<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, 1999.
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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: 333-18019
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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) 841-8302
(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.
[ ] Yes [X] No
As of August 24, 1999, the registrant had 100 shares of its common
stock, no par value, $.01 stated value, outstanding.
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<PAGE> 2
WCI STEEL, INC. AND SUBSIDIARIES
INDEX
--------------------------------
Page No.
--------
PART I FINANCIAL INFORMATION
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Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
July 31, 1999 and October 31, 1998. 3
Condensed Consolidated Statements of Income for the
three and nine months ended July 31, 1999 and 1998. 4
Condensed Consolidated Statements of Cash Flows for the
nine months ended July 31, 1999 and 1998. 5
Notes to Condensed Consolidated Financial Statements. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II OTHER INFORMATION
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Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit Index 17
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
WCI STEEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
July 31, October 31,
1999 1998
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.........................$ 61,809 $ 62,195
Accounts receivable, less allowances.............. 61,377 48,724
Inventories....................................... 86,245 87,140
Deferred income taxes............................. - 8,610
Prepaid expenses.................................. 363 1,144
-------- --------
Total current assets......................... 209,794 207,813
Property, plant and equipment, net.................. 210,201 217,624
Other assets, net................................... 28,827 34,849
-------- --------
Total assets............................$ 448,822 $ 460,286
======== ========
LIABILITIES and SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities
Current portion of long-term debt.................$ 120 $ 116
Accounts payable.................................. 54,911 46,620
Accrued liabilities............................... 47,186 53,237
-------- --------
Total current liabilities.................... 102,217 99,973
Long-term debt, excluding current portion........... 301,411 301,502
Deferred income taxes............................... - 13,368
Postretirement health care benefits................. 97,777 92,738
Pension benefits.................................... 15,730 23,524
Other liabilities................................... 12,837 14,054
-------- --------
Total liabilities....................... 529,972 545,159
-------- --------
Shareholder's equity (deficit)
Preferred stock, par value $1,000 per share, 5,000
shares authorized, none issued. ................ - -
Common stock, no par value, stated value $.01 per
share, 40 million shares authorized, 100 shares
issued and outstanding.......................... - -
Accumulated deficit............................... (81,150) (84,873)
-------- --------
Total shareholder's equity (deficit).... (81,150) (84,873)
Commitments and contingencies....................... - -
<PAGE> 4
Total liabilities and -------- --------
shareholder's equity (deficit)..........$ 448,822 $ 460,286
======== ========
<FN>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
WCI STEEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)
(Unaudited)
Three months Nine months
ended July 31, ended July 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales........................ $ 143,086 $ 174,947 $ 392,478 $ 519,399
Operating costs and expenses
Cost of products sold........... 119,395 144,947 343,111 435,999
Depreciation and amortization... 5,855 6,436 17,488 19,253
Selling, general and
administrative expenses........ 4,076 4,614 10,817 13,146
------- ------- ------- -------
129,326 155,997 371,416 468,398
------- ------- ------- -------
Operating income................. 13,760 18,950 21,062 51,001
------- ------- ------- -------
Other income (expense)
Interest expense................ (8,031) (8,007) (24,047) (24,029)
Interest and other income, net.. 762 775 2,150 1,491
------- ------- ------- -------
(7,269) (7,232) (21,897) (22,538)
------- ------- ------- -------
Income (loss) before income taxes 6,491 11,718 (835) 28,463
Income tax (benefit) expense..... - 4,570 (4,558) 10,598
------- ------- ------- -------
Net income....................... $ 6,491 $ 7,148 $ 3,723 $ 17,865
======= ======= ======= =======
<FN>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</FN>
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
WCI STEEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited) Nine months
ended July 31,
1999 1998
<S> <C> <C>
Cash flows from operating activities
Net income........................................$ 3,723 $ 17,865
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization................ 15,290 17,055
Amortization of deferred maintenance costs... 2,198 2,198
Amortization of financing costs.............. 1,006 993
Postretirement health care benefits.......... 5,039 4,979
Pension benefits............................. (2,514) 2,021
Deferred income taxes........................ (4,758) 3,353
Other........................................ 103 (382)
Cash provided (used) by changes in certain assets
and liabilities
Accounts receivable........................ (12,653) 2,636
Inventories................................ 895 15,942
Accounts payable........................... 8,291 765
Accrued liabilities........................ (8,513) (2,949)
Other assets and liabilities, net.......... (436) (48)
------- -------
Net cash provided by operating activities. 7,671 64,428
------- -------
Cash flows from investing activities
Additions to property, plant and equipment........ (7,970) (12,955)
Gross proceeds from the sale of assets............ - 110
------- -------
Net cash used by investing activities..... (7,970) (12,845)
------- -------
Cash flows from financing activities
Dividends paid.................................... - (11,950)
Principal payments on long-term debt.............. (87) (1,290)
------- -------
Net cash used by financing activities..... (87) (13,240)
------- -------
Net increase (decrease) in cash and cash equivalents... (386) 38,343
Cash and cash equivalents at beginning of period....... 62,195 18,989
------- -------
Cash and cash equivalents at end of period.............$ 61,809 $ 57,332
======= =======
Supplemental disclosure of cash flow information
Cash paid for interest............................$ 30,533 $ 30,555
Cash paid for income taxes........................ 971 1,486
<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
Three and nine months ended July 31, 1999 and 1998
( Unaudited )
NOTE 1 : BASIS OF PRESENTATION
WCI Steel, Inc. (Company or WCI) is a wholly-owned subsidiary of Renco Steel
Holdings, Inc. (Renco Steel) and an indirect wholly-owned subsidiary of The
Renco Group, Inc. (Renco). 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 months ended July
31, 1999 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 Form 10-K for the fiscal year ended October 31, 1998.
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, 1999 and October 31, 1998 was as follows:
<TABLE>
<CAPTION>
July 31, October 31,
1999 1998
(Unaudited)
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Raw materials.........................$ 24,426 $ 36,259
Finished and semi-finished product.... 67,410 58,332
Supplies.............................. 71 86
-------- --------
91,907 94,677
Less LIFO reserve..................... 5,662 7,537
-------- --------
$ 86,245 $ 87,140
======== ========
</TABLE>
NOTE 3 : ENVIRONMENTAL MATTERS and OTHER CONTINGENCIES
In common with much of the steel industry, the Company's facilities are
located on sites that have been used for heavy industrial purposes for
decades. The Company is and will continue to be subject to numerous
federal, state and local environmental laws and regulations governing, among
other things, air emissions, waste water discharge and solid and hazardous
waste disposal. The Company has made and intends to continue to make the
necessary expenditures for environmental remediation and compliance with
environmental laws and regulations. Environmental laws and regulations have
changed rapidly in recent years, and the Company may be subject to more
stringent environmental laws and regulations in the future. Compliance with
<PAGE> 7
more stringent environmental laws and regulations could have a material
adverse effect on the Company's financial condition and results of
operations.
The Company was named a defendant in two civil actions instituted by the
Department of Justice (DOJ), on behalf of the Environmental Protection Agency
(EPA), in the United States District Court for the Northern District of Ohio
which were recently resolved. The first action, instituted on June 29, 1995,
under the Clean Water Act, alleged numerous violations of the Company's
National Pollutant Discharge Elimination System permit during the years 1989
through 1996. The second action, instituted on March 29, 1996, under the
Clean Air Act, alleged violations by the Company of the work practice,
inspection and notice requirements for demolition and renovation under the
National Emission Standard for Hazardous Air Pollutants for Asbestos and also
violations of the particulate standard and the opacity limits at the
Company's facilities in Warren, Ohio. On June 4, 1999, the court entered
consent decrees in these two cases which provide for $1.74 million in cash
penalties which were paid in July 1999 and for injunctive relief and
supplemental environmental projects estimated to cost between $1.7 million
and $2.2 million that will be expended over two years. The largest of the
projects to be undertaken as part of the settlement involves sediment removal
from the Mahoning River at an estimated cost of $750,000 but not to exceed $1
million.
The Company currently is the defendant in a pending action instituted by DOJ
on May 11, 1998 under the Resource Conservation and Recovery Act (RCRA),
which alleges violations of RCRA, the Ohio Administrative Code (OAC) and the
Company's hazardous waste management permit related to the Company's
management of alleged hazardous waste in surface impoundments at the Warren,
Ohio facility. The action alleges that from September 1988 to the present,
the Company operated hazardous waste management units at the Warren facility
without the proper permits and in noncompliance with RCRA. This action seeks
a civil penalty of not more than the statutory maximum of $25,000 per day per
violation ($27,500 per day per violation for violations since January 30,
1997) and also an injunction requiring closure of the surface impoundments
under RCRA. The Company believes that it has defenses to liability and that
imposition of the statutory maximum penalty for the alleged violations is
unlikely, in any event, based upon past judicial penalties imposed under
RCRA. A trial in the RCRA action was completed in June 1999. However, the
court has not yet rendered a decision. If a substantial penalty similar to
the statutory maximum penalty were imposed, it would have a material adverse
effect on the operating results and financial condition of the Company.
As a condition of a previous RCRA operating permit, the Company is required
to undertake a corrective action program with respect to historical material
handling practices at the Warren facility. The Company is currently
undertaking the first investigation step of the corrective action program,
the RCRA Facility Investigation (RFI), the initial phase of which is expected
to be completed in 1999. The RFI workplan identifies thirteen historical
solid waste management units which are the subject of the RFI, including
areas of the facility which are the subject of the RCRA civil action filed on
May 11, 1998 described above. The final scope of the corrective action
required to remediate any contamination that may be present at or emanating
from the Warren facility is dependent upon the completion and 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
<PAGE> 8
incurred and there can be no assurance that any such corrective action
program would not have a material adverse effect on the operating results or
financial condition of the Company.
On January 23, 1996, two retired employees instituted an action against the
Company and the United Steelworkers of America (USWA) 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
violated certain agreements, the Employee Retirement Income Security Act
(ERISA), the National Labor Relations Act (NLRA) and common law. On July 31,
1997, the court granted the Company's motion to dismiss this action and
entered judgement in favor of the Company and the USWA. The Plaintiffs filed
an appeal regarding the court's decision to dismiss which was heard in June
1998. In March 1999, the appellate court upheld the dismissal of the claims
under ERISA and common law, but reversed the dismissal of the NLRA claim and
remanded to the district court for further proceedings.
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
business. A liability has been established for an amount, which the Company
believes is adequate, based on information currently available, to cover the
costs to resolve the above described matters, including remediation, if any,
except for any costs of corrective action that may result from the RFI for
which no estimate can currently be made. The outcome of the above described
matters could have a material adverse effect on the future operating results
of the Company in a particular quarterly or annual period; however, the
Company believes that the effect of such matters will not have a material
adverse effect on the Company's consolidated financial position.
NOTE 4 : INCOME TAXES
On January 15, 1999, Renco filed an election with the consent of its
shareholders with the Internal Revenue Service to change its taxable status
from that of a subchapter C corporation to that of a subchapter S
corporation, effective November 1, 1998. At the same time, Renco elected for
the Company to be treated as a qualified subchapter S subsidiary (QSSS).
Most states in which the Company operates will follow similar tax treatment.
QSSS status requires the ultimate shareholders to include their pro rata
share of the Company's income or loss in their individual tax returns. The
Company will continue to provide for state and local income taxes for the
taxing jurisdictions which do not recognize QSSS status, however, management
believes this is not material to the Company. As a result of this change in
tax status, the Company recognized an income tax benefit of $4,558,000 during
the three months ended January 31, 1999, which includes the elimination of
net deferred tax liabilities recorded as of October 31, 1998.
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three Months Ended July 31, 1999 Compared to
Three Months Ended July 31, 1998
Net sales for the three months ended July 31, 1999 were $143.1 million on
328,336 tons shipped, representing an 18.2% decrease in net sales and a 10.7%
decrease in tons shipped compared to the three months ended July 31, 1998.
During the 1998 period, the Company shipped 23,458 tons of lower value added
semi-finished steel. Excluding semi-finished steel, net sales per ton
shipped decreased 11.0% to $436 in the 1999 quarter compared to $490 in the
1998 quarter. Excluding semi-finished steel, shipments of custom carbon,
alloy and electrical steels accounted for 66.6% of total shipments during the
1999 quarter compared to 66.5% in the comparable period of 1998. While steel
imports have receded from record levels, they remain above historical levels,
and net sales per ton shipped remain well below the comparable period in 1998
as a result of the unprecedented surge in steel imports that occurred during
the second half of 1998. The Company realized slightly higher selling prices
in the third quarter compared to the second quarter of 1999; however, this
increase was offset by changes in product mix. Many steel producers,
including the Company, have announced price increases of $10 to $30 per ton
effective October 1999. However, no assurance can be given that such price
increases will be realized. The Company's order backlog increased to 255,000
tons at July 31, 1999 compared to 155,000 tons at October 31, 1998 and
236,000 tons at July 31, 1998.
Gross margin (net sales less cost of products sold) was $23.7 million for the
three months ended July 31, 1999 compared to $30.0 million for the three
months ended July 31, 1998. The decrease in gross margin in the 1999 quarter
is primarily attributable to the lower selling prices and volume discussed
above partially offset by lower raw material costs, operating costs and
variable compensation expense. During the fourth quarter of 1999, the
Company will perform certain scheduled annual maintenance at its blast
furnace designed to extend the life of the furnace lining. As a result of
this, and other scheduled maintenance, operating costs are expected to rise
slightly in the fourth quarter compared to the third quarter.
Operating income was $13.8 million, $42 per ton, for the three months ended
July 31, 1999 compared to $19.0 million, $52 per ton, for the three months
ended July 31, 1998. The operating results for the 1999 quarter reflect the
lower gross margin discussed above partially offset by decreases in
depreciation expense and selling, general and administrative expenses
primarily as a result of lower variable compensation expense.
As a result of the items discussed above, income before taxes was $6.5
million in 1999 compared to $11.7 million in 1998. Effective November 1,
1998, the Company was designated as a qualified subchapter S subsidiary by
Renco. Accordingly, the Company is generally not subject to income taxes.
Nine Months Ended July 31, 1999 Compared to
Nine Months Ended July 31, 1998
Net sales for the nine months ended July 31, 1999 were $392.5 million on
888,978 tons shipped, representing a 24.4% decrease in net sales and a 19.5%
decrease in tons shipped compared to the nine months ended July 31, 1998.
<PAGE> 10
The Company shipped 69,714 tons of lower value added semi-finished steel
during the 1998 period. Excluding semi-finished steel, net sales per ton
shipped decreased 8.9% to $441 compared to $484 for the 1998 period. This
decrease is the result of an unprecedented surge in imports during the second
half of 1998. Excluding semi-finished steel, shipments of custom carbon,
alloy and electrical steels accounted for 66.7% in the 1999 period and 65.1%
in the 1998 period.
Gross margin (net sales less cost of goods sold) was $49.4 million for the
nine months ended July 31, 1999 compared to $83.4 million for the nine months
ended July 31, 1998. The decrease in gross margin reflects the lower selling
prices and volume discussed above and the effect of higher costs in the first
quarter of 1999 caused by production levels being significantly below
capacity. Production returned to more normal levels late in the first
quarter of 1999 and the Company enjoyed lower raw material and production
costs throughout the second and third quarters of 1999 compared to the same
periods in 1998. In addition, the decrease in gross margin resulted in lower
variable compensation expense in 1999 compared to 1998.
Operating income was $21.1 million, $24 per ton shipped, for the nine months
ended July 31, 1999 compared to $51.0 million, $46 per ton shipped, for the
nine months ended July 31, 1998. The decrease in operating income in the
1999 period reflects the lower gross margin discussed above offset by lower
depreciation expense and a decrease in selling, general and administrative
expenses in the 1999 period as a result of lower variable compensation
expense.
As a result of the items discussed above, the Company incurred a loss before
taxes of $0.8 million in the 1999 period compared to income before taxes of
$28.5 million in the 1998 period. Effective November 1, 1998, the Company
was designated as a qualified subchapter S subsidiary by Renco. Accordingly,
the Company is generally not subject to income taxes and recognized an income
tax benefit of $4.6 million during the three months ended January 31, 1999,
representing the elimination of net deferred tax liabilities recorded as of
October 31, 1998.
Liquidity and Capital Resources
WCI s liquidity requirements result from capital investments, working capital
requirements, postretirement health care and pension funding, and interest
expense.
WCI has met these requirements in each fiscal year since 1992 from cash
balances and cash provided by operating activities. The Company's primary
sources of liquidity as of July 31, 1999 consisted of cash and cash
equivalents of $61.8 million and available borrowing under its $100 million
revolving credit facility (Revolving Credit Facility). The Revolving Credit
Facility has a maximum borrowing limit of $100 million, and is secured by
eligible inventories and receivables, as defined therein. During the third
quarter of 1999, the Company extended the term of the Revolving Credit
Facility to December 29, 2003. As of July 31, 1999, WCI had no borrowings
outstanding under the Revolving Credit Facility, with a borrowing limit of
$93.5 million based on eligible inventories and receivables, net of $6.5
million in outstanding letters of credit. Management believes that it has
sufficient liquidity to support its operations for the foreseeable future.
<PAGE> 11
Cash provided by operating activities was $7.7 million for the nine months
ended July 31, 1999 compared to $64.4 million for the 1998 period. The lower
operating cash flow in 1999 compared to 1998 resulted primarily from a decrease
in income before taxes as described above and from changes in working
capital.
Capital expenditures were $8.0 million and $13.0 million during the nine months
ended July 31, 1999 and 1998, respectively, and are estimated to be
approximately $11 million for all of fiscal 1999. Management has funded
capital expenditures in 1999 and 1998 through cash balances and cash provided
by operating activities. At July 31, 1999, the Company had commitments for
capital expenditures of approximately $7.7 million.
The Revolving Credit Facility and the indenture governing the Company's 10%
Senior Secured Notes due 2004 (Senior Secured Notes) contain numerous
covenants and prohibitions that limit the financial activities of the
Company, including requirements that the Company satisfy certain financial
ratios which limit the incurrence of additional indebtedness. The ability of
the Company to meet its debt service requirements and to comply with such
covenants will be dependent upon future operating performance and financial
results of the Company, which will be subject to financial, economic,
political, competitive and other factors affecting the Company, many of which
are beyond its control.
The Company paid no dividends during the nine months ended July 31, 1999 and,
under the terms of the Senior Secured Notes indenture, $2.1 million was
available for dividends at July 31, 1999.
Year 2000 Business Matters
Many information and process control systems used in the current business
environment were designed to use only two digits in the date field and thus
may not function properly in or after the year 2000. Over the past several
years, the Company has been assessing and modifying its business systems to
be year 2000 ready and has completed the required program changes and the
replacement/upgrading of purchased systems. The Company has completed
testing of the applications and, after completing additional remediation on
approximately 5% of the programs tested, has found them to be year 2000
ready. The Company completed a comprehensive enterprise-wide test for its
business systems in March 1999. Based on the results of this test, the
Company believes that its critical business systems are year 2000 ready. The
Company has completed an inventory and assessment of its process control
environment, including automation, instrumentation and components with
embedded chips, with approximately 90% of the assessed inventory being year
2000 ready. The Company completed testing of the process control systems and
components, including integration tests, during June 1999 and has identified
additional remediation which is expected to be completed by September 30,
1999. The Company does not expect year 2000 issues related to its business
systems or process control environment to cause any significant disruption to
operations. The Company incurred $0.3 million of incremental costs to
address year 2000 issues during the nine months ended July 31, 1999 and,
based on information available at this time, estimates that it will incur
additional incremental costs of approximately $0.2 million during the
remainder of 1999.
<PAGE> 12
In conjunction with its efforts to achieve year 2000 readiness, the Company
is also monitoring the status of the year 2000 readiness programs at its
significant suppliers and business partners through questionnaires which were
sent to each such entity. The Company has received responses from each of
these entities. The Company is evaluating these responses and has made and
intends to make additional inquiries of critical suppliers during 1999 to
monitor the status of their year 2000 readiness efforts. The Company is
using information learned from this process to develop its contingency plans
to mitigate the impact that may occur if its critical suppliers are not year
2000 ready on a timely basis.
While the Company is developing contingency plans for the sourcing and
transportation of raw material components critical to its operations, the
Company is presently dependent on single sources for certain of its energy,
raw materials and transportation needs. If certain vendors are unable to
supply the raw materials, energy or transportation services on a timely basis
in the year 2000, it could result in the Company being unable to operate or
require the Company to operate at a reduced level. In addition, the lack of
accurate and timely year 2000 information from suppliers of automation and
process control systems and components or suppliers' inability to provide
year 2000 ready replacement components could result in the Company being
unable to operate, or require the Company to operate at a reduced level, in
the year 2000.
Accounting Standards
In March 1998, the American Institute of Certified Public Accounts issued its
Statement of Position No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
provides guidelines for companies to capitalize or expense as incurred costs
to develop or obtain internal-use software. The Company adopted SOP 98-1
effective November 1, 1998. The adoption of SOP 98-1 did not have a material
impact on the Company's results of operations for the nine months ended July
31, 1999.
Labor Matters
Most of the Company's hourly employees are represented by the USWA, with
which the Company has a four-year collective bargaining agreement that
expires September 1, 1999. While the Company does not expect any disruption
to its operations as a result of the expiration of the current agreement, the
Company has experienced such disruptions in the past, and no assurance can be
given that there will not be a disruption to operations at the expiration of
this agreement. The Company is unable to estimate the effect on its results
of operations that a new labor agreement may have.
Forward-Looking Statements
This report includes "forward-looking statements" which involve known and
unknown risks, uncertainties and other important factors that could cause the
actual results, performance or achievements of the Company to differ
materially from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such risks, uncertainties and
other important factors include, among others: general economic and business
conditions; increasing industry capacity and levels of imports of steel or
<PAGE> 13
steel products; industry trends, including product pricing; competition;
currency fluctuations; the loss of any significant customers; availability of
qualified personnel; effects of future collective bargaining negotiations and
agreements; major equipment failures; changes in, or the failure or inability
to comply with, government regulation, including, without limitation,
environmental regulations; and the outcome of pending environmental and other
legal matters. These forward-looking statements speak only as of the date of
this report. The Company expressly disclaims any obligation or undertaking
to disseminate any updates or revisions to any forward-looking statement
contained herein to reflect any change in the Company's expectations with
regard thereto or any change in events, conditions or circumstances on which
any such statement is based.
<PAGE> 14
PART II - OTHER INFORMATION
WCI STEEL, INC.
ITEM 1. LEGAL PROCEEDINGS
Leonard v. WCI Steel, Inc.
--------------------------
Reference is made to the description of this action in the
Company's quarterly report on Form 10-Q for the quarter ended
April 30, 1999.
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, 1999 and as described in Note 3 to the condensed
consolidated financial statements.
United States v. WCI Steel, Inc.
--------------------------------
Reference is made to the description of these actions in the
Company's Form 10-Q for the quarter ended April 30, 1999, and
as described in Note 3 to the condensed consolidated financial
statements.
On June 4, 1999 the court entered consent decrees embodying
settlements reached between the Company and the EPA regarding the
Clean Water Act and Clean Air Act civil actions. The agreements
provide for $1.74 million in cash penalties which were paid in July
1999 and for injunctive relief and supplemental environmental
projects estimated to cost between $1.7 million and $2.2 million
that will be expended over two years. The largest of the projects
to be undertaken as part of the settlement involves sediment
removal from the Mahoning River at an estimated cost of $750,000
but not to exceed $1 million. WCI had previously established
reserves to provide for the estimated settlement and related costs
and does not expect the settlement to result in any charge to
earnings.
The action against the Company under the Resource Conservation
and Recovery Act remains pending and is not affected by these
settlements. A trial in this action was completed in June 1999.
However, the court has not yet rendered a decision. See note 3 to
Item 1. Financial Statements.
<PAGE> 15
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, 1999.
<PAGE> 16
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: August 24, 1999 /S/ JOHN P. JACUNSKI
-----------------------------
John P. Jacunski
Chief Financial Officer and
Controller
(principal financial officer)
<PAGE> 17
WCI STEEL, INC.
EXHIBIT INDEX
Exhibit Number Description
10.4.12 Second Amended and Restated Loan and
Security Agreement dated July 30, 1999.
27. Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AT July 31, 1999 (UNAUDITED) AND THE
CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTH PERIOD ENDED
July 31, 1999 (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-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JUL-31-1999
<CASH> 61,809
<SECURITIES> 0
<RECEIVABLES> 62,281
<ALLOWANCES> 904
<INVENTORY> 86,245
<CURRENT-ASSETS> 209,794
<PP&E> 363,445
<DEPRECIATION> 153,244
<TOTAL-ASSETS> 448,822
<CURRENT-LIABILITIES> 102,217
<BONDS> 301,411
0
0
<COMMON> 0
<OTHER-SE> (81,150)
<TOTAL-LIABILITY-AND-EQUITY> 448,822
<SALES> 392,478
<TOTAL-REVENUES> 392,478
<CGS> 343,111
<TOTAL-COSTS> 343,111
<OTHER-EXPENSES> 28,305
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,047
<INCOME-PRETAX> (835)
<INCOME-TAX> (4,558)
<INCOME-CONTINUING> 3,723
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,723
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 2. ACKNOWLEDGEMENT AND RESTATEMENT; JOINT AND
SEVERAL LIABILITY. . . . . . . . . . . . . . . . . . . . 16
2.1 Existing Obligations. . . . . . . . . . . . . . . . 16
2.2 Acknowledgement of Security Interests . . . . . . . 16
2.3 Existing Agreements . . . . . . . . . . . . . . . . 17
2.4 Intentionally omitted . . . . . . . . . . . . . . . 17
2.5 Restatement . . . . . . . . . . . . . . . . . . . . 17
2.6 Release . . . . . . . . . . . . . . . . . . . . . . 17
2.7 Joint and Several Liability . . . . . . . . . . . . 18
SECTION 3. AMOUNTS AND TERMS OF LOANS AND
OTHER FINANCIAL ACCOMMODATIONS . . . . . . . . . . . . . 19
3.1 Loans . . . . . . . . . . . . . . . . . . . . . . . 19
3.2 Letter of Credit Accommodations . . . . . . . . . . 20
3.3 Maximum Credit. . . . . . . . . . . . . . . . . . . 22
3.4 Reserves. . . . . . . . . . . . . . . . . . . . . . 22
3.5 Fees. . . . . . . . . . . . . . . . . . . . . . . . 22
3.6 Interest. . . . . . . . . . . . . . . . . . . . . . 23
3.7 Conduct of Accounts;
Cross-Collateralization . . . . . . . . . . . . . . 25
3.8 Collected Credit Balances . . . . . . . . . . . . . 27
3.9 Appointment of Agent for
Requesting Loans and Receipt of Loans
and Statements. . . . . . . . . . . . . . . . . . . 27
3.10 Use of Proceeds . . . . . . . . . . . . . . . . . . 28
3.11 Compensation Adjustment . . . . . . . . . . . . . . 28
3.12 Changes in Laws and Increased Costs of
Eurodollar Rate Loans . . . . . . . . . . . . . . . 30
SECTION 4. CONDITIONS PRECEDENT TO EFFECTIVENESS
AND TO LOANS AND OTHER FINANCIAL
ACCOMMODATIONS . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5. COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 33
6.1 Organization and Qualification. . . . . . . . . . . 34
6.2 Power and Authority . . . . . . . . . . . . . . . . 34
6.3 Capitalization. . . . . . . . . . . . . . . . . . . 35
6.4 Compliance with Other
Agreements and Applicable Law . . . . . . . . . . . 35
6.5 Governmental Approval . . . . . . . . . . . . . . . 36
6.6 Chief Executive Offices; Collateral
Locations . . . . . . . . . . . . . . . . . . . . . 36
6.7 Priority of Liens/Title to Properties . . . . . . . 36
6.8 Tax Returns . . . . . . . . . . . . . . . . . . . . 37
6.9 Litigation. . . . . . . . . . . . . . . . . . . . . 37
6.10 Intellectual Property . . . . . . . . . . . . . . . 37
6.11 Accounts. . . . . . . . . . . . . . . . . . . . . . 38
6.12 Employee Benefits . . . . . . . . . . . . . . . . . 38
6.13 Environmental Compliance. . . . . . . . . . . . . . 39
6.14 Investment Company. . . . . . . . . . . . . . . . . 40
6.15 Regulation U; Securities Exchange
Act of 1934 . . . . . . . . . . . . . . . . . . . . 40
6.16 No Material Adverse Change. . . . . . . . . . . . . 40
6.17 Financial Statements. . . . . . . . . . . . . . . . 40
6.18 Disclosure. . . . . . . . . . . . . . . . . . . . . 41
6.19 Labor Disputes. . . . . . . . . . . . . . . . . . . 41
6.20 Corporate Name; Tradenames; Prior
Transactions. . . . . . . . . . . . . . . . . . . . 41
6.21 New WCI Notes . . . . . . . . . . . . . . . . . . . 41
SECTION 7. ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . 43
7.1 Tradenames. . . . . . . . . . . . . . . . . . . . . 43
7.2 Subsidiaries. . . . . . . . . . . . . . . . . . . . 43
7.3 Indebtedness. . . . . . . . . . . . . . . . . . . . 44
7.4 Limitation on Liens . . . . . . . . . . . . . . . . 47
7.5 Loans, Investments, Guarantees, Etc . . . . . . . . 50
7.6 Transactions With Affiliates. . . . . . . . . . . . 53
7.7 Dividends . . . . . . . . . . . . . . . . . . . . . 56
7.8 Maintenance of Existence. . . . . . . . . . . . . . 59
7.9 Sale of Assets, Consolidation, Merger,
Dissolution, Etc. . . . . . . . . . . . . . . . . . 59
7.10 Compliance with Laws, Regulations,
Etc.. . . . . . . . . . . . . . . . . . . . . . . . 59
7.11 Payment of Taxes and Claims . . . . . . . . . . . . 60
7.12 Properties in Good Condition. . . . . . . . . . . . 60
7.13 Insurance . . . . . . . . . . . . . . . . . . . . . 61
7.14 Appraisals. . . . . . . . . . . . . . . . . . . . . 62
7.15 Compliance with ERISA . . . . . . . . . . . . . . . 62
7.16 Notice of Default . . . . . . . . . . . . . . . . . 63
7.17 Financial Statements and Other
Information . . . . . . . . . . . . . . . . . . . . 63
7.18 Consolidated Adjusted Working Capital . . . . . . . 67
7.19 Consolidated Adjusted Net Worth . . . . . . . . . . 67
7.20 Capital Expenditures. . . . . . . . . . . . . . . . 68
7.21 Further Assurances. . . . . . . . . . . . . . . . . 68
SECTION 8. EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . 69
8.1 Events of Default . . . . . . . . . . . . . . . . . 69
8.2 Remedies. . . . . . . . . . . . . . . . . . . . . . 71
SECTION 9. COLLECTION AND ADMINISTRATION. . . . . . . . . . . . . . 74
9.1 Collections; Management of Collateral. . . . . . . . 74
9.2 Right of Inspection; Access. . . . . . . . . . . . . 75
9.3 Lock Box or Blocked Account. . . . . . . . . . . . . 75
9.4 Accounts Documentation . . . . . . . . . . . . . . . 75
9.5 Specific Powers. . . . . . . . . . . . . . . . . . . 76
SECTION 10. EFFECTIVE DATE; TERMINATION;
COSTS; MISCELLANEOUS . . . . . . . . . . . 77
10.1 Agent . . . . . . . . . . . . . . . . . . . . . . 77
10.2 Term. . . . . . . . . . . . . . . . . . . . . . . 77
10.3 Expenses and Additional Fees. . . . . . . . . . . 78
10.4 Survival of Agreement . . . . . . . . . . . . . . 79
10.5 No Waiver; Cumulative Remedies. . . . . . . . . . 79
10.6 Notices . . . . . . . . . . . . . . . . . . . . . 80
10.7 Entire Agreement. . . . . . . . . . . . . . . . . 81
10.8 Amendments and Waivers. . . . . . . . . . . . . . 81
10.9 Applicable Law. . . . . . . . . . . . . . . . . . 81
10.10 Successors. . . . . . . . . . . . . . . . . . . . 81
10.11 Partial Invalidity. . . . . . . . . . . . . . . . 81
10.12 Headings. . . . . . . . . . . . . . . . . . . . . 82
10.13 Participant's Security Interests. . . . . . . . . 82
10.14 Waiver of Jury Trial. . . . . . . . . . . . . . . 82
10.15 Waiver of Counterclaims; Jurisdiction;
Service of Process. . . . . . . . . . . . . . . . 82
10.16 Indemnification . . . . . . . . . . . . . . . . . 83
10.17 Counterparts. . . . . . . . . . . . . . . . . . . 83
EXECUTION COPY
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
by and among
CONGRESS FINANCIAL CORPORATION
BANKAMERICA NATIONAL TRUST & SAVINGS ASSOCIATION
as Lenders
and
CONGRESS FINANCIAL CORPORATION
as Agent for Lenders
and
WCI STEEL, INC.
WCI STEEL SALES L.P.
as Borrowers
Dated: As of July 30, 1999
<PAGE>
INDEX TO EXHIBITS
EXHIBIT A JURISDICTIONS OF Section 6.1
QUALIFICATION
EXHIBIT B CHIEF EXECUTIVE OFFICES Section 6.6
EXHIBIT C LOCATIONS OF COLLATERAL Section 6.6
EXHIBIT D EXISTING LIENS Section 6.7, 7.4
EXHIBIT E PENDING LITIGATION Section 6.9
EXHIBIT F PENSION PLANS Section 6.12, 7.15
EXHIBIT G ENVIRONMENTAL VIOLATIONS Section 6.4, 6.13
EXHIBIT H COLLECTIVE BARGAINING Section 6.19
AGREEMENTS
EXHIBIT I CORPORATE NAME; TRADENAMES; Section 6.20, 7.1
PRIOR TRANSACTIONS
EXHIBIT J EQUIPMENT, REAL PROPERTY Section 5.2, 7.3,
AND OTHER ASSETS EXCLUDED 7.4
FROM COLLATERAL
EXHIBIT K EXISTING INDEBTEDNESS Section 7.3
EXHIBIT L FORM OF BORROWING BASE Section 1.11
CERTIFICATE
<PAGE>
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
AGREEMENT dated as of July 30, 1999 by and among WCI STEEL,
INC., an Ohio corporation ("WCI Steel"), WCI STEEL SALES L.P., an
Ohio limited partnership ("WCI Sales LP", and together with WCI
Steel, individually, each a "Borrower" and collectively,
"Borrowers") and CONGRESS FINANCIAL CORPORATION, a Delaware
corporation, as successor by merger to Congress Financial
Corporation, a California corporation (in its individual capacity
"Congress"), BANKAMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, a
national trust and savings association ("BankAmerica", and
together with Congress, collectively "Lenders") and CONGRESS
FINANCIAL CORPORATION, as Agent for Lenders (in such capacity,
the "Agent", as hereinafter further defined).
W I T N E S S E T H
WHEREAS, Borrowers and Lenders have heretofore entered into
certain financing arrangements as set forth in the Existing
Agreements (as hereinafter defined) pursuant to which each of
Lenders has made loans and advances and provided other financial
accommodations to each Borrower; and
WHEREAS, Borrowers have requested that Agent and Lenders
extend, modify and restate the existing financing arrangements
with Borrowers; and
WHEREAS, Agent and Lenders are willing to extend, modify and
restate the existing financing arrangements, subject to the terms
and conditions set forth herein and in the other Financing
Agreements (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing, the
mutual covenants and agreements herein contained and other good
and valuable consideration, Agent, Lenders and Borrowers hereby
mutually covenant, warrant and agree as follows:
SECTION 1. DEFINITIONS
For the purposes of this Agreement and the other Financing
Agreements, the following terms shall have the respective
meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of
any Borrower 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.
1.2 "Account Debtor" shall mean each debtor or obligor in
any way obligated on or in connection with any Account.
1.3 "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.
1.4 "Affiliate" shall mean, with respect to a specified
Person, a partnership, corporation or any other person which
directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with such
Person, and without limiting the generality of the foregoing,
includes (a) any Person which beneficially owns or holds five
(5%) percent or more of any class of voting securities of such
Person or other equity interests in such Person, (b) any Person
of which such Person beneficially owns or holds five (5%) percent
or more of any class of voting securities or in which such Person
beneficially owns or holds five (5%) percent or more of the
equity interests and (c) any director, officer or employee of
such Person. For the purposes of this definition, the term
"control" (including with correlative meanings, the terms
"controlled by" and "under common control with"), as used with
respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
1.5 "After-Tax Profits" shall mean, as to any Person, with
respect to any period, the consolidated net income of such Person
and its Subsidiaries after deducting all charges which should be
deducted before arriving at consolidated net income for such
period, all in accordance with GAAP, consistently applied, and
after deducting (without duplication) the Provision for Taxes for
such fiscal year. For purposes of this Section 1.5, "Provision
for Taxes" shall mean an amount equal to all taxes imposed on or
measured by net income, whether federal, state or local, and
whether foreign or domestic, as recorded by such Person and its
Subsidiaries in respect of such fiscal year in accordance with
GAAP, consistently applied; provided, that, if such Person and
its Subsidiaries are members of a larger consolidated group of
corporations in respect of any fiscal year, the "Provision for
Taxes" shall be deemed to mean an amount equal to the highest of
(a) the Provision for Taxes determined without reference to this
proviso, or (b) the amount of all taxes that would be imposed on,
or measured by, net income that would be paid or payable by such
Person and its Subsidiaries if they were not members of such
consolidated group, or (c) the total of all taxes imposed on, or
measured by, net income that are paid or payable by such Person
and its Subsidiaries plus the amount of any payments made or
required to be made by such person or its Subsidiaries to any
other members of such consolidated group under any tax sharing
arrangements or that are otherwise in lieu of the payment of such
taxes; provided, further, that, solely for purposes of Sections
7.5(c)(ii), 7.6(b)(iii) and 7.7(b) of this Agreement, the charges
net of taxes incurred by WCI Steel in November of 1996 for
extraordinary losses, stock grant amortization and net worth
[appreciation] amounting to $24,799,000 shall not be included in
the calculation of After-Tax Profits.
1.6 "Agent" shall mean Congress Financial Corporation, a
Delaware corporation, as successor by merger to Congress
Financial Corporation, a California Corporation, acting in its
capacity as agent for itself and Bank America, and its successors
and assigns, and not as a Lender, as defined below.
1.7 "Assignment of Claims Act" shall mean the Federal
Assignment of Claims Act of 1940 as amended and any state or
local equivalents, as the same now exist or may from time to time
hereafter be amended, modified, recodified or supplemented,
together with all rules, regulations and interpretations
thereunder or related thereto.
1.8 "BankAmerica" shall mean BankAmerica National Trust &
Savings Association, a national trust and savings association,
and its successors and assigns.
1.9 "Bankruptcy Code" shall mean the United States
Bankruptcy Code, being Title 11 of the United States Code, as the
same now exists or may from time to time hereafter be amended,
modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.10 "Board" shall mean the Board of Governors of the
Federal Reserve System or any successor thereto.
1.11 "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 a
Borrower acceptable to Agent and delivered to Agent.
1.12 "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, the Commonwealth of Pennsylvania or the State of Ohio,
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.
1.13 "Code" shall mean the Internal Revenue Code of 1986,
as the same now exists or may from time to time hereafter be
amended, modified, recodified or supplemented, together with all
rules, regulations and interpretations thereunder or related
thereto.
1.14 "Collateral" shall have the meaning set forth in
Section 5 hereof.
1.15 "Collected Credit Balance" shall have the meaning set
forth in Section 3.8 hereof.
1.16 "Commitment Percentage" shall mean, for each of
Lenders, with respect to the making of Loans and any other
Obligations, fifty (50%) percent.
1.17 "Congress" shall mean Congress Financial Corporation,
a Delaware corporation, as successor by merger to Congress
Financial Corporation, a California corporation, in its
individual capacity as Lender, and its successors and assigns.
1.18 "Consolidated Adjusted Net Worth" shall 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 after deducting from such book values all
appropriate reserves in accordance with GAAP consistently applied
(including all reserves for doubtful receivables, obsolescence,
depreciation and amortization) and (b) the total aggregate
Indebtedness of such Person and its Subsidiaries including tax
and other proper accruals, but not including the aggregate
undrawn amount of outstanding letters of credit issued for the
account of such Person.
1.19 "Consolidated Adjusted Working Capital" shall 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 Indebtedness hereunder consisting of the Loans and any
Indebtedness payable on demand or within one (1) year from the
date of 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, but not including the aggregate undrawn amount
of outstanding letters of credit issued for the account of such
Person.
1.20 "Currency Protection Agreements" shall mean any
currency exchange contract or other similar arrangement solely
for the purpose of protecting a person against fluctuations in
the exchange rate of different currencies.
1.21 "Eligible Accounts" shall mean, as to each Borrower,
the Accounts created by such Borrower in the ordinary course of
its business arising out of the sale of goods or rendition of
services by such 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 such 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 the applicable 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. 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.
1.22 "Eligible Inventory" shall mean, as to each Borrower,
Inventory consisting of first quality finished goods held for
resale in the ordinary course of the business of such Borrower,
current raw materials for such finished goods (including scrap
and "seconds") and current work-in-process with respect thereto,
which are acceptable to Agent in all respects. General criteria
for Eligible Inventory may be established and revised from time
to time by Agent in its exclusive judgment. In determining such
acceptability Agent may, but need not, rely on reports and
schedules of Inventory furnished to Agent by Borrower, but
reliance thereon by Agent from time to time shall not be deemed
to limit Agent's right to revise standards of eligibility at any
time. In general, except in Agent's discretion, Eligible
Inventory shall not include (a) components which are not part of
finished goods, (b) spare parts, (c) packaging and shipping
materials, (d) supplies used or consumed in a Borrower's
business, (e) Inventory at the premises of third parties,
(f) Inventory subject to a security interest or lien in favor of
any person other than Lenders, (g) bill and hold goods, (h)
Inventory which is not subject to the first priority perfected
security interest of Agent and Lenders, and (i) Inventory
purchased on consignment; provided, that, any Inventory which
would otherwise be deemed Eligible Inventory at locations which
are not owned and operated by the applicable Borrower may
nevertheless be considered Eligible Inventory: (i) if Agent shall
have received an agreement in writing, in form and substance
satisfactory to Agent, from the holder of such Inventory or the
owner and/or operator of such location, pursuant to which such
holder, owner and/or operator, if required by Agent:
(A) acknowledges the first priority lien on such Inventory of
Agent and Lenders, (B) agrees to waive any and all claims such
holder, owner and/or operator may, at any time, have against such
Inventory, whether for processing, storage or otherwise, and
(C) agrees to permit Agent and Lenders to have access to the
premises to sell or otherwise deal with such Inventory and
(ii) in addition to the agreement described above, if the
Inventory is on consignment and if required by Agent: (A) the
holder, owner and/or operator, lessor and/or mortgagee executes
appropriate UCC-1 financing statements in favor of the applicable
Borrower, which are duly assigned to Agent and (B) if required by
Agent, any lenders to the holder, owner and/or operator, lessor
and/or mortgagee with any interest in Inventory is properly
notified of the first priority lien on such Inventory of Agent
and Lenders. Any Inventory which Agent determines to be
ineligible or unacceptable for purposes of the Lending Formulas
at any time shall nevertheless be and remain at all times part of
the Collateral.
1.23 "Environmental Laws" shall mean all federal, state and
local laws, rules, regulations, ordinances, and consent decrees
relating to health, safety, hazardous substances, and
environmental matters, as now or at any time hereafter in effect,
applicable to a Borrower's business and facilities (whether or
not owned by it). Such laws and regulations include, but are not
limited to, the Resource Conservation and Recovery Act, as
amended; the Comprehensive Environmental Response, Compensation
and Liability Act, as amended; the Toxic Substances Control Act,
as amended; the Clean Water Act, as amended; the Clean Air Act,
as amended; the Hazardous Materials Transportation Act, as
amended; state and federal superlien and environmental cleanup
programs; and U.S. Department of Transportation and Environmental
Protection Agency regulations.
1.24 "Equipment" shall mean all of each Borrower's now
owned and hereafter acquired equipment and fixtures, of every
kind and description, wherever located, including, without
limitation, any and all machinery used in connection with the
manufacture, sale, exchange or lease of goods or rendition of
services, machinery, tooling, tools, telephone equipment,
computers, computer hardware and related computer equipment and
accessories (including software and records), vehicles, dies,
jigs, furniture, trade fixtures and fixtures, all attachments,
components, parts, accessions and property now or hereafter
affixed thereto, installed thereon or used in connection
therewith, and all additions to and substitutions and
replacements thereof and all existing and future leasehold
interests in equipment and fixtures, wherever located, whether
now owned or hereafter acquired and all licenses and other rights
of such Borrower relating thereto, whether in the possession and
control of such Borrower or in the possession and control of a
third person for the account of such Borrower and all claims to
the proceeds of insurance thereon and all maintenance and
warranty records relating thereto.
1.25 "ERISA" shall mean the United States Employee
Retirement Income Security Act of 1974, as the same now exists or
may hereafter from time to time be amended, modified, recodified
or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.
1.26 "ERISA Affiliate" shall mean any (a) corporation which
is a member of the same controlled group of corporations (within
the meaning of section 414(b) of the Code) as any Borrower, (b)
partnership or other trade or business (whether or not
incorporated) which is under common control (within the meaning
of Section 414(c) of the Code) with any Borrower, and (c) member
of the same affiliated service group (within the meaning of
Section 414(m) of the Code) as any Borrower.
1.27 "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.
1.28 "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 a
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
such Borrower in accordance with this Agreement, with a maturity
of comparable duration to the Interest Period selected by such
Borrower.
1.29 "Event of Default" shall have the meaning set forth in
Section 8.1 hereof.
1.30 "Excess Availability" shall mean, as to each Borrower,
the amount, as determined by Agent, as of any date, equal to:
(a) the lesser of: (i) the amount of the Loans
available to such Borrower as of such date based
on the applicable Lending Formulas multiplied by
the Net Amount of Eligible Accounts of such
Borrower and the value of Eligible Inventory of
such Borrower, as determined by Agent, and subject
to the sublimits and reserves from time to time
established by Agent and (ii) the amount equal to
(A) the Maximum Credit minus (B) the then
outstanding Loans by Lenders to the other
Borrower,
minus
(b) the amount of all then outstanding Loans to such
Borrower (together with interest and fees
attributable thereto) and Letter of Credit
Accommodations then outstanding for the account of
such Borrower.
1.31 "Existing Agreements" shall mean, collectively: (a) the
Amended and Restated Loan and Security Agreement, dated as of
December 29, 1992, by and among Borrowers, Lenders and Agent, 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 March 28,
1995, Amendment No. 4 to Amended and Restated Loan and Security
Agreement, dated as of February 23, 1996, Amendment No. 5 to
Amended and Restated Loan and Security Agreement, dated as of
March 8, 1996, Amendment No. 6 to Amended and Restated Loan and
Security Agreement, dated as of June 17, 1996, Amendment No. 7 to
Amended and Restated Loan and Security Agreement, dated as of
November 27, 1996, Amendment No. 8 to Amended and Restated Loan
and Security Agreement, dated as of October 31, 1997, (b) the
Loan and Security Agreement, dated as of August 31, 1988, by and
among WCI Steel, Lenders and Agent as amended and supplemented
pursuant to the First Amendment to Loan and Security Agreement,
dated as of January 29, 1990, the Second Amendment to Loan and
Security Agreement, dated as of December 20, 1991 and the Third
Amendment to Loan and Security Agreement, dated September 29,
1992, (c) the Letter of Credit Agreement, dated as of August 31,
1988, by Borrower in favor of Agent and Lenders, (d) the
Inventory Security Agreement, dated as of August 31, 1988, by
Borrower in favor of Agent and Lenders and (e) the Equipment
Security Agreement, dated as of August 31, 1988, by Borrower in
favor of Agent and Lenders.
1.32 "Existing RSI Note Agreements" shall mean, individually
and collectively, each and all of the following (as the same now
exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced): (a) the Existing RSI
Notes (b) the Indenture, dated as of December 14, 1993, between
WCI Steel and the Existing RSI Note Trustee, as amended by the
First Supplemental Indenture, dated December 14, 1993, and the
Second Supplemental Indenture, dated November 27, 1996, (c) the
Open-End Mortgage, Assignment of Rents, Security Agreement and
Fixture Filing, dated as of December 14, 1993, by WCI Steel in
favor of the Existing RSI Note Trustee, and (d) the Security
Agreement, dated as of December 14, 1993, between WCI Steel and
the Existing RSI Note Trustee.
1.33 "Existing RSI Notes" shall mean the 10 1/2% Senior
Notes due March 1, 2002, Series B issued by Renco Steel, Inc.
(and assumed by Borrower as the survivor of the merger with Renco
Steel, Inc.) pursuant to the Existing RSI Note Agreements in the
original principal amount of $250,000,000, as the same now exist
or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.34 "Existing RSI Note Trustee" shall mean State Street
Bank and Trust Company of Connecticut, N.A., and its successors
and assigns, and any replacement or other trustee or collateral
agent under the Existing RSI Note Agreements.
1.35 "Financing Agreements" shall mean, collectively, this
Agreement, together with all other agreements, documents and
instruments heretofore, now or at any time hereafter executed
and/or delivered by any Borrower or any other person with, to or
in favor of Agent and/or Lenders in connection herewith or
related hereto, as this Agreement and such other agreements,
documents or instruments now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.36 "GAAP" shall mean generally accepted accounting
principles in the United States of America as in effect from time
to time as set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board which
are applicable to the circumstances as of the date of
determination except that, for purposes of Sections 7.18, 7.19
and 7.20, GAAP shall be determined on the basis of such
principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements
delivered to Agent and Lenders prior to the date hereof.
1.37 "Hazardous Materials" shall mean any hazardous, toxic
or dangerous waste, substance or material defined as such under
any Environmental Laws, including, without limitation, (a) those
substances included within the definitions of "hazardous
substances", "hazardous materials", "toxic substances", or "solid
waste" in the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability
Act, the Hazardous Materials Transportation Act, Section 311 of
the Clean Water Act, and in the regulations promulgated pursuant
to said laws; (b) those substances listed in the U.S. Department
of Transportation Table or by the Environmental Protection Agency
(or any successor agency) as hazardous substances; (c) such other
substances, materials and wastes that are or become regulated
under applicable local, state or federal law, or that are
classified as hazardous or toxic under other applicable federal,
state, or local laws or regulations; and (d) any material, waste
or substance that is (i) petroleum, (ii) asbestos, (iii)
polychlorinated biphenyls, (iv) flammable explosives, or (v)
radioactive materials. In the event that any of the applicable
Environmental Laws are amended so as to broaden the meaning of
any of the above-referenced terms, such broader meaning shall
apply subsequent to the effective date of such amendment.
1.38 "Indebtedness" shall mean, as to any Person, all items
which, in accordance with GAAP, consistently applied, would be
included in determining total liabilities of such Person shown on
the liability side of its balance sheet as at the date such
Indebtedness is to be calculated and, in any event, shall include
any liabilities secured by any mortgage, pledge, lien or security
interest existing on any of its properties or assets.
1.39 "Interest Period" shall mean for any Eurodollar Rate
Loan, a period of approximately one (1), two (2), or three (3)
months duration as any Borrower may elect, the exact duration to
be determined in accordance with the customary practice in the
applicable Eurodollar Rate market; provided, that, no Borrower
may elect an Interest Period which will end after the last day of
the then-current term of this Agreement.
1.40 "Interest Rate" shall mean:
(a) as to Prime Rate Loans, a rate per annum equal to
the Prime Rate; and
(b) as to Eurodollar Rate Loans, a rate of two and
one-quarter (2 1/4%) percent per annum in excess of the Adjusted
Eurodollar Rate (based on the Eurodollar Rate applicable for the
Interest Period selected by a Borrower as in effect three (3)
Business Days after the date of receipt by Agent of the request
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 any Borrower); provided, that the
Interest Rate shall mean the rate of two (2%) percent per annum
in excess of the Prime Rate as to Prime Rate Loans and the rate
of four and one-quarter (4 1/4%) percent per annum in excess of
the Adjusted Eurodollar Rate at Agent's option, without notice,
(i) 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 (ii) on the Loans at any time outstanding
in excess of the amounts available to any Borrower under Section
3 of this 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).
1.41 "Inventory" shall mean all of each Borrower's now
owned and hereafter acquired inventory, wherever located,
including, without limitation, all raw materials,
work-in-process, finished and semi-finished inventory of any
kind, nature or description, including, without limitation, blast
furnace slag, coal, coated coils, coils, coke, coke breeze, cold
rolled coils, galvanized coils, galvanized corrugated pipe,
galvanized corrugated sheet, galvanized sheet and strip steel,
galvanized steel coils, hot roll bands, hot rolled coils, iron
ore, iron ore pellets, refractory brick/cement, scrap, slabs,
steel alloys, terne coils, zinc, and any other personal property
(other than Equipment) held for sale, exchange or lease or
furnished or to be furnished under a contract of service or an
exchange arrangement or used or consumed in the business or in
connection with the manufacturing, packaging, shipping,
advertising, selling or furnishing of such goods, inventory,
merchandise and other personal property (other than Equipment),
and all names or marks affixed to or to be affixed thereto for
purposes of selling same by the seller, manufacturer, lessor or
licensor thereof and all right, title and interest therein and
thereto, and the proceeds (including, without limitation, all
proceeds of insurance with respect thereto, including the
proceeds of any applicable property insurance) and products of
all of the foregoing; and all ledgers, books of account, records,
computer printouts, computer runs, and other computer prepared
information relating to any of the foregoing.
1.42 "Lenders" shall mean Congress and Bank America and
their respective successors and assigns.
1.43 "Lending Formulas" shall mean the percentages set
forth in Section 3.1 hereof with respect to Eligible Accounts and
Eligible Inventory.
1.44 "Letter of Credit Accommodations" shall have the
meaning set forth in Section 3.2 hereof.
1.45 "Loans" shall mean the aggregate outstanding
Obligations owed to Lenders by both Borrowers consisting of the
secured loans and advances at any time made by Agent for and on
behalf of Lenders to each Borrower to or for the benefit of such
Borrower as provided in Section 3.1 hereof, on a revolving basis
(involving advances, repayments and readvances), subject to the
terms and conditions of this Agreement and the other Financing
Agreements.
1.46 "Maximum Credit" shall mean $100,000,000.
1.47 "Net Amount of Eligible Accounts" shall mean, as to
each Borrower, the gross amount of Eligible Accounts of such
Borrower less sales, excise or similar taxes, and less returns,
discounts, claims, credits and allowances of any nature at any
time issued, owing, granted, outstanding, available or claimed
with respect thereto.
1.48 "New WCI Note Indenture" shall mean the Indenture,
dated November 27, 1996, between WCI Steel and the New WCI Note
Trustee with respect to the New WCI Notes, as the same now exists
or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.49 "New WCI Notes" shall mean, individually and
collectively, each and all of the 10% Senior Secured Notes due
2004, Series B, issued by WCI Steel pursuant to the New WCI Note
Indenture (as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced).
1.50 "New WCI Note Trustee" shall mean State Street Bank and
Trust Company of Connecticut, N.A., and its successors and
assigns, and any replacement or other trustee under the New WCI
Note Indenture.
1.51 "Niles" shall mean Niles Properties, Inc., an Ohio
corporation, and its successors and assigns.
1.52 "Obligations" shall mean any and all now existing and
hereafter arising obligations, liabilities and Indebtedness of
any or all Borrowers to Agent and/or Lenders of every kind and
description arising under this Agreement, the other Financing
Agreements or by operation of law in connection therewith,
whether direct or indirect, absolute or contingent, joint or
several, secured or unsecured, due or not due, primary or
secondary, liquidated or unliquidated, whether arising before,
during or after the initial or any renewal term hereof, or after
the commencement of any case with respect to any Borrower under
the Bankruptcy Code or any similar statute and whether incurred
by any Borrower as principal, surety, endorser, guarantor or
otherwise in connection with the foregoing. Without limiting the
generality of the foregoing, "Obligations" shall include: (a) the
liability of any or all of Borrowers to Agent or Lenders for all
balances owing to Lenders in any account maintained on Agent's or
Lenders' books under this Agreement or the other Financing
Agreements, (b) the liability of any or all of Borrowers to Agent
or Lenders as maker or endorser of any promissory note or other
instrument for the payment of money, the liability of any or all
of Borrowers to Agent or Lenders under any instrument of
guarantee or indemnity, or arising under or with respect to any
letter of credit, acceptance, instrument, guarantee, endorsement
or undertaking which Agent or Lenders may make, endorse or issue
to others for the account of Borrower, (c) Indebtedness owing by
any or all of Borrowers to Agent or Lenders or to present or
future Affiliates or Participants of or with Agent or Lenders
arising under or in connection with any of the foregoing types of
agreements, instruments or transactions, and (d) all principal,
interest, financing charges, early termination and other fees,
commissions and expenses payable to Agent or Lenders, including,
but not limited to, attorneys' and accountants' fees and
disbursements chargeable to any or all of Borrowers and due from
any or all of Borrowers under this Agreement, the other Financing
Agreements, or under any other agreement or arrangement which may
be now or hereafter entered into between any or all of Borrowers
and Agent or Lenders.
1.53 "Participant" shall mean any Person which at any time
participates with either of Lenders in respect of the Loans, the
Letter of Credit Accommodations or other Obligations or any
portion thereof.
1.54 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without
limitation, any subchapter "S" corporation, as defined in the
Code), business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any
government or any agency or instrumentality or political
subdivision thereof.
1.55 "Prime Rate" shall mean the rate from time to time
publicly announced by First Union National Bank, or its
successors and assigns, as its prime rate, whether or not such
announced rate is the best rate available at such bank.
1.56 "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 hereof.
1.57 "Real Property" shall mean all now owned and hereafter
acquired real property of any or all of Borrowers, including
leasehold interests, together with all buildings, structures, and
other improvements located thereon and all licenses, easements and
appurtenances relating thereto, wherever located, including without
limitation, the real property and related assets of Borrowers
located in Warren, Ohio.
1.58 "Reference Bank" shall mean First Union National Bank,
or such other bank as Agent may from time to time designate.
1.59 "Renco Group" shall mean The Renco Group, Inc., a New
York corporation, and its successors and assigns.
1.60 "Renco Steel Holdings" shall mean Renco Steel Holdings,
Inc., an Ohio corporation, and its successors and assigns.
1.61 "Renewal Date" shall have the meaning set forth in
Section 10.1(a) hereof.
1.62 "Subsidiary" or "subsidiary" shall mean, with respect to
any Borrower, any corporation, association or organization, active
or inactive, as to which more than fifty (50%) percent of the
outstanding voting stock or shares or interests shall now or
hereafter be owned or controlled, directly or indirectly, by such
Borrower, any Subsidiary of such Borrower, or any Subsidiary of
such Subsidiary.
1.63 "Tradename" shall have the meaning set forth in Section
7.1 hereof.
1.64 "UCC" shall mean the Uniform Commercial Code as from
time to time in effect in the State of New York.
1.65 "Value" or "value" shall mean, as determined by Agent,
with respect to the Inventory, the lower of (a) cost computed on a
first-in-first-out basis in accordance with GAAP consistently
applied or (b) market value, as determined by Agent.
1.66 "VEBA Trust" shall mean a Voluntary Employee
Beneficiaries Association trust fund established under that certain
501(c)(9) Trust Agreement, dated October 1, 1988, between WCI Steel
and Bank One Trust Company, N.A. to hold contributions by WCI Steel
to fund postretirement health care, life insurance and supplemental
unemployment benefit plan obligations for the benefit of certain
hourly employees of WCI Steel.
1.67 "VEBA Trust Agreements" shall mean, individually and
collectively, each and all of the following (as the same now exist
or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced): (a) the VEBA Term Sheet, dated
October 24, 1995, between WCI Steel and the United Steelworkers of
America, AFL-CIO-CLC, (b) the Open-End Mortgage, dated November 27,
1996, by WCI Steel in favor of the VEBA Trustee with respect to the
Real Property of WCI Steel located in Trumbull County, Ohio, (c)
the Security Agreement, dated November 27, 1996, between WCI Steel
and the VEBA Trustee, (d) the Intercreditor Agreement, dated
November 27, 1996, between VEBA Trustee and the New WCI Note
Trustee, and (e) the Open-End Mortgage, dated November 27, 1996, by
Niles in favor of the VEBA Trustee with respect to the real
property of Niles located in Trumbull County, Ohio.
1.68 "VEBA Trustee" shall mean Bank One Trust Company, N.A., a
national banking association, and its successors and assigns, and
any replacement or other trustee under the VEBA Trust Agreements.
1.69 "WCI Debt Tender Offer" shall mean the offer by WCI
Steel to purchase for cash of up to all of the Existing RSI Notes,
plus accrued and unpaid interest pursuant to the WCI Debt Tender
Offer Agreements.
1.70 "WCI Debt Tender Offer Agreements" shall mean,
individually and collectively, the Offer to Purchase and Consent
Solicitation, dated October 23, 1996, by WCI Steel with respect to
the repurchase by WCI Steel of the Existing RSI Notes, as amended
pursuant to the First Supplement to Offer to Purchase and Consent
Solicitation Statement, dated November 6, 1996, and the Second
Supplement to Offer to Purchase and Consent Solicitation Statement,
dated November 8, 1996, and all other agreements, documents and
instruments related thereto, as the same now exist or may hereafter
be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.71 "WCI Metallurgical" shall mean WCI Steel Metallurgical
Services, Inc., an Ohio corporation, and its successors and
assigns.
1.72 "WCI Production" shall mean WCI Steel Production Control
Services Inc., an Ohio corporation, and its successors and assigns.
1.73 "WCI Public Shares" shall mean all of the issued and
outstanding shares of common stock of WCI Steel which are not owned
by Renco Group.
1.74 "WCI Sales LP" shall mean WCI Steel Sales L.P., an Ohio
limited partnership, and its successors and assigns.
1.75 "WCI Sales LP Limited Partnership Agreement" shall mean
the Limited Partnership Agreement, dated October 2, 1997, between
WCI Metallurgical and WCI Production, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.76 "WCI Steel" shall mean WCI Steel, Inc., an Ohio
corporation, and its successors and assigns.
1.77 "Youngstown Sinter" shall mean Youngstown Sinter Company,
an Ohio corporation and wholly owned subsidiary of Borrower, and
its successors and assigns.
1.78 Terms. All accounting terms used in this Agreement which
are not specifically defined herein shall be construed in
accordance with GAAP, consistently applied, except as otherwise
stated herein.
1.79 Other Defined Terms. The words "hereof", "herein",
"hereunder", "this Agreement" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not
to any particular provision of this Agreement, as the same now
exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.80 Uniform Commercial Code Definitions. All terms used
herein which are not specifically defined herein which are defined
or used in the UCC shall have the meanings as defined or used in
the UCC.
1.81 Interpretation. For purposes of this Agreement, unless
the context otherwise requires, all other terms hereinbefore or
hereinafter defined, including but not limited to those terms
defined in the recitals hereto, shall have the meanings herein
assigned to such terms. All references to any Borrower and other
Persons pursuant to the definitions set forth in the recitals
hereto shall include their respective successors and assigns. 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.
SECTION 2. ACKNOWLEDGEMENT AND RESTATEMENT; JOINT AND SEVERAL
LIABILITY
2.1 Existing Obligations. Borrowers hereby acknowledge,
confirm and agree that they are indebted to Lenders for loans and
advances to Borrowers under the Existing Agreements, as of the
close of business on July 30, 1999, in the aggregate principal
amount of $0 and the aggregate amount of $6,401,000 in respect of
Letter of Credit Accommodations, together with all interest accrued
and accruing thereon (to the extent applicable), and all costs,
expenses and other charges relating thereto, all of which are
unconditionally owing by Borrowers to Lenders, without offset,
defense or counterclaim of any kind, nature or description
whatsoever.
2.2 Acknowledgement of Security Interests.
(a) Borrowers hereby acknowledge, confirm and agree that
Lenders have and shall continue to have a security interest in and
lien upon the Collateral heretofore granted to Agent and/or Lenders
pursuant to the Existing Agreements to secure the Obligations, and
any Collateral granted under this Agreement or under any of the
other Financing Agreements or otherwise granted to or held by Agent
or Lenders.
(b) The liens and security interests of Agent and
Lenders in the Collateral shall be deemed to be continuously
granted and perfected from the earliest date of the granting and
perfection of such liens and security interests, whether under the
Existing Agreements, this Agreement, any of the other Financing
Agreements or otherwise.
2.3 Existing Agreements. Each Borrower hereby acknowledges,
confirms and agrees that: (a) each of the Existing Agreements to
which it is a party has been duly executed and delivered by such
Borrower and each is in full force and effect as of the date
hereof, and (b) the agreements and obligations of such Borrower
contained in the Existing Agreements constitute the legal, valid
and binding obligations of such Borrower enforceable against it in
accordance with their respective terms and such Borrower has no
valid defense to the enforcement of such obligations and (c) Agent
and Lenders are entitled to all of the rights and remedies provided
for in the Existing Agreements.
2.4 Intentionally omitted.
2.5 Restatement.
(a) Except as otherwise stated in Section 2.2 hereof and
this Section 2.5, as of the date hereof, the terms, conditions,
agreements, covenants, representations and warranties set forth in
the Existing Agreements are hereby amended and restated in their
entirety, and as so amended and restated, replaced and superseded
by the terms, conditions, agreements, covenants, representations
and warranties set forth in this Agreement and the other Financing
Agreements, except that nothing herein or in the other Financing
Agreements shall impair or adversely affect the continuation of the
liability of any Borrower for the Obligations heretofore granted,
pledged and/or assigned to Agent or Lenders. The amendment and
restatement contained herein shall not, in any manner, be construed
to constitute payment of, or impair, limit, cancel or extinguish,
or constitute a novation in respect of, the Indebtedness and other
obligations and liabilities of any Borrower evidenced by or arising
under the Existing Agreements, and the liens and security interests
securing such Indebtedness and other obligations and liabilities,
which shall not in any manner be impaired, limited, terminated,
waived or released.
(b) The principal amount of the Loans outstanding as of
the date hereof under the Existing Agreements shall be allocated to
the Loans hereunder in such manner and in such amounts as Agent
shall determine.
2.6 Release. Each Borrower for itself and its successors and
assigns does hereby remise, release, discharge and hold Agent and
Lenders, their officers, directors, agents and employees and their
respective predecessors, successors and assigns harmless from all
claims, demands, debts, sums of money, accounts, damages,
judgments, financial obligations, actions, causes of action, suits
at law or in equity, of any kind or nature whatsoever, whether or
not now existing or known, which such Borrower or its successors or
assigns has had or may now or hereafter claim to have against any
of Agent, Lenders or their officers, directors, agents and
employees and their respective predecessors, successors and assigns
in any way arising from or connected with the Existing Agreement or
the arrangements set forth therein or transactions thereunder up to
and including the date hereof.
2.7 Joint and Several Liability.
(a) Each Borrower hereby expressly assumes and agrees to
be directly liable to Agent and Lenders, jointly and severally, for
all Obligations under, contained in, or arising out of the Loan
Agreement and the other Financing Agreements.
(b) WCI Steel and WCI Sales LP shall be liable for all
amounts due to Agent and Lenders under this Agreement, regardless
of which of them actually receives the Loans or other extensions of
credit hereunder or the amount of such Loans received or the manner
in which Agent or any Lender accounts for such Loans, Letter of
Credit Accommodations or other extensions of credit on its books
and records. The Obligations with respect to Loans made to WCI
Steel or WCI Sales LP and the Obligations arising as a result of
the joint and several liability of WCI Steel or WCI Sales LP, with
respect to Loans made to either WCI Steel or WCI Sales LP, shall be
separate and distinct obligations, but all such other Obligations
shall be primary obligations of WCI Steel and WCI Sales LP. The
Obligations arising as a result of the joint and several liability
of WCI Steel and WCI Sales LP with respect to Loans, Letter of
Credit Accommodations or other extensions of credit made to the
other shall, to the fullest extent permitted by law, be
unconditional irrespective of (i) the validity or enforceability,
avoidance or subordination of the Obligations of the other or of
any promissory note or other document evidencing all or any part of
the Obligations of the other, (ii) the absence of any attempt to
collect the Obligations from the other Borrower, or any other
security therefor, or the absence of any other action to enforce
the same, (iii) the waiver, consent, extension, forbearance or
granting of any indulgence by Agent or any Lender with respect to
any provisions of any instrument evidencing the Obligations of the
other Borrower, or any part thereof, or any other agreement now or
hereafter executed by the other Borrower and delivered to Agent or
any Lender, (iv) the failure by Agent or any Lender to take any
steps to perfect and maintain its security interest in, or to
preserve its rights and maintain its security or collateral for the
Obligations of the other Borrower, (v) the election of Agent or any
Lender in any proceeding instituted under the Bankruptcy Code, of
the application of Section 1111(b)(2) of the Bankruptcy Code,
(vi) any borrowings or grant of a security interest by the other
Borrower, as debtor-in-possession under Section 364 of the
Bankruptcy Code, (vii) the disallowance of all or any portion of
the claim(s) of Agent or any Lender for the repayment of the
Obligations of the other Borrower under Section 502 of the
Bankruptcy Code, or (viii) any other circumstances which might
constitute a legal or equitable discharge or defense of a guarantor
or of the other Borrower. With respect to the Obligations arising
as a result of the joint and several liability of WCI Steel and WCI
Sales LP with respect to Loans, Letter of Credit Accommodations or
other extensions of credit made to the other Borrower hereunder,
each of WCI Steel and WCI Sales LP waives, until the Obligations
shall have been paid in full and this Agreement shall have been
terminated, any right to enforce any right of subrogation or any
remedy which Agent or any Lender now has or may hereafter have
against WCI Steel and WCI Sales LP, any endorser or any guarantor
of all or any part of the Obligations, and any benefit of, and any
right to participate in, any security or collateral given to Agent.
Upon any Event of Default, Agent may proceed directly and at once,
without notice, against either WCI Steel or WCI Sales LP to collect
and recover the full amount, or any portion of the Obligations,
without first proceeding against the other Borrower or any other
Person, or against any security or collateral for the Obligations.
Each of WCI Steel and WCI Sales LP consents and agrees that Agent
shall be under no obligation to marshall any assets in favor of WCI
Steel and WCI Sales LP or against or in payment of any or all of
the Obligations.
SECTION 3. AMOUNTS AND TERMS OF LOANS AND
OTHER FINANCIAL ACCOMMODATIONS
3.1 Loans.
(a) Subject to, and upon the terms and conditions
contained herein:
(i) at the request of WCI Sales LP, or at the
request of WCI Steel on behalf of WCI Sales LP, each of
Lenders severally, but not jointly, agrees to lend to WCI
Sales LP and authorizes and appoints Agent to make Loans
to WCI Sales LP, for the account of and as Agent for
Lenders, in such amounts from time to time as may be so
requested, of up to: (A) eighty-five (85%) percent of
the Net Amount of Eligible Accounts of WCI Sales LP (or
such greater or lesser percentage thereof as Agent may
determine from time to time), plus (B) sixty (60%)
percent of the Value of Eligible Inventory of WCI Sales
LP taking into account the elimination of intercompany
profit (or such greater or lesser percentage thereof as
Agent may, in good faith, determine from time to time);
(ii) at the request of WCI Steel, each of Lenders
severally, but not jointly, agrees to lend to WCI Steel,
and authorizes and appoints Agent to make Loans to WCI
Steel, for the account of and as Agent for Lenders, in
such amounts from time to time as may be so requested, of
up to (A) eighty-five (85%) percent of the Net Amount of
Eligible Accounts of WCI Steel (or such greater or lesser
percentage thereof as Agent may determine from time to
time), plus (B) sixty (60%) percent of the Value of
Eligible Inventory of WCI Steel taking into account the
elimination of intercompany profit (or such greater or
lesser percentage thereof as Agent may, in good faith,
determine from time to time).
(b) Notwithstanding anything to the contrary contained
herein or in any of the other Financing Agreements, except in
Agent's discretion, the aggregate unpaid principal amount of the
Loans outstanding at any time based on Eligible Inventory,
regardless of the amounts of such Eligible Inventory, shall not
exceed $60,000,000.
(c) Agent may, from time to time, permit the outstanding
amount of the Loans and/or Letter of Credit Accommodations, or the
aggregate amounts of the outstanding Loans and the Letter of Credit
Accommodations to exceed the amounts available under the Lending
Formulas, the lending sublimit set forth in Section 3.1(b) above,
or the Maximum Credit, as applicable; provided, that, should Agent
so permit in any one instance such event shall not operate to
limit, waive or otherwise affect any rights of Agent or Lenders on
any future occasions. In such event, and without limiting the
right of Agent to demand payment of the Obligations, or any portion
thereof, in accordance with any other terms of this Agreement or
the other Financing Agreements, Borrowers shall remain liable
therefor and Borrowers shall, upon demand by Agent, which may be
made at any time and from time to time, repay to Agent the entire
amount of any such excess(es) or in accordance with such other
terms as Agent may agree to in writing at the time.
3.2 Letter of Credit Accommodations.
(a) Agent may, in its discretion, from time to time, for
the account and on behalf of Lenders, on terms and conditions and
in amounts acceptable to Agent, at the request of a Borrower,
provide one or more of the following financial accommodations to
such Borrower: (i) issue, open or cause the issuance or opening of
letters of credit or purchase or other guaranties for the purchase
of goods and services in the ordinary course of the business of
such Borrower or for any other purpose approved by Agent or (ii)
assist such Borrower in establishing or opening letters of credit
for such purposes by indemnifying the issuer thereof or
guaranteeing the payment or performance of such Borrower to such
issuer in connection therewith (individually and collectively, the
"Letter of Credit Accommodations").
(b) Without limiting Agent's continuing discretion as
aforesaid, the extension of such Letter of Credit Accommodations by
Agent shall be subject to the satisfaction of each of the following
additional conditions precedent: (i) additional Loans pursuant to
the Lending Formulas, the lending sublimit set forth in Section
3.1(b) and the Maximum Credit, shall be available to such Borrower
on the date of, and after giving effect to, the proposed issuance
of the Letter of Credit Accommodations equal to one hundred percent
(100%) of the amount thereof; (ii) if any of such Letter of Credit
Accommodations is for the purpose of purchasing goods, Agent and
Lenders shall have a valid and perfected first security interest in
and lien upon goods being acquired in connection therewith; (iii)
the form and content of all such Letter of Credit Accommodations
shall be satisfactory to Agent and all documents, instruments,
notices and statements relating thereto, if any, which Agent may
request, shall be promptly delivered to Agent; and (iv) such
Borrower shall have fully complied to Agent's satisfaction with all
terms and provisions hereof and of the terms and provisions of any
agreements relating to the Letter of Credit Accommodations in form
and substance acceptable to Agent or Lenders now or hereafter
entered into between such Borrower, Agent and Lenders, including
the payment of all fees, commissions and charges set forth herein
and therein.
(c) Borrowers hereby, jointly and severally, agree to
indemnify Agent and each of Lenders with respect to any loss, cost,
liability or expense which Agent and either of Lenders may suffer
or incur in connection with the Letter of Credit Accommodations.
Each Borrower further agrees that any payments made or other
obligations incurred by Agent or Lenders in connection with Letter
of Credit Accommodations are part of the Obligations, and shall be
payable in accordance with the terms hereof and of the other
Financing Agreements. Any such payments made or obligations
incurred by Agent on behalf of Lenders, including, without
limitation, any of the same made after termination or non-renewal
of this Agreement or the other Financing Agreements with respect to
Letter of Credit Accommodations provided to any Borrower prior to
such termination or non-renewal, shall automatically be treated for
purposes hereof as Loans and shall accrue interest at the Interest
Rate then payable by such Borrower commencing on the date such
payment is made by Agent.
(d) Except in Agent's discretion, the aggregate maximum
amount of Loans which might otherwise be made available to
Borrowers by Agent pursuant to the Lending Formulas, the lending
sublimit set forth in Section 3.1(b) and the Maximum Credit, shall
be reduced from time to time in an amount equal to one hundred
(100%) percent of the then outstanding aggregate amount of the
Letter of Credit Accommodations and all other commitments and
obligations made or incurred by Agent with respect thereto.
(e) In addition to any charges, fees or expenses charged
by any bank or issuer in connection with the Letter of Credit
Accommodations, Borrowers 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 Borrowers to pay such fee shall
survive the termination or non-renewal of this Agreement.
(f) Notwithstanding anything to the contrary contained
herein or in any of the other Financing Agreements, except in
Agent's discretion, the aggregate amount of all Letter of Credit
Accommodations pursuant hereto and all other commitments and
obligations made or incurred by Agent or Lenders pursuant hereto
for the account or benefit of Borrowers in connection therewith
outstanding at any time shall not exceed $20,000,000.
3.3 Maximum Credit.
(a) Except in Lenders discretion, the aggregate unpaid
principal amount of the Loans outstanding at any time, plus all
then outstanding Letter of Credit Accommodations (and all other
commitments and obligations made or incurred by Agent or Lenders
with respect to such Letter of Credit Accommodations) shall not
exceed the amount of the Maximum Credit.
(b) The aggregate unpaid principal amount of Loans plus
all then outstanding Letter of Credit Accommodations (and all other
commitments and obligations made or incurred by Agent or Lenders
with respect to such Letter of Credit Accommodations), made or
provided by Agent to Borrowers for the account of and as agent for
each Lender, shall not exceed each Lender's respective Commitment
Percentage with respect to such amount.
3.4 Reserves. Without limiting any other rights and remedies
of Agent or Lenders hereunder or under the other Financing
Agreements, all Loans otherwise available to any Borrower pursuant
to the Lending Formulas, the lending sublimit set forth in Section
3.1(b) hereof and the Maximum Credit shall be subject to Agent's
continuing right, for and on behalf of Lenders, in its good faith
discretion, to establish a reserve reducing the amounts of Loans
otherwise available to any or all of Borrowers pursuant to the
Lending Formulas, such sublimit and the Maximum Credit, and to
increase and decrease such reserve from time to time, if and to the
extent that, in Agent's judgment, such reserve is necessary to
protect Agent and Lenders against possible non-payment for any
reason by Account Debtors or possible non-payment of any of the
Obligations, or in respect of any state of facts which does or
would, with notice or passage of time or both, constitute an Event
of Default hereunder or for any other reason.
3.5 Fees.
(a) Borrowers shall 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,
which fee is fully earned as of the date hereof.
(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, Borrowers shall pay to Agent for the account of
Lenders a fee at a rate equal to one-half of one percent (1/2%) per
annum (calculated on the basis of a three hundred sixty (360) day
year and actual days elapsed) for such month and payable monthly,
in arrears, upon the excess, if any, of: (i) $60,000,000 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).
(c) Borrowers shall pay to Agent for the account of
Agent 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.
(d) The fees provided for in this Section 3.5 shall be
in addition to all other amounts payable by Borrowers under this
Agreement and the other Financing Agreements and shall constitute
part of the Obligations. Such fees may, at Agent's option, be
charged directly to any account(s) of Borrowers maintained with
Agent or Lenders.
3.6 Interest.
(a) Borrowers 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) Each Borrower may from time to time request that
Prime Rate Loans to it be converted to Eurodollar Rate Loans or
that any existing Eurodollar Rate Loans to it continue for an
additional Interest Period. Such request from a 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 a
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) such Borrower shall have complied
with such customary procedures as are established by Agent and
specified by Agent to Borrowers from time to time for requests by
Borrowers 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 Borrowers shall not exceed eighty
(80%) 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 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 such Borrower.
Any request by a 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 the applicable Borrower, convert to Prime Rate Loans in
the event that (i) 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
converted 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
outstanding, or (B) the Loans then available to such Borrower under
Section 3 of this Agreement. Borrowers shall pay to Agent, upon
demand by Agent (or Agent may, at its option, charge any loan
account of a Borrower) any amounts required to compensate Agent
and/or Lenders, the Reference Bank or any participant with Agent
for any loss (excluding 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 Borrowers 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 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 Borrowers 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.
3.7 Conduct of Accounts; Cross-Collateralization.
(a) Agent and Lenders may maintain one or more accounts
reflecting the Loans, the Letter of Credit Accommodations,
repayments of the Loans and payments of the other Obligations and
any of the Collateral contemplated under this Agreement or the
other Financing Agreements with respect to Borrowers, as Agent and
Lenders shall, in their discretion, determine. All Loans to a
Borrower shall be charged to a loan account in the name of such
Borrower on Agent's books. All Collateral or other collateral
security held by or granted to Agent and Lenders by any Borrower or
any third persons shall be security for the payment and performance
of any and all Obligations of Borrowers to Agent and Lenders
(including but not limited to the Loans and the Letter of Credit
Accommodations), notwithstanding the maintenance of separate
accounts for any Borrower or third persons or the existence of any
notes.
(b) All Loans under this Agreement shall be made by
Agent for the account of Lenders on a pro rata basis pursuant to
each Lender's Commitment Percentage. It is understood that neither
of Lenders nor Agent shall be responsible to any Borrower for any
failure by the other Lender or Agent to fulfill its obligations to
make or, in the case of Agent, to advance for the account of
Lenders, the Loans provided to be made by it or on its behalf
hereunder.
(c) All payments (including prepayments) by or on behalf
of any Borrower or any other amounts received by Agent on account
of the Loans or the other Obligations, or charged to any Borrower's
account as permitted hereunder, shall be made by or on behalf of
such Borrower, and/or received by Agent for the account of Lenders
on a pro rata basis pursuant to each Lender's Commitment
Percentage. Borrowers shall make all payments in respect of the
Obligations free and clear of, and without deduction or withholding
for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholdings,
restrictions or conditions of any kind or nature whatsoever. Each
Borrower acknowledges and agrees that Agent shall have the sole
responsibility for the distribution of any such payments or other
amounts to each of Lenders. As between Borrowers and Lenders,
together with Agent, each Lender may enforce against Borrowers the
Obligations to such Lender, based on the Commitment Percentage, and
Agent may enforce against Borrowers the Obligations on behalf of
both Lenders or either Lender.
(d) All Loans and other Obligations shall be payable to
Agent for the account of Lenders at its address specified herein or
at such other place as Agent may hereafter designate in writing
from time to time. Agent may apply payments received or collected
from any Borrower or for the account of any Borrower (including,
without limitation, the monetary proceeds of collections or of
realization upon any Collateral) to such of the Obligations,
whether or not then due, in whatever order and manner Agent, in its
discretion, determines. Agent shall have the continuing and
exclusive right to apply and reverse and reapply any and all such
proceeds and payments to any portion of the Obligations. Upon the
request of Agent and/or Lenders, Borrowers shall execute and
deliver to Agent and Lenders one or more promissory notes, in form
and substance satisfactory to Agent and Lenders, to evidence
further the Loans, the Letter of Credit Accommodations or any
portion thereof.
(e) If after receipt of any payment of, or proceeds
applied to the payment of, all or any part of the Obligations,
Agent or Lenders are for any reason required to surrender such
payment or proceeds to any Person, because such payment or proceeds
is invalidated, declared fraudulent, set aside, determined to be
void or voidable as a preference, or a diversion of trust funds, or
for any other reason, then the Obligations or any part thereof
intended to be satisfied shall be revived and continue and this
Agreement shall continue in full force as if such payment or
proceeds had not been received by Agent or Lenders and Borrowers
shall be liable to pay to Agent for the account of Lenders, and
hereby do indemnify Agent and Lenders and hold them harmless for
the amount of such payment or proceeds surrendered. The provisions
of this Section 3.7(e) shall be and remain effective
notwithstanding any contrary action which may have been taken by
Agent or Lenders in reliance upon such payment or proceeds, and any
such contrary action so taken shall be without prejudice to Agent's
or Lenders' rights under this Agreement and shall be deemed to have
been conditioned upon such payment or proceeds having become final
and irrevocable. The provisions of this Section 3.7(e) shall
survive the termination of this Agreement and the other Financing
Agreements.
(f) At Agent's option, all principal, interest, fees,
commissions, costs, expenses, or other charges hereunder, under the
other Financing Agreements or in connection herewith or therewith,
and any and all Loans, may be charged directly to any account(s) of
Borrowers maintained by Agent.
(g) Agent shall render to each Borrower at the address
of such Borrower set forth in Section 10.6 hereof, each month, one
or more statements with respect to the loan account(s) maintained
by Agent for such Borrower pursuant to the provisions hereof, as of
the end of each month while this Agreement is in effect. Such
statements of account shall be considered correct, and deemed
accepted by and conclusively binding upon such Borrower, except to
the extent Agent and Lenders shall receive from such Borrower
written notice of all exceptions to such statement of account with
specificity, within forty-five (45) days from the date of sending.
3.8 Collected Credit Balances.
(a) Any Borrower may from time to time maintain a credit
balance in its loan account with Agent. To the extent of the
outstanding daily amount of such credit balance for any Borrower
received by Agent in immediately available funds and then held by
Agent for the account of Lenders (a "Collected Credit Balance"),
Agent shall, for the account of Congress, credit the loan account
of such Borrower as hereafter provided in an amount equal to three
(3%) percent per annum less than the Prime Rate on such Collected
Credit Balance (the "Interest Equivalent"); provided, that, the
aggregate amount of such credits to Borrowers' loan accounts in
respect of the amount of such Collected Credit Balances shall not
exceed $10,000,000.
(b) Such Interest Equivalent on the Collected Credit
Balance shall be credited thereto monthly on the first day of each
month and shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed, so long as no Event of
Default shall exist or have occurred. The Prime Rate used to
calculate such Interest Equivalent shall increase or decrease by an
amount equal to such increase or decrease in such Prime Rate
effective 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.
(c) Notwithstanding anything to the contrary set forth
herein, for each day on which a Borrower maintains a Collected
Credit Balance, all payments and other funds for which Agent has
received immediately available funds prior to 11:00 a.m., New York
City time on such date will be applied (conditional upon final
collection) on such date, or on the next business day if not
received at or before such time, for purposes of calculating
Interest Equivalent on the Collected Credit Balance.
3.9 Appointment of Agent for Requesting Loans and Receipt of
Loans and Statements.
(a) WCI Sales LP hereby irrevocably appoints and
constitutes WCI Steel as its agent to request and receive Loans and
Letter of Credit Accommodations pursuant to the Loan Agreement and
the other Financing Agreements from Agent and Lenders in the name
or on behalf of WCI Sales LP. Agent and Lenders may disburse the
Loans to such bank account of WCI Steel or otherwise make such
Loans to WCI Sales LP and provide such Letter of Credit
Accommodations to WCI Sales LP as WCI Steel may designate or
direct, without notice to WCI Sales LP, any Obligor or any other
person at any time obligated on or in respect of the Obligations.
(b) WCI Steel hereby accepts the appointment by WCI
Sales LP as the agent of WCI Sales LP pursuant to Section 5(a)
hereof. WCI Steel shall ensure that the disbursements of any Loans
to WCI Sales LP requested by or paid to WCI Steel or the issuance
of any Letter of Credit Accommodations for WCI Sales LP shall be
paid to or for the account of WCI Sales LP.
(c) WCI Sales LP hereby irrevocably appoints and
constitutes WCI Steel as its agent to receive statements of account
and all other notices from Agent and Lenders with respect to the
Obligations or otherwise under or in connection with the Loan
Agreement and the other Financing Agreements.
(d) No purported termination of the appointment of WCI
Steel as agent as aforesaid shall be effective, except after ten
(10) days prior written notice to Agent.
3.10 Use of Proceeds. All Loans made and Letter of Credit
Accommodations and any other financial accommodations provided by
Lenders to Borrowers pursuant to this Agreement and any of the
other Financing Agreements shall be used by Borrowers for general
operating and/or working capital purposes of Borrowers or, in the
case of WCI Steel, to repurchase any Existing RSI Notes and/or WCI
Public Shares in accordance with Sections 7.3(d)(ii)(B)(2) and
7.7(b)(iii) hereof, respectively.
3.11 Compensation Adjustment.
(a) If after the date of this Agreement the introduction
of, or any change in, any law or any governmental rule, regulation,
policy, guideline or directive (whether or not having the force of
law), or any interpretation thereof, or compliance by Agent or
Lenders therewith:
(i) subjects either Agent or Lenders to any tax,
duty, charge or withholding on or from payments due from Borrower
(excluding franchise taxes imposed upon, and taxation of the
overall net income of, Agent or Lenders), or changes the basis of
taxation of payments, in either case in respect of amounts due it
hereunder; or
(ii) imposes or increases or deems applicable any
reserve requirement or other reserve, assessment, insurance charge,
special deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by Agent or Lenders;
or
(iii) imposes any other condition the result of
which is to increase the cost to Agent or Lenders of making,
funding or maintaining the Loans or reduces any amount receivable
by Agent or Lenders in connection with the Loans, or requires
either of them to make payment calculated by reference to the
amount of loans held or interest received by it, by an amount
deemed material by Lenders; or
(iv) imposes or increases any capital requirement
or affects the amount of capital required or expected to be
maintained by Lenders or any corporation controlling Lenders, and
either of Lenders determines that such imposition or increase in
capital requirements or increase in the amount of capital expected
to be maintained is based upon the existence of this Agreement or
the Loans hereunder, all of which may be determined by Lenders'
reasonable allocation of the aggregate of its impositions or
increases in capital required or expected to be maintained;
and the result of any of the foregoing is to increase the cost to
Agent or Lenders of making, renewing or maintaining the Loans, or
to reduce the rate of return to Agent or either of Lenders on the
Loans, then, within fifteen (15) days of demand by Agent or either
of Lenders, Borrowers shall pay to Agent, and continue to make
periodic payments to Agent, such additional amounts as may be
necessary to compensate Agent and Lenders for any such additional
cost incurred or reduced rate of return realized.
(b) A certificate of Agent or either of Lenders claiming
entitlement to compensation as set forth above will be conclusive
in the absence of manifest error. Such certificate will set forth
the nature of the occurrence giving rise to such compensation, the
additional amount or amounts to be paid and the method by which
such amounts were determined. In determining any additional
amounts due from Borrowers under this Section 3.9, Agent and
Lenders shall act reasonably and in good faith and will, to the
extent that the increased costs, reductions, or amounts received or
receivable relate to the Agent's or such Lender's loans or
commitments generally and are not specifically attributable to the
Loans and commitments hereunder, use averaging and attribution
methods which are reasonable and equitable and which cover all
loans and commitments similar to the Loans and commitments under
this Agreement by such Agent or Lender, as the case may be, whether
or not the loan documentation for such other loans and commitments
permits such Agent or Lender to receive compensation costs of the
type described in this Section 3.9.
(c) In the event that Borrowers shall be required to
make any payments to Agent or either of Lenders pursuant to this
Section 3.9 and such payments, together with amounts paid by
Borrowers in respect of interest, results in the amounts paid by
Borrowers to Agent or either of Lenders to exceed the amounts
otherwise payable by Borrowers to Agent or either of Lenders by
more than one-quarter percent (1/4%) per annum in excess of the
then applicable Interest Rate, within ninety (90) days after the
date of demand by the Agent or either of Lenders for the first of
such payment or payments as provided in Section 3.9(a) above,
Borrowers may, without payment of the early termination fee
provided for in Section 10.2(e) hereof, terminate the portion of
the financing arrangements provided to Borrowers by the Lender
requesting such payment or payments (but not the other Lender);
provided, that, (i) within such ninety (90) day period, all
Obligations of Borrowers to such Lender based on the Commitment
Percentage shall be paid in full and (ii) the Maximum Credit and
the termination fee provided for in Section 10.2(e) shall be
reduced accordingly.
3.12 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 any 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. Borrowers shall pay to Agent for the account of
Lenders, upon demand by Agent (or Agent may, at its option, charge
any loan account of a Borrower) any amounts required to compensate
Agent, Lenders, the Reference Bank or any participant with Lenders
for any loss (excluding 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, provided, that no
participant shall be entitled to receive any greater amount than
the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred by such
transferor Lender to such participant had no such transfer
occurred. 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 be delivered to any
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,
Borrowers shall pay to Agent upon demand by Agent (or Agent may, at
its option, charge any loan account of a Borrower) any amounts
required to compensate Agent, Lenders, the Reference Bank or any
participant with Lenders for any additional loss (excluding 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.
SECTION 4. CONDITIONS PRECEDENT TO EFFECTIVENESS AND
TO LOANS AND OTHER FINANCIAL ACCOMMODATIONS
The effectiveness of this Agreement is subject to the
satisfaction of all of the following conditions and each of the
following conditions is an additional condition precedent to Agent
on behalf of Lenders making the Loans and providing the Letter of
Credit Accommodations pursuant to this Agreement and the other
Financing Agreements, including the making of the initial and any
future Loans and Letter of Credit Accommodations contemplated
hereunder (any of which may be waived, in whole or in part, only by
each Lender in writing):
4.1 Agent shall have received, in form and substance
satisfactory to Agent, all consents, waivers, acknowledgments,
releases, terminations and other agreements and documents from
third persons which Agent may deem necessary or desirable in order
to permit, protect and perfect its security interests in and liens
upon the Collateral or to effectuate the provisions or purposes of
this Agreement and the other Financing Agreements, including,
without limitation, agreements from processors, warehouses, lessors
and/or mortgagees acknowledging the first priority liens of Agent
and Lenders, waiving any security interests, liens or other claims
by such persons to the Collateral and permitting Agent and Lenders
access to the premises to exercise their rights and remedies and
otherwise deal with the Collateral;
4.2 Agent shall have received, in form and substance
satisfactory to Agent, an opinion letter of counsel to Borrowers
with respect to this Agreement, the other Financing Agreements and
such other matters as Agent or Lenders or their counsel may
request;
4.3 Agent shall have received, in form and substance
satisfactory to Agent, the reaffirmation of each of the following
documents:
(a) Guarantee, dated as of October 31, 1997, by WCI
Production, WCI Metallurgical, and WCI Sales LP in favor of Agent
and Lenders, with respect to the Obligations of WCI Steel;
(b) Guarantee, dated as of October 31, 1997, by WCI
Production, WCI Metallurgical, WCI Steel and Niles in favor of
Agent and Lenders, with respect to the Obligations of WCI Sales LP;
(c) Security Agreement, dated as of October 31, 1997, by
WCI Production in favor of Agent and Lenders; and
(d) Security Agreement, dated as of October 31, 1997, by
WCI Metallurgical in favor of Agent and Lenders.
4.4 this Agreement, the other Financing Agreements and all
instruments and documents thereunder shall have been duly
authorized, executed and delivered to Agent and Lenders, in form
and substance satisfactory to Agent;
4.5 all representations and warranties contained herein and
in the other Financing Agreements shall be true and correct in all
material respects;
4.6 no Event of Default shall have occurred and be continuing
and no event shall have occurred or condition be existing and
continuing which, with notice or passage of time or both, would
constitute an Event of Default.
SECTION 5. COLLATERAL
5.1 As collateral security for the prompt performance,
observance and payment in full of all of the Obligations, each
Borrower hereby grants, pledges and assigns to each of Lenders and
Agent, and also confirms, reaffirms and restates its prior grant to
each of Lenders and Agent of, a continuing security interest in and
liens upon, and rights of setoff against, all of the following now
owned and hereafter acquired or existing assets and properties of
such Borrower (which assets and properties, together with all other
collateral security for the Obligations granted to or otherwise
held or acquired by Agent and/or Lenders are referred to herein as
the "Collateral"):
(a) all Accounts;
(b) all Inventory;
(c) all monies, securities and other investment
property, deposits (general or special), deposit accounts,
balances, sums and credits to the extent constituting or containing
proceeds of Collateral or now or hereafter held by Agent or any
Lender as additional Collateral (including, without limitation,
cash collateral delivered by Borrowers to Agent pursuant to Section
10.2(c) hereof) to secure any Obligations; provided, that, any
monies received in the Blocked Accounts and thereafter transferred
to the operating account of a Borrower, in accordance with the
Blocked Account Agreement, shall not constitute proceeds of
Collateral for purposes of this Section 5.1(c);
(d) all right, title and interest, and all enforcement
and other rights, remedies, and security and liens, in, to and in
respect of the Accounts and other Collateral, including, without
limitation, rights of stoppage in transit, replevin, repossession,
sequestration and reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, guaranties or other
contracts of suretyship with respect to the Accounts, deposits or
other security for the obligation of any Account Debtor, credit and
other insurance;
(e) all right, title and interest in, to and in respect
of all goods relating to Accounts, including, without limitation,
all goods described in invoices, documents, contracts or
instruments with respect to, or otherwise representing or
evidencing, any Account or other Collateral, including, without
limitation, all returned, reclaimed or repossessed goods;
(f) all general intangibles of every kind and
description (other than trademarks and patents) to the extent
relating to, arising out of, or used in connection with, any of the
other Collateral, including, without limitation, (i) the interests
of such Borrower in any surety, insurance (other than business
interruption insurance) or bonds, letters of credit or other
guaranties and (ii) claims and other choses in action;
(g) all present and future books and records relating to
any of the above, including, without limitation, all ledgers, books
of account, records, tapes, cards, computer programs, computer
disks or tape files, computer printouts, computer runs, computer
data and other computer prepared information in the possession or
control of such Borrower, any computer service bureau or other
third person; and
(h) all products and proceeds of the foregoing, in any
form, including, without limitation, any insurance proceeds and any
claims against third persons for loss or damage to or destruction
of any or all of the foregoing.
SECTION 6. REPRESENTATIONS AND WARRANTIES
Borrowers hereby jointly and severally represent and warrant
to Agent and Lenders as follows, which representations and
warranties are continuing and shall survive the execution and
delivery hereof, and the truth and accuracy of each, together with
the representations and warranties in the other Financing
Agreements, being a continuing condition of each Loan and each
Letter of Credit Accommodation:
6.1 Organization and Qualification.
(a) WCI Steel is a duly organized and validly existing
corporation in good standing under the laws of the State of Ohio,
with perpetual corporate existence. WCI Metallurgical is an Ohio
corporation, duly organized and validly existing in good standing
under the laws of the State of Ohio. WCI Production is an Ohio
corporation, duly organized and validly existing in good standing
under the laws of the State of Ohio. WCI Sales LP is an Ohio
limited partnership, duly formed and validly existing in good
standing under the laws of the State of Ohio. The sole general
partner of WCI Sales LP is and shall be WCI Production and the sole
limited partner of WCI Sales LP is and shall be WCI Metallurgical.
Each of WCI Steel, WCI Sales LP, WCI Metallurgical and WCI
Production (i) is duly licensed or qualified to do business as a
foreign corporation or partnership, as the case may be, and is in
good standing in each of the jurisdictions set forth in Exhibit A
annexed hereto, which are the only jurisdictions where the nature
of the properties owned or licensed or the nature of the business
makes such licensing or qualification to do business necessary, and
(ii) has all requisite power and authority to own, lease and
operate its properties and to carry on its business as it is now
being conducted and will be conducted in the future.
(b) The only Subsidiaries of WCI Steel are Niles,
Youngstown Sinter, WCI Metallurgical, WCI Production and WCI Sales
LP. WCI Steel is the owner of record and holder of all of the
issued and outstanding shares of capital stock or other equity
interests of each of such Subsidiaries free and clear of all
claims, liens, pledges and encumbrances of any kind except in favor
of Agent or Lenders. All of the outstanding shares of capital
stock of each of WCI Production and WCI Metallurgical have been
duly authorized, validly issued and are fully paid and non-
assessable, free and clear of all claims, liens, pledges and
encumbrances of any kind.
6.2 Power and Authority. Each Borrower has the power and
authority to borrow and to execute, deliver and carry out the terms
and provisions of this Agreement and the other Financing Agreements
and all other agreements, instruments and documents delivered by
such Borrower pursuant hereto and thereto applicable to it, and
each Borrower has taken or caused to be taken all necessary
corporate or other action to authorize the execution, delivery and
performance of this Agreement, the other Financing Agreements and
the other agreements relating hereto or thereto to which it is a
party, the present and future borrowings by such Borrower hereunder
and thereunder and the execution, delivery and performance of the
instruments and documents delivered and to be delivered by it
pursuant hereto and thereto. This Agreement and the other
Financing Agreements to which any Borrower is a party constitute
and will constitute legal, valid and binding obligations of such
Borrower, enforceable in accordance with their respective terms.
6.3 Capitalization.
(a) All of the issued and outstanding shares of stock of
WCI Steel are directly and beneficially owned and held by Renco
Steel Holdings and have been duly authorized and are fully paid and
non-assessable. All of the issued and outstanding shares of stock
of Renco Steel Holdings are directly and beneficially owned and
held by Renco Group and have been duly authorized and are fully
paid and non-assessable.
(b) Each Borrower has sufficient capital to carry on all
businesses and transactions in which it now engages or proposes to
engage in, is solvent and will, in the reasonable, good faith
determination of such Borrower as of the date hereof, continue to
be solvent after the creation of the Obligations and the security
interests in favor of Agent and Lenders, and is able to pay its
debts as they mature.
6.4 Compliance with Other
Agreements and Applicable Law.
(a) Each Borrower is not in default under, in violation
of or in contravention of, in any respect, any material indenture,
mortgage, deed of trust, deed to secure debt, agreement or
instrument to which it is a party or by which it or any of its
assets or properties may be or are bound.
(b) Neither the execution and delivery of this
Agreement, the other Financing Agreements, or any of the instr-
uments and documents to be delivered pursuant hereto or thereto,
nor the consummation of the transactions herein or therein conte-
mplated, nor compliance with the provisions hereof or thereof, has
violated any law or regulation or any order or decree of any court
or governmental instrumentality in any respect or does or will
conflict with or result in the breach of, or constitute a default
in any respect under, any indenture, mortgage, deed of trust,
agreement or instrument to which any Borrower is a party or may be
bound, or result in the creation or imposition of any lien, charge
or encumbrance upon any of the property of any Borrower (except as
specifically contemplated hereunder or under the other Financing
Agreements) or violate any provision of the Certificate of
Incorporation or By-Laws of any Borrower.
(c) Except as set forth in Exhibit G hereto, each
Borrower has obtained all material permits, licenses, certificates,
approvals, consents, orders or authorizations of any governmental
regulatory authority or other governmental body or authority
required for the lawful conduct of its business and is in
compliance in all material respects with the requirements of all
applicable laws, rules, regulations and orders of any governmental
authority relating to its business (including, without limitation,
those set forth in or promulgated pursuant to ERISA, the
Occupational Safety and Hazard Act of 1970, as amended, the Fair
Labor Standards Act of 1938, as amended, the Code, and the
Environmental Laws).
6.5 Governmental Approval. No consent, approval or other
action of, or filing with, or notice to any governmental or public
body, authority or instrumentality is required in connection with
the execution, delivery and performance of this Agreement, the
other Financing Agreements or any of the instruments or documents
to be delivered pursuant hereto or thereto, except for the filing
of UCC financing statements.
6.6 Chief Executive Offices; Collateral Locations.
(a) The address of the principal place of business and
chief executive office of each Borrower is as set forth on Exhibit
B hereto, which address is the mailing address for such principal
place of business and chief executive office. The books and
records relating to the Accounts of each Borrower are located at
its chief executive office as set forth on Exhibit B. The
Collateral is located only at the addresses set forth on Exhibit C.
(b) A Borrower may open any new location within the
continental United States provided it (i) gives Agent thirty (30)
days prior written notice (or, if the Value of the Collateral to be
located in such location will be $250,000 or less, ten (10) days
prior written notice) of the intended opening of any such new
location and (ii) executes and delivers, or causes to be executed
and delivered, to Agent such agreements, documents, and instruments
as Agent and Lenders may deem reasonably necessary or desirable to
protect their interests in the Collateral to be located in such
location, including, without limitation, UCC financing statements
and agreements from appropriate Persons acknowledging the liens of
Lenders on the Collateral to be located in such location, waiving
any lien or claim by such Person to the Collateral and permitting
Agent and Lenders access to the premises to exercise their rights
and remedies and otherwise deal with the Collateral.
6.7 Priority of Liens/Title to Properties.
(a) The security interests and liens granted to Agent
and Lenders under this Agreement and the other Financing Agreements
constitute valid and perfected liens and security interests in and
upon the Collateral subject only to the liens indicated on Exhibit
D hereto and the liens permitted under Section 7.4 hereof.
(b) Each Borrower has good and marketable title to all
of its properties and assets subject to no liens, mortgages,
pledges, security interests, encumbrances or charges of any kind,
except those directly in favor of or assigned to Lenders and such
others as are specifically permitted under the provisions of this
Agreement as listed on Exhibit D hereto or under Section 7.4 hereof
and the other Financing Agreements. Each Borrower has peaceful and
undisturbed possession of all Real Property and Equipment and such
other assets as may be necessary for its business as presently
conducted or proposed to be conducted and under all leases,
licenses and easements necessary for the operation of its
properties and business. None of such leases, licenses and
easements contain any unusual or burdensome provisions which might
materially affect or impair the operations of such properties and
business and all such leases, licenses and easements are valid and
subsisting and in full force and effect.
6.8 Tax Returns. Each Borrower has filed, or caused to be
filed all Federal, State, county, local, foreign and other tax
returns, reports and declarations which are required to be filed by
it and as to which an extension has not been granted and has paid
or caused to be paid all taxes shown to be due and payable on said
returns and reports or in any assessment received by it, to the
extent that such taxes have become due and payable, except taxes
the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to such
Borrower and with respect to which adequate reserves have been set
aside on its books. Adequate provision has been made for the
payment of all accrued and unpaid Federal, State, county, local,
foreign and other taxes whether or not yet due and payable and
whether or not disputed.
6.9 Litigation. Except as set forth on Exhibit E hereto,
there is no present investigation by any governmental agency
pending or threatened against or affecting any Borrower or its
properties or business and there is no action, suit, proceeding or
claim by any Person pending or threatened against any Borrower or
its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, the other Financing Agreements, or
other instruments, agreements or documents delivered in connection
herewith or therewith, which if adversely determined with respect
to it would result in any material adverse change in the business,
properties, assets, goodwill or condition, financial or otherwise,
of any Borrower.
6.10 Intellectual Property. Each Borrower owns or licenses
all patents, trademarks, service-marks, logos, tradenames, trade
secrets, know-how, copyrights, or licenses and other rights with
respect to any of foregoing, which are necessary for the operation
of its business as presently conducted or proposed to be conducted.
No trademark, service-mark, logo or similar item at any time used
by any Borrower which is owned by another person or owned by any
Borrower subject to any security interest, lien, collateral
assignment, pledge or other encumbrance in favor of any person
other than Lenders is affixed to any Eligible Inventory. To the
best of each Borrower's knowledge, no product, process, method,
substance, part or other material presently contemplated to be sold
by or employed by any Borrower infringes any patent, trademark,
service-mark, tradename, copyright, license or other right owned by
any other Person and no claim or litigation is pending or
threatened against or affecting any Borrower contesting its right
to sell or use any such product, process, method, substance, part
or other material.
6.11 Accounts. Each Eligible Account of a Borrower represents
a valid and legally enforceable indebtedness based upon an actual
and bona fide sale and delivery of goods or rendition of services
in the ordinary course of the business of such Borrower which has
been finally accepted by the Account Debtor and for which the
Account Debtor is unconditionally liable to make payment of the
amount stated in each invoice, document or instrument evidencing
the Eligible Account in accordance with the terms thereof, without
offset, defense or counterclaim. All statements made and all
unpaid balances appearing in the invoices, documents and
instruments evidencing each Eligible Account are true and correct
and are in all respects what they purport to be and all signatures
and endorsements that appear thereon are genuine and all
signatories and endorsers have full capacity to contract and each
Account Debtor is solvent and financially able to pay in full the
Eligible Account when it matures. None of the transactions
underlying or giving rise to any Account violates any state,
federal or foreign laws or regulations, and all documents relating
to the Accounts are legally sufficient under such laws or
regulations and shall be legally enforceable in accordance with
their terms and all recording, filing and other requirements of
giving public notice under any applicable law have been duly
complied with.
6.12 Employee Benefits.
(a) No Borrower has engaged in any transaction in
connection with which such Borrower or, to the knowledge of
Borrowers, any ERISA Affiliate of such Borrower, could be subject
to either a civil penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed by Section 4975 of the Code.
(b) No liability to the Pension Benefit Guaranty
Corporation has been or is expected by any Borrower to be incurred
with respect to any employee pension benefit plan of any Borrower
or, to the knowledge of Borrowers, of any ERISA Affiliate of any
Borrower. There has been no reportable event (within the meaning
of Section 4043(b) of ERISA) or any other event or condition with
respect to any employee pension benefit plan of any Borrower or, to
the knowledge of Borrowers, of any ERISA Affiliate of any Borrower,
which presents a risk of termination of any such plan by the
Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which any
Borrower or, to the knowledge of Borrowers, any ERISA Affiliate of
any Borrower, is required under Section 302 of ERISA and Section
412 of the Code to have paid under the terms of each employee
pension benefit plan as contributions to such plan as of the last
day of the most recent fiscal year of such plan ended prior to the
date hereof, and no accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not
waived, exists with respect to any employee pension benefit plan
maintained by any Borrower or, to the knowledge of Borrowers, any
ERISA Affiliate of any Borrower.
(d) The current value of all vested accrued benefits
under all employee pension benefit plans maintained by each
Borrower that are subject to Title IV of ERISA does not exceed the
current value of the assets of such plans allocable to such vested
accrued benefits, except as set forth on Exhibit F. The terms
"current value" and "accrued benefit" have the meanings specified
in Section 4062(b)(1)(A) and Section 3 of ERISA, respectively.
(e) No Borrower or, to the knowledge of Borrowers, any
ERISA Affiliate of any Borrower, is or has ever been obligated to
contribute to any "multiemployer plan" (as such term is defined in
Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA,
except as set forth on Exhibit G hereto.
6.13 Environmental Compliance.
(a) Except as set forth on Exhibit G hereto, Borrowers
and their Subsidiaries have not 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 Law or any license, permit, certificate, approval or
similar authorization thereunder and the operations of Borrowers
and their Subsidiaries comply in all material respects with all
Environmental Laws and all licenses, permits, certificates,
approvals and similar authorizations thereunder.
(b) Except as set forth on Exhibit G 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 threatened, with respect to any
non-compliance with or violation of the requirements of any
Environmental Law by any Borrower or its Subsidiaries or the
release, spill or discharge, threatened or actual, of any Hazardous
Material 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 Borrower or its Subsidiaries or
their businesses, operations or assets or any properties at which
any Borrower or its Subsidiaries transported, stored or disposed of
any Hazardous Materials.
(c) No Borrower or its Subsidiaries has any 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.
(d) Borrowers and their Subsidiaries have all licenses,
permits, certificates, approvals or similar authorizations required
to be obtained or filed in connection with the operations of
Borrowers and their Subsidiaries under any Environmental Law and
all of such licenses, permits, certificates, approvals or similar
authorizations are valid and in full force and effect.
6.14 Investment Company. No Borrower is an "investment
company", or an "affiliated person" or "promoter" or "principal
underwriter", as such terms are defined in the Investment Company
Act of 1940, as amended. The making of the Loans and extension of
the Letter of Credit Accommodations by Agent and Lenders, the
application of the proceeds and the repayment thereof by Borrowers
and the performance of the transactions contemplated herein will
not violate any provision of the Investment Company Act of 1940, as
amended, or any rule, regulation or order issued pursuant thereto.
6.15 Regulation U; Securities Exchange Act of 1934. No
Borrower owns any "margin security" as such term is defined in
Regulation U, as amended (12 C.F.R. Part 207) of the Board. The
proceeds of the borrowings made pursuant to this Agreement and the
other Financing Agreements will be used by Borrowers only for the
purposes contemplated hereunder. None of the proceeds will be
used, directly or indirectly, for the purpose of purchasing or
carrying any margin security or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might
cause any of the Loans to be considered a "purpose credit" within
the meaning of Regulation U of the Board, as amended. No Borrower
will take, nor will it permit any agent acting in its behalf to
take, any action which might cause this Agreement or the other
Financing Agreements, or instruments delivered pursuant hereto or
thereto, to violate any regulation of the Board or to violate the
Securities Exchange Act of 1934 or any state or other securities
laws, in each case as in effect on the date hereof or as amended
hereafter.
6.16 No Material Adverse Change. There has been no material
adverse change in the business, assets, condition (financial or
otherwise) or results of operations or prospects of any Borrower
since the date of the most recent financial statements with respect
thereto submitted to Agent and Lenders or field examination with
respect thereto conducted by Agent and/or Lenders.
6.17 Financial Statements. None of the financial statements,
reports and other information furnished or to be furnished by any
Borrower to Agent and Lenders with respect to such Borrower and/or
its Subsidiaries contain, as of their respective dates, any untrue
statement of material fact or omit to state any material fact
necessary to make the information therein not misleading. Such
financial statements and reports were and will be prepared in
accordance with GAAP, consistently applied, and shall fairly,
completely and accurately present the consolidated financial
condition and results of operations of the applicable Persons, as
of the dates and for the periods indicated thereon.
6.18 Disclosure.
(a) The information contained in the representations and
warranties of each Borrower set forth in this Agreement, the other
Financing Agreements, or in any other instrument, document, list,
certificate, statement, schedule or exhibit heretofore delivered or
to be delivered to Agents and Lenders, as contemplated in this
Agreement or in the other Financing Agreements, does not contain
and will not contain any untrue statement of a material fact and
does not omit and will not omit to state a material fact necessary
in order to make the information contained herein or therein not
misleading.
(b) After giving effect to the transactions contemplated
by this Agreement, the other Financing Agreements, and the other
instruments or documents delivered in connection herewith and
therewith, there does not exist and there has not occurred any act,
condition or event which constitutes an Event of Default or which,
with notice or passage of time or both would constitute an Event of
Default.
6.19 Labor Disputes. Except as set forth on Exhibit H: (a)
there is no collective bargaining agreement or other labor contract
covering employees of any Borrower or any Subsidiary of any
Borrower; (b) no such collective bargaining agreement or other
labor contract is scheduled to expire during the term of this
Agreement; and (c) there is no pending or threatened strike, work
stoppage, material unfair labor practice claims, or other material
labor dispute against or affecting any Borrower or any Subsidiary
of any Borrower or their respective employees.
6.20 Corporate Name; Tradenames; Prior Transactions. No
Borrower has, during the past five years, been known by or used any
other corporate or fictitious name or been a party to any merger or
consolidation, or acquired all or substantially all of the assets
of any Person, or acquired any of its property or assets out of the
ordinary course of business, except as set forth on Exhibit I
hereto.
6.21 New WCI Notes. The New WCI Notes have been duly
authorized, issued and delivered by WCI Steel and all agreements,
documents and instruments related thereto, including, but not
limited to, the New WCI Note Indenture, have been duly authorized,
executed and delivered and the transactions contemplated thereunder
performed in accordance with their terms by the respective parties
thereto in all respects, including the fulfillment (not merely the
waiver) of all conditions precedent set forth herein. All actions
and proceedings required by the New WCI Note Agreements and the
agreements, documents and instruments related thereto, applicable
law or regulation have been taken and the transactions required
thereunder have been duly and validly taken and consummated.
Neither the execution and delivery of the New WCI Notes, any of the
other New WCI Note Agreements or any of the instruments and
documents to be delivered pursuant thereto, nor the consummation of
the transactions therein contemplated, nor compliance with the
provisions therein contemplated, has violated or will violate any
law or regulation or any order or decree of any court or
governmental instrumentality in any respect or does or will
conflict with or result in the breach of, or constitute a default
in any respect under, any indenture, mortgage, deed of trust,
agreement or instrument to which any Borrower is a party or may be
bound, or result in the creation or imposition of any lien, charge
or encumbrance upon any of the property of any Borrower (except as
specifically contemplated hereunder or under the other Financing
Agreements) or violate any provision of the Certificate of
Incorporation or By-Laws of any Borrower.
6.22 The WCI Sales LP Limited Partnership Agreement has been
duly and validly authorized, executed and delivered and constitutes
a valid binding agreement enforceable in accordance with its terms.
6.23 The assets and properties of WCI Sales LP, WCI Production
and WCI Metallurgical are owned by them, free and clear of all
security interests, liens and encumbrances of any kind, nature or
description, except those security interests granted pursuant
hereto or the Loan Agreement in favor of Agent and Lenders and
except for Liens (if any) permitted under Section 7.4 of this
Agreement or the other Financing Agreements. WCI Sales LP, WCI
Production and WCI Metallurgical do not, and shall not, own any
Equipment or Real Property having a value in the aggregate of more
than $1,000,000 and the only other assets of WCI Sales LP are and
shall be Accounts and Inventory. The only business of WCI Sales LP
is, and shall be, the resale to third party customers of Inventory
sold by WCI Steel to WCI Sales LP.
6.24 All sales of Inventory by WCI Steel to WCI Sales LP
after the date hereof shall be in the ordinary course of and
pursuant to the reasonable requirements of its business and upon
fair and reasonable terms no less favorable to WCI Steel than it
would obtain in a comparable arm's length transaction with a person
other than an Affiliate (except that the price of such Inventory so
sold by WCI Steel to WCI Sales LP may be between ninety (90%)
percent and one hundred (100%) percent of the market value of such
Inventory based on the sales price to the ultimate third party
customer). All services provided by WCI Production to WCI Steel
and WCI Steel LP for planning steel production and all services
provided by WCI Metallurgical to WCI Steel and WCI Sales LP for
making steel and furnishing services to customers of WCI Sales LP
shall be in the ordinary course of and pursuant to the reasonable
requirements of the business of WCI Steel and WCI Sales LP and upon
fair and reasonable terms no less favorable to each of WCI Steel
and WCI Sales LP than it would obtain in a comparable arm's length
transaction with a person other than an Affiliate.
SECTION 7. ADDITIONAL COVENANTS
In addition to the covenants set forth in the other Financing
Agreements, each Borrower hereby covenants to and agrees with Agent
and Lenders that such Borrower shall comply with the following
covenants, or cause the same to be complied with, unless Agent on
behalf of both Lenders shall otherwise consent in writing:
7.1 Tradenames. Some of each Borrower's invoices may from
time to time be rendered to customers under the tradenames listed
on Exhibit I hereto (which, together with any new tradenames used
after the date hereof are referred to collectively as the
"Tradenames" and individually, as a "Tradename"). As to the
Tradenames used by it, and the related Accounts, each Borrower
hereby agrees that:
(a) Each Tradename is a tradename (and not an
independent corporation or other legal entity) by which such
Borrower may identify and sell or lease certain of its goods or
services and conduct a portion of its business.
(b) All Accounts and proceeds thereof (including any
returned merchandise) which arise from the sale or lease of goods
or rendition of services invoiced under the Tradename shall be
owned solely by such Borrower and shall be subject to the security
interests of Agent and Lenders and other terms of this Agreement
and the other Financing Agreements.
(c) All assignments or confirmatory schedules of
Accounts delivered to Agent or Lenders by such Borrower, whether in
the name of any of the Tradenames or of such Borrower, shall be
executed by such Borrower as owner of such assigned Accounts, as
the case may be.
(d) New Tradenames may be used by such Borrower, but
only if (i) Agent or Lenders are given at least thirty (30) days
prior written notice of the intended use of any new Tradename and
(ii) such supplemental financing statements or similar instruments
as Agent or Lenders may request shall be executed and delivered to
Agent by such Borrower for filing or recording by Agent prior to
the use of such new Tradename.
7.2 Subsidiaries. No Borrower shall form or acquire any
Subsidiaries without the prior written consent of Agent and
Lenders. In the event Agent and Lenders so consent, promptly upon
such formation or acquisition, such Subsidiary shall be deemed a
party to this Agreement and bound by the terms and conditions
hereof and each Borrower shall cause any such Subsidiary formed or
acquired by it to execute and deliver to Agent and Lenders, in form
and substance satisfactory to Agent and Lenders and their counsel:
(a) an absolute and unconditional guarantee of payment of any and
all present and future Obligations of Borrowers to Agent and
Lenders, (b) a general security agreement granting to Agent and
Lenders a first and only lien (except as otherwise consented to in
writing by Agent on behalf of Lenders) upon such assets of such
Subsidiary of the same type as are included in the definition of
Collateral herein, (c) related Uniform Commercial Code Financing
Statements, and (d) such other agreements, documents and
instruments as Agent and Lenders may require, including, but not
limited to, supplements and amendments hereto and other loan
agreements or instruments evidencing Indebtedness of such new
Subsidiary to Agent and Lenders.
7.3 Indebtedness. Each Borrower shall not, and shall not
permit any Subsidiary to, create, incur, assume or permit to exist,
contingently or otherwise, any Indebtedness, except:
(a) Indebtedness to Agent and Lenders;
(b) Indebtedness consisting of unsecured current
liabilities incurred in the ordinary course of its business;
(c) Indebtedness incurred in the ordinary course of its
business secured only by liens permitted under Section 7.4(c) and
(d) hereof;
(d) all Indebtedness of WCI Steel not to exceed the
principal amount of $300,000 evidenced by the Existing RSI Notes,
plus interest thereon at the rate provided for in the Existing RSI
Notes as in effect on November 27, 1996; provided, that, WCI Steel
may prepay, redeem, retire, defease or purchase any Existing RSI
Notes so long as the aggregate of the amounts paid for such
prepayments, redemptions, retirements, defeasance and repurchases
and the amounts paid for repurchases of WCI Public Shares pursuant
to Section 7.7(b)(iii) shall not exceed $300,000;
(e) Indebtedness of any wholly owned Subsidiary of any
Borrower arising pursuant to loans by such Borrower to such
Subsidiary permitted under Section 7.5 hereof;
(f) Indebtedness of any Borrower to any wholly owned
Subsidiary of such Borrower arising pursuant to loans by such
Subsidiary to such Borrower permitted under Section 7.5 hereof;
(g) Indebtedness of Youngstown Sinter with respect to
the bonds issued by City of Youngstown, Ohio or an instrumentality
thereof not to exceed the principal amount of $1,100,000, arising
pursuant to the term loan provided by the City of Youngstown, Ohio
or such instrumentality to Youngstown Sinter pursuant to the
Promissory Note, dated April 15, 1991, issued by Youngstown Sinter
to the order of the City of Youngstown, the Loan Agreement, dated
June 11, 1990, by Youngstown Sinter in favor of the City of
Youngstown, and the Security Agreement, dated April 5, 1991 by
Youngstown Sinter in favor of the City of Youngstown, true, correct
and complete copies of which have been delivered to Agent;
provided, that, as to any such Indebtedness (i) Youngstown Sinter
may only make regularly scheduled payments of principal and
interest with respect to such Indebtedness, (ii) Youngstown Sinter
shall not, directly or indirectly, (A) make any prepayments or
other non-mandatory payments in respect of such Indebtedness or (B)
redeem, retire, defease, purchase or otherwise acquire such
Indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose or (C) amend, modify, alter or change the terms of
the arrangements related thereof, or any agreement or instrument
evidencing such Indebtedness, and (iii) WCI Steel shall, or shall
cause Youngstown Sinter to, furnish to Agent and Lenders all
notices, demands or other materials concerning such Indebtedness,
either received by WCI Steel or Youngstown Sinter in connection
therewith promptly after receipt thereof or sent by WCI Steel or
Youngstown Sinter or on its or their behalf, concurrently with the
sending thereof, as the case may be; except that Youngstown Sinter
may prepay such Indebtedness, in whole or in part, if: (1) Excess
Availability for WCI Steel shall have been not less than
$25,000,000 at all times during the thirty (30) consecutive day
period immediately prior to the date of any such prepayment; (2)
after giving effect to any such prepayment, Excess Availability for
WCI Steel shall not be less than $25,000,000; and (3) as of the
date of making such prepayment 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;
(h) Indebtedness incurred in the ordinary course of
business (other than for borrowed money or with respect to capital
leases) consisting of unsecured non-current accruals and deferred
liabilities relating to deferred compensation and taxes,
environmental liabilities, post-employment benefits for health
care, life insurance and long term disability benefits and similar
items;
(i) unsecured Indebtedness of Borrowers and their
Subsidiaries arising after July 30, 1999 not to exceed $20,000,000
in the aggregate at any time outstanding; provided, that, (i) prior
to any Borrower or its Subsidiaries incurring such Indebtedness,
Agent shall have received not less than ten (10) days prior written
notice setting forth the terms of such Indebtedness, (ii) such
Indebtedness shall be incurred by Borrowers and their Subsidiaries
at commercially reasonable rates and terms in an arm s length
transaction, (iii) such Indebtedness shall not at any time include
any terms that include any limitation on the right of any Borrower
to request or receive Loans or Letter of Credit Accommodations or
the right of any Borrower to amend, modify or supplement any of the
terms or conditions of this Agreement or any of the other Financing
Agreements, (iv) 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,
(v) any Borrower or Subsidiary incurring such Indebtedness shall
promptly furnish to Agent such information and documents with
respect thereof as Agent may from time to time reasonably request,
(vi) any Borrower or Subsidiary incurring such Indebtedness shall
not, directly or indirectly, (A) make any prepayments or other non-
mandatory payments in respect of such Indebtedness or any payments
pursuant to the purported acceleration thereof or (B) make any
payments in respect of such Indebtedness if, as of the date such
payment, and after giving effect thereto, an 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, (C) amend, modify, alter or change the terms of the
agreements with respect to such payments or otherwise or (D)
redeem, retire, defease, purchase or otherwise acquire such
Indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose, and (vii) any Borrower or Subsidiary incurring
such Indebtedness shall furnish to Agent and Lenders all notices,
demands or other materials in connection with such Indebtedness
sent by such Borrower or Subsidiary or on its behalf, concurrently
with the sending thereof, or received by such Borrower or
Subsidiary promptly after the receipt thereof, as the case may be;
(j) Indebtedness of any Borrower existing on the date
hereof which is described on Exhibit K hereto; provided, that: (i)
such Borrower may only make regularly scheduled payments of
principal and interest as set forth on Exhibit K; (ii) such
Borrower shall not, directly or indirectly, (A) make any
prepayments or other non-mandatory payments in respect of such
Indebtedness, or (B) amend, modify, alter or change the terms of
the agreements with respect to such payments or otherwise or (C)
redeem, retire, defease, purchase or otherwise acquire such
Indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose; (iii) such Borrower shall furnish to Agent and
Lenders all notices, demands or other materials in connection with
such Indebtedness sent by such Borrower or on its behalf,
concurrently with the sending thereof, or received by such Borrower
promptly after the receipt thereof, as the case may be;
(k) Indebtedness of any Borrower arising under Currency
Protection Agreements entered into by such Borrower in the ordinary
course of its business consistent with the current practices of
such Borrower, provided, that, (i) no Borrower shall engage in any
speculative hedging or similar transaction, (ii) the aggregate net
exposure of Borrowers 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; and
(l) Indebtedness of WCI Steel up to the principal amount
of $300,000,000 evidenced by the New WCI Notes (as reduced by
payments of principal in respect thereof), plus interest thereon at
the rate provided for in the New WCI Notes as in effect on the date
of the issuance thereof; provided, that: (i) WCI Steel 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 WCI Notes as in effect on the
date of the issuance thereof, except that WCI Steel may prepay, in
whole or in part, the New WCI Notes as in effect on the date of the
issuance thereof, so long as (A) WCI Steel provides Agent with two
(2) Business Days' prior written notice of the intention of WCI
Steel to make any such prepayment, (B) as of the date of such
prepayment and after giving effect thereto, no Obligations (other
than pursuant to Letter of Credit Accommodations and the costs,
expenses and other charges relating thereto) 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) WCI Steel shall not, directly or indirectly, (A) amend,
modify, alter or change the terms of the New WCI Note Agreements or
any agreements, documents or instruments executed and/or delivered
in connection therewith as in effect on the original date of the
execution and delivery thereof or (B) redeem, retire, defease,
purchase or otherwise deposit or invest any sums for such purpose,
except (1) as permitted by Section 7.3(l)(i) above and (2) for
mandatory repurchases of New WCI Notes as in effect on the original
date of issuance thereof in connection with the sales of certain
assets of WCI Steel (other than the Collateral) and changes in
control of WCI Steel in accordance with the terms and conditions of
the New WCI Note Agreements as in effect on the date of the
execution and delivery thereof, (iii) WCI Steel shall furnish to
Agent and Lenders all notices, demands or other materials either
received from the New WCI Note Trustee or any of the holders of the
New WCI Notes, or on its or their behalf, promptly after receipt
thereof, or sent by Borrower, or on its behalf, to the New WCI Note
Trustee or any other representative of the holders of the New WCI
Notes or to any of the holders of the New WCI Notes, 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 WCI Steel and certain other related assets and
properties of WCI Steel as set forth on Exhibit J hereto;
7.4 Limitation on Liens. Each Borrower shall not, and shall
not permit any Subsidiary to, create or suffer to exist any
mortgage, pledge, security interest, lien, encumbrance, defect in
title or restriction upon the use of its personal properties
(including, without limitation, cash, monies, cash equivalents,
securities, deposits, deposit accounts and investments), whether
now owned or hereafter acquired, except:
(a) the liens or security interests in favor of Agent
and each of Lenders;
(b) the mortgages, liens upon or security interests in
the Equipment and Real Property of WCI Steel and certain other
related assets and properties of WCI Steel as set forth on Exhibit
J hereto in favor of (i) the Existing RSI Note Trustee to secure
Indebtedness permitted under Section 7.3(d) hereof to the extent
any Indebtedness of WCI Steel evidenced by the Existing RSI Notes
(as in effect on November 27, 1996) remains outstanding upon
consummation of the WCI Debt Tender Offer, (ii) the New WCI Note
Trustee to secure Indebtedness permitted under Section 7.3(l)
hereof, and (iii) the VEBA Trustee for the VEBA Trust to secure the
VEBA Secured Obligations of WCI Steel under the VEBA Trust
Agreements; provided, that, (A) if, upon consummation of the WCI
Debt Tender Offer, any of the Existing RSI Notes remain
outstanding, the second priority mortgages, liens and security
interests of the New WCI Note Trustee and the VEBA Trustee shall
rank pari passu, except that, if the Indebtedness evidenced by the
Existing RSI Notes shall be repaid in full, the mortgages, liens
and security interests of the Existing RSI Trustee with respect to
the Existing RSI Notes shall be terminated, released and
discharged, and the mortgages, liens and security interests of the
New WCI Note Trustee shall, without any further action, rank senior
to the mortgages, liens and security interests of the VEBA Trustee
in the Equipment and Real Property of WCI Steel and certain related
assets and properties of WCI Steel as set forth on Exhibit J
hereto, (B) at all times that the Obligations or the Indebtedness
under the New WCI Notes and/or Existing RSI Notes remain
outstanding, the VEBA Trustee shall have agreed not to exercise any
of its rights or remedies pursuant to such mortgages, liens or
security interests, except to the extent permitted and directed by
the New WCI Note Trustee pursuant to the New WCI Note Agreements
(as in effect on November 27, 1996), (C) Agent shall have received,
in form and substance satisfactory to Agent and Lenders, an
agreement from each of the VEBA Trustee and the New WCI Note
Trustee permitting Agent, on behalf of Lenders, to enter and use
the Equipment and Real Property and other assets and properties of
WCI Steel subject to such mortgages, liens and security interests
permitted under this Section 7.4(b) to exercise the rights and
remedies of Agent and Lenders with respect to the Collateral, (D)
WCI Steel shall not, directly or indirectly, amend, modify, alter
or change the terms of the VEBA Trust Agreements or any agreements,
documents or instruments executed and/or delivered in connection
therewith, and (E) WCI Steel shall furnish to Agent and Lenders all
notices, demands or other materials either received from the VEBA
Trustee or its or any of the beneficiaries under the VEBA Trust
Agreements, or on their behalf, promptly after receipt thereof, or
sent by WCI Steel, or on its behalf, to the VEBA Trustee or its or
any of the beneficiaries under the VEBA Trust Agreements,
concurrently with the sending thereof, as the case may be;
(c) tax, mechanics and other like statutory liens
arising in the ordinary course of Borrowers or any of their
Subsidiaries' respective businesses to the extent (i) such liens
secure Indebtedness which is not overdue or (ii) until foreclosure
or similar proceedings shall have been commenced, such liens secure
Indebtedness relating to claims or liabilities which are (A) fully
insured and being defended at the sole cost and expense and the
sole risk of the insurer or (B) being contested in good faith by
appropriate proceedings diligently pursued and available to
Borrowers or Subsidiaries prior to the commencement of foreclosure
or other similar proceedings and are adequately escrowed for or
reserved against in Lenders' judgment;
(d) purchase money mortgages or other purchase money
liens or security interests upon any specific fixed assets
hereafter acquired or liens or security interests existing on any
such future fixed assets at the time of acquisition thereof and
including in any event any capital or finance leases; provided,
that: (i) no such purchase money lien or security interest (or
capital or finance lease, as the case may be) with respect to
specific future fixed assets or as refinanced shall extend to or
cover any other property other than the specific fixed assets so
acquired, or acquired subject to such lien or security interest (or
lease) and the proceeds thereof; (ii) such lien or security
interest only secures the obligation to pay the purchase price of
such specific fixed assets (or the obligations under the capital or
finance lease); (iii) the principal amount secured thereby shall
not exceed one hundred (100%) percent of the cost of the fixed
assets so acquired; and (iv) 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; and
(e) the liens, encumbrances or security interests listed
on Exhibit D annexed hereto or with respect to the Equipment and
Real Property, provided, that, such liens, encumbrances or security
interests with respect to the Equipment and Real Property: (i) do
not interfere with the use of the Equipment and Real Property or
the ordinary conduct of any Borrower's (or its predecessor's)
business as presently conducted or proposed to be conducted thereon
and (ii) do not impair the value of the affected property; and
(f) the mortgages, liens upon or security interests in
substantially all of the real property, plant and equipment of
Niles pursuant to the Open-End Mortgage, dated November 27, 1996,
by Niles in favor of the VEBA Trustee with respect to the premises
of Niles located in Trumbull County, Ohio to secure the obligations
of WCI Steel under the VEBA Trust Agreements (as in effect on
November 27, 1996) and the negative pledge by Youngstown Sinter
pursuant to the VEBA Trust Agreements (as in effect on November 27,
1996); provided, that, (i) at all times that the Obligations or the
Indebtedness under the New WCI Notes and/or Existing RSI Notes
remain outstanding, the VEBA Trustee shall have agreed not to
exercise any of its rights or remedies pursuant to such mortgages,
liens or security interests and (ii) Agent shall have received, in
form and substance satisfactory to Agent and Lenders, an agreement
from the VEBA Trustee permitting Agent on behalf of Lenders to
enter and use the real property, plant and equipment of Niles
subject to such mortgages, liens and security interests to exercise
the rights and remedies of Agent and Lenders with respect to the
Collateral.
7.5 Loans, Investments, Guarantees, Etc. Each Borrower shall
not, and shall not permit any Subsidiary to, 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 stock or Indebtedness 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 Indebtedness, performance, obligations
or dividends of any Person or agree to do any of the foregoing,
except:
(a) the endorsement of instruments for collection or
deposit in the ordinary course of business;
(b) investments in cash, cash equivalents or short-term
investments (as such terms are used in accordance with GAAP), at
such Borrower's discretion, so long as Excess Availability for such
Borrower exceeds $25,000,000;
(c) loans by WCI Steel to Renco Group or Affiliates of
Renco Group as follows:
(i) loans in any fiscal year of WCI Steel
commencing with the fiscal year of WCI Steel ending October 31,
1999; provided, that, as to each such loan, all of the following
conditions are satisfied: (A) Excess Availability for WCI Steel
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
making such loan, (B) after giving effect to the payment of any
such loan, Excess Availability for WCI Steel shall be not less than
$25,000,000, (C) the financial projections provided by WCI Steel to
Lender for the fiscal year of WCI Steel in which such loan is made,
prior to the commencement of such fiscal year, shall reflect that
Excess Availability for WCI Steel 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 making of such loan, (D) as of the
date of making of any such loan 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, and (E) Agent shall have
received not less than ten (10) Business Days prior written notice
of the intention of WCI Steel to make any such loans; or
(ii) in the event that any of the conditions to the
making of loans by WCI Steel to Renco Group or Affiliates of Renco
Group set forth in Section 7.5(c)(i) are not satisfied, loans in
any fiscal year of WCI Steel not to exceed, in any fiscal year of
WCI Steel commencing with the fiscal year of WCI Steel ending
October 31, 1996, in the aggregate, an amount equal to: (A) fifty
(50%) percent of (1) the cumulative After-Tax Profits of WCI Steel
(or if cumulative After-Tax Profits shall be a loss, minus one
hundred (100%) percent of such loss) earned subsequent to October
31, 1996 and prior to the date such loan occurs (treating such
period as a single accounting period) minus (2) all payments to
Renco Steel Holdings made pursuant to Section 7.7(c) for federal,
state and local income taxes, minus (B) the aggregate amount of all
dividends declared and paid by WCI Steel to Renco Steel Holdings in
such period, other than dividends made to Renco Steel Holdings
pursuant to Section 7.7(c) minus (C) the aggregate amount of all
management fees paid by WCI Steel to Renco Group and affiliates of
Renco Group in such period, other than the monthly management fees
under Section 7.6(b)(ii) below minus (D) the aggregate amount of
all loans made by WCI Steel to Renco Group and Affiliates of Renco
Group (other than Subsidiaries of WCI Steel) (net of repayments and
prepayments) in such period, and still outstanding; provided, that,
each of the following conditions is satisfied as of the date of
each such loan, as determined by Agent: (1) 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 or would exist or occur after giving effect to
such loan; (2) at the time of such loan and after giving effect
thereto, WCI Steel shall have Excess Availability of not less than
$5,000,000; and (3) Agent shall have received not less than ten
(10) days prior notice of any such loan;
(d) investments by any Borrower in the stock of any
wholly owned Subsidiary; provided, that:
(i) the total aggregate amount of any such
investments by Borrowers in their wholly owned Subsidiaries,
together with the aggregate amount of any loans made by Borrowers
to such Subsidiaries, shall not exceed $5,000,000 in the aggregate
in any one (1) year and $15,000,000 in the aggregate at any time
outstanding;
(ii) unless Agent shall otherwise specifically
agree, such Subsidiary if formed or acquired by any Borrower after
the date hereof in accordance with Section 7.2 hereof shall have
executed and delivered to Agent and Lenders, in form and substance
satisfactory to Lenders and their counsel: (A) an absolute and
unconditional guarantee of payment of any and all present and
future Obligations of Borrowers to Agent and Lenders, (B) a general
security agreement granting to Agent and Lenders a first lien
(except as otherwise consented to in writing by Agent on behalf of
Lenders) upon such assets of the Subsidiary as are of the same type
as those included in the definition of Collateral in Section 5.1
hereof (C) related Uniform Commercial Code Financing Statements,
and (D) such other agreements, documents and instruments as Agent
and Lenders may require, including, but not limited to, supplements
and amendments hereto and other loan agreements or instruments
evidencing indebtedness of such new Subsidiary to Agent and
Lenders; and
(iii) such Borrower shall have given Agent ten (10)
days prior written notice of any such investment in excess of
$500,000 and written notice at such time as any such investments
are in excess of 2,000,000 in the aggregate.
(e) guarantees by any wholly owned Subsidiary of any
Borrower in favor of Agent and Lenders of the Obligations of any
Borrower to Agent and guarantees by any Borrower in favor of Agent
and Lenders of Indebtedness, if any, of such Subsidiary to Agent
and Lenders;
(f) loans by any Borrower to any wholly owned Subsidiary
of such Borrower; provided, that:
(i) no Event of Default or act, condition or
event which with notice or passage of time or both would constitute
an Event of Default hereunder exists or has occurred and is
continuing;
(ii) the total aggregate amount of any such loans
by Borrowers to their wholly owned Subsidiaries, together with the
aggregate investments of Borrowers in the stock of such
Subsidiaries, shall not exceed $5,000,000 in the aggregate in any
one (1) year and $15,000,000 in the aggregate at any time
outstanding;
(iii) unless Agent shall otherwise specifically
agree, such Subsidiary if formed or acquired by any Borrower after
the date hereof in accordance with Section 7.2 hereof shall have
executed and delivered to Agent and Lenders, in form and substance
satisfactory to Lenders and their counsel: (A) an absolute and
unconditional guarantee of payment of any and all present and
future Obligations of Borrowers to Agent and Lenders, (B) a general
security agreement granting to Agent and Lenders a first lien
(except as otherwise consented to in writing by Agent on behalf of
Lenders) upon such assets of the Subsidiary as are of the same type
as those included in the definition of Collateral in Section 5.1
hereof (C) related Uniform Commercial Code Financing Statements,
and (D) such other agreements, documents and instruments as Agent
and Lenders may require, including, but not limited to, supplements
and amendments hereto and other loan agreements or instruments
evidencing indebtedness of such Subsidiary to Agent and Lenders;
(iv) such Borrower shall have given Agent ten (10)
days prior written notice of any such loans and any repayments of
such loans, in each instance, in amounts in excess of $500,000 and
written notice at such time as any such outstanding loans aggregate
or the repayments thereof aggregate in excess of $1,000,000; and
(v) such Borrower shall have immediately upon the
request of Agent and/or Lenders pledged and delivered to Agent any
instruments or other agreements evidencing the Indebtedness at any
time owing by such Subsidiary to such Borrower with all necessary
endorsements or assignments;
(g) loans by any wholly owned subsidiary of any Borrower
to such Borrower; provided, that, (i) prior to the making of any
such loans Agent shall have received, in form and substance
satisfactory to Agent, a subordination agreement by and between
Agent, Lenders and such wholly owned Subsidiary, as acknowledged
and agreed to by such Borrower, providing for, inter alia, the
subordination in right of payment of any and all present and future
Indebtedness and other obligations and liabilities of such Borrower
to such wholly owned Subsidiary to the indefeasible payment and
satisfaction in full of the Obligations and related matters, duly
authorized, executed and delivered by such wholly owned Subsidiary
and such Borrower and (ii) 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;
(h) investments by any Borrower pursuant to the purchase
by such Borrower of the capital stock of any person, or any voting
trust certificates, bonds, debentures or other evidences of
indebtedness or any 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 any Borrower to any person; provided, that, (i) to
the extent of any such investments in any wholly owned Subsidiary
of such 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 Borrowers shall not exceed $25,000,000 (not
including up to $5,000,000 in aggregate investments in bonds which
are held by Borrowers on the date hereof), (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;
(i) the guarantees by WCI Steel, WCI Sales LP, WCI
Production and WCI Metallurgical in favor of Lenders and Agent.
7.6 Transactions With Affiliates. Each Borrower shall not,
and shall not permit any Subsidiary to, directly or indirectly:
(a) purchase, acquire or lease any property from, or
sell, transfer or lease any property to, any shareholder, officer,
director, agent, employee or Affiliate except in prices or terms no
less favorable than would have been obtained in an arm's length
transaction with a non-affiliated person; or
(b) make any payment of management fees or of the
principal amount of or interest or any Indebtedness owing to any
shareholder, officer, director or Affiliate of any Borrower,
except:
(i) any Borrower and its Subsidiaries may make
payments for purchases from other Subsidiaries for goods delivered
or services rendered in the ordinary course of business on terms no
less favorable than would have been obtained in a comparable arm's
length transaction with a non-affiliated third party;
(ii) WCI Steel may pay to Renco Group monthly a
management fee in an amount not to exceed, on a non-cumulative
basis, $1,200,000 in any fiscal year; provided, that, 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, and the payment of such fee would not
result in an Event of Default or such act, condition or event;
(iii) WCI Steel may in any fiscal year of WCI Steel
commencing with the fiscal year of WCI Steel ending October 31,
1999 pay to Renco Group management fees (in addition to those
permitted to be paid under Section 7.6(b)(ii) above) as follows:
(A) WCI Steel may pay such management fees to Renco
Group; provided, that, each of the following conditions is
satisfied: (1) Excess Availability for WCI Steel 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 payment of any such management fees, (2) after giving
effect to the payment of any such management fees, Excess
Availability for WCI Steel shall be not less than $25,000,000,
(3) the financial projections provided by WCI Steel to Lender
for the fiscal year of WCI Steel in which such management fees
are paid, prior to the commencement of such fiscal year, shall
reflect that Excess Availability for WCI Steel 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 payment
of such management fees, (4) as of the date of the payment of
such management 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 and be continuing, and (5) Agent
shall have received not less than ten (10) Business Days prior
written notice of the intention of WCI Steel to pay such
management fees; or
(B) in the event that any of the conditions set
forth in Section 7.6(b)(iii)(A) above are not satisfied,
WCI Steel may pay such management fees to Renco Group in
any such fiscal year up to, in the aggregate, an amount
equal to: (1) fifty (50%) percent of (x) the cumulative
After-Tax Profits of WCI Steel (or if cumulative After-
Tax Profits shall be a loss, minus one hundred (100%)
percent of such loss) earned subsequent to October 31,
1996 and prior to the date the payment occurs (treating
such period as a single accounting period) minus (y) all
payments to Renco Steel Holdings made pursuant to Section
7.7(c) for federal, state and local income taxes minus
(2) the aggregate amount of all dividends declared and
paid by WCI Steel to Renco Steel Holdings in such period,
other than dividends paid to Renco Steel Holdings
pursuant to Section 7.7(c) minus (3) the aggregate amount
of all loans made by WCI Steel to Renco Group and
Affiliates of Renco Group, (other than Subsidiaries of
WCI Steel) (net of repayments and prepayments) in such
period and still outstanding minus (4) the aggregate
amount of all management fees paid by WCI Steel to Renco
Group in such period, other than the monthly management
fees contemplated under Section 7.6(b)(ii) above;
provided, that, each of the following conditions is
satisfied as of the date of payment of any such
management fees, as determined by Agent: (aa) 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 or would
exist or occur after giving effect to the payment of such
fee; (bb) at the time of the payment of such fee and
after giving effect thereto, WCI Steel shall have Excess
Availability of not less than $5,000,000; and (cc) Agent
shall have received not less than ten (10) days prior
notice of any such management fees;
(iv) Each Borrower and its Subsidiaries may accrue
and pay dividends as permitted under Section 7.7 below.
(v) Each Borrower may make payments to Renco
Group and Affiliates of Renco Group to reimburse Renco Group and
Affiliates of Renco Group for insurance premium payments previously
paid or then payable by Renco Group and Affiliates of Renco Group
on behalf of such Borrower and related brokerage fees;
(vi) Borrowers may make payments to Renco Steel
Holdings or an Affiliate of Renco Steel Holdings pursuant to the
tax sharing agreement between Renco Steel Holdings and WCI Steel
(as in effect on the date hereof); provided, that (A) Borrowers are
included in the consolidated federal, state and local income tax
return filed by Renco Group or an Affiliate of Renco Group as to
which Borrowers are making such payments for the 1998 tax year or
any previous tax year, or for any taxable period during which such
Borrower joins with Renco Group or an Affiliate of Renco Group in
filing any combined or consolidated (or similar) state or local
income tax return for a jurisdiction which does not recognize Renco
Steel Holdings and its subsidiaries as a QSSS, (B) the payments in
any year shall not exceed the federal income tax liability that
Borrowers would have been liable for if Borrowers had filed their
tax returns on a stand-alone basis except that Borrowers will not
have the benefit of any of their tax loss carryforwards and any
intercompany items shall, for such tax liability purposes, be
recorded on a cash basis rather than on an accrual basis, and (C)
such payments shall be made by Borrowers no earlier than five (5)
days prior to the date on which Renco Group or an Affiliate of
Renco Group is required to make its payments to the Internal
Revenue Service or a state or local jurisdiction.
7.7 Dividends. Each Borrower shall not, and shall not permit
any Subsidiary to, directly or indirectly, during any fiscal year,
commencing with such Borrower's current fiscal year, declare or pay
any cash dividends or dividends payable in property other than
stock on account of any shares of any class of capital stock of
such Borrower or Subsidiary now or hereafter outstanding, or set
apart any sums for such purpose, or redeem, retire, defease,
purchase or otherwise acquire any shares of any class of capital
stock of such Borrower or Subsidiary (or set aside or otherwise
deposit or invest any sums for such purpose) for any consideration
other than stock or apply or set apart any sums, 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:
(a) dividends may be accrued and paid by any Subsidiary
of a Borrower to such Borrower;
(b) (i) WCI Steel may in any fiscal year commencing
with the fiscal year of WCI Steel 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 for WCI
Steel 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 for WCI Steel shall be not less than $25,000,000, (C)
the financial projections provided by WCI Steel to Lender for the
fiscal year of WCI Steel 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 for WCI Steel
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 redemp-
tion 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
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); (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, WCI Steel may in any fiscal
year commencing with the fiscal year of WCI Steel 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 redemptions or repurchases shall
not exceed the amount equal to (1) fifty (50%) percent of (x) the
cumulative After-Tax Profits of WCI Steel (or if cumulative After-
Tax Profits shall be a loss, minus one hundred (100%) percent of
such loss) for the period commencing November 1, 1996 and ending on
the last day of the most recently ended month prior to the date of
the declaration of such dividend or payment for such redemption or
repurchase (treating such period as a single accounting period)
minus (y) all payments to Renco Steel Holdings made pursuant to
Section 7.7(c) for federal, state and local income taxes minus (2)
the aggregate amount of all loans made by WCI Steel to Renco Group
and Affiliates of Renco Group (other than Subsidiaries of WCI
Steel) (net of repayments and prepayments) in such period and still
outstanding minus (3) the aggregate amount of all management fees
paid by WCI Steel 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 WCI Steel to its shareholders in such period, other than
dividends paid to Renco Steel Holdings pursuant to Section 7.7(c),
(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 for WCI Steel
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); (iii)
in the event that any of the conditions to the repurchases of
common stock set forth in Sections 7.7(b)(i) and (ii) are not
satisfied, WCI Steel may repurchase up to all of the remaining WCI
Public Shares, provided, that, each of the following conditions is
satisfied: (A) the aggregate of the amounts paid for such
repurchases and the amounts paid for redemptions, retirements,
defeasance or purchases of Existing RSI Notes pursuant to Section
7.3(d)(ii)(2) shall not exceed $300,000 and (B) as of the date of
such repurchase 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; and (iv) notwithstanding the
foregoing, WCI Steel shall be permitted to declare and pay the
dividend referred to in Section 2(c) of Amendment No. 7 to Amended
and Restated Loan and Security Agreement, dated November 27, 1996,
among WCI Steel, Lenders and WCI Steel Holdings, Inc. ( Amendment
No. 7") in accordance with the terms and conditions of Amendment
No. 7; and
(c) with respect to any year that WCI Steel and its
Subsidiaries have effectively been designated as qualified
Subchapter S subsidiary companies ( QSSS ) under the Code,
Borrowers and their Subsidiaries may pay cash dividends, from
legally available funds therefor, to the extent taxable income of
Borrowers is required to be included in the taxable income shown by
Renco Group as reported in its Subchapter S tax returns ( Form
1120S ), subject to the following:
(i) Such cash dividends shall be with respect to
any such period, in an amount up to the product of (A) the taxable
income of Borrowers and their Subsidiaries for such period which is
the basis for Renco Group being required to include such taxable
income in its Form 1120S, as amended or modified or determined by
audit, and the required estimated taxable income related thereto
and the comparable and local taxable income reports and estimated
taxable income, multiplied by (B) the corporate Federal, State and
local tax rates, whether calculated on regular taxable income or
alternative minimum taxable income, as applicable, in effect for
the taxable period applicable to Borrowers and their Subsidiaries
using the rates that would be applicable if Borrowers were not a
QSSS and calculated in accordance with the tax sharing arrangement
by and among Renco Steel Holdings and WCI Steel (as in effect on
the date hereof),
(ii) Borrowers may pay such cash dividends with
respect to any such period so long as (A) in such period, Borrowers
are effectively designated a QSSS, (B) the product of the taxable
income of Borrowers and their Subsidiaries for such period
multiplied by the applicable tax rates as described above shall be
reduced by any applicable tax credits or deductions calculated in
accordance with the tax sharing arrangements by and among
Borrowers, their Subsidiaries and Renco Steel Holdings (as in
effect on the date hereof) available to Borrowers and their
Subsidiaries which would reduce the amount of the income taxes
payable by Borrowers and their Subsidiaries, (C) any such dividends
shall be paid no more than five (5) days prior to the date that
Renco Group s shareholders are required to make payment of the
taxes based on the taxable income of Borrowers and their
Subsidiaries, (D) not less than five (5) days prior to the payment
of any such dividends, Agent shall have received a certificate
signed by the chief financial officer of WCI Steel, in form and
substance satisfactory to Agent, stating the calculation of the
amount which is the basis for tax distributions permitted hereunder
through such period (if any) and providing full information and
computations with respect thereto and (E) such dividend shall not
be in violation of applicable law or any other agreement to which
Borrowers are a party or by which Borrowers or their assets are
bound, and
(iii) In no event shall dividends be paid to Renco
Steel Holdings based on taxable income of Borrowers and their
Subsidiaries for jurisdictions which do not recognize Borrowers and
their Subsidiaries as a QSSS and where (A) Borrowers and their
Subsidiaries are required to file and pay their individual taxes,
and (B) where Renco Group is not required to pay, or by virtue of a
consolidated (or similar) return does not make payments in respect
of, the tax liabilities of the Borrowers or any of their
Subsidiaries in such jurisdictions.
7.8 Maintenance of Existence. Each Borrower shall at all
times preserve, renew and keep in full, force and effect its
corporate existence and rights and franchises with respect thereto
and maintain in full force and effect all permits, licenses,
trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or
proposed to be conducted.
7.9 Sale of Assets, Consolidation, Merger, Dissolution, Etc.
Each Borrower shall not, 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, or (b) sell,
assign, lease, transfer, abandon or otherwise dispose of any stock
or Indebtedness to any other Person or any of its respective
properties or assets to any other Person (except for sales of
Inventory in the ordinary course of business and the disposition of
worn-out or obsolete Equipment or Equipment no longer used in the
business of such Borrower), or (c) wind up, liquidate or dissolve
or (d) agree to do any of the foregoing.
7.10 Compliance with Laws, Regulations, Etc.
(a) Each Borrower shall, and shall cause each Subsidiary
to, at all times comply in all material respects with all
applicable provisions of laws, rules, regulations, licenses,
permits, approvals and orders and duly observe all requirements, of
any foreign, Federal, State or local governmental authority,
including, without limitation, ERISA, the Code, the Occupational
Safety and Health Act of 1970, as amended, the Fair Labor Standards
Act of 1938, as amended, and the rules and regulations thereunder
and all statutes, rules, regulations, orders, permits and
stipulations relating to environmental pollution and employee
health and safety, including, without limitation, all of the
Environmental Laws.
(b) Each Borrower shall, and shall cause each Subsidiary
to, take prompt and appropriate action to respond to any
non-compliance with any of the Environmental Laws and shall
regularly report to Agent with regard to such response. If any
Borrower receives any notice of (i) the happening of any event
involving the use, spill, discharge or clean-up of any Hazardous
Material or (ii) any complaint, order, citation or notice with
regard to air emissions, water discharges, noise emissions or any
other environmental, health or safety matter affecting any Borrower
from any Person, including, but not limited to, the United States
Environmental Protection Agency or any state or local environmental
agency or authority, then such Borrower shall give within three (3)
business days both oral and written notice of same to Agent.
7.11 Payment of Taxes and Claims. Each Borrower shall, and
shall cause each Subsidiary to, duly pay and discharge all taxes,
assessments, contributions and governmental charges upon or against
it or them or its or their properties or assets, except for taxes
the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to such
Borrower prior to the date on which penalties attach thereto.
Borrowers shall be liable for any tax or penalty imposed upon any
transaction under this Agreement or any of the other Financing
Agreements or giving rise to the Accounts or any other Collateral
or which Agent and/or Lenders may be required to withhold or pay
for any reason and Borrowers agree to indemnify and hold Agent and
Lenders harmless with respect thereto, and to repay to Agent and
Lenders on demand the amount thereof, and until paid by Borrowers
such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require
Borrowers to pay any income tax attributable to the income of Agent
or Lenders from any amounts charged or paid hereunder to Agent or
Lenders.
7.12 Properties in Good Condition.
(a) Each Borrower shall keep its properties, and shall
cause each of its Subsidiaries to keep their properties, in good
repair, working order and condition (reasonable wear and tear
excepted) and, from time to time, make and cause its Subsidiaries
to make all needful and proper repairs, renewals, replacements,
additions and improvements thereto, so that the business carried on
may be properly and advantageously conducted at all times in
accordance with prudent business management. The Inventory and the
Equipment of each Borrower shall only be used in such Borrower's
business and not for personal, family, household or farming use.
(b) All of the Inventory of each Borrower is and will be
held for sale or lease, or to be furnished in connection with the
rendition of services, in the ordinary course of such Borrower's
businesses, and is and will be fit for such purposes. Each
Borrower shall keep its Inventory in good and marketable condition,
at its own expense. Each Borrower will not, without prior written
notice to Agent, acquire or accept any inventory on consignment or
approval. Borrowers agree that all Inventory will be produced in
accordance with the Federal Fair Labor Standards Act of 1938, as
amended, and all rules, regulations, and orders thereunder. Each
Borrower shall conduct a physical count of its Inventory at least
once per fiscal year, and at such other times as Agent or Lenders
reasonably request, and shall promptly supply Agent and Lenders
with a copy of such count accompanied by a report of the Value of
such Inventory. Borrowers shall not, without Agent's or Lenders'
prior consent, sell any Inventory on a bill-and-hold, guaranteed
sale, sale and return, sale on approval, or other repurchase or
return basis if such sale would cause the aggregate amount of sales
of the type referred to in this sentence for which payment has not
been received to exceed $250,000.
7.13 Insurance. Each Borrower shall at all times maintain
with financially sound and reputable insurers, insurance with
respect to the Collateral against loss or damage of the kind and in
the amounts customarily insured against by corporations of
established reputation engaged in the same or similar businesses
and similarly situated and each Borrower shall maintain public
liability insurance against claims for personal injury, death or
property damage occurring upon, in, about or in connection with the
use of any properties owned, occupied or controlled by it and
occurring in connection with the use (or otherwise) of any products
manufactured or sold by it, and workmen's compensation insurance
(except as to workmen's compensation insurance to the extent such
Borrower is self-insured with respect thereto). Said policies of
insurance shall be satisfactory to Lenders as to form, amount and
insurer. Each Borrower shall furnish certificates, policies or
endorsements to Agent and Lenders as proof of such insurance, and,
if they fail to do so, Lenders are authorized, but not required, to
obtain such insurance at the expense of such Borrower. All
policies shall provide for at least thirty (30) days prior written
notice to Agent and Lenders of any cancellation or reduction of
coverage and that Agent may act as attorney for the applicable
Borrower in obtaining, and at any time on or after the occurrence
of an Event of Default, adjusting, settling, amending and canceling
such insurance. Each Borrower shall obtain non-contributory
lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lenders specifying that the
proceeds of such insurance shall be payable to Agent and Lenders as
their interests may appear and further specifying that Lenders
shall be paid regardless of any act or omission by such Borrower.
At its option, Agent and Lenders may apply any insurance proceeds
received by Agent or Lenders 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 Agent,
in its discretion, may determine.
7.14 Appraisals. Upon Agent's request, each Borrower shall,
at such Borrower's expense, prior to the occurrence of an Event of
Default no more than once in any twelve (12) consecutive month
period, but at any time or times as Agent or Lenders may request on
or after the occurrence of an Event of Default, deliver, or cause
to be delivered, to Agent written reports or appraisals of any or
all of the Collateral in form, scope and methodology, and by an
appraiser acceptable to Agent and Lenders. Such reports or
appraisals as to the Inventory shall list all items and categories
thereof, describing the condition of same and setting forth the
lower of cost (calculated on a first-in-first-out basis) or fair
market value, in such form as is satisfactory to Agent.
7.15 Compliance with ERISA. Each Borrower shall not with
respect to all "employee pension benefit plans" maintained by such
Borrower or any of its ERISA Affiliates:
(a) (i) terminate any of such employee pension benefit
plans so as to incur any liability to the Pension Benefit Guaranty
Corporation established pursuant to ERISA, (ii) allow or suffer to
exist any prohibited transaction involving any of such employee
pension benefit plans or any trust created thereunder which would
subject such Borrower or such ERISA Affiliate to a tax or penalty
or other liability on prohibited transactions imposed under Section
4975 of the Code or ERISA, (iii) fail to pay to any such employee
pension benefit plan any contribution which it is obligated to pay
under Section 302 of ERISA, Section 412 of the Code or the terms of
such plan, (iv) allow or suffer to exist any accumulated funding
deficiency, whether or not waived, with respect to any such
employee pension benefit plan, (v) allow or suffer to exist any
occurrence of a reportable event or any other event or condition
which presents a material risk of termination by the Pension
Benefit Guaranty Corporation of any such employee pension benefit
plan that is a Single Employer Plan, which termination could result
in any liability to the Pension Benefit Guaranty Corporation or
(vi) incur any withdrawal liability with respect to any
multiemployer pension plan, except as set forth on Exhibit F.
(b) As used in this Section 7.16, the term "employee
pension benefit plans," "employee benefit plans", "accumulated
funding deficiency" and "reportable event" shall have the
respective meanings assigned to them in ERISA, and the term
"prohibited transaction" shall have the meaning assigned to it in
Section 4975 of the Code and ERISA.
7.16 Notice of Default. Promptly upon becoming aware of the
existence of any condition or event which constitutes an Event of
Default or any condition or event which, with the passage of time
or notice or both would constitute such an Event of Default,
pursuant to the provisions of this Agreement or the other Financing
Agreements, each Borrower shall give Agent and Lenders written
notice thereof specifying the nature of such condition or event.
7.17 Financial Statements and Other Information.
(a) Each Borrower shall promptly furnish to Agent and
Lenders all such financial and other information as Agent and
Lenders shall reasonably request relating to the Collateral and the
assets, businesses and operations of such Borrower, and notify the
auditors and accountants of such Borrower that Agent and Lenders
are authorized to obtain such information directly from them.
Without limiting the foregoing, each Borrower shall furnish to
Agent and Lenders, in such detail as it shall request, the
following:
(i) As soon as available, but in any event not
later than ninety (90) days after the close of each fiscal year,
audited consolidated balance sheets, statements of earnings and
retained earnings and cash flows for WCI Steel and its Subsidiaries
for such fiscal year, and the accompanying notes thereto, and
unaudited consolidated balance sheets, statements of earnings and
retained earnings and cash flows for WCI Steel and its Subsidiaries
for such fiscal year, and the accompanying notes thereto, setting
forth in each case in comparative form figures for the previous
fiscal year, all in reasonable detail, fairly presenting the
financial position and the results of operations of WCI Steel and
its Subsidiaries as at the date thereof and for the fiscal year
then ended, and prepared in accordance with GAAP consistently
applied. Such audited consolidated statements of WCI Steel and its
Subsidiaries shall be examined in accordance with generally
accepted auditing standards by and accompanied by a report thereon
unqualified as to scope of independent certified public accountants
selected by WCI Steel and satisfactory to Lenders.
(ii) As soon as available, but in any event not
later than forty-five (45) days after the close of each fiscal
quarter other than the fourth quarter of a fiscal year,
consolidated unaudited balance sheets of WCI Steel and its
Subsidiaries as at the end of such quarter, and consolidated
unaudited statements of income and expense and statements of cash
flow for WCI Steel and its Subsidiaries for such quarter and for
the period from the beginning of the fiscal year to the end of such
quarter, together with the accompanying notes thereto, all in
reasonable detail, fairly presenting the financial position and
results of operation of WCI Steel and its Subsidiaries as at the
date thereof and for such periods, prepared in accordance with GAAP
consistently applied. Such statements shall be certified to be
correct by the chief financial officer, treasurer or controller of
WCI Steel, subject to normal year-end adjustments.
(iii) As soon as available, but in any event not
later than thirty (30) days after the end of each month,
consolidated unaudited balance sheets of WCI Steel and its
Subsidiaries as at the end of such month, and consolidated
unaudited statements of income and expenses for WCI Steel and its
Subsidiaries for such month and for the period from the beginning
of the fiscal year to the end of such month, all in reasonable
detail, fairly presenting the financial position and results of
operation of WCI Steel and its Subsidiaries as at the date thereof
and for such periods, and prepared in accordance with GAAP
consistently applied. Such statements shall be certified to be
correct by the chief financial officer, treasurer or controller of
WCI Steel, subject to normal year-end adjustments.
(iv) With each of the audited financial statements
delivered pursuant to Section 7.18(a)(i) above, a certificate of
the independent certified public accountants that examined such
statements to the effect that they have reviewed and are familiar
with the Financing Agreements and that, in examining such financial
statements, they did not become aware of any fact or condition
which then constituted an Event of Default, except for those, if
any, described in reasonable detail in such certificate.
(v) Simultaneously with the delivery of each of
the annual audited and quarterly unaudited financial statements as
set forth herein, Agent and Lenders shall receive a certificate of
the chief financial officer, treasurer or controller of each
Borrower (A) setting forth in reasonable detail the calculations
required to establish that such Borrower was in compliance with the
covenants set forth in Sections 7.18, 7.19 and 7.20 hereof during
the period covered in such financial statements; (B) stating that,
except as explained in reasonable detail in such certificate, (1)
all of the representations, warranties and covenants of such
Borrower contained in this Agreement and the other Financing
Agreements are correct and complete as at the date of such
certificate and (2) no Event of Default then exists or existed
during the period covered by such financial statements, and (C)
describing and analyzing in reasonable detail all material trends,
changes and developments in each and all financial statements. If
such certificate discloses that a representation or warranty is not
correct or complete, or that a covenant has not been complied with,
or that an Event of Default existed or exists, such certificate
shall set forth what action the Borrower has taken or proposes to
take with respect thereto.
(vi) No sooner than ninety (90) days prior to, and
no less than, fifteen (15) days after the beginning of each fiscal
year of each Borrower, projected balance sheets, statements of
income and expense, and statements of cash flow for such Borrower
and its Subsidiaries as at the end of and for each month of such
fiscal year.
(vii) Promptly after delivery thereof, any
management letters and reports by such independent certified public
accountants to each Borrower and its Subsidiaries.
(viii) Monthly accounts receivable agings and
inventory reports and such schedules of Accounts and Inventory,
together with any further financial and other information regarding
the Collateral, as Agent and Lenders may request from time to time.
(ix) Subject to the terms and conditions contained
herein, each Borrower shall deliver to Agent a Borrowing Base
Certificate setting forth such Borrower's calculation of the
Revolving Loans and Letter of Credit Accommodations available to
such Borrower pursuant to the terms and conditions contained
herein, duly completed and executed by the chief financial officer
or other appropriate financial officer of such Borrower 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 to any Borrower
is greater than $50,000,000 or (2) Excess Availability
for such Borrower is less than $25,000,000, then such
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 to any Borrower is equal
to or greater than $25,000,000 but equal to or less than
$50,000,000 and (2) Excess Availability for such Borrower
is greater than $25,000,000, then such 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 to any Borrower is
less than $25,000,000 and (2) Excess Availability for
such Borrower is greater than $50,000,000, then such
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, each Borrower shall provide
Agent on a daily basis with a schedule of Accounts,
collections received and credits issued and on a daily
basis with an inventory report in the event that at any
time 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) such 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 any 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 such Borrower. Without
limiting the foregoing, each 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 a Borrower's records or reports
of the Collateral are prepared or maintained by an
accounting service, contractor, shipper or other agent,
such 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) Each 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 such 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 such Borrower pursuant to the
terms and conditions contained herein reflected in the most recent
Borrowing Base Certificate delivered by such Borrower to Agent
pursuant to Section 7.18(a)(ix) hereof, (ii) the Revolving Loans
made by Lenders to such 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 such Borrower under the terms hereof as a result of any decrease
in the amount of Revolving Loans and Letter of Credit
Accommodations then available and the amount of such excess, or
(iii) Excess Availability for such Borrower is less than
$50,000,000 and at such times as Excess Availability for such
Borrower may be less than $50,000,000 if Excess Availability for
such Borrower is less than $25,000,000.
(c) Each Borrower shall promptly notify Agent and
Lenders in writing of any loss, damage, investigation, action,
suit, proceeding or claim relating to the Collateral or which might
result in any material adverse change in its business, properties,
assets, goodwill or condition, financial or otherwise.
(d) Each Borrower shall promptly provide Agent and
Lenders such budgets, forecasts, projections and other information
respecting the business operations and financial or other condition
of such Borrower and its Subsidiaries, as Agent and Lenders may,
from time to time, reasonably request.
(e) Agent and Lenders are hereby authorized to deliver a
copy of any financial statement or any other information relating
to the business, operations or financial condition of each Borrower
or its Subsidiaries, which may be furnished to it hereunder or
otherwise, to any court, regulatory body or agency having
jurisdiction over Agent and Lenders or to any other Person which
shall, or shall have any right or obligation to, succeed to all or
any part of Agent's and Lenders' interests in any of the Loans,
this Agreement, the other Financing Agreements or the Collateral,
including, without limitation, any Participant.
(f) Each Borrower hereby irrevocably authorizes and
directs all accountants, auditors or other third parties to deliver
to Agent and Lenders, at such Borrower's expense, copies of the
financial statements, and other accounting records relating to such
Borrower and its Subsidiaries of any nature in their possession and
to disclose to Agent and Lenders any information they may have
regarding the business affairs and financial condition of such
Borrower and its Subsidiaries.
7.18 Consolidated Adjusted Working Capital. WCI Steel and its
Subsidiaries shall, at all times, maintain a Consolidated Adjusted
Working Capital of not less than $0 on the date hereof and at all
times thereafter.
7.19 Consolidated Adjusted Net Worth. WCI Steel and its
Subsidiaries shall, at all times, maintain a Consolidated Adjusted
Net Worth of not less than ($150,000,000) on the date hereof and at
all times thereafter.
<PAGE>
7.20 Capital Expenditures.
(a) The expenditures of WCI Steel 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 November 1, 1998 through
and including October 31, 1999 $ 25,000,000
(ii) from November 1, 1998 through
and including October 31, 2000 $100,000,000
(iii) from November 1, 1998 through
and including October 31, 2001 $150,000,000
(iv) from November 1, 1998 through
and including October 31, 2002 $200,000,000
(b) The aggregate amount of expenditures of WCI Steel
and its Subsidiaries for fixed or capital assets (including,
without limitation, capitalized lease obligations) in any fiscal
year commencing with the fiscal year of Borrowers ending on October
31, 2003 shall not exceed an amount equal to the sum of (i)
$200,000,000 less than the aggregate amount of expenditures of WCI
Steel and its Subsidiaries for fixed or capital assets, on a
cumulative basis, for the period from November 1, 1998 through and
including October 31, 2002, plus (ii) the greater of: (A)
$35,000,000 or (B) the sum of: (A) fifty (50%) percent of the
After-Tax Profits of Borrowers in the immediately preceding fiscal
year plus (B) one hundred (100%) percent of the depreciation for
fixed or capital assets in such fiscal year.
7.21 Further Assurances. Each Borrower has executed or will
contemporaneously herewith execute and deliver to Agent and Lenders
such of the other Financing Agreements to which it is a party and
financing statements pursuant to the UCC, in form and substance
satisfactory Agent and Lenders. Each Borrower shall, at its
expense, at any time or times duly execute and deliver, or shall
cause to be duly executed and delivered, such further agreements,
instruments and documents, including, without limitation,
additional security agreements, collateral assignments, UCC
financing statements or amendments or continuations thereof,
landlord's or mortgagee's waivers of liens and consents to the
exercise by Agent and Lenders of all the rights and remedies
hereunder, under any of the other Financing Agreements or
applicable law with respect to the Collateral, and do or cause to
be done such further acts as may be necessary or proper in Agent's
and Lenders' opinion to evidence, perfect, maintain and enforce the
security interest and the priority thereof in the Collateral and to
otherwise effectuate the provisions or purposes of this Agreement
or any of the other Financing Agreements. Where permitted by law,
each Borrower hereby authorizes Agent to execute and file one or
more UCC financing statements signed only by Agent. Upon the
request of Agent or Lenders, at any time and from time to time,
each Borrower shall, at its cost and expense, do, make, execute,
deliver and record, register or file, financing statements,
mortgages, deeds of trust, deeds to secure debt, and other
instruments, acts, pledges, assignments and transfers (or cause the
same to be done) and will deliver to Agent and Lenders such
instruments evidencing items of Collateral as may be requested by
any of them.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of
the following events shall constitute an "Event of Default"
hereunder:
(a) any Borrower shall be in default in the payment of
any of the Obligations when due, which default shall continue for
three (3) days; or
(b) any Borrower shall fail to observe or perform any
covenants or agreements contained in this Agreement, the other
Financing Agreements or in any other document or instrument
referred to herein or therein other than as described in Section
8.1(a) above and such failure shall continue for fifteen (15) days,
provided, that, such fifteen (15) day period shall not apply in the
case of: (i) any failure to observe any such covenant or agreement
which is not capable of being cured at all or within such fifteen
(15) day period or which has been the subject of a prior failure
within a six (6) month period or (ii) an intentional breach by a
Borrower or its management of any such covenant or agreement, or
(iii) the failure to observe or perform any of the covenants or
agreements contained in Section 7.14 or Section 7.23 of this
Agreement or any covenants or agreements covering substantially the
same subject matter as such sections in any of the other Financing
Agreements; or
(c) any present or future representation, warranty or
statement of fact when made by or on behalf of any Borrower to
Agent or Lenders is false or misleading in any material respect; or
(d) a judgment is rendered against any Borrower or any
other Person at any time liable on or in respect of the Obligations
in excess of $2,000,000 in any one case or in excess of $2,000,000
in the aggregate from both Borrowers and the same shall remain
undischarged for a period in excess of thirty (30) days or
execution shall at any time not be effectively stayed except if it
is a judgment for which Borrower or such other person is fully
insured and with respect to which the insurer has admitted in
writing its liability for the full amount thereof and so long as
execution is at all times effectively stayed; or
(e) any Borrower or any other Person at any time liable
on or in respect of the Obligations shall be generally unable to
pay its debts as they mature, suspend or discontinue doing business
for any reason, become insolvent, call a meeting of creditors or
have a creditors' committee appointed, make a general assignment
for the benefit of creditors, shall admit in writing its inability
to pay its debts as they become due or shall commence any action or
proceeding for the appointment of any trustee, receiver, custodian
or liquidator of such Borrower or such other Person or all or any
part of their respective properties or assets; or
(f) any Borrower or any other Person at any time liable
on or in respect of the Obligations shall commence any action or
proceeding for relief under the Bankruptcy Code or any
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under the Bankruptcy
Code or any other present or future statute, law or regulation or
shall take any corporate action to authorize any of such actions or
proceedings; or
(g) any Borrower or any other Person at any time liable
on or in respect of the Obligations shall have commenced against it
any action or proceeding for relief under the Bankruptcy Code or
any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under the Bankruptcy
Code or any other present or future statute, law or regulation, or
any action or proceeding for the appointment of any trustee,
receiver, custodian or liquidator of any of such Borrower or such
other Person or all or any part of their respective properties or
assets, which is not dismissed within thirty (30) days of its
commencement, or such Borrower or such other Person shall file any
answer admitting or not contesting the allegations of a petition
filed against it in any such proceeding or by any act or omission
indicates its consent to, acquiescence in or approval of, any such
action or proceeding or if the relief requested is granted sooner;
or
(h) any guarantee of the Obligations shall at any time
cease to be in full force and effect, or shall be declared void or
invalid or the validity or enforceability thereof shall be
contested or any party thereto shall deny it has any further
liability or obligation, or shall fail to perform its obligations,
under the any such guarantee; or
(i) any Borrower or any other Person at any time liable
on or in respect of the Obligations shall default in the payment of
any amounts at any time due on any Indebtedness for borrowed money,
capitalized lease obligations or any contingent Indebtedness in
connection with any guarantee, letter of credit, indemnity or
similar type of instrument at any time owing to any Person other
than Agent or Lenders in an amount in excess of $2,000,000 or in
the performance of any other terms or covenants or any evidence of
same or other agreement relating thereto or securing same or with
respect to any contract, lease, license or other obligation owed to
any Person other than Agent or Lenders involving $2,000,000 or
more, which default continues for more than the applicable cure
period, if any, with respect thereto, but in no event more than
thirty (30) days after the occurrence of any such default; or
(j) there is any change in the ultimate control of any
Borrower or Renco Steel Holdings or the majority ownership of any
Borrower or Renco Steel Holdings; or
(k) the occurrence of any default or event of default
under any of the other Financing Agreements.
8.2 Remedies.
(a) Without limiting Agent's and Lenders' rights to
demand payment sooner as provided in this Agreement, upon or at any
time after the occurrence or existence of any one or more of such
Events of Default, upon termination of this Agreement or the other
Financing Agreements, or if this Agreement and the other Financing
Agreements are not renewed, in addition to any other rights Agent
and Lenders may have under the Financing Agreements or otherwise:
(i) Lenders may, at any time thereafter, at their
option, without presentment for payment, demand, notice of dishonor
or notice of protest or any other or further notice, all of which
are hereby expressly waived by Borrowers, declare any or all of the
Obligations to be immediately due and payable, together with
interest at the highest rate of interest hereunder until fully and
indefeasibly paid; and
(ii) each Participant, to the fullest extent
permitted by applicable law, shall have the right to (A) set off
against the Obligations any and all deposits (whether general or
special, time or demand, provisional or final), credits, balances,
accounts, monies or other assets which are the property of any
Borrower and held by such Participant or owed by such Participant
to any Borrower and (B) remit the same to Agent for application to
the Obligations;
(iii) without further notice to any Borrower
appropriate, set off and apply to the payment of any or all of the
Obligations, any or all Collateral, in such manner as Agent and
Lenders shall determine, enforce payment of any Collateral, settle,
compromise or release in whole or in part, any amounts owing on the
Collateral, make allowances and adjustments with respect thereto,
issue credits in Agent's or any Borrower's name, sell, assign and
deliver the Collateral (or any part thereof), at public or private
sale, at broker's board, for cash, upon credit or otherwise, at
Agent's and Lenders' option and discretion, and Agent and Lenders
may bid or become purchaser at any such sale, if public, free from
any right of redemption which is hereby expressly waived;
(iv) without limiting the generality of the
foregoing, Agent and Lenders are hereby authorized at any time and
from time to time, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any
time held and other Indebtedness at any time owing by Agent or
Lenders to or for the credit or the account of any Borrower against
any and all of the Obligations, whether or not then due and
payable;
(v) Agent and Lenders shall have the right, without
notice to any Borrower (except as otherwise expressly provided
herein), at any time and from time to time in its discretion, with
or without judicial process or the aid or assistance of others and
without cost to Agent or Lenders (A) to enter upon any premises on
or in which any of the Inventory may be located and, without
resistance or interference by any Borrower, take possession of the
Inventory; (B) to complete processing, manufacturing and repair of
all or any portion of the Inventory; (C) to sell, foreclose or
otherwise dispose of any part or all of the Inventory on or in any
premises of any Borrower or premises of any other party; (D) to
require any Borrower, at its expense, to assemble and make
available to Lender any part or all of the Inventory at any
reasonable place and time designated by Agent or Lenders; and (E)
to remove any or all of the Inventory from any premises on or in
which the same may be located, for the purpose of effecting the
sale, foreclosure or other disposition thereof or for any other
purpose.
(b) Agent and Lenders shall have all of the rights and
remedies of a secured party under the UCC or applicable law of any
other State in which any Collateral may be situated, in addition to
all of the rights and remedies set forth in this Agreement and the
other Financing Agreements, and in any instrument or document
referred to herein or therein, and/or under any other applicable
law relating to this Agreement, the other Financing Agreements, the
Obligations or the Collateral.
(c) Each Borrower agrees that the giving of five (5)
days notice to such Borrower by Agent or Lenders at such Borrower's
address set forth below, designating the place and time of any
public sale or of the time after which any private sale or other
intended disposition of the Collateral is to be made, shall be
deemed to be reasonable notice thereof and each Borrower waives
any other notice with respect thereto.
(d) The net cash proceeds resulting from the exercise of
any of the foregoing rights or remedies shall be applied by Agent
to the payment of the Obligations in such order as Agent may elect,
and Borrowers shall remain liable to Agent and Lenders for any
deficiency. Without limiting the generality of the foregoing, if
Agent enters into any credit transaction, directly or indirectly,
in connection with the disposition of any Collateral, Agent shall
have the option, at any time, in its discretion, to reduce the
Obligations by the principal amount of such credit transaction or
to defer the reduction thereof until actual receipt by Agent of
cash or other immediately available funds in connection therewith.
(e) In the event Agent or Lenders institutes an action
to recover any Collateral or seeks recovery of any Collateral by
way of prejudgment remedy or otherwise, each Borrower hereby
irrevocably waives (i) the posting of any bond, surety or security
with respect thereto which might otherwise be required, (ii) any
demand for possession prior to the commencement of any suit or
action to recover the Collateral, and (iii) any requirement that
Agent and Lenders retain possession and not dispose of any
Collateral until after trial or final judgment.
(f) Agent and Lenders may, at their option, cure any
default by a Borrower under any agreement with any Person, which
constitutes, or with notice or passage of time or both would
constitute, an Event of Default hereunder or under any of the other
Financing Agreements, or pay or bond on appeal any judgment entered
against a Borrower (irrespective of the amount of said judgment or
the time elapsed since entry thereof), and charge any Borrower's
account(s) therefor, such amounts to be repayable by Borrowers on
demand, together with interest thereon at the highest rate of
interest payable hereunder; provided, however, Agent and Lenders
shall be under no obligation to effect such cure, payment or
bonding and shall not, by making any payment for any Borrower's
account(s), be deemed to have assumed any obligation or liability
of any Borrower.
(g) The enumeration of the foregoing rights and remedies
is not intended to be exclusive, and such rights and remedies are
in addition to and not by way of limitation of any other rights or
remedies Agent and Lenders may have under the UCC or other
applicable law. Agent and Lenders shall have the right to
determine which rights and remedies, and in which order any of the
same, are to be exercised, and to determine which Collateral is to
be proceeded against and in which order, and the exercise of any
right or remedy shall not preclude the exercise of any others, all
of which shall be cumulative.
(h) No act, failure or delay by Agent and/or Lenders
shall constitute a waiver of any of the rights and remedies of
Agent and Lenders. No single or partial waiver by Agent or Lenders
of any provision of this Agreement or any of the other Financing
Agreements, or breach or default thereunder, or of any right or
remedy which Agent or Lenders may have shall operate as a waiver of
any other provision, breach, default, right or remedy or of the
same provision, breach, default, right or remedy on a future
occasion.
(i) Each Borrower waives presentment, notice of
dishonor, protest and notice of protest of all instruments included
in or evidencing any of the Obligations or the Collateral and any
and all notices or demands whatsoever (except as expressly provided
herein). Agent and Lenders may, at all times, proceed directly
against any Borrower to enforce payment of the Obligations and
shall not be required to take any action of any kind to preserve,
collect or protect any rights in the Collateral.
SECTION 9. COLLECTION AND ADMINISTRATION
9.1 Collections; Management of Collateral.
(a) Each 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 such 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 (the "Blocked Account 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
of any Borrower are maintained to transfer the funds on deposit in
the Blocked Accounts to such operating bank account of such
Borrower as such 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) a Borrower shall have failed to
deliver any Borrowing Base Certificate in accordance with the terms
hereof, or (iii) upon Agent's good faith belief, any information
contained in any Borrowing Base Certificate is incomplete,
inaccurate or misleading, or (iv) any Loans are outstanding.
Unless otherwise requested by a Borrower, amounts received by
Lenders from such Borrower pursuant to the foregoing sentence which
are not applied to the Obligations (or held as cash collateral
pursuant to Section 10.2(c)) or otherwise retained by the Lenders
as expressly provided in this Agreement shall be promptly remitted
to such Borrower, so long as none of the conditions set forth in
clauses (i), (ii), (iii) or (iv) above exists. Each 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.
(b) Each Borrower shall immediately upon obtaining
knowledge thereof report to Agent all reclaimed, repossessed or
returned goods, material claims of Account Debtors and any other
matter affecting the value, enforceability or collectibility of any
Account of such Borrower. At Agent's request, any goods reclaimed
or repossessed by or returned to any Borrower will be set aside,
marked with Agent's name and held by such Borrower for the account
of Agent and Lenders and subject to the security interests of
Agent and Lenders. All claims and disputes relating to Accounts of
any Borrower are to be promptly adjusted within a reasonable time,
at such Borrower's own cost and expense. Agent may, at its option,
settle, adjust or compromise claims and disputes relating to
Accounts of any Borrower which are not adjusted by such Borrower
within a reasonable time.
9.2 Right of Inspection; Access. Agent and Lenders and their
respective representatives shall at all times, have free access to
and right of inspection of the Collateral and have full access to
and the right to examine and make copies of the books and records
of each Borrower to confirm and verify all Accounts, to perform
general audits and to do whatever else Agent and/or Lenders deem
necessary to protect the interests of Lenders. Agent and Lenders
may at any time remove from the premises of any Borrower or require
any Borrower or any accountants and auditors employed by any
Borrower to deliver any books and records and Agent and Lenders
may, without cost or expense to them, use such of Borrower's
personnel, supplies, computer equipment and space at its places of
business as may be reasonably necessary for the handling of
collections.
9.3 Lock Box or Blocked Account. Each Borrower shall, in the
manner requested by Agent from time to time, direct that all
proceeds of Collateral shall be payable to a lock box or post
office box designated by Agent and under its control and/or
deposited into a blocked account under its control and/or deposited
into an account maintained in such Borrower's name and under
Agent's control and in connection therewith shall execute such lock
box, blocked account and other agreement as Agent in its discretion
shall specify.
9.4 Accounts Documentation. Each Borrower shall maintain its
shipping forms, invoices and other related documents in a form
satisfactory to Agent and each Borrower shall maintain its books,
records and accounts in accordance with GAAP consistently applied.
Each Borrower shall keep and maintain, at its cost and expense,
satisfactory and complete books and records of all of its Accounts,
all payments received or credits granted thereon, and all other
dealings therewith. At such times as Agent may reasonably request,
each Borrower shall deliver to Agent, all original documents
evidencing the sale and delivery of goods or the performance of
services which created any of its Accounts, including, but not
limited to, all contracts, orders, invoices, bills of lading,
warehouse receipts, delivery tickets and shipping receipts,
together with schedules describing such Accounts and/or written
confirmatory assignments to Agent of each such Account, in form and
substance satisfactory to Agent and duly executed by such Borrower,
together with such other information as Agent may request. In no
event shall the making or the failure to make or the content of any
schedule or assignment or any Borrower's failure to comply with the
provisions hereof be deemed or construed as a waiver, limitation or
modification of the security interest in, lien upon and assignment
of the Collateral or the representations, warranties or covenants
under this Agreement or the other Financing Agreements. Any
documents, schedules, invoices or other papers delivered to Agent
or Lenders, pursuant to this Section or otherwise, may be destroyed
or otherwise disposed of by it one (1) year after the same are
delivered, unless the Borrower that delivered such documents,
schedules, invoices or other papers to Agent or Lenders makes
written request therefor and pays all expenses attendant to their
return, in which event Agent or such Lender shall return same when
its actual or anticipated need therefor has ceased.
9.5 Specific Powers. Each Borrower hereby constitutes Agent
and its designees, as its attorney-in-fact, with power of
substitution, at the cost and expense of such Borrower, to exercise
at any time all or any of the following powers which appointment,
being coupled with an interest, shall be irrevocable until all
Obligations have been indefeasibly paid in full: (a) to receive,
take, endorse, assign, deliver, accept and deposit, in the name of
Agent or such Borrower, any and all checks, notes, drafts,
remittances and other instruments and documents or chattel paper
relating to the Collateral; (b) on or after the occurrence of an
Event of Default, or an event which with notice, passage of time or
both would constitute an Event of Default, to receive, open and
dispose of all mail addressed to such Borrower and to notify postal
authorities to change the address for delivery thereof to such
address as Agent designates; (c) to transmit to Account Debtors
notice of Lenders' interest therein and to request from such
Account Debtors at any time, in the name of Agent or such Borrower
or that of Agent's designee, information concerning the Collateral
and the amounts owing thereon; (d) on or after the occurrence of an
Event of Default, or an event which with notice, passage of time or
both would constitute an Event of Default, to notify Account
Debtors to make payment directly to Agent; (e) on or after the
occurrence of an Event of Default, or an event which with notice,
passage of time or both would constitute an Event of Default, to
take or bring, in the name of Agent or such Borrower, all steps,
actions, suits or proceedings deemed by Agent necessary or
desirable to effect collection of the Collateral; and (f) to
execute in such Borrower's name and on its behalf any UCC financing
statements or amendments thereto. Each Borrower hereby releases
Agent and each of Lenders and their respective officers, employees
and designees, from any liability arising from any act or acts
under this Agreement or in furtherance thereof, whether of omission
or commission, and whether based upon any error of judgment or
mistake of law or fact, except for acts of wilful misconduct.
SECTION 10. EFFECTIVE DATE; TERMINATION;
COSTS; MISCELLANEOUS
10.1 Agent. Each of Lenders hereby appoints the Agent and the
Agent hereby agrees to act as agent under this Agreement and the
other Financing Agreements. The Agent shall have and may exercise
such powers as are delegated to the Agent by the terms hereof and
of the Amended and Restated Co-Lending and Agency Agreement, dated
of even date herewith, by and among Agent and Lenders. Each of
Lenders hereby authorizes, consents to and directs Borrowers to
deal with the Agent as the true and lawful agent of such Lender to
the extent set forth herein and at any time directed by such
Lender.
10.2 Term.
(a) This Agreement and the other Financing Agreements
shall become effective as of the date hereof and shall continue in
full force and effect for a term ending on December 29, 2003 (the
"Renewal Date") and from year to year thereafter, unless sooner
terminated pursuant to the terms hereof; provided, that, Lenders or
Borrowers may terminate this Agreement and the other Financing
Agreements effective on the Renewal Date or on the anniversary of
the Renewal Date in any year by giving to the other party at least
sixty (60) days prior written notice. This Agreement and all other
Financing Agreements must be terminated simultaneously.
(b) In addition, Agent and Lenders shall have the right
to terminate this Agreement and the other Financing Agreements as
to future Loans and Letter of Credit Accommodations and other
liabilities of Agent and Lenders immediately at any time upon the
occurrence of an Event of Default or an act, condition or event
which with notice or passage of time or both would constitute an
Event of Default.
(c) Upon the effective date of termination or
non-renewal of the Financing Agreements, Borrowers shall pay to
Agent for the account of Lenders in full, all outstanding and
unpaid Obligations (including but not limited to the Loans and all
interest, fees (including the early termination fees provided
herein, if applicable), charges, expenses and other amounts
provided for hereunder, under the other Financing Agreements or
otherwise) and shall furnish cash collateral to Agent for all
undrawn amounts available pursuant to previously issued and
outstanding Letter of Credit Accommodations, by wire transfer in
federal funds to such bank account of Agent, as Agent may, in its
discretion, designate in writing to any Borrower for such purpose.
Interest at the Interest Rate shall be due until and including the
next business day, if the amounts so paid by any Borrower to the
bank account designated by Agent are received in such bank account
later than 12:00 noon, New York, New York time.
(d) No termination of the Financing Agreements shall
relieve or discharge any Borrower of its duties, obligations and
covenants under the Financing Agreements until all Obligations have
been fully indefeasibly discharged and paid, and Agent's and
Lenders' continuing security interests in the Collateral shall
remain in effect until all such Obligations have been fully and
indefeasibly discharged and paid.
(e) If Lenders terminate this Agreement or the other
Financing Agreements upon the occurrence of an Event of Default or,
subject to Section 3.9(c) hereof, at the request of Borrowers prior
to the Renewal Date, in view of the impracticality and extreme
difficulty of ascertaining actual damages and by mutual agreement
of the parties as to a reasonable calculation of Lenders' lost
profits as a result thereof, Borrowers hereby agree to pay to Agent
for the account of Lenders, upon the effective date of such
termination, an early termination fee in an amount equal to:
(i) $500,000, if such termination is effective
prior to December 29, 2001; or
(ii) $250,000, if such termination is effective
on or after December 29, 2001 and prior to
October 31, 2003.
Such early termination fee shall be presumed to be the amount of
damages sustained by said early termination and Borrowers agree
that it is reasonable under the circumstances currently existing.
The early termination fee provided for in this Section 10.2 shall
be deemed included in the Obligations.
10.3 Expenses and Additional Fees.
(a) Borrowers shall pay to Agent on demand all
reasonable costs and expenses that Agent and Lenders pay or incur
in connection with the negotiation, preparation, consummation,
administration, enforcement, and termination of this Agreement and
the other Financing Agreements, including, without limitation: (i)
reasonable attorneys' and paralegals' fees and disbursements of
counsel to Agent and Lenders and any Participant (including
allocated costs of in-house counsel); (ii) costs and expenses
(including reasonable attorneys' and paralegals' fees and
disbursements, and allocated costs of in-house counsel) for any
amendment, supplement, waiver, consent, or subsequent closing in
connection with the Financing Agreements and the transactions
contemplated thereby; (iii) costs and expenses of lien and title
searches and title insurance; (iv) taxes, fees and other charges
for recording any agreements or documents with the Office of
Patents and Trademarks, the Copyright Office or any other
governmental authority, and the filing of UCC financing statements
and continuations, and other actions to perfect, protect, and
continue the security interests and liens of Lenders in the
Collateral; (v) sums paid or incurred to pay any amount or take any
action required of any Borrower under the Financing Agreements that
such Borrower failed to pay or take; (vi) costs of appraisals,
environmental audits, inspections, and verifications of the
Collateral, including, without limitation, travel, lodging, and
meals for inspections of the Collateral and Borrowers' operations
by Agent, Lenders, Participants or their agents, plus a charge of
$650 per person per day for Agent's, Lenders' and Participants'
field examiners; (vii) costs and expenses of forwarding loan
proceeds, collecting checks and other items of payment, and
establishing and maintaining payment accounts and lock boxes;
(viii) costs and expenses of preserving and protecting the
Collateral; and (ix) costs and expenses (including reasonable
attorneys' and paralegals' fees and disbursements and allocated
costs of in-house counsel) paid or incurred to obtain payment of
the Obligations, enforce the security interests and liens of Agents
and Lenders, sell or otherwise realize upon the Collateral, and
otherwise enforce the provisions of this Agreement and the other
Financing Agreements, or to defend any claims made or threatened
against Agent and Lenders arising out of the transactions
contemplated hereby (including, without limitation, preparations
for and consultations concerning any such matters). The foregoing
shall not be construed to limit any other provisions of the
Financing Agreements regarding costs and expenses to be paid by
Borrowers.
(b) Borrowers shall pay to Agent and Lenders all of
their customary charges and fees in connection with (i) any
payment, claim or refund relating to the dishonor of any checks or
other items of any Borrower or any Account Debtors, and (ii) wire
transfers to any Borrower.
(c) All sums provided for in this Section 10.3 shall be
part of the Obligations, shall be payable on demand, and shall
accrue interest after demand for payment thereof at the applicable
rate of interest then payable hereunder. Agent is hereby
irrevocably authorized to charge any amounts payable hereunder
directly to any of the account(s) maintained by Agent with respect
to any Borrower.
10.4 Survival of Agreement. All agreements, representations
and warranties contained herein or made in writing by the parties
hereto in connection with the transactions contemplated hereby
shall survive the execution and delivery of this Agreement, the
other Financing Agreements and the consummation of the transactions
contemplated herein or therein regardless of any investigation made
by or on behalf of Lenders.
10.5 No Waiver; Cumulative Remedies. No failure to exercise,
and no delay in exercising on the part of Agent or Lenders any
right, power or privilege under this Agreement or under any of the
other Financing Agreements or other documents referred to herein or
therein shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or
thereunder preclude any other or further exercise thereof or the
exercise of any other right, power and privilege. No notice to or
demand on any Borrower not required hereunder or any of the other
Financing Agreements shall entitle any Borrower to any other or
further notice or demand in similar or other circumstances or
constitute a waiver of the rights of Agent and Lenders to any other
or further action in any circumstances without notice or demand.
The rights and remedies of Agent and Lenders under this Agreement,
the other Financing Agreements and any other present and future
agreements between Agent, Lenders and Borrowers are cumulative and
not exclusive of any rights or remedies provided by law or under
any of the Financing Agreements or such other agreements and all
such rights and remedies may be exercised successively or
concurrently.
10.6 Notices. 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 by hand, immediately
upon delivery; if by telex, telecopier or telegram, immediately
upon sending; if by express mail or any other overnight delivery
service, one (1) day after dispatch; 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 WCI Steel or
WCI Sales LP: WCI Steel, Inc.
1040 Pine Avenue, S.E.
Warren, Ohio 44482
Attn: Paul A. Santuzzi
with copies to: The Renco Group, Inc.
45 Rockefeller Plaza
New York, New York 10111
Attn: Roger L. Fay
If to Agent or Congress: Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Attn: Mr. Andrew W. Robin
If to Bank America: BankAmerica National Trust &
Savings Association
335 Madison Avenue
New York, New York 10017
Attn: Legal Department
10.7 Entire Agreement. This Agreement, the other Financing
Agreements, any supplements hereto or thereto, and any instru-
ments or documents delivered or to be delivered in connection
herewith or therewith represent the entire agreement and under-
standing concerning the subject matter hereof and thereof between
the parties hereto, and supersede all other prior and contempo-
raneous agreements, understandings, negotiations and discussions,
representations, warranties, commitments, offers and contracts
concerning the subject matter hereof and thereof, whether oral or
written.
10.8 Amendments and Waivers. Neither this Agreement, nor
any of the other Financing Agreements or any other instrument or
document referred to herein or therein may be changed, waived,
discharged or terminated orally, except by an instrument in
writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
10.9 Applicable Law. This Agreement and the other Financing
Agreements and all other documents referred to herein or therein,
shall be governed by, construed and interpreted in accordance
with the laws of the State of New York.
10.10 Successors. This Agreement, the other Financing
Agreements and any other document referred to herein or therein
shall be binding upon and inure to the benefit of and be
enforceable by Agent, Lenders, Borrowers and their respective
successors and assigns, except that no Borrower may assign its
rights under this Agreement, the other Financing Agreements and
any other document referred to herein or therein without the
prior written consent of Agent and Lenders. Agent or Lenders may
assign their rights and delegate their obligations under this
Agreement and the other Financing Agreements and further may
assign, or sell participations in, all or any part of the Loans,
the Letter of Credit Accommodations or any other interest herein
to another bank or other entity, in which event, the assignee or
participant shall have, to the extent of such assignment or
participation, the same rights and benefits as it would have if
it were the Lenders hereunder, except as otherwise provided by
the terms of such assignment or participation. Agent and Lenders
may furnish any information concerning Borrowers in the
possession of Agent and Lenders from time to time to assignees
and participants. Upon Borrowers' request, Agent and Lenders
shall inform Borrowers of the names of the persons who as of the
date of such request have purchased participations in the Loans.
10.11 Partial Invalidity. If any provision of this
Agreement or the other Financing Agreements is held to be invalid
or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement or the other Financing Agreements as a
whole but this Agreement or the particular Financing Agreement,
as the case may be, shall be construed as though it did not
contain the particular provision or provisions 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 law.
10.12 Headings. The headings used herein are for
convenience only and do not constitute matters to be considered
in interpreting this Agreement.
10.13 Participant's Security Interests. If a Participant
shall at any time participate with Lenders in the Loans and
Letter of Credit Accommodations, each Borrower hereby grants to
such Participant and such Participant shall have and is hereby
given, a continuing lien on and security interest in any money,
securities and other property of such Borrower in the custody or
possession of the Participant, including the right of setoff, to
the extent of the Participant's participation in the Obligations,
and such Participant shall be deemed to have the same right of
setoff to the extent of its participation in the Obligations, as
it would have if it were a direct Lender.
10.14 Waiver of Jury Trial. The parties hereto hereby waive
trial by jury in any action or proceeding of any kind with
respect to, in connection with, or arising out of this Agreement,
the other Financing Agreements, the Obligations, the Collateral
or any instrument, document or guaranty delivered pursuant hereto
or to any of the foregoing, or the validity, protection,
interpretation, administration, collection or enforcement hereof
or thereof or pursuant to the other Financing Agreements, or any
other claim or dispute hereunder or thereunder.
10.15 Waiver of Counterclaims; Jurisdiction; Service of
Process. Each Borrower hereby waives all rights of setoff and
rights to impose counterclaims (other than compulsory
counterclaims) in the event of any litigation with respect to any
matter connected with this Agreement, the other Financing
Agreements, the Obligations, the Collateral, or any transaction
between the parties hereto, and irrevocably consents and submits
to the nonexclusive jurisdiction of the Supreme Court of the
State of New York in New York City and the United States District
Court for the Southern District of New York and the courts of any
State in which any of the Collateral is located and of any
Federal Court located in such States in connection with any
action, proceeding or claim arising out of or relating to this
Agreement, the other Financing Agreements, the Obligations, the
Collateral or any document, instrument or guaranty delivered
pursuant hereto or to any of the foregoing. In any such
litigation, each Borrower waives personal service of any summons,
complaint or other process and agrees that the service thereof
may be made by certified or registered mail, return receipt
requested and by telecopier, directed to it at its chief
executive office set forth herein, or designated in writing
pursuant to this Agreement, or in any other manner permitted by
the rules of said Courts. Within thirty (30) days after service,
the Borrower named in such summons, complaint or other process
shall appear to answer such summons, complaint or other process,
failing which such Borrower shall be deemed in default and
judgment may be entered by Lenders against such Borrower for the
amount of the claim and other relief requested therein.
10.16 Indemnification. Each Borrower hereby agrees to
indemnify, defend and hold Agent and Lenders, and their
directors, officers, agents, employees and counsel, harmless from
and against any and all losses, claims, damages, liabilities,
deficiencies, judgments, penalties or expenses imposed on,
incurred by or asserted against any of them, except as a result
of Agent's or Lenders' gross negligence or wilful misconduct as
determined pursuant to a final non-appealable order of a court of
competent jurisdiction.
10.17 Counterparts. This Agreement may be executed in any
number of counterparts, and by Agent, Lenders and Borrowers in
separate counterparts, each of which shall be an original, but
all of which shall together constitute one and the same
agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed and delivered by their duly authorized
officers as of the day and year first above written.
CONGRESS FINANCIAL CORPORATION,
individually and as agent
By: /S/ KEITH HOLLER
Title: Vice President Congress
BANKAMERICA NATIONAL TRUST & SAVINGS
ASSOCIATION
By:/S/ WILLIAM WILSON
Title: Vice President Bank of America
WCI STEEL, INC.
By: /S/ ROGER FAY
Title: Vice President WCI Steel, Inc.
WCI STEEL SALES L.P.
By: /S/ ROGER FAY
Title: Vice President WCI Production Control
Services, Inc. for WCI Steel Sales L.P.
