INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT dated as of November 27, 1996 (this
"Intercreditor Agreement") between FLEET NATIONAL BANK, a national banking
association, as Note Trustee (as defined in the recitals hereto) and CONGRESS
FINANCIAL CORPORATION, a California corporation, as Bank Agent (as defined in
the recitals hereto).
R E C I T A L S :
A. Pursuant to an Indenture dated as of November 27, 1996 (as
amended, modified and supplemented and in effect from time to time, the
"Indenture"), between WCI Steel, Inc., an Ohio corporation ("WCI") and Fleet
National Bank, as trustee under the Indenture (in such capacity and together
with any successors and assigns in such capacity, the "Note Trustee"), WCI is
concurrently with the execution and delivery of this Intercreditor Agreement
issuing 10% Senior Secured Notes due December 1, 2004 (the "Notes").
B. Pursuant to the Indenture, the Note Trustee may take certain
actions under the Collateral Documents (as defined in the Indenture) with
respect to the collateral pledged thereunder (such collateral whether now
existing or hereafter arising as granted in the Indenture and the Collateral
Documents collectively referred to herein as the "Note Trustee Collateral").
C. WCI is a party to a certain Amended and Restated Loan and
Security Agreement, dated as of December 29, 1992 (as amended, modified and
supplemented and in effect from time to time, the "Revolving Credit Agreement")
with the banks and financial institutions which are or may from time to time
become parties thereto (collectively, the "Banks") and Congress Financial
Corporation, as agent (in such capacity and together with any successors or
assigns in such capacity, the "Bank Agent").
D. Pursuant to the Revolving Credit Agreement, WCI has entered into
revolving credit and letter of credit financing arrangements with the Banks and
the Bank Agent and pursuant to the Revolving Credit Agreement and the other
Financing Agreements (as defined in the Revolving Credit Agreement)
(collectively, as amended, modified and supplemented and in effect from time to
time, the "Loan Documents"), WCI has secured its obligations in connection
therewith by pledging certain collateral to the Banks and the Bank Agent (such
collateral whether now existing or hereafter arising as granted in the Loan
Documents collectively referred to herein as the "Bank Collateral").
-2-
E. The Note Trustee has been authorized and directed to enter into
this Intercreditor Agreement pursuant to the Indenture.
F. The Bank Agent has been authorized and directed to enter into
this Intercreditor Agreement pursuant to the Revolving Credit Agreement.
G. The Bank Agent and the Note Trustee desire to execute and deliver
this Intercreditor Agreement to set forth certain agreements between them in
respect of their respective rights and the respective rights of the Banks with
respect to certain of the Bank Collateral and the holders of the Notes with
respect to certain of the Note Trustee Collateral.
A G R E E M E N T :
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration receipt of which is hereby acknowledged, the parties
hereto hereby agree as follows:
Section 1. Use of Note Trustee Collateral for Work-in-Process. If
the Note Trustee has obtained possession or control of any or all of the Note
Trustee Collateral, the Note Trustee shall notify the Bank Agent and the Bank
Agent may elect, by written notice to the Note Trustee delivered to it within
twenty (20) calendar days of its receipt of such notice from the Note Trustee,
to utilize, at the sole cost, expense, liability and risk of the Bank Agent and
the Banks, each item of Note Trustee Collateral of which the Note Trustee has
obtained possession or control to finish work as promptly as practicable on any
of the Bank Collateral that is work-in-process to the extent permitted by
applicable law; provided that (i) such right to use the Note Trustee Collateral
for purposes of completing work-in-process shall continue for a period of ninety
(90) days after the date of the written notice by the Bank Agent to the Note
Trustee of the election of the Bank Agent to utilize the Note Trustee Collateral
as set forth above, but in no event shall such period extend beyond the date
immediately prior to a sale, lease of one year or more in duration or other
disposition of a significant portion of the Note Trustee Collateral or interests
therein being used by the Bank Agent for such purpose; provided that the Bank
Agent is given at least thirty (30) days prior written notice of such sale,
lease or other disposition by the Note Trustee, (ii) all such work shall be
conducted (a) with the standard of care consistent with the most recent past
practices of WCI and (b) in compliance with all applicable laws unless such
failure to comply would not have a material adverse effect on the value of the
Note Trustee Collateral and would not result in any liability to the Note
Trustee and (iii) the Bank Agent shall, prior
-3-
to the commencement of any work by the Bank Agent, provide to the Note Trustee
an indemnity agreement in the form annexed hereto as Exhibit A. During the
period referred to in clause (i) of this Section 1, the Bank Agent may not use
the Note Trustee Collateral to perform any work on any part of Bank Collateral
that is raw materials except: (A) to the extent any such raw materials may be
necessary to complete work-in-process and (B) to the extent such raw materials
may be necessary to complete an order from a customer received by WCI prior to
the date of the written notice by the Bank Agent to the Note Trustee of the
election of the Bank Agent to utilize the Note Trustee Collateral as set forth
above. The Bank Agent shall compensate the Note Trustee for all the Note
Trustee's reasonable direct and allocated costs related to use of the Note
Trustee Collateral by the Bank Agent during the period provided for above which
the Note Trustee would not otherwise have had to incur or pay but for the use of
the Note Trustee Collateral by the Bank Agent pursuant to the terms hereof and
directly incident to or attributable or allocated to such use consistent with
the most recent past practices of WCI. Any time periods referred to in this
Section 1 or Section 2 below shall be tolled so long as the Bank Agent is
effectively stayed from enforcing its rights against WCI or any of the Bank
Collateral during the pendency of any proceeding of WCI under the U.S.
Bankruptcy Code or other proceeding or otherwise pursuant to any court order or
other applicable law.
Section 2. Access to Note Trustee Collateral. If the Note Trustee
has obtained possession or control of any or all of the Note Trustee Collateral,
upon reasonable notice to the Note Trustee, the Note Trustee shall permit the
Bank Agent, its employees, agents, advisers and representatives to enter upon
the Note Trustee Collateral solely for purposes of repossessing, removing or
selling the Bank Collateral. The Bank Agent shall compensate the Note Trustee in
cash for any damage to the Note Trustee Collateral directly as a result of such
repossession, removal or sale upon such repossession, removal or sale, and shall
pay the Note Trustee for all the Note Trustee's reasonable direct and
incremental costs related to the provision and supervision of such access to the
Note Trustee Collateral necessary for the repossession, removal or sale of the
Bank Collateral. At any time after the expiration of the applicable time period
provided for in clause (i) of the proviso to the first sentence of Section 1
above, upon seven business days' notice from the Note Trustee requesting that
the Bank Collateral be removed from the Note Trustee's Collateral, the Bank
Agent shall at its sole cost, expense, liability and risk either remove that
portion of the Bank Collateral from the Note Trustee Collateral, or pay the Note
Trustee its reasonable storage costs as provided in such notice, but only if
after such seven business day period expires no stay or
-4-
other order prohibiting the Bank Agent's removal of such Bank Collateral has
been entered.
Section 3. Use of Certain Note Trustee Collateral. If the Note
Trustee has obtained possession or control of any or all of the Note Trustee
Collateral, the Bank Agent may: (i) enter and use any of the Note Trustee
Collateral consisting of trademarks or other general intangibles marked or
stamped on any inventory or otherwise required to sell or dispose of any of such
inventory and (ii) use any of the Note Trustee Collateral consisting of
computers or other data processing equipment relating to the storage or
processing of records, documents or files pertaining to any accounts and/or
inventory of WCI to deal with or dispose of any of such assets constituting Bank
Collateral.
Section 4. Books and Records. In the event that in the exercise of
their respective rights, the Note Trustee or the Bank Agent shall receive
possession or control of any books and records which contain information
relating to any of the property of WCI in which the other party has been granted
a security interest or lien, it shall notify the other party hereto that it has
received such books and records and shall, as promptly as practicable
thereafter, make available to the other party hereto such books and records for
inspection and duplication.
Section 5. Transfer of Note Trustee Collateral. (a) The Note Trustee
shall promptly notify the Bank Agent of the sale or assignment by the Note
Trustee during the period during which the Bank Agent is entitled to access
pursuant hereto of any portion of the Note Trustee Collateral if any part of the
Bank Collateral is located in or upon any portion of the Note Trustee Collateral
sold or assigned.
(b) If the Note Trustee sells or assigns during any period during
which the Bank Agent is entitled to access pursuant hereto, all or any portion
of the Note Trustee Collateral containing any Bank Collateral, the Note Trustee
shall require the purchaser or assignee thereof to agree with the Bank Agent or
for the benefit of the Bank Agent that it has acquired that portion of the Note
Trustee Collateral subject to the Bank Agent's rights hereunder by delivering an
acknowledgment to that effect to the Bank Agent.
Section 6. Insurance. WCI has agreed to insure the Note Trustee's
interest in the Note Trustee Collateral pursuant to the Indenture and the
Collateral Documents and has agreed to insure the Bank Agent's interest in the
Bank Collateral pursuant to the Loan Documents. To the extent that the insurance
coverage which WCI is
-5-
required to maintain is carried under a blanket policy which insures both the
Bank Collateral and the Note Trustee Collateral, the Bank Agent and the Note
Trustee agree that (i) the insurance proceeds of any loss solely involving the
Bank Collateral shall be paid directly to the Bank Agent, (ii) the insurance
proceeds of any loss solely involving the Note Trustee Collateral shall be paid
directly to the Note Trustee, and (iii) the insurance proceeds of any loss
involving both the Bank Collateral and the Note Trustee Collateral (a "Combined
Loss") shall be paid to a mutually acceptable third party to be invested in Cash
Equivalents (as defined in the Revolving Credit Agreement) for allocation in
accordance with the interest of the Bank Agent and the Note Trustee as provided
herein, or if not provided herein, as they may mutually agree, with interest
earned on such invested proceeds allocated in the same manner as principal;
provided that if the Note Trustee and the Bank Agent cannot agree on the proper
allocation of the insurance proceeds, such determination shall be made by a
court of competent jurisdiction. If after a Default under either the Revolving
Credit Agreement or the Indenture, either the Bank Agent or the Note Trustee
pays any insurance premiums on behalf of WCI and a Combined Loss occurs during
an insurance period for which such premiums were paid by either the Bank Agent
or the Note Trustee, the party that paid such insurance premiums shall be
reimbursed for the payment of such premiums from the insurance proceeds prior to
the distribution of the balance of such proceeds pursuant to the provisions of
this Section 6.
Section 7. Cooperation; Notices. The Bank Agent and the Note Trustee
agree to use their best efforts to cooperate with each other to (a) provide
notice of, and any information regarding, any release of any of the Note Trustee
Collateral or the Bank Collateral, as the case may be, and (b) give to each
other copies of any notice of the occurrence or existence of an Event of Default
under the Revolving Credit Agreement or the Indenture, respectively, but the
failure to give such notice shall not affect the effectiveness of any notice of
an Event of Default as against WCI or the validity of this Intercreditor
Agreement or create a cause of action against the party failing to give such
notice or create any claim or right on behalf of any third party. The sending of
such notice shall not give the recipient any obligation to cure such Event of
Default.
Section 8. Successor and Assigns. The Bank Agent and the Note
Trustee will cause any of their respective successors and assigns, and WCI will
cause any successor, assign, replacement or other party that succeeds to or
substitutes for or otherwise acquires either the Bank Agent's or the Note
Trustee's respective rights and interest in the Bank Collateral or the Note
Trustee
-6-
Collateral, as the case may be, or in any significant portion thereof, to assume
and incur all of the obligations of the Bank Agent or the Note Trustee
hereunder, as the case may be, and regardless of whether the obligations of WCI
to such replacement party are greater or less than WCI's obligations to the Bank
Agent or the Note Trustee, as the case may be. Upon so assuming or incurring all
of such obligations of the Bank Agent or the Note Trustee, as the case may be,
such party shall succeed to all the rights and benefits of the Bank Agent or the
Note Trustee, as the case may be, under this Intercreditor Agreement. This
Intercreditor Agreement shall not be amended, supplemented or modified without
the written consent of the Bank Agent, the Note Trustee, or with respect to any
replacement party that has assumed obligations hereunder, the written consent of
such replacement party, as applicable.
Section 9. Further Assurances. The parties hereto will use all
reasonable efforts to execute such certificates and other documents and to take
such other actions as may be reasonably necessary to consummate the transactions
contemplated hereby.
Section 10. Severability. Any provision of this Intercreditor
Agreement which is prohibited or unenforceable in any jurisdiction, the
substantive laws of which are held to be applicable hereto, shall not invalidate
the remaining provisions hereof, and any such prohibition or unenforceability in
any such jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
Section 11. Execution in Counterparts. This Intercreditor Agreement
may be executed in counterparts, each of which shall be deemed to be an original
but all of which together shall constitute a single agreement.
Section 12. Choice of Law. This Intercreditor Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and performed wholly in the State of New York.
Section 13. Captions; Gender and Number. The captions and section
headings of this Intercreditor Agreement are for convenience only and are not to
be used to define the provisions hereof. All terms contained herein shall be
construed, whenever the context of this Intercreditor Agreement requires, so
that the singular includes the plural and so that the masculine includes the
feminine.
-7-
Section 14. Concerning the Niles Property. Notwithstanding anything
to the contrary herein or in the Collateral Documents, for purposes of Sections
1, 2 and 3 hereof and Section 19 of that certain Intercreditor Agreement, dated
as of the date hereof, between Fleet National Bank, as Second Note Trustee, and
Bank One Trust Company, N.A., as Trustee, the definition of Note Trustee
Collateral shall include the property subject to that certain Open End Mortgage,
dated as of the date hereof, made by Niles Properties, Inc. in favor of Bank One
Trust Company, N.A., as Trustee.
-8-
IN WITNESS WHEREOF, the parties hereto have caused this
Intercreditor Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first written above.
FLEET NATIONAL BANK,
as Note Trustee
By: /s/ Xxxxxx X. Xxxx, Xx.
-------------------------------
Name: Xxxxxx X. Xxxx, Xx.
Title: Vice President
CONGRESS FINANCIAL CORPORATION,
as Bank Agent
By: /s/ Xxxxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: Vice President
Acknowledged and Accepted:
WCI STEEL, INC.
By: /s/ Xxxx X. Xxxx
-------------------------------
Name: Xxxx X. Xxxx
Title: VP, Finance and Chief
Financial Officer
EXHIBIT A
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of __________, 19__ (the
"Indemnification Agreement") between FLEET NATIONAL BANK, a national banking
association, as trustee (the "Note Trustee") and CONGRESS FINANCIAL CORPORATION,
a California corporation, as agent (the "Bank Agent").
R E C I T A L S :
A. The Note Trustee, the Bank Agent and WCI Steel, Inc., an Ohio
corporation, entered into an Intercreditor Agreement, dated as of November __,
1996 (as amended, modified and supplemented and in effect from time to time, the
"Intercreditor Agreement"; capitalized terms used herein and not defined shall
have the meanings assigned to such term in the Intercreditor Agreement) pursuant
to which the Note Trustee has agreed to permit the Bank Agent to have access to
and utilize certain Note Trustee Collateral for the purposes set forth in the
Intercreditor Agreement.
B. It is a condition precedent to the Note Trustee's obligation to
permit the Bank Agent to utilize the Note Trustee Collateral to finish Bank
Collateral that the Bank Agent shall execute and deliver this Indemnification
Agreement.
A G R E E M E N T
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration receipt of which is hereby acknowledged, the parties
hereto hereby agree as follows:
Section 1. Indemnity. The Bank Agent shall indemnify and hold
harmless the Note Trustee and its officers, directors, employees and agents
(each such party, an "Indemnified Party") from and against any and all losses,
claims, liabilities, damages (other than consequential damages) and expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted against such Indemnified Party
(collectively, "Losses"), suffered or incurred by such Indemnified Party and
which are caused by any act or omission by the Bank Agent pursuant to the
exercise by the Bank Agent of its right to utilize
-2-
any Note Trustee Collateral to finish work in process with respect to any Bank
Collateral pursuant to the Intercreditor Agreement. The foregoing
indemnification shall not include Losses which have been finally judicially
determined by a court of competent jurisdiction to have been caused solely by
the gross negligence or wilful misconduct of the Note Trustee or any other
Indemnified Party acting on behalf of and with the approval of the Note Trustee.
Section 2. Miscellaneous.
(a) This Indemnification Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and performed wholly in the State of New York.
(b) This Indemnification Agreement may be executed in counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute a single agreement.
(c) Any provision of this Indemnification Agreement which is
prohibited or unenforceable in any jurisdiction, the substantive laws of which
are held to be applicable hereto, shall not invalidate the remaining provisions
hereof, and any such prohibition or unenforceability in any such jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
(d) No amendment or termination of this Indemnification Agreement
shall be binding on any party hereto unless in writing and signed by the party
sought to be charged therewith.
(e) This Indemnification Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, successors or
assigns under this Indemnification Agreement or the Intercreditor Agreement.
(f) The Note Trustee's acceptance of this Indemnification Agreement
is not intended to create, and shall not be construed as, any release, waiver or
modification of any right or remedy of the Note Trustee under or pursuant to the
Intercreditor Agreement or otherwise.
-3-
IN WITNESS WHEREOF, the parties hereto have caused this
Indemnification Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
FLEET NATIONAL BANK,
as Note Trustee
By: ____________________________
Name:
Title:
CONGRESS FINANCIAL CORPORATION,
as Bank Agent
By: ____________________________
Name:
Title:
