<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1996.
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-13028
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WCI STEEL, INC.
(Exact name of registrant as specified in its charter)
Ohio 34-1585405
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1040 Pine Ave., S.E., Warren, Ohio 44483-6528
(Address of principal executive offices) (Zip Code)
(330) 841-8218
(Registrant's telephone number, including area code)
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.
[X] Yes [ ] No
The number of shares of Common Stock (no par value, $.01 stated value)
of the registrant outstanding as of August 31, 1996 was 36,401,400.
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<PAGE> 2
WCI STEEL, INC. AND SUBSIDIARIES
INDEX
--------------------------------
Page No.
--------
PART I FINANCIAL INFORMATION
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Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
July 31, 1996 and October 31, 1995. 3
Condensed Consolidated Statements of Income for the three
months and nine months ended July 31, 1996 and 1995. 4
Condensed Consolidated Statements of Cash Flows for the
nine months ended July 31, 1996 and 1995. 5
Notes to Condensed Consolidated Financial Statements. 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
PART II OTHER INFORMATION
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Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibit Index 14
<PAGE> 3
PART I - FINANCIAL INFORMATION
<TABLE> WCI STEEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
( Dollars in thousands )
July 31, October 31,
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.........................$ 138,633 $ 94,266
Short-term investments............................ 18,052 12,282
Accounts receivable, less allowances.............. 65,652 33,616
Inventories....................................... 81,044 101,089
Recoverable income taxes.......................... - 5,960
Deferred income taxes............................. 10,499 11,102
Prepaid expenses.................................. 361 1,372
-------- --------
Total current assets......................... 314,241 259,687
Property, plant and equipment, net.................. 195,033 189,733
Intangible pension asset............................ 41,157 44,028
Other assets, net................................... 21,516 25,711
-------- --------
Total assets............................$ 571,947 $ 519,159
======== ========
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt.................$ 2,447 $ 2,323
Accounts payable.................................. 72,640 47,740
Accrued liabilities............................... 48,596 39,584
Income taxes...................................... 2,745 1,611
-------- --------
Total current liabilities.................... 126,428 91,258
Long-term debt, excluding current portion........... 209,354 211,531
Deferred income taxes............................... 9,351 10,367
Postretirement health benefits...................... 80,378 76,287
Pension benefits.................................... 46,231 44,027
Other liabilities................................... 26,741 26,194
-------- --------
Total liabilities....................... 498,483 459,664
-------- --------
Shareholders' equity
Preferred stock, par value $1,000 per share, 5,000
shares authorized, none issued. ................ - -
Common stock, no par value, stated value $.01 per
share, 40,000,000 shares authorized, 36,623,700
and 36,563,300 shares issued at July 31, 1996
and October 31, 1995, respectively.............. 366 366
Treasury stock at cost, 222,300 shares at July 31,
1996. .......................................... (1,200) -
Additional paid-in capital........................ 534 458
Retained earnings................................. 73,764 58,671
-------- --------
Total shareholders' equity.............. 73,464 59,495
Commitments and contingencies....................... - -
Total liabilities and -------- --------
shareholders' equity....................$ 571,947 $ 519,159
======== ========
<FN>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</FN>
</TABLE>
<PAGE> 4
<TABLE> WCI STEEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
( Dollars in thousands, except per share data )
( Unaudited )
Three months Nine months
ended July 31, ended July 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales..................... $ 174,695 $ 170,742 $ 490,147 $ 523,611
Operating costs and expenses
Cost of products sold........ 145,265 139,044 411,467 423,834
Depreciation and amortization 5,650 5,587 16,960 15,504
Selling, general and
administrative expenses..... 5,740 5,702 15,939 16,827
------- ------- ------- -------
156,655 150,333 444,366 456,165
------- ------- ------- -------
Operating income.............. 18,040 20,409 45,781 67,446
------- ------- ------- -------
Other income (expense)
Interest expense............. (6,232) (6,366) (18,742) (19,530)
Interest and other income, net 1,742 1,576 4,813 4,510
------- ------- ------- -------
(4,490) (4,790) (13,929) (15,020)
------- ------- ------- -------
Income before income taxes.... 13,550 15,619 31,852 52,426
Income tax expense............ (5,420) (6,248) (12,740) (21,007)
------- ------- ------- -------
Net income.................... $ 8,130 $ 9,371 $ 19,112 $ 31,419
======= ======= ======= =======
Weighted average common shares
issued and outstanding........ 36,529,852 36,578,300 36,552,069 36,576,444
INCOME PER COMMON SHARE
Net income per common share... $ .22 $ .26 $ .52 $ .86
======= ======= ======= =======
Dividends paid per
common share................ $ .06 $ - $ .11 $ -
======= ======= ======= =======
<FN>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</FN>
</TABLE>
<PAGE> 5
<TABLE> WCI STEEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
( Dollars in thousands)
( Unaudited ) Nine months
ended July 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities
Net income........................................$ 19,112 $ 31,419
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization................ 14,763 14,869
Amortization of deferred blast furnace
maintenance costs.......................... 2,197 635
Amortization of financing costs.............. 1,637 1,636
Postretirement health benefits............... 4,091 7,505
Pension benefits............................. 5,075 -
Deferred income taxes........................ (413) 2,826
Other........................................ (636) (903)
Cash provided (used) by changes in certain assets
and liabilities
Accounts receivable........................ (31,478) 8,767
Inventories................................ 20,045 13,145
Prepaid expenses and other assets.......... 1,372 344
Accounts payable........................... 24,900 (2,221)
Accrued liabilities........................ 9,012 3,970
Income taxes payable and recoverable, net.. 7,094 (168)
Other liabilities.......................... 547 2,951
------- -------
Net cash provided by operating activities. 77,318 84,775
Cash flows from investing activities ------- -------
Additions to property, plant and equipment, net... (20,406) (12,552)
Deferred blast furnace maintenance costs.......... - (11,391)
Gross proceeds from the sale of assets............ 497 2,818
Short-term investments, net....................... (5,770) -
------- -------
Net cash used by investing activities..... (25,679) (21,125)
------- -------
Cash flows from financing activities
Principal payments of long-term debt.............. (2,053) (1,960)
Dividends paid.................................... (4,019) -
Purchases of treasury stock....................... (1,200) -
------- -------
Net cash used by financing activities..... (7,272) (1,960)
------- -------
Net increase in cash and cash equivalents.............. 44,367 61,690
Cash and cash equivalents at beginning of period....... 94,266 71,426
------- -------
Cash and cash equivalents at end of period.............$ 138,633 $133,116
======= =======
Supplemental disclosure of cash flow information
Cash paid for interest............................$ 11,811 $ 12,644
Cash paid for income taxes........................ 6,071 18,348
<FN>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</FN>
</TABLE>
<PAGE> 6
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
( Unaudited )
Three and nine month periods ended July 31, 1996 and 1995
NOTE 1 : BASIS OF PRESENTATION
WCI Steel, Inc. (Company or WCI) is a majority-owned subsidiary of The Renco
Group, Inc. (Renco or Parent). The financial information included herein is
unaudited; however, such information reflects all adjustments (consisting
solely of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of results for the interim
periods. The results of operations for the three and nine month periods
ended July 31, 1996 are not necessarily indicative of the results to be
expected for the full year.
These interim consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Report to Shareholders filed on Form 10-K for the fiscal
year ended October 31, 1995.
NOTE 2 : INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by
the last-in, first-out (LIFO) method. The composition of inventories at July
31, 1996 and October 31, 1995 follows:
<TABLE>
July 31, October 31,
1996 1995
----------- -----------
(Unaudited)
( Dollars in thousands )
<S> <C> <C>
Raw materials.........................$ 30,785 $ 41,471
Finished and semi-finished product.... 57,807 65,979
Supplies.............................. 380 571
-------- --------
88,972 108,021
Less LIFO reserve..................... 7,928 6,932
-------- --------
$ 81,044 $ 101,089
======== ========
</TABLE>
NOTE 3 : ENVIRONMENTAL MATTERS and OTHER CONTINGENCIES
The Company and other industrial companies have, in recent years, become
subject to increasingly demanding environmental standards imposed by federal,
state, and local environmental laws and regulations. It is the policy of the
Company to endeavor to comply with applicable environmental laws and
regulations. A liability has been established for an amount, which the
Company believes is adequate, based on information currently available, to
cover the costs of remedial actions it will likely be required to take to
comply with existing environmental laws and regulations.
On June 29, 1995, the Department of Justice, on behalf of the Environmental
Protection Agency (EPA), instituted a civil action against WCI under the
Clean Water Act in the United States District Court for the Northern District
of Ohio. The action alleges numerous violations of the Company's National
Pollution Discharge Elimination System permit alleged to have occurred during
the years 1989 through 1995, inclusive. On March 29, 1996, the Department
of Justice on behalf of the EPA, instituted another civil action against the
Company in the same court, under the Clean Air Act, alleging violations by
<PAGE> 7
WCI STEEL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
( Unaudited )
Three and nine month periods ended July 31, 1996 and 1995
the Company of the work practice, inspection and notice requirements for
demolition and renovation of the National Emission Standard for Hazardous Air
Pollutants for Asbestos and also violations of the particulate standard and
the opacity limits applicable to the Company's facilities in Warren, Ohio.
Each action seeks a civil penalty not to exceed the statutory maximum of
$25,000 per day per violation and also seeks an injunction against continuing
violations. The Company believes that imposition of the statutory maximum
penalty for the alleged violations is unlikely based upon past judicial
penalties imposed under the Clean Water Act and the Clean Air Act, and that
it has defenses to liability. However, no assurance can be given that the
Company will not be found to have liability and, if it has liability, that
the statutory maximum penalty will not be imposed. If the statutory maximum
penalty or a similarly substantial penalty were imposed, it could have a
material adverse effect on the Company. The Company is negotiating with the
EPA toward a settlement of these matters.
The Company has obtained a Resource Conservation and Recovery Act (RCRA)
storage permit for waste pickle liquor at its Warren facility acid
regeneration plant. As a provision of the permit, the Company will be
required to undertake a corrective action program with respect to historical
material handling practices at the Warren facility. The Company has
developed and submitted a workplan for the first investigation step of the
corrective action program, the RCRA Facility Investigation (RFI), to the EPA
and is presently negotiating the scope of the RFI with the EPA. The final
scope of the corrective action required to remediate or reclaim any
contamination that may be present at the Warren facility is dependent upon
the findings of the RFI and the development and approval of a corrective
action program. Accordingly, the Company is unable at this time to estimate
the final cost of the corrective action program or the period over which such
costs may be incurred.
On January 23, 1996 two retired employees instituted an action against the
Company in the United States District Court for the Northern District of Ohio
alleging in substance that certain distributions made by the Company to
employees and benefit plans were violative of certain agreements, Employee
Retirement Income Security Act (ERISA), National Labor Relations Act and
common law. The plaintiffs seek declaratory and injunctive relief and
damages and allege that they bring this action as a class action. The
Company denies the plaintiffs allegations of liability and has filed for
dismissal of the action. The court has not ruled on the Company's motion.
In addition to the above matters, the Company is contingently liable with
respect to lawsuits and other claims incidental to the ordinary course of its
operations. Certain of these actions are covered by insurance. Although the
outcome of the above described matters, to the extent they exceed applicable
reserves, could have a material adverse effect on the future operating
results of the Company in a particular quarterly or annual period, the
Company believes that the effect of such matters will not have a material
adverse effect on the Company's consolidated financial position.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth selected operating data of WCI for the periods
indicated below.
<TABLE>
Three months Nine months
ended July 31, ended July 31,
1996 1995 1996 1995
( Dollars in thousands )
<S> <C> <C> <C> <C>
Net sales........................... $174,695 $170,742 $490,147 $523,611
Gross margin........................ 29,430 31,698 78,680 99,777
Gross margin as a % of net sales... 16.8% 18.6% 16.1% 19.1%
Operating income.................... 18,040 20,409 45,781 67,446
Operating income as a % of net sales 10.3% 12.0% 9.3% 12.9%
Net interest expense................ (4,481) (4,847) (14,273) (15,697)
------- ------- ------- -------
Net income................ $ 8,130 $ 9,371 $ 19,112 $ 31,419
======= ======= ======= =======
</TABLE>
Three Months Ended July 31, 1996
Compared To Three Months Ended July 31, 1995
Net sales for the three months ended July 31, 1996 were $174.7 million on
363,765 tons shipped, representing a 2.3% increase in net sales and a 12.3%
increase in tons shipped over the three months ended July 31, 1995. Net
sales per ton shipped declined 8.9% to $480 compared to $527 for the 1995
quarter due to lower prices realized on spot market sales. The 1996 period
included a slightly higher mix of custom carbon, alloy and electrical steel
products which accounted for 63.8% of total shipments compared with 61.8% in
the 1995 quarter.
Gross margin was $29.4 million for the three months ended July 31, 1996
compared to $31.7 million for the three months ended July 31, 1995. The
decline in gross margin reflects lower sales prices partially offset by
increased shipping volume and lower per ton operating costs. The 1995 period
included cost penalties from a blast furnace reline and the restart of the
furnace.
Operating income was $18.0 million, $50 per ton shipped, for the three months
ended July 31, 1996 compared to $20.4 million, $63 per ton shipped, for the
three month period ended July 31, 1995. The decline in operating income per
ton in the 1996 period reflects the lower gross margin described above.
As a result of the items discussed above, net income was $8.1 million ($.22
per common share) for the three months ended July 31, 1996 compared to net
income of $9.4 million ($.26 per common share) for the three months ended
July 31, 1995.
<PAGE> 9
Nine Months Ended July 31, 1996
Compared To Nine Months Ended July 31, 1995
Net sales for the nine months ended July 31, 1996 were $490.1 million on
1,054,585 tons shipped, representing a 6.4% decline in net sales and a 4.1%
increase in tons shipped compared to the nine months ended July 31, 1995.
Net sales per ton shipped declined 10.1% to $465 compared to $517 for the
nine months ended July 31, 1995 due to lower prices realized in the spot
market as well as a change in product mix. The 1996 period included the
sales of lower value added semi-finished steel and a lower mix of custom
carbon, alloy and electrical steel products which accounted for 55.4% of
total shipments in the first nine months of 1996 compared with 58.6% in the
first nine months of 1995. There were no sales of semi-finished steel during
the three months ended July 31, 1996. The sales mix and volume were
adversely effected by the 54 day contract dispute with certain hourly
employees which was concluded October 24, 1995. As of July 31, 1996 the
Company had a backlog of 299,378 tons compared to 241,475 tons at July 31,
1995.
Gross margin was $78.7 million for the nine months ended July 31, 1996
compared to $99.8 million for the nine months ended July 31, 1995. The
decline in gross margin reflects the lower sales prices and the change in
product mix mentioned above offset somewhat by higher volume and improved per
ton operating costs in the 1996 period. The 1995 period included cost
penalties related to a blast furnace reline and the restart of the furnace.
Operating income was $45.8 million, $43 per ton shipped, for the nine months
ended July 31, 1996 compared to $67.4 million, $67 per ton shipped, for the
nine months ended July 31, 1995. These operating results reflect the lower
gross margin described above and higher depreciation and amortization expense
associated with the Company's blast furnace reline completed in May 1995.
As a result of the items discussed above, net income was $19.1 million ($.52
per common share) for the nine months ended July 31, 1996 compared to net
income of $31.4 million ($.86 per common share) for the nine months ended
July 31, 1995.
Liquidity and Capital Resources
At July 31, 1996 the Company had $156.7 million of cash, cash equivalents,
and short-term investments with no borrowings outstanding under its $100
million revolving credit agreement. The Company amended its $100 million
Revolving Credit Facility (Revolver) during August 1996. This amendment
extended the expiration date to December 29, 1999 and reduced the interest
rate to prime plus 0.5% or, at the Company's option, a Eurodollar based rate.
WCI's liquidity requirements result primarily from capital investments,
working capital requirements, postretirement health care and pension funding,
interest expense, and principal payments on its indebtedness. WCI has met
these requirements in 1996 and 1995 from cash provided by operating
activities. Cash provided by operating activities was $77.3 million for the
nine months ended July 31, 1996 compared to $84.8 million for the nine months
ended July 31, 1995.
The steel industry has become increasingly competitive as technological
developments have resulted in additional capacity and has allowed
<PAGE> 10
mini-mills to enter certain of the sheet markets, including certain WCI
markets, previously supplied by integrated producers. In addition,
significant new steel making capacity is expected to be available in late
1996 and 1997. This has resulted in significant investments in plant and
equipment throughout the industry which is expected to improve efficiency,
productivity and quality and further increase competition. The Company has an
extensive capital program designed to enhance or maintain its competitive
position. Capital expenditures for the nine months ended July 31, 1996 and
1995 were $20.4 million and $23.9 million, respectively. Capital
expenditures in 1996 are expected to be approximately $30 million to $35
million in the aggregate. Major projects accounting for most of the planned
expenditures are the upgrade of the hot strip mill and the installation of a
hydrogen anneal facility. Management expects to fund the Company's capital
expenditures in 1996 from cash balances and cash provided by operating
activities. At July 31, 1996, the Company had capital expenditure purchase
commitments outstanding of approximately $17.7 million related primarily to
the hot strip mill upgrade.
The Company's debt repayment requirements are less than $2.5 million annually
through 2000. Management expects to generate cash flows from operations
sufficient to service these debt obligations.
On June 18, 1996, the Company's Board of Directors authorized the purchase of
up to $1.2 million of common stock. This stock repurchase program was
completed during July 1996 with the Company having acquired 222,300 common
shares.
At pricing in effect on July 31, 1996, the Company has commitments under its
raw material supply contracts for blast furnace coke, iron ore and oxygen of
approximately $62.4 million for the remainder of fiscal 1996, and $211.1
million in the aggregate thereafter.
Environmental
WCI has made and will continue to make the necessary capital expenditures for
environmental remediation and compliance with environmental laws and
regulations. The Company believes that compliance with environmental
requirements as presently interpreted and enforced, including remediation of
existing conditions, could have a material adverse effect on the future
operating results of the Company in a particular quarterly or annual period;
however, the effect of such matters should not have a material adverse impact
on its consolidated financial position.
Environmental laws and regulations have changed rapidly in recent years, and
WCI may become subject to more stringent environmental laws and regulations
in the future. Compliance with more stringent environmental laws and
regulations could have a material adverse effect on WCI's consolidated
financial position and future results of operations. The U.S. Environmental
Protection Agency has asserted certain alleged environmental violations
against the Company which are described in Note 3 to the condensed
consolidated financial statements.
Other
The Board of Directors on September 3, 1996 authorized a dividend payment of
7 cents per common share payable October 1, 1996 to shareholders of record
<PAGE> 11
on September 17, 1996 and authorized the expenditure of up to $1.2 million
for the purchase of shares of common stock of the Company from time to time
in the open market or in negotiated transactions at approximately the current
market price at that time.
<PAGE> 12
PART II - OTHER INFORMATION
WCI STEEL, INC.
Item 1. Legal Proceedings
United States v. WCI Steel, Inc. (Two cases)
- ---------------------------------------------
Reference is made to the description of this action contained in
the Company's Quarterly Report on Form 10-Q for the quarter ended April 30,
1996. See also discussion in Management's Discussion and Analysis.
Thomas C. Williams, etc. v. WCI Steel, Inc.
- -------------------------------------------
Reference is made to the description of this action contained in
the Company's Quarterly Report on Form 10-Q for the quarter ended April 30,
1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
A list of the exhibits required to be filed as part of this
Report on Form 10-Q is set forth in the "Exhibit Index" which
immediately precedes such exhibits, and is incorporated herein
by reference.
(b) Reports on Form 8-K:
No report on Form 8-K was filed during the quarter ended
July 31, 1996.
<PAGE> 13
WCI STEEL, INC.
SIGNATURES
Pursuant to the requirements 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.
WCI STEEL, INC.
(registrant)
Date: September 11, 1996 /S/ BRET W. WISE
-----------------------------
Bret W. Wise
Vice President and
Chief Financial Officer
(principal financial officer)
<PAGE> 14
WCI STEEL, INC.
EXHIBIT INDEX
Exhibit Number Description
10.1 Amendment No. 6 dated June 17, 1996 to the
amended and restated Loan and Security
Agreement with Congress Financial Corporation
and Security Pacific Business Credit Inc. which
extends the expiration date to December 29,
1999 and reduces the interest rate to prime
plus 0.5% or, at the Company's option, a
Eurodollar based rate.
27. Financial Data Schedule
AMENDMENT NO. 6 TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
As of June 17, 1996
WCI Steel, Inc.
1040 Pine Avenue, S.E.
Warren, Ohio 44483-6528
Gentlemen:
Congress Financial Corporation, a California corporation
("Congress") and Security Pacific Business Credit Inc., a
Delaware corporation ("Security Pacific", and together with
Congress, individually and collectively, "Lenders") and Congress
Financial Corporation, as agent for Lenders (in such capacity,
"Agent") have entered into financing arrangements with WCI Steel,
Inc., an Ohio corporation ("Borrower"), pursuant to which Agent
on behalf of Lenders may make loans and advances and provide
other financial accommodations to Borrower, as set forth in the
Amended and Restated Loan and Security Agreement, dated as of
December 29, 1992, by and among Agent, Lenders and Borrower, as
amended and supplemented pursuant to Amendment No. 1 to Amended
and Restated Loan and Security Agreement, dated as of
December 14, 1993, Amendment No. 2 to Amended and Restated Loan
and Security Agreement, dated as of July 13, 1994, Amendment
No. 3 to Amended and Restated Loan and Security Agreement, dated
as of March 28, 1995, Amendment No. 4 to Amended and Restated
Loan and Security Agreement, dated as of February 23, 1996, and
Amendment No. 5 to Amended and Restated Loan and Security
Agreement, dated as of March 8, 1996 (as the same is amended
hereby or may hereafter be further amended, modified,
supplemented, extended, renewed, restated or replaced, the "Loan
Agreement") and the other Financing Agreements (as such term is
defined in the Loan Agreement).
Borrower has requested that each of Agent and Lenders enter
into an amendment to the Loan Agreement and Lenders and Agent are
willing to agree to such amendment subject to the terms and
conditions contained herein. By this Amendment, Agent, Lenders
and Borrower desire and intend to evidence such amendment.
In consideration of the foregoing, and the respective
agreements and covenants contained herein, and for other good and
valuable consideration, the adequacy and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
(a) ADDITIONAL DEFINITIONS. As used herein, the Loan
Agreement or in any of the other Financing Agreements, the
following terms shall have the respective meanings given to them
below and the Loan Agreement shall be deemed and is hereby
amended to include, in addition and not in limitation, each of
the following definitions:
<PAGE>
(i) "ADJUSTED EURODOLLAR RATE" shall mean, with
respect to each Interest Period for any Eurodollar Rate Loan, the
rate per annum (rounded upwards, if necessary, to the next
one-sixteenth (1/16) of one (1%) percent) determined by dividing
(a) the Eurodollar Rate for such Interest Period by (b) the
percentage equal to: (i) one (1) minus (ii) the Reserve
Percentage. For purposes hereof, "Reserve Percentage" shall mean
the reserve percentage, expressed as a decimal, prescribed by any
United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits
of United States dollars in a non-United States or an
international banking office of the Reference Bank used to fund a
Eurodollar Rate Loan or any Eurodollar Rate Loan made with the
proceeds of such deposit, whether or not the Reference Bank
actually holds or has made any such deposits or loans. The
Adjusted Eurodollar Rate shall be adjusted on and as of the
effective day of any change in the Reserve Percentage.
(ii) "BORROWING BASE CERTIFICATE" shall mean a
certificate substantially in the form of Exhibit L hereto, as
such form may from time to time be modified by Agent, which is
duly completed (including all schedules thereto) and executed by
the chief financial officer or other appropriate financial
officer of Borrower acceptable to Agent and delivered to Agent.
(iii) "BUSINESS DAY" shall mean any day other
than a Saturday, Sunday, or other day on which commercial banks
are authorized or required to close under the laws of the State
of New York or the Commonwealth of Pennsylvania, and a day on
which the Reference Bank and Agent are open for the transaction
of business, except that if a determination of a Business Day
shall relate to any Eurodollar Rate Loans, the term Business Day
shall also exclude any day on which banks are closed for dealings
in dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.
(iv) "CASH EQUIVALENTS" shall mean, at any time,
(a) any evidence of indebtedness with a maturity of one (1) year
or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality
thereof; PROVIDED, THAT, the full faith and credit of the United
States of America is pledged in support thereof, EXCEPT in the
case of any such evidence of indebtedness issued by the Student
Loan Marking Association, the Federal National Mortgage
Association, a Federal Farm Credit Bank or a Federal Home Loan
Bank so long as any such evidence of indebtedness issued by such
federal governmental entities is rated at least A-1 by Standard &
Poor's Corporation or at least P-1 by Moody's Investor Service,
Inc.; (b) certificates of deposit or bankers' acceptances with a
maturity of one (1) year or less of any financial institution
that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than Two
Hundred Fifty Million Dollars ($250,000,000); (c) commercial
paper (including variable rate demand notes) with a maturity of
one (1) year or less issued by a corporation (except an Affiliate
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of Borrower) organized under the laws of any State of the United
States of America or the District of Columbia and rated at least
A-l by Standard & Poor's Corporation or at least P-l by Moody's
Investor Service, Inc.; (d) repurchase obligations with a term of
not more than thirty (30) days for underlying securities of the
types described in clause (a) above entered into with any bank
meeting the qualifications specified in clause (b) above; (e)
repurchase agreements and reverse repurchase agreements relating
to marketable direct obligations issued or unconditionally
guaranteed by the United States of America or issued by any
governmental agency thereof and backed by the full faith and
credit of the United States of America, in each case maturing
within one (1) year or less from the date of acquisition;
PROVIDED, THAT, the terms of such agreements comply with the
guidelines set forth in the Federal Financial Agreements of
Depository Institutions With Securities Dealers and Others, as
adopted by the comptroller of the Currency on October 31, 1985;
and (f) investments in money market funds and mutual funds which
invest substantially all of their assets in securities of the
types described in clauses (a) through (e) above.
(v) "CURRENCY PROTECTION AGREEMENTS" shall mean
any currency exchange contract or other similar arrangement
solely for the purpose of protecting a person against fluctua-
tions in the exchange rate of different currencies.
(vi) "EURODOLLAR RATE LOANS" shall mean any
Loans or portion thereof on which interest is payable based on
the Adjusted Eurodollar Rate in accordance with the terms hereof.
(vii) "EURODOLLAR RATE" shall mean with respect
to the Interest Period for a Eurodollar Rate Loan, the interest
rate per annum equal to the arithmetic average of the rates of
interest per annum (rounded upwards, if necessary, to the next
one-sixteenth (1/16) of one (1%) percent) at which the Reference
Bank is offered deposits of United States dollars in the London
interbank market (or other Eurodollar Rate market selected by
Borrower and approved by Agent) on or about 9:00 a.m. (New York
time) two (2) Business Days prior to the commencement of such
Interest Period in amounts substantially equal to the principal
amount of the Eurodollar Rate Loans requested by and available to
Borrower in accordance with this Agreement, with a maturity of
comparable duration to the Interest Period selected by Borrower.
(viii) "INTEREST PERIOD" shall mean for any
Eurodollar Rate Loan, a period of approximately one (1), two (2),
or three (3) months duration as Borrower may elect, the exact
duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; PROVIDED,
THAT, Borrower may not elect an Interest Period which will end
after the last day of the then-current term of this Agreement.
(ix) "PRIME RATE LOANS" shall mean any Loans or
portion thereof on which interest is payable based on the Prime
Rate in accordance with the terms thereof.
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(x) "REFERENCE BANK" shall mean CoreStates Bank,
N.A., or such other bank as Agent may from time to time
designate.
(b) AMENDMENTS TO DEFINITIONS.
( i ) All references to the term "Interest Rate"
herein and in the Loan Agreement and the other Financing
Agreements shall be deemed and each such reference is hereby
amended to mean:
(A) as to Prime Rate Loans, a rate of one-
half of one (1/2%) percent per annum in excess of the Prime Rate
and
(B) as to Eurodollar Rate Loans, a rate of
two and one-half (2 1/2%) percent per annum in excess of the
Adjusted Eurodollar Rate in respect of the aggregate amount of
Eurodollar Rate Loans at any time outstanding of up to
$20,000,000 and a rate of three (3%) percent per annum in excess
of the Adjusted Eurodollar Rate in respect of the aggregate
amount of Eurodollar Rate Loans (if any) at any time outstanding
in excess of $20,000,000, in each case based on the Eurodollar
Rate applicable for the Interest Period selected by Borrower as
in effect three (3) Business Days after the date of receipt by
Agent of the request of 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 Borrower;
PROVIDED, THAT, (i) in the event that at any time the Eurodollar
Rate Loans then outstanding are less than $20,000,000, if
Borrower shall at such time request a Eurodollar Rate Loan in an
amount which would cause the total amount of Eurodollar Rate
Loans outstanding after giving effect to such request to exceed
$20,000,000, the rate for such Eurodollar Rate Loan shall be
three (3%) percent per annum in excess of the Adjusted Eurodollar
Rate calculated as set forth above and (ii) the Interest Rate
shall mean the rate of two and one-half (2 1/2%) percent per
annum in excess of the Prime Rate as to Prime Rate Loans and the
rate of five (5%) percent per annum in excess of the Adjusted
Eurodollar Rate at Agent's option, without notice, (A) for the
period on and after the date of termination or non-renewal
hereof, or the date of the occurrence of any Event of Default and
for so long as such Event of Default is continuing as determined
by Agent and until such time as all Obligations are indefeasibly
paid in full (notwithstanding entry of any judgment against
Borrower) and (B) on the Loans at any time outstanding in excess
of the amounts available to Borrower under Section 3 of the Loan
Agreement (whether or not such excess(es), arise or are made with
or without knowledge or consent and whether made before or after
an Event of Default).
(ii) All references to the term "Eligible
Accounts" herein and in the Loan Agreement and the other
Financing Agreements shall be deemed and each such reference is
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hereby amended to mean Accounts created by Borrower in the
ordinary course of its business arising out of the sale of goods
or rendition of services by Borrower, which are and at all times
shall continue to be acceptable to Agent in all respects.
Standards of eligibility may be fixed and revised from time to
time solely by Agent in its exclusive judgment. In determining
eligibility, Agent may, but need not, rely on agings, reports and
schedules of Accounts furnished to Agent by Borrower, but
reliance by Agent thereon from time to time shall not be deemed
to limit Agent's right to revise standards of eligibility at any
time as to both present and future Accounts. In general, an
Account shall not be deemed eligible unless: (a) the Account
Debtor on such Account resides in the United States, Puerto Rico,
the U.S. Virgin Islands or Canada and is and at all times
continues to be acceptable to Agent, or, at Agent's option, if
either: (i) the Account Debtor has delivered to Borrower an
irrevocable letter of credit issued or confirmed by a bank
satisfactory to Agent, sufficient to cover such Account, in form
and substance satisfactory to Agent and, if required by Agent,
the original of such letter of credit has been delivered to Agent
or Agents's authorized representative and the issuer thereof
notified of the assignment of the proceeds of such letter of
credit to Agent, or (ii) such Account is subject to credit
insurance payable to Agent issued by an insurer and on terms and
in an amount acceptable to Agent, (b) such Account complies in
all respects with the representations, covenants, and warranties
set forth herein and in the other Financing Agreements, and (c)
no more than ninety (90) days have elapsed since the original
invoice date. In addition, without limiting Agent's continuing
right to revise standards of eligibility from time to time,
Borrower acknowledges and agrees that Accounts arising from any
sales by Borrower to LTV or any of its Affiliates shall not be
deemed Eligible Accounts to the extent such Accounts exceed
$5,000,000 at any one time except as Agent may otherwise
determine in its discretion. Any Account which Agent determines
to be ineligible or unacceptable for purposes of the Lending
Formulas (as hereinafter defined) at any time shall nevertheless
be and remain at all times part of the Collateral.
(iii) All references to the term "Consolidated
Adjusted Working Capital" herein and in the Loan Agreement and
the other Financing Agreements shall be deemed and each such
reference is hereby amended to mean, as to any Person, at any
time, in accordance with GAAP, consistently applied, on a
consolidated basis for such Person and its Subsidiaries, the
amount equal to the difference between: (a) the aggregate net
book value of all assets of such Person and its subsidiaries,
calculating the book value of Inventory for this purpose on a
first-in-first-out basis, on a consolidated basis, which would in
accordance with GAAP, consistently applied, be classified as
current assets and (b) all Indebtedness of such Person and its
Subsidiaries, on a consolidated basis, which would be classified
as current liabilities and in any event including any Indebted-
ness hereunder consisting of the Loans and any Indebtedness
payable on demand or within one (1) year from the date of
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determination without any option on the part of the obligor to
extend or renew beyond such year and all accruals for federal or
other taxes based on or measured by income and payable within
such year.
(c) 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 hereto, shall have the respective meanings assigned
to such terms in the Loan Agreement.
2. INTEREST. Section 3.6 of the Loan Agreement is hereby
deleted in its entirety and replaced with the following:
"3.6 INTEREST.
(a) Borrower shall pay to Agent interest on the
outstanding principal amount of the non-contingent
Obligations at the Interest Rate. All interest
accruing hereunder on and after the date of any Event
of Default or termination or non-renewal hereof shall
be payable on demand.
(b) Borrower may from time to time request that
Prime Rate Loans be converted to Eurodollar Rate Loans
or that any existing Eurodollar Rate Loans continue for
an additional Interest Period. Such request from
Borrower shall specify the amount of the Prime Rate
Loans which will constitute Eurodollar Rate Loans
(subject to the limits set forth below) and the
Interest Period to be applicable to such Eurodollar
Rate Loans. Subject to the terms and conditions
contained herein, three (3) Business Days after receipt
by Agent of such a request from Borrower, such Prime
Rate Loans shall be converted to Eurodollar Rate Loans
or such Eurodollar Rate Loans shall continue, as the
case may be; PROVIDED, THAT, (i) no Event of Default,
or event which with notice or passage of time or both
would constitute an Event of Default exists or has
occurred and is continuing, (ii) no party hereto shall
have sent any notice of termination or non-renewal of
this Agreement, (iii) Borrower shall have complied with
such customary procedures as are established by Agent
and specified by Agent to Borrower from time to time
for requests by Borrower for Eurodollar Rate Loans,
(iv) no more than four (4) Interest Periods may be in
effect at any one time, (v) the aggregate amount of the
Eurodollar Rate Loans must be in an amount not less
than $5,000,000 or an integral multiple of $1,000,000
in excess thereof, (vi) the maximum amount of the
Eurodollar Rate Loans at any time requested by Borrower
shall not exceed seventy-five (75%) percent of the
lowest principal amount of the Loans which it is
anticipated will be outstanding during the applicable
Interest Period, as determined by Agent (but with no
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obligation of Agent to make such Loans) and (vii) Agent
shall have determined that the Interest Period or
Adjusted Eurodollar Rate is available to Agent through
the Reference Bank and can be readily determined as of
the date of the request for such Eurodollar Rate Loan
by Borrower. Any request by Borrower to convert Prime
Rate Loans to Eurodollar Rate Loans or to continue any
existing Eurodollar Rate Loans shall be irrevocable.
Notwithstanding anything to the contrary contained
herein, Agent and the Reference Bank shall not be
required to purchase United States Dollar deposits in
the London interbank market or other applicable
Eurodollar Rate market to fund any Eurodollar Rate
Loans, but the provisions hereof shall be deemed to
apply as if Agent and the Reference Bank had purchased
such deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall
automatically convert to Prime Rate Loans upon the last
day of the applicable Interest Period, unless Agent has
received and approved a request to continue such
Eurodollar Rate Loan at least three (3) Business Days
prior to such last day in accordance with the terms
hereof. Any Eurodollar Rate Loans shall, at Agent's
option, upon notice by Agent to Borrower, convert to
Prime Rate Loans in the event that (i) an Event of
Default or event which with the notice or passage of
time or both would constitute an Event of Default,
shall exist, (ii) this Agreement shall terminate or not
be renewed, or (iii) the aggregate principal amount of
the Prime Rate Loans which have previously been con-
verted to Eurodollar Rate Loans or existing Eurodollar
Rate Loans continued, as the case may be, at the
beginning of an Interest Period shall at any time
during such Interest Period exceed either (A) the
aggregate principal amount of the Loans then outstand-
ing, or (B) the Loans then available to Borrower under
Section 3 of the Loan Agreement. Borrower shall pay to
Agent, upon demand by Agent (or Agent may, at its
option, charge any loan account of Borrower) any
amounts required to compensate Agent and/or Lenders,
the Reference Bank or any participant with Agent for
any loss (including loss of anticipated profits), cost
or expense incurred by such person, as a result of the
conversion of Eurodollar Rate Loans to Prime Rate Loans
pursuant to any of the foregoing.
(d) Interest shall be payable by Borrower to
Agent monthly in arrears not later than the first day
of each calendar month and shall be calculated on the
basis of a three hundred sixty (360) day year and
actual days elapsed. The interest rate on non-
contingent Obligations (other than Eurodollar Rate
Loans) shall increase or decrease by an amount equal to
each increase or decrease in the Prime Rate effective
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on the first day of the month after any change in such
Prime Rate is announced based on the Prime Rate in
effect on the last day of the month in which any such
change occurs. In no event shall charges constituting
interest payable by Borrower to Agent exceed the
maximum amount or the rate permitted under any
applicable law or regulation, and if any such part or
provision of this Agreement is in contravention of any
such law or regulation, such part or provision shall be
deemed amended to conform thereto."
3. LETTER OF CREDIT ACCOMMODATIONS.
(a) Section 3.2(e) of the Loan Agreement is hereby
deleted in its entirety and replaced with the following:
"(e) In addition to any charges, fees or expenses
charged by any bank or issuer in connection with the
Letter of Credit Accommodations, Borrower shall pay to
Agent for the account of Lenders a letter of credit fee
at a rate equal to one and one-half (1 1/2%) percent
per annum on the daily outstanding balance of the
Letter of Credit Accommodations for the immediately
preceding month (or part thereof), payable in arrears
as of the first day of each succeeding month. Such
letter of credit fee shall be calculated on the basis
of a three hundred sixty (360) day year and actual days
elapsed and the obligation of Borrower to pay such fee
shall survive the termination or non-renewal of this
Agreement."
(b) The reference to the amount of "$10,000,000"
contained in the last line of Section 3.2(f) of the Loan
Agreement between the words "exceed" and the period is hereby
deleted in its entirety and replaced with the amount of
"$20,000,000".
4. UNUSED LINE FEE. Section 3.5(b) of the Loan Agreement
is hereby deleted in its entirety and replaced with the
following:
"(b) With respect to each month (or part thereof)
that this Agreement is in effect or so long as any of
the Obligations are outstanding, Borrower shall pay to
Agent for the account of Lenders a fee at a rate equal
to one-half of one (1/2%) percent per annum calculated
for such month and payable monthly, in arrears, upon
the excess, if any, of: (i) $75,000,000 over (ii) the
sum of: (A) the greater of (1) the average of the daily
principal balances of the outstanding Loans for such
month (or part thereof) or (2) zero, plus (B) the
average of the daily principal balances of the Letter
of Credit Accommodations for such month (or part
thereof)."
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5. SERVICING FEE. Section 3.5(c) of the Loan Agreement is
hereby redesignated Section 3.5(d) and a new Section 3.5(c) is
hereby added immediately after Section 3.5(b) as follows:
"(c) Borrower shall pay to Agent for the account
of Lenders monthly a servicing fee in the amount of
$15,000 for each month (or part thereof) while this
agreement remains in effect or so long thereafter as
any of the Obligations are outstanding, which fee shall
be fully earned and payable as of the first day of each
month."
6. CHANGES IN LAWS AND INCREASED COSTS OF EURODOLLAR RATE
LOANS. A new Section 3.10 of the Loan Agreement is hereby added
immediately after Section 3.9 of the Loan Agreement as follows:
"3.10 CHANGES IN LAWS AND INCREASED COSTS OF
EURODOLLAR RATE LOANS.
(a) In addition to, and not in limitation of, the
provisions contained in Section 3.9(a) hereof, all
Eurodollar Rate Loans shall, upon notice by Agent to
Borrower, convert to Prime Rate Loans in the event that
(i) any change in applicable law or regulation (or the
interpretation or administration thereof) shall either
(A) make it unlawful for Agent, Lenders, the Reference
Bank or any participant to make or maintain Eurodollar
Rate Loans or to comply with the terms hereof in
connection with the Eurodollar Rate Loans, or (B) shall
result in the increase in the costs to Agent, Lenders,
the Reference Bank or any participant of making or
maintaining any Eurodollar Rate Loans by an amount
deemed by Agent to be material, or (C) reduce the
amounts received or receivable by Agent or Lenders in
respect thereof, by an amount deemed by Agent to be
material or (ii) the cost to Agent, Lenders, the
Reference Bank or any participant of making or
maintaining any Eurodollar Rate Loans shall otherwise
increase by an amount deemed by Agent to be material.
Borrower shall pay to Agent for the account of Lenders,
upon demand by Agent (or Agent may, at its option,
charge any loan account of Borrower) any amounts
required to compensate Agent, Lenders, the Reference
Bank or any participant with Lenders for any loss
(including loss of anticipated profits), cost or
expense incurred by such person as a result of the
foregoing, including, without limitation, any such
loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds
acquired by such person to make or maintain the
Eurodollar Rate Loans or any portion thereof. A
certificate of Agent setting forth the basis for the
determination of such amount necessary to compensate
Agent or Lenders as provided in this Section 3.10 shall
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be delivered to Borrower and shall be conclusive,
absent manifest error.
(b) If any payments or prepayments in respect of
the Eurodollar Rate Loans are received by Agent, other
than on the last day of the applicable Interest Period
(whether pursuant to acceleration, upon maturity or
otherwise), including any payments pursuant to the
application of collections under Section 9.1 hereof or
any other payments made with the proceeds of
Collateral, Borrower shall pay to Agent upon demand by
Agent (or Agent may, at its option, charge any loan
account of Borrower) any amounts required to compensate
Agent, Lenders, the Reference Bank or any participant
with Lenders for any additional loss (including loss of
anticipated profits), cost or expense incurred by such
person as a result of such prepayment or payment,
including, without limitation, any loss, cost or
expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by
such person to make or maintain such Eurodollar Rate
Loans or any portion thereof."
7. INDEBTEDNESS.
(a) Section 7.3(d) of the Loan Agreement is hereby
deleted in its entirety and replaced with the following:
"(d) all Indebtedness of Borrower of up to the
principal amount of $250,000,000 evidenced by the New
RSI Notes plus interest thereon at the rate provided
for in the New RSI Notes as in effect on December 14,
1993; PROVIDED, THAT: (i) Borrower shall only make
regularly scheduled payments of principal and interest
or other mandatory payments in respect of such
Indebtedness in accordance with the terms of the New
RSI Notes as in effect on December 14, 1993, EXCEPT
Borrower may prepay, in whole or in part, the New RSI
Notes as in effect on December 14, 1993 so long as (A)
Borrower provides Agent with two (2) Business Days
prior written notice of the intention of Borrower to
make any such prepayment, (B) immediately prior to
making and immediately after giving effect to any such
prepayment, no obligations (other than pursuant to
Letter of Credit Accommodations) shall be then
outstanding, and (C) 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 and is continuing; (ii) Borrower shall
not, directly or indirectly, (A) amend, modify, alter
or change the terms of the New RSI Notes or any
agreements, documents or instruments executed and/or
delivered in connection therewith or (B) redeem,
retire, defease, purchase or otherwise deposit or
invest any sums for such purpose, EXCEPT for (1) the
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issuance of the RSI Series B Notes to be offered to the
holders of the RSI Series A Notes in exchange therefor
pursuant to a registration statement filed with the
Securities and Exchange Commission or (2) mandatory
repurchases of New RSI Notes (as in effect on the date
hereof) in connection with the sales of certain assets
of Borrower (other than the Collateral) and changes in
control of Borrower or (3) to the extent permitted
under this Section 7.3(d)(i); (iii) Borrower shall
furnish to Agent and Lenders all notices, demands or
other materials either received from any of the holders
of the New RSI Notes, or on their behalf, promptly
after receipt thereof, or sent by Borrower, or on its
behalf, to any of the holders of the New RSI Notes, or
any representative of the holders (including, but not
limited to, the trustee) concurrently with the sending
thereof, as the case may be and (iv) such Indebtedness
shall only be secured by the Equipment and Real
Property of Borrower and certain other related assets
and properties of Borrower as set forth on Exhibit K
hereto;"
(b) Section 7.3 of the Loan Agreement is hereby amended by
adding a new Section 7.3(1) as follows:
"(1) Indebtedness of Borrower arising under
Currency Protection Agreements entered into by Borrower
in the ordinary course of the business of Borrower
consistent with the current practices of Borrower,
PROVIDED, THAT, (i) Borrower shall not engage in any
speculative hedging or similar transaction, (ii) the
aggregate net exposure of Borrower pursuant to such
agreements shall not exceed $2,500,000 at any time
outstanding and (iii) such agreements shall be with
financial institutions organized under the laws of and
located in the United States of America or any State
thereof and having capital, surplus and undivided
profits of at least $100,000,000."
8. INVESTMENTS.
(a) Section 7.5(b) of the Loan Agreement is deleted in
its entirety and replaced with the following:
"(b) investments in cash and Cash Equivalents;"
(b) Section 7.5(h) of the Loan Agreement is hereby
redesignated Section 7.5(i) and a new Section 7.5(h) of the Loan
Agreement is hereby added immediately after Section 7.5(g) as
follows:
"(h) investments by Borrower pursuant to the
purchase by Borrower of the capital stock of any
person, or any voting trust certificates, bonds,
debentures or other evidences of indebtedness or any
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certificates of interest, shares or participations in
temporary or interim certificates for the purchase or
acquisition of, or right to subscribe to, any of the
foregoing (other than any evidence of the Obligations),
or capital contributions by Borrower to any person;
PROVIDED, THAT, (i) to the extent of any such invest-
ments in any wholly-owned Subsidiary of Borrower, all
of the conditions set forth in Section 7.5(d) hereof
shall have been satisfied as to such Subsidiary,
(ii) as of the date of any such investment 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, (iii) the aggregate amount of
all such investments by Borrower shall not exceed
$25,000,000, (iv) such investments shall not arise from
a non-consensual tender offer for the purchase of the
capital stock of any person, (v) Agent shall have
received not less than ten (10) days prior written
notice of the intention to make any such investment,
which notice shall set forth in reasonable detail
satisfactory to Agent, the amount and nature of such
investment and such other information with respect
thereto as Agent may request, and (vi) as of the date
of any such investment and after giving effect thereto,
the Excess Availability shall be not less than
$5,000,000;"
9. CONSOLIDATED ADJUSTED WORKING CAPITAL. Section 7.19 of
the Loan Agreement is hereby deleted in its entirety and replaced
with the following:
"7.19 CONSOLIDATED ADJUSTED WORKING CAPITAL.
Borrower and its Subsidiaries shall, at all times,
maintain a Consolidated Adjusted Working Capital of not
less than the following amounts during the following
respective periods:
PERIOD AMOUNT
(a) From the date hereof through
October 30, 1993 $25,000,000
(b) From October 31, 1993 through
October 30, 1994 $40,000,000
(c) From October 31, 1994 through
October 30, 1995 $45,000,000
(d) From October 31, 1995 through
April 30, 1996 $50,000,000
(e) From May 1, 1996 and at all
times thereafter $ -0-"
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10. CONSOLIDATED ADJUSTED NET WORTH. Section 7.20 of the
Loan Agreement is hereby deleted in its entirety and replaced
with the following:
"7.20 CONSOLIDATED ADJUSTED NET WORTH. Borrower
and its Subsidiaries shall, at all times, maintain a
Consolidated Adjusted Net Worth of not less than the
following amounts during the following respective
periods:
PERIOD AMOUNT
(a) From the date hereof through
October 30, 1993 $40,000,000
(b) From October 31, 1993 through
October 30, 1994 ($40,000,000)
(c) From October 31, 1994 through
April 30, 1996 ($30,000,000)
(d) From May 1, 1996 and at all
times thereafter $ -0-"
11. CAPITAL EXPENDITURES. Section 7.22 of the Loan
Agreement is hereby deleted in its entirety and replaced with the
following:
"7.22 CAPITAL EXPENDITURES.
(a) The expenditures of Borrower and its
Subsidiaries for fixed or capital assets (including,
without limitation, capitalized lease obligations), on
a cumulative basis, shall not exceed the following
amounts during the following respective periods:
PERIOD AMOUNT
(i) From the date hereof through
and including October 31, 1993 $20,000,000
(ii) From the date hereof through
and including October 31, 1994 $55,000,000
(iii)From the date hereof through
and including October 31, 1995 $75,000,000
(iv) From November 1, 1995 through
and including October 31, 1996 $75,000,000
(v) From November 1, 1995 through
and including October 31, 1997 $125,000,000
(vi) From November 1, 1995 through
and including October 31, 1998 $175,000,000
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(vii) From November 1, 1995 through
and including October 31, 1999 $200,000,000
(b) The expenditures of Borrower and its
Subsidiaries for fixed or capital assets (including,
without limitation, capitalized lease obligations) in
any fiscal year commencing with the fiscal year of
Borrower ending on October 31, 2000 shall not exceed
the greater of: (i) $25,000,000 or (ii) the sum of:
(A) fifty (50%) percent of the After-Tax Profits of
Borrower in the immediately preceding fiscal year plus
(B) one hundred (100%) percent of the depreciation for
fixed or capital assets in such fiscal year."
12. DIVIDENDS. Section 7.7(b) of the Loan Agreement is
hereby deleted in its entirety and replaced with the following:
"(b) (i) Borrower may in any fiscal year
commencing with the fiscal year of Borrower ending
October 31, 1996 declare and pay dividends to its
shareholders in respect of common and preferred stock
in accordance with the terms of such stock, or may
redeem or repurchase such stock, PROVIDED, THAT, each
of the following conditions is satisfied: (A) Excess
Availability shall have been not less than $25,000,000
at all times during the ninety (90) consecutive day
period immediately prior to the date of the declaration
of any such dividends (so long as such dividends are
paid within thirty (30) days of the date of the
declaration thereof) or in the case of a redemption or
repurchase, at all times during the ninety (90)
consecutive day period immediately prior to the date of
the payment for such redemption or repurchase, as the
case may be, (B) after giving effect to the payment of
any such dividends or redemptions or repurchases Excess
Availability shall be not less than $25,000,000, (C)
the financial projections provided by Borrower to
Lender for the fiscal year of Borrower in which such
dividends are to be paid, or redemptions or repurchases
made, prior to the commencement of such fiscal year,
shall reflect that Excess Availability is projected to
be not less than $25,000,000 for the ninety (90) day
period immediately after (but not including) the date
of the declaration of any such dividends or the payment
for such redemption or repurchase, as the case may be,
(D) as of the date of the payment of such dividend or
redemption or repurchase (as the case may be) 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, (E) there are
sufficient legally available funds for such dividend or
redemption or repurchase (as the case may be) and
(F) Agent shall have received notice of the declaration
of any such dividend, or intention to redeem or
-14-
repurchase any such stock, one (1) Business Day after
its declaration or after such intention (as the case
may be) and Agent shall have received not less than
five (5) Business Days notice prior to payment of any
such dividend, or payment for any such redemption or
repurchase (as the case may be); and (ii) in the event
that any of the conditions to the declaration and
payment of such dividends or redemptions or repurchases
of stock set forth in Section 7.7(b)(i) are not
satisfied, Borrower may in any fiscal year commencing
with the fiscal year of Borrower ending October 31,
1996, declare and pay dividends to its shareholders in
respect of common and preferred stock in accordance
with the terms of such stock, or may redeem or
repurchase such stock, PROVIDED, THAT, each of the
following conditions is satisfied: (A) the total
amount of such dividends or amounts paid for redemp-
tions or repurchases shall not exceed the amount equal
to (1) fifty (50%) percent of the cumulative After-Tax
Profits of Borrower (or if cumulative After-Tax Profits
shall be a loss, minus one hundred (100%) percent of
such loss) for the period commencing November 1, 1995
and ending on the last day of the most recently ended
fiscal quarter prior to the date of the declaration of
such dividend or payment for such redemption or repur-
chase (treating such period as a single accounting
period) MINUS (2) the aggregate amount of all loans
made by Borrower to Renco Group (net of repayments and
prepayments) in such period and still outstanding MINUS
(3) the aggregate amount of all management fees paid by
Borrower to Renco Group in such period, other than the
monthly management fees contemplated under Section
7.6(b)(ii) hereof MINUS (4) the aggregate amount of all
dividends declared and paid by Borrower to its share-
holders in such period, (B) as of the date of the
payment of such dividend or redemption or repurchase
(as the case may be) and after giving effect thereto,
no Event of Default, or act, event or condition, which
with notice, passage of time or both would constitute
an Event of Default shall exist or have occurred and be
continuing, (C) there are sufficient legally available
funds for such dividend or redemption or repurchase (as
the case may be), (D) as of the date of the payment of
such dividend or redemption or repurchase (as the case
may be) and after giving effect thereto, Excess
Availability shall be not less than $5,000,000, and
(E) Agent shall have received notice of the declaration
of any such dividend, or intention to redeem or
repurchase any such stock, one (1) Business Day after
its declaration or after such intention (as the case
may be) and Agent shall have received not less than
five (5) Business Days prior notice of the payment of
any such dividend, or payment for any such redemption
or repurchase (as the case may be)."
-15-
<PAGE>
13. REPORTING REQUIREMENTS.
(a) Section 7.18(a) of the Loan Agreement is hereby
amended by adding the following new subsection 7.l8(a)(ix)
immediately after subsection 7.18(a) (viii):
"(ix) Subject to the terms and conditions
contained herein, Borrower shall deliver to Agent a
Borrowing Base Certificate setting forth Borrower's
calculation of the Revolving Loans and Letter of Credit
Accommodations available to Borrower pursuant to the
terms and conditions contained herein, duly completed
and executed by the chief financial officer or other
appropriate financial officer acceptable to Agent,
together with all schedules required pursuant to the
terms of the Borrowing Base Certificate duly completed.
(A) If at any time either (1) the average
aggregate daily principal balance of the outstanding
Loans and Letter of Credit Accommodations is greater
than $50,000,000 or (2) Excess Availability is less
than $25,000,000, then Borrower shall deliver such
Borrowing Base Certificate to Agent on a daily basis
calculating Revolving Loans and Letter of Credit
Accommodations available as of the immediately
preceding day.
(B) If at any time for the period during
the immediately preceding week (1) the average
aggregate daily principal balance of the outstanding
Loans and Letter of Credit Accommodations is equal to
or greater than $25,000,000 but equal to or less than
$50,000,000 and (2) Excess Availability is greater than
$25,000,000, then Borrower shall deliver such Borrowing
Base Certificate to Agent on a weekly basis calculating
Revolving Loans and Letter of Credit Accommodations
available as of the last business day of the
immediately preceding week.
(C) If at any time for the period during
the immediately preceding consecutive two (2) weeks,
(1) the average aggregate daily balance of the
outstanding Loans and Letter of Credit Accommodations
is less than $25,000,000 and (2) Excess Availability is
greater than $50,000,000, then Borrower shall deliver
such Borrowing Base Certificate to Agent every two (2)
weeks calculating Revolving Loans and Letter of Credit
Accommodations available as of the last day of the
immediately preceding week.
(D) Notwithstanding anything to the
contrary contained herein, without limiting any other
rights of Agent, upon Agent's request, Borrower shall
provide Agent on a daily basis with a schedule of
Accounts, collections received and credits issued and
-16-
on a daily basis with an inventory report in the event
that at anytime either: (1) an Event of Default or
event which with notice or passage of time or both
would constitute an Event of Default, shall exist or
have occurred, or (2) Borrower shall have failed to
deliver any Borrowing Base Certificate in accordance
with the terms hereof, or (3) upon Agent's good faith
belief, any information contained in any Borrowing Base
Certificate is incomplete, inaccurate or misleading.
(E) Nothing contained in any Borrowing Base
Certificate shall be deemed to limit, impair or
otherwise affect the rights of Agent and Lenders
contained herein and in the event of any conflict or
inconsistency between the calculation of the Loans and
Letter of Credit Accommodations available to Borrower
as set forth. in any Borrowing Base Certificate and as
determined by Lender, the determination of Agent shall
govern and be conclusive and binding upon Borrower.
Without limiting the foregoing, Borrower shall furnish
to Agent any information which Agent may reasonably
request regarding the determination and calculation of
any of the amounts set forth in the Borrowing Base
Certificate.
(F) If any of Borrower's records or reports
or the collateral are prepared or maintained by an
accounting service, contractor, shipper or other agent,
Borrower hereby irrevocably authorizes such service,
contractor, shipper or agent to deliver such records,
reports and related documents to Agent and to follow
Agent's instructions with respect to further services
at any time that an Event of Default exists or has
occurred and is continuing."
(b) Sections 7.18(b), (c), (d) and (e) of the Loan
Agreement are hereby redesignated sections 7.18(c), (d), (e) and
(f) and a new Section 7.18(b) is hereby added as follows:
"(b) Borrower shall promptly notify Agent in
writing in the event that at any time: (i) the amount
of Revolving Loans and Letter of Credit Accommodations
available to Borrower pursuant to the terms and
conditions contained herein is less than ninety (90%)
percent of the amount of Revolving Loans and Letter of
Credit Accommodations available to Borrower pursuant to
the terms and conditions contained herein reflected in
the most recent Borrowing Base Certificate delivered by
Borrower to Agent pursuant to section 7.l8(a)(ix)
hereof, (ii) the Revolving Loans made by Lenders to
Borrower and/or Letter of Credit Accommodations
outstanding at such time exceed the amount of the
Revolving Loans and Letter of Credit Accommodations
then available to Borrower under the terms hereof as a
result of any decrease in the amount of Revolving Loans
-17-
<PAGE>
and Letter of Credit Accommodations then available and
the amount of such excess, or (iii) Excess Availability
is less than $50,000,000 and at such times as Excess
Availability may be less than $50,000,000 if Excess
Availability is less than $25,000,000."
14. COLLECTIONS. Section 9.1(a) of the Loan Agreement is
hereby deleted in its entirety and replaced with the following:
"(a) Borrower shall establish and maintain, at
its expense, blocked accounts or lockboxes and related
blocked accounts (in either case, "Blocked Accounts"),
as Agent may specify, with such banks as are acceptable
to Agent into which Borrower shall promptly deposit and
direct its account debtors to directly remit all
payments on Accounts and all payments constituting
proceeds of Inventory or other Collateral in the
identical form in which such payments are made, whether
by cash, check or other manner. The banks at which the
Blocked Accounts are established shall enter into an
agreement, in form and substance satisfactory to Agent,
providing that all items received or deposited in the
Blocked Accounts are the property of Agent, that the
depository bank has no lien upon, or right to setoff
against, the Blocked Accounts, the items received for
deposit therein, or the funds from time to time on
deposit therein and that the depository bank will wire,
or otherwise transfer, in immediately available funds,
on a daily basis, at such time as Agent shall direct,
all funds received or deposited into the Blocked
Accounts to such bank account of Lender as Lender may
from time to time designate for such purpose ("Payment
Account"). Agent shall instruct the depository banks
at which the Blocked Accounts are maintained to
transfer the funds on deposit in the Blocked Accounts
to such operating bank account of Borrower as Borrower
may specify in writing to Agent until such time as
Agent shall notify the depository bank otherwise.
Agent may instruct the depository bank at which the
Blocked Accounts are maintained to transfer all funds
received or deposited into the Blocked Accounts to the
Payment Account at any time that either: (i) an Event
of Default, or event which with notice or passage of
time or both would constitute an Event of Default,
shall exist or have occurred, or (ii) Borrower shall
have failed to deliver any Borrowing Base Certificate
in accordance with the terms hereof, or (iii) upon
Agent's good faith behalf, any information contained in
any Borrowing Base Certificate is incomplete,
inaccurate or misleading, or (iv) any Loans are
outstanding. Borrower agrees that all payments made to
such Blocked Accounts or other funds received and
collected by Agent, whether on the Accounts or as
proceeds of Inventory or other Collateral or otherwise
shall be the property of Agent and Lenders."
-18-
<PAGE>
15. TERM.
(a) Section 10.2(a) of the Loan Agreement is hereby
amended by deleting the reference to "four (4) years" in the
first sentence thereof and substituting "seven (7) years"
therefor.
(b) Section 10.2(e) of the Loan Agreement is hereby
amended by adding the following new subsections 10.2(e)(v),
10.2(e)(vi) and 10.2(e) (vii) immediately after subsection
10.2(e)(iv):
"(v) $500,000, if such termination is effective
on or after December 29, 1996 but prior to December 29,
1998;
(vi) $250,000, if such termination is effective
on or after December 29, 1998 but prior to October 29,
1999."
16. EXTENSION FEE. In addition to all other fees, charges,
interest and expenses payable by Borrower to Agent and Lenders
under the Loan Agreement and the other Financing Agreements,
Borrower hereby agrees to pay to Agent for the account of Lenders
an extension fee in an amount equal to $200,000, which amount
shall be payable simultaneously with the execution hereof, and
which amount is fully earned as of the date hereof, and may be
charged directly to Borrower's loan account maintained by Agent.
17. CONDITIONS PRECEDENT. The effectiveness of the
amendments to the Loan Agreement provided for herein shall only
be effective upon the satisfaction of each of the following
conditions precedent in a manner reasonably satisfactory to
Agent:
(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 shall exist or have occurred;
(b) Agent shall have received an original of this
Amendment, duly authorized, executed and delivered by Borrower,
and Lenders;
(c) Agent shall have received an amendment to the Co-
Lending and Agency Agreement among Agent and Lenders.
18. 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 any 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 be construed as one agreement.
-19-
<PAGE>
19. FURTHER ASSURANCES. The parties hereto shall execute
and deliver such additional documents and take such additional
actions as may be necessary or desirable to effectuate the
provisions and purposes of this Amendment.
20. GOVERNING LAW. The rights and obligations hereunder of
each of the parties hereto shall be governed by and interpreted
and determined in accordance with the laws of the State of
New York.
21. 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.
22. 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.
Please indicate the acknowledgment and agreement of
Borrower to the foregoing by signing in the space provided below.
The amendments contained herein shall only be effective after the
receipt by Agent of an original of this Amendment duly
authorized, executed and delivered by Borrower and each of
Lenders.
Very truly yours,
CONGRESS FINANCIAL CORPORATION,
in its individual capacity and
as agent
By: /s/ Laurence S. Forte
Title: Vice President
SECURITY PACIFIC BUSINESS CREDIT INC.
By: /s/ Michael Kurshuk
Title: Vice President
ACKNOWLEDGED AND AGREED:
WCI STEEL, INC.
By: /s/ Bret W. Wise
Title: Vice President and CFO
-20-
EXHIBIT L
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
A new Exhibit L to Amended and Restated Loan Agreement
is hereby added as follows:
BORROWING BASE CERTIFICATE
CONGRESS FINANCIAL CORPORATION, as Agent for
itself and SECURITY PACIFIC BUSINESS CREDIT INC.
PURPOSE OF THIS FORM
Many asset based borrowers are required to keep the dollar amount
of their borrowings within a dollar total based on percentage
advances against accounts receivable and inventory. This
Certificate assures compliance with the terms. All capitalized
terms used herein and not defined herein shall have the meanings
given to them in the Amended and Restated Loan and Security
Agreement, dated as of December 29, 1992, by and among Congress
Financial Corporation ("Congress") and Security Pacific Business
Credit Inc. (together with Congress, individually and
collectively, "Lenders") and Congress Financial Corporation, as
Agent for Lenders ("Agent"), and WCI Steel, Inc. ("Borrower"), as
amended (the "Loan Agreement").
COMPLETION INSTRUCTIONS
The Borrowing Base Certificate should be completed by the
Borrower.
A. Enter date of information.
B. All Certificates should be numbered in sequential order.
RECONCILIATION OF COLLATERAL BALANCE
ACCOUNTS AVAILABILITY
C. Enter date of most recent Certificate previously delivered
to Agent.
1. Enter dollar balance certified to Agent per previous
Certificate and the date of the previous Certificate.
(Dollar figure from line 5 of previous Certificate).
2. Enter dollar amount of collections applied by the Borrower
against accounts receivable since the date of the last
Certificate.
3. Enter dollar amount of other credits and adjustments applied
by the Borrower against accounts receivable.
<PAGE>
4. Enter dollar amount of any new sales since the date of the
last Certificate.
5. Enter total of all Accounts being certified to Agent per the
date of the Certificate. This is the sum of lines 1 through
4 above and is calculated as follows:
(a) Dollar balance certified to tender per previous
Certificate
MINUS (-)
(b) Dollar amount of collections and credits received since
date of last Certificate
PLUS (+)
(c) Dollar amount of any new sales since the date of the
last Certificate.
6. Enter dollar amount of Accounts not meeting the criteria of
Eligible Accounts. Eligible Accounts are defined in the
Loan Agreement.
7. Subtract item 6 from item 5 and enter this figure.
8. Multiply the dollar amount in item 7 by the percentage of
the lending formula applicable to Eligible Accounts provided
for in the Loan Agreement and enter this new dollar amount.
9. Enter Availability Reserves.
10. Subtract the Availability Reserves from item 8 and enter
Accounts Availability.
INVENTORY AVAILABILITY
D. Enter date of most recent Inventory Report delivered to
Lender
11. Enter total Value of Inventory as of the most recent
Inventory Report delivered to Agent. "Value" is lower of
cost or market and should be determined in the same manner
as in prior certificates.
12. Enter the total Value of Inventory from the most recent
Inventory Report delivered to Agent which did not meet the
criteria for Eligible Inventory. Eligible Inventory is
defined in the Loan Agreement.
13. Subtract item 12 from item 11 and enter this figure.
-2-
<PAGE>
14. Multiply the dollar amount in item 13 by the percentage of
the lending formula applicable to Eligible Inventory
provided for in the Loan and Security Agreement and enter
this new dollar amount.
15. Enter applicable Availability Reserves, excluding reserves
for Letter of Credit Accommodations relating to Inventory
purchases and freight, taxes, duty and other amounts which
Agent estimates must be paid in connection with delivery of
Inventory to Borrower's premises.
16. Subtract the Availability Reserves, excluding reserves for
Letter of Credit Accommodations, from item 14.
17. Enter the amount of the sublimit on loans based on Inventory
from the Loan Agreement.
18. Enter lesser of formula availability as set forth in item 16
or the sublimit on loans based on Inventory provided for in
the Loan Agreement as set forth in item 17.
TOTAL AVAILABILITY
19. Enter the sum of item 10 plus item 18.
20. (a) Enter outstanding undrawn amounts of Letter of Credit
Accommodations issued for any purpose other than the
purchase of Eligible Inventory.
(b) Enter the sum of: (i) the amount equal to (A) 100%
minus the percentage set forth in item 14 multiplied by
(B) the outstanding undrawn amounts of Letter of Credit
Accommodations issued for purposes of purchasing
Eligible Inventory plus (ii) the amount equal to
freight, taxes, duty and other amounts which Lender
estimates must be paid in connection with delivery of
Inventory to Borrower's premises.
21. Subtract the sum of item 20(a) and 20(b) from item 19 and
enter this figure.
22. Enter the amount of the Maximum Credit from the Loan
Agreement, less the then outstanding principal amount of the
Term Loan, if any.
23. Enter the lesser of item 21 or item 22.
RECONCILIATION OF LOAN BALANCE
24. Enter dollar figure of outstanding Loans from last
Certificate.
-3-
<PAGE>
25. List cash collections received by Borrower and remitted or
to be remitted to Lender since last Certificate.
26. Enter dollar amount of Loans made by Lender and other
charges payable to Lender (including adjustments for
returned checks and other remittances, fees, interests,
costs and expenses) since last Certificate.
27. Enter dollar amount of outstanding Revolving Loans (item 24
less item 25 plus item 26).
28. Enter outstanding undrawn amounts of Letter of Credit
Accommodations.
29. Enter total outstanding Revolving Loans and Letter of Credit
Accommodations. (Add items 27 and 28).
30. Subtract item 29 from 23 and enter dollar amount.
31. Name of Borrower.
32. Signature of person authorized by Borrower on the corporate
borrowing resolution.
-4-
<PAGE>
Date: (A)
Number: (B)
BORROWING BASE CERTIFICATE
Pursuant to the Amended and Restated Loan and Security Agreement. dated as of
December 29,1992, by and among Congress Financial Corporation ("Congress")
and Security Pacific Business Credit Inc. (together with Congress,
individually and collectively, "Lenders"), Congress Financial
Corporation, as agent for Lenders ("Agent") and the undersigned ("Borrower"),
and any amendments thereto (the "Loan Agreement), Borrower hereby certifies
to Agent, as of the above date, as follows:
RECONCILIATION OF COLLATERAL BALANCE
ACCOUNTS AVAILABILITY
1. Total Accounts as of ( C ) $ (1)
-------- -------
2. Less: Collections $ (2)
-------
3. Less: Credits and Adjustments since
date of prior Certificate $ (3)
-------
4. Add: New sales since date of prior
Certificate $ (4)
-------
5. Current total of all Accounts $ (5)
------
6. Total amount of Accounts which
are not Eligible Accounts (as $ (6)
------
per Schedule I annexed hereto)
7. Net Amount of Eligible Accounts
(item 5 less item 6) $ (7)
------
8. Availability based on Net
Amount of Eligible Accounts
( % of item 7) $ (8)
--- ------
9. Less: Availability Reserves $ (9)
-------
10. Accounts Availability $ (10)
------
INVENTORY AVAILABILITY
11. Total Value of Inventory as of (D) $ (11)
------ -------
12. Total Value of Inventory which is not
Eligible Inventory (as per Schedule II
annexed hereto) $ (12)
-------
13. Value of Eligible Inventory (item 11
less item 12) $ (13)
------
14. Availability based on Eligible Inventory
( % of item 13) $ (14)
---- -------
15. Less: Availability Reserves $ (15)
-------
16. Inventory Formula Availability $ (16)
------
17. Inventory Sublimit $ (17)
------
18. Inventory Availability (lesser of
item 16 or item 17) $ (18)
------
TOTAL AVAILABILITY
19. Total Availability based on Accounts
and Inventory $ (19)
------
20. Less: Availability Reserves for Letters
of Credit
(a) 100% X Standby Letters of Credit $(20a)
------
(b) % X Letters of Credit for
----
Inventory plus freight, duty,
taxes, etc. $(20b)
------
21. Availability $ (21)
------
22. Maximum Credit (less the then outstanding
amount of the Term Loan, if any) $ (22)
------
23. Total Availability (lesser of item 21 or 22) $ (23)
------
RECONCILIATION OF LOAN BALANCE
24. Principal amount of outstanding
Loans as of the date of prior
Certificate $ (24)
------
-2-
<PAGE>
25. Less: Net cash collections since
date of prior Certificate
----------
--------- $ (25)
--------- -------
26. Add: Principal amount of
Loans made since date of prior
Certificate $ (26)
-------
27. Current principal amount of outstanding
Loans $ (27)
-------
28. Current undrawn amount of outstanding
Letter of Credit Accommodations $ (28)
-------
29. Total Loans and Letters of
Credit Accommodations $ (29)
--------
30. Unused availability (item 23 less item 29) $ (30)
--------
As of the date of this Certificate, no Event of Default exists or has
occurred and is continuing. Borrower acknowledges that the Loans and Letter
of Credit Accommodations by Agent to Borrower are based upon Agent's reliance
on the information contained herein and all representations and warranties
with respect to Accounts and Inventory in the Loan Agreement are applicable
to the Accounts and Inventory included in this Certificate. The reliance by
Agent on this Certificate should not be deemed to limit the right of Agent to
establish or revise criteria of eligibility or Availability Reserves or
otherwise limit, impair, or affect in any manner the rights of Agent and
Lenders under the Loan Agreement. In the event of any conflict between the
determination of Agent of the amount of the Loans and Letter of Credit
Accommodations available to Borrower in accordance with the terms of the Loan
Agreement and the determination by Borrower of such amounts, the
determination of Agent shall govern. All capitalized terms used in this
Certificate shall have the meaning assigned to them in the Loan Agreement.
(31)
-------------------
By: (32)
-------------------
Title:
-3-
<PAGE>
SCHEDULE I
to
BORROWING BASE CERTIFICATE
1. Accounts unpaid more than days
----
after invoice date $
----------
2. Cross-Age Accounts
----------
3. Concentration Accounts
----------
4. Affiliate Accounts
----------
5. Returns, Discounts, Claims, Credits
Allowances, Taxes
----------
6. Other
----------
Total Accounts which are
not Eligible Accounts $
==========
-4-
<PAGE>
SCHEDULE II
to
BORROWING BASE CERTIFICATE
1. Work-in-Process $
----------
2. Slow Moving
----------
3. Packaging and Supplies
----------
4. Other
----------
Total Value of Inventory
which is not Eligible Inventory $
==========
-5-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AT July 31, 1996 (UNAUDITED) AND THE
CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTH PERIOD ENDED
July 31, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JUL-31-1996
<CASH> 138,633
<SECURITIES> 18,052
<RECEIVABLES> 67,352
<ALLOWANCES> 1,700
<INVENTORY> 81,044
<CURRENT-ASSETS> 314,241
<PP&E> 298,936
<DEPRECIATION> 103,903
<TOTAL-ASSETS> 571,947
<CURRENT-LIABILITIES> 126,428
<BONDS> 209,354
0
0
<COMMON> 366
<OTHER-SE> 73,098
<TOTAL-LIABILITY-AND-EQUITY> 571,947
<SALES> 490,147
<TOTAL-REVENUES> 490,147
<CGS> 411,467
<TOTAL-COSTS> 411,467
<OTHER-EXPENSES> 33,541
<LOSS-PROVISION> (642)
<INTEREST-EXPENSE> 18,742
<INCOME-PRETAX> 31,852
<INCOME-TAX> 12,740
<INCOME-CONTINUING> 19,112
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,112
<EPS-PRIMARY> .52
<EPS-DILUTED> .52
</TABLE>
