shall exist under the Loan Documents and there shall have occurred no event which with notice or lapse of time would become an Event of Default under the Loan Documents, as amended. 3. Effect on Loan Documents. Except as amended herein, the Loan Agreement and all other Loan Documents remain in full force and effect as originally executed. Subject to Section 1.1 above, nothing herein shall act as a waiver of the Lender's rights under the Loan Documents as amended, including the waiver of any default or event of default, however denominated. Each Obligor must continue to comply with the terms of the Loan Documents, as amended. This Agreement is a Loan Document for the purposes of the provisions of the other Loan Documents. Without limiting the foregoing, any breach of representations, warranties, and covenants under this Agreement shall be a default under the other Loan Documents. 4. Effectiveness. This Agreement shall become effective and the Loan Agreement shall be amended as provided in this Agreement when the Lender shall have received duly executed counterparts hereof signed by the Obligors and the Lender. 5. Miscellaneous. The miscellaneous provisions of the Loan Agreement apply to this Agreement. This Agreement may be signed in any number of counterparts, each of which shall be an original. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. EXECUTED as of the date first above written. LENDER: ENRON NORTH AMERICA CORP. By: ______________________________________ Name: ____________________________________ Title: _____________________________________ OBLIGORS: HUNTCO STEEL, INC. By: ______________________________________ Robert J. Marischen President HSI AVIATION, INC. By: ______________________________________ Robert J. Marischen President HUNTCO INC. By: ______________________________________ Robert J. Marischen President & CEO HUNTCO NEVADA, INC. By: ______________________________________ Robert J. Marischen Vice President MIDWEST PRODUCTS, INC. By: ______________________________________ Robert J. Marischen Vice President EX-10 3 warrants.txt HUNTCO INC. CLASS A COMMON STOCK WARRANT HUNTCO INC. CLASS A COMMON STOCK WARRANT NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE ON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT UNDER SUCH ACT AND APPLICABLE LAWS OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. No. W-1 Warrant to Purchase up to 1,000,000 Shares of Class A Common Stock This certifies that, for value received, Enron North America Corp., a Delaware corporation ("ENA"), or its registered assigns (the "Holder") is entitled, subject to the terms set forth herein, to purchase from Huntco Inc., a Missouri corporation (the "Company"), 1,000,000 shares of Class A Common Stock, par value $.01 per share, of the Company (the "Class A Common Stock") at the Exercise Price (as hereinafter defined). The Exercise Price and the number of shares of Class A Common Stock issuable on exercise of this Warrant are subject to adjustment as provided below. This Warrant is issued by the Company to ENA as consideration for and in connection with the execution by ENA of the Master Steel Purchase and Sale Agreement, the Inventory Management Agreement for Phase I and the Inventory Management Agreement for Phase II, each dated April 6, 2001, between the Company and ENA. 1. Term of Warrant. Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or in part, during the period beginning on June 8, 2001 (the "Warrant Issue Date") and ending at 5:00 p.m., Central Time, on June 8, 2011 (the "Expiration Date") and shall be void thereafter. The Exercise Price shall be $1.45 per share of Class A Common Stock, as adjusted from time to time pursuant to Section 9 hereof. 2. Exercise of Warrant. (a) Surrender and Payment. The purchase rights represented by this Warrant are exercisable by the Holder in whole or in part, at any time, or from time to time, prior to the Expiration Date, by the surrender of this Warrant and the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder, at the office of the Company specified in the Notice of Exercise (or such other principal office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company), together with payment of the Exercise Price by cashier's check payable to the Company or by wire transfer of immediately available funds to an account designated by the Company. (b) Effectiveness of Exercise. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided herein, and the person entitled to receive the shares of Class A Common Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As promptly as practicable, and in any event within five (5) days after the date of exercise, the Company, at its expense, shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares issuable upon such exercise. In the event that this Warrant is exercised in part, the Company will execute and deliver a new Warrant of like tenor exercisable for the number of shares for which this Warrant may then be exercised. (c) Net Issue Exercise. Notwithstanding any provisions herein to the contrary, if the fair market value of one share of Class A Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant as set forth in paragraph (b), the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being exercised) by surrender of this Warrant, together with the properly endorsed Notice of Exercise and notice of such election, at the principal office of the Company, in which event the Company shall issue to the Holder a number of shares of Class A Common Stock computed using the following formula: X = Y (A-B)/A Where X = the number of shares of Class A Common Stock to be issued to the Holder Y = the number of shares of Class A Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised A = the fair market value of one share of Class A Common Stock (as of the date of exercise determined in accordance with paragraph (b) above) B = Exercise Price (as adjusted to the date of such calculation) For purposes of the above calculation, fair market value of one share of Class A Common Stock shall be the average of (i) the closing price quoted on the New York Stock Exchange, Inc., or on any other exchange (including NASDAQ National Market) on which the Class A Common Stock is listed, as published in The Wall Street Journal or (ii) the average of the bid and asked prices therefor at the close of trading as quoted by NASDAQ (including the OTC Bulletin Board), or (iii) the average of the bid and asked prices therefor at the close of trading as quoted by the National Quotation Bureau in the National Daily Quotation Sheets, in each case for the thirty (30) trading days prior to the date of determination of fair market value. In the event the Class A Common Stock is not listed for trading on any national securities exchange (including NASDAQ National Market), and the bid and asked prices therefor are not quoted by NASDAQ (including the OTC Bulletin Board), or by the National Quotation Bureau in the National Daily Quotation Sheets, then the fair market value of one share of Class A Common Stock shall be the value determined in good faith by the board of directors of the Company. 3. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. In lieu of any fractional share to which the Holder would otherwise be entitled, the Company shall make a cash payment equal to the fair market value of one share of Class A Common Stock multiplied by such fraction. 4. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount. 5. Rights as Stockholder. Except as set forth in Section 9, the Holder shall not be deemed a stockholder of the Company for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company, including any right to vote for the election of directors or upon any other matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action or to receive notice of meetings, or to receive dividends or subscription rights, until the Warrant shall have been exercised as provided herein. 6. Transfer of Warrant. (a) Warrant Register. The Company will maintain a register (the "Warrant Register") containing the names and addresses of the Holder or Holders. The Holder of this Warrant may change his or her address as shown on the Warrant Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register. Until this Warrant is transferred on the Warrant Register of the Company, the Company may treat the Holder as shown on the Warrant Register as the absolute owner of this Warrant for all purposes, notwithstanding any notice to the contrary. (b) Warrant Agent. The Company may, by written notice to the Holder, appoint an agent for the purpose of maintaining the Warrant Register referred to in Section 6(a) above, issuing the Class A Common Stock or other securities then issuable upon the exercise of this Warrant, exchanging this Warrant, replacing this Warrant, or any or all of the foregoing. Thereafter, any such registration, issuance, exchange, or replacement, as the case may be, shall be made at the office of such agent. (c) Limitations on Transfer. In no event may this Warrant be transferred without registration under the Securities Act of 1933, as amended (the "Act") and state securities laws, or pursuant to available exemptions from the registration provisions thereof, and the Company may condition any transfer on the Warrant Register upon the delivery to the Company of investment representation letters and legal opinions to the effect that no such registration is required, such letters and opinions to be in form and substance reasonably satisfactory to the Company. Subject to the foregoing provisions, this Warrant may be transferred (by the Holder executing an assignment in the form annexed hereto) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery. (d) Exchange of Warrant Upon a Transfer. On surrender of this Warrant for exchange, properly endorsed on the Assignment Form and subject to the provisions of this Warrant with respect to compliance with the Act and with the limitations on transfers contained in this Section 6, the Company at its expense shall issue to or on the order of the Holder a new warrant or warrants of like tenor, in the name of the Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct, for the number of shares issuable upon exercise hereof. 7. Reservation of Stock. The Company covenants that during the term this Warrant is exercisable, the Company will reserve from its authorized and unissued Class A Common Stock a sufficient number of shares to provide for the issuance of Class A Common Stock upon the exercise of this Warrant and, from time to time, will take all steps necessary to amend its certificate or articles of incorporation and other governing documents (the "Certificate") to provide sufficient reserves of shares of Class A Common Stock to permit exercise of the Warrant. The Company covenants that during the term this Warrant is exercisable, the Company shall take all commercially reasonable steps to ensure that the shares of Class A Common Stock issuable upon exercise of this Warrant are approved for trading on the New York Stock Exchange, Inc. or such other national securities exchange or on the NASDAQ National Market, if the Class A Common Stock is or becomes traded thereon, provided that the Company shall have no such obligation if the Class A Common Stock is not traded on any such exchange or on the NASDAQ National Market. The Company further covenants that all shares issued upon the exercise of this Warrant will be duly authorized, validly issued, fully paid and nonassessable and shall be free from all preemptive rights, taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously or otherwise specified herein). The Company agrees that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Class A Common Stock (or other securities) upon the exercise of this Warrant. 8. Notices. (a) Whenever the Exercise Price or number of shares purchasable hereunder shall be adjusted pursuant to Section 9 hereof, the Company shall issue a certificate setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Exercise Price and number of shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first-class mail, postage prepaid) to the Holder of this Warrant. (b) In the event: (i) the Company shall take a record of the holders of its Class A Common Stock (or other stock or securities at the time receivable upon the exercise of this Warrant) for the purpose of entitling them to receive any dividend (other than a regular quarterly cash dividend) or any other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, or (ii) of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation, or any conveyance of all or substantially all of the assets of the Company, or (iii) of any voluntary dissolution, liquidation or winding- up of the Company, then, and in each such case, the Company will mail or cause to be mailed to the Holder a notice specifying, as the case may be, (A) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (B) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Class A Common Stock (or such stock or securities at the time receivable upon the exercise of this Warrant) shall be entitled to exchange their shares of Class A Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be mailed at least 15 days prior to the date therein specified. (c) All such notices, advices and communications shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery and (ii) in the case of mailing, on the third business day following the date of such mailing. 9. Adjustments. The Exercise Price and the number of shares purchasable hereunder are subject to adjustment from time to time upon the occurrence of the following events while this Warrant remains outstanding; 9.1 Merger, Sale of Assets, etc. If there shall be (i) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (ii) a merger or consolidation of the Company with or into another entity, in which the Company is not the surviving entity or in which the Company is the surviving entity but the shares of the Company's Class A Common Stock are converted into other property, whether in the form of securities, cash, or otherwise, or (iii) a sale or transfer of the Company's prop- erties and assets as, or substantially as, an entirety, then, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, in lieu of Class A Common Stock, the number of shares of stock or other securities or property of the surviving or successor corporation receivable by the Holder upon such reorganization, merger, consolidation, sale or transfer if this Warrant had been exercised immediately before such reorganization, merger, consolidation, sale or transfer all subject to further adjustment as provided in this Section 9. The foregoing provisions of this Section 9.1 shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other entity that are at the time receivable upon the exercise of this Warrant. If the consideration payable in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company's Board of Directors. In all events, appropriate adjustment (as determined in good faith by the Company's Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant. 9.2 Reclassification, etc. If the Company, by reclassification of securities or otherwise, changes the Class A Common Stock into the same or a different number of securities of any other class or series, then this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable to the Holder as the result of such change if this Warrant had been fully exercised immediately prior to such reclassification or other change and the Exercise Price shall be appropriately adjusted, all subject to further adjustment as provided in this Section 9. 9.3 Split, Subdivision or Combination of Shares. If the Company shall split, subdivide or combine the Class A Common Stock, the Exercise Price shall be proportionately decreased (in the case of a split or subdivision) or proportionately increased (in the case of a combination). 9.4 Adjustments for Dividends in Stock or Other Securities or Property. If the Company shall distribute to the holders of the Class A Common Stock capital stock (other than Class A Common Stock) or other securities or property ("Distributed Property") (excluding dividends payable out of profits or surplus legally available for the payment of dividends under Missouri law), then, upon exercise of this Warrant, the Holder shall be entitled to receive, in addition to shares of Class A Common Stock, the amount of such Distributed Property or, at the election of the Company, a sum equal to the fair market value of such Distributed Property, in either case as would have been deliverable to such Holder, as owner of that number of Class A Common Stock had such Holder been a record holder of such shares of Class A Common Stock on the record date for such distribution. 9.5 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment pursuant to this Section 9, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder of this Warrant a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request, at any time, of any such Holder, furnish or cause to be furnished to such Holder a like certificate setting forth: (i) such adjustments and readjustments; (ii) the Exercise Price at the time in effect; and (iii) the number of shares and the amount, if any, of other property that at the time would be received upon the exercise of the Warrant. 9.6 No Impairment. The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 9 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Warrant against impairment. For purposes of this Section 9, the term "Class A Common Stock" shall mean the shares of the class of stock designated as the Class A Common Stock of the Company as of the date hereof or any other classes of stock resulting from successive changes or reclassifications of such shares consisting of changes in par value. In the event that, as a result of an adjustment made pursuant to this Section 9, the Warrants shall entitle the Holder to purchase any securities other than shares of Class A Common Stock, the number of other such securities so purchasable upon exercise and the Exercise Price shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions of this Section 9, which shall apply on like terms to any other such securities. 10. Dispute Resolution. Any action, dispute, claim or controversy of any kind between the Company and the Purchaser arising out of, or pertaining to this Agreement or the transactions contemplated hereby (a "Dispute") shall be resolved by binding arbitration in accordance with the terms hereof. Any party may, by summary proceedings, bring an action in court to compel arbitration of any Dispute. Any arbitration shall be administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Section 10, the Commercial Arbitration Rules of the AAA, and, to the maximum extent applicable, the Federal Arbitration Act. Judgment on any award rendered by an arbitration panel may be entered in any court having jurisdiction. Any arbitration shall be conducted by an arbitration panel consisting of three arbitrators. Each party shall designate one arbitrator. The third arbitrator shall be designated by the two arbitrators designated by the parties. If either party fails to designate an arbitrator within 10 days after the filing of the Dispute with the AAA, such arbitrator shall be appointed in the manner prescribed by the AAA. Any arbitration proceeding hereunder shall be conducted in Houston, Texas. Each proceeding shall be concluded within 180 days of the filing of the Dispute with the AAA. The arbitration panel shall be empowered to award sanctions and to take such other actions as they deem necessary, to the same extent a judge could impose sanctions or take such other actions pursuant to the Federal Rules of Civil Procedure and applicable law. No award by the arbitration panel shall assess consequential, punitive or exemplary damages but may assess costs and expenses in a manner deemed equitable. The arbitration panel shall make specific written findings of fact and conclusions of law. The decision of the majority of the arbitration panel shall be final and binding on each party. 11. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Missouri. IN WITNESS WHEREOF, HUNTCO INC. has caused this Warrant to be executed by its officer thereunto duly authorized. THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. Dated: June 8, 2001 HUNTCO INC. By:________________________ Robert J. Marischen President & CEO - ---------------------------------------------------------------------------- NOTICE OF EXERCISE To: HUNTCO INC. 14323 South Outer Forty Drive Suite 600N Town and Country, Missouri 63017 (1) The undersigned Holder hereby (A) elects to purchase _________ shares of Class A Common Stock of Huntco Inc. pursuant to the provisions of Section 2(a) of the attached Warrant, and tenders herewith (or by separate wire transfer) payment of the purchase price for such shares in full, or (B) elects to exercise this Warrant for the purchase of __________ shares of Class A Common Stock, pursuant to the provisions of Section 2(c) of the attached Warrant. (2) Please issue a certificate or certificates representing said shares of Class A Common Stock in the name of the undersigned or in such other name as is specified below: (3) (3) Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below. ______________________________ (Name) ______________________________ (Signature) Name in which Class A Common Stock is to be issued (if other than the Holder): ____________________________ ____________________________ Name in which Warrant is to be reissued (if other than the Holder): _____________________________ _____________________________ (Date) - ----------------------------------------------------------------------------- ASSIGNMENT FORM FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the Warrant with respect to the number of shares of Class A Common Stock set forth below: Name of Assignee Address No. of Shares and does hereby irrevocably constitute and appoint _______________________ Attorney to make such transfer on the books of Huntco Inc., maintained for the purpose, with full power of substitution in the premises. Dated: _______________ __, 2___ ___________________________________ Signature of Holder EX-10 4 regrts.txt REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of June 8, 2001, by and between HUNTCO INC., a Missouri corporation (the "Company"), and ENRON NORTH AMERICA CORP., a Delaware corporation ("ENA"). This Agreement is made and entered into in connection with the Master Steel Purchase and Sale Agreement, the Inventory Management Agreement for Phase I (the "Inventory Management Agreement") and the Inventory Management Agreement for Phase II, each as of April 6, 2001, by and between the Company and ENA (collectively, the "Transaction Agreements"). The parties agree as follows: ARTICLE I Section 1.1. Definitions. The terms set forth below are used herein as so defined: "Commission" has the meaning specified therefor in Section 1.2 of this Agreement. "Class A Common Stock" means the Class A Common Stock, par value $.01 per share, of the Company. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Holder" means the record holder of any Warrants or Registrable Securities. "Inspectors" has the meaning specified therefor in Section 2.3 this Agreement. "Losses" has the meaning specified therefor in Section 2.7 of this Agreement. "Other Holders" has the meaning specified therefor in Section 2.1 of this Agreement. "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, business trust, trust or unincorporated entity. "Records" has the meaning specified therefor in Section 2.3 of this Agreement. "Registrable Securities" means the Warrant Shares, until such time as such securities cease to be Registrable Securities pursuant to Section 1.2 hereof. "Registration Expenses" has the meaning specified therefor in Section 2.6(a) of this Agreement. "Registration Statement" has the meaning specified therefor in Section 2.1(b) of this Agreement. "Requesting Holder(s)" has the meaning specified therefor in Section 2.1(a) of this Agreement. "Request Notice" has the meaning specified therefor in Section 2.1(a) of this Agreement. "Securities Act" has the meaning specified therefor in Section 1.2 of this Agreement. "Selling Expenses" has the meaning specified therefor in Section 2.6(a) of this Agreement. "Selling Holder" means a Holder who is selling Registrable Securities pursuant to a Registration Statement. "Warrants" means the Warrants to purchase 1,000,000 shares of Class A Common Stock to be issued to ENA. "Warrant Shares" means the shares of Class A Common Stock (or other securities) issuable upon exercise of the Warrants. Section 1.2. Registrable Securities. Any Registrable Security will cease to be a Registrable Security when (i) a Registration Statement covering such Registrable Security has been declared effective by the Securities and Exchange Commission (the "Commission") and such Registrable Security has been sold or disposed of pursuant to such effective Registration Statement; (ii) such Registrable Security is disposed of pursuant to Rule 144 (or any similar provision then in force) under the Securities Act of 1933, as amended (the "Securities Act"); (iii) such Registrable Security is eligible to be, and at the time of determination can be, disposed of pursuant to paragraph (k) of Rule 144 (or any similar provision then in force) under the Securities Act; or (iv) such Registrable Security is held by the Company or one of its subsidiaries. ARTICLE II Section 2.1. Demand Registration. (a) Any Holder or Holders who collectively beneficially own a majority of the Registrable Securities may request (a "Request Notice") the Company to register under the Securities Act all or any portion of the Registrable Securities that are held by such Holder or Holders (collectively, the "Requesting Holder") for sale in the manner specified in the Request Notice. Any Registration Statement filed by the Company in response to a Request Notice may be filed on a Form S-3 (or any comparable successor form), to the extent the Company is then eligible to file such form. The Company shall be obligated to register Registrable Securities pursuant to this Section 2.1 on three occasions only. A request pursuant to this Section 2.1 shall be counted only when the corresponding Registration Statement has been filed and becomes effective under the Securities Act. Notwithstanding the foregoing, in the event the Company files a Registration Statement pursuant to this Section 2.1 (a) and one or more Holders thereafter withdraw Registrable Securities from inclusion in such Registration Statement prior to its effectiveness and such withdrawal causes such Registration Statement not to be declared effective, then such Registration Statement shall be counted as the exercise by the Holders of a demand registration right, unless the Holders reimburse the Company for the Registration Expenses incurred by the Company in connection with such Registration Statement. (b) Promptly following receipt of a Request Notice, the Company shall immediately notify each Holder (except the Requesting Holder) of the receipt of a Request Notice and shall use its best efforts to file a registration statement under the Securities Act (each such registration statement is hereinafter referred to as a "Registration Statement") effecting the registration under the Securities Act, for public sale in accordance with the method of disposition specified in such Request Notice, of the Registrable Securities specified in the Request Notice (and in any notices that the Company receives from other Holders no later than the 15th day after receipt of the notice sent by the Company) (such other Holders and the Requesting Holder are hereinafter referred to as the "Requesting Holders"). If such method of disposition shall be an underwritten public offering, the Requesting Holders holding a majority of the Registerable Securities to be registered may designate the managing underwriter of such offering, subject to the approval of the Company, which approval shall not be withheld unreasonably. (c) If the Company has received a Request Notice, whether or not a Registration Statement with respect thereto has been filed or has become effective, and furnishes to the Requesting Holders a copy of a resolution of the Board of Directors of the Company certified by the Secretary of the Company stating that in the good faith judgment of the Board of Directors it would be materially detrimental to the Company and its stockholders for such Registration Statement (A) to be filed on or before the date such filing would otherwise be required hereunder, or (B) to become effective because such action (x) would materially interfere with a significant acquisition, corporate reorganization or other similar transaction involving the Company, (y) would require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential or (z) the Company is unable to comply with requirements of the Commission, the Company shall have the right, but not more than once with respect to any Request Notice, to defer such filing or effectiveness for such period as may be reasonably necessary (which period shall not, in any event, exceed 120 days from the date the Request Notice is deemed to be received under Section 3.2). (d) The Company and any Person other than a Holder (the "Other Holders") who is entitled to piggy-back registration rights with respect to a Registration Statement filed pursuant to Section 2.1 may include securities of the Company in such Registration Statement, but only to the extent, in the opinion of the managing underwriter (if such method of disposition shall be an underwritten public offering), such inclusion would not have a material adverse effect on the successful marketing of the Registerable Securities to be sold. If the managing underwriter determines that it is necessary to reduce the number of securities to be registered on behalf of the Company or such Other Holders, securities held by such Other Holders shall be excluded first and then the securities to be registered by the Company shall be excluded. Except as provided in this subsection (d), the Company will not effect any other registration of its securities (except with respect to Registration Statements on Form S-4 or S-8 or any forms succeeding thereto for purposes permissible under such forms as of the date hereof), whether for its own account or that of any Other Holder, from the date of receipt of a Request Notice related to an underwritten public offering until the completion of the distribution by the underwriters of all securities thereunder. Section 2.2. Piggy-Back Registration. If the Company proposes to register any of its securities under the Securities Act for sale to the public for cash, whether for its own account or for the account of Other Holders or both (except with respect to Registration Statements on Forms S-4 or S-8 or any forms succeeding thereto for purposes permissible under such forms as of the date hereof), each such time it will give written notice to all Holders of its intention to do so no less than 20 days prior to the anticipated filing date. Upon the written request received by the Company from any Holder no later than the 15th day after receipt by such Holder of the notice sent by the Company (which request shall state the intended method of disposition thereof), the Company will use commercially reasonable efforts to cause the Registerable Securities as to which registration shall have been so requested to be included in the securities to be covered by such Registration Statement, all to the extent requisite to permit the sale or other disposition by each Holder (in accordance with its written request) of such Registerable Securities so registered; provided, however, that the Company may at any time prior to the effectiveness of any such Registration Statement, in its sole discretion and without the consent of any Holder, abandon any proposed offering by the Company in which any Holder had requested to participate. The number of Registerable Securities to be included in such a registration may be reduced or eliminated if and to the extent, in the case of an underwritten offering, the managing underwriter shall advise the Company that such inclusion would materially jeopardize the successful marketing of the securities (including the Registerable Securities) proposed to be sold therein; provided, however, that (a) in the case of a Registration Statement filed pursuant to the exercise of demand registration rights of any Other Holders, priority shall be given first to the Other Holders demanding such registration, then to the Holders, then to the Company and then to Other Holders (other than the Other Holders demanding such registration) and (b) in the case of a Registration Statement the filing of which is initiated by the Company, priority shall be given (A) first to the Company, then (B) to the Holders, then (C) to Other Holders. Section 2.3. Registration Procedures. If and whenever the Company is required pursuant to this Agreement to effect the registration of any of the Registerable Securities under the Securities Act, the Company will, as expeditiously as possible: (a) prepare and file with the Commission a Registration Statement, on a form available to the Company, with respect to such securities (which filing shall be made (i) as expeditiously as reasonably possible (but in no event later than 15 days after the receipt by the Company of a Request Notice) in the case of a shelf registration if the Company is then eligible to file a Registration Statement on Form S-3 or (ii) as expeditiously as reasonably possible (but in no event later than 45 days after the receipt by the Company of a Request Notice) if the Company is not eligible to file a Registration Statement on Form S-3; the Company shall thereafter use commercially reasonable efforts to cause such Registration Statement to become and remain effective for the period of the distribution contemplated thereby (determined pursuant to subparagraph (g) below); (b) prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for the distribution period (determined pursuant to subparagraph (g) below) and as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement; (c) furnish to each Selling Holder and to each underwriter such number of copies of the Registration Statement and the prospectus included therein (including each preliminary prospectus and each document incorporated by reference therein to the extent then required by the rules and regulations of the Commission) as such Persons may reasonably request in order to facilitate the public sale or other disposition of the Registerable Securities covered by such Registration Statement; (d) if applicable, use commercially reasonable efforts to register or qualify the Registerable Securities covered by such Registration Statement under the securities or blue sky laws of such jurisdictions as the Selling Holders or, in the case of an underwritten public offering, the managing underwriter, shall reasonably request, provided that the Company will not be required to qualify generally to transact business in any jurisdiction where it is not then required to so qualify or to take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject; and to thereafter use commercially reasonable efforts to cause such registrations or qualifications to become and remain effective for the period of the distribution contemplated thereby (determined pursuant to subparagraph (g) below) (e) immediately notify each Selling Holder and each underwriter, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus contained in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and as promptly as practicable amend or supplement the prospectus or take other appropriate action so that the prospectus does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (f) in the case of an underwritten public offering enter into such customary agreements, (including an underwriting agreement), and furnish, at the request of the underwriters, such opinions of counsel, and "cold comfort" letters from the independent accountants for the Company as are, in each case, customary in form and substance; (g) For purposes of subsections (a), (b) and (c) above, the period of distribution of Registerable Securities in a firm commitment underwritten public offering shall be deemed to extend until each underwriter has completed the distribution of all securities purchased by it (but not more than six months) and the period of distribution of Registerable Securities in any other registration shall be deemed to extend until the earlier of the sale of all Registerable Securities covered thereby or one year; (h) make available for inspection by one representative of the Selling Holders designated by a majority thereof, any underwriter participating in any distribution pursuant to such Registration Statement, and any attorney, accountant or other agent retained by such representative of the Selling Holders or underwriter (the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records"), and cause the Company=s officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such Registration Statement; provided that the Company may require the Inspectors to conduct their investigation in a manner that does not unreasonably disrupt the Company=s operations and to execute such reasonable confidentiality agreements as the Company may reasonably determine to be advisable; (i) use commercially reasonable efforts to cause the Registerable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders to consummate the disposition of such Registerable Securities; and (j) take such other actions as are reasonably requested by the Selling Holders or the underwriters, if any, in order to expedite, facilitate or consummate the disposition of such Registerable Securities. Each Selling Holder, upon receipt of notice from the Company of the happening of any event of the kind described in subsection (e) of this Section 2.3, shall forthwith discontinue disposition of the Registerable Securities until such Selling Holder's receipt of the copies of the supplemented or amended prospectus contemplated by subsection (e) of this Section 2.3 or until it is advised in writing by the Company that the use of the prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the prospectus, and, if so directed by the Company, such Selling Holder will, or will request the managing underwriter or underwriters, if any, to, deliver to the Company (at the Company's expense) all copies in their possession or control, other than permanent file copies then in such Selling Holder's possession, of the prospectus covering such Registerable Securities current at the time of receipt of such notice. If the Company shall give any such notice, the time periods specified in subsection (g) of this Section 2.3 shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each Selling Holder shall have received the copies of the supplemented or amended prospectus contemplated by subsection (e) of this Section 2.3 hereof or the notice that they may resume use of the prospectus. In connection with each registration hereunder with respect to an underwritten public offering, the Company and each Selling Holder agrees to enter into a written agreement with the managing underwriter or underwriters selected in the manner herein provided in such form and containing such provisions as are customary in the securities business for such an arrangement between underwriters and companies of the Company=s size and investment stature, provided that such agreement shall not contain any such provision applicable to the Company or the Selling Holders that is inconsistent with the provisions hereof; and further provided, that the time and place of the closing under said agreement shall be as mutually agreed upon among the Company, the Selling Holders and such managing underwriter. Each Selling Holder shall supply to the Company the information relating to such Selling Holder that is required by the Securities Act and the rules and regulations thereunder to be included in a Registration Statement which registers Registerable Securities of such Selling Holder and each Selling Holder shall execute all consents, powers of attorney, registration statements and other documents reasonably required to be signed by such Selling Holder in order to effectuate the registration or disposition of Registerable Securities by such Selling Holder. Section 2.4. Restrictions on Public Sale by Selling Holders of Registerable Securities. To the extent not inconsistent with applicable law, each Selling Holder whose Registerable Securities are included in a Registration Statement pursuant to this Agreement agrees not to effect any public sale or distribution of the issue being registered (or any securities of the Company convertible into or exchangeable or exercisable for securities of the same type as the issue being registered) during the 14 days before, and during the 90-day period beginning on, the effective date of such Registration Statement (except as part of such registration), but only if and to the extent requested in writing (with reasonable prior notice) by the managing underwriter or underwriters in the case of an underwritten public offering by the Company of securities of the same type as the Registerable Securities, provided that the duration of the foregoing restrictions shall be no longer than the duration of the shortest restriction imposed by the underwriters pursuant to a lock-up agreement with any officer or director or any other stockholder of the Company. Section 2.5. Restrictions on Public Sale by the Company. To the extent required by an underwriter in an underwritten public offering, the Company agrees not to effect on its own behalf any public sale or distribution of any securities similar to those being registered, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days before, and during the 90-day period beginning on, the effective date of any Registration Statement in which the Selling Holders of Registerable Securities are participating, other than pursuant to such Registration Statement or a Registration Statement on Form S-8 or Form S-4. Section 2.6. Expenses. (a) "Registration Expenses" means all expenses incident to the Company's performance under or compliance with this Agreement, including without limitation, all registration and filing fees, blue sky fees and expenses, printing expenses, listing fees, fees and disbursements of counsel and independent public accountants for the Company, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of insurance, reasonable out-of-pocket expenses, but excluding any Selling Expenses. "Selling Expenses" means all underwriting fees, discounts and selling commissions allocable to the sale of the Registerable Securities, the fees and expenses of counsel to the Selling Holders, and underwriters= counsel fees and expenses in case of any underwritten demand registration under Section 2.1. (b) The Company will pay all Registration Expenses in connection with each Registration Statement filed pursuant to this Agreement, whether or not the Registration Statement becomes effective, and the Selling Holders shall pay all Selling Expenses in connection with any Registerable Securities registered pursuant to this Agreement. Section 2.7. Indemnification. (a) In the event of a registration of any Registerable Securities under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless each Selling Holder thereunder and each underwriter, pursuant to the applicable underwriting agreement with such underwriter, of Registerable Securities thereunder and each Person, if any, who controls such Selling Holder or underwriter within the meaning of the Securities Act and the Exchange Act, against any losses, claims, damages or liabilities (including reasonable attorneys= fees) ("Losses"), joint or several, to which such Selling Holder or underwriter or controlling Person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Losses, (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement under which such Registerable Securities were registered under the Securities Act pursuant to this Agreement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such Selling Holder, each such underwriter and each such controlling Person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Loss or actions; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Selling Holder, such underwriter or such controlling Person in writing specifically for use in such Registration Statement or prospectus. (b) Each Selling Holder agrees to indemnify and hold harmless the Company, its directors, officers, employees and agents and each Person, if any, who controls the Company within the meaning of the Securities Act or of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Selling Holder, but only with respect to information regarding such Selling Holder furnished in writing by or on behalf of such Selling Holder expressly for inclusion in any Registration Statement or prospectus relating to the Registerable Securities, or any amendment or supplement thereto; provided, however, that the liability of such Selling Holder shall not be greater in amount than the dollar amount of the proceeds (net of any Selling Expenses) received by such Selling Holder from the sale of the Registerable Securities giving rise to such indemnification. (c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party under this Section 2.7, unless the indemnifying party shall have been prejudiced by such failure to give notice, and such failure to give notice shall not relieve the indemnifying party from any obligation of indemnification or contribution arising otherwise than under this Section 2.7. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 2.7 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof; provided, however, that, (i) if the indemnifying party has failed to assume the defense and employ counsel or (ii) if the defendants in any such action include both the indemnified party and the indemnifying party and counsel to the indemnified party shall have reasonably concluded that the interests of the indemnified party conflict with the interests of the indemnifying party, then the indemnified party shall have the right to select a separate counsel reasonably acceptable to the indemnifying party and to assume such legal defense and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other reasonable expenses related to such participation to be reimbursed by the indemnifying party as incurred. (d) If the indemnification provided for in this Section 2.7 is unavailable to the Company or the Selling Holders or is insufficient to hold them harmless in respect of any Losses, then each such indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses as between the Company on the one hand and each Selling Holder on the other, in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and of each Selling Holder on the other in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and each Selling Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statements of a material fact or the omission or alleged omission to state a material fact has been made by, or relates to, information supplied by such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who is not guilty of such fraudulent misrepresentation. ARTICLE III Section 3.1. Dispute Resolution. Any action, dispute, claim or controversy of any kind between the Company and any Holder arising out of, or pertaining to this Agreement or the transactions contemplated hereby (a "Dispute") shall be resolved by binding arbitration in accordance with the terms hereof. Any party may, by summary proceedings, bring an action in court to compel arbitration of any Dispute. Any arbitration shall be administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Section 3.1, the Commercial Arbitration Rules of the AAA, and, to the maximum extent applicable, the Federal Arbitration Act. Judgment on any award rendered by an arbitration panel may be entered in any court having jurisdiction. Any arbitration shall be conducted by an arbitration panel consisting of three arbitrators. Each party shall designate one arbitrator. The third arbitrator shall be designated by the two arbitrators designated by the parties. If either party fails to designate an arbitrator within 10 days after the filing of the Dispute with the AAA, such arbitrator shall be appointed in the manner prescribed by the AAA. An arbitration proceeding hereunder shall be conducted in Houston, Texas. Each proceeding shall be concluded within 180 days of the filing of the Dispute with the AAA. The arbitration panel shall be empowered to award sanctions and to take such other actions as they deem necessary, to the same extent a judge could impose sanctions or take such other actions pursuant to the Federal Rules of Civil Procedure and applicable law. No award by the arbitration panel shall assess consequential, punitive or exemplary damages but may assess costs and expenses in a manner deemed equitable. The arbitration panel shall make specific written findings of fact and conclusions of law. The decision of the majority of the arbitration panel shall be final and binding on each party. Section 3.2. Communications. All notices and other communications provided for or permitted hereunder shall be made in writing by telecopy, courier service or personal delivery: (a) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 3.2, which address initially is, with respect to ENA, as follows: Enron North America Corp. with a copy to: Enron Corp. 1400 Smith Street 1400 Smith Street Houston, Texas 77002 Houston, Texas 77002 Attention: Julia Murray Attention: Rex R. Rogers Fax No.: (713) 646-3393 Fax No.: (713) 646-5847 (b) if to the Company, initially at its address set forth below: Huntco Inc. 14323 South Outer Forty Drive Town and Country, Missouri 63017 Attention: President & CEO Fax No.: (314) 878-4537 (c) for each, thereafter at such other address, notice of which is given in accordance with the provisions of this Section 3.2. All such notices and communications shall be deemed to have been received at the time delivered by hand, if personally delivered; when receipt acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. Section 3.3. Successor and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including subsequent holders of Registerable Securities. Section 3.4. Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. Section 3.5. Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. Section 3.6. Governing Law. THE LAWS OF THE STATE OF MISSOURI SHALL GOVERN THIS AGREEMENT WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. Section 3.7. Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting or impairing the validity or enforceability of such provision in any other jurisdiction. Section 3.8. Entire Agreement. This Agreement, together with the Warrant, are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement and the Warrant supersede all prior agreements and understandings between the parties with respect to such subject matter. Section 3.9. Attorneys' Fees. In any action or proceeding brought to enforce any provision of this Agreement, the successful party shall be entitled to recover reasonable attorneys' fees in addition to its costs and expenses and any other available remedy. Section 3.10. Amendment. This Agreement may be amended only by means of a written amendment signed by the Company and by the Holders of a majority of the Registerable Securities. Section 3.11. Registerable Securities Held by the Company or Its Affiliates. In determining whether the Holders of the required amount of Registerable Securities have concurred in any direction, amendment, supplement, waiver or consent, Registerable Securities owned by the Company or one of its Affiliates shall be disregarded. Section 3.12. Assignment of Rights. The rights of any Holder under this Agreement may be assigned to any Person who acquires any Registerable Securities. Any assignment of registration rights pursuant to this Section 3.12 shall be effective only upon receipt by the Company of written notice from such assigning Holder stating the name and address of any assignee. The rights of an assignee under this Section 3.12 shall be the same rights granted to the assigning Holder under this Agreement. In connection with any such assignment, the term "Holder" as used herein shall, where appropriate to assign the rights and obligations of the assigning Holder hereunder to such assignee, be deemed to refer to the assignee. Section 3.13. No Conflicting Agreements. From and after the date of this Agreement and until no Registerable Securities (as defined in Section 1.2) remain outstanding, the Company shall not grant registration rights to any Person unless such rights are consistent with the provisions of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. HUNTCO INC. By:_______________________ Robert J. Marischen President ENRON NORTH AMERICA CORP. By:_______________________ Name:_____________________ Title:____________________ [signature page] EX-10 5 ima1.txt INVENTORY MANAGEMENT AGREEMENT PHASE I INVENTORY MANAGEMENT AGREEMENT PHASE I This Inventory Management Agreement-Phase I (as amended from time to time this "Agreement"), is made and entered into April 6, 2001, by and between Enron North America Corp., a Delaware corporation ("Enron"), and Huntco Steel, Inc., a Delaware corporation ("HSI"). This Agreement is effective upon execution but the rights and obligations provided for hereunder shall not commence ("Commencement Date") until 30 days after the satisfaction of the Post Closing Items (as hereinafter defined) or on such earlier date as the parties hereto ("Parties," each a "Party") agree. RECITALS : A. The Parties executed a Master Steel Purchase and Sale Agreement of even date herewith (as amended from time to time, the "Master Agreement") regarding the purchase and sale of the specified Commodity thereunder. Any capitalized terms used but not defined herein shall have the meaning set forth in the Master Agreement. B. The Parties executed a Warehouse Agreement of even date herewith (as amended from time to time, the "Warehouse Agreement") regarding HSI's provision of storage and warehouse services with respect to the Commodity purchased by Enron under the Master Agreement. C. The Parties executed an Inventory Management Agreement (Phase II) of even date herewith (as amended from time to time, the "Inventory Management Agreement for Phase II") regarding purchase and sale obligations during the term thereof ("Phase II"). D. The Parties desire to set forth certain agreements with respect to the purchase and sale of Commodity during the term of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and premises herein contained and intending to be legally bound hereby, the Parties agree as follows: 1. Put Options. During the term of this Agreement HSI and Enron shall comply with the following: 1.1. Commodity Purchases. HSI will notify Enron ("Purchase Notification") of HSI's anticipated purchase of Commodity from a third party mill ("Commodity Purchase") prior to ordering such Commodity. The Purchase Notification shall include the proposed seller, delivery point, delivery period, specifications, estimated delivery date, volumes, price quotations and all other relevant information for the Commodity Purchase. For each Purchase Notification given to Enron by 10:00 a.m. on any Business Day, then Enron shall elect by the close of business on such Business Day whether it will issue a Put Option under Section 1.2 of this Agreement with respect to such Purchase Notification. 1.2. Put Option. Subject to the other terms hereof, for each Purchase Notification and the corresponding Commodity Purchase, in consideration of the obligations set forth herein, Enron shall sell HSI an option ("Put Option") under the Master Agreement which upon exercise by HSI as the Option Buyer, Enron as the Option Seller shall have the obligation to buy and receive, and HSI as the Option Buyer shall have the obligation to sell and deliver, the Option Quantity, at the Strike Price, and upon the other terms and conditions set forth herein. Each Put Option given in connection with a Commodity Purchase, shall have the following corresponding terms: 1.2.1. Trade Date: The date Enron issues the Put Option. 1.2.2. Option Seller: Enron. 1.2.3. Option Buyer: HSI. 1.2.4. Commodity: The type of Commodity purchased under the Commodity Purchase. 1.2.5. Delivery Point: A specified HSI Facility. 1.2.6. Option Quantity: Like volumes as set forth in the Commodity Purchase. 1.2.7. Option Term: From the Trade Date until the earlier of (a) the date six (6) months after the Trade Date or (b) the date three (3) days after receipt by HSI of the Option Quantity at the Delivery Point from the third party supplier. 1.2.8. Strike Price. Determined in accordance with Section 1.3. 1.2.9. Estimated Delivery Date: The date HSI anticipates receipt of such Commodity. 1.3. Put Option Strike Price. The Strike Price under each Put Option shall be an amount equal to (a) the Adjusted Index Price less the Applicable Discount, multiplied by (b) the Option Quantity. 1.3.1. The "Adjusted Index Price" means, for any Put Option, (a) PMAG next published after the Trade Date ("Next PMAG"); provided, that Next PMAG for Commodity Purchase from non-U.S. mills shall be the PMAG that is next published after the date which is sixty (60) days prior to the Estimated Delivery Date of such Commodity plus (b) the applicable Extras Adjustment for such Commodity determined in accordance with the Extras Adjustment Schedule attached as Schedule I, plus (c) the Location Adjustment for such Product determined in accordance with the Location Adjustment Schedule attached as Schedule I. The "PMAG" shall have the meaning set forth on Schedule II hereto. 1.3.2. The "Applicable Discount" means, for any Put Option, the sum of the Cost of Carry Discount and the Reserve Discount. (a) The "Cost of Carry Discount" means, for any Put Option, an amount equal to (i) the Adjusted Index Price less the Reserve Discount, multiplied by (ii) an amount equal to (x) (LIBOR plus 2.25%) divided by 3. "LIBOR" shall mean the LIBOR in effect as of the exercise date of the Put Option ("Date of Put Exercise") as the term LIBOR is defined on Schedule II hereto. (b) The "Reserve Discount" means an amount equal to 10% of the Adjusted Index Price. 1.4. Exercise of Put Option. To exercise a Put Option, HSI shall (a) ensure that the Option Quantity is present at the Delivery Point, (b) provide Enron with written notification of its election to exercise the Put Option, and (c) comply with the requirements set out in Section 2.2 of the Warehouse Agreement. With respect to each Put Option exercised prior to3:00 p.m. (Houston time) on a Business Day, Enron shall pay to HSI on the following Business Day the Put Option Strike Price. With respect to each Put Option exercised after 3:00 p.m. (Houston time) on a Business Day, Enron shall pay to HSI on the second Business Day following the Put Option Strike Price. If any Put Option is exercised prior to the publication of the applicable Next PMAG, then Enron will pay to HSI an estimated Strike Price that will be calculated based on the most recently published PMAG as of the date of the exercise of the Put Option. Promptly after the publication of Next PMAG, Enron shall recalculate the Strike Price for any affected Put Options and will either invoice HSI for any overpayment, which invoice will be due within ten days, or pay to HSI the amount of any underpayment. 1.5. Minimum Annual Purchase Quantity. 1.5.1. HSI shall purchase form third party mills and sell to Enron pursuant to Put Options at least 200,000 Tons of Commodity (the "Minimum Annual Quantity") during the one year period that commences on the Commencement Date and during each one year period that commences on any anniversary of the Commencement Date (each, a "CD Year"), and HSI shall purchase from Enron under Call Options (defined below) at least the Minimum Annual Quantity of Commodity during each CD Year. In connection with the first 200,000 Tons purchased from Enron during each CD Year HSI shall pay Enron a "Base Purchasing Fee" of $10 per Ton. Additionally, in connection with each Ton by which the aggregate Tons that HSI purchases during a CD Year exceed 1,000,000 Tons, HSI shall pay Enron an "Additional Purchasing Fee" of one percent (1%) of the Adjusted Index Price of each excess Ton. To the extent HSI fails to purchase pursuant to Call Options at least the Minimum Annual Quantity (for any reason whatsoever) in any CD Year, HSI shall pay Enron a "Purchasing Shortfall Fee" of $10 per Ton for each Ton that HSI's actual purchases pursuant to Call Options in any CD Year are less than the Minimum Annual Quantity. Payment of the Purchasing Shortfall Fee shall be the only remedy available to Enron for HSI's failure to purchase the Minimum Annual Quantity. All the fees described in this Section 1.5.1 are collectively referred to herein as the ("Purchasing Fees"). 1.5.2. HSI shall pay to Enron a monthly payment equal to $166,666.67 (the "Monthly Payment"), which shall be paid the month in which the Commencement Date takes place and each month thereafter up to and including the month in which Phase II commences (as described in Section 4.1). Payment of the Monthly Payment shall be made on the last Business Day of each month and shall be credited against the Purchasing Fees. 1.5.3. At the end of each CD Year and at the end of the Term, Enron will provide an invoice to HSI containing the calculation of the amount of the Base Purchasing Fee, the Additional Purchasing Fee and the Purchasing Shortfall Fee for the applicable CD Year. All amounts owed by HSI pursuant to this Section 1.5.3 shall be paid by HSI by wire transfer within two (2) Business Days after receipt of such invoice from Enron. Upon the commencement of Phase II, the terms of Section 1.5 of the Inventory Management Agreement for Phase II shall supercede the provisions of this Section 1.5. 1.6. Limitations. Notwithstanding the foregoing, Enron shall not be obligated to issue a Put Option or Call Option or perform under any Put Option or Call Option if (a) an Event of Default has occurred and is continuing under the Transaction Documents, (b) the consummation thereof would otherwise cause HSI to exceed the Inventory Cap (as defined below), (c) HSI fails to order the Commodity which is the subject of the corresponding Commodity Purchase, or (d) the Commodity purchased under the corresponding Commodity Purchase is not delivered to the appropriate HSI Facility. The "Inventory Cap" as used herein shall be deemed to be exceeded if (after taking into account the Commodity to be purchased under the proposed Transaction) either the Inventory Volume Cap or the Inventory Credit Cap is exceeded. The "Inventory Volume Cap" shall be exceeded if the number of Tons subject to all open Transactions (the "Outstanding Tons") including all Call Option and Put Options and all open Transactions under the Inventory Management Agreement for Phase II exceeds the greater of (i) 400,000 Tons or (ii) the total Tons purchased by HSI under all Call Options during the preceding 12 month period divided by three (3). The "Inventory Credit Cap" shall be exceeded if the sum of (A) the amount paid or payable by Enron with respect to the Outstanding Tons (excluding the amount paid or payable with respect to unexercised Put Options) plus (B) any other amounts owed under the Transaction Documents other than principal and interest due under the Credit Agreement, exceeds $55,000,000. 1.7. Enron's Option. If Commodity is delivered to HSI at a HSI Facility and such Commodity is not subject to a Put Option or is otherwise not put to Enron, then Enron may at its option buy such Commodity as though it were being put to Enron under the terms of a Put Option. The Purchase Price for any such Commodity shall be the same as the Put Option Strike Price except that the PMAG used in calculating the purchase price shall be the most recently published PMAG as of the date of purchase. As to any such purchases, Enron shall issue a Call Option as provided for in Section 2.1 below. 2. Purchases from Enron. 2.1. Call Option. Subject to the other terms hereof, upon exercise of a Put Option, Enron will sell HSI an option ("Call Option") under the Master Agreement which upon exercise by HSI as the Option Buyer, Enron as the Option Seller shall have the obligation to sell and deliver, and HSI as the Option Buyer shall have the obligation to buy and receive, at the Delivery Point, the Option Quantity, at the Strike Price, and upon the other terms and conditions of the Transaction Documents including those pertaining to the physical purchase and sale of such Option Quantity. Each Call Option given in connection with the exercise of a Put Option, shall have the following corresponding terms: 2.1.1. Trade Date: The Date of Put Exercise. 2.1.2. Option Seller: Enron. 2.1.3. Option Buyer: HSI. 2.1.4. Commodity: The type of Commodity sold under the Put Option. 2.1.5. Delivery Point: The Delivery Point under the Put Option. 2.1.6. Option Quantity: Like volumes as set forth in the Put Option. 2.1.7. Option Term: 120 days. 2.1.8. Strike Price. Determined in accordance with Section 2.2. 2.2. Call Option Strike Price. The Strike Price for Commodity purchased under a Call Option shall be equal to the product of (a) the Adjusted Index Price less the Adjusted Discount, and (b) the Tons of Commodity purchased on such Date. 2.2.1. The "Adjusted Index Price" means, for any Call Option, (a) PMAG next published after the date the Call Option is exercised ("Date of Call Exercise"), plus (b) the applicable Extras Adjustment for such Commodity determined in accordance with the Extras Adjustment Schedule attached as Schedule I, plus (c) the Location Adjustment for such Product determined in accordance with the Location Adjustment Schedule attached as Schedule I. 2.2.2. The "Adjusted Discount" means, for any Call Option, the sum of (i) the Reserve Discount for the corresponding Put Option, and (ii) the Unused Cost of Carry. 2.2.3. The "Unused Cost of Carry" means, for any Call Option, the product of (i) the number of days between the Date of Call Exercise and the final date of the Option Term and (ii) the Cost of Carry Discount under the corresponding Put Option divided by 120. 2.3. Exercise of Call Option. HSI may exercise a Call Option only under the following procedure. 2.3.1. On or before 10:00 a.m. (Houston time) of each Business Day HSI will give Enron written notice of its election to exercise any Call Option ("Notice of Exercise") under which it desires to receive Commodity on or before the following Business Day. The Date of Call Exercise shall be the date the Notice of Exercise is given and each such notice shall be irrevocable. Enron will inform HSI of the Estimated Call Option Strike Price on or before the close of business on the Date of Call Exercise. HSI shall pay the Estimated Call Option Strike Price to Enron prior to taking delivery of such Commodity and not later than the close of business on the day after the Date of Call Exercise. If a Call Option is not timely and properly exercised, it will expire and neither Party shall have any further rights or liabilities with respect to such Call Option except for the obligations set forth in Section 2.3.5 and 2.3.6. The "Estimated Call Option Strike Price" shall be calculated by Enron based on the Adjusted Index Price for such Call Option using the most recently published PMAG as of the Date of Call Exercise. 2.3.2. Upon Enron's notification to HSI of its receipt of the Estimated Call Option Strike Price, HSI may take delivery of and title to the Commodity purchased under the Call Option shall transfer to HSI. 2.3.3. HSI shall have the right on any Business Day to exercise Call Options and take immediate delivery and title to the Commodity thereunder, so long as (a) immediately following exercise of such Call Options the aggregate unpaid amount that HSI owes Enron with respect to all Call Options exercised under this Section 2.3.3 is less than $100,000 and (b) no Event of Default has occurred and is continuing. In connection with Call Options exercised under this Section 2.3.3, HSI shall make payment in full to Enron of the Estimated Call Option Strike Price (as described in Section 2.3.1) by not later than 2:00 p.m. (Houston time) of the Business Day after the day HSI exercises such Call Option. 2.3.4. Promptly after each publication of PMAG, Enron shall calculate the actual amount that was due in connection with all Call Options exercised during the period commencing with the last publication of PMAG and for which the Estimated Call Option Strike Price was due or paid and Enron will thereafter either invoice HSI for any underpayment, which invoice will be due within ten days, or pay to HSI the amount of any overpayment. 2.3.5. Five days prior to the expiration of each unexercised Call Option, HSI shall deliver to Enron all mill and test certificates and other documentation with respect to the Commodity that is subject to such Call Option. 2.3.6. It is contemplated hereunder that Enron may sell to third parties Commodity that was acquired by Enron pursuant to a Put Option and is subject to a Call Option. If HSI does not deliver to Enron a Notice of Exercise prior to the expiration of the Option Term and Enron has sold during such Call Option's Option Term a portion of the Commodity that was subject to such Call Option to third parties, then with respect to the Tons of Commodity sold to third parties, Enron shall pay to HSI a Cost of Carry Rebate (hereinafter defined) which shall be payable on the expiration of the applicable Option Term. The "Cost of Carry Rebate" shall be a per Ton payment equal to the product of (i) the Cost of Carry Discount under the corresponding Put Option multiplied by (ii) the number of days between the date Enron sold such Commodity to a third party and the date Enron acquired replacement Commodity available to HSI divided by 120. 2.3.7. Following proper delivery by HSI of the Notice of Exercise, Enron as the Option Seller shall have the obligation to sell and deliver, and HSI as the Option Buyer shall be obligated to buy and receive the designated Commodity. Failure to sell and deliver or buy and receive shall obligate the non-performing party to pay the amounts specified for such non-performance in the Master Agreement. In addition to the remedies set forth in the Master Agreement, if (a) HSI gives a proper Notice of Exercise and is otherwise entitled to exercise a Call Option, (b) such Notice of Exercise is given in connection with a bona fide customer order for Commodity, (c) Enron does not deliver the requested Tons of Commodity to HSI because Enron has sold them to a third party and (d) HSI is entitled to a payment from Enron under Section 6.3 of the Master Agreement for Enron's non-delivery, then Enron shall pay HSI an additional per Ton payment equal to the Cost of Carry Discount under the corresponding Put Option for each Ton Enron was required to but did not deliver. 3. Forecasting. HSI shall provide Enron with annual and monthly forecasts of its Commodity requirements by type, volume, location, and anticipated delivery dates and such forecasts shall note any specific mill requirements and seasonal factors. HSI will deliver an annual forecast on the date of this Agreement and on each December 15th hereafter that includes a month by month forecast for the following twelve (12) month period. HSI will deliver a four (4) month rolling forecast, on the last Monday of each month that shall include a month- by-month forecast for the following four (4) months. The monthly forecasts in each rolling forecast shall comply with the following accuracy standards: (i) the forecast for the month immediately following delivery of such rolling Forecast shall designate as accurately as possible the types, volumes, locations and anticipated delivery dates that HSI expects to take Commodity in such month, (ii) the forecast for the second month following delivery of such rolling forecast shall designate as accurately as possible the types, volumes, locations and anticipated delivery dates that HSI is reasonably certain to take Commodity in such month, (iii) the forecast for the third and fourth month following delivery of such rolling forecast shall designate HSI's best estimate of the types, volumes, locations and anticipated delivery dates for Commodity in such months. 4. Covenants. 4.1. Term. The term of this Agreement ("Term") shall begin on the Commencement Date and continue in full force and effect until Phase II has commenced and all Transactions entered into pursuant to the terms of this Agreement have been consummated and all amounts due with respect to such Transactions or otherwise due hereunder have been paid. Phase II shall commence on the date that is eighteen (18) months after the date of this Agreement (the "Scheduled Phase II Commencement Date"), unless HSI gives Enron 90 days prior written notice of its election to cause Phase II to commence prior to the Scheduled Phase II Commencement Date. Such written notice shall specify an earlier Scheduled Phase II Commencement Date, which date shall be the first day of a calendar month. Any notice from HSI of an early commencement of Phase II shall be irrevocable. Upon the commencement of Phase II all new Transactions shall be completed in accordance with the terms of that certain Inventory Management Agreement for Phase II dated as of even date herewith by and between HSI and Enron. Notwithstanding the foregoing, this Agreement shall terminate immediately upon the termination of the Warehouse Agreement. 4.2. Foreign Purchase Limit. The amount of Commodity milled outside of the United States that is ordered by HSI in any calendar quarter shall not exceed 30% (measured in Tons) of the total amount of Commodity ordered by HSI in such calendar quarter. 4.3. Exclusivity. All of HSI's Commodity purchases from Enron shall be made pursuant to the terms of this Agreement and the Master Agreement. Neither HSI nor any of its Affiliates shall purchase Commodity from any third party during the term of this Agreement except for (i) purchases from third party mills that are made in compliance with Section 1.1 and 1.2, and (ii) purchases from third party mills that are permitted because Enron has elected not to supply such Commodity pursuant to Enron's rights as set forth in Section 1.6. 4.4. Processing. HSI shall only process Commodity that (a) is in its current inventory as of the date of this Agreement, (b) has already been ordered from a third party supplier as of the date of this Agreement, (c) is purchased in accordance with the terms of this Agreement, or (d) is owned by a third party and is being processed pursuant to a customer tolling agreement. 4.5. Adjustments to Index Price and PMAG. 4.5.1. Commencing with the six month period beginning on June 30, 2001, and for each six month period that begins on December 31st or June 30th thereafter, each Party shall have the right to request one adjustment to the method of determining the Adjusted Index Price if such Party believes that the components of the Adjusted Index Price for any Delivery Point fail in any material respect to accurately reflect the market price for such Commodity (the "Market Amount") assuming a purchaser similar to HSI as to volumes purchased, location of deliveries, creditworthiness and otherwise in the position of HSI. If the Parties agree upon the adjustment, then Enron shall adjust the components to the Adjusted Index Price, as reasonably determined by the Parties, to cause the Adjusted Index Price in future periods to materially correspond with the expected Market Amount for the Commodity for such periods, such adjustment to be evidenced by an amendment to Schedule I prepared by Enron. If the Parties are unable to agree as to whether the components of the Adjusted Index Price accurately reflect the Market Amount or if HSI does not agree to Enron's proposed adjustments, either Party may promptly notify the other in writing of such disagreement, setting forth in reasonable detail the basis therefor. Enron and HSI shall cooperate in good faith to resolve such disagreement within 10 Business Days of such notification. If Enron and HSI are unable to resolve the disagreement within such period, either Party may institute dispute resolution proceedings in accordance with Section 7 of the Master Agreement. Until resolution of such dispute, the Adjusted Index Price in effect prior to the disputed determination or adjustment shall remain in effect. Upon resolution of the dispute, the resulting determination or adjustment shall become effective for the Commodity, retroactive to the date of the delivery of a notice of a request for adjustment. The difference with respect to such revised Adjusted Index Price for the period of the dispute shall be paid by the owing Party within 10 days of the final determination. 4.5.2. In the event that PMAG ceases to be published or is otherwise no longer available, then Enron shall use a substitute index in place of PMAG that is publicly available and is based on substantially the same market information that PMAG was based on. If there is no suitable publicly available substitute index then Enron and HSI shall construct a formula that generates a replacement index and is based on substantially the same market information that PMAG was based on. Any substitute index that is implemented pursuant to this Section 4.5.2 shall be used for all purposes of this Agreement in the same manner which PMAG was previously used in this Agreement and shall be subject to subsequent adjustment as provided in Section 4.5. 4.6. Taxes. HSI will be responsible for payment of all taxes in connection with the purchases and sales of commodity contemplated by this Agreement and the other Transaction Documents except for Enron's income taxes. 4.7. Sales. HSI shall not sell an amount of unprocessed Commodity in any month that is greater than twenty percent (20%), measured in Tons, of all Commodity that HSI sells in such month, provided, that cold roll steel products shall be excluded from all calculations with respect to this Section 4.7. 5. Records and Audits. HSI will maintain accurate and complete records with respect to the Commodity purchased and sold during the term of this Agreement. HSI shall send to Enron in Houston via email (or other mutually acceptable format) daily reports detailing the Enron Commodity at each HSI Facility in form and substance reasonably satisfactory to Enron and each day's report shall be delivered to Enron not later than 8:00 a.m. of the following day. HSI shall permit Enron's employees, representatives, agents and authorized designees to examine and verify HSI's records with respect to any Commodity subject to the terms of the Master Agreement and to inspect any Commodity in the possession or under the control of HSI, wherever located. All such inspections shall be conducted during normal business hours. Without limiting the generality of the foregoing, Enron shall have the right (but not the obligation) to have its employees, representatives, agents or authorized designees present at the HSI Facilities or at any of HSI's offices or other facilities (a) to audit HSI's record-keeping with respect to the Commodity, (b) to ensure proper identification, tracking and storage of the Commodity or (c) for such other purposes as Enron shall determine in its sole discretion; provided, however, that Enron shall not incur, whether by the performance or non-performance of such undertakings, any liability on account thereof. 6. Security Interests. 6.1. True Sale. The Parties intend that the sale and purchase of Commodity or other steel products pursuant to this Agreement, the Master Agreement and each Confirmation issued thereunder shall be treated as a true sale. If the sale arrangements provided for hereunder are ever deemed to be a financing and not a true sale, the Parties agree that all Commodity and steel products that by the terms of this Agreement are owned by Enron but which are determined because of a recharacterization or otherwise to be owned or deemed to be owned by HSI (the "Enron Inventory Collateral") shall be subject to the lien and security interest granted in favor of Enron pursuant to Section 6.2 below. 6.2. Security Agreement. As security for the payment of the obligations of HSI hereunder and under the other Transaction Documents, together with any increases, extensions, and rearrangements of such obligations under any amendments, supplements, and other modifications thereof, HSI hereby grants to Enron a first priority security interest in all of HSI's present and future right, title, and interest in and to the following collateral: (i) any Enron Inventory Collateral in transit to or stored at any HSI Facility, (ii) all payments under any insurance, indemnity, warranty, or guaranty of or for any Enron Inventory Collateral, and (iii) all books and records of HSI relating to the foregoing including mill certifications. HSI shall execute, deliver, and file such financing statements as are necessary to perfect the foregoing interest. HSI hereby represents and warrants that there is no other security interest in any of the above described collateral and HSI shall not grant or permit to exist any other security interest in any of such collateral. 6.3. Foreclosure on Collateral. Upon the occurrence of any Event of Default by HSI under any of the Transaction Documents, Enron may exercise all the rights and remedies of a secured Party under the Uniform Commercial Code ("UCC") as in effect in the State of Texas whether or not the affected collateral is located in Texas. Enron may sell any collateral at one or more public or private sales, at the office of Enron or elsewhere, for cash or credit and upon such other terms as Enron deems commercially reasonable. Enron may bid at any such sale. HSI agrees that to the extent permitted by law such sales may be made without notice. If notice is required by law, HSI hereby deems ten days advance notice of the time and place of any public or private sale reasonable notification, recognizing that if the collateral threatens to decline speedily in value or is of a type customarily sold on a recognized market, shorter notice may be reasonable. Enron shall not be obligated to make any sale of collateral regardless of notice of sale having been given. Enron may adjourn any sale by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was adjourned. In the event that any sale hereunder is not completed or is defective in the opinion of Enron, Enron shall have the right to cause subsequent sales to be made hereunder. The remedies described in this Section 6.3 shall be cumulative with all other remedies of Enron hereunder or under any other Transaction Document and no delay in enforcing the foregoing shall act as a waiver of Enron's rights hereunder or thereunder. 7. Storage. Contemporaneously with the execution of this Agreement, the Parties have entered into a Warehouse Agreement under which HSI shall provide storage, warehouse, and related services to Enron at each of HSI's Facilities, all as more fully provided for in the Warehouse Agreement. 8. Events of Default. 8.1. An event of default ("Event of Default") with respect to a Party (the "Defaulting Party") shall mean any of the following: 8.1.1. the failure of Defaulting Party to pay when due any required payment under this Agreement and such failure is not remedied within three (3) Business Days after written notice thereof; 8.1.2. the failure of the Defaulting Party to perform or otherwise comply with Section 4.2, 4.3, 4.4 or any material provision of this Agreement to be performed by it, which failure remains uncured for more than thirty (30) days after written notice thereof; 8.1.3. any representation or warranty made or deemed made by the Defaulting Party herein or in any written statement or certificate at any time given by any such Party pursuant to this Agreement shall be false or misleading in any material respect on the date as of which made or deemed made; 8.1.4. the occurrence of either (a) six (6) Delivery Failures (defined below) in any calendar year or (b) three (3) Delivery Failures in any two consecutive calendar quarters. A "Delivery Failure" shall occur when all of the following take place with respect to the requested exercise of a Call Option: (a) HSI gives a proper Notice of Exercise and is otherwise entitled to exercise such Call Option, (b) such Notice of Exercise is given in connection with a bona fide customer order for Commodity, (c) Enron does not deliver the requested Tons of Commodity to HSI because Enron has sold them to a third party, (d) HSI is entitled to a payment from Enron under Section 6.3 of the Master Agreement for Enron's non-delivery, (e) following Enron's failure to deliver, HSI provides Enron with a notice stating that it needs delivery of the Commodity within 48 hours to fill a bona fide customer order (together with documents confirming same) and (f) Enron fails to deliver such Commodity to HSI within 48 hours of receiving the notice described in (e) above; or 8.1.5. the occurrence as to such Party of any event of default under any other Transaction Document. 9. Remedies. Upon the occurrence and during the continuance of an Event of Default, the non-defaulting Party shall have all of the rights and remedies provided for in the Master Agreement and all remedies afforded by law or at equity, which remedies shall be cumulative. 10. Warranty Claims Handling. 10.1. HSI shall be responsible for examining all Commodity that is delivered to a HSI Facility and shall not exercise a Put Option with respect to any Commodity that fails to meet the specification set out on Schedule 1 to the Master Agreement or which is otherwise defective. 10.2. With respect to Commodity Enron conveys to HSI pursuant to the Master Agreement, Enron hereby assigns to HSI all warranties received by Enron under the purchase arrangements for such Commodity. Pursuit of rights under such warranties shall be the sole and exclusive remedy of HSI with respect to any Commodity that fails to meet the specifications for which HSI has contracted or which is otherwise defective. Enron shall cooperate with HSI in pursuing any such rights. Enron makes no warranties with respect to Commodity which Enron conveys to HSI pursuant to the Master Agreement and all warranties with respect thereto are hereby expressly disclaimed. 10.3. THE FOREGOING WARRANTIES ARE EXCLUSIVE, AND ARE IN LIEU OF ALL OTHER WARRANTIES (WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED), INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, DESCRIPTION, QUALITY, OR ANY OTHER MATTER WITH RESPECT TO ALL COMMODITY TO WHICH THIS AGREEMENT OR THE MASTER AGREEMENT RELATE. 11. LIMITATION OF LIABILITY. EACH PARTY'S LIABILITY TO THE OTHER PARTY FOR BREACH HEREOF OR DEFAULT HEREUNDER SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER ANY PROVISION OF THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, TRANSACTION OR CONFIRMATION FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS, OR BUSINESS INTERRUPTION DAMAGES, WHETHER BY STATUTE, IN TORT, IN CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. THIS SECTION 11 SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT AND ALL TRANSACTIONS CONTEMPLATED HEREBY. 12. Miscellaneous. 12.1. Miscellaneous. All of the provisions set forth in Section 8 of the Master Agreement are incorporated by reference herein and shall apply to this Agreement as though each reference to the Master Agreement in such Section was a reference to this Agreement. 12.2. Designated Representatives. As set forth on Exhibit A hereto, each Party shall designate two representatives who shall serve as the primary and secondary contacts of such Party for all operational aspects contemplated by this Agreement and the other Transaction Documents including, but not limited to, forecasts, purchases and record reporting. The names of a Party's designated representatives may be changed at any time by either Party by giving prior written notice to the other. 12.3. Payments. Unless otherwise specified by the receiving Party, all amounts to be paid hereunder or under the Master Agreement shall be paid by wire transfer into the account specified from time to time by the receiving party. 12.4. Financing Arrangements. Enron may pledge, encumber, assign, sell or otherwise transfer Commodity or other steel products or any rights thereto to a third party in connection with Enron's borrowing and / or financing activities regardless of whether such Commodity or other steel products are subject to a Call Option or other Transaction under the Master Agreement. If the Commodity or other steel products subject to such pledge, encumbrance, assignment, sale or other transfer are not removed from the HSI Facility where they are located (because of or in connection with such transaction) then, Enron shall not be obligated to pay any Cost of Carry Rebate with respect to such Commodity or other steel products because of such pledge, encumbrance, assignment, sale, or other transfer or the transactions related thereto, and for purposes of the Warehouse Agreement and all other Transaction Documents such Commodity or other steel products shall be treated the same as all other Enron Inventory Collateral that is not subject to such a financing transaction. This Agreement is subject to the terms of that certain Post Closing Agreement of even date herewith entered into by and among the Parties and certain other signatories provided for therein. The Post Closing Agreement provides for the satisfaction of certain specified requirements ("Post Closing Items") more fully described therein. THIS WRITTEN AGREEMENT, THE TRANSACTION DOCUMENTS AND THE POST CLOSING AGREEMENT REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by a duly authorized representative as of the day and year first above written. ENRON NORTH AMERICA CORP. By: ______________________________ Name: ______________________________ Title: ______________________________ HUNTCO STEEL, INC. By: ______________________________ Name: ______________________________ Title: ______________________________ EX-10 6 ima2.txt INVENTORY MANAGEMENT AGREEMENT PHASE II INVENTORY MANAGEMENT AGREEMENT PHASE II This Inventory Management Agreement-Phase II (as amended from time to time this "Agreement"), is made and entered into April 6, 2001, by and between Enron North America Corp., a Delaware corporation ("Enron"), and Huntco Steel, Inc., a Delaware corporation ("HSI"). This Agreement is effective upon execution but the rights and obligations provided for hereunder shall not commence ("Commencement Date") until after the satisfaction of the Post Closing Items (as hereinafter defined) or on such earlier date as the parties hereto ("Parties," each a "Party") agree. RECITALS: A. The Parties executed a Master Steel Purchase and Sale Agreement of even date herewith (as amended from time to time, the "Master Agreement") regarding the purchase and sale of the specified Commodity thereunder. Any capitalized terms used but not defined herein shall have the meaning set forth in the Master Agreement. B. The Parties executed a Warehouse Agreement of even date herewith (as amended from time to time, the "Warehouse Agreement") regarding HSI's provision of storage and warehouse services with respect to the Commodity purchased by Enron under the Master Agreement. C. The Parties executed an Inventory Management Agreement (Phase I) of even date herewith (as amended from time to time, the "Inventory Management Agreement for Phase I") regarding purchase and sale obligations during the term thereof ("Phase I"). D. The Parties desire to set forth certain agreements with respect to the purchase and sale of Commodity during the term of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and premises herein contained and intending to be legally bound hereby, the Parties agree as follows: 1. Transactions. 1.1 Ordering Procedure. To purchase Commodity during Phase II, HSI shall provide Enron with an offer to purchase which shall include volumes, specifications, delivery point, the period during which HSI desires that the Commodity be delivered to the delivery point (the "Delivery Period"), and all other information requested by Enron in connection with such offer. HSI may place orders under this Section 1.1 if such orders are placed no later than the "Normal Lead Time", before the first day of the Delivery Period specified in such order. The "Normal Lead Time" shall mean the lead time applicable to the Commodity and Delivery Point as set forth in Schedule III attached hereto and updated periodically as described in Schedule III. 1.2 Acceptance and Confirmation. Subject to the other terms hereof, Enron shall accept offers made pursuant to Section 1.1 and such offer and acceptance shall constitute a Transaction under the Master Agreement. Thereafter, Enron shall provide HSI a Confirmation of such Transaction which shall have the following terms: 1.2.1 Seller: Enron. 1.2.2 Buyer: HSI. 1.2.3 Commodity: The Commodity purchased under the Transaction. 1.2.4 Delivery Point: A specified HSI Facility. 1.2.5 Contract Quantity: Specified volumes. 1.2.6 Delivery Period: Enron shall deliver the Commodity to the Delivery Point not later than the last day of the Delivery Period, provided that Enron shall have no liability to HSI for failure to deliver Commodity by such date if such failure is caused by a third party supplier or transporter's delay in delivering the Commodity. If Enron believes the Commodity will not be delivered by the last day of the Delivery Period, Enron shall have the right to verbally notify HSI and specify the new Delivery Period which shall replace the current Delivery Period with the remainder of the terms of such Transaction remaining unchanged, provided HSI does not terminate the Transaction by giving written notice to Enron within three (3) Business Days of HSI receiving verbal notice of the new Delivery Period. If Commodity is not delivered by the last day of the then current Delivery Period, HSI shall have the option to terminate the Transaction by giving written notice to Enron within three (3) Business Days of the last day of such Delivery Period, provided, that if HSI fails to exercise such option to terminate the Transaction then the Delivery Period shall be extended until the date such Commodity is delivered. If a Transaction is terminated by HSI pursuant to the terms of this Section 1.2.6 such Transaction shall be treated as though it was never entered into and each party shall be released from all of its obligations with respect to thereto. If on three (3) occasions during any three month period a specific third party supplier or transporter fails to deliver 100 Tons or more of Commodity on time, then HSI may send a written instruction to Enron that such supplier or transporter shall not be used for any Transaction entered into within the next six (6) months and Enron shall comply with such instruction. If Commodity is not delivered on time to HSI and Enron receives compensation from the supplier or transporter with respect to such late delivery then Enron shall give such compensation to HSI. 1.2.7 Purchase Period: HSI shall complete the purchase of the Commodity on the day of its choosing during the 120 day period which commences on the day the Commodity is received at the Delivery Point (the "First Availability Date"). 1.2.8 Purchase Price. Determined in accordance with Section 1.3. 1.3 Purchase Price. The Purchase Price under each Transaction entered into pursuant to Section 1.2 shall be equal to the product of (i) the Adjusted Index Price plus the Cost of Carry, and (ii) the Contract Quantity. 1.3.1 The "Adjusted Index Price" means (a) PMAG next published after the completion of such Transaction, plus (b) the applicable Extras Adjustment for such Commodity determined in accordance with the Extras Adjustment Schedule attached as Schedule I, plus (c) the Location Adjustment for such Product determined in accordance with the Location Adjustment Schedule attached as Schedule I. 1.3.2 The "Cost of Carry" means the product of (i) the Adjusted Index Price and (ii) the product of (A) the number of days from the date that is the "Average Payment Delay" (as defined on Schedule II) after the First Availability Date, to the date the purchase is completed (including both the day that is the Average Payment Delay after the First Availability Date and the day the purchase is completed) and (B) the Daily Cost of Carry. 1.3.3 The "Daily Cost of Carry" means a per annum rate of interest equal to (LIBOR plus 2.25%) divided by 360. LIBOR shall mean the LIBOR in effect as of the First Availability Date as the term LIBOR is defined on Schedule II hereto. 1.4 Completion of Purchases by HSI. Following receipt of a notice from Enron that the Commodity is available for purchase by HSI, HSI shall complete a purchase of such Commodity by performing the following actions: 1.4.1 On or before 10:00 a.m. (Houston time) of each Business Day HSI will give Enron written notice of its intent to complete a Transaction ("Notice of Purchase Date") under which it desires to receive Commodity on or before the following Business Day. Each Notice of Purchase Date shall be irrevocable. Enron will inform HSI of the Estimated Purchase Price by the close of business on the Notice of Purchase Date. HSI shall pay the Estimated Purchase Price to Enron prior to taking delivery of such Commodity and not later than the close of business on the day after the Notice of Purchase Date. The "Estimated Purchase Price" shall be calculated by Enron based on the Adjusted Index Price for such Transaction using the most recently published PMAG as of the Notice of Purchase Date. 1.4.2 Upon Enron's notification to HSI of its receipt of the required payment, HSI may take delivery and receive title to the Commodity it has purchased. 1.4.3 So long as no Event of Default has occurred and is continuing, HSI shall have the right on any Business Day to purchase Commodity under Transactions and take immediate delivery and title to such Commodity; provided, the aggregate amount of such purchases on any day shall not exceed $100,000. In connection with purchases completed under this Section 1.4.3, HSI shall make payment in full to Enron of the Estimated Purchase Price (as described in Section 1.4.1) by not later than 10:00 a.m. of the Business Day after the day HSI makes such purchase. 1.4.4 Promptly after each publication of PMAG, Enron shall calculate the actual amount that was due in connection with the completed Transactions and Enron will thereafter either invoice HSI for any underpayment, which invoice will be due within ten days, or pay to HSI the amount of any overpayment. 1.4.5 Failure to complete any purchase by the end of the Purchase Period shall cause HSI to be liable to Enron for the damages set forth in the Master Agreement applicable to a buyer's failure to perform under a Transaction, with such damages being calculated as though the last day of the Purchase Period was the required purchase date, provided that in no event shall the damages for failure to purchase Commodity include costs of carry for a period of time that is greater than 2 months. 1.4.6 It is contemplated hereunder that Enron may sell to third parties Commodity that is subject to a Transaction. With respect to any such sales, Enron shall pay to HSI a per Ton payment equal to the Cost of Carry Rebate on the date HSI either completes such Transaction or pays Enron the damages applicable to its failure to complete such Transaction. The "Cost of Carry Rebate" shall be a per Ton payment equal to the product of (i) the Daily Cost of Carry (as defined in Section 1.3.2) multiplied by the Adjusted Index Price and (ii) the number of days between the date Enron sold such Commodity to a third party and the date Enron acquired replacement Commodity. 1.5 Minimum Annual Purchase Quantity. 1.5.1 HSI shall purchase under Call Options (as defined in Inventory Management Agreement for Phase I) and Transactions an aggregate amount of at least 200,000 Tons of Commodity (the "Minimum Annual Quantity") during the one year period that commences on the Commencement Date and during each one year period that commences on any anniversary of the Commencement Date (each, a "CD Year"). In connection with the first 200,000 Tons purchased from Enron during each CD Year HSI shall pay Enron a "Base Purchasing Fee" of $10 per Ton. Additionally, in connection with each Ton by which the aggregate Tons that HSI purchases during a CD Year exceed 1,000,000 Tons, HSI shall pay Enron an "Additional Purchasing Fee" of one percent (1%) of the Adjusted Index Price of each excess Ton. To the extent HSI fails to purchase at least the Minimum Annual Quantity in any CD Year, HSI shall pay Enron a "Purchasing Shortfall Fee" of $10 per Ton for each Ton that HSI's actual purchases in any CD Year are less than the Minimum Annual Quantity. Payment of the Purchasing Shortfall Fee shall be the only remedy available to Enron for HSI's failure to purchase the Minimum Annual Quantity. All the fees described in this Section 1.5.1 are collectively referred to herein as the ("Purchasing Fees"). 1.5.2 HSI shall pay to Enron a monthly payment equal to $166,666.67 (the "Monthly Payment"), which shall be paid the month following the month in which Phase II commences and each month thereafter up to and including the last month of the Term. Payment of the Monthly Payment shall be made on the last Business Day of each month and shall be credited against the Purchasing Fees. 1.5.3 At the end of each CD Year and at the end of the Term, Enron will provide an invoice to HSI containing the calculation of the amount of the Base Purchasing Fee, the Additional Purchasing Fee and the Purchasing Shortfall Fee for the applicable CD Year. All amounts owed by HSI pursuant to this Section 1.5.3 shall be paid by HSI by wire transfer within two (2) Business Days after receipt of such invoice from Enron. Upon the commencement of Phase II, the terms of this Section 1.5 shall supercede the provisions of Section 1.5 of the Inventory Management Agreement for Phase I. For the last CD Year of this Agreement both the 1,000,000 Ton amount and the Minimum Annual Quantity amount that are used in the calculations in this Section 1.5 shall be prorated downward based on the number of days in such CD Year that this Agreement is in effect. 1.6 Limitations. 1.6.1 Notwithstanding the foregoing, Enron shall not be obligated to enter into any Transaction or perform under any Transaction if (a) an Event of Default has occurred and is continuing under the Transaction Documents, (b) the consummation thereof would otherwise cause HSI to exceed the Inventory Cap (as defined below), or (c) the Commodity purchased by Enron to satisfy its supply obligations under Section 2.1, 2.3, 2.5 or 2.7 Transactions are not delivered to the appropriate HSI Facility or otherwise fails to comply with the ordered specifications. The "Inventory Cap" as used herein shall be deemed to be exceeded if (after taking into account the Commodity to be purchased under the proposed Transaction) either the Inventory Volume Cap or the Inventory Credit Cap is exceeded. The "Inventory Volume Cap" shall be exceeded if the number of Tons subject to all open Transactions (the "Outstanding Tons") including all Call Option and Put Options under the Inventory Management Agreement for Phase I and all open Transactions under this Agreement exceeds the greater of (i) 400,000 Tons or (ii) the total Tons purchased under all Transactions for the preceding 12 month period divided by three (3). The "Inventory Credit Cap" shall be exceeded if the sum of (A) the Outstanding Tons (excluding the number of Tons subject to unexercised Put Options as described in the Inventory Management Agreement for Phase I) multiplied by the most recently published PMAG plus (B) any other amounts owed under the Transaction Documents to Enron other than principal and interest due under the Credit Agreement, exceeds $55,000,000. 1.6.2 If as a result of the terms of Section 1.6.1, Enron fails to accept an offer to purchase from HSI, then HSI may purchase such Commodity from a third party seller so long as no Event of Default has occurred and is continuing. 2. Non-Standard Purchases by HSI. 2.1 Special Orders. If HSI needs Commodity delivered prior to the Normal Lead Time, HSI shall immediately contact Enron with a description of the desired purchase Transaction including the specifications, volumes, delivery date, delivery location, maximum price and all other information requested by Enron in connection therewith. Provided Enron is able to find a supplier to fill such order upon reasonable business terms, Enron shall enter into a Transaction under the Master Agreement to supply such Commodity to HSI which shall be completed pursuant to the provisions of Section 1.4 and shall contain the following terms: 2.1.1 Trade Date: The date the Parties enter into a Transaction to fill a request for Commodity made by HSI under Section 2.1. 2.1.2 Seller: Enron. 2.1.3 Buyer: HSI. 2.1.4 Commodity: The Commodity purchased under the Transaction. 2.1.5 Delivery Point: A specified HSI Facility. 2.1.6 Contract Quantity: Specified volumes. 2.1.7 Delivery Period: The Delivery Period agreed to by the third party supplier, provided that Enron shall have no liability for any failure of such third party supplier to deliver the product pursuant to the terms negotiated with such third party supplier. 2.1.8 Purchase Period: HSI shall complete the purchase of the Commodity on the day of its choosing during the 30 day period which begins on the First Availability Date. 2.1.9 Purchase Price. Determined in accordance with Section 2.2. 2.2 Purchase Price on Special Orders. The Purchase Price on each Special Order shall be equal to the product of (i) the Adjusted Index Price plus the Cost of Carry and the Price Differential and (ii) the Contract Quantity. 2.2.1 The "Adjusted Index Price" and "Cost of Carry" shall have the meanings set forth in Section 1.3. 2.2.2 The "Price Differential" means the amount (if any) by which the price per Ton that Enron is required to pay the third party supplier for such Commodity is greater than the Trade Date Adjusted Index Price. The "Trade Date Adjusted Index Price" is (a) PMAG next published after the Trade Date, plus (b) the applicable Extras Adjustment for such Commodity determined in accordance with the Extras Adjustment Schedule attached as Schedule I, plus (c) the Location Adjustment for such Product determined in accordance with the Location Adjustment Schedule attached as Schedule I. 2.3 Mill Specific Purchases. Subject to the Combined Purchase Limit (as described in Section 2.9) and the other terms of this Agreement, If HSI desires to purchase from Enron Commodity fabricated by a specific steel mill (a "Mill Specific Purchase") HSI shall immediately contact Enron with a description of the desired purchase Transaction including the supplier, specifications, volumes, delivery date, delivery location and all other information requested by Enron in connection therewith. Provided the designated mill agrees to fill such order upon reasonable business terms, Enron shall purchase such Commodity from the designated mill and Enron shall enter into a Transaction under the Master Agreement to supply such Commodity to HSI which shall be completed pursuant to the provisions of Section 1.4 and shall contain the following terms: 2.3.1 Trade Date: The date the Parties enter into a Transaction to fill a request for Commodity made by HSI under this Section 2.3. 2.3.2 Seller: Enron. 2.3.3 Buyer: HSI. 2.3.4 Commodity: The Commodity purchased under the Transaction. 2.3.5 Delivery Point: A specified HSI Facility. 2.3.6 Contract Quantity: Specified volumes. 2.3.7 Delivery Period: The Delivery Period agreed to by the third party supplier, provided that Enron shall have no liability for any failure of such third party supplier to deliver the product pursuant to the terms negotiated with such third party supplier. 2.3.8 Purchase Period: HSI shall complete the purchase of the Commodity on the day of its choosing during the 120 day period which begins on the First Availability Date. 2.3.9 Purchase Price. Determined in accordance with Section 2.4. 2.4 Purchase Price on Mill Specific Purchases. The Purchase Price on each Mill Specific Purchase shall be equal to the product of (i) the Adjusted Index Price plus the Cost of Carry and the Price Differential and (ii) the Contract Quantity. 2.4.1 The "Adjusted Index Price" and "Cost of Carry" shall have the meanings set forth in Section 1.3. 2.4.2 The "Price Differential" means the amount (if any) by which the price per Ton that Enron is required to pay the third party supplier for such Commodity is greater than the Trade Date Adjusted Index Price. The "Trade Date Adjusted Index Price" is (a) PMAG next published after the Trade Date, plus (b) the applicable Extras Adjustment for such Commodity determined in accordance with the Extras Adjustment Schedule attached as Schedule I, plus (c) the Location Adjustment for such Product determined in accordance with the Location Adjustment Schedule attached as Schedule I. 2.5 HSI Negotiated Purchases. Subject to the Combined Purchase Limit (described in Section 2.9) and the other terms of this Agreement, HSI may negotiate the terms of a Commodity purchase with a steel mill (an "HSI Negotiated Purchase") and Enron shall purchase such Commodity from the designated mill in accordance with the terms HSI negotiated. Contemporaneously with any such HSI Negotiated Purchase, HSI and Enron shall enter into a Transaction whereby HSI agrees to purchase such Commodity from Enron, which Transaction shall be completed pursuant to the provisions of Section 1.4 and shall contain the following terms: 2.5.1 Trade Date: The date Enron enters into a purchase agreement with a steel mill to purchase Commodity pursuant to its obligations under this Section 2.5. 2.5.2 Seller: Enron. 2.5.3 Buyer: HSI. 2.5.4 Commodity: The Commodity purchased under the Transaction. 2.5.5 Delivery Point: A specified HSI Facility. 2.5.6 Contract Quantity: Specified volumes. 2.5.7 Delivery Period: The Delivery Period HSI negotiated with the mill, provided that Enron shall have no liability for any failure of the mill to deliver the product pursuant to the terms negotiated by HSI with the mill. 2.5.8 Purchase Period: HSI shall complete the purchase of the Commodity on the day of its choosing during the 120 day period which begins on the First Availability Date. 2.5.9 Purchase Price. Determined in accordance with Section 2.6. 2.6 Purchase Price for HSI Negotiated Purchases. The Purchase Price for each HSI Negotiated Purchase shall be equal to the product of (i) the HSI Index Price plus the Cost of Carry and (ii) the Contract Quantity. 2.6.1 The "HSI Index Price" shall be the Adjusted Index Price plus the HSI Price Differential if the HSI Negotiated Price is greater than the Trade Dated Adjusted Index Price, but it shall be the Adjusted Index Price minus the HSI Price Differential if the HSI Negotiated Price is less than the Trade Date Adjusted Index Price. 2.6.2 The "HSI Price Differential" means the absolute value of the difference between the price per Ton that Enron is required to pay the third party supplier for such Commodity (the "HSI Negotiated Price"), and the Trade Date Adjusted Index Price. The "Trade Date Adjusted Index Price" is (a) PMAG next published after the Trade Date, plus (b) the applicable Extras Adjustment for such Commodity determined in accordance with the Extras Adjustment Schedule attached as Schedule I, plus (c) the Location Adjustment for such Product determined in accordance with the Location Adjustment Schedule attached as Schedule I. 2.6.3 The "Adjusted Index Price" and "Cost of Carry" shall have the meanings set forth in Section 1.3. 2.7 HSI Purchases of Non-Commodity Steel Products. HSI may request that Enron purchase Non-Commodity steel products in connection with Commodity purchases Enron is making and such request shall include volumes, specifications, delivery point, delivery period, and all other information requested by Enron in connection with such Non-Commodity request. Enron shall provide HSI with a copy of the terms pursuant to which the mill is willing to supply such steel products. Subject to the Combined Purchase Limit (described in Section 2.9) and the other terms of this Agreement, if HSI agrees to the mill's terms Enron shall purchase such Non-Commodity steel products in accordance with the mill's terms (a "Non-Commodity Purchase"). Contemporaneously with any such Non-Commodity Purchase, HSI and Enron shall enter into a transaction whereby Enron shall agree to sell such steel products to HSI and such transaction shall be governed by the terms of and otherwise treated as though it is a Transaction under the Master Agreement. All transactions under this Section 2.7 shall be completed pursuant to the provisions of Section 1.4 and shall contain the following terms: 2.7.1 Trade Date: The date Enron enters into a purchase agreement with a steel mill to purchase the steel products pursuant to its obligations under this Section 2.7. 2.7.2 Seller: Enron. 2.7.3 Buyer: HSI. 2.7.4 Product(s): The Non-Commodity steel products the mill has agreed to provide. 2.7.5 Delivery Point: A specified HSI Facility. 2.7.6 Contract Quantity: Specified volumes. 2.7.7 Delivery Period: The Delivery Period specified by the mill, provided that Enron shall have no liability for any failure of the mill to deliver the product pursuant to the terms specified by the mill. 2.7.8 Purchase Period: HSI shall complete the purchase of the Contract Quantity on the day of its choosing during the period which begins on the First Availability Date and ends on the date (3) Business Days prior to the date Enron is obligated to pay the mill for such steel products. 2.7.9 Purchase Price. Determined in accordance with Section 2.8. 2.8 Purchase Price on Non-Commodity Purchases. The Purchase Price on each Non-Commodity Purchase shall be equal to the total of the actual purchase price payable for such Non-Commodity Purchase plus all other direct costs and expenses incurred by Enron in connection with the acquisition and delivery of the steel products to be delivered to HSI including without limitation all transportation costs. 2.9 Combined Purchase Limit. HSI shall not, in any calendar quarter, enter into Mill Specific Purchases (as such term is defined in Section 2.3), HSI Negotiated Purchases (as such term is defined in Section 2.5) and Non-Commodity Purchases (as such term is defined in Section 2.7), that collectively are for a greater number of Tons than the number of Tons equal to 20% of the Tons of Commodity that were purchased by HSI pursuant to the Transactions completed under this Agreement in the previous calendar quarter (the "Combined Purchase Limit"). 2.10 Enron's Option. If Commodity is delivered to HSI at an HSI Facility from any party other than Enron, then Enron may at its option purchase such Commodity for a price equal to (a) the most recently published PMAG as of the date Enron makes such purchase, plus (b) the applicable Extras Adjustment for such Commodity determined in accordance with the Extras Adjustment Schedule attached as Schedule I, plus (c) the Location Adjustment for such Product determined in accordance with the Location Adjustment Schedule attached as Schedule I. Concurrently with any such purchase, HSI shall enter into a Transaction to purchase a like type and volume of Commodity from Enron pursuant to a Transaction that shall have the terms set forth in Section 1.2 and which shall be completed pursuant to the provisions of Section 1.4. 3. Forecasting. HSI shall provide Enron with annual and monthly forecasts of its Commodity requirements by type, volume, location, and anticipated delivery dates and such forecasts shall note any specific mill requirements and seasonal factors. HSI will deliver an annual forecast on the date of this Agreement and on each December 15th hereafter that includes a month by month forecast for the following twelve (12) month period. HSI will deliver a four (4) month rolling forecast, on the last Monday of each month that shall include a month-by-month forecast for the following four (4) months. The monthly forecasts in each rolling forecast shall comply with the following accuracy standards: (i) the forecast for the month immediately following delivery of such rolling Forecast shall designate as accurately as possible the types, volumes, locations and anticipated delivery dates that HSI expects to take Commodity in such month, (ii) the forecast for the second month following delivery of such rolling forecast shall designate as accurately as possible the types, volumes, locations and anticipated delivery dates that HSI is reasonably certain to take Commodity in such month, (iii) the forecast for the third and fourth month following delivery of such rolling forecast shall designate HSI's best estimate of the types, volumes, locations and anticipated delivery dates for Commodity in such months. 4. Covenants. 4.1 Term. The term of this Agreement ("Term") shall begin on the Commencement Date, however, the provisions of the Inventory Management Agreement for Phase I shall govern all Transactions between the Parties until Phase II commences as provided for in the Inventory Management Agreement for Phase I. On the date Phase II commences and thereafter all new Transactions shall be completed in accordance with the terms of this Agreement, however, all Put Options and Call Options and the obligations related thereto that are in existence as of the commencement of Phase II shall continue to be governed by the Inventory Management Agreement for Phase I. The purchasing obligations set out in Sections 1 and 2 hereof shall terminate on June 30, 2016. Notwithstanding the foregoing, this Agreement shall terminate immediately upon the termination of the Warehouse Agreement. 4.2 Exclusivity. All of HSI's Commodity purchases from Enron shall be made pursuant to the terms of this Agreement and the Master Agreement. Neither HSI nor any of its Affiliates shall purchase Commodity from any third party during the term of this Agreement except for (i) purchases from third party mills that are permitted by Section 1.6.2 because Enron has elected not to supply such Commodity pursuant to Enron's rights as set forth in Section 1.6.1 and (ii) purchases from third parties that are made following Enron giving notice to HSI that it is unable to supply Commodity that has been appropriately requested by HSI pursuant to Section 2.1. 4.3 [Intentionally deleted]. 4.4 Processing. HSI shall only process Commodity that (a) is in its current inventory as of the date of this Agreement, (b) has already been ordered from a third party supplier as of the date of this Agreement, (c) is purchased in accordance with the terms of this Agreement, or (d) is owned by a third party and is being processed pursuant to a customer tolling agreement. 4.5 Adjustments to Index Price and PMAG. 4.5.1 Commencing with the first six month period that begins on December 31st or June 30th after the commencement of Phase II and on each December 31st or June 30th thereafter, each Party shall have the right to request one adjustment to the method of determining the Adjusted Index Price if such Party believes that the components of the Adjusted Index Price for any Delivery Point fail in any material respect to accurately reflect the market price for such Commodity (the "Market Amount") assuming a purchaser similar to HSI as to volumes purchased, location of deliveries, creditworthiness and otherwise in the position of HSI. If the Parties agree upon the adjustment, then Enron shall adjust the components to the Adjusted Index Price, as reasonably determined by the Parties, to cause the Adjusted Index Price in future periods to materially correspond with the expected Market Amount for the Commodity for such periods, such adjustment to be evidenced by an amendment to Schedule I prepared by Enron. If the Parties are unable to agree as to whether the components of the Adjusted Index Price accurately reflect the Market Amount or if HSI does not agree to Enron's proposed adjustments, either Party may promptly notify the other in writing of such disagreement, setting forth in reasonable detail the basis therefor. Enron and HSI shall cooperate in good faith to resolve such disagreement within 10 Business Days of such notification. If Enron and HSI are unable to resolve the disagreement within such period, either Party may institute dispute resolution proceedings in accordance with Section 7 of the Master Agreement. Until resolution of such dispute, the Adjusted Index Price in effect prior to the disputed determination or adjustment shall remain in effect. Upon resolution of the dispute, the resulting determination or adjustment shall become effective for the Commodity, retroactive to the date of the delivery of a notice of a request for adjustment. The difference with respect to such revised Adjusted Index Price for the period of the dispute shall be paid by the owing Party within 10 days of the final determination. 4.5.2 In the event that PMAG ceases to be published or is otherwise no longer available, then Enron shall use a substitute index in place of PMAG that is publicly available and is based on substantially the same market information that PMAG was based on. If there is no suitable publicly available substitute index then Enron and HSI shall construct a formula that generates a replacement index and is based on substantially the same market information that PMAG was based on. Any substitute index that is implemented pursuant to this Section 4.5.2 shall be used for all purposes of this Agreement in the same manner which PMAG was previously used in this Agreement and shall be subject to subsequent adjustment as provided in Section 4.5. 4.6 Taxes. HSI will be responsible for payment of all taxes in connection with the purchases and sales of commodity contemplated by this Agreement and the other Transaction Documents except for Enron's income taxes. 4.7 Sales. HSI shall not sell an amount of unprocessed Commodity in any month that is greater than twenty percent (20%), measured in Tons, of all Commodity that HSI sells in such month, provided, that cold roll steel products shall be excluded from all calculations with respect to this Section 4.7. 5. Records and Audits. HSI will maintain accurate and complete records with respect to the Commodity purchased and sold during the term of this Agreement. HSI shall send to Enron in Houston via email (or other mutually acceptable format) daily reports detailing the Enron Commodity at each HSI Facility in form and substance reasonably satisfactory to Enron. HSI shall permit Enron's employees, representatives, agents and authorized designees to examine and verify HSI's records with respect to any Commodity subject to the terms of the Master Agreement and to inspect any Commodity in the possession or under the control of HSI, wherever located. Except during an emergency or following an Event of Default, all such inspections shall be conducted during normal business hours. Without limiting the generality of the foregoing, Enron shall have the right (but not the obligation) to have its employees, representatives, agents or authorized designees present at the HSI Facilities or at any of HSI's offices or other facilities (a) to audit HSI's record-keeping with respect to the Commodity, (b) to ensure proper identification, tracking and storage of the Commodity or (c) for such other purposes as Enron shall determine in its sole discretion; provided, however, that Enron shall not incur, whether by the performance or non-performance of such undertakings, any liability on account thereof. 6. Security Interests. 6.1 True Sale. The Parties intend that the sale and purchase of Commodity or other steel products pursuant to this Agreement, the Master Agreement and each Confirmation issued thereunder shall be treated as a true sale. If the sale arrangements provided for hereunder are ever deemed to be a financing and not a true sale, the Parties agree that all Commodity and steel products that by the terms of this Agreement are owned by Enron but which are determined because of a recharacterization or otherwise to be owned or deemed to be owned by HSI (the "Enron Inventory Collateral") shall be subject to the lien and security interest granted in favor of Enron pursuant to Section 6.2 below. 6.2 Security Agreement. As security for the payment of the obligations of HSI hereunder and under the other Transaction Documents, together with any increases, extensions, and rearrangements of such obligations under any amendments, supplements, and other modifications thereof, HSI hereby grants to Enron a first priority security interest in all of HSI's present and future right, title, and interest in and to the following collateral: (i) any Enron Inventory Collateral in transit to or stored at any HSI Facility, (ii) all payments under any insurance, indemnity, warranty, or guaranty of or for any Enron Inventory Collateral, and (iii) all books and records of HSI relating to the foregoing including mill certifications. HSI shall execute, deliver, and file such financing statements as are necessary to perfect the foregoing interest. HSI hereby represents and warrants that there is no other security interest in any of the above described collateral and HSI shall not grant or permit to exist any other security interest in any of such collateral. 6.3 Foreclosure on Collateral. Upon the occurrence of any Event of Default by HSI under any of the Transaction Documents, Enron may exercise all the rights and remedies of a secured Party under the Uniform Commercial Code ("UCC") as in effect in the State of Texas whether or not the affected collateral is located in Texas. Enron may sell any collateral at one or more public or private sales, at the office of Enron or elsewhere, for cash or credit and upon such other terms as Enron deems commercially reasonable. Enron may bid at any such sale. HSI agrees that to the extent permitted by law such sales may be made without notice. If notice is required by law, HSI hereby deems ten days advance notice of the time and place of any public or private sale reasonable notification, recognizing that if the collateral threatens to decline speedily in value or is of a type customarily sold on a recognized market, shorter notice may be reasonable. Enron shall not be obligated to make any sale of collateral regardless of notice of sale having been given. Enron may adjourn any sale by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was adjourned. In the event that any sale hereunder is not completed or is defective in the opinion of Enron, Enron shall have the right to cause subsequent sales to be made hereunder. The remedies described in this Section 6.3 shall be cumulative with all other remedies of Enron hereunder or under any other Transaction Document and no delay in enforcing the foregoing shall act as a waiver of Enron's rights hereunder or thereunder. 7. Storage. Contemporaneously with the execution of this Agreement, the Parties have entered into a Warehouse Agreement under which HSI shall provide storage, warehouse, and related services to Enron at each of HSI's Facilities, all as more fully provided for in the Warehouse Agreement. 8. Events of Default. 8.1 An event of default ("Event of Default") with respect to a Party (the "Defaulting Party") shall mean any of the following: 8.1.1 the failure of Defaulting Party to pay when due any required payment under this Agreement and such failure is not remedied within three (3) Business Days after written notice thereof; 8.1.2 the failure of the Defaulting Party to perform or otherwise comply with Section 4.2, 4.3, 4.4 or any material provision of this Agreement to be performed by it, which failure remains uncured for more than thirty (30) days after written notice thereof; 8.1.3 any representation or warranty made or deemed made by the Defaulting Party herein or in any written statement or certificate at any time given by any such Party pursuant to this Agreement shall be false or misleading in any material respect on the date as of which made or deemed made; 8.1.4 the occurrence of either (a) six (6) Delivery Failures (defined below) in any calendar year or (b) three (3) Delivery Failures in any two consecutive calendar quarters. A "Delivery Failure" shall occur when all of the following take place with respect to a Transaction entered into under this Agreement: (a) HSI gives a proper Notice of Purchase Date and is otherwise entitled to complete such purchase, (b) such Notice of Purchase Date is given in connection with a bona fide customer order for Commodity, (c) Enron does not deliver the requested Tons of Commodity to HSI because Enron has sold them to a third party, (d) HSI is entitled to a payment from Enron under Section 6.3 of the Master Agreement for Enron's non-delivery, (e) following Enron's failure to deliver, HSI provides Enron with a notice stating that it needs delivery of the Commodity within 48 hours to fill a bona fide customer order (together with documents confirming same) and (f) Enron fails to deliver such Commodity to HSI within 48 hours of receiving the notice described in (e) above; or 8.1.5 the occurrence as to such Party of any event of default under any other Transaction Document. 9. Remedies. Upon the occurrence and during the continuance of an Event of Default, the non-defaulting Party shall have all of the rights and remedies provided for in the Master Agreement and all remedies afforded by law or at equity, which remedies shall be cumulative. 10. Warranty Claims Handling. 10.1 HSI shall be responsible for examining all Commodity that is delivered to an HSI Facility. 10.2 With respect to steel products that Enron conveys to HSI under the provisions of this Agreement (other than conveyances under Sections 2.1, 2.3, 2.5 and 2.7), Enron warrants to HSI that such steel products shall conform to the specifications set forth in the applicable Transaction; provided, however, (i) HSI will be responsible for inspecting all incoming steel products as specified in Section 10.1 and as described in the Warehouse Agreement, and shall cooperate with Enron to reject nonconforming or defective steel products, and shall provide, perform and deliver all related notices, unloading, handling, and services with respect to steel products within the time period allowed for inspection and rejection of goods by the mill that provides such steel products; and (ii) such warranty shall not apply to any defects that could have been discovered in connection with the delivery of the Commodity to the HSI Facility. Notwithstanding HSI's obligation to inspect Commodity upon receipt at an HSI Facility, HSI shall continue to maintain its rights and privileges to warranty claims for Commodity defects until such defects are discoverable. In the event that it is determined that Enron has any warranty obligations with respect to any steel products, then at Enron's option replacement of the defective steel products or refund or reduction of the purchase price therefor shall be the sole and exclusive remedy for any claim by HSI related thereto. 10.3 With respect to Commodity and Non-Commodity products that Enron conveys to HSI pursuant to Sections 2.1, 2.3, 2.5 or 2.7 Enron hereby assigns to HSI all warranties received by Enron under the purchase arrangements for such Commodity. Pursuit of rights under such warranties shall be the sole and exclusive remedy of HSI with respect to any Commodity or Non-Commodity products that fail to meet the specifications for which HSI has contracted or which is otherwise defective. Enron makes no warranties with respect to Commodity or Non- Commodity products which Enron conveys to HSI pursuant to Sections 2.1, 2.3, 2.5 or 2.7 of this Agreement and all warranties with respect thereto are hereby expressly disclaimed. 10.4 The Parties shall each cooperate with the other in pursuing any warranty claims arising hereunder or arising in connection with the purchase of Commodity or Non-Commodity products from third parties. 10.5 THE FOREGOING WARRANTIES ARE EXCLUSIVE, AND ARE IN LIEU OF ALL OTHER WARRANTIES (WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED), INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, DESCRIPTION, QUALITY, OR ANY OTHER MATTER WITH RESPECT TO ALL COMMODITY TO WHICH THIS AGREEMENT OR THE MASTER AGREEMENT RELATE. 11. LIMITATION OF LIABILITY. EACH PARTY'S LIABILITY TO THE OTHER PARTY FOR BREACH HEREOF OR DEFAULT HEREUNDER SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER ANY PROVISION OF THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, TRANSACTION OR CONFIRMATION FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS, OR BUSINESS INTERRUPTION DAMAGES, WHETHER BY STATUTE, IN TORT, IN CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. THIS SECTION 11 SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT AND ALL TRANSACTIONS CONTEMPLATED HEREBY. 12. Miscellaneous. 12.1 Miscellaneous. All of the provisions set forth in Section 8 of the Master Agreement are incorporated by reference herein and shall apply to this Agreement as though each reference to the Master Agreement in such Section was a reference to this Agreement. 12.2 Designated Representatives. As set forth on Exhibit A hereto, each Party shall designate two representatives who shall serve as the primary and secondary contacts of such Party for all operational aspects contemplated by this Agreement and the other Transaction Documents including, but not limited to, forecasts, purchases and record reporting. The names of a Party's designated representatives may be changed at any time by either Party by giving prior written notice to the other. 12.3 Payments. Unless otherwise specified by the receiving Party, all amounts to be paid hereunder or under the Master Agreement shall be paid by wire transfer into the account specified from time to time by the receiving party. 12.4 Financing Arrangements. Enron may pledge, encumber, assign, sell or otherwise transfer Commodity or other steel products or any rights thereto to a third party in connection with Enron's borrowing and / or financing activities regardless of whether such Commodity or other steel products are subject to a Call Option or other Transaction under the Master Agreement. If the Commodity or other steel products subject to such pledge, encumbrance, assignment, sale or other transfer are not removed from the HSI Facility where they are located (because of or in connection with such transaction) then, Enron shall not be obligated to pay any Cost of Carry Rebate with respect to such Commodity or other steel products because of such pledge, encumbrance, assignment, sale, or other transfer or the transactions related thereto, and for purposes of the Warehouse Agreement and all other Transaction Documents such Commodity or other steel products shall be treated the same as all other Enron Inventory Collateral that is not subject to such a financing transaction. This Agreement is subject to the terms of that certain Post Closing Agreement of even date herewith entered into by and among the Parties and certain other signatories provided for therein. The Post Closing Agreement provides for the satisfaction of certain specified requirements ("Post Closing Items") more fully described therein. THIS WRITTEN AGREEMENT, THE TRANSACTION DOCUMENTS AND THE POST CLOSING AGREEMENT REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by a duly authorized representative as of the day and year first above written. ENRON NORTH AMERICA CORP. By: _______________________________ Name: _______________________________ Title:_______________________________ HUNTCO STEEL, INC. By: _______________________________ Name: _______________________________ Title:_______________________________ EX-10 7 apaamnd1.txt FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT This First Amendment to Asset Purchase Agreement ("Amendment") is made as of June 8, 2001, by and among ENRON INDUSTRIAL MARKETS LLC, a Delaware limited liability company ("Purchaser"), HUNTCO STEEL, INC., a Delaware corporation (the "Company"), and HUNTCO INC., a Missouri corporation, as the indirect owner of all of the outstanding equity interests in the Company (the "Stockholder"). WHEREAS, Purchaser, the Company and the Stockholder have entered into an Asset Purchase Agreement dated as of April 30, 2001 (as amended by this Amendment, the Agreement) in which Purchaser has agreed to purchase certain assets more fully described in the Agreement (all capitalized terms used but not defined herein shall have the meanings ascribed to such terms as set forth in the Agreement); WHEREAS, at the time of the execution of the Agreement, it was contemplated that (i) the Company would close the Business prior to the Closing Date; and (ii) the purchaser would acquire the Assets subject to the Bonds and the Series 1992 Lease and enter into a Sublease with the Company; WHEREAS, the parties hereto have now determined that the Business will not be closed and that the Bonds and all documents entered into in connection with the Bonds including the Series 1992 Lease and the Series 1995 and 1996 Lease will be terminated and that the Company will convey to the Purchaser fee title to the real property more fully described in the Agreement. NOW, THEREFORE, in consideration of the premises and of the agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Amendments. The Agreement is hereby amended and modified as follows: A. The third whereas clause in the Agreement is hereby amended by deleting the phrase "including the Commonly Used Assets (as defined below),". B. Sections 1.1, 1.2, 1.3 and 1.4 of the Agreement are hereby deleted and the following inserted therefor: 1.1 Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, at the Closing (as defined below), the Company hereby agrees to sell, convey, transfer, assign and deliver and Purchaser hereby agrees to purchase from the Company, the assets described below (collectively, the "Assets"), free and clear of all security interests, liens, claims and encumbrances of any kind except as expressly noted below with respect to the Equipment and Real Property: (a) Real Property. Subject to the Permitted Encumbrances (as defined below), all of the real property identified on Schedule 1.1(b), including all improvements thereon and all of Company's right, title and interest in and to all easements, tenements, hereditaments, privileges and appurtenances in any way belonging to said real property (the "Real Property"). (b) Tangible Personal Property and Equipment. Excluding the Excluded Assets, all of the tangible personal property on the Real Property, including without limitation (i) the tangible personal property identified on Schedule 1.1(a) and (ii) any other equipment, cranes, machinery, tools, appliances, furniture, telephone systems, copy machines, fax machines, implements, spare parts, supplies and other tangible personal property used or useful in the Business (the "Equipment"). The Equipment includes certain tangible and intangible real and personal property used in connection with both the Business and the Excluded Assets and such jointly used Equipment shall be subject to the terms of the Services Agreement. (c) Vehicles. The vehicles, trailers and other transportation equipment identified on Schedule 1.1(c). (d) Goodwill. The goodwill of the Business. (e) Intangible Assets. All right, title and interest of the Stockholder Parties in, to and under all patents, trademarks, service marks, technology, know-how, copyrights and applications used in connection with the Business. (f) Assumed Contracts. All right, title and interest of the Stockholder Parties in, to and under (and subject to the terms and conditions of) the existing contracts and agreements of the Stockholder Parties set forth on Schedule 1.5 (the "Assumed Contracts"). The obligations assumed by the Purchaser under the Assumed Contracts (the "Assumed Contract Obligations") are more fully described in Section 1.5. (g) Licenses, Franchises and Permits. Excluding the Excluded Permits (as defined below), all right, title and interest of the Stockholder Parties in, to and under all transferable licenses, franchises, permits, authorizations, certificates, approvals, registrations and other governmental authorizations used in connection with the Business (collectively, the "Governmental Approvals") relating to all or any of the Assets. (h) Computers and Software. Excluding the Excluded Computers and Software (as defined below), all right, title and interest of the Stockholder Parties in computer equipment and hardware used in connection with the Assets or Business, including, without limitation, all central processing units, terminals, disk drives, tape drives, electronic memory units, printers, keyboards, screens, peripherals (and other input/output devices), modems and other communication controllers, networking equipment, and any and all parts and appurtenances thereto, together with all software and intellectual property used by the Stockholder Parties with such computer equipment and hardware. (i) Books and Records. Copies of the Stockholder Parties' books, records, papers and instruments of whatever nature and wherever located that relate principally to the Assets or which Purchaser reasonably requests in connection with Purchaser's use or proposed use of the Assets. (j) Other Property. All other or additional privileges, rights, interests, properties and assets of the Stockholder Parties not referred to above (and not excepted from the sale) of every kind and description and wherever located that (i) are located in, on or under or are appurtenant to the Real Property and (ii) are used or intended for use in connection with, or that are necessary to the continued conduct of, the Business as presently conducted. Notwithstanding the foregoing, cash will not be transferred to Purchaser. 1.2 Excluded Assets. The Company will not sell to Purchaser under this Agreement and Company hereby retains, the assets described below (collectively, the "Excluded Assets"): (a) Retained Real Property. The real property (i) more fully described on Schedule 1.2(a-1) and located adjacent to the Real Property (the "HSI Property") and (ii) owned or leased by the Company located east of North County Road No. 1015 near the City of Blytheville, Arkansas, each together with all improvements, equipment and personal property located thereon and intangible personal property used in connection therewith (collectively, the "Retained Real Property"). (b) Tangible Personal Property and Equipment. The eastern most Pickling Line located in the Pickling Building, which building is shown on the sketch attached hereto as Schedule 1.2(a-2), the tangible personal property listed on Schedule 1.2(b) attached hereto and the tangible personal property and equipment located within the buildings and improvements located on the Retained Real Property (the "Excluded E&TPP"). The Excluded E&TPP includes certain tangible and intangible real and personal property used in connection with both the Excluded Assets and the Business and such jointly used Excluded E&TPP shall be subject to the terms of the Services Agreement. (c) Accounts and Notes Receivable. All of the accounts and notes receivable of the Company. (d) Excluded Inventory. All inventory owned by the Company or any third party , including raw materials, work in progress and finished goods existing as of the Closing Date (the "Excluded Inventory"). (e) Excluded Computers and Software. The computers, equipment, software and intellectual property listed on Schedule 1.2(c) and any computer equipment and hardware not located at the Real Property, including, without limitation, all central processing units, terminals, disk drives, tape drives, electronic memory units, printers, keyboards, screens, peripherals (and other input/output devices), modems and other communication controllers, networking equipment, and any and all parts and appurtenances thereto, together with all software and intellectual property used by the Stockholder Parties with such computer equipment and hardware (the "Excluded Computers and Software"). (f) Excluded Permits. The licenses and permits identified on Schedule 1.2(e) (the "Excluded Permits"). (g) Excluded Vehicles. The vehicles, trailers and other transportation equipment identified on Schedule 1.2(d) (the "Excluded Vehicles"). (h) Employees. All employment agreements or other rights to employ the employees employed in connection with the Business as of the Closing Date and the Stockholder Parties' rights, title, interests and liabilities in or to any employee benefit plans, medical or dental plans, or retirement plans maintained for such employees. (i) Railroad Access Agreement. Seller's rights in that certain Rail Access and Indemnification Agreement dated April 20, 1993, by and between the Company and Nucor Corporation. 1.3 Definitions. As used in this Agreement, the following terms shall have the following meanings (unless otherwise indicated, such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Bonds" means any bond or bonds authenticated and delivered under and pursuant to either the Series 1992 Indenture or the Series 1995 and 1996 Indenture, including the Series 1992 Bonds, the Series 1995 Bonds and the Series 1996 Bonds, and any additional bonds issued pursuant to such Indentures. "City" means the City of Blytheville, a municipal corporation organized and existing under the laws of the State of Arkansas. "Closing Documents" means the final versions of all of the schedules to this Agreement (even if preliminary versions are already attached hereto) and all of the following documents in form and substance to be agreed upon by the Company and the Purchaser: (a) a completed Special Warranty Deed from the Company, covering the Real Property free and clear of all liens, security interests, pledges, claims, conditional sales agreements, charges or restrictions on transfer, encumbrances, or any other matter affecting the Real Property whatsoever other than encumbrances and other matters affecting title to the Real Property that Purchaser has waived in writing in its sole discretion ("Permitted Encumbrances"), (b) a completed General Conveyance, Transfer, Assignment and Assumption Agreement, covering the Business and all of the Assets not conveyed pursuant to the agreement referenced in clause (a) above, (c) certificates of title to any Asset covered by a certificate of title, (d) such other instruments of transfer as may be reasonably necessary or appropriate to vest in Purchaser good and indefeasible title to the Business and the Assets, free and clear of any security interest, lien, claim or encumbrance except as provided herein, (e) an Owner's Policy of Title Insurance for the Real Property, (i) dated as of the Closing Date, (ii) naming Purchaser as the insured party, (iii) issued by a title company to be selected by Purchaser, (iv) in the face amount of the allocated value as set forth on Schedule 1.9, of each parcel of Real Property owned by the Company, (v) subject only to the Permitted Encumbrances, (vi) in form customary for the locale in which the Real Property is located; (f) a completed Operating and Maintenance Agreement covering the operation of the Assets on behalf of Purchaser; (g) a completed Reciprocal Easement Agreement granting to both Purchaser and the Company certain easements over real property described therein and encumbering portions of the real property to be owned by both Purchaser and the Company after the consummation of the transactions provided for herein; and (h) a completed Services Agreement covering the joint use of certain of the tangible and intangible real and personal property that is currently used in connection with both the Business and the Excluded Assets. "ENA" means Enron North America Corp. "Excluded Liabilities" means all Liabilities, other than Assumed Contract Obligations, accruing from, related to, incurred in connection with or secured by the Business or the Assets prior to the Closing, including, but not limited to (a) the Liabilities set forth on Schedule 1.6; (b) any Liabilities of any Stockholder Party other than the Assumed Contract Obligations; (c) any act, omission, event, condition or circumstance involving or relating to the Business or Assets occurring or existing before the Closing Date; (d) the ownership or operation of the Business or Assets before the Closing Date; (e) any brokers' or finders' fees or commissions arising with respect to brokers or finders retained or engaged by any person other than Purchaser and resulting from or relating to the transactions contemplated in this Agreement; (f) any liability or obligation to employees or former employees of any Stockholder Party or their beneficiaries arising from or relating to the employment, severance or discharge (or constructive severance or discharge) of such employees by such Stockholder Party, or arising from or relating to their rights to receive benefits under any employee benefits plan or any other employment agreement, contract or arrangement with any Stockholder Party; (g) any Liabilities related to any disputes with third parties, including any Governmental Authorities; and (h) all Liabilities related to the Excluded Assets. "Farm Lease". The Farm Lease between Huntco Steel, Inc., as Lessor, and Langston Enterprises, an Arkansas corporation, as the Lessee, dated February 2001 and having a term expiring December 31, 2001. "GECC Leases" means collectively (a) that certain lease commencing December, 1997, between GE Capital Business Asset Funding Corporation (as successor to MetLife Capital) and Company pertaining to the lease by Company of the New Delta Brands Push Pull Pickling Line and (b) that certain lease commencing January, 1997, between General Electric Capital Corporation and Company pertaining to the lease by Company of the Ebner Annealing Furnaces. "Huntco Nevada" means Huntco Nevada, Inc., a subsidiary of Stockholder. "Liabilities" shall mean any and all direct or indirect demands, claims, notices of violation, filings, investigations, administrative proceedings, actions, causes of action, suits, other legal proceedings, payments, charges, judgments, assessments, indebtedness, liabilities, damages, deficiencies, penalties, fines, obligations, responsibilities, costs and expenses paid or incurred, or diminutions in value of any kind or character (whether or not asserted prior to the date hereof, and whether known or unknown, fixed or unfixed, conditional or unconditional, based on negligence, strict liability or otherwise, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise), including, without limitation, penalties, interest on any amount payable to a third party as a result of the foregoing and any legal or other expenses reasonably incurred in connection with investigating or defending any claim, demand or legal proceeding, whether or not resulting in any liability, and all amounts paid in settlement of claims, demands, or legal proceedings. "Master Purchase Agreement" means that certain Master Steel Purchase and Sale Agreement dated as of April 6, 2001, between ENA and Company. "Railroad Access Agreement" means that certain Rail Access and Indemnification Agreement dated April 20, 1993, between Nucor Corporation and Company. "Series 1992 Bondholder" means the registered owner of any Series 1992 Bond. "Series 1992 Bonds" means the Industrial Development Revenue Bonds (Huntco Steel, Inc. Project), Series 1992, of City issued in the initial principal amount of $2,000,000 pursuant to the Series 1992 Indenture. "Series 1992 Indenture" means the Trust Indenture dated as of June 1, 1992, between City and the Series 1992 Trustee, relating to the Bonds, as supplemented by First Supplemental Trust Indenture dated as of August 17, 1993, and any indentures supplemental thereto. "Series 1992 Lease" means that certain Lease Agreement dated as of June 1, 1992, between City and Company, pertaining to the Real Property and the "Leased Equipment" as described on Exhibit B thereto, as previously amended and as may be amended from time to time. "Series 1992 Trustee" means BNY Trust Company of Missouri, St. Louis, Missouri, as Trustee, as successor to the initial trustee, Worthen Trust Company, Inc., Little Rock Arkansas, or any successor trustee under the Series 1992 Indenture. "Series 1995 Bonds" means the Taxable Industrial Development Revenue Bonds (Huntco Steel, Inc. Project), Subordinate Series 1995, of City issued pursuant to the Series 1995 and 1996 Indenture, authorized in the total principal amount of not to exceed $30,000,000, as described in the Series 1995 and 1996 Indenture. "Series 1996 Bonds" means the Taxable Industrial Development Revenue Bonds (Huntco Steel, Inc. Project), Subordinate Series 1996, of City issued pursuant to the Series 1995 and 1996 Indenture, authorized in the total principal amount of not to exceed $12,000,000, as described in the Series 1995 and 1996 Indenture. "Series 1995 and 1996 Indenture" means the Trust Indenture, dated as of May 1, 1995, between City and Huntco Nevada, Inc., as Trustee, relating to the Bonds, as supplemented by First Supplemental Trust Indenture dated as of January 1, 1996, and any indentures supplemental thereto. "Series 1995 and 1996 Lease" means that certain Lease Agreement, dated as of May 1, 1995, between City and Company, pertaining to the Real Property and the "Leased Equipment" as described on Exhibit B thereto, as previously amended and as may be amended from time to time. "Series 1995 and 1996 Trustee" means Huntco Nevada, Inc., and any successor trustee under the Series 1995 and 1996 Indenture. "Tax Agreement" means that certain Agreement For Payments In Lieu of Taxes dated as of March 15, 1994, between City and Company, as amended by a document dated as of December 19, 1995, between City and Company. "Transaction Documents" has the meaning given such term in the Master Purchase Agreement. 1.4 Purchase Price. The aggregate purchase price for the Assets (the "Purchase Price") shall be Seventeen Million Dollars ($17,000,000). At the Closing, the Purchaser shall pay the Purchase Price to the title company providing the Owner's Policy of Title Insurance for payment to the Company and the creditors that need to be paid in connection with the Closing, by wire transfer pursuant to instructions provided to the Purchaser. At the Closing, the Company shall pay the City the payment due for calendar year 2000 under the terms of the Tax Agreement. All real and personal property taxes relating to the Assets for the calendar year 2001 shall be prorated between Company and Purchaser as follows. The Company shall be responsible for all real and personal property taxes relating to the Assets and Excluded Assets for the period of time prior to the Closing Date. All real and personal property taxes accruing after the Closing Date shall be prorated between the Company and Purchaser based on either (i) if the appropriate taxing authorities have established actual and separate assessed values for the Assets and the Excluded Assets, then the taxes due shall be prorated between the parties based on the designated values; or (ii) if such separate assessed valuation is not available, then the Company shall be responsible for 40% and Purchaser 60% of the aggregate real property taxes and the Company shall be responsible for 33.334% and Purchaser 66.666% of the aggregate personal property taxes due with respect to the Assets and the Excluded Assets for the period after the Closing. All such calculation shall be made within thirty (30) days of the date the amount of taxes for calendar year 2001 is known. Company and Purchaser shall cooperate with each other to ensure the timely payment of real and personal property taxes for calendar year 2001. Rents from the Farm Lease for the year 2001 shall also be prorated between Company and Purchaser as of the Closing Date. C. Section 1.8 of the Agreement is hereby deleted and the following is inserted therefor: 1.8 The Closing. The Closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Bracewell & Patterson, L.L.P., 711 Louisiana, Suite 2900, Houston, Texas 77002, commencing at 9:00 a.m. local time on June 8, 2001 (the "Closing Date"). D. Section 2.6 of the Agreement is hereby amended by deleting the last sentence and including the following at the end of such Section: "The Company has good and marketable title to all owned tangible and intangible personal property included in the Assets, free and clear of all liens (other than liens and leases to be discharged by the Company at Closing), security interests, pledges, claims, conditional sales agreements, charges or restrictions on transfer (other than restrictions on transfer noted on Schedule 1.1(a)), encumbrances, or any other matter affecting the personal property whatsoever." E. Section 2.7 of the Agreement is hereby deleted and the following is inserted therefore: 2.7 Real Property. The Real Property described in Schedule 1.1(b) sets forth an accurate list of all real property owned or leased by any Stockholder Party used in the conduct of the Business, but specifically excluding the Retained Real Property. The Company has good and marketable title to any owned Real Property. All Real Property, whether owned or leased as of the date hereof, is free and clear of all liens, security interests, pledges, claims, conditional sales agreements, charges or restrictions on transfer, encumbrances, or any other matter affecting the Real Property whatsoever (other than the Farm Lease and other than liens for real estate taxes not yet due and payable and liens and leases to be discharged or terminated by the Company at Closing); provided, however, Permitted Encumbrances shall not be deemed to violate the terms of this Section 2.7. The Company has provided the Purchaser with true, complete and correct copies of all leases regarding the Real Property, the Tax Agreement and the Railroad Access Agreement. Except for leases terminated prior to Closing and in connection with the Closing, all of such leases are in full force and effect and constitute valid and binding agreements of the parties (and their successors) thereto in accordance with their respective terms, no defaults have occurred under such leases, and no events or omissions have occurred which, but for the passing of time or giving of notice or both, would be a default under such leases, on the part of Company or any other party to any of such leases. F. Section 4.1 of the Agreement is hereby deleted and the following is inserted therefor: 4.1 Access and Cooperation; Due Diligence. 4.1.1 Prior to Closing the Company shall deliver to Purchaser, at the Company's sole cost and expense, (a) a current Commitment for Title Insurance covering the Real Property meeting the requirements of Section 1.3 (the "Title Commitment"), together with correct and legible copies of all instruments referred to in the Title Commitment as conditions or exceptions to title to the Real Property, including but not limited to liens, easements and recorded plats; and (b) a current survey of the Real Property which shall (i) establish and stake all exterior corners and peripheral boundary lines (courses and distances) of the Real Property; (ii) contain a metes and bounds description of the Real Property; (iii) have all fences, drainage ditches, encroachments, visible rights-of-way, creek beds, and easements and rights-of-way of record drawn on the survey plat showing the width and location thereof, and where applicable reference thereto by recording data; (iv) have all structures and improvements located on the Real Property drawn and located on the survey plat; (v) show the location of all public road rights-of-way adjoining the Real Property as they are paved on the ground, as they are dedicated of record, or otherwise as located; (vi) show all matters reflected in the Title Commitment; (vii) show the location of all 500 year and 100 year flood plains or flood zones, if any, encumbering the Real Property; (viii) contain a certification acceptable to Purchaser and (ix) otherwise be in form and substance which is customary for the location of the Real Property and acceptable for the issuance of the title insurance contemplated by this Agreement. 4.1.2 Purchaser shall deliver written notice to Company of the date Purchaser has completed the Purchaser's due diligence review of the matters described in this Section 4.1. Purchaser shall have the option to terminate this Agreement if the Purchaser is not satisfied for any reason with the results or information obtained or provided in connection with its due diligence review, which such option to terminate and satisfaction shall be in the Purchaser's sole discretion. In consideration of this option to terminate and Company's and Stockholder's execution of this Agreement, Purchaser shall deliver to Company, contemporaneously with the execution of this Agreement, Purchaser's check in the amount of Fifty and No/100 ($50.00) ("Independent Option Consideration"), which amount the parties bargained for and agreed to as consideration for Company's and Stockholder's execution and delivery of this Agreement and Purchaser's option to terminate. The Independent Option Consideration is in addition to and independent of any other consideration or payment provided for in this Agreement, is non-refundable, and shall be retained by Company, notwithstanding any other provision of this Agreement, or whether the purchase and sale contemplated herein is closed; provided that, should the purchase and sale contemplated herein close the Independent Option Consideration will be credited against the Purchase Price payable at Closing. In the event that Purchaser delivers written notice to Company within the Inspection Period that Purchaser desires to terminate this Agreement as provided above, this Agreement shall terminate. G. Section 4.2.1.1 of the Agreement is hereby deleted. H. Section 4.2.1.5 of the Agreement is hereby modified by deleting the phrase "subject of the closing of the Business" and substituting the following: "subject to the public notice given on April 30, 2001 with respect to the planned shutdown of the Business," I. Section 4.2.1.7 of the Agreement is hereby modified by deleting the phrase, ", including without limitation the Series 1992 Lease and the Series 1995 and 1996 Lease". J. Section 4.6 of the Agreement is hereby deleted. K. Sections 5.5 and 6.12 of the Agreement are hereby deleted. L. Section 6.3 of the Agreement is hereby modified by deleting the phrase, "Except for the closing of the Business in accordance with the provisions of this Agreement," and replacing such phrase with the following: "Except for the effect of the public notice given on April 30, 2001 with respect to the then planned shutdown of the Business," M. Section 6.8 and 6.9 of the Agreement are hereby deleted and the following are inserted therefor: 6.8 Bonds and Tax Abatement Agreement. In connection with the Bonds the following shall have occurred in a manner satisfactory to the parties: Contemporaneously with the Closing, the Company shall cause the payment in full or otherwise satisfy all obligations due with respect to the Bonds, the Series 1992 Indenture, the Series 1995 and 1996 Indenture, the Series 1992 Lease, and the Series 1995 and 1996 Lease. Further, the Company shall deliver to Purchaser at the closing documentation in form and substance reasonably acceptable to Purchaser reflecting the satisfaction of the foregoing requirements. In connection with the termination of the Series 1992 Lease and the Series 1995 and 1996 Lease prior to closing, the Company shall cause the City to convey to the Company the Real Property and all Equipment for which the City currently holds legal title. All of such property constituting part of the Assets shall be conveyed to Purchaser pursuant to the Closing Documents. 6.9 GECC Leases. Contemporaneously with the Closing, the Company shall make all payments under the GECC Leases and take all other required actions to payoff the GECC Leases and cause GECC to convey the assets leased pursuant to the GECC Leases to the Company free and clear of all security interests, liens, claims and encumbrances of any kind. All of such property constituting part of the Assets shall be conveyed to Purchaser pursuant to the Closing Documents. N. Sections 6.10 and 6.11 of the Agreement are hereby deleted. O. Section 10.16 of the Agreement is hereby deleted and the following is inserted therefore: 10.16 Schedules. Attached to this Amendment is a complete set of the Schedules to the Agreement, which schedules by this reference are made a part of the Agreement. 2. Acknowledgements. Pursuant to Section 4 of the Agreement, the Company and Stockholder are obligated to deliver certain information to Purchaser. The Company and Stockholder represent that they have delivered to Purchaser all information required to be delivered pursuant to Section 4.1.. The Purchaser acknowledges that all of such information was delivered in a timely fashion. Purchaser hereby acknowledges that it has completed its due diligence review of the matters described in Section 4.1 and has elected not to terminate this Agreement. As provided in Section 5.2, the parties hereto acknowledge that all Post Closing Items have either been satisfied or waived. 3. Effect. Except as amended and modified hereby, the Agreement shall remain in full force and effect and the parties hereto hereby ratify, adopt and confirm the Agreement as hereby amended. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written. PURCHASER: ENRON INDUSTRIAL MARKETS LLC, a Delaware limited liability company By: _____________________________ Name: ___________________________ Title: __________________________ COMPANY: HUNTCO STEEL, INC. By: _____________________________ Robert J. Marischen President STOCKHOLDER: HUNTCO INC. By: _____________________________ Robert J. Marischen President & CEO EX-10 8 ebfassign.txt ASSIGNMENT OF CONTRACT ASSIGNMENT OF CONTRACT THIS ASSIGNMENT OF CONTRACT ("Assignment") is made as of June 8, 2001, by and between ENRON INDUSTRIAL MARKETS LLC, a Delaware limited liability company ("Enron") in favor of EBF LLC, a Delaware limited liability company ("Assignee"). Huntco Steel, Inc., a Delaware corporation ("HSI"), and Huntco, Inc., a Missouri Corporation ("Huntco", and collectively with HSI, the "Sellers") are executing the Assignment to acknowledge their consent to the Assignment and their agreement to the terms set forth below. RECITALS: Enron is the Purchaser under that certain Asset Purchase Agreement between Sellers and Enron dated as of April 30, 2001, as amended by that certain First Amendment dated as of June 8, 2001(as amended, the "Agreement"). Enron desires to assign its interest in the Agreement to Assignee and Assignee desires to assume and perform the obligations of Assignor, as Purchaser under the Agreement. AGREEMENTS: NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, Enron and Assignee agree as follows: 1. Enron does hereby assign, transfer, convey, relinquish and set over unto Assignee all of its rights to the Agreement. 2. Assignee hereby assumes and agrees to perform the obligations of Enron, as Purchaser under the Agreement. 3. Enron is hereby released from any obligations or liabilities arising under or in connection with the Agreement accruing on or after the Closing Date. 4. Sellers consent to the Assignment on the terms and conditions set forth herein. 5. This Assignment shall be binding upon and inure to the benefit of the respective heirs, executors, administrators, successors and assigns of the parties hereto. 6. This Assignment shall be construed in accordance with the laws of the State of Texas other than its principles governing conflicts of laws. 7. This instrument may be executed in counterparts, each of which shall be deemed an original, but all of such counterparts shall together constitute but one and the same instrument. Signature pages from one counterpart may be detached from such counterpart and added to other counterparts. IN WITNESS WHEREOF, Enron and Assignee have executed this Assignment on the day and year first written above. ASSIGNOR: ENRON INDUSTRIAL MARKETS, LLC., By:_____________________________________ Name:___________________________________ Title:__________________________________ ASSIGNEE: EBF LLC By: Long Lane Master Trust IV, not in its individual capacity but solely as Class A Member By: Fleet National Bank, as Trust Administrator By:__________________________ Name:________________________ Title:_______________________ HUNTCO STEEL, INC. By:_________________________ Robert J. Marischen President HUNTCO INC. By:_________________________ Robert J. Marischen President & CEO EX-10 9 bonuspln.txt DESCRIPTION OF PERFORMANCE BONUS ARRANGEMENT Description of performance bonus arrangement for executive officers for the year ending December 31, 2001 ("2001"): The bonus plan for 2001 is based on two components: 1) Return on Capital and 2) Unit Growth. Bonuses (if any) are to be calculated and paid quarterly, based upon stand alone quarterly results. Potential bonuses are also to be calculated on full year amounts at year end, with such year end calculation determined at four times the applicable quarterly rate, less any interim payments. No return of a prior bonus is required if the full year calculation yields less than the sum of prior quarter payments. Return on Capital ("ROC") is defined to equal, for the applicable time period calculated, the product of (a) income from operations before bonus accruals pursuant to this plan (either for the full year, or annualized by multiplying quarterly pre-bonus income from operations by four, as applicable), divided by (b) the sum of (i) average shareholders' equity and (ii) average funded debt. If ROC is 5% or greater, the ROC bonus shall be actual ROC for the applicable period times the employee's full year base salary. Unit Growth is to equal actual unit volume for the applicable quarterly or full year period, less actual unit volume for the comparable prior year period, divided by actual unit volume for the comparable prior year period. The Unit Growth component of the applicable employee's bonus shall be determined as follows: If Unit the ROC Bonus is at least as follows, Growth is and then Unit Growth Bonus % is: - -------------- ------------------------------------------ 5% 10% 15% ---- ----- ----- Zero or less (1.0)% (2.0)% (3.0)% 0.01% to 9.99% - - - 10.00% to 14.99% 2.5% 5.0% 10.0% 15.00% to 19.99% 5.0% 10.0% 15.0% 20.00% or more 10.0% 15.0% 20.0% For the executive officers of the Company, the above calculations will be based on consolidated results for 50% of the quarterly bonus total, if any, with the other 50% based upon the results of the separate divisions of the Company. EX-4 10 ensecagt.txt SECURITY AGREEMENT - ENRON THE LIENS, RIGHTS, AND/OR OTHER OBLIGATIONS CREATED IN FAVOR OF ENRON NORTH AMERICA CORP. BY THIS AGREEMENT ARE SUBORDINATE TO THE LIENS, RIGHTS, AND/OR OTHER OBLIGATIONS IN FAVOR OF CONGRESS (AS SUCH TERM IS DEFINED IN THE CONGRESS INTERCREDITOR AGREEMENT DESCRIBED BELOW) AS PROVIDED IN THAT CERTAIN INTERCREDITOR AND SUBORDINATION AGREEMENT BETWEEN ENRON NORTH AMERICA CORP. AND CONGRESS FINANCIAL CORPORATION (CENTRAL) AS THE SAME NOW EXISTS OR MAY HEREAFTER BE AMENDED, SUPPLEMENTED, MODIFIED, RENEWED, RESTATED, OR REPLACED (THE "CONGRESS INTERCREDITOR AGREEMENT"). SECURITY AGREEMENT (HUNTCO INC.) This Security Agreement dated as of April 6, 2001 ("Agreement"), is made by HUNTCO INC. a Missouri corporation ("Debtor"), in favor of ENRON NORTH AMERICA CORP., a Delaware corporation ("Secured Party"). INTRODUCTION Reference is made to (a) the Master Steel Purchase and Sale Agreement dated as of April 6, 2001 (as modified from time to time, the "Master Agreement"), between Huntco Steel, Inc. ("Borrower"), and Secured Party, pursuant to which Borrower will purchase steel from Secured Party and (b) the Loan Agreement dated as of April 6, 2001 (as modified from time to time, the "Loan Agreement"), by and among Borrower, Debtor, Huntco Nevada, Inc., Midwest Products, Inc., HSI Aviation, Inc., and Secured Party, pursuant to which Secured Party has agreed to make a loan to Borrower on the terms contained therein. Pursuant to the Guaranty dated as of even date herewith (as the same may be amended, supplemented, and modified from time to time, the "Guaranty") made by Debtor in favor of Secured Party, Debtor has guaranteed Borrower's obligations under the Transaction Documents, as defined in the Master Agreement, and the Loan Documents, as defined in the Loan Agreement. It is a condition precedent to Secured Party's obligations under the Transaction Documents and the Loan Documents that Debtor execute this Agreement in favor of Secured Party. In consideration of the foregoing, Debtor and Secured Party hereby agree as follows: Section 1. Definitions. Capitalized terms used herein but not otherwise defined herein shall have the meanings specified by the Loan Agreement. Terms which are defined in neither the Loan Agreement nor this Agreement shall have the meanings specified in the UCC. As used herein, the following terms shall have the following meanings: "Accounts" means all of Debtor's present and future rights to payment for goods sold or leased or for services rendered, which are not evidenced by instruments or chattel paper, and whether or not earned by performance. "Chief Executive Office Location" means the location of the chief executive office of Debtor as specified on Schedule 4.17 of the Loan Agreement. "Collateral" means, all of Debtor's following: (a) Accounts; (b) Intangible Property; (c) all present and future monies, securities and other investment property, credit balances, deposits, deposit accounts and other property of Debtor now or hereafter held or received by or in transit to Secured Party or its affiliates or at any other depository or other institution from or for the account of Debtor whether for safekeeping, pledge, custody, transmission, collection or otherwise, and all present and future liens, security interests, rights, remedies, title and interest in, to and in respect of Accounts and other Collateral, including (i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (ii) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (iii) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Accounts or other Collateral, including returned, repossessed and reclaimed goods, and (iv) deposits by and property of account debtors or other persons securing the obligations of account debtors; (d) Inventory; (e) Equipment; (f) Records; and (g) Proceeds. "Collateral Locations" means all of the locations designated as Collateral Locations for Debtor on Schedule 4.17 of the Loan Agreement, together with any other future locations permitted pursuant to Section 5.18 of the Loan Agreement. "Contracts" means all of Debtor's present and future contracts and agreements, as the same may be amended, restated, or otherwise modified from time to time. "Contract Rights" means all of Debtor's present and future rights under the Contracts, including all rights to payments and the rights to make consents, elections, and other determinations which would affect such rights, to arbitrate or otherwise enforce such rights, and to waive, amend supplement, and otherwise modify the terms of such rights, and all rights under any collateral, insurance, indemnity, warranty, guaranty, or other security and support related to the foregoing. "Equipment" means all of Debtor's present and future owned or leased equipment, machinery, computers and computer hardware and software (whether owned or licensed), vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located. "Intangible Property" means all of Debtor's present and future Contract Rights, general intangibles (including tax and duty refunds, registered and unregistered patents, trademarks, service marks, copyrights, trade names, applications for the foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer lists, licenses, whether as licensor or licensee, chooses in action and other claims and existing and future leasehold interests in equipment, real estate and fixtures), chattel paper, warehouse receipts and other documents, instruments, investment property, letters of credit, bankers' acceptances and guaranties; "Inventory" means all of Debtor's present and future now owned and hereafter existing or acquired raw materials, work in process, finished goods and all other inventory of whatsoever kind or nature, wherever located. "Proceeds" means all of Debtor's present and future products and proceeds of the Collateral, in any form, including insurance proceeds and any claims against third parties for the loss or damage to or destruction of any or all of the Collateral or the foregoing described Proceeds. "Receivables" means all of Debtor's present and future Accounts, documents, instruments, and chattel paper, including accounts from governmental agencies, rights to payment under Contracts, rights to payment under leases, tax refunds, and any other rights to the payment of money. "Records" means all of Debtor's present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of Debtor with respect to the foregoing maintained with or by any other person). "Secured Obligations" means (a) all amounts now or hereafter owed by Debtor to Secured Party under the Guaranty and the other Transaction Documents and Loan Documents, (b) the performance of all covenants, agreements, and other obligations of Debtor under the Transaction Documents and Loan Documents, (c) all principal, interest, fees, reimbursements, indemnifications, and other amounts now or hereafter owed by Borrower to Secured Party under the Master Agreement, the Loan Agreement, and the other Transaction Documents and Loan Documents, and (d) any increases, extensions, renewals, replacements, and rearrangements of the foregoing obligations under any amendments, supplements, and other modifications of the agreements creating the foregoing obligations or any increases, extensions, renewals, replacements, and rearrangements of the foregoing obligations. "UCC" means the Uniform Commercial Code as in effect on the date hereof in the State of Texas, as amended from time to time, and any successor statute. Section 2. Grant of Security Interest. 2.1 Grant of Security Interest. Debtor hereby grants to Secured Party a security interest in all of Debtor's right, title, and interest in and to the Collateral to secure the payment and performance of the Secured Obligations, and, to the extent that the Collateral is not subject to the UCC, Debtor collaterally assigns all of Debtor's right, title, and interest in and to such Collateral to Secured Party to secure the payment and performance of the Secured Obligations to the full extent that such a collateral assignment is possible under the relevant law. 2.2 Debtor Remains Liable. Anything herein to the contrary notwithstanding: (a) Debtor shall remain liable under each Contract and under any contract or agreement included in the Collateral to the extent set forth therein, to perform Debtor's obligations thereunder to the same extent as if this Agreement had not been executed; (b) the exercise by Secured Party of any rights hereunder shall not release Debtor from any obligations under any Contract or under any contract or agreement included in the Collateral; and (c) Secured Party shall not have any obligation under any Contract or under any contract or agreement included in the Collateral by reason of this Agreement, nor shall Secured Party be obligated to perform or fulfill any of the obligations of Debtor thereunder (unless expressly assumed in writing), including any obligation to make any inquiry as to the nature or sufficiency of any payment Debtor may be entitled to receive thereunder, to present or file any claim, or to take any action to collect or enforce any claim for payment thereunder. Section 3. General Provisions. Debtor represents and warrants to and agrees with Secured Party as follows: 3.1 Ownership. Debtor has good and indefeasible title to the assets which comprise the Collateral free from any liens, security interests, assignments, adverse claims, restrictions, or other encumbrances whatsoever except as permitted by the Loan Agreement. No effective recorded interest, financing statement, or similar recording or filing covering any part of the Collateral of Debtor is on file in any recording office, except as permitted under the Transaction Documents and the Loan Documents. Debtor shall not, without the prior written consent of Secured Party, grant any lien, security interest, assignment, restriction, claim, or other encumbrance on or against the Collateral, or lease, sell, or otherwise transfer any of Debtor's rights in the Collateral except as permitted under the Transaction Documents and the Loan Documents; provided, however, Debtor may sell Inventory in the ordinary course of business. 3.2 Perfection. (a) As of the date of this Agreement, the true and correct name of Debtor as listed on Debtor's certificate of incorporation is the name specified for Debtor on the signature pages of this Agreement. Debtor has had no prior names and has not used and does not use any trade names. As of the date of this Agreement, Debtor's State of incorporation is Missouri. As of the date of this Agreement, Debtor's chief executive office is located at the Chief Executive Office Location of Debtor. Without advance written notice to Secured Party and reasonable opportunity for Secured Party to take action to protect Secured Party's interests hereunder, Debtor shall not change its name, its State of incorporation, or the location of its chief executive office. (b) The tangible Collateral of Debtor is located only at the Collateral Locations of Debtor or other Permitted Collateral Locations (hereafter defined) unless being used outside of the Collateral Locations for Debtor in the ordinary course of business, and Debtor shall not move the tangible Collateral of Debtor outside of the Collateral Locations for Debtor or other Permitted Collateral Locations unless being used outside of the Collateral Locations for Debtor in the ordinary course of business, but in no event shall any material portion of the tangible Collateral of Debtor be kept outside of the Collateral Locations for Debtor or other Permitted Collateral Locations for more than four consecutive months. An aggregate amount of tangible Collateral with a value in excess of $100,000 shall be deemed to be a material portion of the tangible Collateral. For purposes of this paragraph "Permitted Collateral Locations" shall mean locations that Debtor would be permitted to have collateral at under Section 9.2 of the Loan and Security Agreement dated April 15, 1999, among Congress Financial Corporations (Central), Huntco Steel, Inc., Midwest Products, Inc., Huntco Inc., Huntco Nevada, Inc., and HSI Aviation, Inc., provided Debtor complies with all covenants and obligations set forth in such Section as though Secured Party were the Lender under such Loan and Security Agreement. (c) The filed financing statements in favor of Secured Party filed in the applicable jurisdictions against the name of Debtor are the only filings or recordings necessary to perfect the security interests purported to be granted hereunder on the Collateral (other than Collateral that consists of titled property, and Collateral for which security interests can only be perfected by possession), and no other filing, recording, authorization, authentication, consent, or other action is necessary to allow Debtor to perform Debtor's obligations or to permit Secured Party to exercise Secured Party's rights and remedies hereunder, except for rights in contracts now existing or that in the future may be entered into that are either (i) one of the non-assignable material contracts listed on Schedule 3.2(c) attached hereto or (ii) a contract that by its terms is non-assignable so long as such contract collectively with all other non-assignable contracts (other than those listed on Schedule 3.2(c)) are with respect to an aggregate amount of payments that is not greater than $100,000. (d) A carbon, photographic, or other reproduction of this Agreement shall be sufficient as a financing statement and may be filed in any appropriate office in lieu thereof. (e) Debtor shall obtain a notification and acknowledgement of Secured Party's security interest in form and substance satisfactory to Secured Party from each third party that will hold more than $100,000 of Inventory for processing, tolling, warehousing, or on consignment. Debtor does not have and shall not obtain any rights or interest in the Enron Inventory Collateral or any documents of title relating thereto, however, if Debtor ever receives any such rights or interest Debtor shall immediately assign same to Secured Party. If disposition of any of the Inventory of Debtor gives rise to any documents (other than dispositions in the ordinary course of business), Debtor will promptly inform Secured Party thereof, and upon request of Secured Party, deliver the documents to Secured Party with all necessary endorsements and assignment agreements requested by Secured Party, or at the request of Secured Party negotiate the same to Secured Party. (f) With respect to Receivables, Debtor shall provide Secured Party with advance written notice of any material increase in the amount of Receivables from governmental agencies that require consents or other actions to assign, perfect, or realize upon (including Receivables from the federal government that are subject to the Federal Assignment of Claims Act), and the opportunity to perfect the security interests of Secured Party in any such Receivables of Debtor. Upon written request of Secured Party, Debtor shall take such actions as Secured Party may reasonably request to permit Secured Party to perfect its security interests in any such Receivables of Debtor, including using best efforts to obtain necessary consents from governmental agencies, delivery of instruments to Secured Party with all necessary endorsements, and delivery of assignment agreements requested by Secured Party. Debtor shall, during the existence of an Event of Default (as defined by either the Master Agreement or the Loan Agreement) and upon request by Secured Party, promptly deliver to Secured Party possession of such Receivables. 3.3 Priority. (a) The security interests created by this Agreement are valid, binding, and first priority, subject only to the prior liens permitted by the other Transaction Documents and Loan Documents, and Debtor shall preserve and maintain the status of such security interests to the end that such security interests remain valid, binding, and first priority security interests in the Collateral subject only to the prior liens permitted by the other Transaction Documents and Loan Documents. 3.4 Value. (a) With respect to the Equipment, the Equipment of Debtor is in good working order and Debtor shall maintain and preserve the Equipment in good working order and shall make all repairs, replacements, and restorations that are necessary or desirable to that end. (b) With respect to the Receivables, to the best of Debtor's knowledge each of the Receivables constitutes a legal, valid, and binding obligation. The amount represented by Debtor to Secured Party as owing under each Receivable is the correct amount actually owing. To the best of Debtor's knowledge no significant portion of the Receivables is subject to any defense, set-off, or counterclaim against it or that can be asserted against Debtor, except as reported to Secured Party pursuant to the Loan Agreement. Debtor shall use commercially reasonable efforts to collect payments on the Receivables of Debtor when due. Unless otherwise specified herein, Debtor shall use commercially reasonable efforts to perform Debtor's obligations under each Contract giving rise to any Receivables of Debtor. 3.5 Further Assurances. (a) Except as listed on Schedule 4.9 of the Loan Agreement, there are no actions, suits, proceedings, or investigations pending or, to the knowledge of Debtor, threatened against or affecting any material portion of the Collateral, or involving the validity or enforceability of this Agreement or any material Contract or the priority of the liens, security interests, or assignments created hereunder with respect to any material portion of the Collateral. If the validity or priority of this Agreement or of any liens, security interests, or assignments created or purported to be created hereunder or the title of Debtor to any Collateral of Debtor shall be endangered, questioned, or attacked in any material respect or if any legal proceedings are instituted against Debtor with respect thereto, Debtor shall give prompt written notice thereof to Secured Party, and the action proposed to be taken by Debtor in connection therewith. During the existence of an Event of Default (as defined by either the Master Agreement or the Loan Agreement), Debtor shall not initiate any action with respect to such matters without granting Secured Party advance written notice of Debtor's intent to initiate such actions and the opportunity to consult with Debtor regarding Debtor's proposed actions (unless immediate action is necessary to prevent loss to Debtor). At Secured Party's request, during the existence of an Event of Default (as defined by either the Master Agreement or the Loan Agreement), Debtor shall take any actions reasonably requested by Secured Party with respect to such matters, including diligently endeavoring to cure any material defect existing or claimed, and taking all reasonably necessary and desirable steps for the defense of any legal proceedings, including the employment of counsel, the prosecution or defense of litigation, and the release or discharge of all adverse claims. During the existence of an Event of Default (as defined by either the Master Agreement or the Loan Agreement), Secured Party, whether or not named as a party to any legal proceedings, is authorized to take any additional steps as Secured Party deems necessary or desirable for the defense of any such legal proceedings or the protection of the validity or priority of this Agreement and the liens, security interests, and assignments created hereunder, including the employment of independent counsel, the prosecution or defense of litigation, the compromise or discharge of any adverse claims made with respect to any Collateral of Debtor and the payment or removal of prior liens or security interests, and the reasonable expenses of Secured Party in taking such action shall be paid by Debtor. (b) Debtor agrees that at any time Debtor shall promptly execute and deliver all further agreements, and take all further action, that may be reasonably necessary or that Secured Party may reasonably request, in order to further evidence the liens, security interests, and assignments granted or purported to be granted hereunder and perfect and protect the same or to enable Secured Party to exercise and enforce Secured Party's rights and remedies hereunder. Without limiting the foregoing, Debtor shall at Secured Party's reasonable request execute financing statements, assignments, notices, certificates of title and applications therefor, and such other documents and agreements as Secured Party may reasonably request in order to perfect and preserve the security interests granted or purported to be granted hereunder. Debtor shall furnish to Secured Party from time to time any statements and schedules further identifying and describing any Collateral of Debtor and such other reports in connection with the Collateral of Debtor as Secured Party may reasonably request. (c) During the existence of an Event of Default (as defined by either the Master Agreement or the Loan Agreement), Debtor agrees that, if Debtor fails to perform under this Agreement, Secured Party may, but shall not be obligated to, perform Debtor's obligations under this Agreement and any reasonable expenses incurred by Secured Party in performing Debtor's obligations shall be paid by Debtor. Any such performance by Secured Party may be made by Secured Party in reasonable reliance on any statement, invoice, or claim, without inquiry into the validity or accuracy thereof. The amount and nature of any expense of Secured Party hereunder shall be conclusively established by a certificate of any officer of Secured Party absent manifest error. (d) Debtor irrevocably appoints Secured Party as Debtor's attorney in fact, with full authority to act during the existence of an Event of Default (as defined by either the Master Agreement or the Loan Agreement) for Debtor and in the name of Debtor, to take any action and execute any agreement which Secured Party deems necessary or advisable to accomplish the purposes of this Agreement, including the matters that Secured Party is expressly authorized to take pursuant to this Agreement (including the matters described in paragraph (c) above), and instituting proceedings Secured Party deems necessary or desirable to enforce the rights of Secured Party with respect to this Agreement. (e) The powers conferred on Secured Party under this Agreement are solely to protect Secured Party's rights under this Agreement and shall not impose any duty upon it to exercise any such powers. Except as elsewhere provided hereunder, Secured Party shall have no duty as to any of the Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to the Collateral. 3.6 Insurance. With respect to any casualty or condemnation to the Collateral, all proceeds of such casualty or condemnation which are due to Debtor, including any property insurance proceeds, condemnation awards, proceeds from actions, and any other proceeds, are assigned to Secured Party and shall be paid directly to Secured Party or as otherwise permitted by the Loan Agreement. Section 4. General Remedies. During the existence of an Event of Default (as defined by either the Master Agreement or the Loan Agreement), in addition to other remedies set forth in the Transaction Documents and the Loan Documents, Secured Party may, at its option, exercise one or more of the following remedies: 4.1 Interim Remedies. (a) To the extent permitted by law, Secured Party may exercise all the rights and remedies of a secured party under the UCC. (b) Secured Party may prosecute actions in equity or at law for the specific performance of any covenant or agreement herein contained or in aid of the execution of any power herein granted or for the enforcement of any other appropriate legal or equitable remedy. (c) Secured Party may require Debtor to, at Debtor's expense, promptly assemble all or part of the Collateral of Debtor and make it available to Secured Party at a place to be designated by Secured Party. Secured Party may occupy any premises owned or leased by Debtor where any Collateral is assembled for a reasonable period in order to effectuate Secured Party's rights and remedies hereunder or under law, without obligation to Debtor with respect to such occupation. 4.2 Foreclosure. (a) Secured Party may foreclose on any Collateral in any manner permitted by the courts of or in the State of Texas or the State in which any Collateral is located. If Secured Party should institute a suit for the collection of the Secured Obligations and for foreclosure under this Agreement, Secured Party may at any time before the entry of a final judgment dismiss the same, and take any other action permitted by this Agreement. (b) To the extent permitted by law, Secured Party may exercise all the foreclosure rights and remedies of a secured party under the UCC. In connection therewith, Secured Party may sell any Collateral at public or private sale, at the office of Secured Party or elsewhere, for cash or credit and upon such other terms as Secured Party deems commercially reasonable. Secured Party may sell any Collateral at one or more sales, and the security interest granted hereunder shall remain in effect as to the unsold portion of the Collateral. Debtor agrees that to the extent permitted by law such sales may be made without notice. If notice is required by law, Debtor hereby deems ten days advance notice of the time and place of any public or private sale reasonable notification, recognizing that if the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, shorter notice may be reasonable. Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Secured Party may adjourn any sale by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was adjourned. In the event that any sale hereunder is not completed or is defective in the opinion of Secured Party, Secured Party shall have the right to cause subsequent sales to be made hereunder. Any statements of fact or other recitals made in any bill of sale, assignment, or other document representing any sale hereunder, including statements relating to the occurrence of an Event of Default (as defined by either the Master Agreement or the Loan Agreement), acceleration of the Secured Obligations, notice of the sale, the time, place, and terms of the sale, and other actions taken by Secured Party in relation to the sale may be conclusively relied upon by the purchaser at any sale hereunder. Secured Party may delegate to any agent the performance of any acts in connection with any sale hereunder, including the sending of notices and the conduct of the sale. (c) Secured Party may, with respect to each Contract, exercise the Contract Rights under such Contract and may instruct Debtor to take or not take action under such Contract with respect to such Contract Rights. Without limiting the foregoing, Secured Party may make consents, elections, and other determinations under such Contract, waive, amend, supplement, or otherwise modify such Contract, and enforce such Contract, in each case in the same manner and to the same extent as Debtor could with respect to the Contract Rights. Debtor authorizes all parties to such Contract to follow the instructions of Secured Party and ignore the instructions of Debtor with respect to Debtor's rights under such Contract with respect to the Contract Rights. In addition, Secured Party may terminate Debtor's right to collect amounts due under the Contract Rights and direct the obligors under such Contract to make payment of all amounts due to Debtor thereunder directly to Secured Party but only to the extent of the Secured Obligations then due and payable, or Secured Party may stop payments under any Contract and may collect such payments hereunder. It is understood that by taking such actions Secured Party is not assuming the obligations of Debtor (except to the extent expressly assumed in writing) and Debtor remains liable for performance under such Contract. Secured Party shall have no duty or obligation to cure any default or condition. (d) If Secured Party or any successor or assign of Debtor in connection with this Agreement has succeeded to the interests of Debtor (whether through foreclosure, assignment in lieu of foreclosure, or otherwise) in any Contract with respect to the Contract Rights, Debtor shall accept the same for all purposes and Secured Party or successor shall succeed to the rights of Debtor under such Contract with respect to the Contract Rights and Debtor agrees that it shall have no rights whatsoever with respect to the Contract Rights following such assumption. 4.3 Application of Proceeds. Unless otherwise specified herein, any cash proceeds received by Secured Party from the sale of, collection of, or other realization upon any part of the Collateral or any other amounts received by Secured Party hereunder may be, at the discretion of Secured Party applied to the Secured Obligations. Amounts applied to the Secured Obligations shall be applied in the following order: First, to the payment of the costs and expenses of exercising Secured Party's rights hereunder, whether expressly provided for herein or otherwise; and Second, to the payment of the Secured Obligations in the order set forth in the Master Agreement and Loan Agreement, and, if no order of application is so provided for, then in the order determined by Secured Party. Any surplus cash collateral or cash proceeds held by Secured Party after payment in full of the Secured Obligations and the termination of all commitments of Secured Party to Debtor shall be paid over by Secured Party to Debtor or to any other Persons that may be lawfully entitled to receive such surplus. 4.4 Obtain Control of the Collateral. During the existence of an Event of Default (as defined by either the Master Agreement or the Loan Agreement), Secured Party may take control of the Collateral of Debtor (regardless of whether such Collateral is held by Debtor or by bailees, warehousemen, or similar parties), and Debtor shall transfer to Secured Party or execute any documents necessary to give control of such Collateral to Secured Party. If Debtor fails to do so, Secured Party may execute any documents reasonably necessary to take such control of such Collateral. Secured Party shall have no obligation to take any action to assemble or otherwise take control of the Collateral, whether for the purposes of sale or otherwise. 4.5 Waiver of Certain Rights. To the full extent Debtor may do so, Debtor shall not insist upon, plead, claim, or take advantage of any law providing for any appraisement, valuation, stay, extension, or redemption, and Debtor hereby waives and releases the same, and all rights to a marshaling of the assets of Debtor, including the Collateral, or to a sale in inverse order of alienation in the event of foreclosure of the liens and security interests hereby created. Debtor shall not assert any right under any law pertaining to the marshaling of assets, sale in inverse order of alienation, the administration of estates of decedents or other matters whatever to defeat, reduce, or affect the right of Secured Party under the terms of this Agreement. Section 5. Miscellaneous. 5.1 Expenses. Debtor shall upon demand pay to Secured Party the amount of any expenses, including the fees and disbursements of its counsel and of any experts and agents, which Secured Party and the other Banks may incur in connection with (a) the custody, preservation, use, or operation of, or the sale, collection, or other realization of, any of the Collateral, (b) the exercise or enforcement of any of the rights of Secured Party hereunder, and (c) the failure by Debtor to perform or observe any of the provisions hereof. 5.2 Notice. All notices and other communications under this Agreement shall be in writing and mailed, telecopied, hand delivered, or delivered by a nationally recognized overnight courier, to the address for the appropriate party specified in the Loan Agreement or at such other address as shall be designated by such party in a written notice to the other parties. Mailed notices shall be effective when received. Telecopied notices shall be effective when transmission is completed. Delivered notices shall be effective when delivered by messenger or courier. Notwithstanding the foregoing, notices and communications to Secured Party under the Note shall not be effective until received by Secured Party. 5.3 Choice of Law. Except to the extent that the validity, perfection, or effect of perfection or nonperfection of the security interests created hereunder, or the remedies hereunder, in respect of any particular Collateral are required to be governed by the laws of a jurisdiction other than the State of Texas, this Agreement shall be subject to and construed and enforced in accordance with the substantive laws of the State of Texas, without regard to principles of conflicts of laws that would select another law. 5.4 General. If any provision in this Agreement is held to be unenforceable, such provision shall be severed and the remaining provisions shall remain in full force and effect. All representations, warranties, and covenants of Debtor in this Agreement shall survive the execution of this Agreement and any other contract or agreement. If a due date for an amount payable is not specified in this Agreement, the due date shall be the date on which Secured Party demands payment therefor. Secured Party's remedies under the Transaction Documents and the Loan Documents shall be cumulative, and no delay in enforcing this Agreement shall act as a waiver of Secured Party's rights thereunder. The provisions of this Agreement may be waived or amended only in a writing signed by the party against whom enforcement is sought. This Agreement shall bind and inure to the benefit of Debtor and Secured Party and their respective successors and assigns. Debtor may not assign its rights or delegate its duties under this Agreement. Secured Party may assign its rights and delegate its duties under this Agreement in accordance with the terms of the Loan Agreement. This Agreement may be executed in multiple counterparts. THIS WRITTEN AGREEMENT, THE TRANSACTION DOCUMENTS, AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Executed as of the date first above written. DEBTOR: HUNTCO INC. By:_________________________ Robert J. Marischen President & CEO SECURED PARTY: ENRON NORTH AMERICA CORP. By: ________________________ Name: Title: - ----------------------------------------------------------------------------- SCHEDULE 3.2(c) - Non-Assignable Material Contracts - ----------------------------------------------------------------------------- Similar Security Agreements were executed between Enron North America Corp., as Secured Party, and the following entities: Huntco Nevada, Inc., Huntco Steel, Inc., and Midwest Products, Inc. EX-4 11 loanhunt.txt LOAN AGREEMENT - ENRON THE OBLIGATIONS OF THE BORROWER AND OBLIGORS HEREUNDER ARE SUBORDINATE TO THE OBLIGATIONS TO SENIOR LENDER (AS SUCH TERM IS DEFINED HEREIN) AS PROVIDED IN THAT CERTAIN INTERCREDITOR AGREEMENT BETWEEN ENRON NORTH AMERICA CORP., AND SENIOR LENDER. LOAN AGREEMENT among ENRON NORTH AMERICA CORP. as Lender, HUNTCO STEEL, INC., as Borrower, and HSI AVIATION, INC. HUNTCO INC., HUNTCO NEVADA, INC., and MIDWEST PRODUCTS, INC. as additional Obligors April 6, 2001 TABLE OF CONTENTS ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS 1.1 Certain Defined Terms 1.2 Computation of Time Periods 1.3 Accounting Terms; Preparation of Financials 1.4 Interpretation ARTICLE 2 THE FACILITY 2.1 The Facility 2.2 Prepayment 2.3 Repayment 2.4 Interest 2.5 Payments; Computations 2.6 Taxes ARTICLE 3 CONDITIONS PRECEDENT 3.1 Conditions Precedent to Initial Extensions of Credit ARTICLE 4 REPRESENTATIONS AND WARRANTIES 4.1 Organization 4.2 Authorization 4.3 Enforceability 4.4 Absence of Conflicts and Approvals 4.5 Investment Companies 4.6 Public Utilities 4.7 Financial Condition 4.8 Condition of Assets 4.9 Litigation 4.10 Subsidiaries 4.11 Laws and Regulations 4.12 Environmental Compliance 4.13 ERISA 4.14 Taxes 4.15 Capitalization 4.16 Validity of Liens 4.17 Chief Executive Office; Collateral Locations 4.18 Bank Accounts 4.19 True and Complete Disclosure 4.20 Survival of Warranties; Cumulative ARTICLE 5 COVENANTS 5.1 Organization 5.2 Reporting 5.4 [Intentionally Deleted] 5.4 Use of Proceeds 5.5 Additional Bank Accounts 5.6 Debt 5.7 Liens 5.8 Loans, Investments, Guarantees, etc. 5.9 Sale of Assets, Consolidation, Merger, Dissolution, Etc. 5.10 Distributions 5.11 Transactions with Affiliates 5.12 Insurance 5.13 Operation of Business 5.14 Compliance with Laws 5.15 Environmental Compliance 5.16 ERISA Compliance 5.17 Payment of Taxes 5.18 New Collateral Locations; Collateral Covenants and Reporting Requirements 5.19 Inspection 5.20 After Acquired Real Property 5.21 Further Assurances 5.22 Incorporated Terms and Provisions of Senior Loan Agreement 5.23 Amendments of Senior Loan Agreements ARTICLE 6 DEFAULT AND REMEDIES 6.1 Events of Default 6.2 Termination of Commitments 6.3 Acceleration of Obligations 6.4 Default Interest 6.5 Right of Setoff and Netting 6.6 Actions Under Loan Documents 6.7 Remedies Cumulative 6.8 Application of Payments ARTICLE 7 MISCELLANEOUS 7.1 Expenses; Indemnity 7.2 Modifications, Waivers, and Consents 7.3 Survival of Agreements 7.4 Assignment and Participation 7.5 Notice 7.6 Choice of Law 7.7 Counterparts 7.8 Usury Protection 7.9 Arbitration 7.10 Limitation on Damages 7.11 Obligations Joint and Several 7.12 No Further Agreements EXHIBITS Exhibit A Form of Note Exhibit B Senior Loan Agreement SCHEDULES Schedule 4.7 Existing Defaults Schedule 4.9 Litigation Schedule 4.12 Environmental Disclosures Schedule 4.17 Chief Executive Offices, Collateral Locations, and Mortgage Holders Schedule 4.18 Bank Accounts Schedule 5.7 Property Subject to a Certificate of Title LOAN AGREEMENT This Loan Agreement dated as of April 6, 2001, is among Enron North America Corp. a Delaware corporation, as Lender, Huntco Steel, Inc., a Delaware corporation, as Borrower, and the other Obligors signatory hereto. The parties hereto agree as follows: ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS. 1.1 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (unless otherwise indicated, such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Accounts" means, with respect to any Person, all present and future rights of such Person to payment for goods sold or leased or for services rendered, which are not evidenced by instruments or chattel paper, and whether or not earned by performance. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person or any Subsidiary of such Person. The term "control" (including the terms "controlled by" or "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership, by contract, or otherwise. "Agreement" means this Loan Agreement. "Borrower" means Huntco Steel, Inc., a Delaware corporation. "Business Day" means any Monday through Friday during which (a) commercial lenders are open for business in Houston, Texas and London, England, and (b) neither the New York Stock Exchange nor the Federal Reserve Banks are closed. "Capital Leases" means, with respect to any Person, any lease of any property by such Person which would, in accordance with generally accepted accounting principles, be required to be classified and accounted for as a capital lease on the balance sheet of such Person. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's capital stock, partnership interests or interests in any limited liability company at any time outstanding, and any and all rights, warrants or options exchangeable for or convertible into such capital stock or other interests (but excluding any debt security that is exchangeable for or convertible into such capital stock). "Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Collateral" means, all of the Borrower's following: (a) Accounts; (b) all present and future contract rights, general intangibles (including tax and duty refunds, registered and unregistered patents, trademarks, service marks, copyrights, trade names, applications for the foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer lists, licenses, whether as licensor or licensee, chooses in action and other claims and existing and future leasehold interests in equipment, real estate and fixtures), chattel paper, documents, instruments, investment property, letters of credit, bankers' acceptances and guaranties; (c) all present and future monies, securities and other investment property, credit balances, deposits, deposit accounts and other property of Borrower now or hereafter held or received by or in transit to Lender or its Affiliates or at any other depository or other institution from or for the account of Borrower whether for safekeeping, pledge, custody, transmission, collection or otherwise, and all present and future Liens, security interests, rights, remedies, title and interest in, to and in respect of Accounts and other Collateral, including (i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (ii) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (iii) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Accounts or other Collateral, including returned, repossessed and reclaimed goods, and (iv) deposits by and property of account debtors or other persons securing the obligations of account debtors; (d) Inventory; (e) Equipment; (f) Records; (g) Real Property; and (h) all products and proceeds of the foregoing, in any form, including insurance proceeds and any claims against third parties for loss or damage to or destruction of any or all of the foregoing. "Commitment" means $10,000,000. "Congress" means Congress Financial Corporation (Central), an Illinois corporation. "Debt" means, with respect to any Person, without duplication, (a) indebtedness of such Person for borrowed money, (b) obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments, (c) obligations of such Person to pay the deferred purchase price of property or services (other than trade debt and normal operating liabilities incurred in the ordinary course of business), (d) obligations of such Person as lessee under Capital Leases, (e) obligations of such Person under or relating to letters of credit, guaranties, purchase agreements, or other creditor assurances assuring a creditor against loss in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (d) of this definition, and (f) nonrecourse indebtedness or obligations of others of the kinds referred to in clauses (a) through (e) of this definition secured by any Lien on or in respect of any property of such Person. For the purposes of determining the amount of any Debt, the amount of any Debt described in clause (e) of the definition of Debt shall be valued at the maximum amount of the contingent liability thereunder and the amount of any Debt described in clause (f) that is not covered by clause (e) shall be valued at the lesser of the amount of the Debt secured or the book value of the property securing such Debt. "Default" means (a) an Event of Default or (b) any event or condition which with notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Default Rate" means, with respect to any amount due hereunder, a per annum interest rate equal to the lesser of (a) the interest rate applicable to the Loan at such time plus two percent (2%) per annum or (b) the Highest Lawful Rate. "Dollars or $" means lawful money of the United States of America. "Effective Date" means the date on which the Loan is made pursuant to Section 2.1. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Environmental Law" means all federal, state, and local laws, rules, regulations, ordinances, orders, decisions, agreements, and other requirements now or hereafter in effect relating to the pollution, destruction, loss, or injury of the environment, the presence of any contaminant in the environment, the protection, cleanup, remediation, or restoration of the environment, the creation, handling, transportation, use, or disposal of any waste product in the environment, exposure of persons to any contaminant, waste, or hazardous substance in the environment, and the health and safety of employees in relation to their environment. "Equipment" means, with respect to any Person, all of such Person's now owned and hereafter acquired or leased equipment, machinery, computers and computer hardware and software (whether owned or licensed), vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located. "Event of Default" has the meaning specified in Section 6.1. "Financial Statements" means the financial statements of Huntco referred to in Section 4.7(a). "Guaranties" means, collectively (a) each of the guaranties executed by the Guarantors as of the Effective Date in favor of Lender and (b) any future guaranties executed by Borrower or any Guarantor in each case guaranteeing the Obligations. "Guarantors" means (a) Huntco Nevada, (b) Huntco, (c) Midwest, (d) HSI Aviation, and each other entity which executes a guaranty in favor of Lender with respect to the Obligations described in this Agreement. "Hazardous Materials" means any substance or material identified as a hazardous substance pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended and as now or hereafter in effect; any substance or material regulated as a hazardous waste pursuant to the Resource Conservation and Recovery Act of 1976, as amended and as now or hereafter in effect; and any substance or material designated as a hazardous substance or hazardous waste pursuant to any other Environmental Law. "Highest Lawful Rate" means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. "HSI Aviation" means HSI Aviation, Inc., a Missouri corporation. "Huntco" means Huntco Inc., a Missouri corporation. "Huntco Nevada" means Huntco Nevada, Inc., a Nevada corporation. "Intercreditor Agreement" means the Intercreditor Agreement dated as of even date herewith between Lender and Congress. "Interest Period" means the period (a) commencing on (i) for the initial Interest Period, the Effective Date, and (ii) for each subsequent Interest Period, the last day of the immediately preceding Interest Period and (b) ending on the date which is three months after the commencement of such period, provided, however, that any Interest Period for the Loan which would otherwise end after the Maturity Date shall end on the Maturity Date. "Inventory" means, with respect to any Person, all of such Person's now owned and hereafter existing or acquired raw materials, work in process, finished goods and all other inventory of whatsoever kind or nature, wherever located. "Lender" means Enron North America Corp., a Delaware corporation. "LIBOR" means, for any Interest Period, an interest rate per annum equal to the rate per annum reported two Business Days prior to the start of the Interest Period, on Telerate Access Service Page 3750 (British Bankers Association Interest Settlement Rates) provided by Telerate Systems Incorporated (or, if such Telerate Page shall cease to be publicly available, as reported by Reuters or any publicly available source of similar market data reasonably selected by Lender), as the London Interbank Offered Rate for U.S. dollar deposits having a term equal to such Interest Period and in an amount substantially equal to the amount of the Loan. "LIBOR Rate" means, for any Interest Period, the per annum rate equal to sum of the LIBOR plus 3.00%, based on a 360 day year for the actual number of days elapsed. "Lien" means any mortgage, lien, pledge, charge, deed of trust, security interest, encumbrance, or other type of preferential arrangement to secure or provide for the payment of any obligation of any Person, whether arising by contract, operation of law, or otherwise (including any title retention for such purposes under any conditional sale agreement, any Capital Lease, or any other title transfer or retention agreement). "Loan" has the meaning specified in Section 2.1. "Loan Documents" means this Agreement, the Note, the Security Documents, the Guaranties, and each other agreement, instrument, or document executed at any time in connection with this Agreement. "Material Adverse Change" means, with respect to any Person, any material and adverse change in (a) the assets, liabilities, financial condition, business, operations, affairs, or circumstances of such Person or any of its Subsidiaries from those reflected in the Financial Statements or from the facts represented or warranted in the Loan Documents, (b) the ability of such Person to perform its obligations under the Loan Documents, or (c) Lenders' legal ability to enforce its rights and remedies under the Loan Documents. "Maturity Date" means the day which is five (5) years after the Effective Date. "Midwest" means Midwest Products, Inc., a Missouri corporation. "Mortgages" means any present or future deeds of trust or mortgages made by an Obligor or any of its Subsidiaries in favor of Lender granting a security interest in real property or fixtures of such Obligor or any of its Subsidiaries to secure the Obligations. "Note" means the $10,000,000 Promissory Note dated as of April 6, 2001, made by Borrower and payable to Lender. "Obligations" means all principal, interest, fees, reimbursements, indemnifications, and other amounts now or hereafter owed by the Obligors to Lender under the Loan Documents or the Transaction Documents. "Obligor" means Borrower and each of the Guarantors. "Payment Date" means, for any Interest Period, the last day of such Interest Period, provided, however, that whenever the last day of any Interest Period occurs on a day other than a Business Day, the Payment Date for such Interest Period shall be extended to occur on the next succeeding Business Day; provided that if such extension would cause the Payment Date for such Interest Period to occur in the next following calendar month or after the Maturity Date, the Payment Date for such Interest Period shall occur on the next preceding Business Day. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, or other entity, or a government or any political subdivision or agency thereof, or any trustee, receiver, custodian, or similar official. "Plan" means any (a) employee medical benefit plan under Section 3(1) of ERISA, (b) employee pension benefit plan under Section 3(2) of ERISA, (c) multiemployer plan under Section 4001(a)(3) of ERISA, and (d) employee account benefit plan under Section 3(2) of ERISA. "Pledge Agreement" means collectively, the Pledge Agreement dated as of April 6, 2001, made by Huntco granting Lender a security interest in the capital stock or membership interests, as applicable, of each Subsidiary of Huntco, to secure the Obligations, the Pledge Agreement dated as of April 6, 2001, made by Huntco Nevada granting Lender a security interest in the capital stock or membership interests, as applicable, of each Subsidiary of Huntco Nevada, to secure the Obligations, the Pledge Agreement dated as of April 6, 2001, made by HSI granting Lender a security interest in the capital stock or membership interests, as applicable, of each Subsidiary of HSI, to secure the Obligations and all other pledge agreement now in existence or hereafter entered into to secure the Obligations. "Prime Rate" means, for any date of its determination, the rate of interest most recently published in the "Money and Investing" section of the Wall Street Journal as the "prime rate." "Prohibited Transaction" means any transaction set forth in Section 406 of ERISA or Section 4975 of the Code. "Real Property" means, with respect to any Person, all now owned and hereafter acquired real property of such Person, including leasehold interests, together with all buildings, structures, and other improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located, and, with respect to the Borrower, including the real property and related assets more particularly described in the mortgages located in Blytheville, Arkansas, Chattanooga, Tennessee, Gallatin County, Kentucky, Madison, Illinois, Catoosa, Oklahoma, Pasadena, Texas, Springfield, Missouri and Strafford, Missouri. "Records" means, with respect to any Person, all of such Person's present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of such Person with respect to the foregoing maintained with or by any other person). "Related Parties" means, with respect to any Person, such Person's stockholders, directors, officers, employees, agents, Affiliates, successors, and assigns, and their respective stockholders, directors, officers, employees, and agents, and, with respect to any Person that is an individual, such Person's family relations and heirs. "Reportable Event" means any of the events set forth in Section 4043 of ERISA. "Replacement Senior Loan Agreement" means any loan agreement between Borrower and any lender thereto which amends, modifies, refinances or otherwise replaces the Senior Loan Agreement as permitted under Section 5.23 hereto. "Security Agreement" means each Security Agreement dated as of April 6, 2001, made by an Obligor in favor of Lender granting Lender a security interest in all of the personal property of such Obligor, including accounts receivable, equipment, inventory, intellectual property rights, and contract rights to secure the Obligations. "Security Documents" means the Security Agreements, the Pledge Agreements, the Guarantees, the Intercreditor Agreement, and any other document creating or consenting to Liens in favor of Lender securing the Obligations. "Senior Lender" means Congress, any successor or assign to Congress' rights under the Senior Loan Agreement, and any lender under a Replacement Senior Loan Agreement. "Senior Loan Agreement" means the Loan and Security Agreement dated April 15, 1999, by and among Congress, as lender, Borrower and Midwest Products, Inc., as borrowers, and Huntco Inc., Huntco Nevada, Inc., and HSI Aviation, Inc., as guarantors, as in effect on the date hereof and attached hereto as Exhibit B. "Subsidiary" means, with respect to any Person, any other Person, more than 50% of whose outstanding Voting Securities shall at any time be owned by such Person or one or more Subsidiaries of such person. "Transaction Documents" shall have the meaning set forth in the Master Steel Purchase and Sale Agreement, dated as of April 6, 2001, between HSI and Lender. "Voting Securities" means (a) with respect to any corporation, any capital stock of the corporation having general voting power under ordinary circumstances to elect directors of such corporation, (b) with respect to any partnership, any partnership interest having general voting power under ordinary circumstances to elect the general partner or other management of the partnership, and (c) with respect to any other Person, such ownership interests in such Person having general voting power under ordinary circumstances to elect the management of such Person, in each case irrespective of whether at the time any other class of stock, partnership interests, or other ownership interest might have special voting power or rights by reason of the happening of any contingency. 1.2 Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding." 1.3 Accounting Terms; Preparation of Financials. (a) All accounting terms, definitions, ratios, and other tests described herein shall be construed in accordance with United States generally accepted accounting principles applied on a consistent basis with those applied in the preparation of the Financial Statements, together with such changes in such principles as may be required by the promulgators of such principles, except as expressly set forth otherwise in this Agreement. (b) Each Obligor shall prepare its financial statements in accordance with United States generally accepted accounting principles applied on a consistent basis with those applied in the preparation of the Financial Statements, unless otherwise approved in writing by Lender. 1.4 Interpretation. Article, Section, Schedule, and Exhibit references are to this Agreement, unless otherwise specified. All references to instruments, documents, contracts, and agreements are references to such instruments, documents, contracts, and agreements as the same may be amended, supplemented, and otherwise modified from time to time, unless otherwise specified. The word "including" shall mean "including but not limited to." The word "or" shall mean "and/or" wherever necessary to prevent interpretation of any provision against Lender. Whenever an Obligor has an obligation under the Loan Documents, the expense of complying with that obligation shall be an expense of such Person unless otherwise specified. Whenever any determination is to be made by Lender, such determination shall be in Lender's sole discretion unless otherwise specified in this Agreement. If any provision in the Loan Documents is held to be illegal, invalid, not binding, or unenforceable, such provision shall be fully severable and the Loan Documents shall be construed and enforced as if such illegal, invalid, not binding, or unenforceable provision had never comprised a part of the Loan Documents, and the remaining provisions shall remain in full force and effect. The Loan Documents have been reviewed and negotiated by sophisticated parties with access to legal counsel and shall not be construed against the drafter. In the event of a conflict between this Agreement and the other Loan Documents, this Agreement shall control. ARTICLE 2 THE FACILITY 2.1 The Facility. On the terms and conditions set forth in this Agreement, Lender agrees to make a loan to Borrower in an amount equal to the Commitment (the "Loan"). Lender shall make available the Loan in funds immediately available to Borrower. The obligation of Borrower to repay the Loan made by Lender and to pay interest thereon at the rates provided herein shall be evidenced by the Note, payable to the order of Lender and in the principal amount of the Commitment. 2.2 Prepayment. Borrower may from time to time voluntarily prepay the outstanding principal amount of the Loan pursuant to written notice given by Borrower to Lender not less than five Business Days prior to the date of prepayment. Each such notice shall specify the principal amount which shall be prepaid and the date of the prepayment, and shall be irrevocable and binding on Borrower. Partial prepayments of the Loan must be made in an amount equal to or greater than $250,000. For each such notice given by Borrower, Borrower shall prepay the Loan in the specified amount on the specified date as set forth in such notice. Borrower shall have no right to prepay any principal amount of the Loan except as provided in this Section 2.2. Each prepayment of principal pursuant to this Section 2.2 shall be accompanied by payment of all accrued but unpaid interest on the principal amount prepaid, and any LIBOR breakage payment required by Lender under Section 2.4(c). All voluntary prepayments under this Section 2.2 shall be applied to the required principal payments on the Loan in the inverse order of maturity. 2.3 Repayment. Borrower shall pay to Lender mandatory principal repayments as follows: Principal repayments in the amount of $250,000 shall be due and payable on the day before the first anniversary of the Effective Date and on the date six (6) months after such first scheduled principal repayment date; Principal repayments in the amount of $500,000 shall be due and payable on the day before the second anniversary of the Effective Date and at the end of each six (6) months thereafter; and Borrower shall repay the aggregate outstanding principal amount of the Loan on the Maturity Date. If any payment required under this Section 2.3 occurs on a day other than a Business Day, then such payment shall be due on the next succeeding Business Day; provided that if such extension would cause such payment to occur in the next following calendar month or after the Maturity Date, then such payment shall be made on the next preceding Business Day. 2.4 Interest. (a) Interest Rate and Payments. The outstanding principal amount of the Loan shall bear interest during each applicable Interest Period at a per annum rate equal to the LIBOR Rate (as defined in Section 1.1). Borrower shall pay to Lender all accrued but unpaid interest on the Loan (i) on the Payment Date for each such Interest Period, (ii) when required upon prepayment as specified elsewhere in this Agreement, and (iii) on the Maturity Date. (b) If the outstanding principal amount of the Loan is converted to accrue interest based upon the Prime Rate pursuant to Sections 2.4(f) or 2.4(g), the outstanding principal amount of the Loan shall bear interest during each applicable Interest Period at a per annum interest rate equal to the Prime Rate in effect from time to time. Borrower shall pay to Lender all accrued but unpaid interest on the Loan (i) on the Payment Date for each such Interest Period, (ii) when required upon prepayment as specified elsewhere in this Agreement, and (iii) on the Maturity Date. (c) If, while the Loan is accruing interest based upon the LIBOR Rate (i) any payment of principal on or any conversion of the Loan is made on any date other than the first day of an Interest Period, whether as a result of any voluntary or mandatory prepayment, maturity, any acceleration of maturity, or any other cause, (ii) any payment of principal on the Loan is not made when due, whether as a result of any mandatory prepayment, maturity, any acceleration of maturity, or any other cause, or (iii) the Loan is not prepaid in accordance with the respective notice thereof provided by Borrower to Lender, whether as a result of any failure to meet any applicable conditions precedent for prepayment, the permitted cancellation of any request for prepayment, or any other cause not specified above which is created by Borrower, then Borrower shall pay to Lender any amounts requested to compensate Lender for any losses, costs, and expenses directly related to the liquidation or redeployment of funds acquired or designated by Lender to fund or maintain such Loan or directly related to the reacquisition or redesignation of funds by Lender to fund or maintain such Loan following any liquidation or redeployment of such funds caused by such action, together with any associated administrative expenses, in each case which Lender may reasonably allocate to such action, such amounts being due and payable within twenty (20) days after demand by Lender. Lender may allocate such losses, costs, and expenses and associated administrative expenses to Borrower in accordance with Lender's standard practices, without the necessity of proving any specific matched funding for this Agreement. A certificate by an authorized officer of Lender as to the amount of such loss, cost, or expense and associated administrative expenses detailing the calculation thereof shall be conclusive and binding for all purposes, absent manifest error. (d) If, due to either (i) any introduction of, change in, or change in the interpretation of any law or regulation after the date of this Agreement or (ii) compliance with any guideline or request from any central bank or other governmental authority having appropriate jurisdiction (whether or not having the force of law) given after the date of this Agreement, there shall be any increase in the costs of Lender allocable to committing to make, funding, or maintaining any Loan accruing interest based upon the LIBOR Rate or obtaining funds for committing, funding, or maintaining any Loan accruing interest based upon the LIBOR Rate in the relevant interbank market, including in each case any increase in any applicable reserve requirement specified by the Federal Reserve Board and applicable to Lender whether for emergency, marginal, supplemental, or other reserves, then Borrower shall pay to Lender any amounts requested to compensate Lender for such increased costs in accordance with Lender's standard practices, such amounts being due and payable within twenty (20) days after demand by Lender. Lender shall allocate such increased costs to the Loan under this Agreement in accordance with its standard practices. A certificate by an authorized officer of Lender as to the cause and amount of such increased cost detailing the calculation of such cost submitted by Lender to Borrower shall be conclusive and binding for all purposes, absent manifest error. (e) If, due to either (i) any introduction of, change in, or change in the interpretation of any law or regulation after the date of this Agreement or (ii) compliance with any guideline or request from any central bank or other governmental authority having appropriate jurisdiction (whether or not having the force of law) given after the date of this Agreement, there shall be any increase in the capital requirements of Lender allocable to committing to make, funding, or maintaining Loans, as such capital requirements are allocated by Lender, then Borrower shall pay to Lender within twenty (20) days after demand any amounts requested to compensate Lender for such increase in costs (including an amount equal to any reduction in the rate of return on assets or equity of Lender) in accordance with Lender's standard practices. Lender shall allocate such increased costs to the Loan under this Agreement in accordance with its standard practices. A certificate by an authorized officer of Lender as to the cause and amounts detailing the calculation of such amounts submitted by Lender to Borrower shall be conclusive and binding for all purposes, absent manifest error. (f) Notwithstanding any other provision in this Agreement, if it becomes unlawful for Lender to commit to make, fund, or maintain any Loan accruing interest based upon the LIBOR or to obtain deposits or other funds for committing, funding, or maintaining any Advance accruing interest based upon the LIBOR Rate in the relevant interbank market, Lender shall so notify Borrower and Lender's commitment to create and maintain any Loan accruing interest based upon the LIBOR Rate shall be suspended until such condition has passed, and all Loans accruing interest based upon the LIBOR Rate shall be converted to accrue interest based upon the Prime Rate as of the end of each applicable Interest Period or earlier if necessary. (g) Notwithstanding any other provision in this Agreement, if Lender determines that: (a) quotations of interest rates for the relevant deposits referred to in the definition of "LIBOR" are not being provided in the relevant amounts or maturities for purposes of determining the rate of interest referred to in the definition of "LIBOR" or (b) the relevant rates of interest referred to in the definition of "LIBOR" which are used as the basis to determine the rate of interest for Loans accruing interest based upon the LIBOR Rate are not likely to adequately cover the cost to Lender of making or maintaining any such Loan, then if Lender so notifies Borrower, the commitment of Lender to create and maintain the Loan accruing interest based upon the LIBOR Rate shall be suspended until such condition has passed, and the Loan shall be converted to and maintained to accrue interest based upon the Prime Rate as of the end of each applicable Interest Period. 2.5 Payments; Computations. (a) Lender shall retain records of the advancing of the Loan and all payments of principal and interest thereon, but the failure of Lender to do so shall not relieve Borrower of its liability for the payment thereof. Such records shall be conclusive and binding regarding the outstanding principal amount of the Loan and the accrued but unpaid interest thereon, absent manifest error. (b) All payments made by or on behalf of Borrower under this Agreement and the Note shall be made by wire transfer in immediately available funds before 2:00 p.m. (Houston, Texas Time) on the date such payment is required to be made to the account directed by Lender from time to time in writing. Any payment received by Lender after such time shall be considered for all purposes, including the calculation of interest, as having been made on the next following Business Day. All payments required to be made by Borrower shall be made without any counterclaim, offset, abatement, withholding, or reduction whatsoever. (c) Whenever any payment under this Agreement and the Note shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day. In either case, such extension of time shall be included in the computation of the payment of interest, fees, or such other amount due on the outstanding amount. If the time for payment for an amount payable is not specified under this Agreement or the Note, the payment shall be due and payable ten (10) days after the date on which Lender demands payment therefor. (d) If the method of computing any interest or fees is not otherwise set forth in this Agreement or the Note, such interest shall be computed based upon the applicable per annum rate set forth in this Agreement or the Note computed on the basis of a 360 day year for the actual number of days elapsed. (e) In the event Borrower shall fail to make or cause to be made any of the payments required under the foregoing provisions of this Section, the amount not so paid shall continue as an obligation of Borrower until the amount not so paid shall have been fully paid, and shall continue to bear interest at the rate per annum previously accruing or at the Default Rate. 2.6 Taxes. (a) Any and all payments by Borrower to Lender shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges, or withholdings, and all liabilities with respect thereto, excluding taxes imposed on Lender's income and franchise taxes imposed on Lender by any jurisdiction of which Lender is a citizen or resident or any political subdivision of such jurisdiction (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as "Taxes"). If Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable to Lender, (i) the sum payable shall be increased as may be necessary so that, after making all required deductions (including deductions applicable to additional sums payable under this Section 2.6), Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions, and (iii) Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) Borrower agrees to pay and hold Lender harmless from and against any and all present and future stamp and other similar taxes with respect to this Agreement and the Loan Documents and save Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes, and indemnify Lender for the full amount of such taxes paid by Lender, whether or not such taxes were correctly or legally asserted. ARTICLE 3 CONDITIONS PRECEDENT. 3.1 Conditions Precedent to Initial Extensions of Credit. The obligation of Lender to make the initial extension of credit under this Agreement, including any advance of principal under any Note, shall be subject to the condition precedent that each Obligor shall have delivered or shall have caused to be delivered the following: (a) an executed copy of an amendment to the Senior Loan Agreement which appropriately modifies the net worth covenant, (b) executed copies of the Transaction Documents, (c) satisfactory evidence that all post closing items set forth in the Post Closing Agreement, dated of even date herewith, among Lender and the Obligors have been completed to Lender's satisfaction and (d) the documents and other items reasonably requested by Lender to document the agreements and intent of the Loan Documents, each in form and substance satisfactory to Lender. ARTICLE 4 REPRESENTATIONS AND WARRANTIES. Each Obligor represents and warrants to Lender as follows: 4.1 Organization. As of the date of this Agreement, each Obligor is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization and is duly licensed, qualified to do business, and in good standing in each jurisdiction in which it is organized, owns property, or conducts operations to the extent that any failure to be so licensed, qualified, or in good standing could reasonably be expected to cause a Material Adverse Change. 4.2 Authorization. The execution, delivery, and performance by each Obligor of its obligations under the Loan Documents and the consummation of the transactions contemplated thereby (a) do not contravene its respective organizational documents, (b) have been duly authorized by all necessary corporate action, and (c) are within each Obligor's corporate powers. 4.3 Enforceability. Each Loan Document has been duly executed and delivered by each Obligor party thereto, and constitutes the legal, valid, and binding obligation of each such Obligor, enforceable against such Obligor in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws at the time in effect affecting the rights of creditors generally and subject to the availability of equitable remedies. 4.4 Absence of Conflicts and Approvals. The execution, delivery, and performance by each Obligor of the Loan Documents and the consummation of the transactions contemplated thereby, (a) do not result in any violation or breach of any provisions of, or constitute a default under, any note, indenture, credit agreement, security agreement, credit support agreement, or other similar agreement to which such Obligor is a party or any other material contract or agreement to which such Obligor is a party, (b) do not violate any law or regulation binding on or affecting such Obligor, (c) do not require any authorization, approval, or other action by, or any notice to or filing with, any governmental authority, and (d) do not result in or require the creation or imposition of any Lien prohibited by this Agreement. 4.5 Investment Companies. No Obligor nor any Affiliate thereof is an "investment company" or a company "controlled" by an "investment company," in each case within the meaning of the Investment Borrower Act of 1940, as amended. 4.6 Public Utilities. No Obligor nor any Affiliate thereof is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company," within the meaning of the Public Utility Holding Borrower Act of 1935, as amended, or such Persons are exempt from regulation thereunder. 4.7 Financial Condition. (a) Huntco has delivered to Lender its audited, consolidated financial statements dated as of December 31, 1999, its unaudited, unadjusted consolidated and consolidating financial statements at and for the twelve months ended December 31, 2000, as well as its unaudited, unadjusted consolidated and consolidating financial statements at and for the months ended January 2001 and February 2001, as well as its unaudited consolidated financial statements at and for the three and nine months ended September 30, 2000 included within Huntco's Quarterly Report on Form 10-Q. Such financial statements include the balance sheet as of such respective date, and the related statements of operations, cash flows and changes in shareholders' equity for the periods then ended. These financial statements are accurate and complete in all material respects, subject to year end accounting adjustments applicable to the financial statements at and for the year ended December 2000, and the reciprocal adjustments stemming from such potential adjustments that may impact the financial statements at and for the periods ended January and February 2001, and present fairly (subject to the above- referenced potential adjustments) the financial condition of Obligors as of such date in accordance with generally accepted accounting principles. (b) As of the date of the Financial Statements, there were no material contingent obligations, liabilities for taxes, unusual forward or long-term commitments, or unrealized or anticipated losses of Obligors, except as disclosed in the Financial Statements, and adequate reserves for such items have been made in accordance with generally accepted accounting principles. Except as disclosed on Schedule 4.7 hereto, no Material Adverse Change has occurred since the date of the most current Financial Statements described above. (c) No Default exists except as disclosed on Schedule 4.7 hereto. 4.8 Condition of Assets. Each Obligor has good and indefeasible title to all of its owned property and valid leasehold rights in all of its leased property, as reflected in the financial statements most recently provided to Lender free and clear of all Liens except Liens permitted under Section 5.7. Each Obligor possesses and has properly approved, recorded, and filed, where applicable, all permits, licenses, patents, patent rights or licenses, trademarks, trademark rights, trade names rights, and copyrights which are useful in the conduct of its business and which the failure to possess could reasonably be expected to cause a Material Adverse Change. The material properties used or to be used in the continuing operations of each Obligor are in good repair, working order (if completed), and condition, normal wear and tear excepted. The properties of each Obligor have not been adversely affected as a result of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike or other labor disturbance, embargo, requisition or taking of property or cancellation of contracts, permits, or concessions by a governmental authority, riot, activities of armed forces, or acts of God or of any public enemy in any manner which (after giving effect to any insurance proceeds) could reasonably be expected to cause a Material Adverse Change. 4.9 Litigation. Except as set forth on Schedule 4.9 hereto, there are no actions, suits, or proceedings pending or, to the knowledge of each Obligor, threatened against any Obligor at law, in equity, or in admiralty, or by or before any governmental department, commission, board, bureau, agency, or instrumentality, domestic or foreign, or any arbitrator which could reasonably be expected to cause a Material Adverse Change. 4.10 Subsidiaries. Except as an Obligor may be a Subsidiary of another Obligor, each Obligor has no Subsidiaries. 4.11 Laws and Regulations. Each Obligor has been and is in compliance with all federal, state, and local laws and regulations which are applicable to the operations and property of such Person and which the failure to comply with could reasonably be expected to cause a Material Adverse Change. 4.12 Environmental Compliance. (a) Except as set forth on Schedule 4.12 hereto, no Obligor (or any Subsidiary) has generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off its premises (whether or not owned by it) in any manner which at any time violates any applicable Environmental Laws or any license, permit, certificate, approval, or similar authorization thereunder and the operations of each Obligor complies in all respects with all Environmental Laws and all licenses, permits, certificates, approvals, and similar authorizations thereunder where the failure to so comply could cause a Material Adverse Change. (b) Except as set forth on Schedule 4.12 hereto, there has been no investigation, proceeding, complaint, order, directive, claim, citation, or notice by any governmental authority or any other person nor is any pending or to the best of Obligor's knowledge threatened, with respect to any non-compliance with or violation of the requirements of any Environmental Law by any Obligor (or any Subsidiary) or the release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production, or disposal of any Hazardous Materials or any other environmental, health or safety matter, which affects any Obligor or its business, operations, or assets or any properties at which any Obligor has transported, stored, or disposed of any Hazardous Materials which would have a Material Adverse Effect. (c) No Obligor has material liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials. Without limiting the generality of the foregoing, no Obligor has any material liability with respect to the matters disclosed in the Phase I Environmental Site Assessment Reports dated March 22, 1999, by Hall, Blake and Associates, Inc., with respect to the real property of Borrower in Blytheville, Arkansas and the Phase I Report by United Agricultural Services Inc. dated November 17, 1993, with respect to the real property of Borrower in Blytheville, Arkansas. (d) Each Obligor has all licenses, permits, certificates, approvals or similar authorizations required to be obtained or filed in connection with the operations of such Obligor under any Environmental Laws and all of such licenses, permits, certificates, approvals or similar authorizations are valid and in full force and effect. 4.13 ERISA. Each Obligor is in compliance in all material respects with all provisions of ERISA, and as of the date of this Agreement, neither participates in, nor during the past five years has participated in, any employee pension benefit plan covered by Title IV of ERISA or any multiemployer plan under Section 4001(a)(3) of ERISA. With respect to the Plans of the Obligor, no Material Reportable Event or Prohibited Transaction has occurred and exists. 4.14 Taxes. Each Obligor has filed all United States federal, state, and local income tax returns and all other domestic and foreign tax returns which are required to be filed by it and has paid, or provided for the payment before the same became delinquent of, all taxes due pursuant to such returns or pursuant to any assessment received by such Obligor except for tax payments being contested in good faith for which adequate reserves have been made and reported in accordance with generally accepted accounting principles and which could not reasonably be expected to cause a Material Adverse Change. The charges, accruals, and reserves on the books of each Obligor in respect of taxes are adequate in accordance with generally accepted accounting principles. 4.15 Capitalization. (a) Except as a result of transactions permitted under Section 5.9, all of the issued and outstanding: (i) shares of Capital Stock of Huntco Nevada, Inc., are directly and beneficially owned and held by Huntco Inc. as of the date hereof, (ii) shares of Capital Stock of Borrower and Midwest Products, Inc., are directly and beneficially owned and held by Huntco Nevada, Inc., and (iii) shares of Capital Stock of HSI Aviation, Inc., are directly and beneficially owned and held by Borrower and in each case all of such shares referred to in clauses (i), (ii) and (iii) above have been duly authorized and are fully paid and non-assessable, free and clear of all claims, liens, pledges and encumbrances of any kind. (b) Each Obligor is solvent and will continue to be solvent after the creation of the Obligations, the security interests of Lender, and the other transactions contemplated hereunder, is able to pay its debts as they mature, and has (and has reason to believe it will continue to have) sufficient capital to carry on its business and all businesses in which it is about to engage. The assets and properties of each Obligor at a fair valuation and at their present fair salable value are, and will be, greater than the indebtedness of such Obligor, and including subordinated and contingent liabilities computed at the amount which, to the best of such Obligor's knowledge, represents an amount which can reasonably be expected to become an actual or matured liability. 4.16 Validity of Liens. The security interests and liens granted to Lender hereunder and under the other Loan Documents constitute valid and perfected liens and security interests in and upon the Collateral covered by the Security Documents (other than motor vehicles listed on Schedule 5.7 for which compliance with the applicable state certificate of title statute is required in order to perfect a security interest and other than any aircraft or related assets listed on Schedule 5.7 which require filings with the Federal Aviation Administration in order to perfect a security interest). 4.17 Chief Executive Office; Collateral Locations. The chief executive office of each Obligor and each Obligor's records are located only at the addresses set forth on Schedule 4.17 and its only other places of business and the only other locations of Collateral, if any, are the addresses set forth in Schedule 4.17, subject to the right of each Obligor to establish new locations in accordance with Section 5.18. Schedule 4.17 correctly identifies any of such locations which are not owned by Obligors and sets forth the owners and/or operators thereof and to the best of each Obligor's knowledge, the holders of any mortgages on such locations. 4.18 Bank Accounts. All of the deposit accounts, investment accounts or other accounts in the name of or used by any Obligor maintained at any bank or other financial institution are set forth on Schedule 4.18 hereto, subject to the right of Obligor to establish new accounts in accordance with Section 5.5. 4.19 True and Complete Disclosure. All factual information furnished by or on behalf of each Obligor in writing to Lender in connection with the Loan Documents and the transactions contemplated thereby was true and accurate in all material respects on the date as of which such information was dated or certified and did not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements contained therein not misleading. All projections, estimates, and pro forma financial information furnished by each Obligor were prepared on the basis of assumptions, data, information, tests, or conditions believed to be reasonable at the time such projections, estimates, and pro forma financial information were furnished. 4.20 Survival of Warranties; Cumulative. All representations and warranties contained in this Agreement or any of the other Loan Documents shall survive the execution and delivery of this Agreement, and shall be conclusively presumed to have been relied on by Lender regardless of any investigation made or information possessed by Lender. The representations and warranties set forth herein shall be cumulative and in addition to any other representations or warranties which Obligors shall now or hereafter give, or cause to be given, to Lender. ARTICLE 5 COVENANTS. Until Lender receives irrevocable payment of the Obligations and has terminated this Agreement and each other Loan Document, each Obligor shall comply and cause compliance with the following covenants unless and to the extent the same are waived by Lender: 5.1 Organization. Each Obligor shall maintain itself as an entity (a) duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization and (b) duly licensed, qualified to do business, and in good standing in each jurisdiction in which it is organized, owns property, or conducts operations and which requires such licensing or qualification and where failure to be so licensed, qualified, or in good standing could reasonably be expected to cause a Material Adverse Change. 5.2 Reporting. Borrower shall furnish to Lender all of the following: (a) Annual Financial Reports. As soon as available and in any event not later than ninety (90) days after the end of each fiscal year of Huntco, a copy of Huntco's annual consolidated audit report for such fiscal year, including therein the consolidated balance sheet as of the end of such fiscal year and the consolidated statement of operations, stockholders' equity, and cash flows for such fiscal year, setting forth the consolidated financial position and results of Huntco for such fiscal year and certified, without any qualification or limit of the scope of the examination of matters relevant to the financial statements, by a recognized certified public accounting firm. It is acknowledged and agreed that delivery to Lender of copies of Huntco's Annual Reports on Form 10-K for any applicable fiscal year filed with the Securities and Exchange Commission (or any governmental body or agency succeeding to the functions of the Securities and Exchange Commission) shall be deemed to satisfy the requirements of this Section 5.2(a) with respect to furnishing Lender with consolidated financial statements for any such fiscal year, provided, that, it is received by Lender by the date required hereunder; (b) Monthly Financial Reports. As soon as available and in any event not later than forty-five (45) days after the end of each fiscal month of Huntco, a copy of the internally prepared consolidated and consolidating financial statements of Huntco for such fiscal month and for the fiscal year to date period ending on the last day of such fiscal month, including therein the consolidated and consolidating balance sheets of Huntco as of the end of such fiscal month and the consolidated and consolidating statements of operations, stockholders equity, and cash flows for such fiscal month and for such fiscal year to date period, setting forth the consolidating and consolidated financial position and results of Huntco for such fiscal month and fiscal year to date period; (c) Budgets. Annual budgets, forecasts, projections and other information respecting the businesses of Obligors which shall be delivered within thirty (30) days of the end of the prior calendar year and Obligors shall deliver to Lender revised budgets, forecasts, projections and other information within five (5) Business Days of any material adjustment to the previously delivered budgets, forecasts, projections and other information; (d) Defaults. Promptly, but in any event within five (5) Business Days after the discovery thereof, a notice of any facts which constitute a Default, together with a statement of Borrower setting forth the details of such facts and the actions which Borrower has taken and proposes to take with respect thereto; (e) Litigation. Promptly after the commencement thereof, notice of all actions, suits, and proceedings before any court or governmental department, commission, board, bureau, agency, or instrumentality, domestic or foreign, affecting an Obligor which, if determined adversely, could reasonably be expected to result in a judgement in excess of $500,000 after the application of any undisputed insurance coverage payable in connection with such claim or cause a Material Adverse Change; (f) Material Contingent Liabilities. Promptly after acquiring knowledge thereof, notice of any material contingent liabilities, including notice of any contingent liabilities in an amount in excess of $500,000; (g) Material Agreement Default. Promptly after obtaining knowledge thereof, notice of any breach by any Obligor of any contract or agreement which breach could reasonably be expected to cause a Material Adverse Change; (h) Material Changes. Prompt written notice of any condition or event of which an Obligor has knowledge, which condition or event has resulted or could reasonably be expected to cause a Material Adverse Change; and (i) Other Information. Such other information respecting the business operations or property of such Obligor, financial or otherwise, as Lender may from time to time reasonably request. 5.3 [Intentionally Deleted]. 5.4 Use of Proceeds. The proceeds of the Loan shall be used by Borrower only for the repayment of Debt to trade vendors and Congress. Borrower shall not, directly or indirectly, use any part of such proceeds for any purpose which violates applicable laws or regulations. 5.5 Additional Bank Accounts. Neither Obligor nor any of its Subsidiaries shall, directly or indirectly, open, establish or maintain any deposit account, investment account, or any other account with any bank or other financial institution, other than (i) the accounts permitted pursuant to the terms of the Senior Loan Agreement, (ii) the accounts set forth in Schedule 4.18 hereto, (iii) other accounts created with the prior written consent of Lender and subject to such conditions thereto as Lender may establish, and (iv) as to any accounts used by such Obligor to make payments of payroll, taxes, or other obligations to third parties, created after prior written notice to Lender. 5.6 Debt. Neither Obligor nor any of its Subsidiaries shall create, assume, incur, suffer to exist, or in any manner become liable, directly, indirectly, or contingently in respect of, any Debt other than the following Debt: (a) the Obligations; (b) the obligations owed to the Senior Lender under the Senior Loan Agreement or the Replacement Senior Loan Agreement; (c) Debt permitted pursuant to the terms of Section 9.9(b)-(j) of the Senior Loan Agreement, provided that, in connection with Obligor incurring any such Debt, Lender shall have the rights described in Section 5.22 hereof. 5.7 Liens. Neither Obligor nor any of its Subsidiaries shall create, assume, incur, or suffer to exist any Lien on any of its real or personal property whether now owned or hereafter acquired, or assign any right to receive its income, except for the following Liens: (a) Liens securing the Obligations; (b) Liens of the Senior Lender arising under the Senior Loan Agreement or the Replacement Senior Loan Agreement, securing the obligations thereunder; and (c) Liens permitted pursuant to the terms of Section 9.8(b)-(l) of the Senior Loan Agreement, provided that, in connection with the Obligor becoming subject to any such Lien, Lender shall have the rights described in Section 5.22 hereof. 5.8 Loans, Investments, Guarantees, etc. Neither Obligor nor any of its Subsidiaries shall, directly or indirectly, make any loans or advance money or property to any Person, or invest in (by capital contribution, dividend or otherwise) or purchase or repurchase the Capital Stock or Debt or all or a substantial part of the assets or property of any person, or guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly) the Debt, performance, obligations or dividends of any Person or form or acquire any Subsidiaries or agree to do any of the foregoing, except as permitted pursuant to Section 9.10(a)-(n) of the Senior Loan Agreement, provided that, in connection with any of the foregoing provisions of the Senior Loan Agreement, Lender shall have the rights described in Section 5.22 hereof. 5.9 Sales of Assets, Consolidation, Merger, Dissolution, Etc.. Neither Obligor nor any of its Subsidiaries shall, directly or indirectly, (a) merge into or with or consolidate with any other Person or permit any other Person to merge into or with or consolidate with it, except as permitted pursuant to the terms of Section 9.7(a) of the Senior Loan Agreement, provided, that, in connection with such Section 9.7(a), Lender shall have the rights described in Section 5.22 hereof. (b) sell, assign, lease, transfer, abandon or otherwise dispose of any Capital Stock or Debt to any other Person or any of its assets to any other Person except as permitted pursuant to the terms of Section 9.7(b) of the Senior Loan Agreement, provided, that, in connection with such Section 9.7(b), Lender shall have the rights described in Section 5.22 hereof. (c) wind up, liquidate, or dissolve; or (d) agree to do any of the foregoing. 5.10 Distributions. Neither Obligor nor any of its Subsidiaries shall, directly or indirectly, declare or pay any dividends on account of any shares of class of Capital Stock of such Obligor now or hereafter outstanding, or set aside or otherwise deposit or invest any sums for such purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of any class of Capital Stock (or set aside or otherwise deposit or invest any sums for such purpose) for any consideration other than common stock or apply or set apart any sum, or make any other distribution (by reduction of capital or otherwise) in respect of any such shares or agree to do any of the foregoing, except as permitted pursuant to the terms of Section 9.11(a)-(e) of the Senior Loan Agreement, provided, that, in connection with the any of the foregoing provisions of the Senior Loan Agreement, Lender shall have the rights described in Section 5.22 hereof. 5.11 Transactions with Affiliates. Neither Obligor nor any of its Subsidiaries shall, directly or indirectly, (a) purchase, acquire or lease any property from, or sell, transfer or lease any property to, any officer, director, agent or other Affiliate of any Obligor, except in the ordinary course of and pursuant to the reasonable requirements of such Obligor's business and upon fair and reasonable terms no less favorable to such Obligor than such Obligor would obtain in a comparable arm's length transaction with a person who is not an Affiliate, or (b) make any payments of management, consulting or other fees for management or similar services, or of any Debt owing to any officer, employee, shareholder, director or other Affiliate of any Obligor, except as permitted pursuant to the terms of Section 9.12(b)(i)-(vi) of the Senior Loan Agreement, provided, that, in connection with any of the foregoing provisions of the Senior Loan Agreement, Lender shall have the rights described in Section 5.22 hereof. 5.12 Insurance. (a) Each Obligor shall, and shall cause any Subsidiary to, at all times, maintain with financially sound and reputable insurers insurance with respect to the Collateral against loss or damage and all other insurance of the kinds and in the amounts customarily insured against or carried by corporations of established reputation engaged in the same or similar businesses and similarly situated. Said policies of insurance shall be reasonably satisfactory to Lender as to form, amount and insurer. Each Obligor shall furnish certificates, policies or endorsements to Lender as Lender shall require as proof of such insurance, and, if any Obligor fails to do so, Lender is authorized, but not required, to obtain such insurance at the expense of Borrower. All policies shall provide for at least thirty (30) days prior written notice to Lender of any cancellation or reduction of coverage and that Lender may act as attorney for any Obligor in obtaining, and at any time an Event of Default exists or has occurred, adjusting, settling, amending and canceling such insurance. Each Obligor shall cause Lender to be named as a loss payee and an additional insured (but without any liability for any premiums) under such insurance policies and each Obligor shall obtain non-contributory lender's loss payable endorsements to all insurance policies in form and substance satisfactory to Lender. Such lender's loss payable endorsements shall specify that the proceeds of such insurance shall be payable to Lender as its interests may appear and further specify that Lender shall be paid regardless of any act or omission by Obligors or any of their Affiliates. In the event that the proceeds are paid to Obligor in violation of the foregoing, Obligor shall hold the proceeds in trust for Lender, segregate the proceeds from the other funds of Obligor, and promptly pay the proceeds to Lender with any necessary endorsement. (b) At its option, Lender may apply any insurance proceeds received by Lender at any time to the cost of repairs or replacement of Collateral and/or to payment of the Obligations, whether or not then due, in any order and in such manner as Lender may determine or hold such proceeds as cash collateral for the Obligations, except that to the extent any Obligor has the right under Section 9.5(b) of the Senior Loan Agreement to require that insurance proceeds be applied to rebuilding a portion of the damaged Collateral such Obligor shall have identical rights under this Agreement as though such Section 9.5(b) of the Senior Loan Agreement were set forth in its entirety in this Agreement with all references to Senior Lender being treated as references to Lender under this Agreement. 5.13 Operation of Business. (a) No Obligor shall change the character of its business as conducted on the date of this Agreement, or engage in any type of business not reasonably related to such business as presently and normally conducted. (b) Each Obligor shall perform its obligations under all material contracts and prevent any breach or event of default by such Obligor thereunder. Each Obligor shall furnish to Lender promptly upon receipt thereof, copies of any notice of breach or event of default under any material contract received by such Obligor. Each Obligor shall promptly inform Lender of any breach or event of default by an Obligor under any material contract which is known by the Obligor, and the action proposed to be taken by such Obligor in connection therewith. Each Obligor shall promptly remit to Lender a copy of all correspondence and notices provided to Senior Lender under the Senior Loan Agreement or Replacement Senior Loan Agreement and will promptly notify Lender of any default or event of default thereunder. 5.14 Compliance with Laws. Each Obligor shall comply in a material respects with all federal, state, and local laws and regulations which are applicable to the operations and property of such Obligor. 5.15 Environmental Compliance. Each Obligor shall (a) comply with all Environmental Laws and obtain and comply with all related permits necessary for the ownership and operation of its properties unless the same could not reasonably be expected to cause a Material Adverse Change, (b) promptly disclose to Lender any notice to or investigation of itself for any violation or alleged violation of any Environmental Law in connection with its presently or previously owned properties, (c) not create, handle, transport, use, or dispose of any Hazardous Materials on or about its properties except in compliance with all Environmental Laws and related permits, (d) not release any Hazardous Materials into the environment, contaminate any properties with Hazardous Materials, or own properties contaminated by any Hazardous Materials if the same could reasonably be expected to cause a Material Adverse Change, and (e) permit Lender and its agents, contractors, and employees to enter and inspect any of the places of business of the Obligor or any other real property of Obligor at any reasonable time for the purposes of conducting an environmental investigation and audit (including taking physical samples) to ensure that Obligor is complying with this covenant, and such Obligor shall reimburse Lender on demand for the costs of any such environmental investigation and audit. 5.16 ERISA Compliance. Each Obligor shall comply in all material respects with all applicable provisions of ERISA and prevent the occurrence of any Reportable Event or Prohibited Transaction with respect to, or the termination of, any of its Plans. 5.17 Payment of Taxes. Each Obligor shall pay and discharge, before the same shall become delinquent, all taxes, assessments, levies, and like charges imposed upon its income, profits, or property by authorities having competent jurisdiction prior to the date on which penalties attach thereto except for tax payments being contested in good faith for which adequate reserves have been made and reported in accordance with generally accepted accounting principles and which could not reasonably be expected to cause a Material Adverse Change. 5.18 New Collateral Locations; Collateral Covenants and Reporting Requirements. Each Obligor may open any new location within the continental United States if permitted under Section 9.2 of the Senior Loan Agreement provided that in connection with such Section 9.2, Lender shall have the rights described in Section 5.22 hereof. Each Obligor shall comply in all respects with Section 7 of the Senior Loan Agreement, and such Section 7 is hereby incorporated in its entirety by reference. Lender shall be entitled to all rights and remedies of Senior Lender thereunder and all obligations owed by any Obligor to Senior Lender thereunder shall also be owed to Lender hereunder, including the rights and obligations described in Section 5.22 hereof. 5.19 Inspection. Each Obligor shall permit Lender to visit and inspect any of the properties of such Obligor, to examine all of the books of account, records, reports, and other papers, to make copies and extracts therefrom, and to discuss the affairs, finances, and accounts of such Obligor with the officers of such Obligor, all at such reasonable times and as often as may be reasonably requested. 5.20 After Acquired Real Property. Each Obligor shall comply with the obligations set forth in Section 9.15 of the Senior Loan Agreement and Lender shall have the rights described in Section 5.22 hereof with respect thereto, provided, that Section 9.15 shall be interpreted as though references to the term "Mortgages" in such Section shall include all Mortgages as such term is defined in the Senior Loan Agreement and all Mortgages as such term is defined in this Agreement. 5.21 Further Assurances. At the request of Lender at any time and from time to time, each Obligor shall, at its expense, duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further acts as may be necessary or proper to evidence, perfect, maintain and enforce the security interests and the priority thereof in the Collateral and to otherwise effectuate the provisions or purposes of this Agreement or any of the other Loan Documents. Where permitted by law, each Obligor hereby authorizes Lender to execute and file one or more UCC financing statements signed only by Lender. 5.22 Incorporated Terms and Provisions of Senior Loan Agreement. All incorporations or references herein to sections or provisions contained in the Senior Loan Agreement (collectively the "Incorporated Terms and Provisions") shall refer to such sections, or provisions existing as of the date of this Agreement. All Incorporated Terms and Provisions shall run to the benefit of the Lender and each of its successors and assigns. Without the express written consent of the Lender, no amendment, supplement, or other modification to the Senior Loan Agreement or any termination thereof shall modify or otherwise alter the meanings, interpretation, or content of any of the Incorporated Terms and Provisions as used herein. Without the express written consent of the Lender, no waiver of the requirements of or compliance with any of the Incorporated Terms and Provisions in connection with the Senior Loan Agreement shall be effective to waive the requirements of or compliance with the Incorporated Terms and Provisions as used in this Agreement. To the extent any of the Incorporated Terms and Provisions require the consent or approval of the Senior Lender, such Incorporated Terms and Provisions shall be interpreted to require the consent or approval of the Lender. To the extent any of the Incorporated Terms and Provisions require any notice or delivery to be given to the Senior Lender, such Incorporated Terms and Provisions shall be interpreted to require such notice or delivery to be made to the Lender. To the extent any of the incorporated Terms and Provisions grant rights or remedies to the Senior Lender, such Incorporated Terms and Provisions shall be interpreted to grant identical rights and remedies to the Lender. All Incorporated Terms and Provisions shall continue to bind the Obligors and their respective Subsidiaries, if applicable, notwithstanding the loan described in the Senior Loan Agreement having been repaid in full or the Senior Loan Agreement otherwise not requiring continued compliance with Incorporated Terms and Provisions. 5.23 Amendments of Senior Loan Agreements. Borrower shall not enter into any Replacement Senior Loan Agreement or effect any amendment, waiver, modification, or refinancing of the Senior Loan Agreement or of a Replacement Senior Loan Agreement without the prior written consent of Lender. Lender shall not unreasonably withhold its consent to a Replacement Senior Loan Agreement or an amendment or modification of the Senior Loan Agreement or of a Replacement Senior Loan Agreement if the following conditions are met following such replacement or modification: (a) the terms of such agreement as amended or modified are not materially more onerous than the terms of the Senior Loan Agreement, (b) the terms of such agreement as amended or modified do not materially impair the rights and security interests of Lender hereunder, (c) there is no greater likelihood that the Obligors will be unable to timely pay the Obligations described in this Agreement and otherwise comply with their covenants and obligations set forth in the Loan Documents, and (d) if there is to be a new Senior Lender then such entity shall have entered into an intercreditor agreement with Lender that is substantially the same as the Intercreditor Agreement between Congress and Lender that was executed in connection with this Agreement. ARTICLE 6 DEFAULT AND REMEDIES. 6.1 Events of Default. Each of the following shall be an "Event of Default" for the purposes of this Agreement and for each of the Loan Documents: (a) Payment Failure. Borrower (i) fails to pay when due any principal amounts due under the Loan Documents or (ii) fails to pay when due any interest, fees, reimbursements, indemnifications, or other amounts due under the Loan Documents and, with respect to clause (ii), such failure is not cured within three (3) days after the receipt of written notice thereof; (b) False Representation. Any written representation or warranty made by an Obligor in this Agreement or in any other Loan Document proves to have been false or erroneous in any material respect at the time it was made or deemed made; (c) Breach of Covenant. Any breach by an Obligor of (i) any of the covenants contained in Sections 5.1, 5.2, 5.14, 5.15, 5.16, 5.17, 5.18, and 5.20 of this Agreement and such failure is not cured within ten (10) days of the occurrence of such breach; provided, that, such ten (10) day cure period shall not apply in the case of: (A) any failure to observe any such covenant which is not capable of being cured at all or within such ten (10) day period or which has been the subject of a prior failure within a six (6) month period or (B) an intentional breach by any Obligor of any such covenant or (ii) any Obligor fails to perform any of the terms, covenants, conditions, or provisions contained in this Agreement or any of the other Loan Documents other than those described in Sections 6.1(c)(i); (d) Material Debt Default. Any principal, interest, fees, or other amounts due on any Debt of Borrower, any Subsidiary of Borrower, or any Obligor is not paid when due, whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise, and such failure is not cured within the applicable grace period, if any, and the aggregate amount of all Debt so in default exceeds $500,000. (e) Material Agreement Default. There shall occur any breach by an Obligor or any Subsidiary of an Obligor of any contract or agreement which breach could reasonably be expected to cause a Material Adverse Change and such breach is not cured within the applicable grace period, if any; (f) Security Documents. Any Security Document shall at any time and for any reason cease to create the Lien on the property purported to be subject to such agreement in accordance with the terms of such agreement, or cease to be in full force and effect, or shall be contested by any party thereto; (g) Bankruptcy and Insolvency. (i) There shall have been filed against an Obligor, any Subsidiary of an Obligor, or any such Person's properties, without such Person's consent, any petition or other request for relief seeking an arrangement, receivership, reorganization, liquidation, or similar relief under bankruptcy or other laws for the relief of debtors and such request for relief (A) remains in effect for 30 or more days, whether or not consecutive, or (B) is approved by a final nonappealable order, or (ii) an Obligor or any Subsidiary of an Obligor consents to or files any petition or other request for relief of the type described in clause (i) above seeking relief from creditors, makes any assignment for the benefit of creditors or other arrangement with creditors, or admits in writing its inability to pay its debts as they become due (Events of Default under clause (i) and (ii) collectively being referred to as "Bankruptcy Events of Default"); (h) Senior Debt Default. The occurrence of any "Event of Default" under the Senior Loan Agreement, as such term is defined therein; (i) Transaction Default. The occurrence of any default or event of default under, or the breach of, any of the Transaction Documents; or (j) Adverse Judgment. Any single judgment against an Obligor not discharged or stayed pending appeal or other court action within 30 days following entry is greater than $500,000, or the aggregate outstanding amount of judgments against the Obligors not discharged or stayed pending appeal or other court action within 30 days following entry is greater than $1,000,000. 6.2 Termination of Commitments. Upon the occurrence of any Bankruptcy Event of Default, all of the commitments of Lender hereunder shall terminate. During the existence of any Event of Default, Lender may declare by written notice to Borrower all of the commitments of Lender hereunder terminated, whereupon the same shall immediately terminate. 6.3 Acceleration of Obligations. Upon the occurrence of any Bankruptcy Event of Default, the aggregate outstanding principal amount of all loans made hereunder, all accrued but unpaid interest thereon, and all other Obligations shall immediately and automatically become due and payable. During the existence of any Event of Default, Lender may declare by written notice to Borrower the aggregate outstanding principal amount of all loans made hereunder, all accrued but unpaid interest thereon, and all other Obligations to be immediately due and payable, whereupon the same shall immediately become due and payable. In connection with the foregoing, except for any express notice requirements in this Agreement, Borrower waives notice of any Default or Event of Default, notice of intent to accelerate, notice of acceleration, presentment for payment, demand for payment, notice of enforcement of remedies, and all other notices. 6.4 Default Interest. During the existence of an Event of Default under Section 6.1(a), whether by maturity, acceleration, or otherwise, Lender may declare by written notice to Borrower that the Obligations specified in such notice shall bear interest beginning on the date specified in such notice (which may not be earlier than the date of such notice) until paid in full at the Default Rate, whereupon Borrower shall pay such interest to Lender upon demand. 6.5 Right of Setoff and Netting. During the existence of an Event of Default, Lender is hereby authorized at any time, to the fullest extent permitted by law, to setoff and apply any obligation owed by Lender or any Affiliate thereof to an Obligor, its Subsidiaries, or any Affiliate thereof against any and all of the obligations of the Obligors under the Loan Documents, irrespective of whether or not Lender shall have made any demand under the Loan Documents and although such obligations may be contingent and unmatured. Lender agrees promptly to notify Borrower after any such setoff and application made by such party provided that the failure to give such notice shall not affect the validity of such setoff and application. Upon the occurrence and continuance of an Event of Default under the Loan Documents and/or the Transactions Documents (collectively, the "Underlying Master Agreements") that grants the non defaulting party the right to accelerate obligations thereunder or terminate Transactions (as such term is defined in the Transaction Documents) the non defaulting party may, without prior notice, (A) consider and declare each defaulting party, in default of any or all of the Underlying Master Agreements and any or all Transactions thereunder and accelerate, cancel, terminate, and liquidate, or otherwise close-out all Transactions thereunder; (B) setoff, net, and/or recoup each non defaulting party's Obligations to any defaulting party against each defaulting party's obligations to any non defaulting party; (C) retain any collateral provided under the Underlying Master Agreements; (D) withhold payment and performance of any non defaulting party's obligations to any defaulting party to pay, secure, setoff against, net, and/or recoup any of the defaulting party's obligations to any non defaulting party; (E) foreclose, collect, sell, or otherwise liquidate any collateral provided under the Underlying Master Agreements in any order and at any time, and apply the proceeds thereof to satisfy any defaulting party's obligations to any non defaulting party; and (F) take any other action permitted by law or in equity or by any Transaction necessary or appropriate to protect, preserve, or enforce its rights or to reduce any risk of loss or delay. For purposes of this Section 6.5 if any Obligor is in default then each Obligor shall be considered to be a defaulting party. 6.6 Actions Under Loan Documents. Following an Event of Default, Lender may take any and all actions permitted under the other Loan Documents, including the Security Documents. 6.7 Remedies Cumulative. No right, power, or remedy conferred to Lender in the Loan Documents, or now or hereafter existing at law, in equity, by statute, or otherwise, shall be exclusive, and each such right, power, or remedy shall to the full extent permitted by law be cumulative and in addition to every other such right, power, or remedy. No course of dealing and no delay in exercising any right, power, or remedy conferred to Lender in the Loan Documents, or now or hereafter existing at law, in equity, by statute, or otherwise, shall operate as a waiver of or otherwise prejudice any such right, power, or remedy. 6.8 Application of Payments. (a) Prior to the existence of any Bankruptcy Event of Default or any Event of Default existing after the acceleration or maturity of the Obligations, all payments made hereunder shall be applied to the Obligations as directed by Borrower, subject to the rules regarding the application of payments to certain Obligations provided for hereunder and in the other Loan Documents. If no direction is provided by Borrower, then applications shall be made as directed by Lender. (b) During the existence of any Bankruptcy Event of Default or any Event of Default existing after the acceleration or maturity of the Obligations, all payments received in respect of obligations under the Loan Documents shall be applied in the order determined by Lender. Any surplus held by Lender and remaining after payment in full of all the Obligations and reserve for Obligations not yet due and payable shall be promptly paid over to Borrower or to whomever may be lawfully entitled to receive such surplus. ARTICLE 7 MISCELLANEOUS. 7.1 Expenses; Indemnity. The Obligors agree to: (a) Pay upon demand (i) all reasonable out-of-pocket expenses of Lender after the date of this Agreement in the administration (including advice of counsel as to the rights and duties of Lender with respect thereto) of, and in connection with the negotiation, investigation, preparation, execution, delivery, recording and filing, refinancing, renegotiation, and restructuring of the Loan Documents and any amendment, waiver, or consent relating thereto (including, without limitation, the reasonable fees and disbursements of counsel for Lender); (ii) pay upon demand all out-of-pocket expenses of Lender incurred in connection with the collection of the Obligations or the enforcement of the rights of Lender under the Loan Documents, which amounts will include all court costs, attorneys' fees (including, without limitation, for arbitration, trial, appeal, or other proceedings), fees of auditors and accountants, and investigation expenses incurred by Lender in connection with any such matters; and (iii) reimburse upon demand Lender for all amounts expended, advanced, or incurred by Lender to satisfy any obligation of the Obligors under the Loan Documents; and (b) Indemnify Lender and its Related Parties (each an "Indemnitee") from, hold each of them harmless against, and promptly upon demand pay or reimburse each of them for, any and all actions, suits, proceedings (including any investigations, litigation, or inquiries), claims, demands, and causes of action, and, in connection therewith, all reasonable costs, losses, liabilities, damages, or expenses of any kind or nature whatsoever, including those arising under Environmental Law (collectively the "Indemnity Matters") which may be incurred by or asserted against or involve any of them (whether or not any of them is designated a party thereto) as a result of, arising out of, or in any way related to (i) any actual or proposed use by Borrower of the proceeds of any advances made under the Note, (ii) the operations of the business of the Obligors, (iii) any bodily injury or death or property damage occurring in or upon or in the vicinity of any real or personal property of an Obligor, (iv) the failure of the Obligors to comply with any laws, or (v) the Loan Documents, including, without limitation, the reasonable fees and disbursements of counsel and all other expenses incurred in connection with investigating, defending, or preparing to defend any such action, suit, proceeding (including any investigations, litigation, or inquiries), or claim and INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE NEGLIGENCE OF ANY INDEMNITEE but not Indemnity Matters arising from the gross negligence or willful misconduct of such Indemnitee. 7.2 Modifications, Waivers, and Consents. No amendment, waiver, or other modification of any provision of this Agreement or the Note, nor any consent required under this Agreement or the Note, shall be effective unless the same shall be in writing and signed by Lender, if the same is to be enforced against Lender, or any other party hereto, if the same is to be enforced against such other party and then such modification or consent shall be effective only in the specific instance and for the specific purpose for which given. In the event that Lender assigns, participates, or otherwise transfers any portion of this Agreement and the Loan Documents to any other Person, the Obligors agree to amend the Loan Documents or execute successor documents as reasonably requested by Lender to reflect such transfer and any division of rights created thereby (subject to the terms of Section 7.4). 7.3 Survival of Agreements. All representations, warranties, and covenants of the Obligors in the Loan Documents shall survive the execution of the Loan Documents and any other document or agreement. 7.4 Assignment and Participation. This Agreement and the other Loan Documents shall bind and inure to the benefit of Borrower and its respective successors and assigns and Lender and its permitted successors and assigns. The Obligors may not assign their rights or delegate their duties under this Agreement or the other Loan Documents without the prior written consent of Lender. Lender may, after notice thereof to Borrower, assign or participate its rights or delegate its duties under this Agreement or the other Loan Documents without the consent of any Obligor. Notwithstanding any other provision of this Agreement, Lender may, at any time, assign its rights and duties under this Agreement or the other Loan Documents to its Affiliates. 7.5 Notice. All notices and other communications under this Agreement and the other Loan Documents shall be in writing and mailed, telecopied, hand delivered, or delivered by a nationally recognized overnight courier, to the address for the appropriate party specified in Schedule 4.17 or at such other address as shall be designated by such party in a written notice to the other parties. Mailed notices shall be effective when received. Telecopied notices shall be effective when transmission is completed. Delivered notices shall be effective when delivered by messenger or courier. Notwithstanding the foregoing, notices and communications to Lender under any Note shall not be effective until received by Lender. 7.6 Choice of Law. THIS AGREEMENT AND THE NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES ARISING HEREFROM AND THEREFROM SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS. THE PARTIES AGREE THAT ANY TRANSACTION BETWEEN THEM UNDER THIS AGREEMENT IS A "QUALIFIED FINANCIAL CONTRACT" WITHIN THE MEANING OF NEW YORK GENERAL OBLIGATIONS LAW Sec. 5-701(b). 7.7 Counterparts. This Agreement may be executed in multiple counterparts which together shall constitute one and the same instrument. 7.8 Usury Protection. (a) If the effective rate of interest contracted for by Lender with Borrower under the Loan Documents, including the stated rates of interest contracted for hereunder and any other amounts contracted for under the Loan Documents which are deemed to be interest, at any time exceeds the Highest Lawful Rate, then the outstanding principal amount of the loans made by Lender to Borrower hereunder shall bear interest at a rate which would make the effective rate of interest on the loans made by Lender to Borrower under the Loan Documents equal the Highest Lawful Rate until the difference between the amounts which would have been due by Borrower to Lender at the stated rates and the amounts which were due by Borrower to Lender at the Highest Lawful Rate (the "Lost Interest") has been recaptured by Lender. If, when the loans made hereunder are repaid in full, the Lost Interest has not been fully recaptured by Lender pursuant to the preceding paragraph, then, to the extent permitted by law, the interest rates charged by Lender to Borrower hereunder shall be retroactively increased such that the effective rate of interest on the loans made by Lender to Borrower under the Loan Documents was at the Highest Lawful Rate since the effectiveness of this Agreement to the extent necessary to recapture the Lost Interest not recaptured pursuant to the preceding sentence and, to the extent allowed by law, Borrower shall pay to Lender the amount of the Lost Interest remaining to be recaptured by Lender. (b) In calculating all sums paid or agreed to be paid to Lender by Borrower for the use, forbearance, or detention of money under the Loan Documents, such amounts shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread in equal parts throughout the term of the Loan Documents. (c) NOTWITHSTANDING THE FOREGOING OR ANY OTHER TERM IN THE LOAN DOCUMENTS TO THE CONTRARY, it is the intention of Lender and Borrower to conform strictly to any applicable usury laws. Accordingly, if Lender contracts for, charges, or receives any consideration from Borrower which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be canceled automatically and, if previously paid, shall at Lender's option be applied to the outstanding amount of the loans made hereunder by Lender to Borrower or be refunded to Borrower. 7.9 Arbitration. ANY AND ALL DISPUTES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, INCLUDING ANY QUESTION REGARDING ITS EXISTENCE, VALIDITY OR TERMINATION, SHALL BE RESOLVED BY BINDING ARBITRATION GOVERNED BY THE FEDERAL ARBITRATION ACT AND CONDUCTED IN ACCORDANCE WITH THE AMERICAN ARBITRATION ASSOCIATION COMMERCIAL ARBITRATION RULES ("RULES"), WHICH RULES ARE DEEMED TO BE INCORPORATED BY REFERENCE INTO THIS CLAUSE. THE NUMBER OF ARBITRATORS SHALL BE THREE, EACH PARTY HAVING THE RIGHT TO APPOINT ONE ARBITRATOR, WHO SHALL TOGETHER APPOINT A THIRD NEUTRAL ARBITRATOR WITH AT LEAST FIVE (5) YEARS EXPERIENCE IN THE LENDING BUSINESS WITHIN THIRTY (30) DAYS IN ACCORDANCE WITH THE RULES. THE LOCATION OF ARBITRATION HEARINGS SHALL BE IN HOUSTON, TEXAS. THE PARTIES HEREBY EXPRESSLY WAIVE ANY RIGHT OF APPEAL TO ANY COURT. THERE WILL BE NO WRITTEN TRANSCRIPT OR RECORD OF THE ARBITRATION PROCEEDING. THE ARBITRATORS WILL ONLY MAKE THEIR AWARD AND WILL NOT RENDER A WRITTEN OPINION EXPLAINING THEIR AWARD. IT IS EXPRESSLY AGREED THAT THE ARBITRATORS SHALL HAVE NO AUTHORITY TO AWARD ATTORNEY'S FEES, OR CONSEQUENTIAL, SPECIAL, INDIRECT, TREBLE, EXEMPLARY OR PUNITIVE DAMAGES OF ANY TYPE, THE PARTIES HEREBY WAIVING THEIR RIGHTS, IF ANY, TO RECOVER ATTORNEY'S FEES AND CONSEQUENTIAL, SPECIAL, INDIRECT, TREBLE, EXEMPLARY AND PUNITIVE DAMAGES WITH RESPECT TO THIS AGREEMENT. ALL OF THE ARBITRATORS' ORDERS AND DECISIONS MAY BE ENFORCEABLE IN, AND JUDGMENT UPON ANY AWARD RENDERED IN THE ARBITRATION PROCEEDING MAY BE CONFIRMED AND ENTERED BY ANY COURT HAVING PROPER JURISDICTION. THE PARTIES AGREE THAT ALL ARBITRATION PROCEEDINGS CONDUCTED HEREUNDER AND THE DECISION OF THE ARBITRATORS SHALL BE KEPT CONFIDENTIAL AND NOT DISCLOSED, EXCEPT TO A PARTY'S AFFILIATES, ACCOUNTANTS, AND LAWYERS. 7.10 Limitation on Damages. EXCEPT AS EXPRESSLY SET FORTH IN THE LOAN DOCUMENTS, IN NO EVENT SHALL ANY PARTY HERETO BE LIABLE TO ANY OTHER PARTY HERETO FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR EXEMPLARY DAMAGES, INCLUDING WITHOUT LIMITATION, LOST PROFITS OR SAVINGS, REGARDLESS OF THE FORM OF ACTION GIVING RISE TO SUCH A CLAIM FOR SUCH DAMAGES, WHETHER IN CONTRACT OR TORT, INCLUDING NEGLIGENCE, EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 7.11 Obligations Joint and Several. (a) Each Obligor is jointly and severally liable for the Obligations and the representations, warranties, covenants, and other obligations of each Obligor under this Agreement and the Loan Documents, and a release of any Obligor shall not release the other Obligors. A separate legal action may be brought against any Obligor without impairing the liability of any other Obligor. (b) Each Obligor is liable for the joint and several obligations of each and every Obligor under this Agreement and the Loan Documents as a primary obligor. This Agreement may not be revoked by any Obligor and shall continue to be effective with respect to Obligations arising or created after any attempted revocation by any Obligor. (c) All references to Obligors herein, unless the context otherwise requires, shall mean each and all of them and their respective successors and assigns, individually and collectively, jointly and severally. 7.12 No Further Agreements. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. [Remainder of Page Left Blank] EXECUTED as of the date first above written. LENDER: ENRON NORTH AMERICA CORP. By: ______________________________________ Name:____________________________________ Title:_____________________________________ BORROWER: HUNTCO STEEL, INC. By: ______________________________________ Name:____________________________________ Title:_____________________________________ OTHER OBLIGORS: HSI AVIATION, INC. By: ______________________________________ Name:____________________________________ Title: _____________________________________ HUNTCO INC. By:_____________________________________ Name:____________________________________ Title:_____________________________________ HUNTCO NEVADA, INC. By: ______________________________________ Name:____________________________________ Title:_____________________________________ MIDWEST PRODUCTS, INC. By: ______________________________________ Name: ____________________________________ Title:_____________________________________ - ----------------------------------------------------------------------------- EXHIBIT "A" THE LIENS, RIGHTS, AND/OR OTHER OBLIGATIONS CREATED IN FAVOR OF ENRON NORTH AMERICA CORP. BY THIS AGREEMENT ARE SUBORDINATE TO THE LIENS, RIGHTS, AND/OR OTHER OBLIGATIONS IN FAVOR OF CONGRESS (AS SUCH TERM IS DEFINED IN THE CONGRESS INTERCREDITOR AGREEMENT DESCRIBED BELOW) AS PROVIDED IN THAT CERTAIN INTERCREDITOR AND SUBORDINATION AGREEMENT BETWEEN ENRON NORTH AMERICA CORP. AND CONGRESS FINANCIAL CORPORATION (CENTRAL) AS THE SAME NOW EXISTS OR MAY HEREAFTER BE AMENDED, SUPPLEMENTED, MODIFIED, RENEWED, RESTATED, OR REPLACED (THE "CONGRESS INTERCREDITOR AGREEMENT"). PROMISSORY NOTE $10,000,000 April 6, 2001 For value received, the undersigned HUNTCO STEEL, INC., a Delaware corporation (the "Borrower"), hereby promises to pay to the order of ENRON NORTH AMERICA CORP., a Delaware corporation (the "Lender"), the principal amount of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) or, if less, the aggregate outstanding principal amount of the Loan (as defined in the Loan Agreement referred to below) made by the Lender to the Borrower, together with accrued but unpaid interest on the outstanding principal amount of the Loan, at such interest rates, and at such times, as are specified in the Loan Agreement. This Promissory Note (this "Note") is entitled to the benefits of, and is subject to the terms of, the Loan Agreement dated as of April 6, 2001 (as the same may be modified from time to time, the "Loan Agreement"), between the Borrower and the Lender. Capitalized terms used herein but not defined herein shall have the meanings specified by the Loan Agreement. The Loan Agreement, among other things, (a) provides for the making of the Loan by the Lender to the Borrower, the indebtedness of the Borrower resulting therefrom being evidenced by this Note, and (b) contains provisions for acceleration of the maturity of this Note upon the happening of certain events stated in the Loan Agreement and for prepayments of principal prior to the maturity of this Note upon the terms and conditions specified in the Loan Agreement, Both principal and interest are payable to the Lender in the currency, at the times, in the locations, and in the manner specified in the Loan Agreement. It is the intention of the Lender and the Borrower to conform strictly to any applicable usury laws or relevant exemptions therefrom. Accordingly, the terms of the Loan Agreement relating to the prevention of usury will be strictly followed. This Note shall be governed by, and construed in accordance with, the internal laws of the State of New York (without reference to principles of conflicts of law). EXECUTED as of the date first above written. HUNTCO STEEL, INC. By:_____________________ Name:___________________ Title:__________________ EX-4 12 enpledge.txt PLEDGE AGREEMENT - ENRON THE LIENS, RIGHTS, AND/OR OTHER OBLIGATIONS CREATED IN FAVOR OF ENRON NORTH AMERICA CORP. BY THIS AGREEMENT ARE SUBORDINATE TO THE LIENS, RIGHTS, AND/OR OTHER OBLIGATIONS IN FAVOR OF CONGRESS (AS SUCH TERM IS DEFINED IN THE CONGRESS INTERCREDITOR AGREEMENT DESCRIBED BELOW) AS PROVIDED IN THAT CERTAIN INTERCREDITOR AND SUBORDINATION AGREEMENT BETWEEN ENRON NORTH AMERICA CORP. AND CONGRESS FINANCIAL CORPORATION (CENTRAL) AS THE SAME NOW EXISTS OR MAY HEREAFTER BE AMENDED, SUPPLEMENTED, MODIFIED, RENEWED, RESTATED, OR REPLACED (THE "CONGRESS INTERCREDITOR AGREEMENT"). PLEDGE AGREEMENT (HUNTCO INC.) This Pledge Agreement dated as of April 6, 2001 ("Agreement"), is made by HUNTCO INC., a Missouri corporation ("Pledgor"), in favor ENRON NORTH AMERICA CORP. a Delaware corporation ("Secured Party"). INTRODUCTION Reference is made to (a) the Master Steel Purchase and Sale Agreement dated as of April 6, 2001 (as modified from time to time, the "Master Agreement"), between Huntco Steel, Inc. ("HSI"), and Secured Party, pursuant to which HSI will purchase steel from Secured Party, and (b) the Loan Agreement dated as of April 6, 2001 (as modified from time to time, the "Loan Agreement"), by and among HSI, Pledgor, Huntco Nevada, Inc., HSI Aviation, Inc., Midwest Products, Inc., and Secured Party, pursuant to which Secured Party has agreed to make a loan to HSI on the terms contained therein. It is a condition precedent to Secured Party's obligations under the Transaction Documents and the Loan Documents that Pledgor execute this Agreement in favor of Secured Party. In consideration of the foregoing, Pledgor and Secured Party hereby agree as follows: Section 1. Definitions. Terms defined in the UCC shall have the meanings specified by the UCC. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Loan Agreement. As used herein, the following terms shall have the following meanings: "Collateral" means the Pledged Securities, Records, and Proceeds. "Pledged Securities" means all of the issued and outstanding shares of stock or units of membership interest (in each case, whether or not certificated and whether or not represented as securities, general intangibles, or otherwise), as applicable, of each Subsidiary of Pledgor, including in each case the shares and units described on the attached Schedule I, together with all dividends, distributions, cash, instruments, and other proceeds from time to time received or otherwise distributed in respect of the foregoing, including stock and unit rights, options, rights to subscribe, dividends, liquidating dividends, stock and unit dividends, new securities and membership interests, or other properties or benefits to which Pledgor may become entitled to receive on account of such property. "Proceeds" means all present and future proceeds of the Pledged Securities, whether arising from the collection, sale, exchange, assignment, or other disposition of any Pledged Securities, including all claims of Pledgor against third parties for impairment, loss, or damage to any Pledged Securities, all proceeds payable under any put, call, hedge, or other protection for the value of any Pledged Securities, and all rights under any indemnity, warranty, or guaranty of or for any of the foregoing, whether such proceeds are represented as money, deposit accounts, accounts, general intangibles, securities, instruments, documents, chattel paper, inventory, equipment, fixtures, or goods. "Records" means all present and future contracts, accounting records, files, computer files, computer programs, and other records relating to the Pledged Securities and Proceeds. "Secured Obligations" means all (a) all principal, interest, and premium, if any, due under the Loan Agreement and the Note, (b) all fees, reimbursements, indemnifications, and other amounts now or hereafter owed by HSI to Secured Party under the Transaction Documents and the Loan Documents, (c) the performance of all covenants, agreements, and other obligations of Pledgor under the Transaction Documents and the Loan Documents, and (d) any increases, extensions, renewals, replacements, and rearrangements of the foregoing obligations under any amendments, supplements, and other modifications of the agreements creating the foregoing obligations or any increases, extensions, renewals, replacements, and rearrangements of the foregoing obligations. "UCC" means the Uniform Commercial Code as in effect on the date hereof in the State of Texas, as amended from time to time, and any successor statute. Section 2. Security Interest. 2.1 Grant of Security Interest. Pledgor hereby grants to Secured Party a security interest in all of Pledgor's right, title, and interest in and to the Collateral to secure the payment and performance of the Secured Obligations. 2.2 Pledgor Remains Liable. Anything herein to the contrary notwithstanding: (a) Pledgor shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform its obligations thereunder to the same extent as if this Agreement had not been executed; (b) the exercise by Secured Party of any rights hereunder shall not release Pledgor from any obligations under the contracts and agreements included in the Collateral; and (c) Secured Party shall not have any obligation under the contracts and agreements included in the Collateral by reason of this Agreement, nor shall Secured Party be obligated to perform or fulfill any of the obligations of Pledgor thereunder, including any obligation to make any inquiry as to the nature or sufficiency of any payment Pledgor may be entitled to receive thereunder, to present or file any claim, or to take any action to collect or enforce any claim for payment thereunder. Section 3. General Provisions. Pledgor represents and warrants to and agrees with Secured Party as follows: 3.1 Ownership. Pledgor has good and marketable title to the Collateral free from any liens, security interests, assignments, options, adverse claims, restrictions, proxies, and other encumbrances whatsoever, except as permitted by the Loan Agreement. No effective pledge or other transfer regarding the Pledged Securities is in effect other than the security interest granted to Senior Lender under the Pledge and Security Agreement dated as of June 8, 2001 (the "Senior Pledge Agreement") between Pledgor and Senior Lender. No recorded financing statement or similar recording or filing covering any part of the Collateral is in effect or on file in any recording office, except those filed in connection with this Agreement, the Senior Pledge Agreement, or as permitted by the Loan Agreement. Pledgor shall not, without the prior written consent of Secured Party, grant any lien, security interest, assignment, option, restriction, claim, or other encumbrance on or against the Collateral, or lease, sell, or otherwise transfer any of its rights in the Collateral. Pledgor represents that the Pledged Securities are duly authorized and validly issued and constitute the percentage of the issued and outstanding capital stock or units of common membership interests, as applicable, of each such Subsidiary as listed on the attached Schedule I. Pledgor covenants that it shall not permit, nor consent to, the issuance of any additional shares of capital stock or units of membership interest of any such Subsidiary unless Secured Party shall have been provided with 30 days prior written notice of such issuance and all such additional shares or units are pledged to Secured Party under this Agreement upon issuance to secure the payment and performance of the Secured Obligations. 3.2 Perfection. Except as delivered to Senior Lender, all certificates or instruments representing the Pledged Securities have been delivered to Secured Party in a form suitable for transfer by delivery, or accompanied by duly executed instruments of transfer or assignment in blank, and Pledgor shall deliver to Secured Party in such manner all certificates and instruments representing all of the Pledged Securities acquired by Pledgor after the date of this Agreement and that are required to be pledged pursuant to this Agreement all in form and substance satisfactory to Secured Party. No other authorization, approval, or other action is necessary to perfect such security interests purported to be granted by Pledgor hereunder, to allow Pledgor to perform its obligations hereunder, or to permit Secured Party to exercise its rights and remedies hereunder with respect to Pledgor's Collateral (except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally). 3.3 Priority. Except as limited by the Intercreditor and Subordination Agreement between Secured Party and Senior Lender, the security interest created by this Agreement is first priority, and Pledgor shall preserve and maintain the status of such security interest to the end that this Agreement shall remain a first priority security interest in the Collateral. 3.4 Use and Condition. (a) So long as no Default or Event of Default shall exist, Pledgor shall be entitled to receive and retain any cash dividends distributed to Pledgor in respect of the Pledged Securities provided that any: (i) non-cash dividends, instruments, and other property received or otherwise distributed in respect of or in substitution for any Pledged Securities; (ii) cash dividends and other distributions in connection with a partial or total liquidation or dissolution of an issuer of any Pledged Securities or in connection with a reduction of capital, capital surplus, or paid-in-surplus of an issuer of Pledged Securities; and (iii) cash distributed in respect of a redemption of principal of, or in exchange for, any Pledged Securities, in each case shall be promptly delivered to Secured Party (A) to the extent the same constitutes Pledged Securities, to be held by Secured Party as Collateral under this Agreement and (B) as to cash and other property, for disposition in accordance with Section 4.3 and shall, if received by Pledgor, be received in trust for the benefit of Secured Party, be segregated from the other property or funds of Pledgor, and be promptly delivered to Secured Party as Collateral in the same form as so received, with any necessary endorsement (b) With regard to the Pledged Securities, so long as no Default or Event of Default shall exist Pledgor shall be entitled to exercise any voting and other consensual rights pertaining to the Pledged Securities for any purpose not materially inconsistent with the terms of this Agreement or the other Transaction Documents and Loan Documents. Secured Party shall execute and deliver (or cause to be executed and delivered) to Pledgor all proxies and other instruments that Pledgor may reasonably request to enable Pledgor to exercise the voting and other rights which it is entitled to exercise hereunder and to receive the dividends, distribution, or interest payments which it is authorized to receive and retain hereunder. 3.5 Further Assurances. (a) Pledgor shall promptly execute and deliver all further agreements, and take all further action, that may be necessary or that Secured Party may reasonably request, in order to further evidence the security interests granted or purported to be granted hereunder and perfect and protect the same or to enable Secured Party to exercise and enforce its rights and remedies hereunder. Without limiting the foregoing, Pledgor shall at Secured Party's reasonable request: (i) mark conspicuously any tangible Collateral with a legend, in form and substance satisfactory to Secured Party, indicating that such Collateral is subject to the security interest granted or purported to be granted hereunder; and (ii) execute stock powers, pledge registration requests, financing statements, amendments and continuations of financing statements, and such other documents and agreements as Secured Party may reasonably request in order to perfect and preserve the security interests granted or purported to be granted hereunder. Pledgor shall furnish to Secured Party from time to time any statements and schedules further identifying and describing any of the Collateral and such other reports in connection with the Collateral as Secured Party may reasonably request. (b) During the existence of an Event of Default, Pledgor agrees that, if Pledgor fails to perform under this Agreement, Secured Party may, but shall not be obligated to, perform Pledgor's obligations under this Agreement and any expenses incurred by Secured Party in performing Pledgor's obligations shall be paid by Pledgor. Any such performance by Secured Party may be made by Secured Party in reasonable reliance on any statement, invoice, or claim, without inquiry into the validity or accuracy thereof. The amount and nature of any expense of Secured Party hereunder shall be conclusively established, absent manifest error, by a certificate of any officer of Secured Party. (c) Pledgor irrevocably appoints Secured Party as Pledgor's attorney in fact, with full authority to act during the existence of an Event of Default for Pledgor and in the name of Pledgor, to take any action and execute any agreement which Secured Party deems necessary or advisable to accomplish the purposes of this Agreement, including taking actions Secured Party is expressly authorized to take pursuant to this Agreement (such as the matters described in paragraph (b) above), instituting proceedings Secured Party deems necessary or desirable to enforce the rights of Secured Party with respect to this Agreement, and taking actions with respect to receiving, endorsing, and collecting instruments made payable to Pledgor representing any dividend, interest payment, or other distribution in respect of the Pledged Securities and giving full discharge for the same. The foregoing power of attorney shall be considered to be coupled with an interest sufficient to make such power of attorney irrevocable, and Pledgor declares such power of attorney irrevocable by Pledgor or any other Person. (d) The powers conferred on Secured Party under this Agreement are solely to protect its rights under this Agreement and shall not impose any duty upon it to exercise any such powers. Except as elsewhere provided hereunder, Secured Party shall have no duty as to any of the Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to the Collateral. Secured Party shall have no responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Securities, whether or not Secured Party has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any parties with respect to any of the Collateral. (e) As of the date of this Agreement, the true and correct name of Pledgor as listed on Pledgor's certificate of incorporation is the name specified for Pledgor on the signature pages of this Agreement. Pledgor has had no prior names and has not used and does not use any trade names. As of the date of this Agreement, Pledgor's State of incorporation is Missouri. As of the date of this Agreement, Pledgor's chief executive office is located as listed on Schedule 4.17 of the Loan Agreement. Without advance written notice to Secured Party and reasonable opportunity for Secured Party to take action to protect Secured Party's interests hereunder, Pledgor shall not change its name, its State of incorporation, or the location of its chief executive office. Section 4. Remedies. During the continuation of any Event of Default (as defined in either the Master Agreement or the Loan Agreement): 4.1 Interim Remedies. (a) Secured Party may exercise all the rights and remedies of a secured party under the UCC. (b) Secured Party may prosecute actions in equity or at law for the specific performance of any covenant or agreement herein contained or in aid of the execution of any power herein granted or for the enforcement of any other appropriate legal or equitable remedy. (c) Following written notice to Pledgor and to the extent specified in such written notice, all rights of Pledgor to receive cash dividends or distributions shall cease, and all such rights shall thereupon become vested in Secured Party who shall thereupon have the sole right to receive such cash dividends or distributions. All cash dividends or distributions received by Pledgor in violation of the foregoing shall be received in trust for the benefit of Secured Party, shall be segregated from other funds of Pledgor, and shall be promptly paid over to Secured Party to be held as Pledged Securities, as applicable, in the same form as so received (with any necessary endorsement). (d) Following written notice to Pledgor and to the extent specified in such written notice, all rights of Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to this Agreement shall cease, and all such rights shall thereupon become vested in Secured Party who shall thereupon have the sole right to exercise such voting and other consensual rights. Following such notice from Secured Party, Pledgor authorizes all other parties to follow the instructions of Secured Party and ignore the instructions of Pledgor with respect to such rights. (e) Following written notice to Pledgor and to the extent specified in such written notice, Secured Party shall have the right, without further notice to Pledgor, to transfer or to register, in the name of Secured Party or any of its nominees, any of the Pledged Securities of Pledgor. In addition, Secured Party shall have the right at any time to exchange the certificates or instruments representing the Pledged Securities of Pledgor for certificates or instruments of smaller or larger denominations. (f) Secured Party may require Pledgor to promptly assemble any tangible Collateral and make it available to Secured Party at a place to be designated by Secured Party. Secured Party shall have no obligation to take any action to assemble or otherwise take control of the Collateral, whether for the purposes of sale or otherwise. (g) Secured Party may take any action permitted under the Transaction Documents and Loan Documents, including declaring the unpaid portion of the Secured Obligations to be immediately due and payable under the terms of the Transaction Documents and Loan Documents. 4.2 Foreclosure. (a) Secured Party may foreclose on the Collateral in any manner permitted by the courts of or in the State of Texas or in any other jurisdiction. If Secured Party should institute a suit for the collection of the Secured Obligations and for the foreclosure of this Agreement, Secured Party may at any time before the entry of a final judgment dismiss the same, and take any other action permitted by this Agreement. (b) Secured Party may exercise all the rights and remedies of a secured party under the UCC, including foreclosure. (i) If, in the opinion of Secured Party, there is any question that a public or semipublic sale or distribution of any Collateral will violate any state or federal securities law, Secured Party in its discretion (A) may offer and sell securities privately to purchasers who will agree to take them for investment purposes and not with a view to distribution and who will agree to imposition of restrictive legends on the certificates representing the security, or (B) may, if lawful, sell such securities in an intrastate offering under Section 3(a)(11) of the Securities Act of 1933, as amended, and no sale so made in good faith by Secured Party shall be deemed to be not "commercially reasonable" because so made. Pledgor shall cooperate fully with Secured Party in all respects in selling or realizing upon all or any part of the Collateral. In addition, Pledgor shall fully comply with the securities laws of the United States and any states thereof and take such actions as may be necessary to permit Secured Party to sell or otherwise dispose of any securities pledged hereunder in compliance with such laws (but Pledgor shall have no obligation under this Agreement to register the Pledged Securities under the Securities Act of 1933). (ii) Secured Party may sell any Collateral at public or private sale, at the office of Secured Party or elsewhere, for cash or credit and upon such other terms as Secured Party deems commercially reasonable. Secured Party may sell any Collateral at one or more sales, and the security interest granted hereunder shall remain in effect as to the unsold portion of the Collateral. If notice is required by law, Pledgor hereby deems ten days advance notice of the time and place of any public or private sale reasonable notification, recognizing that if the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, shorter notice may be reasonable. Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Secured Party may adjourn any sale by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was adjourned. In the event that any sale hereunder is not completed or is defective in the opinion of Secured Party, Secured Party shall have the right to cause subsequent sales to be made hereunder. Any statements of fact or other recitals made in any bill of sale, assignment, or other document representing any sale hereunder, including statements relating to the occurrence of an Event of Default, acceleration of the Secured Obligations, notice of the sale, the time, place, and terms of the sale, and other actions taken by Secured Party in relation to the sale shall be conclusive evidence of the truth of the matters so stated. Secured Party may delegate to any agent the performance of any acts in connection with any sale hereunder, including the sending of notices and the conduct of the sale. 4.3 Application of Proceeds. Unless otherwise specified herein, any cash proceeds received by Secured Party from the sale of, collection of, or other realization upon any part of the Collateral or any other amounts received by Secured Party hereunder may be, at the discretion of Secured Party applied to the Secured Obligations. Amounts applied to the Secured Obligations shall be applied in the following order: First, to the payment of the costs and expenses of exercising Secured Party's rights hereunder, whether expressly provided for herein or otherwise; and second, to the payment of the Secured Obligations in the order set forth in the Master Agreement and Loan Agreement, and, if no order of application is so provided for, then in the order determined by Secured Party. Any surplus cash collateral or cash proceeds held by Secured Party after payment in full of the Secured Obligations and the termination of all commitments of Secured Party to Pledgor shall be paid over to Pledgor or to whomever may be lawfully entitled to receive such surplus. 4.4 Waiver of Certain Rights. To the full extent Pledgor may do so, Pledgor shall not insist upon, plead, claim, or take advantage of any law providing for any appraisement, valuation, stay, extension, or redemption, and Pledgor hereby waives and releases the same, and all rights to a marshaling of the assets of Pledgor, including the Collateral, or to a sale in inverse order of alienation in the event of foreclosure of the liens and security interests hereby created. Pledgor shall not assert any right under any law pertaining to the marshaling of assets, sale in inverse order of alienation, the administration of estates of decedents, or other matters whatever to defeat, reduce, or affect the right of Secured Party under the terms of this Agreement. Section 5. Miscellaneous. 5.1 Notices. All notices and other communications under this Agreement shall be in writing and mailed, telecopied, hand delivered, or delivered by a nationally recognized overnight courier, to the address for the appropriate party specified in the Loan Agreement or at such other address as shall be designated by such party in a written notice to the other parties. Mailed notices shall be effective when received. Telecopied notices shall be effective when transmission is completed. Delivered notices shall be effective when delivered by messenger or courier. 5.2 General. This Agreement shall be subject to and construed and enforced in accordance with the substantive laws of the State of Texas and the applicable laws of the United States, without regard to any principles of conflicts of laws thereof which would select another law. If any provision in this Agreement is held to be unenforceable, such provision shall be severed and the remaining provisions shall remain in full force and effect. All representations, warranties, and covenants of Pledgor in this Agreement shall survive the execution of this Agreement, any Transaction Documents, any Loan Documents, and any other contract or agreement. If a due date for an amount payable is not specified in this Agreement, the due date shall be the date on which Secured Party demands payment therefor. Secured Party's remedies under this Agreement and the Transaction Documents and the Loan Documents shall be cumulative, and no delay in enforcing this Agreement and the Transaction Documents and the Loan Documents to which Pledgor is a party shall act as a waiver of Secured Party's rights hereunder. The provisions of this Agreement may be waived or amended only in a writing signed by the party against whom enforcement is sought. This Agreement shall bind Pledgor and its successors and assigns and shall inure to the benefit of Secured Party and its successors and assigns. Pledgor may not assign its rights or delegate its duties under this Agreement. Secured Party may, after notice thereof to Pledgor, assign its rights or delegate its duties under this Agreement without the consent of Pledgor. Notwithstanding any other provision of this Agreement, Secured Party may, at any time, assign its rights and duties under this Agreement to its Affiliates. This Agreement may be executed in multiple counterparts each of which shall constitute one and the same agreement. THIS WRITTEN AGREEMENT, THE TRANSACTION DOCUMENTS, AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Executed as of the date first above written. PLEDGOR: HUNTCO INC. By: _______________________ Robert J. Marischen President & CEO SECURED PARTY: ENRON NORTH AMERICA CORP. By: Name: title: - ----------------------------------------------------------------------------- Schedule I Description of pledged securities Subsidiary Type and Amount of Ownership Huntco Nevada, Inc. Shareholder of 100 issued and outstanding shares of stock of Huntco Nevada, Inc., constituting 100% ownership. - ---------------------------------------------------------------------------- Similar Pledge Agreement executed by Huntco Nevada, Inc. in favor of Enron North America Corp., whereby Huntco Nevada, Inc. pledged all of the common stock interests of Huntco Steel, Inc. and Midwest Products, Inc. to Enron North America Corp. EX-10 13 mpa.txt MASTER STEEL PURCHASE AGREEMENT MASTER STEEL PURCHASE AND SALE AGREEMENT This Master Steel Purchase and Sale Agreement ("Master Agreement") is entered into between Huntco Steel, Inc. ("Counterparty") and Enron North America Corp. ("Enron") as of April 6, 2001 ("Effective Date"). The parties ("Parties," each a "Party") may, but shall not be required to, enter into Transactions, which will be governed by this Master Agreement. Any capitalized term used herein and not defined in the Section in which it appears shall have the meaning set forth in Section 9 hereof. This Master Agreement is being entered into contemporaneously with the execution of that certain Inventory Management Agreement - PHASE I and that certain Inventory Management Agreement - PHASE II, which agreements have been executed on even dates herewith by and between the Parties (collectively, the "Inventory Agreements"). Pursuant to the terms of the Inventory Agreements, the Parties have agreed to purchase from each other certain required volumes of certain specified steel products, all as more fully provided therein. All such purchases and sales shall be consummated pursuant to the terms of this Master Agreement. Counterparty and Enron hereby agree as follows: 1. Transactions 1.1. Procedures. A Transaction shall be entered into by means of an offer by either Party to the other Party (through their respective representatives) in a telephone conversation that may be recorded (each Party hereby consenting to such recording of such conversations without any further notice) and the acceptance of such offer by the offeree in such telephone conversation, and will be evidenced by a Confirmation (as hereinafter defined) as provided herein. The Parties intend that they are legally bound by the terms of a Transaction, as supplemented by this Master Agreement, from the moment on a particular date ("Trade Date") they agree to those terms (whether orally or otherwise). As a material part of the consideration for entering into this Master Agreement, each of the Parties agrees not to contest or assert (and hereby releases any right to) any defense to the (i) validity or enforceability of telephonic Transactions entered into by them under laws relating to whether certain agreements are to be in writing or signed by such Party to be thereby bound or (ii) the authority of any employee or representative of such Party to enter into a Transaction. The manner of entering into a Transaction as described in this Section 1 is not intended to be the exclusive manner of forming a binding agreement between the Parties regarding a Transaction. 1.2 Confirmations. (a) Enron will execute and send to Counterparty promptly after telephonic agreement as to a Transaction a written confirmation memorializing the Transaction ("Confirmation"), a sample form of which is attached hereto as Exhibit A. Each Confirmation will be promptly executed by Counterparty and returned to Enron; however, Counterparty's failure to do so shall not impair the binding agreement of the Parties as to the Transaction. Each Confirmation will list the terms and conditions for the agreed Transaction not otherwise covered by this Master Agreement or the Inventory Agreements, including, without limitation, (i) the identity of Buyer and Seller, (ii) the Contract Quantity, (iii) the Purchase Price for the Commodity, (iv) the Delivery Point, (v) if the Transaction contains an Option, Option Quantity, Strike Price, Exercise Date(s) and any other relevant terms agreed to by the Parties, and (vi) such other terms as the Parties shall agree. (b) A Confirmation sent as provided above shall be considered correct upon receipt by Enron of Counterparty's written reply to the Confirmation, unless after Counterparty's receipt of the Confirmation, Counterparty notifies Enron within three (3) Business Days of Counterparty's receipt thereof, that the Confirmation contains a bona fide error and that a correction is necessary, in which case the Confirmation as revised by Enron to correct the error shall be the definitive Confirmation for the Transaction. If any dispute shall arise as to whether an error exists, the Parties will, in good faith, make reasonable efforts to resolve the dispute. Notwithstanding the above, if Counterparty has not timely notified Enron of a bona fide error in the Confirmation or has not otherwise replied in writing to the Confirmation within three (3) Business Days after its receipt by Counterparty, the Confirmation shall be deemed correct and binding and conclusive evidence of the Transaction agreed to by the Parties. Enron's failure to send a Confirmation or Counterparty's failure to reply to or return a Confirmation shall not invalidate any otherwise valid oral Transaction. Except as otherwise provided in this Master Agreement, in the event of any inconsistency between the provisions of this Master Agreement or the Inventory Agreements, on the one hand, and the terms set forth in a Confirmation, on the other hand, such Confirmation will prevail for the purpose of the relevant Transaction. (c) Each Confirmation shall supplement and form a part of this Master Agreement and shall be read and construed together with this Master Agreement, the Inventory Agreements and all other applicable Annexes and Exhibits and other Confirmations, which constitute a single integrated agreement between the Parties, and all the Transactions contemplated in Confirmations shall be integral parts of this Master Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the Parties, and that the Parties would not otherwise enter into any Transaction. 1.3 Representations. On the date of entering into each Transaction, each Party represents and warrants to the other Party: (i) it is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its formation and is qualified to conduct its business; (ii) it has all regulatory authorizations necessary for it to legally perform its obligations under the Inventory Agreements, this Master Agreement and each Transaction; (iii) the execution, delivery and performance of the Inventory Agreements, this Master Agreement and each Transaction are within its powers, have been duly authorized by all necessary action, and do not violate its governing documents or any material Law applicable to it; (iv) the Inventory Agreements, this Master Agreement and each Transaction when entered into in accordance with the Inventory Agreements and this Master Agreement constitute its legally valid and binding obligation enforceable against it in accordance with their terms, subject to any equitable defenses; (v) there are no Bankruptcy Proceedings pending or being contemplated by it or to its knowledge, threatened against it; (vi) there are no Legal Proceedings that materially adversely affect its ability to perform its obligations under the Inventory Agreements, this Master Agreement or any Transaction; and (vii) with respect to each Transaction involving an Option, it is a commercial user of or merchant handling the Commodity and that it is entering into the Option for purposes related to its business. Each Party covenants that it will cause these representations and warranties to be true and correct throughout the term of each Transaction. 2. Term The term of this Master Agreement shall commence on the Effective Date and shall remain in effect until both Inventory Agreements are terminated or expire pursuant to their respective terms; provided, however, that such termination shall not affect or excuse the performance of either Party under any provision of this Master Agreement that by its terms survives any such termination and this Master Agreement (and any relevant Confirmations) shall remain in effect with respect to any Transaction(s) entered into on or prior to the date of the termination until both Parties have fulfilled all their obligations with respect to such Transaction(s). 3. Obligations 3.1 Seller's and Buyer's Obligations. With respect to each Transaction and unless otherwise agreed to by the Parties, Seller shall sell and Buyer shall purchase the Contract Quantity of the Commodity and Buyer shall pay Seller the Purchase Price for such Commodity. Seller warrants that at the time of each delivery of the Commodity by Seller hereunder, it will be conveying title to the Commodity to Buyer, free and clear of all liens, claims, security interests, encumbrances and other defects of title; provided, that to the extent Buyer previously conveyed title in the Commodity to Seller in an earlier transaction, Seller's warranty to Buyer shall not cover any defects in title that arose through or under Buyer or any other owner(s) who held title prior to Seller acquiring title to such Commodity. EACH PARTY EXPRESSLY NEGATES ANY OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY WITH RESPECT TO CONFORMITY TO MODELS OR SAMPLES, MERCHANTABILITY, OR FITNESS FOR ANY PARTICULAR PURPOSE. This Section 3.1 shall survive expiration or termination of this Master Agreement and all Transactions. 3.2 Delivery. (a) Source and Delivery Point. Source of the Commodity shall be any producing source capable of producing Commodity, which meets the quality specifications set forth below. The Delivery Point for each Transaction shall be the HSI Facility designated in the applicable Confirmation. Counterparty shall be solely responsible for transporting Commodity within a HSI Facility. (b) Quality Specifications. The Commodity must meet the Specifications described in Schedule 1 attached hereto. (c) Term/Scheduling. Unless otherwise expressly provided in the relevant Confirmation, delivery and scheduling terms shall be those set forth in the Inventory Agreements. (d) Inspection Rights. Counterparty shall be responsible for inspecting all Commodity subject to a Transaction, all as more fully provided for in the Inventory Agreements and the Warehouse Agreements. 3.3 Taxes. Each Party shall use reasonable efforts to administer this Master Agreement and the Inventory Agreements and implement the provisions in accordance with the intent to minimize Taxes. Counterparty shall be solely responsible as to any Transaction for all assessments, fees, costs, expenses and taxes (including without limitation, any new taxes, but not income taxes) imposed by governmental authorities or other third parties ("Third Party Impositions") relating to the production, sale, use, loading and delivery of Commodity to Enron or in any way accrued or levied at or prior to or after the transfer of title to the Commodity to Enron. If either Party is exempt from taxes, it shall provide a certificate of exemption or other reasonably satisfactory evidence of such exemption. Each Party shall use reasonable efforts to obtain and cooperate with the other party's obtaining any exemption from or reduction of any Tax 3.4 Title and Indemnity. Seller warrants that it has title to the Commodity, and will deliver the Commodity to Buyer, free and clear of all liens, claims and encumbrances arising prior to the transfer of title to Buyer; provided, that to the extent Buyer previously conveyed title in the Commodity to Seller in an earlier transaction, Seller's warranty to Buyer shall not cover any defects in title that arose through or under Buyer or any other owner(s) who held title prior to Seller acquiring title to such Commodity. Seller and Buyer shall each indemnify, defend and hold harmless the other Party from any Claims arising from failure of title or loss of the Commodity while title and risk of loss to the Commodity is vested in the indemnifying Party. Except as otherwise provided in the Inventory Agreements, title shall pass to Buyer upon delivery at the Delivery Point in accordance with Schedule 1. 3.5 Option Exercise. Unless otherwise expressly provided in the relevant Confirmation for an Option, Options will be exercised as provided for in the Inventory Agreements. If the Option is not timely exercised, it will expire and neither Party will have any further rights or liabilities with respect to that Option. Once an Option under a Transaction has been timely and properly exercised, the physical purchase and sale of the Commodity related thereto shall be governed by the terms of the Inventory Agreements, this Master Agreement, and the relevant Confirmation, and the terms "Buyer" and "Seller" as used in this Master Agreement shall refer to the physical buyer and seller of the Commodity, respectively, and not to the buyer and seller of the Option. 4. Settlements; Security 4.1 Billing and Payment. Unless otherwise expressly provided in the relevant Confirmation, all amounts due with respect to a Transaction shall be due on the dates provided for in the Inventory Agreements. For any amount due hereunder or under the terms of the Inventory Agreements for which a payment procedure is not expressly provided for in the Inventory Agreements or the relevant Confirmation, such amounts shall be due within 15 days after the receipt of an invoice therefore. If the receiving Party in good faith reasonably disputes an invoice, it shall provide a written explanation specifying in detail the basis for the dispute and pay any undisputed portion no later than the due date. If any amount disputed by the receiving Party is determined to be due, it shall be paid within five (5) days of such determination along with interest accrued at the Interest Rate from the original due date until the date paid. If either Party fails to pay amounts under the Inventory Agreements or this Master Agreement when due, in addition to the rights and remedies provided in this Master Agreement and the Inventory Agreements, the aggrieved Party shall have the right to: (i) suspend performance under this Master Agreement until such amounts plus interest at the Interest Rate have been paid, and/or (ii) exercise any remedy available at law or in equity to enforce payment of such amount plus interest at the Interest Rate. 4.2 Netting and Setoff. If the Parties are each required to pay any amount on the same day, then such amounts with respect to each Party may be aggregated by Enron and the Parties shall discharge their obligations to pay through netting, in which case the Party, if any, owing the greater aggregate amount may pay to the other Party the difference between the amounts owed. Each Party reserves to itself all rights, setoffs, counterclaims, combination of accounts, liens and other remedies and defenses which such Party has or may be entitled to (whether by operation of law or otherwise). The obligations to make payments under this Master Agreement and/or any Transaction Document may be offset against each other, set off or recouped therefrom. 4.3 Audit. Each Party (and its representatives) has the right, at its sole expense during normal working hours and upon reasonable advance notice, to examine the records of the other Party, but only to the extent reasonably necessary to verify the accuracy of any statement, charge or computation made pursuant to the Inventory Agreements, this Master Agreement, or a Transaction. If requested, Counterparty shall provide to Enron statements evidencing the quantities of Commodity delivered or received at the Delivery Point(s). If any such examination reveals any inaccuracy in any statement, the necessary adjustments in such statements and the payments thereof will be promptly made and shall bear interest calculated at the Interest Rate from the date the overpayment or underpayment was made until paid; provided, however, that no adjustment for any statement or payment will be made unless objection to the accuracy thereof was made prior to the lapse of two (2) years from the rendition thereof; and provided further, that for the purpose of such statement and payment objections, this Section will survive any termination of a Transaction or this Master Agreement for a period of (2) years commencing with the rendition thereof. 4.4 Security. (a) In order to secure all payment obligations of Counterparty under the Inventory Agreements, this Master Agreement and the Transactions and the other Transaction Documents, Counterparty has executed or will execute security documents in favor of Enron and has caused or will cause its Guarantors, Huntco Inc., HSI Aviation, Inc., Huntco Nevada, Inc., and Midwest Products, Inc., to execute and deliver to Enron the Guaranties dated of even date herewith, which Guaranties are attached hereto as Exhibit C. 5. Force Majeure If either Party is rendered unable by a Force Majeure to carry out, in whole or part, its obligations under a Transaction and such Party gives oral notice and full details of the event to the other Party as soon as practicable after the occurrence of the event (such notice to be confirmed in writing), then during the pendency of such Force Majeure but for no longer period, the obligations of the Parties (other than obligations to make payments) under such Transaction shall be suspended to the extent required by the event. The Party affected by the Force Majeure shall remedy the Force Majeure with all reasonable dispatch; provided however, that this provision shall not require Seller to deliver, or Buyer to receive, the Commodity at points other than the Delivery Point. 6. Events of Default, Remedies and Limitation of Liability 6.1 Events of Default. An event of default ("Event of Default") with respect to a Party (the "Defaulting Party") shall mean any of the following: (i) the failure of Defaulting Party to pay when due any required payment under any Transaction or this Master Agreement and such failure is not remedied within three (3) Business Days after written notice thereof; (ii) subject to the terms of Section 6.3, the failure of the Defaulting Party to comply with its other respective obligations under any Transaction or this Master Agreement and such failure continues uncured for five (5) Business Days after written notice thereof; (iii) the Defaulting Party shall be subject to a Bankruptcy Proceeding; (iv) the failure of any of a Party's Guarantors, if any, to perform any covenant in its Guaranty, such Guaranty expires, is terminated or ceases to guarantee the obligations of such Party under the Inventory Agreements, this Master Agreement or any Transaction, or any Guarantor becomes subject to a Bankruptcy Proceeding; (v) any representation or warranty made by a Party under any Transaction, this Master Agreement or any other Transaction Document shall prove to be untrue or misleading in any material respect when made or repeated or deemed to have been made or repeated; (vi) any default, event of default, or other similar condition or event (however described) with respect to the Defaulting Party shall occur or exist under any other Transaction Document, provided that in each case such situation shall continue for a period longer than any grace period specifically provided therein; (vii) with respect to Counterparty, the occurrence of a Material Adverse Change; provided, such Material Adverse Change shall not be considered an Event of Default if Counterparty establishes and maintains for so long as the Material Adverse Change is continuing, a Performance Assurance with Enron in an amount equal to the Early Termination Payment that would be owed to Enron; or (viii) with respect to Counterparty, if at any time, Counterparty or any Guarantor shall have defaulted on its indebtedness to third parties, resulting in obligations in excess of $500,000, being accelerated. Upon the occurrence and during the continuation of an Event of Default as to the Defaulting Party, the other Party (the "Non-Defaulting Party") may, in its sole discretion, (a) accelerate and liquidate the Parties' respective obligations under this Master Agreement and all Transactions by establishing, and notifying the Defaulting Party of, an early termination date (which shall be no earlier than the date of such notice) on which this Master Agreement, both Inventory Agreements and all Transactions shall terminate ("Early Termination Date"), (b) withhold any payments due to the Defaulting Party until such Event of Default is cured and/or (c) suspend performance of its obligations under this Master Agreement, any Transactions and under any other Transaction Documents until such Event of Default is cured. Notwithstanding the immediately preceding sentence, if the "Event of Default" is one described in clauses (i), (ii), (iv), or (v) above and the Non-Defaulting Party has elected to establish an Early Termination Date, the Non-Defaulting Party may, in its sole discretion, choose to terminate (i) all Transactions or (ii) only those Transaction(s) which gave rise to such Event(s) of Default (in which latter case, this Master Agreement shall remain in effect as to all Transactions not then terminated, without prejudice to the Non-Defaulting Party's rights under this Section 6.1 to declare upon a subsequent Event of Default an Early Termination Date as to any remaining Transaction(s)). If notice of an Early Termination Date is given under this Section 6.1, the Early Termination Date will occur on the designated date, whether or not the relevant Event(s) of Default is then continuing. Any rights of a Non- Defaulting Party under this Section 6.1 shall be in addition to such Non- Defaulting Party's other rights under this Section 6 or under any other Transaction Document. 6.2 Early Termination Payment. If an Early Termination Date is established, the Non-Defaulting Party shall in good faith calculate its Gains, or Losses and Costs, resulting from the termination of the terminated Transaction(s) and, if applicable, the Inventory Agreements, aggregate such Gains, Losses and Costs with respect to all terminated Transactions and, if applicable, the Inventory Agreements into a single net amount, and then notify the Defaulting Party of the net amount owed or owing and provide the Defaulting Party with a reasonable description of the Gains, Losses and Costs with respect to the terminated Transactions. If the Non-Defaulting Party's aggregate Losses and Costs exceed its aggregate Gains, the Defaulting Party shall, within five (5) days of its receipt of such notice pay the net amount to the Non-Defaulting Party, including interest at the Interest Rate from the Early Termination Date until paid. If the Non-Defaulting Party's aggregate Gains exceed its aggregate Losses and Costs, if any, resulting from such early termination, the Non- Defaulting Party shall pay the net amount to the Defaulting Party in accordance with Section 4.1 hereof. The Non-Defaulting Party shall determine its Gains, Losses and Costs as of the Early Termination Date, or, if that is not possible, at the earliest date thereafter that is reasonably possible. If an Event of Default occurs and/or an Early Termination Date is designated and occurs, the Non-Defaulting Party may (at its election) set off any or all amounts which the Defaulting Party owes to the Non- Defaulting Party or its Affiliates (under this Master Agreement or otherwise) against any or all amounts which the Non-Defaulting Party owes to the Defaulting Party (under this Master Agreement or otherwise). The payments provided under this Section shall be in addition to any other remedies available under any other Transaction Document. 6.3 Remedies. So long as the Defaulting Party pays the amounts required under this Section 6.3, then the remedies set forth in this Section 6.3 shall be the Non-Defaulting Party's exclusive remedies for the Defaulting Party's failure to perform under a Transaction, other than the termination right described in Section 8.1.4 of the Inventory Agreements which arise from a failure to perform under multiple Transactions in a specified time period. (a) Unless excused by Force Majeure or Buyer's failure to perform, if Seller fails to deliver all or any part of the quantity of Commodity to be delivered under a Transaction, Seller shall pay Buyer for each unit of such deficiency ("Deficiency") an amount equal to the positive difference, if any, obtained by subtracting the Purchase Price for the Deficiency from the Replacement Price plus (i) any additional transportation costs incurred by Buyer due to such failure and (ii) Legal Costs incurred by Buyer. "Replacement Price" means the price, determined by Buyer in a commercially reasonably manner, at which Buyer purchases (if at all) substitute Commodity for the Deficiency or, absent such purchase, the market price for such quantity of Commodity F.O.B. Delivery Point. (b) Unless excused by Force Majeure or Seller's failure to perform, if Buyer fails to accept all or any part of the quantity of Commodity to be delivered under a Transaction, Buyer shall pay Seller for each unit of the Deficiency an amount equal to the positive difference, if any, obtained by subtracting the Sales Price from the Purchase Price plus (i) any additional transportation costs incurred by Seller due to such failure, and (ii) Legal Costs incurred by Seller. "Sales Price" means the price determined in a commercially reasonable manner by Seller at which Seller, resells (if at all) the Commodity, or, absent such a sale, the market price for such quantity of Commodity F.O.B. Delivery Point. (c) Payment of amounts, if any, determined under paragraph (a) or (b) of this Section 6.3 shall be made within five (5) days after an invoice is received by the Party obligated to make the payment. All such determinations shall be made in a commercially reasonable manner, and the Non-Defaulting Party shall not be required to enter into any actual replacement transaction in order to determine the Replacement Price or Sales Price as appropriate. If a Party obligated to make a payment under this Section 6.3 timely makes such payment to the other Party, no failure to perform as described in this Section 6.3 shall constitute an Event of Default pursuant to Section 6.1. Notwithstanding the foregoing, following a Non-Defaulting Party's early termination of a Transaction pursuant to the provisions of Section 6.1, the Defaulting Party shall be obligated to make the payments specified in Section 6.1 with respect to such terminated Transaction in lieu of the payments provided for in this Section 6.3 with respect to such Transaction. 6.4 Damages Stipulation. Each Party stipulates that the payment obligations set forth in this Section 6 for the damages incurred are a reasonable approximation of the anticipated harm or loss and acknowledges the difficulty of estimation or calculation of actual damages, and each Party hereby waives the right to contest such payments as unenforceable, an unreasonable penalty or otherwise. 6.5 Expenses. The Defaulting Party will, on demand, indemnify and hold harmless the Non-Defaulting Party for and against all reasonable out-of- pocket expenses, including Legal Costs, incurred by the Non-Defaulting Party in the enforcement and protection of its rights under this Master Agreement or any Transaction or under any other Transaction Document by reason of an Event of Default or an early termination of a Transaction, including, but not limited to, costs of collection. 6.6 Limitation of Liability. THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS MASTER AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS HEREIN PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE LIABLE PARTY'S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED UNLESS OTHERWISE PROVIDED IN THIS MASTER AGREEMENT OR ANOTHER TRANSACTION DOCUMENT. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY HEREIN PROVIDED, THE LIABLE PARTY'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY. NOTWITHSTANDING ANY OTHER PROVISION IN THIS MASTER AGREEMENT OR IN ANY TRANSACTION, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS, OR BUSINESS INTERRUPTION DAMAGES, WHETHER BY STATUTE, IN TORT OR IN CONTRACT, UNDER THE INVENTORY AGREEMENTS, THIS MASTER AGREEMENT, ANY TRANSACTION, ANY INDEMNITY PROVISION OR OTHERWISE. 7. Arbitration ANY AND ALL DISPUTES ARISING OUT OF OR IN CONNECTION WITH THIS MASTER AGREEMENT OR ANY TRANSACTION, INCLUDING ANY QUESTION REGARDING ITS EXISTENCE, VALIDITY OR TERMINATION, SHALL BE RESOLVED BY BINDING ARBITRATION GOVERNED BY THE FEDERAL ARBITRATION ACT AND CONDUCTED IN ACCORDANCE WITH THE AMERICAN ARBITRATION ASSOCIATION COMMERCIAL ARBITRATION RULES ("RULES"), WHICH RULES ARE DEEMED TO BE INCORPORATED BY REFERENCE INTO THIS CLAUSE. THE NUMBER OF ARBITRATORS SHALL BE THREE, EACH PARTY HAVING THE RIGHT TO APPOINT ONE ARBITRATOR, WHO SHALL TOGETHER APPOINT A THIRD NEUTRAL ARBITRATOR WITH AT LEAST FIVE (5) YEARS EXPERIENCE IN THE STEEL TRADING INDUSTRY OR OTHER COMMODITY TRADING INDUSTRY WITHIN THIRTY (30) DAYS IN ACCORDANCE WITH THE RULES. THE LOCATION OF ARBITRATION HEARINGS SHALL BE IN HOUSTON, TEXAS. THE PARTIES HEREBY EXPRESSLY WAIVE ANY RIGHT OF APPEAL TO ANY COURT. THERE WILL BE NO WRITTEN TRANSCRIPT OR RECORD OF THE ARBITRATION PROCEEDING. THE ARBITRATORS WILL ONLY MAKE THEIR AWARD AND WILL NOT RENDER A WRITTEN OPINION EXPLAINING THEIR AWARD. IT IS EXPRESSLY AGREED THAT THE ARBITRATORS SHALL HAVE NO AUTHORITY TO AWARD ATTORNEY'S FEES, OR CONSEQUENTIAL, SPECIAL, INDIRECT, TREBLE, EXEMPLARY OR PUNITIVE DAMAGES OF ANY TYPE, THE PARTIES HEREBY WAIVING THEIR RIGHTS, IF ANY, TO RECOVER ATTORNEY'S FEES AND CONSEQUENTIAL, SPECIAL, INDIRECT, TREBLE, EXEMPLARY AND PUNITIVE DAMAGES WITH RESPECT TO THIS MASTER AGREEMENT AND ANY TRANSACTIONS. ALL OF THE ARBITRATORS' ORDERS AND DECISIONS MAY BE ENFORCEABLE IN, AND JUDGMENT UPON ANY AWARD RENDERED IN THE ARBITRATION PROCEEDING MAY BE CONFIRMED AND ENTERED BY ANY COURT HAVING PROPER JURISDICTION. THE PARTIES AGREE THAT ALL ARBITRATION PROCEEDINGS CONDUCTED HEREUNDER AND THE DECISION OF THE ARBITRATORS SHALL BE KEPT CONFIDENTIAL AND NOT DISCLOSED, EXCEPT TO A PARTY'S AFFILIATES, ACCOUNTANTS, AND LAWYERS. 8. Miscellaneous 8.1 Successors and Assigns; Assignment. This Master Agreement shall inure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns. However, neither Party shall assign this Master Agreement or any Transaction or any of its rights or obligations hereunder or under any Transaction without the prior written consent of the other Party. Notwithstanding the foregoing, Enron may (a) assign its rights hereunder, under any Transaction or under any other Transaction Document without Counterparty's consent to (i) an Affiliate of Enron, or (ii) a special purpose vehicle, whether or not an Affiliate of Enron, provided that Enron or an Enron Affiliate manages the operations of such vehicle; (b) transfer or assign this Master Agreement, any Transaction or any other Transaction Document to any person or entity succeeding to all or substantially all of the assets of Enron by way of merger, reorganization or otherwise; or (c) transfer, sell, pledge, encumber or assign this Master Agreement and/or any Transaction or the accounts, revenues or proceeds hereof or thereof in connection with any financing or other financial arrangements,. Notwithstanding the foregoing, Enron shall not unreasonably withhold its consent to an assignment of this Master Agreement, the Inventory Agreements and all related Transactions from HSI to a person or entity succeeding to all or substantially all of the assets of HSI by way of merger, reorganization or otherwise provided such assignee or transferee accepts in writing responsibility for all of HSI's and the Guarantors' obligations under the foregoing documents and is of equal or greater creditworthiness than HSI and the Guarantors. 8.2 WARRANTIES. OTHER THAN THOSE EXPRESSLY PROVIDED IN SECTION 3.1, OR IN A CONFIRMATION, SELLER MAKES NO OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, ANY REPRESENTATION OR WARRANTY THAT THE COMMODITY WILL BE FIT FOR A PARTICULAR PURPOSE, OR WILL BE MERCHANTABLE. 8.3 Notices. All notices, requests, statements or payments shall be made to the addresses specified in Exhibit D hereto. Unless expressly provided otherwise, notices shall be in writing and delivered by letter, facsimile or other documentary form. Notice by facsimile or hand delivery shall be deemed to have been received by the close of the Business Day on which it was transmitted or hand delivered (unless transmitted or hand delivered after the close of the Business Day, in which case it shall be deemed received at the close of the next Business Day). Notice by overnight mail or courier shall be deemed to have been received one Business Day after it was sent. A Party may change its address by providing notice thereof in accordance with this Section. 8.4 Confidentiality. Neither Party shall disclose the commercial and/or credit terms of this Master Agreement or any Transaction to a third party (other than a Party's and its Affiliates' employees, lenders, counsel, accountants or prospective permitted purchasers, directly or indirectly, of a Party or all or substantially all of a Party's assets or of any rights under this Master Agreement or any Transactions, in each case who have agreed to keep such terms confidential) except in order to comply with any applicable law, order, regulation or exchange rule; provided, each Party shall notify the other Party of any proceeding of which it is aware which may result in disclosure and use reasonable efforts to prevent or limit the disclosure. 8.5 Governing Law. THIS MASTER AGREEMENT AND EACH TRANSACTION AND THE RIGHTS AND DUTIES OF THE PARTIES ARISING HEREFROM AND THEREFROM SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS. THE PARTIES AGREE THAT ANY TRANSACTION BETWEEN THEM UNDER THIS MASTER AGREEMENT IS A "QUALIFIED FINANCIAL CONTRACT" WITHIN THE MEANING OF NEW YORK GENERAL OBLIGATIONS LAW Sec. 5-701(b). 8.6 Entire Agreement; Amendments; Interpretation. This Master Agreement, the Schedules, Annexes, Exhibits and Appendices hereto and made a part hereof, if any, the Inventory Agreements and each of the other Transaction Documents, constitute the entire agreement between the Parties relating to the subject matter contemplated hereby and thereby and supersede any prior or contemporaneous agreements or representations affecting the same subject matter. Except for any matters which, in accordance with the express provisions of this Master Agreement, may be resolved by verbal agreement between the Parties, no amendment, modification or change to this Master Agreement shall be enforceable unless reduced to a writing executed by the Party against whom such amendment, modification or change is sought to be enforced and specifically referencing this Master Agreement. The Parties acknowledge that each Party and its counsel have reviewed and revised this Master Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting Party shall not be used in interpretation of this Master Agreement. 8.7 Counterparts; Severability; Survival. This Master Agreement and each Confirmation may be executed in several counterparts, each of which is an original and all of which constitute one and the same instrument. Except as may otherwise be stated herein, any provision or Section hereof that is declared or rendered unlawful by any applicable court of law or regulatory agency, or deemed unlawful because of a statutory change, will not otherwise affect the lawful obligations that arise under this Master Agreement or a Transaction. In the event any provision of this Master Agreement is declared unlawful, the Parties will promptly renegotiate to restore this Master Agreement or such Transaction as near as possible to its original intent and effect. All indemnity and audit rights shall survive the termination of this Master Agreement in full for a period of two (2) years (except with respect to audit rights as to Third Party Impositions which shall survive for the applicable statute of limitations, including any extensions thereof). 8.8 Non-Waiver; Duty to Mitigate; No Partnership or Third Party Beneficiaries. No waiver by any Party of any of its rights with respect to the other Party or with respect to any matter or default arising in connection with this Master Agreement shall be construed as a waiver of any subsequent right, matter or default whether of a like kind or different nature. Any waiver shall be in writing signed by the waiving Party. Each Party agrees that it has a duty to mitigate damages. Nothing contained in this Master Agreement or in any Transaction shall be construed to cause any Party to be deemed to be the employee, agent, partner, joint venturer or contractor of any other Party. This Master Agreement and each Transaction is made and entered into for the sole protection and legal benefit of the Parties, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Master Agreement or any Transaction. 8.9 Enron and Counterparty agree that the United Nations Convention on Contracts for the International Sale of Goods 1980 shall not in any way apply to, or govern any Transaction(s) under this Master Agreement pursuant to Section 6 of the Convention. 8.10 All claimed damage, nonconformities to contract specifications or defects to Commodity will be handled pursuant to the terms of the Inventory Agreements. 8.11 Unless otherwise expressly stated, Seller shall have the right to make delivery in installments. All installments shall be separately invoiced and paid as billed without regard to subsequent deliveries and no offset shall be allowed against the payment due for such installment. Delay in delivery of any installment shall not relieve Buyer of its obligation to accept remaining installments. 8.12 No claim or cause of action of any kind arising under a Transaction may be asserted more than two (2) years after the date on which such cause of action arises. 8.13 Counterparty undertakes that it has obtained and will maintain all necessary licenses and consents and permits in relation to the purchase and sale of the Commodity. The failure to obtain and retain such licenses, consents and permits shall not constitute an event of Force Majeure, provided that the relevant regulations in force at the date of entering into the Transaction required such licenses, consents or permits. 9. Definitions "Affiliate" means, with respect to any person, any other person (other than an individual) that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such person. For this purpose, "control" means the direct or indirect ownership of fifty percent (50%) or more of the outstanding capital stock or other equity interests having ordinary voting power. "ASTM" means the American Society for Testing and Materials. "Bankruptcy Proceeding" means with respect to a Party or entity, such Party or entity (a) makes an assignment or any general arrangement for the benefit of creditors, (b) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy or similar law for the protection of creditors, or has such a petition filed against it and such petition is not withdrawn or dismissed for thirty (30) days after such filing, (c) otherwise becomes bankrupt or insolvent (however evidenced) or (d) is unable to pay its debts as they fall due. "Business Day" means a day on which Federal Reserve member banks in New York City are open for business; and a Business Day shall open at 8:00 a.m. and close at 5:00 p.m. Central Time. "Buyer" means the Party to a Transaction who is obligated to purchase and receive, or cause to be received, Commodity during a Term of the Transaction. "Central Time" means Central Standard Time or Central Daylight Time, as the case may be. "Claims" means all claims or actions, threatened or filed and whether groundless, false or fraudulent, that directly or indirectly relate to the subject matter of an indemnity, and the resulting losses, damages, expenses, attorneys' fees and court costs, whether incurred by settlement or otherwise, and whether such Claims or actions are threatened or filed prior to or after the termination of this Master Agreement. "Commodity" means steel that conforms to the specification described on Schedule 1 attached hereto as the same may be amended by an amendment agreed to by both Enron and Counterparty. "Confirmation" means a written notice confirming the specific terms of a Transaction which may be in any form adequate at law. "Contract Quantity" means the quantity of Commodity that Seller agrees to sell to or cause to be delivered to, Buyer, and that Buyer agrees to purchase and receive, or cause to be received, from Seller, pursuant to a Transaction, as specified in a Confirmation. "Costs" means any brokerage fees, commissions and other transactional costs and expenses reasonably incurred by the Non-Defaulting Party either as a result of terminating any hedges or other risk management contracts and/or entering into new arrangements to replace the early terminated Transaction(s) and Inventory Agreements, and Legal Costs incurred by the Non-Defaulting Party. "Credit Agreement" means that certain Loan Agreement dated as of even date herewith, among Enron as lender, Counterparty, as borrower, and Huntco Inc., HSI Aviation, Inc., Huntco Nevada, Inc., and Midwest Products, Inc., each as obligors. "Delivery Point" means the agreed point(s) of delivery and receipt of the Commodity pursuant to a Transaction. "Early Termination Payment" means the payment calculated in accordance with the terms of Section 6.2 above. "Exercise Date" means the agreed date (as specified in the relevant Confirmation for an Option) prior to or on which the Option buyer must notify the Option seller that the Option buyer has elected to purchase or sell, as applicable, the relevant Option Quantity, if any, under a Transaction. "F.O.B." shall have the meaning given to such term in the Uniform Commercial Code of the State whose law governs this Master Agreement. "Force Majeure" means an event, which is not within the reasonable control of the Party (or, in the case of third party obligations or facilities, the third party) claiming suspension, and which such claiming Party (but not such third party) is unable to overcome or obtain or cause to be obtained a substitute therefor. "Gains" means, with respect to a Party, an amount equal to the present value of the economic benefit, if any, (exclusive of Costs) to it resulting from the termination of its obligations with respect to a terminated Transaction, determined in a commercially reasonable manner. "Guarantor" means in respect of Counterparty, Huntco Inc., HSI Aviation, Inc., Huntco Nevada, Inc., and Midwest Products, Inc., together with any additional, replacement or substitute guarantors of such Party's obligations hereunder. "Guaranty" means, as to Counterparty, each of the Guaranties described in Section 4.4 hereof and any amendment modification or replacement thereof. "HSI Facility" means one of HSI's existing warehouse and processing facilities, which facilities are more fully described on Exhibit B. "Interest Rate" means, for any date, two percent over the per annum rate of interest equal to the prime lending rate as may from time to time be published in the Wall Street Journal under "Money Rates;" provided the Interest Rate shall never exceed the maximum rate allowed by applicable law. "Laws" means all laws, treaties, regulations, standards, decrees, rules, decisions, judgments, orders, injunctions, interpretations, authorizations, and directives,. "Legal Costs" means, with respect to a Party, the reasonable out-of-pocket expenses incurred by it, including legal fees, by reason of the enforcement and protection of its rights under this Master Agreement or any Transaction. "Legal Proceedings" means any claim, demand, filing, investigation, administrative proceeding, action, suit or other legal proceeding. "Losses" means, with respect to a Party, an amount equal to the present value of the economic loss, if any, (exclusive of Costs) to it resulting from the termination of its obligations with respect to a terminated Transaction and losses resulting from the termination of the Inventory Agreements and its rights thereunder, each determined in a commercially reasonable manner. "Material Adverse Change" means a material adverse change with respect to (i) the business, condition (financial or otherwise), operations, performance or properties of Counterparty or any Guarantor, or (ii) the ability Counterparty to perform its obligations under the Transaction Documents in any material respect. "Option" means the right, but not the obligation, which one Party grants to the other Party under a Transaction to either sell or purchase the Option Quantity under that Transaction. "Option Quantity" means the quantity of Commodity that is covered by an Option and that, upon the proper exercise of such Option by the Option buyer, is required to be sold and delivered (and purchased and received) pursuant to the Transaction. "Performance Assurance" means a letter of credit in an amount equal to Counterparty's Early Termination Payment, in such form and for such amount and from such issuer, as is acceptable to Enron in its absolute discretion "Purchase Price" means the price in U.S. Dollars as defined in the Inventory Agreements unless superseded by the specific terms of a Transaction. With respect to Put Options and Call Options issued pursuant to the Inventory Agreements, the Purchase Price shall be the relevant Strike Price. "Seller" means the Party to a Transaction who is obligated to sell and deliver or cause to be delivered Commodity during the Term of the Transaction. "Specifications" means the quality characteristics for the Commodity subject to a Transaction on an "as received" basis, using ASTM standards, specified in the relevant Confirmation. "Strike Price" means the price in U.S. Dollars as defined in the Inventory Agreements. "Taxes" means any or all ad valorem, property, occupation, gross receipts, privilege, sales, use, consumption, excise, lease, transaction, and other taxes, governmental charges, licenses, fees, permits and assessments, or increases therein, other than taxes based on net income or net worth. "Term" means the period of time from the date a Transaction is to commence to the date a Transaction is to terminate or expire. "Ton" means 2,000 pounds. "Transaction" means a particular transaction agreed to by telephone communications or exchange of electronic communications between the Parties relating to the purchase, sale or exchange of Commodity or Options on the Commodity. "Transaction Document" means this Master Agreement, each Confirmation, the Inventory Agreements, the Guaranties, the Warehouse Agreement, the Credit Agreement, any Loan Agreement (as defined in the Credit Agreement), and the other agreements related thereto. "Warehouse Agreement" means that certain Warehouse and Services Agreement which agreement has been entered into on even date herewith by and between the Parties. "COUNTERPARTY" HUNTCO STEEL, INC. By:__________________________________________ Name:________________________________________ Title:_______________________________________ ENRON NORTH AMERICA CORP. By:_________________________________________ Name:_______________________________________ Title:______________________________________ EX-23 14 consent.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP CONSENT OF PRICEWATERHOUSECOOPERS LLP We hereby consent to the incorporation by reference in the Registration Statement on Forms S-8 (Nos. 33-68488, 33-71610, 333-662, and 333-19461) of Huntco Inc. of our report dated June 13, 2001 relating to the financial statements, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP PRICEWATERHOUSECOOPERS LLP St. Louis, Missouri June 14, 2001 EX-4 15 intercrd.txt INTERCREDITOR AGREEMENT INTERCREDITOR AND SUBORDINATION AGREEMENT THIS INTERCREDITOR AND SUBORDINATION AGREEMENT ("Intercreditor Agreement") dated as of June 8, 2001 is by and between CONGRESS FINANCIAL CORPORATION (CENTRAL), an Illinois corporation ("Congress" as hereinafter further defined) and ENRON NORTH AMERICA CORP., a Delaware corporation ("Enron" as hereinafter further defined). Congress and Enron are sometimes individually referred to herein as a "Creditor" and collectively as "Creditors." W I T N E S S E T H: WHEREAS, Enron has made a loan or provided other financial accommodations to Huntco Steel, Inc., a Delaware corporation ("HSI"), which loan is secured by certain assets and properties of HSI, Huntco, Inc. ("Huntco"), Huntco Nevada, Inc. ("Huntco Nevada"), and Midwest Products, Inc. ("Midwest", and together with HSI, HSIA, Huntco and Huntco Nevada, collectively, "Debtors" as hereinafter further defined); and WHEREAS, Congress has entered into financing arrangements with Debtors, pursuant to which Congress has made and may, upon certain terms and conditions, make loans and provide other financial accommodations to HSI and Midwest secured by certain assets and properties of Debtors; and WHEREAS, Enron has entered into a Master Purchase Agreement (as defined below) with HSI for the purchase and sale of steel products and HSI's obligations under such Master Purchase Agreement are secured by designated steel products and other assets of the Debtors. The parties have agreed that the designated steel products are in fact owned by Enron, but because of the possibility that such products may be determined to be or recharacterized as being owned by HSI, Enron has been granted a security interest in such products; and WHEREAS, Creditors desire to enter into this Intercreditor Agreement to (i) confirm the relative priority of the security interests of each Creditor in the assets and properties of Debtors, (ii) provide for the orderly sharing among Creditors, in accordance with such priorities, of proceeds of such assets and properties upon any foreclosure thereon or other disposition thereof, and (iii) agree upon the terms of the subordination of certain obligations of Debtors and related matters; NOW THEREFORE, in consideration of the mutual benefits accruing to Creditors hereunder and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows: 1. DEFINITIONS As used above and in this Intercreditor Agreement, the following terms shall have the meanings ascribed to them below: 1.1 "Agreements" shall mean, collectively, the Congress Credit Agreements, the Enron Credit Agreements and the Enron Inventory Agreements. 1.2 "Blockage Notice" shall mean a written notice from Congress to the Debtors and Enron that a Payment Event of Default or a Non-Payment Event of Default has occurred and is continuing with respect to the Senior Debt and which specifies that such notice is a "Blockage Notice". 1.3 "Business Day" shall mean any Monday through Friday during which commercial lenders are open for business in both Chicago, Illinois and Houston, Texas. 1.4 "Collateral" shall mean all of the property and interests in property, real or personal, tangible or intangible, now owned or hereafter acquired by any Debtor in or upon which either or both of Creditors at any time has a Lien, and including, without limitation, all proceeds of such property and interests in property, provided, that, the term Collateral as used herein shall not include any of the Enron Inventory Collateral. 1.5 "Commodity" shall mean steel products that conform to the specifications described on Exhibit A hereto. 1.6 "Congress" shall mean Congress Financial Corporation (Central), an Illinois corporation, and its successors and assigns (including any other lender or group of lenders that at any time refinances or replaces the Senior Debt, or succeeds to all or any portion of the Senior Debt or is otherwise party to the Congress Credit Agreements); provided, that, such entity either executes an intercreditor agreement substantially in the form of this Intercreditor Agreement or otherwise agrees to be bound by the terms hereof. 1.7 "Congress Credit Agreements" shall mean, collectively, the Loan and Security Agreement, dated April 15, 1999, by and among Congress and Debtors ("Congress Loan Agreement") and all agreements, documents and instruments at any time executed and/or delivered by any Debtor or any other person to, with or in favor of Congress in connection therewith or related thereto, as all of the foregoing now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated, refinanced, replaced or restructured (in whole or in part and including any agreements with, to or in favor of any other lender or group of lenders that at any time refinances, replaces or succeeds to all or any portion of the Senior Debt; provided, that, such entity either executes an intercreditor agreement substantially in the form of this Intercreditor Agreement or otherwise agrees to be bound by the terms hereof. 1.8 "Creditors" shall mean, collectively, Congress and Enron and their respective successors and permitted assigns. 1.9 "Debtors" shall mean, collectively, the following together with their respective successors and assigns, including, without limitation, a receiver, trustee or debtor-in-possession on behalf of such person or on behalf of any such successor or assign): (a) Huntco Steel, Inc. a Delaware corporation, (b) HSI Aviation, Inc., a Missouri corporation, (c) Huntco Inc., a Missouri corporation, (d) Huntco Nevada, Inc., a Nevada corporation, and (e) Midwest Products, Inc., a Missouri corporation; each of the foregoing sometimes being referred to herein individually as a "Debtor". 1.10 "Enron" shall mean Enron North America Corp., a Delaware corporation and its successors and assigns. 1.11 "Enron Credit Agreements" shall mean, collectively, the Loan Agreement dated as of April 6, 2001, among Enron and Debtors as amended by the First Amendment to Loan Agreement dated as of April 6, 2001, and all agreements, documents and instruments at any time executed and/or delivered by any Debtor or any other person to, with or in favor of Enron in connection therewith or related thereto, as all of the foregoing now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, provided, that the Enron Credit Agreements shall not include any of the Enron Inventory Agreements except for the separate Guarantees, each dated as of April 6, 2001, by Huntco, Huntco Nevada and Midwest in favor of Enron, the separate Security Agreements, each dated as of April 6, 2001, by HSI, Huntco, Huntco Nevada and Midwest in favor of Enron, the separate Pledge Agreements, each dated as of April 6, 2001, by Huntco and Huntco Nevada in favor of Enron and the financing statements related to the foregoing items. 1.12 "Enron Inventory Agreements" shall mean, collectively, IMA1, IMA2, the Master Purchase Agreement and all agreements, documents and instruments at any time executed and/or delivered by any Debtor or any other person to, with or in favor of Enron in connection therewith or related thereto, as all of the foregoing now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, provided that the Enron Inventory Agreements shall not include any of the Enron Credit Agreements except for the separate Guarantees, each dated as of April 6, 2001, by Huntco, Huntco Nevada and Midwest in favor of Enron, the separate Security Agreements, each dated as of April 6, 2001, by HSI, Huntco, Huntco Nevada and Midwest in favor of Enron, the separate Pledge Agreements, each dated as of April 6, 2001, by Huntco and Huntco Nevada in favor of Enron and the financing statements related to the foregoing items. 1.13 "Enron Inventory Collateral" shall mean any of the following that is owned by Enron or, notwithstanding having been purchased and paid for by Enron, is at any time determined to be, through recharacterization or otherwise, property of HSI: (a) all steel products including all Commodity (collectively, "Steel Products"), purchased by Enron after the date hereof pursuant to or in connection with the provisions of IMA1 and/or IMA2 that has not been sold by Enron to and paid for by HSI and (b) any proceeds, insurance, indemnity, warranty, or guaranty of or for any such Steel Products. In no event shall the term "Enron Inventory Collateral" include (i) any Steel Products that were purchased by Enron from HSI with respect to which Enron owes HSI any amounts or (ii) any rights to payment of any Debtor, whether or not earned by performance, for any property which a Debtor purchased from Enron and fully paid for that is subsequently sold, leased, licensed, assigned or otherwise disposed of by such Debtor. 1.14 "Enron Inventory Debt" shall mean all obligations, liabilities and indebtedness of every kind, nature and description owing by any Debtor to Enron under the Enron Inventory Agreements, including purchase payments, interest, charges, fees, premiums, indemnities and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of the Enron Inventory Agreements or after the commencement of any case with respect to such Debtor under the U.S. Bankruptcy Code or any similar statute (and including, without limitation, any principal, interest, fees, costs, expenses and other amounts, whether or not such amounts are allowable in whole or in part, in any such case or similar proceeding), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and whether arising directly or howsoever acquired by Enron, provided, that, the Enron Inventory Debt shall not include any of the Junior Debt. 1.15 "Enron Notice of Remedies" shall have the meaning set forth in Section 2.7(b). 1.16 "IMA1" shall mean the Inventory Management Agreement (Phase I) dated as of April 6, 2001, by and between Enron and HSI as the same may be amended or modified from time to time. 1.17 "IMA2" shall mean the Inventory Management Agreement (Phase II) dated as of April 6, 2001, by and between Enron and HSI as the same may be amended or modified from time to time. 1.18 "Junior Debt" shall mean only all of the obligations, liabilities and indebtedness of every kind, nature and description owing by any Debtor to Enron under the Enron Credit Agreements, including principal, interest, charges, fees, premiums, indemnities and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of the Enron Credit Agreements or after the commencement of any case with respect to such Debtor under the U.S. Bankruptcy Code or any similar statute (and including, without limitation, any principal, interest, fees, costs, expenses and other amounts, whether or not such amounts are allowable in whole or in part, in any such case or similar proceeding), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and whether arising directly or howsoever acquired by Enron, provided, that, the Junior Debt shall not include any of the Enron Inventory Debt. 1.19 "Lien" shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance (including, but not limited to, easements, rights of way and the like), lien (statutory or other), security agreement or transfer intended as security, including without limitation, any conditional sale or other title retention agreement, the interest of a lessor under a capital lease or any financing lease having substantially the same economic effect as any of the foregoing. 1.20 "Master Purchase Agreement" shall mean the Master Steel Purchase and Sale Agreement dated as of April 6, 2001, by and between Enron and Debtor. 1.21 "Non-Payment Event of Default" shall mean any Senior Debt Event of Default (other than a Payment Event of Default). 1.22 "Payment Blockage Period" shall mean (a) any period during which a Payment Event of Default has occurred and is continuing and (b) any other period during which a Standstill Period exists. 1.23 "Payment Event of Default" shall mean any default in the payment of any Senior Debt when due (whether upon maturity, mandatory prepayment, acceleration or otherwise) beyond any applicable grace period with respect thereto. 1.24 "Person" or "person" shall mean any individual, sole proprietorship, partnership, corporation (including, without imitation, any corporation which elects subchapter S status under the Internal Revenue Code of 1986, as amended), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock company, trust, joint venture, or other entity or any government or any agency or instrumentality or political subdivision thereof. 1.25 "Revolver Limit" shall have the meaning set forth in Section 4.1(f). 1.26 "Senior Debt" shall mean any and all obligations, liabilities and indebtedness of every kind, nature and description owing by any Debtor under the Congress Credit Agreements to Congress and/or its affiliates or participants, including principal, interest, charges, fees, premiums, indemnities and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, whether arising under Congress Credit Agreements or otherwise, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of the Congress Credit Agreements or after the commencement of any case with respect to such Debtor under the U.S. Bankruptcy Code or any state insolvency law or similar statute (and including, without limitation, any principal, interest, fees, costs, expenses and other amounts, which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in any such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and whether arising directly or howsoever acquired by Congress. 1.27 "Senior Debt Event of Default" shall mean any "Event of Default" under and as defined in the Congress Credit Agreements. 1.28 "Specified Event of Default" shall mean (a) a Payment Event of Default; or (b) a Non-Payment Event of Default arising out of Debtors' failure to comply with Section 9.16 of the Congress Loan Agreement (as in effect on the date hereof) that continues uncured for a period of 30 days after the earlier of (i) the date Debtor receives a notice from Congress of such Section 9.16 default or (ii) the date Debtor is required to provide financial reports to Congress that disclose (or would have disclosed) such default. 1.29 "Standstill Period" shall mean any period commencing on the date a Blockage Notice is given and ending one hundred eighty (180) days after the date such Blockage Notice is given; provided, that, if Congress receives an Enron Notice of Remedies at any time before Congress delivers a Blockage Notice to Enron, then Standstill Period shall mean any period commencing on the date Congress receives such Enron Notice of Remedies and ending one hundred ninety (190) days after the date such Enron Notice of Remedies is received by Congress. 1.30 All terms defined in the Uniform Commercial Code as in effect in the State of Illinois as of the date hereof, unless otherwise defined herein shall have the meanings set forth therein. All references to any term in the plural shall include the singular and all references to any term in the singular shall include the plural. 2. SECURITY INTERESTS; PRIORITIES; REMEDIES 2.1 Acknowledgment of Liens. Each Creditor hereby acknowledges that the other Creditor has been granted a Lien upon the Collateral. Congress hereby acknowledges that Debtor has granted Enron a Lien upon the Enron Inventory Collateral and that as of the date hereof Congress does not have a Lien on the Enron Inventory Collateral. 2.2 Priority of Liens. Notwithstanding the order or time of attachment, or the order, time or manner of perfection, or the order or time of filing or recordation of any document or instrument, or other method of perfecting a security interest in favor of each Creditor in any Collateral or Enron Inventory Collateral, and notwithstanding any conflicting terms or conditions which may be contained in any of the Agreements, (a) the Liens upon the Collateral of Congress have and shall have priority over the Liens upon the Collateral of Enron and such Liens of Enron are and shall be, in all respects, subject and subordinate to the Liens of Congress therein to the full extent of the Senior Debt and (b) the Liens upon the Enron Inventory Collateral of Enron have and shall have priority over the Liens (if any) upon the Enron Inventory Collateral of Congress and such Liens of Congress (if any) are and shall be, in all respects, subject and subordinate to the Liens of Enron therein to the full extent of the Enron Inventory Debt. 2.3 Priorities Unaffected by Action or Inaction. The lien priorities provided in Section 2.2 shall not be altered or otherwise affected by any amendment, modification, supplement, extension, renewal, restatement or refinancing of the Senior Debt (which does not contravene Section 4.1(c) or (f)), or the Junior Debt or the Enron Inventory Debt, nor by any action or inaction which any Creditor may take or fail to take in respect of the Collateral or the Enron Inventory Collateral. 2.4 Rights of Third Parties; No Contest of Lien. Each Creditor shall be solely responsible for perfecting and maintaining the perfection of its Lien in and to each item constituting the Collateral in which such Creditor has been granted a Lien. The foregoing provisions of this Intercreditor Agreement are intended solely to govern the respective lien priorities as between the Creditors and shall not impose on the Creditors any obligations in respect of the disposition of proceeds of foreclosure on any Collateral or Enron Inventory Collateral which would conflict with prior perfected claims therein in favor of any other person or any order or decree of any court or other governmental authority or any applicable law. Enron agrees that it will not contest the validity, perfection, priority or enforceability of the Liens upon the Collateral of Congress and that as between Congress and Enron, the terms of this Intercreditor Agreement shall govern even if part or all of the Senior Debt or the Liens securing payment and performance thereof are not perfected or are avoided, disallowed, set aside or otherwise invalidated in any judicial proceeding or otherwise. Congress agrees that it will not contest the validity, perfection, priority or enforceability of the Liens upon the Collateral or Enron Inventory Collateral of Enron and that as between Congress and Enron, the terms of this Intercreditor Agreement shall govern even if part or all of the Junior Debt, the Enron Inventory Debt or the Liens securing payment and performance thereof are not perfected or are avoided, disallowed, set aside or otherwise invalidated in any judicial proceeding or otherwise. 2.5 Right to Enforce Agreement. Congress shall have the right to manage, perform and enforce the terms of the Congress Credit Agreements with respect to the Collateral, to exercise and enforce all privileges and rights thereunder according to its discretion and the exercise of its business judgment, including, without limitation, the right to take or retake control or possession of such Collateral and to hold, prepare for sale, process, sell, lease, dispose of, or liquidate such Collateral; provided, that, during a Standstill Period the foregoing rights shall be exclusively the rights of Congress. Enron shall have the exclusive right to manage, perform and enforce the terms of the Enron Inventory Agreements with respect to the Enron Inventory Collateral, to exercise and enforce all privileges and rights thereunder according to its discretion and the exercise of its business judgment, including, without limitation, the exclusive right to take or retake control or possession of such Enron Inventory Collateral and to hold, prepare for sale, process, sell, lease, dispose of, or liquidate same. 2.6 Sale and Release of Collateral; Right of First Refusal. (a) Notwithstanding anything to the contrary contained in any of the Agreements, during the continuance of a Specified Event of Default, Enron shall consent to the sale, transfer or other disposition of Collateral by any Debtor with the consent of Congress, if and only if, Enron does not agree to purchase such Collateral within the 10 days period provided for in the right of first refusal set forth in Section 2.6 (b) below. In connection with any sale or disposition pursuant to the foregoing sentence (i) Debtor shall deliver the proceeds to Congress and Congress shall cause the net cash proceeds Congress receives from such sale or disposition to be immediately applied, first, to the Senior Debt in such order and manner as Congress shall determine and, second, after the payment in full of the Senior Debt, to the Junior Debt in such order and manner as Enron shall determine and (ii) Congress and Debtors shall immediately and permanently reduce the Maximum Credit under the Senior Loan Agreements by not less than the amount of the Senior Debt that is repaid in connection with such sale or disposition of Collateral. Upon the closing of such a sale or disposition, Enron shall (x) immediately upon the request of Congress, release or otherwise terminate its Liens on the Collateral so sold or otherwise disposed of, (y) Enron shall immediately deliver such release documents with respect to the Collateral so sold or otherwise disposed of as Congress may reasonably require in connection therewith and (z) be deemed to have consented under the Enron Credit Agreements to such sale or other disposition. Notwithstanding anything to the contrary contained in any of the Agreements, only Enron shall have the right to restrict or permit, or approve or disapprove, the sale, transfer or other disposition of the Enron Inventory Collateral. To the extent it has or may obtain any Lien with respect to the Enron Inventory Collateral, Congress shall (i) immediately upon the request of Enron, release or otherwise terminate any Lien Congress may have on the Enron Inventory Collateral to the extent such Enron Inventory Collateral is sold or otherwise disposed of either by Enron, its agents or any Debtor with the consent of Enron and Congress shall immediately deliver such release documents with respect to the Enron Inventory Collateral so sold or otherwise disposed of as Enron may require in connection therewith and (ii) be deemed to have consented under the Congress Credit Agreements to such sale or other disposition. (b) In the event that during the continuance of a Specified Event of Default any Debtor obtains a bona fide offer from any Person to purchase all or any portion of the Collateral from such Debtor and Congress is willing to consent to such a sale, Congress shall give notice in writing to Enron (a "Sale Notice") not less than 10 days prior to the proposed purchase date, specifying the name of the proposed purchaser, the proposed purchase date (which shall be a Business Day) (the "Purchase Date"), the Collateral to be sold (the "Proposed Sale Collateral"), the purchase price, and all other material terms of the proposed sale. Within 10 days of receipt of a Sale Notice, Enron may give notice in writing to Congress (a "Purchase Notice") that Enron elects to purchase the Proposed Sale Collateral pursuant to the terms of the Sale Notice, in which event on the Purchase Date (or such other date as may be agreed by Enron and Congress) Enron (or any Person nominated by Enron) shall purchase the Proposed Sale Collateral pursuant to the terms of the Sale Notice. If within 10 days following delivery of a Sale Notice, Enron has not provided Congress with a Purchase Notice, then Debtor, with Congress' consent, may sell the Proposed Sale Collateral (i) on or before the Purchase Date; (ii) to the proposed purchaser, (iii) for a price not less than the purchase price and (iv) upon the material terms of such proposed sale, in each case as specified in the Sale Notice. If Debtor does not sell the Proposed Sale Collateral on or before the Purchase Date in accordance with the foregoing sentence, then it may not subsequently sell the Proposed Sale Collateral without first delivering an additional Sale Notice and following the procedure set out in this Section 2.6(b); provided, that, if Enron agrees it will purchase the Proposed Sale Collateral pursuant to this Section 2.6(b) and Enron fails to complete such purchase on or before the applicable Purchase Date then Debtor, with Congress' consent, may sell such Proposed Sale Collateral to the purchaser under the Sale Notice for any price agreed upon by the parties to such sale, without any further notice to or consent from Enron and Enron shall be deemed to have consented to such sale and to have released all of its liens on such Proposed Sale Collateral. 2.7 Limitation on Remedies. (a) Notwithstanding any rights or remedies avail-able to a Creditor under any of the Agreements, applicable law or otherwise, Congress shall not, directly or indirectly, seek to foreclose or realize upon (judicially or non- judicially) any Lien it may have on any Enron Inventory Collateral or assert any claims or interests therein. (b) Notwithstanding any rights or remedies avail-able to a Creditor under any of the Agreements, applicable law or otherwise, except as otherwise specifically provided in Section 2.7(c) below, Enron shall not, during a Standstill Period (and shall not at any other time upon less than ten (10) Business Days prior written notice to Congress of the intention of Enron to exercise any of the rights or remedies set forth below (an "Enron Notice of Remedies"), directly or indirectly, (i) seek to collect from any Debtor (including, without limitation, from or by way of any Collateral) any of the Junior Debt or exercise any of its rights or remedies upon a default or event of default by any Debtor under the Enron Credit Agreements or otherwise, or (ii) seek to foreclose or realize upon (judicially or non-judicially) its Lien on any Collateral or assert any claims or interests therein (including, without limitation, by setoff or notification of account debtors), or (iii) commence any action or proceeding against any Debtor or its properties under the U.S. Bankruptcy Code or any state insolvency law or similar present or future statute, law or regulation or any proceedings for voluntary liquidation, dissolution or other winding up of any Debtor's business, or the appointment of any trustee, receiver or liquidator for any Debtor or any part of its properties or any assignment for the benefit of creditors or any marshaling of assets of any Debtor, or (iv) take any other action against any Debtor and the Collateral. (c) Notwithstanding Section 2.7(b) above, Enron shall have the right to: (i) bid for and purchase any Collateral at any private or judicial foreclosure upon such Collateral initiated by Congress, (ii) file a proof of claim, attend, participate and vote in any administrative, legal or equitable action or proceeding against any Debtor seeking any reorganization, liquidation, bankruptcy or any other action involving the readjustment of all or any part of the Junior Debt, or other similar relief under the U.S. Bankruptcy Code, (iii) upon not less than seven (7) days prior written notice to Congress, take action and continue to pursue appropriate action to obtain a monetary judgment in respect of any non-payment of the Junior Debt; provided, that no action shall be taken to execute, enforce or collect such judgment, (iv) upon not less than seven (7) days prior written notice to Congress, exercise its right to accelerate the maturity of the Junior Debt under the Enron Credit Agreements (subject to Congress' rights under Section 2.8 hereof); provided, that, no action shall be taken to collect or enforce the Junior Debt, (v) send such notices of the existence of, or any evidence or confirmation of, the Junior Debt under the Enron Credit Agreements or the Liens of Enron in the Collateral to any court or governmental agency, or file or record any such notice or evidence to the extent necessary to prove or preserve (but not enforce) the Liens of Enron in the Collateral or the Junior Debt (including notice of default and acceleration), and (vi) take action to the extent necessary to preserve the validity, efficacy, and priority of the Junior Debt and/or prevent the expiration of any applicable statute of limitation with respect to Enron's rights under the Enron Credit Agreements; provided, that Enron shall not challenge or dispute the validity, perfection, priority or enforceability of the Senior Debt or any of the Liens of Congress in the Collateral. (d) Notwithstanding anything to the contrary contained in this Section 2.7, except during a Standstill Period, Enron shall have the right, upon ten (10) Business Days' prior written notice to Congress, to take action to enforce its Liens on any of the Collateral or assert any claims or interests therein, or exercise any other similar remedies with respect thereto or commence any action or proceeding against any Debtor under the U.S. Bankruptcy Code or any state insolvency law upon an event of default under the Enron Credit Agreements (other than as a result of an event of default under the Congress Credit Agreements) so long as such default is either continuing or was not cured within the applicable cure period, subject at all times to the provisions of Section 2.2 of this Intercreditor Agreement. 2.8 Right to Cure. Congress shall have the right, but not any obligation, to cure for the account of Debtors any default by any Debtor under the Enron Credit Agreements at any time during the Standstill Period or the applicable cure period that is provided for in the Enron Credit Agreements, as applicable, if longer, or thereafter with the consent of Enron, or any default by any Debtor under the Enron Inventory Agreements at any time during the applicable cure period that is provided for in the Enron Inventory Agreements, or thereafter with the consent of Enron. In the event that the default which was the basis for the declaration by Enron shall be cured within such applicable cure period, whether by Congress, any Debtor or any other person, or shall be waived or otherwise cease to exist, the rights of Enron under Section 2.7(d) above shall cease until the occurrence of any other or additional event of default. In no event shall Congress by virtue of the payment of amounts, or performance of any obligation required to be paid or performed by any Debtor, be deemed to have assumed any obligation of any Debtor to Enron or any other person. Enron shall have the right, but not any obligation, to cure for the account of Debtors any default by any Debtor under the Congress Credit Agreements at any time during the applicable cure period that is provided for in the Congress Credit Agreements, or thereafter with the consent of Congress. In no event shall Enron by virtue of the payment of amounts, or performance of any obligation required to be paid or performed by any Debtor, be deemed to have assumed any obligation of any Debtor to Congress of any other person. 2.9 Notices of Default. Each Creditor shall give to the other Creditor concurrently with the giving thereof to any Debtor, (a) a copy of any written notice by such Creditor of either a default or an event of default under its Agreements with such Debtor, or written notice of demand of payment from such Debtor, and (b) any written notice sent by a Creditor to such Debtor at any time an event of default under such Creditor's Agreements with such Debtor exists stating such Creditor's intention to exercise any of its enforcement rights or remedies, including written notice pertaining to any foreclosure on any of the Collateral or other judicial or non-judicial remedy in respect thereof, and any legal process served or filed in connection therewith; provided, that, the failure of any party to give notice as required hereby shall not affect the relative priorities of Creditors' respective Liens as provided herein or the validity or effectiveness of any such notice as against any Debtor. Each Debtor hereby authorizes and consents to each Creditor sending any such notices to the other Creditor. 3. SUBORDINATION OF DEBT 3.1 Subordination. Enron's right to payment and satisfaction of the Junior Debt, directly or indirectly, by any means whatsoever, is deferred, to the indefeasible payment and satisfaction in full of all Senior Debt. Notwithstanding anything to the contrary contained in this Section 3.1, (a) Enron's rights with respect to the Enron Inventory Debt and its rights under the Enron Inventory Agreements are not in any way subordinated to the Senior Debt or the payment and satisfaction thereof and (b) Enron may receive payments in respect of the Junior Debt to the extent permitted under Section 4.1(a) hereof. 3.2 Distributions. (a) In the event of any distribution, division, or application, partial or complete, voluntary or involuntary, by operation of law or otherwise, of all or any part of the Collateral or the proceeds thereof to the creditors of any Debtor or readjustment of the obligations and indebtedness of any Debtor, whether by reason of liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors, marshaling of assets of any Debtor or any other action or proceeding involving the readjustment of all or any part of the indebtedness or other obligations of any Debtor or the application of the assets of any Debtor to the payment or liquidation thereof, or upon the dissolution or other winding up of any Debtor's business, or upon the sale of all or substantially all of any Debtor's assets, then, and in any such event, (i) Enron shall receive the Enron Inventory Collateral and any distribution arising therefrom, (ii) Congress shall receive indefeasible payment in full of all of the Senior Debt in cash or other immediately available funds prior to the payment of all or any part of the Junior Debt, (iii) to the extent Congress has not received indefeasible payment in full of all of the Senior Debt in cash or other immediately available funds, Congress shall be entitled to receive any payment or distribution of any kind or character, whether in cash, securities or other property, which be payable or deliverable in respect of any or all of the Junior Debt and (iv) only after Congress has received payment in accordance with Sections 3.2(a)(ii) and (iii) above, Enron shall receive payment with respect to the Junior Debt. (b) In order to enable Congress to enforce its rights under Section 3.2(a) above, to the extent Enron fails to reasonably pursue enforcement of its claims with respect to the Junior Debt, Congress is hereby irrevocably authorized and empowered, at the expense of Congress (in its own name or in the name of Enron or otherwise), but shall have no obligation to, enforce claims comprising any of the Junior Debt by proof of debt, proof of claim, suit or otherwise and take generally any action which Enron might otherwise be entitled to take, as Congress may deem necessary or advisable for the enforcement of its rights or interests hereunder. (c) To the extent necessary for Creditors to realize the benefits of the subordination of Debt provided for herein (including the right to receive any payment and distributions which might otherwise be payable or deliverable in respect of the Senior Debt or Junior Debt in any proceeding described in Section 3.2(a) or otherwise), each Creditor shall execute and deliver to the other Creditor such instruments or documents together with such assignments or endorsements as the requesting Creditor shall deem necessary. 3.3 Instrument Legend and Notation. Any instrument at any time evidencing the Junior Debt, or any portion thereof, shall be permanently marked on its face with a legend conspicuously indicating that payment thereof is subordinate in right of payment to the Senior Debt and subject to the terms and conditions of this Intercreditor Agreement, and after being so marked certified copies thereof shall be delivered to Congress. No specific legend, further assignment or endorsement or delivery of notes, guarantees or instruments shall be necessary to subject any Junior Debt to the subordination thereof contained in this Intercreditor Agreement. 3.4 Payments Received by Enron. Should any payment or distribution or security or instrument or proceeds thereof be received by Enron in respect of the Junior Debt (other than those permitted under Section 4.1(a)), Enron shall receive and hold the same in trust, as trustee, for the benefit of Congress, segregated from other funds and property of Enron and shall forthwith deliver the same to Congress (together with any endorsement or assignment of Enron where necessary), for application to any of the Senior Debt. In the event of the failure of Enron to make any such endorsement or assignment to Congress, Congress, or any of its officers or employees, are hereby irrevocably authorized on behalf of Enron to make the same. 3.5 Payments Received by Congress. Should any payment or distribution or security or instrument or proceeds thereof be received by Congress that is part of, arises from or is proceeds of the Enron Inventory Collateral pursuant to the sale thereof and of which Congress has received written notice or has actual knowledge, Congress shall receive and hold the same in trust, as trustee, for the benefit of Enron, segregated from other funds and property of Congress and shall forthwith deliver the same to Enron (together with any endorsement or assignment of Congress where necessary), for application to any of the Enron Inventory Debt. Notwithstanding anything to the contrary in the immediately preceding sentence, if Congress receives any funds without having actual knowledge or without having received written notice that such funds constitute proceeds of the Enron Inventory Collateral before Congress has applied such funds to the Senior Debt or given credit for such proceeds to any Debtor for purposes of determining the amount of the loans available to Debtors, Congress shall have no obligation with respect to such proceeds or liability therefor to Enron and such proceeds shall cease to be part of the Enron Inventory Collateral; except that if Congress receives written notice that such funds are proceeds of Enron Inventory Collateral within forty-five (45) days after the date Congress has applied such proceeds to the Senior Debt and Congress receives such evidence that such funds are proceeds of Enron Inventory Collateral as Congress may reasonably require, Congress shall pay over such amounts to Enron to the extent that, after giving effect to such payment, the amount of the Excess Availability (as defined in the Congress Credit Agreements) of HSI and Midwest in the aggregate shall not be less than $1,000,000. In the event of the failure of Congress to make any endorsement or assignment to Enron pursuant to this Section 3.5, Enron, or any of its officers or employees, are hereby irrevocably authorized on behalf of Congress to make the same. 3.6 Release of Liens and Security Interests. Congress hereby releases its security interests in the Enron Inventory Collateral granted to it by HSI in the Congress Credit Agreements and HSI and Congress agree that each will enter into an amendment to the existing Congress Credit Agreements and UCC-3 Partial Releases, each in form and substance satisfactory to Congress and Enron, to indicate that Congress has released such security interests in the Enron Inventory Collateral. 4. COVENANTS, REPRESENTATIONS AND WARRANTIES 4.1 Additional Covenants. (a) Debtors shall not, directly or indirectly, make and Enron shall not, directly or indirectly, accept or receive any payment of principal or interest with respect to the Junior Debt or any prepayment or non-mandatory payment or any payment pursuant to acceleration or claims of breach or any payment to acquire Junior Debt, except that, at any time other than during a Payment Blockage Period, Debtors may make and Enron may receive the fees due as of the date hereof under the Enron Credit Agreements (as in effect on the date hereof), reimbursement of reasonable expenses of Enron due from time to time under the Enron Credit Agreements as in effect on the date hereof, and regularly scheduled payments of principal, interest, and fees under the Enron Credit Agreements (as in effect on the date hereof). (b) Enron shall not sell, assign, pledge, encumber or otherwise dispose of any of the Junior Debt unless the transferee executes an intercreditor agreement substantially in the form of this Intercreditor Agreement or otherwise agrees to be bound by the terms hereof. (c) Congress shall not sell, assign, pledge, encumber or otherwise dispose of any of the Senior Debt unless the transferee executes an intercreditor agreement substantially in the form of this Intercreditor Agreement or otherwise agrees to be bound by the terms hereof. (d) Enron and Debtor shall, at any time or times upon the request of Congress, promptly furnish to Congress a true, correct and complete statement of the outstanding Junior Debt; (e) Congress, Enron and Debtors shall execute and deliver to the other parties hereto such additional agreements, documents and instruments and take such further actions as may be reasonably necessary in the opinion of the requesting party to effectuate the provisions and purposes of this Intercreditor Agreement. (f) Unless Congress receives Enron's prior written consent, Congress shall not increase the "Maximum Credit" (as such term is defined in the Congress Credit Agreements) to be an amount greater than $80,000,000 less the amount of the permanent reductions thereto pursuant to the provisions of Section 2.6 above (such amount being referred to herein as, the "Revolver Limit"). (g) Debtors shall give Congress prompt written notice (but, in any event, within two (2) Business Days) of any exercise by Enron of its rights under the Enron Inventory Agreements to require any Debtor to purchase from or sell to Enron any Commodity or other inventory, which notice shall specify the Commodity or other inventory to be purchased or sold. 4.2 Additional Enron Representations and Warranties. Enron and Debtor represent and warrant to Congress that: (a) as of the date hereof, the total outstanding principal amount of the Junior Debt is $10,000,000; (b) as of the date hereof, no default or event of default, or event which with notice or passage of time or both would constitute an event of default exists or has occurred under the Enron Credit Agreements; (c) Enron is the exclusive legal and beneficial owner of all of the Junior Debt; and (d) this Intercreditor Agreement constitutes the legal, valid and binding obligations of Enron, enforceable in accordance with its terms. 4.3 Additional Congress Representations and Warranties. Congress and Debtor represent and warrant to Enron that upon the effectiveness of the amendments to the Congress Credit Agreements being executed concurrently herewith: (a) as of the date hereof, the Maximum Credit (as set forth in the Congress Credit Agreement) is $80,000,000; (b) as of the close of business on June 6, 2001, based on the books and records of Congress, the total principal amount of the Senior Debt outstanding was $66,476,276.70 (provided, that, such amount is subject to the right of Congress to make adjustments thereto as a result of items which have been provisionally credited to the loan account of Debtors and other charges which may or may not have been reflected in the records of Congress as of the date hereof); (c) as of the date hereof, no default or event of default, or event which with notice or passage of time or both would constitute an event of default exists or has occurred under the Congress Credit Agreements; (d) Congress is the exclusive legal and beneficial owner of all of the Senior Debt (except pursuant to the sale of any participation interests therein); (e) Congress is authorized by each of the financial institutions which have purchased participation interests in the Senior Debt to enter into this Intercreditor Agreement and modify the Congress Credit Agreements in accordance with the terms hereof; and (f) this Intercreditor Agreement constitutes the legal, valid and binding obligations of Congress, enforceable in accordance with its terms. 4.4 Waivers. Notice of acceptance hereof, the making of loans, advances and extensions of credit or other financial accommodations to, and the incurring of any expenses by or in respect of, Debtor by Congress or Enron, and presentment, demand, protest, notice of protest, notice of nonpayment or default and all other notices to which Congress, Enron and Debtor are or may be entitled are hereby waived (except as expressly provided for herein or as to Debtor, in the Agreements). Subject to the covenants set forth in Section 4.1, each Creditor waives as to the other Creditor notice of, and hereby consents to any amendment, modification, supplement, renewal, restatement or extensions of time of payment of or increase or decrease in the amount of any of the Senior Debt, the Junior Debt or the Enron Inventory Debt or to the Congress Credit Agreements, the Enron Credit Agreement, the Enron Inventory Agreements or any Collateral or Enron Inventory Collateral. Enron hereby waives notice of and consents to (a) the taking, exchange, surrender and releasing of Collateral or guarantees now or at any time held by or available to Congress for the Senior Debt or any other person at any time liable for or in respect of the Senior Debt, (b) the exercise by Congress of, or refraining by Congress from the exercise of any rights against Debtor or any other obligor or any Collateral, (c) the settlement, compromise or release of, or the waiver of any default with respect to, any of the Senior Debt, and/or (d) Congress' election, in any proceeding instituted under the U.S. Bankruptcy Code, of the application of Section 1111(b)(2) of the U.S. Bankruptcy Code. Any of the foregoing shall not, in any manner, affect the terms hereof or impair the obligations of Enron hereunder. All of the Senior Debt and the Junior Debt and the Enron Inventory Debt shall be deemed to have been made or incurred in reliance upon this Intercreditor Agreement. 4.5 Subrogation; Marshaling. Enron shall be subrogated to the rights of Congress to the extent that Enron pays over to Congress or Congress otherwise receives pursuant to the terms of this Intercreditor Agreement any payment or proceeds received by or that would have been received by Enron in satisfaction of the Junior Debt. Enron shall not be entitled to enforce any such rights of subrogation until the Senior Debt is indefeasibly paid in full in immediately available funds and the Congress Credit Agreements are terminated. In order to enable Enron to enforce its rights under this Section 4.5, to the extent Congress fails to reasonably pursue enforcement of its claims with respect to the Senior Debt, Enron is hereby irrevocably authorized and empowered, (in its own name or in the name of Congress or otherwise), but shall have no obligation to, enforce claims comprising any of the Senior Debt by proof of debt, proof of claim, suit or otherwise and take generally any action which Congress might otherwise be entitled to take, as Enron may deem necessary or advisable for the enforcement of its rights or interests hereunder; provided, that, such rights shall not be exercised until the Senior Debt is indefeasibly paid in full in immediately available funds and the Congress Credit Agreements are terminated. To the extent necessary for Creditors to realize the benefits of the subrogation provided for herein (including the right to receive any payment and distributions which might otherwise be payable or deliverable in respect of the Senior Debt), each Creditor shall execute and deliver to the other Creditor such instruments or documents together with such assignments or endorsements as the requesting Creditor shall deem necessary. Enron hereby waives any and all rights to have any Collateral or any part thereof granted to Congress marshaled upon any foreclosure or other disposition of such collateral by Congress or Debtor. 4.6 No Offset. In the event that Enron at any time incurs any obligation to pay any money to Debtor, Enron hereby irrevocably agrees that it shall not deduct from or setoff against any amounts owed by Enron to any Debtor in connection with any such transaction any amounts Enron claims are due to it with respect to the Junior Debt, provided, that, such limitation shall not limit in any way Enron's rights to set off amounts owed by Debtor to Enron pursuant to documents other than the Enron Credit Agreements. 5. MISCELLANEOUS 5.1 Amendments. Any waiver, permit, consent or approval by any Creditor of or under any provision, condition or covenant to this Intercreditor Agreement must be in writing and shall be effective only to the extent it is set forth in writing and as to the specific facts or circumstances covered thereby. Any amendment of this Intercreditor Agreement must be in writing and signed by each of the parties to be bound thereby. 5.2 Successors and Assigns. (a) This Intercreditor Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of each of Creditors and its respective successors, participants and permitted assigns. (b) Congress reserves the right to grant participations in, or otherwise sell, assign, transfer or negotiate all or any part of, or any interest in, the Senior Debt and the Collateral securing same; provided, that, Enron shall not be obligated to give any notices to or otherwise in any manner deal directly with any participant in the Senior Debt and no participant shall be entitled to any rights or benefits under this Intercreditor Agreement except through Congress. In connection with any participation or other transfer or assignment, Congress (i) may disclose to such assignee, participant or other transferee or assignee all documents and information which Congress now or hereafter may have relating to the Senior Debt or the Collateral and (ii) shall disclose to such participant or other transferee or assignee the existence and terms and conditions of this Intercreditor Agreement. (c) In connection with any permitted assignment or transfer of any or all of the Senior Debt, or any or all rights of Congress in the property of any Debtor (other than pursuant to a participation), Enron agrees to execute and deliver an agreement containing terms substantially identical to those contained herein in favor of any such assignee or transferee and, in addition, will execute and deliver an agreement containing terms substantially identical to those contained herein in favor of any third person who refinances or succeeds to or replaces any or all of Congress' financing of any Debtor, whether such successor financing or replacement occurs by transfer, assignment, "takeout" or any other means or vehicle. (d) Enron reserves the right to grant participations in, or otherwise sell, assign, transfer or negotiate all or any part of, or any interest in, the Junior Debt, the Enron Inventory Debt, the Collateral and/or the Enron Inventory Collateral securing same; provided, that, Congress shall not be obligated to give any notices to or otherwise in any manner deal directly with any participant in the Junior Debt or the Enron Inventory Debt and no participant shall be entitled to any rights or benefits under this Intercreditor Agreement except through Enron. In connection with any participation or other transfer or assignment, Enron (i) may disclose to such assignee, participant or other transferee or assignee all documents and information which Enron now or hereafter may have relating to the Junior Debt or the Enron Inventory Debt or the Collateral or the Enron Inventory Collateral and (ii) shall disclose to such participant or other transferee or assignee the existence and terms and conditions of this Intercreditor Agreement. (e) In connection with any permitted assignment or transfer of any or all of the Junior Debt or the Enron Inventory Debt, or any or all rights of Enron in the property of any Debtor (other than pursuant to a participation), Congress agrees to execute and deliver an agreement containing terms substantially identical to those contained herein in favor of any such assignee or transferee and, in addition, will execute and deliver an agreement containing terms substantially identical to those contained herein in favor of any third person who refinances or succeeds to or replaces any or all of Enron's financing of any Debtor or the sale of steel products to any Debtor, whether such successor or replacement occurs by transfer, assignment, "takeout" or any other means or vehicle. 5.3 Insolvency. This Intercreditor Agreement shall be applicable both before and after the filing of any petition by or against any Debtor under the U.S. Bankruptcy Code and all converted or succeeding cases in respect thereof, and all references herein to any Debtor shall be deemed to apply to a trustee for such Debtor and such Debtor as debtor-in-possession. The relative rights of Congress and Enron to repayment of the Senior Debt, the Junior Debt and the Enron Inventory Debt, respectively, and in or to any distributions from or in respect of any Debtor or any Collateral, Enron Inventory Collateral or proceeds thereof, shall continue after the filing thereof on the same basis as prior to the date of the petition, subject to any court order approving the financing of, or use of cash collateral by, any Debtor as debtor-in-possession. 5.4 Bankruptcy Financing. If a Debtor shall become subject to a proceeding under the U.S. Bankruptcy Code and if Congress desires to permit the use of cash collateral or to provide financing to such Debtor under either Section 363 or Section 364 of the U.S. Bankruptcy Code, Enron agrees as follows: (a) adequate notice to Enron shall have been provided for such financing or use of cash collateral if Enron receives notice two (2) Business Days prior to the entry of the order approving such financing or use of cash collateral and (b) no objection will be raised by Enron to any such financing or use of cash collateral on the ground of a failure to provide "adequate protection" for Enron's junior Liens on the Collateral or any other grounds, provided (i) Enron retains a Lien on the post-petition Collateral with the same priority as existed prior to the commencement of the proceeding under the U.S. Bankruptcy Code and (ii) the maximum outstanding principal amount of such post-petition financing, together with the outstanding principal amount of the pre-petition Senior Debt, shall not in the aggregate exceed the Revolver Limit. For purposes of this Section, notice of a proposed financing or use of cash collateral shall be deemed given when given, in the manner prescribed by Section 5.5 hereof, to Enron. 5.5 Notices. All notices, requests and demands to or upon the respective parties hereto shall be in writing and shall be deemed duly given, made or received: if delivered in person, immediately upon delivery; if by telex, telegram or facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next Business Day, one (1) Business Day after sending; and if mailed by certified mail, return receipt requested, five (5) days after mailing to the parties at their addresses set forth below (or to such other addresses as the parties may designate in accordance with the provisions of this Section): To Congress: Congress Financial Corporation (Central) 150 South Wacker Drive Chicago, Illinois 60606 Attention: Portfolio Manager To Enron: Enron North America Corp. 1400 Smith Street Houston, Texas 77002 Attention: Lou Stoler Either Creditor may change the address(es) to which all notices, requests and other communications are to be sent by giving written notice of such address change to the other Creditor in conformity with this Section 5.5, but such change shall not be effective until notice of such change has been received by the other Creditors. 5.6 Counterparts. This Intercreditor Agreement may be executed in any number of counterparts, each of which shall be an original with the same force and effect as if the signatures thereto and hereto were upon the same instrument. 5.7 Governing Law. The validity, construction and effect of this Intercreditor Agreement shall be governed by the internal laws of the State of New York (without giving effect to principles of conflicts of law). 5.8 Consent to Jurisdiction; Waiver. Each of the parties hereto, hereby irrevocably consents to the non-exclusive jurisdiction of the Untied States District Court of the Southern District of New York sitting in New York County or the Commercial Division, Civil Branch of the Supreme Court of the State of New York sitting in New York County and any appellate court from any thereof in any action or proceeding with respect to this Intercreditor Agreement or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Intercreditor Agreement or the transactions related hereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise. THE PARTIES HERETO HEREBY WAIVE THEIR RIGHTS, IF ANY, TO RECOVER ATTORNEY'S FEES AND CONSEQUENTIAL, SPECIAL, INDIRECT, TREBLE, EXEMPLARY AND PUNITIVE DAMAGES WITH RESPECT TO THIS INTERCREDITOR AGREEMENT. 5.9 Complete Agreement. This written Intercreditor Agreement is intended by the parties as a final expression of their agreement and is intended as a complete statement of the terms and conditions of their agreement. 5.10 No Third Parties Benefitted. Except as expressly provided in Section 5.2, this Intercreditor Agreement is solely for the benefit of the Creditors and their respective successors, participants and assigns, and no other person shall have any right, benefit, priority or interest under, or because of the existence of, this Intercreditor Agreement. 5.11 Disclosures; Non-Reliance. Each Creditor has the means to, and shall in the future remain, fully informed as to the financial condition and other affairs of each Debtor and no Creditor shall have any obligation or duty to disclose any such information to any other Creditor. Except as expressly set forth in this Intercreditor Agreement, the parties hereto have not otherwise made to each other nor do they hereby make to each other any warranties, express or implied, nor do they assume any liability to each other with respect to: (a) the enforceability, validity, value or collectability of any of the Junior Debt, the Enron Inventory Debt or Senior Debt or any guarantee or security which may have been granted to any of them in connection therewith, (b) any Debtor's title to or right to transfer any of the Collateral or the Enron Inventory Collateral, or (c) any other matter except as expressly set forth in this Intercreditor Agreement. 5.12 Term. This Intercreditor Agreement is a continuing agreement and shall remain in full force and effect until the indefeasible satisfaction in full in immediately available funds of all of the Senior Debt and the termination of the financing arrangements between Congress and Debtors. IN WITNESS WHEREOF, the parties have caused this Intercreditor Agreement to be duly executed as of the day and year first above written. CONGRESS FINANCIAL CORPORATION (CENTRAL) By: Title: ENRON NORTH AMERICA CORP. By: Title: - ----------------------------------------------------------------------------- - --- Each of the undersigned hereby acknowledges and agrees to the foregoing terms and provisions and by its signature below, it agrees that it will, together with its successors and assigns, be bound by the provisions hereof. Each of the undersigned agrees that any Creditor holding Collateral or Enron Inventory Collateral does so as bailee (under the UCC) for the other and is hereby authorized to and may turn over to such other Creditor upon request therefor any such Collateral Enron Inventory Collateral, after all obligations and indebtedness of the undersigned to the bailee Creditor have been fully paid and performed. Each of the undersigned acknowledges and agrees that: (i) although it may sign this Intercreditor Agreement it is not a party hereto and does not and will not receive any right, benefit, priority or interest under or because of the existence of the foregoing Intercreditor Agreement, (ii) in the event of a breach by the undersigned or Congress of any of the terms and provisions contained in the foregoing Intercreditor Agreement to which such person is bound, such a breach shall constitute an "Event of Default" as defined in and under the Enron Credit Agreements and the Enron Inventory Agreements to which such person is bound, (iii) in the event of a breach by the undersigned or Enron of any of the terms and provisions contained in the foregoing Intercreditor Agreement, such a breach shall constitute an "Event of Default" as defined in and under the Congress Credit Agreements and (iv) it will execute and deliver such additional documents and take such additional action as may be necessary or desirable in the opinion of any Creditor to effectuate the provisions and purposes of the foregoing Intercreditor Agreement. HUNTCO STEEL, INC. By: Title: HUNTCO INC. By: Title: HUNTCO NEVADA, INC. By: Title: MIDWEST PRODUCTS, INC. By: Title: - ----------------------------------------------------------------------------- - --- Exhibit A SPECIFICATIONS Specifications for hot rolled, cold rolled and coated steel coils shall be coils with the following specifications, regardless of whether such coils have been treated or otherwise modified. EX-4 16 cfpledge.txt PLEDGE AGREEMENT - CONGRESS FINANCIAL PLEDGE AND SECURITY AGREEMENT THIS PLEDGE AND SECURITY AGREEMENT ("Pledge Agreement"), dated June 8, 2001, is by Huntco Nevada, Inc., a Nevada corporation ("Pledgor"), with its chief executive office at 2437 East Cheyenne, North Las Vegas, Nevada 89030 to and in favor of Congress Financial Corporation (Central), an Illinois corporation ("Pledgee"), having an office at 150 South Wacker Drive, Chicago, Illinois 60606. W I T N E S S E T H: WHEREAS, Pledgor is now the direct and beneficial owner of all of the issued and outstanding shares of capital stock of Huntco Steel, Inc., a Delaware corporation, and Midwest Products, Inc., a Missouri corporation (each individually an "Issuer" and collectively, the "Issuers") as described on Exhibit A hereto and made a part hereof (the "Pledged Securities); WHEREAS, Pledgee and Issuers have entered into financing arrangements pursuant to which Pledgee may make loans and advances and provide other financial accommodations to Issuers as set forth in the Loan and Security Agreement, dated April 15, 1999, by and between Pledgee, Issuers, Pledgor and certain affiliates of Pledgor (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the "Loan Agreement") and other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto, including, but not limited to, the Guarantee (as defined below) and this Pledge Agreement (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the "Financing Agreements"); WHEREAS, Pledgor has absolutely and unconditionally guaranteed the payment and performance of all now existing and hereafter arising obligations, liabilities and indebtedness of Issuers to Pledgee as set forth in the two separate Guarantees, each dated April 15, 1999, by Pledgor and certain of its affiliates in favor of Pledgee (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, collectively, the "Guarantee"); WHEREAS, Pledgee, Issuers and certain affiliates of Issuers are entering into Amendment No. 1 to Loan and Security Agreement, dated even date herewith ("Amendment No. 1"), pursuant to which Pledgee has agreed, among other things, to permit Huntco Steel, Inc. to sell certain of its assets; WHEREAS, it is a condition to the effectiveness of Amendment No. 1 that Pledgor execute and deliver this Pledge Agreement in favor of Pledgee; WHEREAS, in order to induce Pledgee to enter into Amendment No. 1, Pledgor has agreed to secure the payment and performance of the Obligations (as hereinafter defined) to Pledgee and to accomplish same by (i) executing and delivering to Pledgee this Pledge Agreement, (ii) delivering to Pledgee the Pledged Securities which are registered in the name of Pledgor, together with appropriate powers duly executed in blank by Pledgor, and (iii) delivering to Pledgee any and all other documents which Pledgee deems necessary to protect Pledgee's interests hereunder; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor hereby agrees as follows: 1. GRANT OF SECURITY INTEREST As collateral security for the prompt performance, observance and indefeasible payment in full of all of the Obligations (as hereinafter defined), Pledgor hereby assigns, pledges, hypothecates, transfers and sets over to Pledgee and grants to Pledgee a security interest in and lien upon (a) the Pledged Securities, together with all cash dividends, stock dividends, interests, profits, redemptions, warrants, subscription rights, stock, securities options, substitutions, exchanges and other distributions now or hereafter distributed by any Issuer or which may hereafter be delivered to the possession of Pledgor or Pledgee with respect thereto, (b) Pledgor's records with respect to the foregoing, and (c) the proceeds of all of the foregoing (all of the foregoing being collectively referred to herein as the "Pledged Property"). 2. OBLIGATIONS SECURED The security interest, lien and other interests granted to Pledgee pursuant to this Pledge Agreement shall secure the prompt performance and payment in full of any and all obligations, liabilities and indebtedness of every kind, nature and description owing by Pledgor to Pledgee and/or its affiliates, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, whether arising under the Guarantee, this Pledge Agreement, the Loan Agreement, the other Financing Agreements or otherwise, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of the Loan Agreement or after the commencement of any case with respect to Pledgor under the United States Bankruptcy Code or any similar statute (including, without limitation, the payment of interest and other amounts which would accrue and become due but for the commencement of such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and however acquired by Pledgee (all of the foregoing being collectively referred to herein as the "Obligations"). 3. REPRESENTATIONS, WARRANTIES AND COVENANTS Pledgor hereby represents, warrants and covenants with and to Pledgee the following (all of such representations, warranties and covenants being continuing so long as any of the Obligations are outstanding): (a) The Pledged Securities are duly authorized, validly issued, fully paid and non-assessable capital stock of each Issuer and constitute Pledgor's entire interest in each Issuer and are not registered, nor has Pledgor authorized the registration thereof, in the name of any person or entity other than Pledgor or Pledgee. (b) The Pledged Property is directly, legally and beneficially owned by Pledgor, free and clear of all claims, liens, pledges and encumbrances of any kind, nature or description, except for the pledge and security interest in favor of Pledgee, the pledge and security interest in favor of Enron North America Corp. ("Enron") and the other pledges and security interests permitted under the Loan Agreement. (c) The Pledged Property is not subject to any restrictions relative to the transfer thereof and Pledgor has the right to transfer and hypothecate the Pledged Property free and clear of any liens, encumbrances or restrictions (except for the pledge and security interest in favor of Enron). (d) The Pledged Property is duly and validly pledged to Pledgee and no consent or approval of any governmental or regulatory authority or of any securities exchange or the like, nor any consent or approval of any other third party, was or is necessary to the validity and enforceability of this Pledge Agreement. (e) Pledgor authorizes Pledgee to: (i) store, deposit and safeguard the Pledged Property, (ii) perform any and all other acts which Pledgee in good faith deems reasonable and/or necessary for the protection and preservation of the Pledged Property or its value or Pledgee's security interest therein, including, without limitation, transferring, registering or arranging for the transfer or registration of the Pledged Property to or in Pledgee's own name and receiving the income therefrom as additional security for the Obligations and (iii) pay any charges or expenses which Pledgee deems necessary for the foregoing purpose, but without any obligation to do so. Any obligation of Pledgee for reasonable care for the Pledged Property in Pledgee's possession shall be limited to the same degree of care which Pledgee uses for similar property pledged to Pledgee by other persons. (f) If Pledgor shall become entitled to receive or acquire, or shall receive any stock certificate, or option or right with respect to the stock of any Issuer (including without limitation, any certificate representing a dividend or a distribution or exchange of or in connection with reclassification of the Pledged Securities) whether as an addition to, in substitution of, or in exchange for any of the Pledged Property or otherwise, Pledgor agrees to accept same as Pledgee's agent, to hold same in trust for Pledgee and to deliver same forthwith to Pledgee or Pledgee's agent or bailee in the form received, with the endorsement(s) of Pledgor where necessary and/or appropriate powers and/or assignments duly executed to be held by Pledgee or Pledgee's agent or bailee subject to the terms hereof, as further security for the Obligations. (g) Pledgor shall not, without the prior consent of Pledgee, directly or indirectly, sell, assign, transfer, or otherwise dispose of, or grant any option with respect to the Pledged Property, nor shall Pledgor create, incur or permit any further pledge, hypothecation, encumbrance, lien, mortgage or security interest with respect to the Pledged Property. (h) So long as no Event of Default (as hereinafter defined) has occurred and is continuing, Pledgor shall have the right to vote and exercise all corporate rights with respect to the Pledged Securities, except as expressly prohibited herein, and to receive any cash dividends payable in respect of the Pledged Securities. (i) Pledgor shall not permit any Issuer, directly or indirectly, to issue, sell, grant, assign, transfer or otherwise dispose of, any additional shares of capital stock of any Issuer or any option or warrant with respect to, or other right or security convertible into, any additional shares of capital stock of any Issuer, now or hereafter authorized, unless all such additional shares, options, warrants, rights or other such securities are made and shall remain part of the Pledged Property subject to the pledge and security interest granted herein. (j) Pledgor shall pay all charges and assessments of any nature against the Pledged Property or with respect thereto prior to said charges and/or assessments being delinquent. (k) Pledgor shall promptly reimburse Pledgee on demand, together with interest at the rate then applicable to the indebtedness of Issuers to Pledgee set forth in the Loan Agreement, for any charges, assessments or expenses paid or incurred by Pledgee in its discretion for the protection, preservation and maintenance of the Pledged Property and the enforcement of Pledgee's rights hereunder, including, without limitation, attorneys' fees and legal expenses incurred by Pledgee in seeking to protect, collect or enforce its rights in the Pledged Property or otherwise hereunder. (l) Pledgor shall furnish, or cause to be furnished, to Pledgee such information concerning Issuers and the Pledged Property as Pledgee may from time to time reasonably request in good faith, including, without limitation, current financial statements. (m) Pledgee may notify Issuers or the appropriate transfer agent of the Pledged Securities to register the security interest and pledge granted herein and honor the rights of Pledgee with respect thereto. (n) Pledgor waives: (i) all rights to require Pledgee to proceed against any other person, entity or collateral or to exercise any remedy, (ii) the defense of the statute of limitations in any action upon any of the Obligations, (iii) any right of subrogation or interest in the Obligations or Pledged Property until all Obligations have been paid in full, (iv) any rights to notice of any kind or nature whatsoever, unless specifically required in this Pledge Agreement or non-waivable under any applicable law, and (v) to the extent permissible, its rights under Section 9-112 and 9-207 of the Uniform Commercial Code. Pledgor agrees that the Pledged Property, other collateral, or any other guarantor or endorser may be released, substituted or added with respect to the Obligations, in whole or in part, without releasing or otherwise affecting the liability of Pledgor, the pledge and security interests granted hereunder, or this Pledge Agreement. Pledgee is entitled to all of the benefits of a secured party set forth in Section 9-207 of the New York Uniform Commercial Code. 4. EVENTS OF DEFAULT All Obligations shall become immediately due and payable, without notice or demand, at the option of Pledgee, upon the occurrence of any Event of Default, as such term is defined in the Loan Agreement (each an "Event of Default" hereunder). 5. RIGHTS AND REMEDIES At any time an Event of Default exists or has occurred and is continuing, in addition to all other rights and remedies of Pledgee, whether provided under this Pledge Agreement, the Loan Agreement, the other Financing Agreements, applicable law or otherwise, Pledgee shall have the following rights and remedies which may be exercised without notice to, or consent by, Pledgor except as such notice or consent is expressly provided for hereunder: (a) Pledgee, at its option, shall be empowered to exercise its continuing right to instruct the Issuers (or the appropriate transfer agent of the Pledged Securities) to register any or all of the Pledged Securities in the name of Pledgee or in the name of Pledgee's nominee and Pledgee may complete, in any manner Pledgee may deem expedient, any and all stock powers, assignments or other documents heretofore or hereafter executed in blank by Pledgor and delivered to Pledgee. After said instruction, and without further notice, Pledgee shall have the exclusive right to exercise all voting and corporate rights with respect to the Pledged Securities and other Pledged Property, and exercise any and all rights of conversion, redemption, exchange, subscription or any other rights, privileges, or options pertaining to any shares of the Pledged Securities or other Pledged Property as if Pledgee were the absolute owner thereof, including, without limitation, the right to exchange, in its discretion, any and all of the Pledged Securities and other Pledged Property upon any merger, consolidation, reorganization, recapitalization or other readjustment with respect thereto. Upon the exercise of any such rights, privileges or options by Pledgee, Pledgee shall have the right to deposit and deliver any and all of the Pledged Securities and other Pledged Property to any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as Pledgee may determine, all without liability, except to account for property actually received by Pledgee. However, Pledgee shall have no duty to exercise any of the aforesaid rights, privileges or options (all of which are exercisable in the sole discretion of Pledgee) and shall not be responsible for any failure to do so or delay in doing so. (b) In addition to all the rights and remedies of a secured party under the Uniform Commercial Code or other applicable law, Pledgee shall have the right, at any time and without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon Pledgor or any other person (all and each of which demands, advertisements and/or notices are hereby expressly waived to the extent permitted by applicable law), to proceed forthwith to collect, redeem, recover, receive, appropriate, realize, sell, or otherwise dispose of and deliver said Pledged Property or any part thereof in one or more lots at public or private sale or sales at any exchange, broker's board or at any of Pledgee's offices or elsewhere at such prices and on such terms as Pledgee may deem best. The foregoing disposition(s) may be for cash or on credit or for future delivery without assumption of any credit risk, with Pledgee having the right to purchase all or any part of said Pledged Property so sold at any such sale or sales, public or private, free of any right or equity of redemption in Pledgor, which right or equity is hereby expressly waived or released by Pledgor. The proceeds of any such collection, redemption, recovery, receipt, appropriation, realization, sale or other disposition, after deducting all costs and expenses of every kind incurred relative thereto or incidental to the care, safekeeping or otherwise of any and all Pledged Property or in any way relating to the rights of Pledgee hereunder, including attorneys' fees and legal expenses, shall be applied first to the satisfaction of the Obligations (in such order as Pledgee may elect and whether or not due) and then to the payment of any other amounts required by applicable law, including Section 9-504(1)(c) of the Uniform Commercial Code, with Pledgor to be and remain liable for any deficiency. Pledgor shall be liable to Pledgee for the payment on demand of all such costs and expenses, together with interest at the then applicable rate set forth in the Loan Agreement, and any attorneys' fees and legal expenses. Pledgor agrees that five (5) days prior written notice by Pledgee designating the place and time of any public sale or of the time after which any private sale or other intended disposition of any or all of the Pledged Property is to be made, is reasonable notification of such matters. (c) Pledgor recognizes that Pledgee may be unable to effect a public sale of all or part of the Pledged Property by reason of certain prohibitions contained in the Securities Act of 1933, as amended, as now or hereafter in effect or in applicable Blue Sky or other state securities law, as now or hereafter in effect, but may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire such Pledged Property for their own account for investment and not with a view to the distribution or resale thereof. If at the time of any sale of the Pledged Property or any part thereof, the same shall not, for any reason whatsoever, be effectively registered (if required) under the Securities Act of 1933 (or other applicable state securities law), as then in effect, Pledgee in its sole and absolute discretion is authorized to sell such Pledged Property or such part thereof by private sale in such manner and under such circumstances as Pledgee or its counsel may deem necessary or advisable in order that such sale may legally be effected without registration. Pledgor agrees that private sales so made may be at prices and other terms less favorable to the seller than if such Pledged Property were sold at public sale, and that Pledgee has no obligation to delay the sale of any such Pledged Property for the period of time necessary to permit any Issuer, even if any Issuer would agree, to register such Pledged Property for public sale under such applicable securities laws. Pledgor agrees that any private sales made under the foregoing circumstances shall be deemed to have been in a commercially reasonable manner. (d) All of the Pledgee's rights and remedies, including, but not limited to, the foregoing and those otherwise arising under this Pledge Agreement, the Loan Agreement and the other Financing Agreements, the instruments comprising the Pledged Property, applicable law or otherwise, shall be cumulative and not exclusive and shall be enforceable alternatively, successively or concurrently as Pledgee may deem expedient. No failure or delay on the part of Pledgee in exercising any of its options, powers or rights or partial or single exercise thereof, shall constitute a waiver of such option, power or right. 6. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW (a) The validity, interpretation and enforcement of this Pledge Agreement and the other Financing Agreements and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Illinois (without giving effect to principles of conflicts of law). (b) Pledgor irrevocably consents and submits to the non-exclusive jurisdiction of Circuit Court of Cook County, Illinois and the United States District Court for the Northern District of Illinois and waives any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Pledge Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Pledge Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agrees that any dispute with respect to any such matters shall be heard only in the courts described above (except that Pledgee shall have the right to bring any action or proceeding against Pledgor or its property in the courts of any other jurisdiction which Pledgee deems necessary or appropriate in order to realize on the Pledged Property or to otherwise enforce its rights against Pledgor or its property). (c) Pledgor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth herein and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Pledgee's option, by service upon Pledgor in any other manner provided under the rules of any such courts. Within thirty (30) days after such service, Pledgor shall appear in answer to such process, failing which Pledgor shall be deemed in default and judgment may be entered by Pledgee against Pledgor for the amount of the claim and other relief requested. (d) PLEDGOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS PLEDGE AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF PLEDGOR AND PLEDGEE IN RESPECT OF THIS PLEDGE AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. PLEDGOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT PLEDGOR OR PLEDGEE MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS PLEDGE AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. (e) Pledgee shall not have any liability to Pledgor (whether in tort, contract, equity or otherwise) for losses suffered by Pledgor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Pledge Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Pledgee, that the losses were the result of acts or omissions constituting gross negligence or willful misconduct. In any such litigation, Pledgee shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of this Pledge Agreement. 7. MISCELLANEOUS (a) Pledgor agrees that at any time and from time to time upon the written request of Pledgee, Pledgor shall execute and deliver such further documents, including, but not limited to, irrevocable proxies or stock powers, in form satisfactory to counsel for Pledgee, and will take or cause to be taken such further acts as Pledgee may request in order to effect the purposes of this Pledge Agreement and perfect or continue the perfection of the security interest in the Pledged Property granted to Pledgee hereunder. (b) Beyond the exercise of reasonable care to assure the safe custody of the Pledged Property (whether such custody is exercised by Pledgee, or Pledgee's nominee, agent or bailee) Pledgee or Pledgee's nominee agent or bailee shall have no duty or liability to protect or preserve any rights pertaining thereto and shall be relieved of all responsibility for the Pledged Property upon surrendering it to Pledgor or foreclosure with respect thereto. (c) All notices, requests and demands to or upon the respective parties hereto shall be in writing and shall be deemed to have been duly given or made: if delivered in person, immediately upon delivery; if by telex, telegram or facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next business day, one (1) business day after sending; and if by registered or certified mail, return receipt requested, five (5) days after mailing. All notices, requests and demands upon the parties are to be given to the following addresses (or to such other address as any party may designate by notice in accordance with this Section): If to Pledgor: Huntco Nevada, Inc. 2437 East Cheyenne North Las Vegas, Nevada 89030 Attention: President with a copy to: Huntco Inc. 14323 South Outer Forty Drive Suite 600N Town and County, Missouri 63017 Attention: Chief Financial Officer If to Pledgee: Congress Financial Corporation (Central) 150 South Wacker Drive Chicago, Illinois 60606 Attention: Mr. William H. Bloom (d) All references to the plural herein shall also mean the singular and to the singular shall also mean the plural. All references to Pledgor, Pledgee and Issuers pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns. The words "hereof," "herein," "hereunder," "this Pledge Agreement" and words of similar import when used in this Pledge Agreement shall refer to this Pledge Agreement as a whole and not any particular provision of this Pledge Agreement and as this Pledge Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. An Event of Default shall exist or continue or be continuing until such Event of Default is waived in accordance with Section 7(g) hereof. All references to the term "Person" or "Persons" herein shall mean any individual, sole proprietorship, partnership, corporation (including, without limitation, any corporation which elects subchapter S status under the Internal Revenue Code of 1986, as amended), limited liability corporation, limited liability participation, business trust, unincorporated association, joint stock company, trust, joint venture or other entity or any government or any agency, instrumentality or political subdivision thereof. (e) This Pledge Agreement, the other Financing Agreements and any other document referred to herein or therein shall be binding upon Pledgor and its successors and assigns and inure to the benefit of and be enforceable by Pledgee and its successors and assigns. (f) If any provision of this Pledge Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Pledge Agreement as a whole, but this Pledge Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. (g) Neither this Pledge Agreement nor any provision hereof shall be amended, modified, waived or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of Pledgee. Pledgee shall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of its rights, powers and/or remedies unless such waiver shall be in writing and signed by an authorized officer of Pledgee. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Pledgee of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Pledgee would otherwise have on any future occasion, whether similar in kind or otherwise. (h) This Pledge Agreement shall be a continuing agreement and shall remain in full force and effect so long as any of the Obligations remain outstanding. Except as otherwise provided in Section 7(i) below, upon payment and satisfaction in full in immediately available funds of all of the Obligations, the payment of cash collateral in accordance with Section 12.1(d) of the Loan Agreement (or delivery of a letter of credit in accordance with the terms thereof), and the termination of the Loan Agreement in accordance with the terms thereof, Pledgee shall, upon the receipt by Pledgee of written confirmation from Noteholder Agent and Revolving Loan Lender of the foregoing, the written request of Pledgor and at the expense of Pledgor, forthwith release its security interests and liens granted hereunder and shall deliver any original stock certificates then in the possession of Pledgee to Pledgor, except to the extent Pledgee has exercised its rights with respect thereto or such stock is sold or otherwise disposed of and except as may otherwise required under applicable law or order of any court or other governmental authority. (i) If after receipt of any payment of, or proceeds of Collateral or any other assets applied to the payment of, any of the Obligations, Pledgee and Lenders are required to surrender or return such payment or proceeds to any Person for any reason, then the Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Agreement and the security interests and liens granted hereunder shall continue in full force and effect as if such payment or proceeds had not been received by Pledgee or Lenders and Pledgor shall promptly execute and deliver to Pledgee and Lenders such agreements and documents as Pledgee and Lenders may require as a result thereof. This Section 7(i) shall remain effective notwithstanding any contrary action which may be taken by Pledgee or Lenders in reliance upon such payment or proceeds. IN WITNESS WHEREOF, Pledgor has executed this Pledge Agreement as of the day and year first above written. HUNTCO NEVADA, INC. By: ___________________ Title: __________________ - -------------------------------------------------------------------------- EXHIBIT A TO PLEDGE AND SECURITY AGREEMENT Issuer Certificate No. Shares Huntco Steel, Inc. A1 10,000 Midwest Products, Inc. 9 1,000 EX-4 17 cfcamnd1.txt AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT June 8, 2001 Huntco Steel, Inc. 14323 S. Outer Forty Drive Suite 600 North Town and Country, Missouri 63017 Gentlemen: Congress Financial Corporation (Central), an Illinois corporation (together with its successors and assigns, "Lender"), Huntco Steel, Inc., a Delaware corporation ("Huntco Steel"), Midwest Products, Inc., a Missouri corporation ("Midwest", and together with Huntco Steel, individually, each a "Borrower" and collectively, "Borrowers"), Huntco Inc., a Missouri corporation ("Huntco"), Huntco Nevada, Inc, a Nevada corporation ("Huntco Nevada") and HSI Aviation, Inc., a Missouri corporation ("HSIA", and together with Huntco and Huntco Nevada, individually, each a "Guarantor" and collectively, "Guarantors") have entered into financing arrangements pursuant to which Lender may make loans and advances and provide other financial accommodations to Borrowers as set forth in the Loan and Security Agreement, dated April 15, 1999, among Lender, Borrowers and Guarantors (as amended hereby and as the same may hereafter be further amended, modified, supplemented, extended, renewed, restated or replaced, the "Loan Agreement", and together with all agreements, documents and instruments at any time executed and/or delivered in connection therewith or related thereto, as from time to time amended and supplemented, collectively, the "Financing Agreements"). Borrowers and Guarantors have requested certain amendments to and consents in connection with the Loan Agreement and Lender is willing to agree to such amendments and grant such consents, subject to the terms and condi- tions contained herein. By this Amendment, Lender, Borrowers and Guarantors desire and intend to evidence such amendments and consents. In consideration of the foregoing and the agreements and covenants contained herein, the parties hereto agree as follows: 1. Definitions. (a) Additional Definitions. As used herein, the following terms shall have the meanings given to them below, and the Loan Agreement and the other Financing Agreements are hereby amended to include, in addition and not in limitation, the following definitions: (i) "Amendment No. 1" shall mean this Amendment No. 1 to Loan and Security Agreement by and among Lender, Borrowers and Guarantors, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. (ii) "Blytheville Asset Purchase Agreement" shall mean the Asset Purchase Agreement, dated as of April 30, 2001, by and among Huntco Steel, Huntco and Blytheville Purchaser, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. (iii) "Blytheville Fixed Assets" shall mean the Real Property of Huntco Steel located in Blytheville, Arkansas, together with the assets of Huntco Steel located therein used in connection with the operation by Huntco Steel of its cold mill steel processing plant, all as more particularly described on Exhibit A hereto, which includes, without limitation, a pickling line, a reversing cold reduction mill, annealing furnaces and a tempering mill, but which excludes the Retained Blytheville Fixed Assets. (iv) "Blytheville Purchaser" shall mean EBF LLC, a Delaware limited liability company, and its successors and assigns. (v) "Blytheville Sale" shall mean the sale by Huntco Steel to the Blytheville Purchaser of the Blytheville Fixed Assets pursuant to the Blytheville Asset Purchase Agreement (as in effect on the date hereof). (vi) "Capital Expenditures" shall mean, with respect to any Person, all expenditures made and liabilities incurred for the acquisition of assets which are not, in accordance with GAAP, treated as expense items for such Person in the year made or incurred or as a prepaid expense applicable to a future year or years. (vii) "Commodity" shall mean steel that conforms to the specifications described on Exhibit B hereto. (viii) "Consolidated Net Income" shall mean, with respect to any Person for any period, the aggregate of the net income (loss) of such Person and its Subsidiaries, on a consolidated basis, for such period (excluding to the extent included therein any extraordinary and/or one time or unusual and non-recurring gains) after deducting all charges which should be deducted before arriving at the net income (loss) for such period and, without duplication, after deducting the Provision for Taxes for such period, all as determined in accordance with GAAP; provided, that, (A) the net income of any Person that is not a wholly-owned Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid or payable to such Person or a wholly-owned Subsidiary of such Person; (B) except to the extent included pursuant to the foregoing clause, the net income of any Person accrued prior to the date it becomes a wholly-owned Subsidiary of such Person or is merged into or consolidated with such Person or any of its wholly-owned Subsidiaries or that Person's assets are acquired by such Person or by its wholly-owned Subsidiaries shall be excluded; and (C) the net income (if positive) of any wholly-owned Subsidiary (which is not a Borrower) to the extent that the declaration or payment of dividends or similar distributions by such wholly- owned Subsidiary to such Person or to any other wholly-owned Subsidiary of such Person is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such wholly-owned Subsidiary shall be excluded. For the purposes of this definition, net income excludes any gain together with any related Provision for Taxes for such gain realized upon the sale or other disposition of any assets that are not sold in the ordinary course of business (including, without limitation, dispositions pursuant to sale and leaseback transactions) or of any Capital Stock of such Person or a Subsidiary of such Person and any net income realized or loss incurred as a result of changes in accounting principles or the application thereof to such Person. (ix) "EBITDA" shall mean, as to any Person, with respect to any period, an amount equal to: (A) the Consolidated Net Income of such Person and its Subsidiaries for such period determined in accordance with GAAP, plus (B) depreciation, amortization and other non-cash charges (including, but not limited to, imputed interest and deferred compensation) for such period (to the extent deducted in the computation of Consolidated Net Income of such Person), all in accordance with GAAP, plus (C) Interest Expense for such period (to the extent deducted in the computation of Consolidated Net Income of such Person), plus (D) charges for Federal, State, local and foreign income taxes for such period (to the extent deducted in the computation of Consolidated Net Income of such Person). (x) "Enron" shall mean Enron North America Corp., a Delaware corporation and its successors and assigns. (xi) "Enron Credit Agreements" shall mean, collectively, the Loan Agreement, dated as of April 6, 2001, by and among Enron, Borrowers and Guarantors and all agreements, documents and instruments at any time executed and/or delivered by any Borrower or any Guarantor or any other person to, with or in favor of Enron in connection therewith or related thereto, as all of the foregoing now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, provided, that, the term "Enron Credit Agreements" as used herein shall not include the Enron Inventory Agreements except for the separate Guarantees, each dated as of April 6, 2001, by Huntco, Huntco Nevada and Midwest in favor of Enron, the separate Security Agreements, each dated as of April 6, 2001, by Huntco Steel, Huntco, Huntco Nevada and Midwest in favor of Enron and the separate Pledge Agreements, each dated as of April 6, 2001, by Huntco and Huntco Nevada in favor of Enron, and the financing statements related to each of the foregoing. (xii) "Enron Intercreditor Agreement" shall mean the Intercreditor and Subordination Agreement, dated on or about the date hereof, by and between Enron and Lender, as acknowledged by each Borrower and Guarantor, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. (xiii) "Enron Inventory Agreements" shall mean, collectively, IMA1, IMA2, the Master Purchase Agreement and all agreements, documents and instruments at any time executed and/or delivered by any Borrower or Guarantor or any other person to, with or in favor of Enron in connection therewith or related hereto, as all of the foregoing now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, provided, that, the term "Enron Inventory Agreements" shall not include the Enron Credit Agreements except for the separate Guarantees, each dated as of April 6, 2001, by Huntco, Huntco Nevada and Midwest in favor of Enron, the separate Security Agreements, each dated as of April 6, 2001, by Huntco Steel, Huntco, Huntco Nevada and Midwest in favor of Enron and the separate Pledge Agreements, each dated as of April 6, 2001, by Huntco and Huntco Nevada in favor of Enron, and the financing statements related to each of the foregoing. (xiv) "Enron Inventory Collateral" shall mean any of the following that is owned by Enron or, notwithstanding having been purchased and paid for by Enron, is at any time determined to be, through recharacterization or otherwise, property of Huntco Steel: (a) all steel products, including all Commodity (collectively, "Steel Products"), purchased by Enron after the date hereof pursuant to or in connection with the provisions of IMA1 and/or IMA2 that has not been sold by Enron to and paid for by Huntco Steel and (b) any proceeds, insurance, indemnity, warranty, or guaranty of or for any such Steel Products. In no event shall the term "Enron Inventory Collateral" include (i) any Steel Products that were purchased by Enron from Huntco Steel with respect to which Enron owes Huntco Steel any amounts or (ii) any rights to payment of any Borrower or Guarantor, whether or not earned by performance, for any property which a Borrower or Guarantor purchased from Enron and fully paid for that is subsequently sold, leased, licensed, assigned or otherwise disposed of by such Borrower or Guarantor. (xv) "Fixed Charges" for any period shall mean the sum of, without duplication, (A) all Interest Expense, plus (B) all regularly scheduled (as determined at the beginning of the respective period) principal payments of Indebtedness for borrowed money and Indebtedness with respect to Capital Leases (and without duplicating amounts in item (A) of this definition, the interest component with respect to Indebtedness under Capital Leases) plus (C) the fees paid to Lender in respect of the financing arrangements provided for herein, including unused line fees and monthly servicing fees. The foregoing shall not be construed to include principal payments on Indebtedness arising pursuant to revolving loans and advances. (xvi) "Fixed Charge Coverage Ratio" for any Testing Period shall mean, with respect to Huntco and its Subsidiaries, on a consolidated basis, the ratio of (A) the amount equal to (1) EBITDA during such Testing Period less (2) the product of the Capital Expenditures for such Testing Period multiplied by the ratio of (a) the number of months in such Testing Period divided by (b) 12 to (B) Fixed Charges of Huntco and its Subsidiaries for such Testing Period. (xvii) "IMA1" shall mean the Inventory Management Agreement (Phase I), dated as of April 6, 2001, by and between Enron and Huntco Steel. (xviii) "IMA2" shall mean the Inventory Management Agreement (Phase II), dated as of April 6, 2001, by and between Enron and Huntco Steel. (xix) "Interest Expense" shall mean, for any period, as to any Person, as determined in accordance with GAAP, the total interest expense of such Person, whether paid or accrued during such period (including the interest component of Capital Leases for such period), including, without limitation, discounts in connection with the sale of any Accounts and bank fees, commissions, discounts and other fees and charges owed with respect to letters of credit, banker's acceptances or similar instruments. (xx) "Master Purchase Agreement" shall mean the Master Steel Purchase and Sale Agreement, dated as of April 6, 2001, by and between Enron and Huntco Steel, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. (xxi) "Retained Blytheville Fixed Assets" shall mean the Real Property of Huntco Steel located in Blytheville, Arkansas, together with the assets of Huntco Steel located therein, all as more particularly described on Exhibit C hereto. (xxii) "Springfield Real Property" shall mean the Real Property of Huntco Steel consisting of all of Suites 200, 300, 400 and 500 in Building J of Tract II in Woodhurst Office Park located at 1200 East Woodhurst Drive, Springfield, Missouri 65804. (xxiii) "Springfield Purchaser" shall mean Sheldan, LLC, a Missouri limited liability company and its successors and assigns. (xxiv) "Springfield Real Property Sale" shall mean the sale by Huntco Steel to the Springfield Purchaser of the Springfield Real Property pursuant to the Springfield Sale Contract (as in effect on the date hereof). (xxv) "Springfield Sale Contract" shall mean the Commercial and Industrial Real Estate Contract, effective as of April 9, 2001, by and between Huntco Steel and Springfield Purchaser, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. (xxvi) "Testing Period" shall mean, with respect to Huntco and its Subsidiaries, at any time during any year, the period commencing on the immediately preceding July 1 and ending on the last day of the most recently ended month, which period shall not exceed twelve (12) months; it being understood that the initial Testing Period shall begin on July 1, 2001 and end on July 31, 2001. (b) Interpretation. For purposes of this Amendment, unless otherwise defined herein, all terms used herein, including, but not limited to, those terms used and/or defined in the recitals above, shall have the respective meanings assigned to such terms in the Loan Agreement. 2. Consent to Enron Inventory Agreements. Subject to the terms and conditions contained in this Amendment, to the extent such consent is or may be required under the Loan Agreement, Lender hereby consents to the Enron Inventory Agreements (as in effect on the date hereof) and the arrangements contemplated thereunder, including sale by Huntco Steel of Commodity from time to time to Enron pursuant to the exercise of the put option with respect to such Commodity granted by Enron to Huntco Steel upon the purchase by Huntco Steel of such Inventory in accordance with the terms of the Enron Inventory Agreements (as in effect on the date hereof) and the purchase by Huntco Steel from time to time of Commodity from Enron in accordance with the Enron Inventory Agreements (as in effect on the date hereof). 3. Consent to Redemption of Blytheville 1992 Bonds. Subject to the terms and conditions contained in this Amendment, to the extent such consent is or may be required under the Loan Agreement, Lender hereby consents to each of the following (the "1992 Redemption"): (a) the payment by Huntco Steel to the Blytheville 1992 Bond Trustee in the amount of $257,118.77 plus per diem interest thereon of $46.05 for each day from June 5, 2001, through the date of redemption for the purpose of the redemption and cancellation of the Blytheville 1992 Bonds and (b) the termination of each of the Blytheville 1992 Bond Agreements; provided, that, Lender shall have received evidence, in form and substance satisfactory to Lender, that (i) the Blytheville 1992 Bonds have been redeemed in full and cancelled, (ii) the liens on and security interests in the assets of Huntco Steel granted pursuant to the 1992 Bond Agreements have been released and discharged in full and no Borrower or Guarantor has any liabilities or obligations pursuant to the 1992 Bond Agreements, (iii) the City has conveyed to Huntco Steel by deed and bill of sale the Real Property and other personal property included in the Blytheville Fixed Assets that was subject to the Blytheville 1992 Bond Agreements, (iv) Huntco Steel has conveyed to the Blytheville Purchaser by one or more deeds or bills of sale the Blytheville Fixed Assets, (v) the City has conveyed to Huntco Steel by deed the Retained Blytheville Fixed Assets and (vi) Lender shall have received evidence, in form and substance satisfactory to Lender, that all consents from any Governmental Authority or other Person required in connection with the foregoing have been obtained and are in full force and effect, including, without limitation, from the City of Blytheville and the Blytheville 1992 Bond Trustee. 4. Consent to Redemption of Blytheville 1995 and 1996 Bonds. Subject to the terms and conditions contained in this Amendment, to the extent such consent is or may be required under the Loan Agreement, Lender hereby consents to each of the following (the "1995/1996 Redemption"): (a) the contribution of capital by Huntco Nevada to Huntco Steel of the Blytheville Subordinate Bonds and the subsequent surrender of such Bonds by Huntco Steel to the Blytheville Subordinate Bond Trustee, (b) the redemption in full and cancellation of the each of the Blytheville Subordinate Bonds (so long as no Borrower or Guarantor is required to pay cash or incur any indebtedness in connection therewith) and (c) the termination of each of the Blytheville Subordinate Bond Agreements; provided, that, Lender shall have received evidence, in form and substance satisfactory to Lender, that (i) the Blytheville Subordinate Bonds have been redeemed in full and cancelled (without the payment of any cash or the incurrence of any indebtedness by any Borrower or Guarantor), (ii) the lien on and security interests in the assets of Huntco Steel granted pursuant to the Blytheville Subordinate Bond Agreements have been released and discharged in full and no Borrower or Guarantor has any liabilities or obligations pursuant to the Blytheville Subordinate Bond Agreements, (iii) the City has conveyed to Huntco Steel by deed and bill of sale the Real Property and other personal property included in the Blytheville Fixed Assets that was subject to the Blytheville Subordinate Bond Agreements, (iv) Huntco Steel has conveyed to the Blytheville Purchaser by one or more deeds or bills of sale the Blytheville Fixed Assets, (v) the City has conveyed to Huntco Steel by deed the Retained Blytheville Fixed Assets and (vi) all consents from any Governmental Authority or other Person required in connection with the foregoing have been obtained and are in full force and effect, including, without limitation, from the City of Blytheville and the Blytheville Subordinate Bond Trustee. Upon the effectiveness of Lender's consent set forth in this Section 4, Lender shall release its security interest in the Blytheville 1995 Bonds and the Blytheville 1996 Bonds. 5. Dissolution of HSIA. Notwithstanding anything to the contrary contained in Section 9.1 of the Loan Agreement, HSIA may wind up, liquidate or dissolve, provided, that, each of the following conditions is satisfied as determined by Lender: (a) the winding up, liquidation and dissolution of HSIA shall not violate any law or any order or decree of any court or other Governmental Authority in any material respect and shall not conflict with or result in the breach of, or constitute a default under, any material indenture, mortgage, deed of trust, or any other agreement or instrument to which any Borrower or Guarantor is a party or may be bound, (b) such winding up, liquidation or dissolution shall be done in accordance with the requirements of all applicable laws and regulations, (c) effective upon such winding up, liquidation or dissolution, all of the assets and properties of HSIA shall be duly and validly transferred and assigned to Huntco Steel free and clear of any liens, restrictions or encumbrances other than the security interests and liens of Lender or other security interests, liens, restrictions or encumbrances expressly permitted hereunder (and Lender shall have received such evidence thereof as Lender may require), (d) Lender shall have received copies of all documents and agreements of HSIA to be filed with any Governmental Authority or otherwise required to effectuate such winding up, liquidation or dissolution, (e) no Borrower or Guarantor shall assume any Indebtedness, obligations or liabilities as a result of such winding up, liquidation or dissolution, or otherwise become liable in respect of any obligations or liabilities of HSIA, unless such Indebtedness is otherwise expressly permitted hereunder or such obligations or liabilities are not prohibited under the Loan Agreement or any of the other Financing Agreements, (f) Lender shall have received not less than three (3) Business Days' prior written notice of the intention of HSIA to wind up, liquidate or dissolve, (g) Lender shall have received copies of such deeds, assignments or other agreements as Lender may reasonably request to evidence and confirm the transfer of the assets of HSIA to Huntco Steel, and (h) as of the date of such winding up, liquidation or dissolution and after giving effect thereto, no Event of Default, or act, condition or event which with notice or passage of time or both would constitute an Event of Default, shall exist or have occurred and be continuing (after giving effect to the waiver set forth herein). 6. Eligible Inventory. Section 1.28 of the Loan Agreement is hereby amended by adding the following new subsection (m) thereto: "; and (m) Enron Inventory Collateral." 7. Equipment Availability. The first clause of Section 1.32 of the Loan Agreement (up to but excluding clause (a) of such Section) is deleted in its entirety and the following is substituted therefor: "1.32 "Equipment Availability" shall mean, as to Huntco Steel the amount equal to $11,428,180, as reduced effective as of the first day of each month commencing on June 1, 2001 by an amount equal to $190,470 per month and, as to Midwest, the amount equal to $662,040, as reduced effective as of the first day of each month commencing on June 1, 2001 by an amount equal to $11,034 per month, provided, that:" 8. Interest Rate. Section 1.51 of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor: "1.51 "Interest Rate" shall mean the following: (a) subject to clause (b) below, as to Prime Rate Loans, a rate equal to one (1%) percent per annum in excess of the Prime Rate and, as to Eurodollar Rate Loans, a rate of two and three-quarters (2 3/4%) percent per annum in excess of the Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable for the Interest Period selected by a Borrower (or Huntco on behalf of such Borrower) as in effect three (3) Business Days after the date of receipt by Lender of the request of a Borrower (or Huntco on behalf of such Borrower) for such Eurodollar Rate Loans in accordance with the terms hereof, whether such rate is higher or lower than any rate previously quoted to such Borrower or Huntco); and (b) notwithstanding anything to the contrary contained herein, the Interest Rate shall mean the rate of three (3%) percent per annum in excess of the Prime Rate as to Prime Rate Loans and the rate of four and three-quarters (4 3/4%) percent per annum in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, at Lender's option, without notice, (i) either (A) for the period on and after the date of termination or non-renewal hereof until such time as all Obligations are indefeasibly paid in full, or (B) for the period from and after the date of the occurrence of any Event of Default, and for so long as such Event of Default is continuing as determined by Lender and (ii) on the Loans to a Borrower at any time outstanding in excess of the amounts available to such Borrower under Section 2 (whether or not such excess(es) arise or are made with or without Lender's knowledge or consent and whether made before or after an Event of Default)." 9. Maximum Credit. Section 1.56 of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor: "1.56 "Maximum Credit" shall mean the following: (a) $80,000,000 from the date of Amendment No. 1 through and including June 30, 2001, (b) $70,000,000 from July 1, 2001 through and including October 30, 2001 and (c) $60,000,000 from October 31, 2001 and at all times thereafter. 10. Loans. Section 2.1 of the Loan Agreement is hereby amended by adding the following new Section 2.1(d) thereto: "(d) Notwithstanding anything to the contrary contained herein or in any of the other Financing Agreements, on each date when any reduction to the Maximum Credit becomes effective, Borrowers agree absolutely and unconditionally to automatically and without notice or demand make a payment in respect of the Loans and Letter of Credit Accommodations in an amount equal to the excess, if any, of the aggregate amount of the Loans and Letter of Credit Accommodations outstanding on such date over the Maximum Credit as so reduced in immediately available funds." 11. Collateral Reporting. Section 7.1(a) of the Loan Agreement is hereby amended by adding the following new Section 7.1(a)(iii) thereto: "and (iii) reports identifying all Enron Inventory Collateral and any other assets subject to the right of Borrowers to put any such assets to Enron or the right of Enron to require that any Borrower sell such assets to Enron and any assets that any Borrower has the right to require that Enron sell to any Borrower, which set forth, among other things, the type, value and location of such inventory, together with copies of any notices or related materials received by Borrowers from Enron in connection with the Enron Inventory Agreements;" 12. Financial Statements and Other Information. Section 9.6 of the Loan Agreement is hereby amended by adding the following new Section 9.6(e) thereto: "(e) At any time and from time to time upon Lender's request, Borrowers shall provide Lender (whether on a consistent basis or periodically as Lender may elect) with a copy of each written confirmation or other written notice of any exercise by any Borrower of any of the following promptly upon the receipt thereof by any Borrower or Guarantor: (i) any put option with respect to any Commodity or other product under the Enron Inventory Agreements, (ii) any exercise by any Borrower of any call option with respect to any Commodity or other product by any Borrower under the Enron Inventory Agreements and (iii) the purchase by Enron of any Commodity or other product on behalf of any Borrower pursuant to the Enron Inventory Agreements. On or before the tenth (10th) day of each month, or more frequently as Lender may request, Borrowers shall furnish to Lender a summary of the purchases and sales of Commodity or other product between any Borrower and Enron during the immediately preceding month, which summary shall include the total amount owing by Borrowers to Enron and the total amount owing by Enron to Borrower as of the end of such month." 13. Sale of Assets, Etc. Section 9.7(b) of the Loan Agreement is hereby amended by adding the following new Sections 9.7(b)(v) and (vi) thereto: "or (v) the Blytheville Sale, provided, that, each of the following conditions is satisfied: (A) Lender shall have received a true, correct and complete copy of the Blytheville Asset Purchase Agreement and all other agreements, documents and instruments related thereto requested by Lender, duly executed, authorized and delivered by the parties thereto, (B) the Blytheville Asset Purchase Agreement shall be in form and substance satisfactory to Lender, (C) the gross purchase price in connection with the Blytheville Sale shall be not less than $17,000,000, (D) Lender shall have received, in cash or other immediately available funds, the amount of not less than $6,474,000 from the proceeds of the Blytheville Sale, for application to the Obligations in such order and manner as Lender may determine, (E) Lender shall have received evidence, in form and substance satisfactory to Lender, that all consents from any Governmental Authority or other Person required in connection with the Blytheville Sale have been obtained and are in full force and effect, including, without limitation, from the City of Blytheville, the Blytheville 1992 Bond Trustee and the Blytheville Subordinate Bond Trustee, (F) Lender shall have received copies of the executed deed of sale and any such other transfer documents and instruments in connection therewith, as duly authorized, executed and delivered by the parties thereto, (G) Lender shall have received a Collateral Access Agreement, in form and substance satisfactory to Lender, with respect to the portion of the Real Property located in Blytheville, Arkansas (which constitutes part of the Blytheville Fixed Assets) in which Huntco Steel shall continue to keep or store any of its Collateral, duly authorized, executed and delivered by Blytheville Purchaser (the "Blytheville Purchaser Collateral Access Agreement"), (H) Lender shall have received, in form and substance satisfactory to Lender, a fully executed original Modification Agreement No. 1 With Respect to Fee and Leasehold Mortgage, Security Agreement and Assignment of Leases and Rents, Partial Release, Partial Subordination and Termination of Intercreditor Agreements, (I) Lender shall have received, in form and substance satisfactory to Lender, an endorsement issued by First American Title Insurance Company ("First American") in favor of Lender to title policy bearing policy no. LP3621124 issued by First American in favor of Lender, (J) the Blytheville Sale pursuant to the Blytheville Asset Purchase Agreement shall have occurred and each of the conditions set forth herein shall have been satisfied by no later than the date of Amendment No. 1 and (K) as of the date of such sale and after giving effect thereto, no Event of Default, or event, act or condition which with notice or passage of time or both would constitute an Event of Default, shall exist or have occurred, or (vi) the Springfield Real Property Sale, provided, that, each of the following conditions is satisfied: (A) Lender shall have received a true, correct and complete copy of the Springfield Sale Contract and all other agreements, documents and instruments related thereto requested by Lender, duly executed, authorized and delivered by the parties thereto, (B) the Springfield Sale Contract shall be in form and substance satisfactory to Lender, (C) the purchase price in connection with the Springfield Real Property Sale shall be not less than $470,000, (D) Lender shall have received, in cash or other immediately available funds, the amount of not less than $435,000 constituting all of the proceeds of the Springfield Real Property Sale, for application to the Obligations in such order and manner as Lender may determine, (E) Lender shall have received copies of the executed deed of sale and any such other transfer documents and instruments in connection therewith, as duly authorized, executed and delivered by the parties thereto, (F) the Springfield Real Property Sale pursuant to the Springfield Sale Contract shall have occurred and each of the conditions set forth herein shall have been satisfied by no later than August 15, 2001 and (G) as of the date of such sale and after giving effect thereto, no Event of Default, or event, act or condition which with notice or passage of time or both would constitute an Event of Default, shall exist or have occurred;" 14. Encumbrances. Section 9.8 of the Loan Agreement is hereby amended by adding the following new subsections (m) and (n) at the end thereof: "(m) the security interests and liens on the assets of Borrowers and Guarantors of Enron to secure Indebtedness permitted under Section 9.9(k) below, provided, that, such security interests and liens are and shall be subject to the Enron Intercreditor Agreement; and (n) the security interests and liens on the assets of Borrowers and Guarantors of Enron to secure Indebtedness permitted under Section 9.9(l) below and the other obligations of Borrowers and Guarantors arising under the Enron Inventory Agreements, provided, that, such security interests and liens are and shall be subject the Enron Intercreditor Agreement." 15. Indebtedness. Section 9.9 of the Loan Agreement is hereby amended by adding the following new subsections (k) and (l) at the end thereto: "(k) secured Indebtedness of Borrowers and Guarantors to Enron evidenced by the Enron Credit Agreements as amended from time to time; provided, that, (i) the aggregate principal amount of such Indebtedness shall not exceed $10,000,000, less the aggregate amount of all repayments, repurchases or redemptions of principal, whether optional or mandatory in respect thereof, (ii) on the date of Amendment No.1, Lender shall receive the amount of $4,664,000, in immediately available funds, from the loan proceeds disbursed by Enron pursuant to such Enron Credit Agreements for application to the Obligations in such order and manner as Lender may determine, (iii) on the date of Amendment No.1, Huntco Steel shall receive the balance of the loan proceeds disbursed by Enron pursuant to such Enron Credit Agreements, in immediately available funds, in the amount of $5,336,000 to be used exclusively for the prompt payment by Huntco Steel of its existing trade payables owing to its trade vendors and to pay for transaction expenses incurred in connection with entering into the Enron Credit Agreements, the Enron Inventory Agreements, the Blytheville Sale and Amendment No.1, (iv) Lender shall have received true, correct and complete copies of the Enron Credit Agreements requested by Lender, as duly authorized, executed and delivered by the parties thereto, (v) the Indebtedness evidenced by the Enron Credit Agreements shall be subject and subordinate in right of payment to the indefeasible payment and satisfaction in full of all of the Obligations as set forth in the Enron Intercreditor Agreement, (vi) the security interests in and liens upon the assets of Borrowers and Guarantors that may secure such Indebtedness shall be subject to the security interests and liens of Lender therein as set forth in the Enron Intercreditor Agreement, (vii) Borrowers and Guarantors shall not, directly or indirectly, (A) amend, modify, alter or change the terms of the Enron Credit Agreements as in effect on the date of Amendment No. 1 so as to cause the forgiveness or cancellation of any portion of such Indebtedness (other than pursuant to payments thereof), or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest any sums for such purpose (excluding regularly scheduled payments of principal, interest and fees, subject to the terms of the Enron Intercreditor Agreement), (viii) Borrowers and Guarantors shall furnish to Lender all notices or demands in connection with such Indebtedness either received by any Borrower or any Guarantor or on its behalf, promptly after the receipt thereof, or sent by any Borrower or any Guarantor or on its behalf, concurrently with the sending thereof, as the case may be and (ix) Lender shall have received, in form and substance satisfactory to Lender, an original of the Enron Intercreditor Agreement, providing for, among other things, the subordination of the security interests in and liens upon the assets of Borrowers and Guarantors of Enron to the security interests and liens of Lender therein, duly authorized, executed and delivered by Enron, Borrowers and Guarantors; (l) Indebtedness of any Borrower or any Guarantor to Enron arising pursuant to the sale of Inventory to Enron in accordance with the Enron Inventory Agreements as amended from time to time; provided, that, (i) the aggregate principal amount of such Indebtedness shall not exceed $60,000,000, (ii) Lender shall have received true, correct and complete copies of the Enron Inventory Agreements requested by Lender, as duly authorized, executed and delivered by the parties thereto, (iii) the security interests in and liens upon the assets of Borrowers and Guarantors that may secure such Indebtedness shall be subject to the Enron Intercreditor Agreement, and (iv) Borrowers and Guarantors shall furnish to Lender all notices or demands in connection with such Indebtedness either received by any Borrower or Guarantor or on its behalf, promptly after the receipt thereof, or sent by any Borrower or Guarantor or on its behalf, concurrently with the sending thereof, as the case may be." 16. Guarantees. Section 9.10 of the Loan Agreement is hereby amended by deleting clause (c) of such Section in its entirety and replacing it with the following: "(c) (i) the guarantee by each Borrower and Guarantor of the Obligations of any Borrower in favor of Lender; and (ii) the guarantee in favor of Enron by each Borrower and Guarantor of the Indebtedness of any Borrower owing to Enron permitted under Sections 9.9(k) and (l);" 17. Dividends and Redemptions. Section 9.11 of the Loan Agreement is hereby amended by deleting clauses (d) and (e) of such Section in their entirety and replacing them with the following: "(d) [Intentionally Deleted]; and (e) [Intentionally Deleted]" 18. Transactions with Affiliates. Section 9.12 of the Loan Agreement is hereby amended by deleting clause (b)(ii) of such Section in its entirety and replacing it with the following: "(b)(ii) payments by Borrowers to Huntco of the monthly base management fee in accordance with the terms of the Management Services Agreement, dated as of July 1, 1993, between Huntco and Midwest (as in effect on the date hereof) and the Management Services Agreement, dated as of January 1, 1998, between Huntco and Huntco Steel (as in effect on the date hereof), provided, that, (A) the aggregate amount of such payments in any month shall not exceed $135,000 and (B) as of the date of any payment of such fees and after giving effect thereto, no Event of Default, or act, condition or event which with notice or passage of time or both would constitute an Event of Default shall exist or have occurred," 19. Fixed Charge Coverage Ratio. Section 9.16 of the Loan Agreement is hereby deleted in its entirety and the following substituted therefor: "9.16 Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio shall not be less than 1:1 for any Testing Period." 20. Enron Accounts. Notwithstanding anything to the contrary contained in the Loan Agreement or in any of the other Financing Agreements, none of the following shall be considered an Eligible Account: (a) any Account arising from the sale or other disposition of any Enron Inventory Collateral or (b) any Account where Enron is the account debtor. 21. Additional Event of Default. Notwithstanding anything to the contrary contained in the Loan Agreement or in any of the other Financing Agreements, in addition to the Events of Default set forth therein, an event of default under any of the Enron Credit Agreements or any of the Enron Inventory Agreements shall also constitute an Event of Default under the Financing Agreements. 22. Maximum Credit Reduction Fee. In consideration of the reductions to the Maximum Credit set forth herein, Borrowers shall pay to Lender or Lender may, at its option, charge any loan account of Borrowers maintained by Lender, a line reduction fee in the aggregate amount of $150,000 which fee is fully earned as of the date hereof and shall constitute part of the Obligations, payable as follows: (a) $50,000 on the date hereof, (b) $50,000 on June 30, 2001, and (c) $50,000 on October 31, 2001, provided, that, all such payments shall become immediately due and payable upon the occurrence of an Event of Default. 23. Default Waiver. (a) Subject to the terms and conditions set forth herein, Lender hereby waives the Events of Default arising under Section 10.1(a) of the Loan Agreement as a result of the failure of Borrowers and Guarantors to deliver (a) the unaudited consolidated financial statements and unaudited consolidating financial statements of Huntco and its Subsidiaries as required under Section 9.6(a)(i) of the Loan Agreement for each of the fiscal months ended October 31, 2000, November 30, 2000, December 31, 2000, January 31, 2001, February 28, 2001 and March 31, 2001, within forty-five (45) days after the end of such fiscal month and (b) the audited consolidated financial statements and unaudited consolidating financial statements of Huntco and its Subsidiaries as required under Section 9.6(a)(ii) of the Loan Agreement for the fiscal year ended December 31, 2000, together with the opinion of the independent certified public accountants of Borrowers with respect thereto, within ninety (90) days after the end of such fiscal year; provided, that, the audited consolidated financial statements and the unaudited consolidating financial statements as of December 31, 2000, together with such opinion of independent certified public accountants, and the unaudited consolidated and consolidating financial statements through the month ended March 31, 2001, shall be delivered to Lender by no later than June 15, 2001. In the event that Lender does not receive such financial statements and opinion by June 15, 2001, such failure shall constitute an Event of Default and the waivers set forth herein shall be of no force and effect. (b) Lender has not waived, is not by this Amendment waiving, and has no intention of waiving any Event of Default which may have occurred on or prior to the date hereof, whether or not continuing on the date hereof, or which may occur after the date hereof (whether the same or similar to the Events of Default referred to above or otherwise), other than the Events of Default specifically referred to above. The foregoing waiver shall not be construed as a bar to or a waiver of any other or further Event of Default on any future occasion, whether similar in kind or otherwise and shall not constitute a waiver, express or implied, of any of the rights and remedies of Lender arising under the terms of the Loan Agreement or any other Financing Agreements on any future occasion or otherwise. 24. Termination of Pledge Agreement and Intercreditor Agreement; Release of Lien on Enron Inventory Collateral. (a) Upon the consummation of each of the 1992 Redemption, the 1995/1996 Redemption and the Blytheville Sale in accordance with the terms hereof and the satisfaction of the conditions set forth in Section 26 of this Amendment, each of the Pledge and Security Agreement, dated April 15, 1999, by and between Huntco Nevada and Congress and the Intercreditor and Subordination Agreement, dated April 15, 1999, by and among the Blytheville Subordinate Bond Trustee, Huntco Nevada (in its capacity as the sole owner and holder of the Blytheville 1995 Bonds and the Blytheville 1996 Bonds) and Congress with respect to the pledge to Congress of the Blytheville 1995 Bonds and the Blytheville 1996 Bonds shall be deemed terminated and of no further force and effect. (b) Upon the closing of transactions contemplated by Section 15 hereof and the satisfaction of the conditions set forth in Section 26 hereof, the Security Interests in and liens upon the Enron Inventory Collateral (if any) that have been granted by Borrowers pursuant to the Financing Agreements shall be released and terminated. 25. Additional Representations, Warranties and Covenants. Borrower represents, warrants and covenants with and to Lender as follows, which representations, warranties and covenants are continuing and shall survive the execution and delivery hereof, and the truth and accuracy of, or compliance with each, together with the representations, warranties and covenants in the other Financing Agreements, being a continuing condition of the making of Loans by Lender to Borrower: (a) No Event of Default or act, condition or event which with notice or passage of time or both would constitute an Event of Default exists or has occurred as of the date of this Amendment (after giving effect to the amendments to the Financing Agreements and waivers made by this Amendment). (b) This Amendment has been duly executed and delivered by Borrowers and Guarantors and is in full force and effect as of the date hereof and the agreements and obligations of Borrower contained herein constitute legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms. (c) In no event will any Enron Inventory Collateral or other product at any time owned by Enron be included in any report of the Inventory of Borrowers provided by Borrowers or Guarantors to Lender, unless specifically, conspicuously and separately identified as such in the report. (d) Borrowers and Guarantors shall cause all Enron Inventory Collateral and any other product at any time owned by Enron at any location in which Borrowers and Guarantors keep or store Inventory to be specifically, conspicuously and separately identified as Enron Inventory Collateral and physically segregated from all other Inventory of Borrowers and Guarantors and shall at all times maintain its records and reports in such a manner that Lender may verify, in a manner satisfactory to Lender, that the Enron Inventory Collateral or any other product at any time owned by Enron is not or has not been included in any inventory report provided by any Borrower or Guarantor to Lender. (e) The security interests in and liens of Lender upon all assets and properties of Huntco Steel, other than the Blytheville Fixed Assets (upon the effectiveness of the Blytheville Sale), the Springfield Real Property (upon the effectiveness of the Springfield Real Property Sale) and the Enron Inventory Collateral, are and shall continue to be in full force and effect, including, but not limited to, all amounts at any time payable to Huntco Steel or any of its Affiliates, and all rights, benefits and remedies of Huntco Steel or any of its Affiliates, pursuant to each of the Blytheville Asset Purchase Agreement and the Springfield Sale Contract. (f) To the extent set forth in Section 9.7(b)(v)(D) of the Loan Agreement, Huntco Steel shall cause all amounts at any time payable to Huntco Steel or any of its Affiliates pursuant to the Blytheville Asset Purchase Agreement or any related agreements to be paid by Blytheville Purchaser directly to Lender for application to the Obligations in such order and manner as Lender may determine. (g) Huntco Steel shall cause all amounts at any time payable to Huntco Steel or any of its Affiliates pursuant to the Springfield Sale Contract or any related agreements to be paid by Springfield Purchaser directly to Lender for application to the Obligations in such order and manner as Lender may determine. (h) To the extent set forth in Section 9.7(b)(v)(D) of the Loan Agreement, in the event Huntco Steel or any of its Affiliates receives any amounts at any time payable to Huntco Steel or any of its Affiliates pursuant to the Blytheville Asset Purchase Agreement or any related agreements, documents and instruments, such amounts shall be collected by Huntco Steel or its Affiliates as the property of Lender and held by it or them in trust for Lender and shall on the day received be remitted to Lender in the form received, with any necessary assignments or endorsements for application to the Obligations of Borrowers to Lender in such order and manner as Lender may determine. (i) In the event Huntco Steel or any of its Affiliates receives any amounts at any time payable to Huntco Steel or any of its Affiliates pursuant to the Springfield Sale Contractor any related agreements, documents and instruments, such amounts shall be collected by Huntco Steel or its Affiliates as the property of Lender and held by it or them in trust for Lender and shall on the day received be remitted to Lender in the form received, with any necessary assignments or endorsements for application to the Obligations of Borrowers to Lender in such order and manner as Lender may determine. (j) Huntco Steel shall remove all of its assets and properties from the Real Property that is subject to the Blytheville Sale prior to the expiration of Congress' right to access such Real Property pursuant to the Blytheville Purchaser Collateral Access Agreement. 26. Conditions Precedent for Amendment. The effectiveness of the amendments contained herein shall be subject to the satisfaction of each of the following, in a manner satisfactory to Lender and its counsel: (a) Lender shall have received this Amendment duly authorized, executed and delivered by the parties hereto; (b) Lender shall have received, in form and substance satisfactory to Lender, an original of the Enron Intercreditor Agreement, duly authorized, executed and delivered by the parties thereto; (c) Lender shall have received, in form and substance satisfactory to Lender, an original of the Pledge and Security Agreement, dated on or about the date hereof, by Huntco in favor of Congress with respect to the pledge of the stock of Huntco Nevada, duly authorized, executed and delivered by Huntco, together with the original stock certificates representing all of the issued and outstanding shares of Huntco Nevada; (d) Lender shall have received, in form and substance satisfactory to Lender, an original of the Pledge and Security Agreement, dated on or about the date hereof, by Huntco Nevada in favor of Congress with respect to the pledge of the stock of Huntco Steel and Midwest, duly authorized, executed and delivered by Huntco Nevada, together with the original stock certificates representing all of the issued and outstanding shares of each of Huntco Steel and Midwest; (e) Lender shall have received, in form and substance satisfactory to Lender, the consent of each of the financial institutions which have acquired a participation in the interests and Obligations of Lender under the Financing Agreements to the terms and provisions of this Amendment; (f) Lender shall have received, in form and substance satisfactory to Lender, true correct and complete copies of each of the following as duly authorized, executed and delivered by the parties thereto: (i) the Enron Credit Agreements requested by Lender (including, without limitation, the First Amendment to Loan Agreement, dated on or about the date hereof, by and among Enron, Borrower and Guarantors), (ii) the Enron Inventory Agreements requested by Lender and (iii) the Blytheville Asset Purchase Agreement and all agreements, documents and instruments related thereto requested by Lender; (g) Lender shall have received, in form and substance satisfactory to Lender, an original of the Blytheville Purchaser Collateral Access Agreement, duly authorized, executed and delivered by Enron; and (h) Lender shall have received, in form and substance satisfactory to Lender, letters from each counsel of Borrowers which have delivered opinions to Enron in connection with the arrangements contemplated by the Enron Credit Agreements and the Enron Inventory Agreements, stating that Congress may rely on such opinions; (i) no Event of Default, or event, act or condition which with notice or passage of time or both would constitute an Event of Default, shall exist or have occurred (after giving effect to the amendments to the Financing Agreements made by this Amendment). 27. Effect of this Amendment. Except as modified pursuant hereto, no other changes or modifications to the Financing Agreements are intended or implied, and in all other respects the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the effective date hereof. To the extent of conflict between the terms of this Amendment and the other Financing Agreements, the terms of this Amendment shall control. The Loan Agreement and this Amendment shall be read and construed as one agreement. 28. Further Assurances. The parties hereto shall execute and deliver such additional documents and take such additional action as may be necessary or desirable to effectuate the provisions and purposes of this Amendment. 29. Governing Law. The validity, interpretation and enforcement of this Amendment and the other Financing Agreements and any dispute arising out of the relationship between the parties hereto whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Illinois (without giving effect to principles of conflicts of laws). 30. Binding Effect. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns. 31. Headings. The headings listed herein are for convenience only and do not constitute matters to be construed in interpreting this Amendment. 32. Counterparts. This Amendment may be executed in any number of counterparts, but all of such counterparts shall together constitute but one and the same agreement. In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart thereof signed by each of the parties hereto. Delivery of an executed counterpart of this Amendment by telefacsimile shall have the same force and effect as delivery of an original executed counterpart of this Amendment. Any party delivering an executed counterpart of this Amendment by telefacsimile also shall deliver an original executed counterpart of this Amendment, but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Amendment as to such party or any other party. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] Please sign the enclosed counterpart of this Amendment in the space provided below, whereupon this Amendment, as so accepted by Lender, shall become a binding agreement among Borrowers, Guarantors and Lender. Very truly yours, CONGRESS FINANCIAL CORPORATION(CENTRAL) By: Title: AGREED: HUNTCO STEEL, INC. By: Title: MIDWEST PRODUCTS, INC. By: Title: HUNTCO INC. By: Title: HUNTCO NEVADA, INC. By: Title: HSI AVIATION, INC. By: Title: EX-10 18 apa-eim.txt ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT dated as of April 30, 2001 by and among HUNTCO STEEL, INC., a Delaware corporation HUNTCO INC., a Missouri corporation and ENRON INDUSTRIAL MARKETS LLC, a Delaware limited liability company TABLE OF CONTENTS 1. PURCHASE AND SALE 1.1 Purchase and Sale 1.2 Excluded Assets 1.3 Definitions 1.4 Purchase Price 1.5 Assumed Contract Obligations 1.6 Excluded Liabilities 1.7 Exculpation 1.8 The Closing 1.9 Value Assigned to the Assets 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER 2.1 Due Organization 2.2 Authorization 2.3 Capital Stock of the Company 2.4 Permits and Intangibles 2.5 Environmental Matters 2.6 Personal Property 2.7 Real Property 2.8 Contracts and Commitments 2.9 Collective Bargaining Agreements 2.10 Employee Obligations 2.11 Conformity with Law; Litigation 2.12 Taxes 2.13 No Violations; All Required Consents Obtained 2.14 Absence of Changes 2.15 Financial Statements 2.16 Bulk Transfer Laws 2.17 Sufficiency of Assets 2.18 Intentionally Deleted 2.19 Date Compliance 2.20 Bonds. 2.21 Disclosure 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER 3.1 Due Organization 3.2 Authorization 3.3 No Violations 3.4 Validity of Obligations 4. COVENANTS PRIOR TO CLOSING 4.1 Access and Cooperation; Due Diligence 4.2 Conduct of Business Pending Closing 4.3 Prohibited Activities 4.4 No Shop 4.5 Notification of Certain Matters 4.6 Positions Offered to Employees 4.7 Further Assurances 4.8 Notices and Consents 4.9 Commitment 5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDER 5.1 Representations and Warranties; Performance of Obligations 5.2 Satisfaction 5.3 Consents and Approvals 5.4 Closing Documents 5.5 Opinion of Counsel 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER 6.1 Representations and Warranties; Performance of Obligations 6.2 Master Purchase Agreement 6.3 No Adverse Changes 6.4 Satisfaction 6.5 Consents and Approvals 6.6 Instruments of Transfer and Title Insurance 6.7 Condition of the Business and Assets 6.8 Bonds and Tax Abatement Agreement 6.9 GECC Leases 6.10 Tolling Obligations 6.11 Closing of Business 6.12 Opinion of Counsel 7. POST-CLOSING COVENANTS 7.1 Future Cooperation 7.2 Expenses 7.3 Payment of Liabilities; Bulk Transfer Compliance 7.4 Access to Books and Records 7.5 Railroad Access Agreement 8. INDEMNIFICATION 8.1 Survival of Representations and Warranties 8.2 General Indemnification by the Company and the Stockholder 8.3 Indemnification by Purchaser 8.4 Specific Indemnification 8.5 Third Person Claims 8.6 Limitations on Indemnification 9. TERMINATION OF AGREEMENT 9.1 Termination 9.2 Liabilities in Event of Termination 10. GENERAL 10.1 Successors and Assigns 10.2 Entire Agreement 10.3 Counterparts 10.4 Notices 10.5 Governing Law 10.6 Survival of Representations and Warranties 10.7 Effect of Investigation 10.8 Exercise of Rights and Remedies 10.9 Time 10.10 Reformation and Severability 10.11 Captions 10.12 Press Releases and Public Announcements 10.13 No Third-Party Beneficiaries 10.14 Dispute Resolution 10.15 Waiver of Certain Damages 10.16 Schedules SCHEDULES 1.1(a) - Tangible Personal Property and Equipment 1.1(b) - Real Property 1.1(c) - Vehicles 1.1(d) - Commonly Used Assets 1.2(a) - Survey Showing Excluded Assets 1.2(b) - Listed Excluded Tangible Personal Property 1.2(c) - Listed Excluded Software and Intellectual Property 1.2(d) - Excluded Vehicles 1.5 - Assumed Contracts 1.6 - Excluded Liabilities 1.9 - Value Assigned to the Assets 2.4 - Intangible Assets of the Stockholder Parties 2.5 - Environmental Matters 2.8 - Contracts and Commitments 2.11 - Conformity with Law; Litigation 2.12 - Taxes 2.13 - Listed Required Consents 2.14 - Absence of Changes 2.17 - Sufficiency of Assets 4.1 - Due Diligence Schedule ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into as of April 30, 2001 by and among ENRON INDUSTRIAL MARKETS LLC, a Delaware limited liability company ("Purchaser"), HUNTCO STEEL, INC., a Delaware corporation (the "Company"), and HUNTCO INC., a Missouri corporation, as the indirect owner of all of the outstanding equity interests in the Company (the "Stockholder"). WHEREAS, the Company is engaged in the business of operating a cold mill steel processing plant, which includes without limitation, a pickling line, a reversing cold reduction mill, annealing furnaces, and a tempering mill, located west of North County Road No. 1015 near the City of Blytheville, Arkansas (the "Business"), but excludes the Excluded Assets (as defined below); and WHEREAS, the Company is currently planning on closing the Business and anticipates closing the Business prior to the Closing Date (as defined below); and WHEREAS, Purchaser desires to purchase, and the Company desires to sell, the Business along with substantially all of the assets of the Company used in the Business, whether owned by the Company, the Stockholder or any direct or indirect subsidiary of the Stockholder (the Company, the Stockholder and any such subsidiary being referred to individually herein as a "Stockholder Party" and collectively as the "Stockholder Parties"), including the Commonly Used Assets (as defined below), but excluding the Excluded Assets (as defined below), all upon the terms and conditions set forth in this Agreement (the "Transaction"); and WHEREAS, Purchaser is only purchasing the assets as set forth herein, and is not assuming any liabilities of the Company except for the Assumed Contract Obligations (as defined below); NOW, THEREFORE, in consideration of the premises and of the agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: 1. PURCHASE AND SALE 1.1 Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, at the Closing (as defined below), the Company hereby agrees to sell, convey, transfer, assign and deliver to Purchaser and Purchaser hereby agrees to purchase from the Company, the assets described below (collectively, the "Assets"), free and clear of all security interests, liens, claims and encumbrances of any kind except as expressly noted below with respect to the Equipment and Real Property: (a) Tangible Personal Property and Equipment. Excluding the Excluded Assets, and subject to any liens or security interests granted under the Series 1992 Lease and the Series 1995 and 1996 Lease, all of the tangible personal property on the Real Property (as defined below), including without limitation (i) the tangible personal property identified on Schedule 1.1(a), (ii) certain property currently subject to lease agreements (with such properties to be separately noted on Schedule 1.1(a)), including without limitation the GECC Leases (as defined below), and (iii) any other equipment, cranes, machinery, tools, appliances, furniture, telephone systems, copy machines, fax machines, implements, spare parts, supplies and other tangible personal property used or useful in the Business (the "Equipment"). (b) Real Property. Subject to the Permitted Encumbrances (as defined below), all of the real property, whether owned or leased, identified on Schedule 1.1(b), including all improvements thereon and all of Company's right, title and interest in and to all easements, tenements, hereditaments, privileges and appurtenances in any way belonging to said real property (the "Real Property"). (c) Vehicles. The vehicles, trailers and other transportation equipment identified on Schedule 1.1(c). (d) Goodwill. The goodwill of the Business. (e) Intangible Assets. All right, title and interest of the Stockholder Parties in, to and under all patents, trademarks, service marks, technology, know-how, copyrights and applications used in connection with the Business. (f) Assumed Contracts. All right, title and interest of the Stockholder Parties in, to and under (and subject to the terms and conditions of) the existing contracts and agreements of the Stockholder Parties set forth on Schedule 1.5 (the "Assumed Contracts"). The obligations assumed by the Purchaser under the Assumed Contracts (the "Assumed Contract Obligations") are more fully described in Section 1.5. (g) Licenses, Franchises and Permits. All right, title and interest of the Stockholder Parties in, to and under all transferable licenses, franchises, permits, authorizations, certificates, approvals, registrations and other governmental authorizations used in connection with the Business (collectively, the "Governmental Approvals") relating to all or any of the Assets. (h) Computers and Software. Excluding the Excluded Computers and Software (as defined below), all right, title and interest of the Stockholder Parties in computer equipment and hardware used in connection with the Assets or Business, including, without limitation, all central processing units, terminals, disk drives, tape drives, electronic memory units, printers, keyboards, screens, peripherals (and other input/output devices), modems and other communication controllers, networking equipment, and any and all parts and appurtenances thereto, together with all software and intellectual property used by the Stockholder Parties with such computer equipment and hardware. (i) Books and Records. Copies of the Stockholder Parties' books, records, papers and instruments of whatever nature and wherever located that relate principally to the Assets or which Purchaser reasonably requests in connection with Purchaser's use or proposed use of the Assets. (j) Commonly Used Assets. All tangible and intangible real and personal property used in connection with both the Business and the Excluded Assets as listed on Schedule 1.1(d), as such schedule may be modified with the agreement of the parties (the "Commonly Used Assets"). (k) Other Property. All other or additional privileges, rights, interests, properties and assets of the Stockholder Parties not referred to above (and not excepted from the sale) of every kind and description and wherever located that (i) are located in, on or under or are appurtenant to the Real Property and (ii) are used or intended for use in connection with, or that are necessary to the continued conduct of, the Business as presently conducted. Notwithstanding the foregoing, cash will not be transferred to Purchaser. 1.2 Excluded Assets. The Company will not sell to Purchaser under this Agreement and Company hereby retains, the assets described below (collectively, the "Excluded Assets"): (a) Tangible Personal Property and Equipment. The eastern most Pickling Line located in the Pickling Building, which building is shown on the survey attached hereto as Schedule 1.2(a), the tangible personal property listed on Schedule 1.2(b) attached hereto and the tangible personal property and equipment located within the Subleased Buildings (as defined below) which are not Commonly Used Assets (the "Excluded E&TPP"). (b) Eastern Property. The land owned or leased by the Company located east of North County Road No. 1015 near the City of Blytheville, Arkansas, together with all improvements, equipment and personal property located thereon and intangible personal property used in connection therewith, but excluding any Commonly Used Assets (the "Eastern Property"). (c) Accounts and Notes Receivable. All of the accounts and notes receivable of the Company. (d) Excluded Inventory. All inventory owned by the Company or any third party , including raw materials, work in progress and finished goods existing as of the Closing Date (the "Excluded Inventory"). (e) Excluded Computers and Software. The computers, equipment, software and intellectual property listed on Schedule 1.2(c) and any computer equipment and hardware not located at the Real Property, including, without limitation, all central processing units, terminals, disk drives, tape drives, electronic memory units, printers, keyboards, screens, peripherals (and other input/output devices), modems and other communication controllers, networking equipment, and any and all parts and appurtenances thereto, together with all software and intellectual property used by the Stockholder Parties with such computer equipment and hardware (the "Excluded Computers and Software"). (f) Excluded Vehicles. The vehicles, trailers and other transportation equipment identified on Schedule 1.2(d) (the "Excluded Vehicles"). (g) Employees. All employment agreements or other rights to employ the employees employed in connection with the Business as of the Closing Date and the Stockholder Parties' rights, title, interests and liabilities in or to any employee benefit plans, medical or dental plans, or retirement plans maintained for such employees. (h) Railroad Access Agreement. Seller's rights in that certain Rail Access and Indemnification Agreement dated April 20, 1993, by and between the Company and Nucor Corporation. 1.3 Definitions. As used in this Agreement, the following terms shall have the following meanings (unless otherwise indicated, such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Bonds" means any bond or bonds authenticated and delivered under and pursuant to either the Series 1992 Indenture or the Series 1995 and 1996 Indenture, including the Series 1992 Bonds, the Series 1995 Bonds and the Series 1996 Bonds, and any additional bonds issued pursuant to such Indentures. "City" means the City of Blytheville, a municipal corporation organized and existing under the laws of the State of Arkansas. "Closing Documents" means the Sublease, the final versions of all of the schedules to this Agreement (even if preliminary versions are already attached hereto) and all of the following documents in form and substance to be agreed upon by the Company and the Purchaser: (a) a completed Special Warranty Deed , covering the Real Property owned in fee, if any, free and clear of all liens, security interests, pledges, claims, conditional sales agreements, charges or restrictions on transfer, encumbrances, or any other matter affecting the Real Property whatsoever other than encumbrances and other matters affecting title to the Real Property that Purchaser has waived in writing in its sole discretion ("Permitted Encumbrances"), (b) completed Assignment and Assumption of Lease Agreement(s), covering the leased Real Property, executed by all necessary parties (including the current lessor(s) of each parcel of Real Property currently leased) , such that Purchaser will hold the lessee's leasehold estate under such leases free and clear of all liens, security interests, pledges, claims, conditional sales agreements, charges or restrictions on transfer, encumbrances, or any other matter affecting the Real Property whatsoever other than the Permitted Encumbrances and the rights running to the lessors under such leases, (c) a completed General Conveyance, Transfer, Assignment and Assumption Agreement, covering the Business and all of the Assets, (d) certificates of title to any Asset covered by a certificate of title, (e) such other instruments of transfer as may be reasonably necessary or appropriate to vest in Purchaser good and indefeasible title to the Business and the Assets, free and clear of any security interest, lien, claim or encumbrance except as provided herein, (f) an Owner's Policy of Title Insurance for each parcel of Real Property owned by the Company or a Leasehold Policy of Title Insurance for each parcel of Real Property leased by the Company, each (i) dated as of the Closing Date, (ii) naming Purchaser as the insured party, (iii) issued by a title company to be selected by Purchaser, (iv) in the face amount of the allocated value as set forth on Schedule 1.9, of each parcel of Real Estate owned by the Company or the value (as reasonably determined by Purchaser) of the leasehold interest, as the case may be, (v) subject only to the Permitted Encumbrances, (vi) in form customary for the locale in which the Real Property is located; and (g) a completed Operating and Maintenance Agreement covering the operation of the Assets on behalf of Purchaser. If by May 15, 2001, Seller and Purchaser are unable to agree on acceptable terms of an Operating and Maintenance Agreement, Purchaser may enter into an Operating and Maintenance Agreement with a third party, in which case the Company will not have the right to approve the form or substance of the Operating and Maintenance Agreement. "ENA" means Enron North America Corp. "Excluded Liabilities" means all Liabilities, other than Assumed Contract Obligations, accruing from, related to, incurred in connection with or secured by the Business or the Assets prior to the Closing, including, but not limited to (a) the Liabilities set forth on Schedule 1.6; (b) any Liabilities of any Stockholder Party other than the Assumed Contract Obligations; (c) any act, omission, event, condition or circumstance involving or relating to the Business or Assets occurring or existing before the Closing Date; (d) the ownership or operation of the Business or Assets before the Closing Date; (e) any brokers' or finders' fees or commissions arising with respect to brokers or finders retained or engaged by any person other than Purchaser and resulting from or relating to the transactions contemplated in this Agreement; (f) any liability or obligation to employees or former employees of any Stockholder Party or their beneficiaries arising from or relating to the employment, severance or discharge (or constructive severance or discharge) of such employees by such Stockholder Party, or arising from or relating to their rights to receive benefits under any employee benefits plan or any other employment agreement, contract or arrangement with any Stockholder Party; (g) any Liabilities related to any disputes with third parties, including any Governmental Authorities; and (h) all Liabilities related to the Excluded Assets. "GECC Leases" means collectively (a) that certain lease commencing December, 1997, between GE Capital Business Asset Funding Corporation (as successor to MetLife Capital) and Company pertaining to the lease by Company of the New Delta Brands Push Pull Pickling Line and (b) that certain lease commencing January, 1997, between General Electric Capital Corporation and Company pertaining to the lease by Company of the Ebner Annealing Furnaces. "Huntco Nevada" means Huntco Nevada, Inc., a subsidiary of Stockholder. "Liabilities" shall mean any and all direct or indirect demands, claims, notices of violation, filings, investigations, administrative proceedings, actions, causes of action, suits, other legal proceedings, payments, charges, judgments, assessments, indebtedness, liabilities, damages, deficiencies, penalties, fines, obligations, responsibilities, costs and expenses paid or incurred, or diminutions in value of any kind or character (whether or not asserted prior to the date hereof, and whether known or unknown, fixed or unfixed, conditional or unconditional, based on negligence, strict liability or otherwise, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise), including, without limitation, penalties, interest on any amount payable to a third party as a result of the foregoing and any legal or other expenses reasonably incurred in connection with investigating or defending any claim, demand or legal proceeding, whether or not resulting in any liability, and all amounts paid in settlement of claims, demands, or legal proceedings. "Master Purchase Agreement" means that certain Master Steel Purchase and Sale Agreement dated as of April 6, 2001, between ENA and Company. "Railroad Access Agreement" means that certain Rail Access and Indemnification Agreement dated April 20, 1993, between Nucor Corporation and Company. "Series 1992 Bondholder" means the registered owner of any Series 1992 Bond. "Series 1992 Bonds" means the Industrial Development Revenue Bonds (Huntco Steel, Inc. Project), Series 1992, of City issued in the initial principal amount of $2,000,000 pursuant to the Series 1992 Indenture. "Series 1992 Indenture" means the Trust Indenture dated as of June 1, 1992, between City and the Series 1992 Trustee, relating to the Bonds, as supplemented by First Supplemental Trust Indenture dated as of August 17, 1993, and any indentures supplemental thereto. "Series 1992 Lease" means that certain Lease Agreement dated as of June 1, 1992, between City and Company, pertaining to the Real Property and the "Leased Equipment" as described on Exhibit B thereto, as previously amended and as may be amended from time to time. "Series 1992 Trustee" means BNY Trust Company of Missouri, St. Louis, Missouri, as Trustee, as successor to the initial trustee, Worthen Trust Company, Inc., Little Rock Arkansas, or any successor trustee under the Series 1992 Indenture. "Series 1995 Bonds" means the Taxable Industrial Development Revenue Bonds (Huntco Steel, Inc. Project), Subordinate Series 1995, of City issued pursuant to the Series 1995 and 1996 Indenture, authorized in the total principal amount of not to exceed $30,000,000, as described in the Series 1995 and 1996 Indenture. "Series 1996 Bonds" means the Taxable Industrial Development Revenue Bonds (Huntco Steel, Inc. Project), Subordinate Series 1996, of City issued pursuant to the Series 1995 and 1996 Indenture, authorized in the total principal amount of not to exceed $12,000,000, as described in the Series 1995 and 1996 Indenture. "Series 1995 and 1996 Indenture" means the Trust Indenture, dated as of May 1, 1995, between City and Huntco Nevada, Inc., as Trustee, relating to the Bonds, as supplemented by First Supplemental Trust Indenture dated as of January 1, 1996, and any indentures supplemental thereto. "Series 1995 and 1996 Lease" means that certain Lease Agreement, dated as of May 1, 1995, between City and Company, pertaining to the Real Property and the "Leased Equipment" as described on Exhibit B thereto, as previously amended and as may be amended from time to time. "Series 1995 and 1996 Trustee" means Huntco Nevada, Inc., and any successor trustee under the Series 1995 and 1996 Indenture. "Sublease" means the sublease to be executed by Purchaser, as sublessor, and Company, as sublessee, in a form to be agreed upon by Purchaser and Company, pertaining to (a) the sublease of the Subleased Land and the Subleased Buildings subject to the Series 1992 Lease and the Series 1995 and 1996 Lease, (b) the non-exclusive right to use of the western most Pickling Line located in the Pickling Building (which building is shown on the survey attached hereto as Schedule 1.2(a)), subject to Purchaser's right to use such line, (c) the right to leave the eastern most Pickling Line located in the Pickling Building(which building is shown on the survey attached hereto as Schedule 1.2(a)) in such building for a time period after Closing to be agreed upon by the parties and use such line in such location, (d) the non-exclusive use of the Commonly Used Assets and allocation of costs between Purchaser and Company related thereto, and (e) certain services such as maintenance of the Assets and railroad transportation and access to be provided by Company to Purchaser. "Subleased Buildings" means the two buildings labeled Stamping Plant and CTL/Slitter Building on the survey attached hereto as Schedule 1.2(a) (the "Subleased Buildings") "Subleased Land" shall mean only the land directly under the Subleased Buildings and such other areas for parking and coil storage as are agreed to by the parties. "Tax Agreement" means that certain Agreement For Payments In Lieu of Taxes dated as of March 15, 1994, between City and Company, as amended by a document dated as of December 19, 1995, between City and Company. "Transaction Documents" has the meaning given such term in the Master Purchase Agreement. 1.4 Purchase Price. The aggregate purchase price for the Assets (the "Purchase Price") shall be Seventeen Million Dollars ($17,000,000) less the sum of the outstanding principal and accrued interest on the Series 1992 Bonds as of the Closing Date which has not already been escrowed with the Series 1992 Trustee. At the Closing, the Purchaser shall pay the Purchase Price to the title company providing the Owner's Policy of Title Insurance for payment to the Company and the creditors that need to be paid in connection with the Closing, by wire transfer pursuant to instructions provided to the Purchaser. At the Closing, all ad valorem taxes relating to the Assets for the calendar year in which the Closing Date occurs shall be prorated between Company and Purchaser as of the Closing Date, based upon the best available estimates of the amount of taxes that will be due and payable on the Assets during the calendar year in which the Closing Date occurs. If such taxes have not yet been paid, Company shall pay to Purchaser in cash at the Closing or credit against the Purchase Price, Company's pro rata portion of such estimated taxes. If such taxes have already been paid, Purchaser shall pay to Company in cash at the Closing, Purchaser's pro rata portion of such taxes. Within thirty (30) days of the date the amount of taxes on the Property for such year is known, Company and Purchaser shall readjust the amount of taxes to be paid by each party with the result that Company shall pay for those taxes attributable to the period of time prior to the Closing Date. 1.5 Assumed Contracts. At the Closing, Purchaser shall assume the obligations of the Company under the Assumed Contracts set forth on Schedule 1.5 hereto which are scheduled to be performed after the Closing Date, but shall not assume or otherwise become liable (a) for any liability or obligation under the Assumed Contracts that Company was required to perform, or which was incurred or existed or resulted from an act or event occurring on or prior to the Closing Date, (b) for any liability or obligation that arises under the Assumed Contracts with respect to a breach or default prior to the Closing Date, or (c) for any other liability or obligation whatsoever. 1.6 Excluded Liabilities. All Excluded Liabilities are expressly excluded from the Assets purchased and sold hereunder and the Assumed Contracts assumed hereunder, and Purchaser shall not assume or otherwise become liable for any such Liability whatsoever in connection therewith. The Company and the Stockholder agree that they shall remain solely responsible for the Excluded Liabilities. 1.7 Exculpation. Except for the Assumed Contract Obligations, Purchaser does not assume or agree to pay, perform or discharge, and shall not be responsible for, any other Liabilities of the Company or the Stockholder, or any affiliate of any of them, whether accrued, absolute, contingent or otherwise. 1.8 The Closing. The Closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Bracewell & Patterson, L.L.P., 711 Louisiana, Suite 2900, Houston, Texas 77002, commencing at 9:00 a.m. local time on the date seven (7) days following the date of expiration of the Inspection Period (or such other date as may be agreed upon by the parties) following the satisfaction or waiver of all conditions to the obligations of the parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective parties will take at the Closing itself) or such other date as the parties may mutually determine (the "Closing Date"). 1.9 Value Assigned to the Assets. The Purchase Price shall be allocated among the Assets as set forth on Schedule 1.9 hereto for all federal, state and local tax purposes. Purchaser, the Company and the Stockholder agree that they shall not take any position or action inconsistent with such allocation in the filing of any federal income or other tax returns. 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER The Company and the Stockholder jointly and severally represent and warrant to Purchaser as follows: 2.1 Due Organization. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has full power and authority to carry on its business as it is now being conducted. The Stockholder is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Missouri and has full power and authority to carry on its business as it is now being conducted. Each of the Company and the Stockholder is duly authorized or qualified to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, except where the failure to be so authorized or qualified would not (i) have any material adverse change in the condition (financial or otherwise), Assets or Business, or (ii) impair the ability of the Company or the Stockholder to perform on a timely basis its obligations under this Agreement or the consummation of the Transaction contemplated by this Agreement. 2.2 Authorization. (i) The representatives of the Company and the Stockholder executing this Agreement have full power and authority to execute and deliver this Agreement and (ii) each of the Company and the Stockholder has full corporate power and authority to enter into this Agreement and the Transaction. This Agreement and the Transaction have been approved by Huntco Nevada and the Stockholder and approved by the boards of directors of Huntco Nevada, the Company and the Stockholder, and does not require the approval of the stockholders of the Stockholder. This Agreement has been validly executed and delivered by the Company and the Stockholder and constitutes the legal, valid and binding obligation of each of them enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization or similar laws now or hereafter in effect relating to creditors' rights generally. 2.3 Capital Stock of the Company. The authorized capital stock of the Company consists solely of shares of common stock (the "Company Stock"). All of the shares of the Company Stock are owned of record and beneficially by Huntco Nevada free and clear of all voting trusts, voting agreements, proxies and voting restrictions of any kind except for liens and security interests granted pursuant to the Transaction Documents. All of the shares of the common stock and any preferred stock of Huntco Nevada are owned of record and beneficially by the Stockholder free and clear of all voting trusts, voting agreements, proxies and voting restrictions of any kind except for liens and security interests granted pursuant to the Transaction Documents. 2.4 Permits and Intangibles. Schedule 2.4 sets forth an accurate list of all licenses, permits and other governmental authorizations, franchises and titles owned or held by any of the Stockholder Parties that relate, directly or indirectly, to the Assets or the Business (including licenses, franchises, certificates, trademarks, trade names, patents, patent applications and copyrights owned or held by any of the Stockholder's employees that relate, directly or indirectly, to the Assets or the Business (including interests in software or other technology systems, programs and intellectual property)), and the Stockholder Party or employee who owns or holds such item. Collectively, the items on Schedule 2.4 are referred to as the "Intangible Assets" (it being understood and agreed that a list of all environmental permits and other environmental approvals is set forth on Schedule 2.5). The Company is not infringing on any Intangible Assets owned by the Stockholder or, to its knowledge, by any third party, and to the Company's knowledge, neither the Stockholder nor any third party is infringing on any Intangible Assets owned by the Company. The Intangible Assets and other governmental authorizations listed on Schedules 2.4 and 2.5 are valid or enforceable as the case may be. The Company has not received any notice that any person intends to cancel, terminate or not renew any such Intangible Assets or other governmental authorization. The Company has conducted and is conducting the Business in compliance with the requirements, standards, criteria and conditions set forth in the Intangible Assets and other governmental authorizations listed on Schedules 2.4 and 2.5 and is not in violation of any of the foregoing. Except for the Excluded Assets and as specifically set forth on Schedule 2.4 or 2.5, all of the rights of and benefits afforded to the Company by any such Intangible Assets or other governmental authorizations are transferable to the Purchaser and are being transferred to the Purchaser on the Closing Date. 2.5 Environmental Matters. Except as set forth on Schedule 2.5, the Company is in compliance with all federal, state, local and foreign statutes, laws, ordinances, regulations, rules, notices, permits, judgments, orders and decrees applicable to the Business relating to environmental protection (collectively "Environmental Laws") including, without limitation, Environmental Laws relating to air, water, land and the generation, storage, use, handling, transportation, treatment or disposal of Hazardous Wastes, Hazardous Materials and Hazardous Substances including petroleum and petroleum products (as such terms are defined in any applicable Environmental Law) (collectively referred to herein as "Hazardous Substances"). The Company has obtained and adhered to all necessary permits and any and all other approvals required pursuant to Environmental Laws for the Business, a list of all of which permits and approvals is set forth on Schedule 2.5. The Company has reported to the appropriate authorities, to the extent required by any Environmental Law, the treatment, storage, disposal of, transportation or otherwise handling of Hazardous Substances in connection with the Business. Except as set forth on Schedule 2.5, there have been no releases or threats of releases (as defined in Environmental Laws) at, from, in, to, under or on any Real Property, other than such releases permitted by Environmental Laws. There is no on-site or off-site location to which the Company has transported or disposed of Hazardous Substances from the Business or arranged for the transportation or disposal of Hazardous Substances from the Business which, to Company's knowledge, is the subject of any federal, state, local or foreign enforcement action or any other investigation which could lead to any claim against Purchaser for any clean-up cost, remedial work, damage to natural resources, property damage or personal injury, including, but not limited to, any claim under (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, (ii) the Resource Conservation and Recovery Act, as amended, (iii) the Hazardous Materials Transportation Act, as amended or (iv) comparable state or local statutes and regulations. The Company has no contingent liability in connection with any release of any Hazardous Substance into the environment in connection with the Business. 2.6 Personal Property. Except for the Excluded Assets, Schedule 1.1(a) sets forth an accurate list of (a) all tangible personal property owned by any of the Stockholder Parties and used in connection with the Business and who the particular owner is and (b) a list of all operating leases of personal property used in connection with the Business. Except for the Excluded Assets, all (i) tangible personal property used by the Company in the Business is either owned by the Company or leased by the Company pursuant to a lease included on Schedule 1.1(a), (ii) the tangible personal property included on Schedule 1.1(a), taken as a whole, is in good working order and operating condition, ordinary wear and tear excepted, so as to render the facilities operable and able to perform in the ordinary course of business, and (iii) leases and agreements included on Schedule 1.1(a) are in full force and effect, are not subject to any default and constitute valid and binding agreements of the parties (and their successors) thereto in accordance with their respective terms. The Company has good and marketable title to all owned tangible and intangible personal property included in the Assets, free and clear of all liens (other than personal property subject to operating leases, liens for personal property taxes not yet due and payable, liens and security interests under the Series 1992 Lease and the Series 1995 and 1996 Lease, and liens to be discharged by the Company at Closing), security interests, pledges, claims, conditional sales agreements, charges or restrictions on transfer (other than restrictions on transfer noted on Schedule 1.1(a)), encumbrances, or any other matter affecting the personal property whatsoever. 2.7 Real Property. The Real Property described in Schedule 1.1(b) sets forth an accurate list of all real property owned or leased by any Stockholder Party used in the conduct of the Business, but specifically excluding the Eastern Property. Company is the lessee under both the Series 1992 Lease and the Series 1995 and 1996 Lease. The Company has good and marketable title to any owned Real Property. All Real Property, whether owned or leased, is free and clear of all liens, security interests, pledges, claims, conditional sales agreements, charges or restrictions on transfer, encumbrances, or any other matter affecting the Real Property whatsoever (other than liens for real estate taxes not yet due and payable, liens to be discharged by the Company at Closing, liens and security interests under the Series 1992 Lease and the Series 1995 and 1996 Lease, and the liens and security interests securing the Bonds); provided, however, Permitted Encumbrances shall not be deemed to violate the terms of this Section 2.7. The Company has provided the Purchaser with true, complete and correct copies of all leases included on Schedule 1.1(b), the Tax Agreement and the Railroad Access Agreement. All of such leases and agreements are in full force and effect and constitute valid and binding agreements of the parties (and their successors) thereto in accordance with their respective terms, no defaults have occurred under such leases or agreements, and no events or omissions have occurred which, but for the passing of time or giving of notice or both, would be a default under such leases or agreements, on the part of Company or any other party to any of such leases or agreements. 2.8 Contracts and Commitments. Schedule 2.8 sets forth an accurate list of all contracts, commitments and similar agreements related or pertaining to the Business or by which any of the Assets are bound. Except as described on Schedule 2.8, (a) the Company has complied in all material respects with all commitments and obligations pertaining to the Business or Assets, is not in default and has no knowledge of any matter which with notice, the passage of time or both would constitute a default under any contracts or agreements listed on Schedule 2.8, and no notice of default under any such contract or agreement has been received and (b) no party has canceled or substantially reduced or, to the knowledge of the Company, is currently attempting or threatening to cancel or substantially reduce the scope of any such contract or agreement. Except as specifically set forth on Schedule 2.8, (a) the Transaction will not result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to the Company by, any of the Assumed Contracts, and (b) all of the rights and benefits under all of the Assumed Contracts are transferable to the Purchaser and will be transferred to the Purchaser as of the Closing Date. 2.9 Collective Bargaining Agreements. The Company is not a party to or obligated under any collective bargaining or similar agreement. 2.10 Employee Obligations. Except as set forth in Section 4.6 hereof, the Purchaser will not, as a result of its purchase of the Assets or consummation of the Transaction, upon such consummation at any time thereafter, incur any liability or obligation of any nature whatsoever on behalf of any employee or former employee of the Company relating to any period prior to or after the Closing, including, but not limited to, any obligation arising under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), any liability, including, but not limited to, withdrawal liability, to any multi-employer or employee pension benefit plan under ERISA or any other federal, state or local statute regulation.. The Purchaser and the Company acknowledge that the Purchaser is not obtaining or assuming any right or interest in the existing employee benefit plans maintained by or on behalf of the Company. 2.11 Conformity with Law; Litigation. Except as set forth on Schedule 2.11 there are no claims, actions, suits or proceedings, pending or, to the knowledge of the Company, threatened against or affecting the Business or any of the Assets, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over the Business or any of the Assets. Except as set forth on Schedule 2.11 no notice of any claim, action, suit or proceeding, whether pending or threatened, pertaining to the Business or any of the Assets has been received by the Company during the last two years and, to the knowledge of the Company, there is no basis therefor. Except as set forth on Schedule 2.11 the Company has conducted the Business for the past two years and now conducts the Business in material compliance with all laws, regulations, writs, injunctions, decrees and orders of governmental authorities applicable to the Business or the Assets. The Company and the other Stockholder Parties are not in material violation of any law or regulation or any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over any of them that could materially and adversely impact the Business or the Purchaser's use of any of the Assets on and after the Closing Date. The Company and the other Stockholder Parties have conducted and are conducting the Business in material compliance with the requirements, standards, criteria and conditions set forth in applicable federal, state and local statutes, ordinances, permits, licenses, orders, approvals, variances, rules and regulations, including the Governmental Approvals and all such permits, licenses, orders and other governmental approvals set forth on Schedules 2.4 and 2.5. 2.12 Taxes. For purposes of this Agreement, the term "Taxes" shall mean all taxes, charges, fees, levies or other assessments including, without limitation, income, gross receipts, excise, property, sales, withholding, social security, unemployment, occupation, use, service, license, payroll, franchise, transfer and recording taxes, fees and charges, imposed by the United States or any state, local or foreign government or subdivision or agency thereof, whether computed on a separate, consolidated, unitary, combined or any other basis; and such term shall include any interest, fines, penalties or additional amounts attributable to or imposed with respect to any such taxes, charges, fees, levies or other assessments. The Company and the other Stockholder Parties have timely filed all requisite federal, state and other tax returns or extension requests for all fiscal periods ended on or before the Closing Date. Except as set forth on Schedule 2.12, there are no examinations in progress or pending claims against the Company or the other Stockholder Parties for federal, state or other taxes (including penalties and interest) and no notice of any claim for taxes, whether pending or threatened, has been received. All tax, including interest and penalties (whether or not shown on any tax return) owed by the Company, any member of an affiliated or consolidated group which includes or included the Company has been paid. The amounts shown as accruals for Taxes on the Financial Statements (as defined below) are correct. The Company uses the accrual method of accounting for income tax purposes, and the Company's methods of accounting have not changed in the past three years. The Company is not an investment company as defined in Section 351(e)(1) of the Internal Revenue Code of 1986, as amended, and any successor statute. 2.13 No Violations; All Required Consents Obtained. The Company is not in violation of its Articles of Incorporation or Bylaws, each as amended to date ("Charter Documents"), nor is it or any of the other Stockholder Parties in default under any of the Assumed Contracts, nor does it have knowledge of any matter which with notice, the passage of time or both would constitute a default under any of the Assumed Contracts. The execution of this Agreement by the Company and the performance by the Company of its obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under any of the terms or provisions of the Charter Documents. Notwithstanding anything contained in this Agreement to the contrary, except for those consents set forth in Schedule 2.13 attached hereto (the "Listed Required Consents"), no consents are required in connection with the closing of the Transaction. 2.14 Absence of Changes. Since March 31, 2001, the Company has conducted its operations in the ordinary course of business and, except as set forth on Schedule 2.14 there has not been: 2.14.1.1 any adverse change affecting any of the Assets or the Business; 2.14.1.2 any plan, agreement or arrangement granting any preferential rights to purchase or acquire any interest in any of the assets, property or rights of the Company or requiring consent of any party to the transfer and assignment of any such assets, property or rights; 2.14.1.3 any acceleration, termination, modification or cancellation by any party (including the Company, management of the Company and the Stockholder) of any agreement, contract, lease or license (or series of related agreements, contracts, leases and licenses) related to or pertaining to the Business or the Assets and involving more than $5,000; 2.14.1.4 any damage, destruction or loss (whether or not covered by insurance) to any of the Assets; or 2.14.1.5 any other occurrence, event, incident, action, failure to act or transaction outside the ordinary course of business involving any of the Assets. 2.15 Financial Statements. The Stockholder has provided to the Purchaser complete and correct copies of the Stockholder's audited, consolidated financial statements dated as of December 31, 1999, its unaudited, unadjusted consolidated and consolidating financial statements at and for the twelve months ended December 31, 2000, as well as its unaudited, unadjusted consolidated and consolidating financial statements at and for the months ended January 2001 and February 2001, as well as its unaudited consolidated financial statements at and for the three and nine months ended September 30, 2000 included within Stockholder's Quarterly Report on Form 10- Q. Such financial statements include the balance sheet as of such respective date, and the related statements of operations, cash flows and changes in shareholders' equity for the periods then ended. These financial statements are accurate and complete in all material respects, subject to year end accounting adjustments applicable to the financial statements at and for the year ended December 2000, the reciprocal adjustments stemming from such potential adjustments that may impact the financial statements at and for the periods ended January and February 2001, and those obligations and commitments under the Transaction and the Transaction Documents, and present fairly (subject to the above-referenced potential adjustments) the financial condition of Stockholder and such consolidated parties as of such date in accordance with generally accepted accounting principles. As of the date of the aforementioned financial statements, there were no material contingent obligations, liabilities for taxes, unusual forward or long-term commitments, or unrealized or anticipated losses of the Stockholder Parties, except as disclosed in such financial statements and those obligations and commitments under the Transaction and the Transaction Documents, and adequate reserves for such items have been made in accordance with generally accepted accounting principles. 2.16 Bulk Transfer Laws. The consummation of the Transaction shall not result in any claims, losses, demands, damages, liabilities, losses, costs and expenses under the bulk transfer provisions of the Uniform Commercial Code (or any similar law). 2.17 Sufficiency of Assets. Except for those assets on Schedule 2.17 attached hereto, the Assets constitute all of the assets, properties and rights necessary to operate the Business, as it is presently conducted by the Company. 2.18 Intentionally Deleted. 2.19 Date Compliance. To the best of Company's knowledge and belief, the computer-based systems used in connection with the Business are able to operate and effectively process data that includes dates on and after January 1, 2000. 2.20 Bonds. The Company or the Stockholder has provided Purchaser with true and correct copies of all material agreements executed in connection with the Bonds, including without limitation the Series 1992 Indenture and the Series 1995 and 1996 Indenture. All of the Series 1995 Bonds and Series 1996 Bonds are held by Huntco Nevada. The trustee under the Series 1995 and 1996 Indenture is the Series 1995 and 1996 Trustee. To the best of Company's knowledge and belief, all of the Series 1992 Bonds are held by Arkansas Teachers' Retirement System. The trustee under the Series 1992 Indenture is the Series 1992 Trustee. The outstanding principal amount of the 1992 Series Bonds consists of $255,000 of 6.5% bonds due June 1, 2002 and $175,000 of bonds due June 1, 2001 of which the Company has funded approximately $158,000into escrow with the Series 1992 Trustee towards such June 1, 2001 maturity as of March 31, 2001. 2.21 Disclosure. The Company or the Stockholder has provided Purchaser with all material information pertaining to the Business and Assets and all the information that Purchaser has requested in analyzing whether to consummate the transactions contemplated hereby. None of the information so provided nor any representation or warranty of the Company or the Stockholder contained in this Agreement contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. There is no material fact known to any Stockholder Party on the date of this Agreement that has not been disclosed to Purchaser which could reasonably be expected to cause a material adverse change in the overall business, condition (financial or otherwise) or prospects of the Business or Assets; provided, however, that Purchaser acknowledges that prior to the Closing the Company will shut down the Business and neither the Company nor any of the other Stockholder Parties make any representations about what will be required to re-start the operation of the Business. The Company acknowledges and agrees that the Company intends to shut down the Business regardless of whether the Transaction closes or not. 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser represents and warrants to Company and Stockholder that all of the following representations and warranties in this Section 3 are true at the date of this Agreement and will be true at the time of Closing. 3.1 Due Organization. Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of the state of Delaware and has the requisite power and authority to carry on its business as it is now being conducted. 3.2 Authorization. (i) The representatives of the Purchaser executing this Agreement have full power and authority to execute and deliver this Agreement and (ii) the Purchaser has full power and authority to enter into this Agreement and the Transaction. This Agreement and the transactions contemplated hereby have been approved by the Purchaser, and do not require the approval of the sole member of Purchaser. This Agreement has been validly executed and delivered by the Purchaser and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization or similar laws now or hereafter in effect relating to creditors' rights generally. All other documents to be executed and delivered to Company by Purchaser, when so executed and delivered, will constitute the valid, legal and binding obligations of Purchaser, enforceable in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization or similar laws now or hereafter in effect relating to creditors' rights generally. 3.3 No Violations. The execution of this Agreement, the other agreements and documents required to be executed by Purchaser, and the performance of the obligations hereunder and the consummation of the transactions contemplated hereby will not result in any violation or breach or constitute a default under any of the terms or provisions of the Certificate of Incorporation, the Bylaws or any other agreement of Purchaser. 3.4 Validity of Obligations. The execution and delivery of this Agreement by Purchaser, the execution of the other agreements and documents required to be executed by Purchaser, and the performance of the transactions contemplated herein have been duly and validly authorized by the Board of Directors of Purchaser and this Agreement has been duly and validly authorized by all necessary corporate action and is, or when so executed and delivered will be, the legal, valid and binding obligation of Purchaser. 4. COVENANTS PRIOR TO CLOSING 4.1 Access and Cooperation; Due Diligence. Between the date of this Agreement and the date which is the earlier of (a) sixty (60) days following the date of this Agreement and (b) the date fourteen (14) days following the receipt and/or completion, as applicable, by Purchaser of the due diligence matters described in this Section 4.1 (the "Inspection Period"), the Company and the Stockholder will afford to the officers and authorized representatives of Purchaser reasonable access to all of the Stockholder Parties' properties, books and records related to the Business and the Assets and will furnish Purchaser with such additional financial and operating data and other information as to the Business and Assets as follows: 4.1.1.1 during the Inspection Period the Company and the Stockholder will permit Purchaser and its agents and contractors to have access to all Assets and the Business for the purpose of (a) conducting environmental site assessments, including, but not limited to, such soil and/or groundwater sampling and analysis as may be deemed appropriate by Purchaser and otherwise evaluating potential compliance and liability matters under applicable Environmental Laws (collectively, the "Environmental Review"), and (b) to review and conduct due diligence with the matters set forth on Schedule 4.1 attached hereto. For those matters set forth on Schedule 4.1 attached hereto that are in the possession of a Stockholder Party and have not yet been provided to the Purchaser, the Company will cause such matters to be delivered to the Purchaser as soon as practical following the date of this Agreement. The Company and the Stockholder represent and warrant that (a) for those matters set forth on Schedule 4.1 that have been denoted "None", that no such matters exist with respect to the Assets or Business and (b) for those matters set forth on Schedule 4.1 that have been denoted "Already Provided" the Company has already provided to the Purchaser all such matters related to the Assets or Business. When the Company has provided all of the matters on Schedule 4.1 that the Company is responsible for delivering to the Purchaser the Company shall give the Purchaser written notice that the Company has completed such deliveries. The Purchaser shall have five (5) days from receipt of such letter to object in writing to the Company if the Purchaser believes that assertion is incorrect. 4.1.1.2 Within fifteen (15) days following the date of this Agreement, the Company shall deliver to Purchaser, at the Company's sole cost and expense, (a) a current Commitment for Title Insurance covering the Real Property meeting the requirements of Section 1.3 (the "Title Commitment"), together with correct and legible copies of all instruments referred to in the Title Commitment as conditions or exceptions to title to the Real Property, including but not limited to liens, easements and recorded plats; and (b) a current survey of the Real Property which shall (i) establish and stake all exterior corners and peripheral boundary lines (courses and distances) of the Real Property; (ii) contain a metes and bounds description of the Real Property; (iii) have all fences, drainage ditches, encroach- ments, visible rights-of-way, creek beds, and easements and rights-of-way of record drawn on the survey plat showing the width and location thereof, and where applicable reference thereto by recording data; (iv) have all structures and improvements located on the Real Property drawn and located on the survey plat; (v) show the location of all public road rights-of-way adjoining the Real Property as they are paved on the ground, as they are dedicated of record, or otherwise as located; (vi) show all matters reflected in the Title Com- mitment; (vii) show the location of all 500 year and 100 year flood plains or flood zones, if any, encumbering the Real Property; (viii) contain a certification acceptable to Purchaser and (ix) otherwise be in form and substance which is customary for the location of the Real Property and acceptable for the issuance of the title insurance contemplated by this Agreement. 4.1.2 During the Inspection Period, the Company and the Stockholder will negotiate in good faith the forms of the Closing Documents; provided, however, that the Closing Documents must be acceptable to the parties executing such documents in such parties' sole discretion. The Company and the Stockholder will cooperate with Purchaser, its representatives, auditors and counsel in the preparation of any other documents or other material which may be required in connection with the transactions contemplated by this Agreement. 4.1.3 Purchaser shall deliver written notice to Company of the date Purchaser has completed the Purchaser's due diligence review of the matters described in this Section 4.1. During the Inspection Period, the Purchaser shall have the option to terminate this Agreement if the Purchaser is not satisfied for any reason with the results or information obtained or provided in connection with the Environmental Review or any of the matters set forth on Schedule 4.1, which such option to terminate and satisfaction shall be in the Purchaser's sole discretion. In consideration of this option to terminate and Company's and Stockholder's execution of this Agreement, Purchaser shall deliver to Company, contemporaneously with the execution of this Agreement, Purchaser's check in the amount of Fifty and No/100 ($50.00) ("Independent Option Consideration"), which amount the parties bargained for and agreed to as consideration for Company's and Stockholder's execution and delivery of this Agreement and Purchaser's option to terminate. The Independent Option Consideration is in addition to and independent of any other consideration or payment provided for in this Agreement, is non-refundable, and shall be retained by Company, notwithstanding any other provision of this Agreement, or whether the purchase and sale contemplated herein is closed; provided that, should the purchase and sale contemplated herein close the Independent Option Consideration will be credited against the Purchase Price payable at Closing. In the event that Purchaser delivers written notice to Company within the In- spection Period that Purchaser desires to terminate this Agreement as provided above, this Agreement shall terminate. In addition, in the event Purchaser has not terminated this Agreement by written notice to the Company within the Inspection Period, it shall be conclusively presumed that Purchaser has elected Purchaser's option to terminate this Agreement pursuant to the provisions of this Section 4.1. Only if Purchaser provides written notice of Purchaser's election to not terminate this Agreement pursuant to the provisions of this Section 4.1 (which notice would contain an express waiver of the Purchaser's termination right under this Section 4.1.3), shall this Agreement not terminate. 4.2 Conduct of Business Pending Closing. Between the date of this Agreement and the Closing Date, the Company and the Stockholder covenant that the Company will: 4.2.1.1 close the Business as provided in Section 6.11; 4.2.1.2 maintain the Assets in the same manner as it has heretofore; 4.2.1.3 perform all of its obligations in all material respects under agreements materially or directly relating to or affecting the Assets or the Business; 4.2.1.4 use all reasonable efforts to keep in full force and effect present insurance policies or other comparable insurance coverage covering any of the Assets; 4.2.1.5 subject to the closing of the Business, use its reasonable efforts to maintain and preserve its business relationships with suppliers, customers, and others having business relations with the Business; 4.2.1.6 maintain compliance with all permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar governmental authorities necessary for the ongoing conduct of the Business; 4.2.1.7 use its best efforts to obtain all necessary third party consents to assign the Assumed Contracts to Purchaser, including without limitation the Series 1992 Lease and the Series 1995 and 1996 Lease. 4.3 Prohibited Activities. Between the date hereof and the Closing Date, the Company and the Stockholder covenant that the Company will not, without prior written consent of Purchaser, which consent shall not be unreasonably withheld: 4.3.1.1 make any change in its articles or certificate of incorporation or by-laws; 4.3.1.2 except for Transaction Documents, issue any securities, options, warrants, calls, conversion rights or commitments relating to its securities of any kind; 4.3.1.3 create, assume or permit to exist any mortgage, pledge or other lien or encumbrance upon any of the Assets or the Business (other than pursuant to any Transaction Documents, personal property subject to operating leases, liens for personal property taxes not yet due and payable, liens and security interests under the Series 1992 Lease and the Series 1995 and 1996 Lease, and liens to be discharged by the Company at Closing); 4.3.1.4 sell, assign, lease or otherwise transfer or dispose of any of the Assets, except for the sale of inventory in the ordinary course of business; 4.3.1.5 merge or consolidate or agree to merge or consolidate with or into any other corporation or other entity, except for the dissolution of the Company's wholly-owned subsidiary, HSI Aviation, Inc., into the Company at the Company's election; 4.3.1.6 except for Transaction Documents, enter into any other transaction outside the ordinary course of its business or prohibited hereunder; or 4.3.1.7 except for Transaction Documents, purchase or enter into any commitments to purchase inventory, except in the ordinary course of business. 4.4 No Shop. Neither the Stockholder, the Company, nor any agent, officer, director, trustee or any representative of any of the foregoing will, during the period commencing on the date of this Agreement and ending with the earlier to occur of the Closing Date or the termination of this Agreement in accordance with its terms, directly or indirectly or in any manner whatsoever (including, without restriction, through any representative or otherwise through any affiliate or subsidiary or through any agency, trust or nominee arrangement): 4.4.1.1 solicit or initiate the submission of proposals or offers from any person pertaining to, or 4.4.1.2 enter into or agree to enter into any binding agreement with any party other than Purchaser or ENA with respect to, or 4.4.1.3 participate in any discussions pertaining to, or 4.4.1.4 furnish any information to any person other than Purchaser or its authorized agents relating to (other than as necessary to fulfill the Company's duties under this Agreement), any acquisition, purchase or finance of any of the Assets or Business. Company will immediately notify Purchaser regarding any contact between any Stockholder Party or its representatives and any other person regarding any such offer or proposal or any related inquiry. For any breach of this Section 4.4, Purchaser shall be entitled to all equitable and injunctive relief available under applicable laws. 4.5 Notification of Certain Matters. The Purchaser, on the one hand, and the Company and the Stockholder, on the other hand, shall give prompt notice to the other of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would be likely to cause any representation or warranty of such party contained herein to be untrue or inaccurate at or prior to the Closing and (ii) any failure of such party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder, and (iii) any matter which if known at the date of this Agreement would have required an addition to or correction of any Schedule hereto. In the event the Company or the Stockholder delivers any such notice to the Purchaser, Purchaser shall have the right to terminate this Agreement within ten (10) business days after its receipt of such notice. In the event that the Purchaser delivers any such notice to the Company or the Stockholder, the Company and the Stockholder shall have the right to terminate this Agreement within ten (10) business days after its receipt of such notice. 4.6 Positions Offered to Employees. Subject to the parties' agreement on the terms and provisions of the Sublease, Purchaser shall be entitled to offer any employee of any of the Stockholder Parties whose employment has been or will be terminated an offer of employment, with such employment to commence after such employee's termination of employment. Such offers may be made prior to the Closing Date. With respect to each employee offered employment, the position offered by Purchaser shall be on an at-will basis. Upon request of Purchaser, the Company shall provide or make available to Purchaser data that is in the Company's possession regarding the dates of hire, compensation and job description of such employees of the Company working in the Business as of the date of Purchaser's request made not earlier than the date which is the earlier of (a) fifteen (15) days prior to the Closing Date and (b) the date any of the Stockholder Parties either publicly announces the closing of the Business or notifies the employees in the Business of such closing. Such data shall be provided by the Company not later than five (5) days after the Company receives Purchaser's request. Purchaser acknowledges that Company is not transferring to Purchaser, and Purchaser is not assuming liabilities with respect to, any Excluded Assets related to employees. 4.7 Further Assurances. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 4.8 Notices and Consents. The Company and the Stockholder will give any notices to third parties, and the Company and the Stockholder shall use their best efforts to obtain any third party consents, (i) that may be necessary to consummate the transactions contemplated hereby, (ii) that may be necessary to assign any contract, permit, license or claim or any right or benefit arising thereunder or resulting therefrom or (iii) that Purchaser may otherwise request. 4.9 Commitment. The Stockholder hereby agrees to cause the Company to comply with its obligations under this Agreement and to use diligent efforts to cause the conditions to the Closing to be satisfied. 5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDER The obligations of the Company and the Stockholder with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of all of the following conditions. 5.1 Representations and Warranties; Performance of Obligations. All representations and warranties of Purchaser contained in Section 3 shall be true and correct as of the Closing Date as though such representations and warranties had been made as of that time; all of the terms, covenants and conditions of this Agreement to be complied with or performed by Purchaser on or before the Closing Date, as the case may be, shall have been duly complied with or performed, and the Purchaser shall have delivered to the Company certificates dated as of the Closing Date and signed by Purchaser to such effect. 5.2 Satisfaction. All actions, proceedings, instruments and documents required to carry out this Agreement or incidental hereto and all other related legal matters shall be satisfactory to the Company and the Stockholder and their counsel. All of the Post Closing Items ("Post Closing Items", as such term is defined in the Post Closing Agreement dated April 6, 2001 by and among the Company, ENA and the other signatories thereto) have been satisfied or waived. 5.3 Consents and Approvals. All Listed Required Consents and all other necessary consents of: (i) any governmental authority or agency (including any necessary filings); and (ii) any party to any Assumed Contracts for which consent is required for assumption by Purchaser (unless the requirement of consent is waived by Purchaser), relating to the consummation of the Transaction, shall have been obtained and made and no action or proceeding shall have been instituted or threatened to restrain or prohibit the transactions contemplated hereby; and no action or proceeding shall have been instituted or threatened to restrain or prohibit the Transaction and no governmental agency or body shall have taken any other action or made any request of the Company as a result of which the Company deems it inadvisable to proceed with the Transaction. 5.4 Closing Documents; Purchase Price. The Purchaser shall have (a) executed and delivered to or caused to be executed and delivered to the Company all Closing Documents to which the Purchaser or any of its affiliates is a party and (b) paid the Purchase Price as provided in Section 1.4. 5.5 Opinion of Counsel. Company shall have received the opinion of Bracewell & Patterson, as counsel to Purchaser, in form and substance reasonably acceptable to the parties. 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER The obligations of Purchaser with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of all of the following conditions. 6.1 Representations and Warranties; Performance of Obligations. All the representations and warranties of the Company and the Stockholder contained in this Agreement shall be true and correct as of the Closing Date with the same effect as though such representations and warranties had been made on and as of such date; all of the terms, covenants and conditions of this Agreement to be complied with or performed by the Company and the Stockholder on or before the Closing Date, as the case may be, shall have been duly performed or complied with, and the Company and Stockholder shall have delivered to Purchaser certificates dated as of the Closing Date and signed by them to such effect. 6.2 Master Purchase Agreement. No default by any Stockholder Party shall exist under the Master Purchase Agreement or any of the other Transaction Documents. 6.3 No Adverse Changes. Except for the closing of the Business in accordance with the provisions of this Agreement, no events or circumstances shall have occurred individually or in the aggregate with respect to the Assets or the Business since March 31, 2001 which would constitute a material adverse change in the condition (financial or otherwise) of the Assets or Business and the Company shall not have suffered any material loss or damage to any of the Assets since March 31, 2001, whether or not covered by insurance. 6.4 Satisfaction. All actions, proceedings, instruments and documents required to carry out this Agreement or incidental hereto and all other related legal matters shall be satisfactory to the Purchaser and its counsel. All of the Post Closing Items have been satisfied or waived. 6.5 Consents and Approvals. All necessary consents of and filings with any governmental authority or agency relating to the consummation of the transactions contemplated herein shall have been obtained and made; all Listed Required Consents and all other consents and approvals of third parties necessary to consummate this Agreement shall have been obtained or the requirement to obtain such consent shall have been waived by Purchaser; all consents necessary to assign any contract, permit, license, lease or claim or any right or benefit arising thereunder or resulting therefrom to Purchaser shall have been obtained, or the requirement to obtain such consent shall have been waived by Purchaser; and no action or proceeding shall have been instituted or threatened to restrain or prohibit the transactions contemplated hereby and no governmental agency or body shall have taken any other action or made any request of Purchaser as a result of which Purchaser deems it inadvisable to proceed with the Transaction. 6.6 Instruments of Transfer and Title Insurance. The Company and the Stockholder shall have executed and delivered to Purchaser the Closing Documents to which any of the Stockholder Parties are to be a party. At all times hereafter as may be necessary, the Company and the Stockholder shall execute and deliver to Purchaser such additional instruments of transfer as shall be reasonably necessary or appropriate to vest in Purchaser good and marketable title to the Business and the Assets and to comply with the purposes and intent of this Agreement and the Closing Documents. 6.7 Condition of the Business and Assets. The Inspection Period shall have expired and Purchaser shall not have terminated this Agreement pursuant to its rights under Section 4.1. 6.8 Bonds and Tax Abatement Agreement. In connection with the Bonds the following shall have occurred in a manner satisfactory to the parties: 6.8.1.1 The Series 1992 Lease, the Series 1995 and 1996 Lease and the Tax Abatement Agreement shall have been assigned to the Purchaser and all consents necessary for such assignment shall have been obtained. The Purchaser shall have received an estoppel certificate from the City stating that no defaults have occurred under such leases or agreement, and no events or omissions have occurred which, but for the passing of time or giving of notice or both, would be a default under such leases or agreement, on the part of Company or any other party to any of such leases or agreement. 6.8.1.2 The Series 1995 and 1996 Trustee shall have been removed and an entity designated by the Purchaser shall replace such entity as the trustee under the Series 1995 and 1996 Indenture. 6.8.1.3 The Series 1995 and 1996 Bondholder shall have conveyed the Series 1995 Bonds and the Series 1996 Bonds to an entity designated by the Purchaser. Prior to such conveyance the parties shall agree upon the amount of the Series 1995 Bonds and the 1996 Bonds to be outstanding at the time of such conveyance. 6.8.1.4 Notwithstanding the foregoing, at the option of Purchaser, the Series 1995 and 1996 Bonds shall be retired and, if requested by Purchaser, the Series 1995 and 1996 Lease shall be terminated. 6.9 GECC Leases. Contemporaneously with the Closing Company shall make all payments under the GECC Leases necessary to purchase the assets leased pursuant to the GECC Leases and shall acquire title to such assets, free and clear of all security interests, liens, claims and encumbrances of any kind. 6.10 Tolling Obligations. The Stockholder Parties shall have completed all tolling requirements under any tolling agreements that may be entered into between any of the Stockholder Parties and ENA or any affiliate of ENA, which tolling agreements contemplate the utilization of any of the Assets or the Business. 6.11 Closing of Business. The Company shall have closed the Business and terminated the employment of all employees employed in connection with the Assets or Business (except for those employees that the Company desires to employ in connection with the Excluded Assets and the performance of the Company's obligations under the Sublease) in compliance with all federal, state, local and foreign statutes, laws, ordinances, regulations, rules, notices, permits, judgments, orders and decrees applicable thereto 6.12 Opinion of Counsel. The Purchaser shall have received the opinion of Blackwell Sanders Peper Martin LLP, as counsel to the Company and the Stockholder, in form and substance reasonably acceptable to the parties. 7. POST-CLOSING COVENANTS The parties to this Agreement further covenant and agree as follows: 7.1 Future Cooperation. The Stockholder, the Company and Purchaser shall each deliver or cause to be delivered to the other following the date hereof such additional instruments as the other may reasonably request for the purpose of transferring, assigning and delivering to Purchaser and its assigns the Assets and fully carrying out the intent of this Agreement and the Closing Documents. 7.2 Expenses. Purchaser will pay the fees, expenses and disbursements of Purchaser and its agents, representatives, financial advisors, accountants and counsel incurred in connection with the execution, delivery and performance of this Agreement. The Company will pay the fees, expenses and disbursements of the Company and the Stockholder and their respective agents, representatives, financial advisors, brokers, accountants and counsel incurred in connection with the negotiation, preparation, execution, delivery and performance of this Agreement. Further, the Company or Stockholder agrees to pay for all charges for the recordation of the instruments conveying rights to the Real Property, the cost of the title insurance policy in the forms contemplated hereunder, and all charges for the preparation and recordation of any releases or instruments required to clear the Company's title for conveyance in accordance with the provisions of this Agreement. 7.3 Payment of Liabilities; Bulk Transfer Compliance. The Company shall pay or otherwise satisfy in the ordinary course of business consistent with customary practices all of its trade payables, other current liabilities and all other liabilities of the Company accruing with respect to the period prior to the Closing. The Company shall fully pay or otherwise satisfy all Excluded Liabilities accruing with respect to the period prior to the Closing. The Company and the Stockholder hereby indemnify and hold Purchaser harmless from and against all claims, losses, demands, damages, liabilities, losses, costs and expenses resulting from or relating to non-compliance by the Company with the bulk transfer provisions of the Uniform Commercial Code (or any similar law) in connection with the sale and transfer of the Business and Assets to Purchaser. The Company or the Stockholder shall pay when due any sales, transfer or similar Taxes which may become applicable in respect of the Company's sale of the Business and Assets to Purchaser. 7.4 Access to Books and Records. After the Closing Date, Purchaser shall permit, at any time and from time to time, the Stockholder and the Company and their representatives reasonable access, during regular business hours and upon reasonable advance notice, to the Company's books and records in connection with the preparation and review of tax returns and any audit thereof, and as necessary to prosecute or defend any litigation involving the Company. 7.5 Railroad Access Agreement. The Company shall not voluntarily terminate the Railroad Access Agreement. 8. INDEMNIFICATION The Company, Stockholder and Purchaser each make the following covenants that are applicable to them, respectively: 8.1 Survival of Representations and Warranties. 8.1.1 The representations, warranties and pre-Closing covenants of the Company and the Stockholder made in this Agreement and in the documents and certificates delivered in connection herewith shall (a) if related to any representation, warranty or pre-Closing covenant pertaining to environmental or tax matters survive until the date which is the later of (i) two years from the Closing Date and (ii) the date of the expiration of the applicable statutes of limitations (including any extensions thereof) and (b) if related to any other representation, warranty or pre-Closing covenant survive until the date which is two years from the Closing Date, provided, however, that representations, warranties and pre-Closing covenants with respect to which a claim is made within the applicable survival period shall survive until such claim is finally determined and paid. 8.1.2 The representations and warranties of Purchaser made in this Agreement and in the certificates delivered in connection herewith shall survive for a period of two years following the Closing Date; provided, however, that representations and warranties with respect to which a claim is made within such two year period shall survive until such claim is finally determined and paid. 8.1.3 The date on which a representation or warranty expires as provided herein is herein called the "Expiration Date." No claim for indemnification may be made with respect to a representation or warranty after the Expiration Date, other than claims based on fraud. 8.2 General Indemnification by the Company and the Stockholder. The Company and the Stockholder covenant and agree that they will jointly and severally indemnify, defend, protect, and hold harmless Purchaser, and its respective subsidiaries and officers, directors, employees, stockholders, agents, representatives and affiliates at all times from and after the date hereof from and against all claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) (collectively "Damages") incurred by such indemnified person as a result of or incident to (i) any breach of any representation or warranty of the Company or the Stockholder set forth herein or in the certificates or other documents delivered in connection herewith, (ii) any breach or nonfulfillment of any covenant or agreement by the Company or the Stockholder under this Agreement, and (iii) any broker or finder claiming any compensation in connection with any aspect of the Transaction by, through or under any of the Stockholder Parties. Purchaser shall not be entitled to indemnification hereunder to the extent that Purchaser is compensated for any Damages sustained by Purchaser by any insurance policy proceeds paid to Purchaser as a result of such Damages. 8.3 Indemnification by Purchaser. Purchaser covenants and agrees that it will indemnify, defend, protect and hold harmless the Company and Stockholder, and their respective employees, officers, directors, stockholders, agents, representatives and affiliates, at all times from and after the date hereof from and against all Damages incurred by the Company or Stockholder as a result of (i) any breach of any representation or warranty of Purchaser set forth herein or in the certificates or other documents delivered in connection herewith; and (ii) any breach or nonfulfillment of any covenant or agreement by Purchaser under this Agreement. 8.4 Specific Indemnification. In addition to the indemnification provided for in Section 8.2, the Company and the Stockholder covenant and agree that they will jointly and severally indemnify, defend, protect and hold harmless, Purchaser and its subsidiaries, officers, directors, employees, stockholders, agents, representatives and affiliates from and against all Damages incurred by any of them in connection with: 8.4.1.1 the presence, emanation, migration, disposal, release or threatened release of any oil or other petroleum products or Hazardous Materials or Hazardous Substances on, within, or to or from any of the Assets or any properties presently or previously owned or leased by the Company or any predecessor of the Company as a result of (i) the presence of and closure or removal of any underground storage tank on such property prior to the Closing, including any future manifestations of such conditions, (ii) the operations of the Company or any predecessor of the Company prior to the Closing, including any future manifestations of such conditions, or (iii) the condition of such properties prior to the Closing, including any future manifestations of such conditions; 8.4.1.2 any liability or obligation, either arising prior to Closing or resulting from facts arising or occurring prior to Closing, of any nature whatsoever, to or on behalf of any employee or former employee of the Company, including, but not limited to, any claim arising under any applicable workers' compensation statute, any applicable states' civil rights statute, the Age Discrimination in Employment Act of 1967, the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), any withdrawal liability to any multi-employer or employee pension benefit plan applicable under ERISA, the Americans with Disabilities Act of 1990, the Rehabilitation Act of 1973, Executive Order 11246, the Civil Rights Acts of 1866, 1964 and 1991, the Family and Medical Leave Act of 1993, the Equal Pay Act, all tort and/or common law claims, and all claims for past or future employment benefits, including, but not limited to, wages, bonuses, vacation pay, or insurance coverage. This also includes, but is not limited to, those claims which any employee or former employee has asserted, or could have asserted, against Company arising out of or relating in any way to such employee's employment with, separation from and/or affiliation with Company; and 8.4.1.3 any Excluded Liability or any liability or obligation of any nature whatsoever relating to any of the Excluded Liabilities or the Excluded Assets. 8.5 Third Person Claims. Promptly after any party hereto (the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person") or the commencement of any action or proceeding by a Third Person that may give rise to a right of indemnification hereunder, such Indemnified Party shall give to the party obligated to provide indemnification hereunder (an "Indemnifying Party") written notice of such claim or the commencement of such action or proceeding; provided, however, that the failure to give such notice will not relieve such Indemnifying Party from liability under this Section with respect to such claim, action or proceeding, except to the extent that the Indemnifying Party has been actually prejudiced as a result of such failure. The Indemnifying Party (at its own expense) shall have the right to defend any such claim, suit or proceeding, provided that the Indemnified Party, at its own expense, shall have the right to associate with the Indemnifying Party in such defense. Neither the Indemnifying Party nor the Indemnified Party shall, except at its own cost, make any settlement with respect to any such claim, suit or proceeding without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed. It is understood and agreed that in situations where failure of a party to settle a claim expeditiously could have an adverse effect on the other party, the failure of the refusing party to act upon the other party's request for consent to such settlement within five business days of such party's receipt of notice thereof from the other party shall be deemed to constitute consent by such party of such settlement for purposes of this Section. 8.6 Limitations on Indemnification. No person shall be entitled to indemnification under this Section if and to the extent that such person's claim for indemnification is directly or indirectly caused by a breach by such person of any representation, warranty, covenant or other agreement set forth in this Agreement. 9. TERMINATION OF AGREEMENT 9.1 Termination. This Agreement may be terminated at any time prior to the Closing Date solely: 9.1.1.1 by mutual consent of Purchaser and the Company; 9.1.1.2 by the Purchaser or by the Company, if the transactions contemplated by this Agreement to take place at the Closing shall not have occurred by June 30, 2001 (the "Termination Date"), unless the failure of such transactions to be consummated is due to the willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; 9.1.1.3 by the Purchaser or by the Company if a breach or default shall be made by the other in the observance or in the due and timely performance of any of the covenants or agreements contained herein, and the curing of such default shall not have been made within ten days after written notice thereof is delivered to the breaching or defaulting party by the other party; 9.1.1.4 by the Purchaser or by the Company, if the transactions contemplated by this Agreement to take place at the Closing shall not have occurred by the Termination Date because a condition precedent to such party's performance in Article 6 and 5, respectively, has not been satisfied by the Termination Date; or 9.1.1.5 by any party pursuant to a termination right otherwise granted such party under this Agreement. 9.2 Liabilities in Event of Termination. Following a termination of this Agreement the parties hereto shall have no further obligations or liabilities hereunder one to the other; provided that he termination of this Agreement will in no way (a) limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs and out of pocket expenses or (b) terminate the provisions of Articles 8 and 10, all of which provisions shall survive such termination. 10. GENERAL 10.1 Successors and Assigns. This Agreement and the rights of the parties hereunder may not be assigned, directly or indirectly, by operation of law or otherwise, by any party without the prior written consent of the other party; provided, however, that the Purchaser may assign, convey, transfer or otherwise dispose of all or any portion of its interest in, or its rights and obligations under, this Agreement and such other documents and instruments to (i) any party that acquires a substantial portion of the Assets or the Business, (ii) any affiliate of Enron Corp., (iii) an entity approved by the Company, or (iv) any financial institution financing or refinancing the transaction contemplated hereby or otherwise extending credit to the Purchaser or any of its affiliates and provided further, that upon the foreclosure, sale in lieu of foreclosure, deed in lieu of foreclosure, or deed of the assets of the Purchaser, or a substantial portion thereof by or to any such financial institution, any of its affiliates, or any other person, the representations, warranties and covenants contained herein and in such other documents and instruments shall inure to the benefit of and shall be enforceable by such financial institution, affiliate or other person. Any assignment, conveyance, transfer or other disposition made or attempted in violation of this Section 10.1 shall be void and of no effect. This Agreement shall be binding on the heirs, executors, administrators, personal representatives, successors and permitted assigns of the parties hereto. 10.2 Entire Agreement. This Agreement (including the schedules, exhibits and annexes attached hereto) and the documents delivered pursuant hereto constitute the entire agreement and understanding of the parties and supersede any prior agreement and understanding relating to the subject matter of this Agreement. This Agreement, upon execution, constitutes a valid and binding agreement of the parties hereto enforceable in accordance with its terms and may be modified or amended only by a written instrument executed by the parties. 10.3 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, by facsimile or otherwise, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 10.4 Notices. All notices and communications required or permitted hereunder shall be in writing and may be given by depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, or by delivering the same in person or by facsimile to an officer or agent of such party, as follows: If to Purchaser, addressed to it at: Enron Industrial Markets LLC 1400 Smith Street Houston, Texas 77002 Attn:Glenn Wright Facsimile No.: (713) 646-8408 And a copy to: Mr. David W. Locascio Bracewell & Patterson, L.L.P. 711 Louisiana Street, Suite 2900 Houston, Texas 77002 Facsimile No.: (713) 221-2134 If to the Company, addressed to it at: 14323 South Outer Forty Drive, Suite 600N Town & Country, Missouri 63017 Attn: President & CEO Facsimile No.: (314) 878-4537 And a copy to: Blackwell Sanders Peper Martin LLP 720 Olive Street, Suite 2400 St. Louis, Missouri 63101 Attn: Mr. Craig A. Adoor Facsimile No.: (314) 345-6060 If to the Stockholder addressed to it at: 14323 South Outer Forty Drive, Suite 600N Town & Country, Missouri 63017 Attn: President & CEO Facsimile No.: (314) 878-4537 And a copy to: Blackwell Sanders Peper Martin LLP 720 Olive Street, Suite 2400 St. Louis, Missouri 63101 Attn: Mr. Craig A. Adoor Facsimile No.: (314) 345-6060 or to such other address as any party hereto shall specify pursuant to this Section from time to time. 10.5 Governing Law. This Agreement shall be construed in accordance with the laws of the State of Texas other than its principles governing conflicts of laws. 10.6 Survival of Representations and Warranties. The representations, warranties, covenants and agreements of the parties made herein or in writing delivered pursuant to the provisions of this Agreement shall survive the consummation of the transactions contemplated hereby and any examination on behalf of the parties until the applicable Expiration Date or as otherwise provided herein. 10.7 Effect of Investigation. 10.7.1 No investigation by any party hereto in connection with this Agreement or otherwise shall affect the representations, warranties, covenants and other agreements of the parties contained herein or in any schedule, certificate or other document delivered in connection herewith and each such representation, warranty, covenant and other agreement shall survive such investigation. 10.7.2 When a representation or warranty contained herein or in any certificate or other document delivered in connection herewith is made to the "knowledge" of a party, such party shall be deemed to know all facts and circumstances that a reasonable investigation of the subject matter of such representation or warranty would have revealed. 10.8 Exercise of Rights and Remedies. No delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 10.9 Time. Time is of the essence with respect to this Agreement. 10.10 Reformation and Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 10.11 Captions. The headings of this Agreement are inserted for convenience only, and shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 10.12 Confidentiality; Press Releases and Public Announcements. The existence of this Agreement and its contents are intended to be confidential and are not to be discussed with or disclosed to any third party (other than financial and legal advisors retained by the parties to work on the Transaction), except (i) with the express prior written consent of the parties hereto, (ii) as may be required or appropriate in response to any summons or discovery order, or to comply with any applicable law, order, regulation, or ruling including rules and regulations of the Securities and Exchange Commission and the New York Stock Exchange, (iii) as Purchaser, ENA and the Company, or their designees, reasonably deem appropriate in order to conduct due diligence or other investigation relating to the contemplated Transaction or in connection with discussions with potential lenders, (iv) to Congress Financial Corporation (Central), or (v) to other third parties as reasonably required in connection with the performance of the covenants contained in this Agreement. Without the prior written consent of the other, no party will, and each party will cause their respective officers, directors, employees, agents, counsel, accountants, financial advisors, consultants and other representatives (collectively, "Representatives") not to, make any release to the press or other public disclosure with respect to either the fact that discussions or negotiations are taking place concerning the foregoing or the existence or contents of this Agreement, except for such public disclosure as may be necessary, in the written opinion of outside counsel, for the party proposing to make the disclosure not to be in violation of or default under any applicable law, regulation or governmental order including rules and regulations of the Securities and Exchange Commission and the New York Stock Exchange. If either party proposes to make any disclosure based upon such an opinion, that party will deliver a copy of such opinion to the other party, together with the text of the proposed disclosure, as far in advance of its disclosure as is practicable, and will in good faith consult with and consider the suggestions of the other party concerning the nature and scope of the information it proposes to disclose. 10.13 No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any person other than the parties and their respective successors and permitted assigns, except as otherwise expressly provided herein. 10.14 Dispute Resolution. Any action, dispute, claim or controversy of any kind between the parties arising out of, or pertaining to this Agreement or the transactions contemplated hereby (a "Dispute") shall be resolved by binding arbitration in accordance with the terms hereof. Any party may, by summary proceedings, bring an action in court to compel arbitration of any Dispute. Any arbitration shall be administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Section 10.14, the Commercial Arbitration Rules of the AAA, and, to the maximum extent applicable, the Federal Arbitration Act. Judgment on any award rendered by an arbitration panel may be entered in any court having jurisdiction. Any arbitration shall be conducted by an arbitration panel consisting of three arbitrators. Each party shall designate one arbitrator. The third arbitrator shall be designated by the two arbitrators designated by the parties. If either party fails to designate an arbitrator within 10 days after the filing of the Dispute with the AAA, such arbitrator shall be appointed in the manner prescribed by the AAA. An arbitration proceeding hereunder shall be conducted in Houston, Texas. Each proceeding shall be concluded within 180 days of the filing of the Dispute with the AAA. The arbitration panel shall be empowered to award sanctions and to take such other actions as they deem necessary, to the same extent a judge could impose sanctions or take such other actions pursuant to the Federal Rules of Civil Procedure and applicable law. No award by the arbitration panel shall assess consequential, punitive or exemplary damages but may assess costs and expenses in a manner deemed equitable. The arbitration panel shall make specific written findings of fact and conclusions of law. The decision of the majority of the arbitration panel shall be final and binding on each party. 10.15 Waiver of Certain Damages. IN NO EVENT WILL EITHER PARTY BE LIABLE OR RESPONSIBLE TO THE OTHER FOR ANY TYPE OF INCIDENTAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL OR ECONOMIC DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOST REVENUE, LOST PROFITS, LOST GOODWILL OR CUSTOMER COMPLAINTS, REPLACEMENT GOODS, FINANCING COSTS, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER ARISING UNDER THEORY OF CONTRACT, TORT (INCLUDING FRAUD, FRAUD IN THE INDUCEMENT, NEGLIGENCE, NEGLIGENT MISREPRESENTATION, AND GROSS NEGLIGENCE), INDEMNITY, STRICT LIABILITY, CONTRIBUTION, PROFESSIONAL LIABILITY, PRODUCTS LIABILITY, EQUITY, OR OTHERWISE. 10.16 Schedules. Prior to the execution of this Agreement, Company has delivered to Purchaser certain proposed Schedules to this Agreement. Purchaser acknowledges the receipt of such Schedules but has not reviewed or approved all of such Schedules. The parties hereto acknowledge that prior to Closing the form and substance of all Schedules to this Agreement will be agreed to by parties as Closing Documents, all as more fully provided for in Section 4.1.2. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. PURCHASER: ENRON INDUSTRIAL MARKETS LLC, a Delaware limited liability company By: Name: ___________________________________ Title: ____________________________________ COMPANY: HUNTCO STEEL, INC., a Delaware corporation By: Name: ___________________________________ Title: ___________________________________ STOCKHOLDER: HUNTCO INC., a Missouri corporation By: Name: ___________________________________ Title: ___________________________________ -----END PRIVACY-ENHANCED MESSAGE-----