<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SCHUFF STEEL COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 1791 86-0318760
(STATE OF OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
1841 WEST BUCHANAN STREET
PHOENIX, ARIZONA 85009
(602) 252-7787
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SEE TABLE OF CO-REGISTRANTS BELOW
------------------------
SCOTT A. SCHUFF
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SCHUFF STEEL COMPANY
1841 WEST BUCHANAN STREET
PHOENIX, ARIZONA 85009
(602) 252-7787
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
STEVEN D. PIDGEON, ESQ.
SNELL & WILMER L.L.P.
ONE ARIZONA CENTER
PHOENIX, ARIZONA 85004-0001
(602) 382-6000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ------------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------------
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 1/2% Senior Notes due
2008...................... $100,000,000 100.0% $100,000,000 $29,500.00
- -----------------------------------------------------------------------------------------------------------------------------
Guarantees.................. -- -- -- None(2)
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f) of the Securities Act of 1933, as amended.
(2) Pursuant to Rule 457(n).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
TABLE OF CO-REGISTRANTS
<TABLE>
<CAPTION>
PRIMARY STANDARD IRS
STATE OR OTHER INDUSTRIAL EMPLOYER
NAME, ADDRESS JURISDICTION OF CLASSIFICATION IDENTIFICATION
AND PHONE NUMBER INCORPORATION CODE NUMBER NUMBER
---------------- --------------- ---------------- --------------
<S> <C> <C> <C>
B&K Steel Fabrications, Inc................... Arizona 3441 86-0494204
420 South 19th Avenue
P.O. Box 39670
Phoenix, Arizona 85069
(602) 252-7787
Addison Structural Services, Inc.............. Florida 1798 58-2178447
1920 Lado Road
P.O. Box 3629
Albany, Georgia 31706
(912) 883-4506
Addison Steel, Inc............................ Florida 1798 59-0900504
7351 Overland Road
Lockhart, Florida 32810
(407) 295-6434
Quincy Joist Company.......................... Florida 1798 58-1921954
520 South Virginia Street
P.O. Box 998
Quincy, Florida 32353-0520
(800) 277-1075
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED JUNE 30, 1998
PROSPECTUS
SCHUFF STEEL COMPANY
OFFER TO EXCHANGE ITS
10 1/2% SENIOR NOTES DUE JUNE 1, 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR ANY AND ALL OF ITS OUTSTANDING
10 1/2% SENIOR NOTES DUE JUNE 1, 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED.
Schuff Steel Company, a Delaware corporation ("Schuff"), hereby offers, upon
the terms and subject to the conditions set forth in this Prospectus (the
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal" and together with this Prospectus, the "Exchange Offer"), to
exchange its 10 1/2% Senior Notes due June 1, 2008 (the "Exchange Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a registration statement (the "Registration
Statement") of which this Prospectus is a part, for its outstanding 10 1/2%
Senior Notes due June 1, 2008 (the "Outstanding Notes"), of which $100.0 million
in principal amount is outstanding as of the date hereof.
Schuff will accept for exchange any and all validly tendered Outstanding Notes
prior to 5:00 P.M., New York City time, on , 1998, unless extended
(the "Expiration Date"). Outstanding Notes may be tendered only in integral
multiples of $1,000. Tenders of Outstanding Notes may be withdrawn at any time
prior to 5:00 P.M., New York City time, on the Expiration Date. The Exchange
Offer is not conditioned upon any minimum principal amount of Outstanding Notes
being tendered for exchange. However, the Exchange Offer is subject to certain
customary conditions. In the event Schuff terminates the Exchange Offer and does
not accept for exchange any Outstanding Notes, Schuff will promptly return the
Outstanding Notes to the holders thereof. Schuff will not receive any proceeds
from the Exchange Offer. See "The Exchange Offer."
The Exchange Notes will be obligations of Schuff evidencing the same debt as
the Outstanding Notes, and will be entitled to the benefits of the same
indenture (the "Indenture"). See "Description of Exchange Notes." The form and
terms of the Exchange Notes are the same as the form and terms of the
Outstanding Notes in all material respects except that the Exchange Notes have
been registered under the Securities Act and hence do not include certain rights
to registration thereunder and do not contain transfer restrictions or terms
with respect to the special interest payments applicable to the Outstanding
Notes. The Outstanding Notes were issued on June 4, 1998 pursuant to an offering
exempt from registration under the Securities Act. See "The Exchange Offer."
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of Schuff under the Registration Rights Agreement, dated as of June
4, 1998 (the "Registration Rights Agreement"), by and among Schuff and the
Initial Purchasers (as defined herein), a copy of which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
Exchange Offer is intended to satisfy Schuff's obligations under the
Registration Rights Agreement to register the Outstanding Notes under the
Securities Act. Once the Exchange Offer is consummated, Schuff will have no
further obligations to register any of the Outstanding Notes not tendered by the
holders of the Outstanding Notes (the "Holders") for exchange. See "Risk
Factors -- Consequences of Failure to Exchange."
(Continued on following page)
THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL ARE FIRST BEING MAILED TO
HOLDERS OF THE OUTSTANDING NOTES ON , 1998.
SEE "RISK FACTORS" ON PAGE 17 FOR INFORMATION THAT SHOULD BE CONSIDERED IN
CONNECTION WITH THIS EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1998.
<PAGE> 4
(Continuation of Cover Page)
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties with respect to similar
transactions, the Company believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Outstanding Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than (i) a
broker-dealer who purchases such Exchange Notes from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities Act,
or (ii) a person that is an "affiliate" of the Company within the meaning of
Rule 405 of the Securities Act) without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders are not engaged in, have no arrangement or understanding with any
person to participate in, and do not intend to engage in, any distribution of
the Exchange Notes. However, the Company has not sought a no-action letter with
respect to the Exchange Offer and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer. Each holder of Exchange Notes, other than a broker-dealer, must represent
that such conditions have been met. In addition, each broker-dealer that
receives Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
The Letter of Transmittal accompanying this Prospectus states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act. A
broker-dealer may nonetheless be deemed to be an "underwriter" under the
Securities Act notwithstanding such disclaimer. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Outstanding
Notes where such Outstanding Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities. Pursuant to the
Registration Rights Agreement, the Company has agreed that, for a period of one
year after the Expiration Date, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "The Exchange
Offer -- Purpose and Effect of the Exchange Offer" and "Plan of Distribution."
Any Holder who tenders in the Exchange Offer with the intention to
participate, or for the purpose of participating, in a distribution of the
Exchange Notes may not rely on the position of the staff of the Commission
enunciated in no-action letters and, in the absence of an applicable exemption,
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
The Exchange Notes will be available initially only in book-entry form, and
Schuff expects the Exchange Notes will be issued in the form of one or more
Global Notes (as defined herein). The U.S. Global Notes (as defined herein) and
the Reg S Global Notes (as defined herein) will be deposited with or on behalf
of the Depository Trust Company ("DTC") and registered in its name or in the
name of a nominee. Beneficial interests in the U.S. Global Notes will be shown
on, and transfers thereof will be effected through, records maintained by DTC
and its Direct and Indirect Participants (as defined herein). Beneficial
interests in the Reg S Global Notes may be held only through the Euroclear
System ("Euroclear") and Cedel Bank, societe anonyme ("Cedel").
The Exchange Notes will bear interest at a rate of 10 1/2% per annum from
their date of issuance. Interest on the Exchange Notes will be payable
semi-annually in arrears on June 1 and December 1 of each year, commencing
December 1, 1998. Holders whose Outstanding Notes are accepted for exchange will
receive, in cash, accrued interest thereon to, but not including, the date of
issuance of the Exchange Notes. Such interest will be paid with the first
interest payment on the Exchange Notes. Interest on the Outstanding Notes
accepted for exchange will cease to accrue interest upon cancellation of the
Outstanding Notes and issuance of the Exchange Notes.
The Exchange Notes will be redeemable at the option of Schuff, in whole or
in part, at any time on or after June 1, 2003 at the redemption prices set forth
herein, plus accrued and unpaid interest to the date of redemption.
Notwithstanding the foregoing, at any time prior to June 1, 2001, Schuff may
redeem up to 35% of the original aggregate principal amount of the Notes with
the net cash proceeds of Public Equity Offerings
i
<PAGE> 5
(Continuation of Cover Page)
(as defined herein) at a redemption price equal to 110.5% of the principal
amount thereof, plus accrued and unpaid interest to the date of redemption;
provided that at least 65% of the original aggregate principal amount of the
Notes remains outstanding immediately after such redemption. Upon the occurrence
of a Change of Control (as defined herein), Schuff will be required to offer to
purchase the Notes at a purchase price equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest to the date of purchase.
The Outstanding Notes are, and the Exchange Notes will be, senior unsecured
obligations of Schuff and will rank pari passu in right of payment with all
Indebtedness (as defined herein) and other liabilities of Schuff that are not
subordinated by their express terms to the Notes and other Indebtedness of
Schuff and senior in right of payment to all Indebtedness of Schuff that by its
terms is so subordinated. Schuff's obligation to pay the principal of, premium,
if any, and interest on, the Notes is unconditionally guaranteed, on a joint and
several basis (the "Guarantees"), by all of its existing Subsidiaries (as
defined herein) and any future subsidiary that guarantees any Indebtedness of
Schuff or any other guarantor of the Notes (collectively, the "Guarantors"). The
Guarantees are senior unsecured obligations of each respective Guarantor and
will rank pari passu in right of payment with all other Indebtedness and
liabilities of such Guarantor that are not subordinated by their express terms
to other Indebtedness of such Guarantor. The Guarantees may be released under
certain circumstances. Schuff's obligations under the Notes will be effectively
subordinated to all existing and future secured Indebtedness of Schuff to the
extent of the value of the assets securing such Indebtedness and will be
structurally subordinated to all existing and future Indebtedness, if any, and
other liabilities of Schuff's subsidiaries that are not and do not become
Guarantors. A Guarantor's Guarantee will be effectively subordinated to all
existing and future secured Indebtedness of such Guarantor to the extent of the
value of the assets securing such Guarantee. As of March 31, 1998, after giving
effect to the sale of the Outstanding Notes and the application of the proceeds
therefrom, including the repayment of certain of Schuff's existing indebtedness,
and the Acquisition (as defined herein), Schuff and its subsidiaries would have
had outstanding $3.2 million of secured Indebtedness and $119.1 million of
unsecured senior Indebtedness and other liabilities. The indenture governing the
Notes (the "Indenture") will permit Schuff and its subsidiaries to incur
additional Indebtedness, subject to certain limitations, including additional
secured Indebtedness under existing and proposed credit facilities. See
"Description of Existing Indebtedness" and "Description of Exchange Notes."
Prior to this offering, there has been no public market for the Outstanding
Notes. Following completion of the Exchange Offer, Schuff does not intend to
list the Exchange Notes on a national securities exchange or to seek approval
for quotation through the Nasdaq National Market. Although the Initial
Purchasers have informed Schuff that they currently intend to make a market in
the Exchange Notes, the Initial Purchasers are not obligated to do so and any
such market-making may be discontinued at any time without notice. Therefore, no
assurance can be given as to whether an active trading market will develop or be
maintained for the Exchange Notes. As the Outstanding Notes were issued and the
Exchange Notes will be issued to a limited number of institutions who typically
hold similar securities for investment, Schuff does not expect that an active
public market for the Exchange Notes will develop. In addition, resales by
certain holders of the Outstanding Notes or the Exchange Notes of a substantial
percentage of the aggregate principal amount of such Notes could constrain the
ability of any market maker to develop or maintain a market for the Exchange
Notes. To the extent that a market for the Exchange Notes should develop, the
market value of the Exchange Notes will depend on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition, performance and prospects of Schuff. Such factors might cause the
Exchange Notes to trade at a discount from face value. See "Risk Factors -- Lack
of Public Market for the Notes; Possible Volatility of Note Price." Schuff has
agreed to pay the expenses of the Exchange Offer.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
THE CHIEF FINANCIAL OFFICER, SCHUFF STEEL COMPANY, 1841 WEST BUCHANAN STREET,
PHOENIX, ARIZONA 85009, TELEPHONE NUMBER (602) 251-0313. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE AT LEAST FIVE
BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
ii
<PAGE> 6
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Such
forward-looking statements include, among other items, statements regarding the
Company's business strategy, growth strategy, anticipated synergies and benefits
resulting from the acquisition of Addison (as defined herein), other potential
acquisitions and future acquisition plans, anticipated trends in the Company's
business, including trends associated with the effects of national and regional
economic conditions, the availability of and terms of financing to fund the
Company's anticipated growth, the availability and cost of steel, changes in or
the failure to comply with governmental regulations, liability and other claims
asserted against the Company, the ability to maintain stable labor relations,
changes in operating strategy or development plans, including the Company's
capital expenditure plans, the ability to attract and retain qualified personnel
and the ability to service the indebtedness of the Company. Discussions
containing such forward-looking statements may be found in the material set
forth under "Summary," "Risk Factors," "The Acquisition," "Use of Proceeds,"
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Unaudited Pro Forma Condensed Combined Financial
Statements," "Business" and "Description of Exchange Notes," as well as
elsewhere herein. Additional written or oral forward-looking statements may be
made by the Company from time to time in filings with the Commission or
otherwise. The words "believe," "expect," "anticipate," "project" and similar
expressions identify forward-looking statements, which speak only as of the date
the statement is made. Investors are cautioned that all forward-looking
statements involve risks and uncertainties, some of which cannot be predicted or
quantified and are beyond the Company's control. Future events and actual
results could differ materially from those set forth in, contemplated by, or
underlying the forward-looking statements. Important factors that could cause
actual results to differ materially from the Company's expectations are
disclosed in this Prospectus, including those set forth in "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business." In light of the significant uncertainties inherent
in the forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the objectives and plans of the Company will be achieved.
2
<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
As used in this Prospectus, unless the context requires or indicates otherwise,
(i) "Schuff" refers to Schuff Steel Company and its subsidiary and predecessor
Arizona corporation prior to giving effect to the acquisition of Addison
Structural Services, Inc. on June 4, 1998 (the "Acquisition"), (ii) "Addison"
refers to Addison Structural Services, Inc. and its subsidiaries prior to giving
effect to the Acquisition and (iii) the "Company" refers to the combined entity
comprised of Schuff and its consolidated subsidiaries, including Addison and its
subsidiaries. For purposes of this Prospectus, references to pro forma financial
condition and results of operations give effect to (i) the Acquisition and (ii)
the sale of the Outstanding Notes and the application of the net proceeds
therefrom.
THE COMPANY
The Company is one of the leading industrial and commercial steel services
firms in the United States. The Company differentiates itself from its
competitors by providing not only fabrication services but also a fully
integrated range of steel services, including design engineering, detailing,
joist manufacturing and erection, and by providing a level of project management
expertise necessary to accommodate fast track, "design-as-you-go" projects. The
Company believes it has a competitive advantage over many of its smaller
competitors in that its ability to manage all steel related aspects of a project
in-house lowers overall project cost, provides attractive margins to the Company
and offers maximum flexibility and efficiency to the respective general
contractor or project owner. Founded in 1976, the Company operates primarily in
the southwestern and southeastern United States, and has recently expanded its
operations into selected international markets, including South America, Mexico
and the Caribbean. The Company believes it is the largest steel fabrication and
erection firm serving the Arizona industrial and commercial markets, the leading
steel fabricator and erector for the hotel, entertainment and gaming industry in
Nevada and a leading steel fabricator and joist manufacturer serving the Central
Florida and Georgia industrial and commercial markets. On a pro forma basis, for
the last twelve months ended March 31, 1998, the Company's revenues were $206.1
million and its net income before interest, income taxes, depreciation,
amortization, other expenses and other income ("EBITDA") was $25.1 million.
The Company provides its integrated steel services primarily to general
contractors and engineering firms, including, among others, Fluor Daniel, Inc.,
Bechtel Group Inc. and Perini Corporation, that focus on a wide variety of
projects, including hotels and casinos, office complexes, hospitals, mining
facilities, manufacturing plants, shopping malls and centers, sports stadiums,
large diameter water pipes, power plants, dams, bridges, restaurants, convention
facilities, entertainment complexes, airports, schools, churches and warehouses.
Representative projects include: Bank One Ballpark, a state-of-the-art baseball
stadium featuring a fully retractable steel roof constructed for Major League
Baseball's Arizona Diamondbacks franchise; Atlas Missile Launch Complex at
Vandenberg Air Force Base in California; MGM Grand Hotel & Casino in Las Vegas,
the world's largest hotel and casino; several projects for Walt Disney World and
Universal Studios in Orlando, Florida; and Bajo de la Alumbrera in Argentina,
one of the largest copper and gold mines in the world. The Company maintains
relationships with a number of national and multi-national general contracting
and engineering firms and is a preferred subcontractor to companies such as
PETsMART, Inc. and Albertson's, Inc.
The Company believes that there is an increasing trend in the industry to
design and build projects according to accelerated time schedules. In many large
projects, only a portion of the detail design drawings are completed when
building begins. The remaining drawings are completed, with numerous design
changes being implemented, throughout the building process. The fast track,
design-as-you-go nature of these projects creates a demand for service providers
such as the Company that can perform the work of numerous subcontractors. By
integrating multiple services, the Company can facilitate rapid and multiple
design changes, reduce logistical problems and minimize project delays and cost
overruns.
3
<PAGE> 8
The steel services industry is highly fragmented. Management estimates that
there are in excess of 1,000 detailing, fabricating and erection firms in the
United States. Many of these firms are small, family-operated businesses that
offer limited services and confine operations to local or regional markets. In
addition, these firms generally do not have the financial resources to address
large, fast track projects, are unable to buy raw materials in volume directly
from steel mills at advantageous pricing and lack state-of-the-art information
systems and shop fabrication equipment. The Company believes these market
dynamics afford an opportunity for businesses like the Company to make strategic
and consolidating acquisitions while providing an attractive exit strategy for
small business owners serving these markets.
The Company's principal executive offices are located at 1841 West Buchanan
Street, Phoenix, Arizona 85009 and its telephone number is (602) 251-7787.
BUSINESS STRENGTHS AND STRATEGY
The Company's objective is to achieve and maintain a leading position in
the geographic and project markets in which it competes by providing timely,
high quality services to its customers, continuing to grow internally, and
making selected strategic and consolidating acquisitions. The Company is
pursuing this objective with a strategy comprised of the following components:
- Pursue Design-As-You-Go Projects. The Company pursues fast track,
design-as-you-go projects as a significant portion of its overall
business. The Company's unique ability to offer a full range of steel
services and project management capabilities makes it a preferred
subcontractor for fast track projects in the markets it serves. This
capability often enables the Company to compete against a few, select
firms in a less traditional, more negotiated selection process on such
projects, thereby allowing the Company to realize attractive margins
while providing overall cost savings and project flexibility and
efficiencies to its customers.
- Expand Revenue Base. The Company is seeking to expand its revenue base
by leveraging its long term relationships with national and
multi-national construction and engineering firms, national and regional
accounts and other customers. The Company also intends to grow its
operations by developing new project capabilities and services and by
targeting specific types of projects in which it has an existing
reputation for expertise, such as semiconductor facilities, sports
stadiums, airports, hotels and casinos and specialty projects such as
large diameter water pipes. The Company believes that continuing to
diversify its revenue base will reduce the impact of periodic adverse
market or economic conditions.
- Manage Capacity Through Outsourcing. The Company increases its project
capacity by outsourcing a significant amount of its detailing and
fabrication work to reputable subcontractors. Outsourcing has enabled the
Company to effectively double the capacity of its Phoenix fabrication
facilities while maintaining margins comparable to in-house services. The
Company believes outsourcing will play a key role in its strategy to
expand its presence in selected international markets, where it typically
provides design engineering and project management services and utilizes
local subcontractors for fabrication and erection. The ability to expand
or contract capacity through the use of outsourcing provides the Company
flexibility to meet changing market demands in a cost effective manner.
- Make Strategic and Consolidating Acquisitions. The Company intends to
pursue selected acquisitions that offer the Company (i) strategically
located facilities, (ii) expansion into new geographic markets, (iii)
access to new domestic and international customers and (iv) penetration
of new product market segments. Such acquisitions may also provide the
additional benefits of increasing purchasing efficiencies with respect to
steel and other raw materials, bonding and insurance, more efficiently
allocating and utilizing its resources, and integrating the "best
practices" of the Company and acquired companies throughout the combined
organization. Schuff is in preliminary negotiations with several
potential acquisition candidates and expects to close additional
acquisitions by the end of 1998.
- Maintain Entrepreneurial Environment. The Company believes its
management and operating structure, which emphasizes quality, innovation,
flexibility, performance and safety, has contributed
4
<PAGE> 9
significantly to increased profitability and the ability to develop new
business in competitive or difficult economic environments. The Company's
operating structure provides incentives to employees at all levels to
focus on pursuing profitable growth opportunities, attaining financial
objectives and delivering superior customer service.
THE ACQUISITION AND EXPECTED BENEFITS
On June 4, 1998, Schuff consummated the Acquisition with Addison. The
purchase price for Addison, net of estimated excess cash on hand of Addison at
the closing and certain non-business related assets sold to Addison's majority
stockholder, was $50.4 million, of which approximately $47.2 million was paid in
cash at closing and approximately $3.2 million was paid in the form of a
promissory note secured by a letter of credit (the "Holdback Note"). Founded in
1960, Addison provides structural steel fabrication and erection services and
manufactures short and long span joists, trusses and girders. Addison maintains
steel fabrication facilities both in Lockhart, Florida and in Albany, Georgia,
and an advanced joist manufacturing plant in Quincy, Florida. Addison operates
primarily in the southeastern United States in the industrial and commercial
markets. Addison's revenues for the last twelve months ended March 31, 1998 were
$66.4 million and its EBITDA, as adjusted for owner's compensation, expenses of
its employee stock ownership plan and certain other expenses, was $11.3 million
for this period. See "The Acquisition."
Schuff believes that the Acquisition provides the following strategic and
operating benefits:
- Access Joist Manufacturing. Quincy Joist Company ("Quincy"), a
subsidiary of Addison, manufactures steel joists, trusses, girders and
related products which are complementary to the steel fabrication and
erection services provided by Schuff and Addison's other operations.
Joists are currently delivered in 16 to 18 weeks from date of order from
third party specialty manufacturers. Schuff believes that its ability to
obtain joists from a captive manufacturer will significantly reduce the
lead time for delivery of these products and will enable it to compete
more effectively for fast track projects where the reliable and timely
supply of joists and related products is critical. With Quincy's recent
plant expansion, the Company believes that Quincy has the capacity to
meet the Company's anticipated internal joist demand for selected fast
track projects as well as continue to grow its own joist business through
sales to other steel fabricators and erectors, which currently comprise
the majority of Quincy's revenues.
- Expand Geographic Reach. The Acquisition provides Schuff with an
operating platform in the growing southeastern United States market,
where Schuff's ability to compete has previously been limited by
transportation costs. In addition, the Company believes expansion into
new geographic markets will increase the Company's resilience to economic
downturns and other conditions that could negatively affect a
geographically focused operation.
- Acquire Growing Revenue Stream and Experienced Management. Addison's
revenues grew from $32.5 million for the fiscal year ended June 30, 1993
to $63.7 million for the fiscal year ended June 30, 1997, a compound
annual growth rate of 18.3%, and its unadjusted EBITDA increased from
$2.0 million to $10.4 million in that same period, a compound annual
growth rate of 51.4%. Addison has an experienced management team with the
top four managers having over 75 years of combined experience in the
steel fabrication, erection and joist manufacturing business with an
average tenure at Addison of approximately 19 years. Addison management's
quality reputation, knowledge of its markets, and strong relationships
with its key customers should continue to enhance its operations and
integration with Schuff. Certain senior members of Addison's management
team have entered into employment agreements with performance-based bonus
and option arrangements and are expected to play integral roles in the
Company's expansion in the southeastern United States.
- Leverage Operating Capabilities. Schuff believes that it can leverage
its fast track, design-as-you-go expertise to increase the number of
larger, high-margin project opportunities for Addison. In addition,
Schuff believes that Addison can increase its fabrication revenues
through the utilization of Schuff's outsourcing expertise. Addison
fabricates all of its steel in-house, while Schuff outsources
approximately half of its fabrication services to third party
fabricators. Schuff believes that these strategies will more efficiently
utilize the Company's infrastructure and plant capacities.
5
<PAGE> 10
- Capitalize on Cross-Selling Opportunities. Management believes that
there are numerous cross-selling opportunities between Schuff and
Addison. In particular, Addison is a preferred subcontractor to a number
of national and regional accounts in the southeastern United States and,
in some cases, across the country. Schuff has strong strategic
relationships with several national and multi-national contractors and
engineering firms. The Company believes that each company will be able to
utilize these relationships to expand the Company's overall business
operations.
RECENT DEVELOPMENTS
The Company is in preliminary negotiations with potential acquisition
candidates that would further expand its geographic, product and customer base.
The potential acquisition candidates have annual revenues ranging from $21
million to $25 million, and are located in various geographic regions, including
Texas, California and select international markets. Although Schuff has not
entered into definitive agreements or binding letters of intent with any of
these targets, it does expect to conclude additional acquisitions during 1998.
6
<PAGE> 11
THE EXCHANGE OFFER
Issuer........................ Schuff Steel Company
Outstanding Notes............. The Outstanding Notes were sold by the Company
on June 4, 1998, to Donaldson, Lufkin &
Jenrette Securities Corporation, Jefferies &
Company, Inc. and Friedman, Billings, Ramsey &
Co., Inc. (collectively, the "Initial
Purchasers") pursuant to a Purchase Agreement
dated June 1, 1998 (the "Purchase Agreement").
The Initial Purchasers subsequently resold the
Outstanding Notes to qualified institutional
buyers pursuant to Rule 144A under the
Securities Act or institutional "accredited
investors" (as defined in Rule 501 (a)(1), (2),
(3) or (7) of Regulation D under the Securities
Act) or outside the United States in compliance
with Regulation S under the Securities Act.
Registration Rights
Agreement..................... Pursuant to the Purchase Agreement, the Company
and the Initial Purchasers entered into the
Registration Rights Agreement, which grants the
holders of the Outstanding Notes certain
exchange and registration rights. The Exchange
Offer is intended to satisfy such exchange and
registration rights, which will terminate upon
the consummation of the Exchange Offer.
Securities Offered............ $100,000,000 aggregate principal amount of
10 1/2% Senior Notes due 2008 (the "Exchange
Notes").
The Exchange Offer............ The Company is offering to exchange $1,000
principal amount of Exchange Notes for each
$1,000 principal amount of Outstanding Notes
that are properly tendered and accepted. The
Company will issue Exchange Notes on or
promptly after the Expiration Date. As of the
date hereof, there is $100,000,000 in aggregate
principal amount of Outstanding Notes
outstanding. The terms of the Exchange Notes
are identical in all material respects to the
terms of the Outstanding Notes for which they
may be exchanged pursuant to the Exchange
Offer, except that the Exchange Notes are
freely transferable by holders thereof (other
than as provided herein), and are not subject
to any covenant restricting transfer absent
registration under the Securities Act. See "The
Exchange Offer." The Exchange Offer is not
conditioned upon any minimum aggregate
principal amount of Outstanding Notes being
tendered for exchange.
Based on no-action letters issued by the staff
of the Commission to third parties with respect
to similar transactions, the Company believes
that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Outstanding
Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other
than (i) a broker-dealer who purchases such
Exchange Notes from the Company to resell
pursuant to Rule 144A or any other available
exemption under the Securities Act, or (ii) a
person that is an "affiliate" of the Company
within the meaning of Rule 405 of the
Securities Act) without compliance with the
registration and prospectus delivery
requirements of the Securities Act, provided
that such Exchange Notes are acquired in the
ordinary course of such holders' business and
such holders are not engaged in, have no
arrangement or understanding with any person to
participate in,
7
<PAGE> 12
and do not intend to engage in, any
distribution of the Exchange Notes. However,
the Company has not sought a no-action letter
with respect to the Exchange Offer and there
can be no assurance that the staff of the
Commission would make a similar determination
with respect to the Exchange Offer. Each holder
of Exchange Notes, other than a broker-dealer,
must represent that such conditions have been
met. In addition, each broker-dealer that
receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection
with any resale of such Exchange Notes.
The Letter of Transmittal accompanying this
Prospectus states that by so acknowledging and
by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. A broker-dealer may nonetheless
be deemed to be an "underwriter" under the
Securities Act notwithstanding such disclaimer.
This Prospectus, as it may be amended or
supplemented from time to time, may be used by
a broker-dealer in connection with resales of
Exchange Notes received in exchange for
Outstanding Notes where such Outstanding Notes
were acquired by such broker-dealer as a result
of market-making activities or other trading
activities. Pursuant to the Registration Rights
Agreement, the Company has agreed that, for a
period of one year after the Expiration Date,
it will make this Prospectus available to any
broker-dealer for use in connection with any
such resale. See "The Exchange Offer -- Purpose
and Effect of the Exchange Offer" and "Plan of
Distribution."
Any Holder who tenders in the Exchange Offer
with the intention to participate, or for the
purpose of participating, in a distribution of
the Exchange Notes may not rely on the position
of the staff of the Commission enunciated in
no-action letters and, in the absence of an
applicable exemption, must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction. Failure
to comply with such requirements in such
instance may result in such Holder incurring
liability under the Securities Act for which
the Holder is not indemnified by the Company.
Expiration Date............... 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange
Offer is extended. See "The Exchange
Offer -- Expiration Date; Extensions;
Amendments."
Accrued Interest on the
Exchange Notes................ Each Exchange Note will bear interest from the
most recent date to which interest has been
paid on the Outstanding Notes or, if no
interest has been paid on such Outstanding
Notes, from June 4, 1998.
Exchange Date................. As soon as practicable after the close of the
Exchange Offer, the Company will accept for
exchange all Outstanding Notes properly
tendered and not validly withdrawn prior to
5:00 p.m., New York
8
<PAGE> 13
City time, on the Expiration Date. See "The
Exchange Offer -- Withdrawal of Tenders."
Conditions to the Exchange
Offer......................... The Exchange Offer is subject to customary
conditions, certain of which may be waived by
the Company. The Company reserves the right to
terminate or amend the Exchange Offer at any
time prior to the Expiration Date upon the
occurrence of any such condition. The Exchange
Offer is not conditioned on any minimum
aggregate principal amount of Outstanding Notes
being tendered for exchange. See "The Exchange
Offer -- Conditions."
Consequences of Failure to
Exchange...................... Any Outstanding Notes not tendered pursuant to
the Exchange Offer will remain outstanding and
continue to accrue interest. Such Outstanding
Notes will remain "restricted securities" under
the Securities Act, subject to the transfer
restrictions described herein. As a result, the
liquidity of the market for such Outstanding
Notes could be adversely affected upon
completion of the Exchange Offer. See "Risk
Factors -- Consequences of Failure to Exchange"
and "The Exchange Offer -- Consequences of
Failure to Exchange."
Certain Federal Income Tax
Considerations.............. The exchange of the Outstanding Notes for
Exchange Notes by tendering holders should not
be a taxable exchange for U.S. Federal income
tax purposes, and such holders should not
recognize any taxable gain or loss for U.S.
Federal income tax purposes as a result of such
exchange. Holders of Exchange Notes will
continue to be required to include interest on
such Exchange Notes in gross income in
accordance with their method of accounting for
U.S. Federal income tax purposes. Holders
should review the information set forth under
"Certain Federal Income Tax Consequences" for a
discussion of certain U.S. Federal income tax
consequences relating to the Outstanding Notes
and the Exchange Notes prior to tendering the
Outstanding Notes in the Exchange Offer.
Use of Proceeds............... There will be no cash proceeds to the Company
from the Exchange Offer. See "Use of Proceeds."
PROCEDURES FOR TENDERING OUTSTANDING NOTES
Tendering Outstanding Notes... Each beneficial owner owning interests in
Outstanding Notes ("Beneficial Owner") through
a DTC Participant (as defined) must instruct
such DTC Participant to cause Outstanding Notes
to be tendered in accordance with the
procedures set forth in this Prospectus and in
the applicable Letter of Transmittal. See "The
Exchange Offer -- Procedures for
Tendering -- Outstanding Notes held through
DTC."
Each participant (a "DTC Participant") in the
Depository Trust Company ("DTC") holding
Outstanding Notes through DTC must (i)
electronically transmit its acceptance to DTC
through the
9
<PAGE> 14
DTC Automated Tender Offer Program ("ATOP"),
for which the transaction will be eligible, and
DTC will then verify the acceptance, execute a
book-entry delivery to the Exchange Agent's (as
defined herein) account at DTC and send an
Agent's Message (as defined herein) to the
Exchange Agent for its acceptance, or (ii)
comply with the guaranteed delivery procedures
set forth in this Prospectus and in the Letter
of Transmittal. By tendering through ATOP, DTC
Participants will expressly acknowledge receipt
of the accompanying Letter of Transmittal and
agree to be bound by its terms and the Company
will be able to enforce such agreement against
such DTC Participants. See "The Exchange
Offer -- Procedures for
Tendering -- Outstanding Notes held through
DTC" and "-- Guaranteed Delivery
Procedures -- Outstanding Notes held through
DTC."
Each Holder must (i) complete and sign a Letter
of Transmittal, and mail or deliver such Letter
of Transmittal, and all other documents
required by the Letter of Transmittal, together
with certificate(s) representing all tendered
Outstanding Notes, to the Exchange Agent at its
address set forth in this Prospectus and in the
Letter of Transmittal, or (ii) comply with the
guaranteed delivery procedures set forth in
this Prospectus. See "The Exchange
Offer -- Procedures for Tendering,"
"-- Exchange Agent" and "-- Guaranteed Delivery
Procedures -- Outstanding Notes held by
Holders."
By tendering, each Holder will represent to the
Company that, among other things, (i) it is not
an affiliate of the Company or the Guarantors,
(ii) it is not a broker-dealer tendering
Outstanding Notes acquired directly from the
Company for its own account, (iii) the Exchange
Notes acquired pursuant to the Exchange Offer
are being obtained in the ordinary course of
business of such Holder and (iv) it has no
arrangements or understandings with any person
to participate in the Exchange Offer for the
purpose of distributing the Exchange Notes. See
"The Exchange Offer -- Purpose and Effect of
the Exchange Offer."
Guaranteed Delivery
Procedures.................... DTC Participants holding Outstanding Notes
through DTC who wish to cause their Outstanding
Notes to be tendered, but who cannot transmit
their acceptances through ATOP prior to the
Expiration Date, may effect a tender in
accordance with the procedures set forth in
this Prospectus and in the Letter of
Transmittal. See "The Exchange
Offer -- Guaranteed Delivery Procedures."
Holders who wish to tender their Outstanding
Notes but (i) whose Outstanding Notes are not
immediately available and will not be available
for tendering prior to the Expiration Date, or
(ii) who cannot deliver their Outstanding
Notes, the Letter of Transmittal or any other
required documents to the Exchange Agent prior
to the Expiration Date, may effect a tender in
accordance with the procedures set forth in
this Prospectus. See "The Exchange
Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights............. The tender of Outstanding Notes pursuant to the
Exchange Offer may be withdrawn at any time
prior to 5:00 p.m., New York City
10
<PAGE> 15
time, on the Expiration Date, in accordance
with the procedures set forth in this
Prospectus. See "The Exchange
Offer -- Withdrawal of Tenders."
Exchange Agent................ is serving as Exchange
Agent in connection with the Exchange Offer.
See "The Exchange Offer -- Exchange Agent."
Shelf Registration
Statement..................... Under certain circumstances described in the
Registration Rights Agreement, certain Holders
of Outstanding Notes (including Holders who are
not permitted to participate in the Exchange
Offer or who may not freely resell Exchange
Notes received in the Exchange Offer) may
require the Company to file and use its best
efforts to cause to become effective a shelf
registration statement under the Securities
Act, which would cover resales of Outstanding
Notes by such Holders. See "The Exchange
Offer -- Purpose and Effect of the Exchange
Offer."
11
<PAGE> 16
THE EXCHANGE NOTES
Securities Offered............ $100,000,000 aggregate principal amount of
10 1/2% Senior Notes due 2008 that have been
registered under the Securities Act. The form
and terms of the Exchange Notes are identical
in all material respects to the form and terms
of the Outstanding Notes for which they may be
exchanged pursuant to the Exchange Offer,
except for certain transfer restrictions and
registration rights relating to the Outstanding
Notes and except for certain provisions
providing for an increase in the interest rate
on the Outstanding Notes under circumstances
relating to the Exchange Offer. Unless the
context otherwise requires, the Outstanding
Notes and the Exchange Notes are sometimes
referred to herein together as the "Notes." See
"Description of Exchange Notes."
Maturity Date................. June 1, 2008.
Interest Rate and Payment
Dates......................... Interest on the Notes will accrue from June 4,
1998 at a rate of 10 1/2% per annum and will be
payable semi-annually in cash in arrears on
each June 1 and December 1 commencing December
1, 1998.
Subsidiary Guarantees......... The Outstanding Notes are, and the Exchange
Notes will be, unconditionally guaranteed, on a
joint and several basis, by all of Schuff's
existing subsidiaries and any future subsidiary
that guarantees any Indebtedness of Schuff or
the other guarantors of the Notes. The
Guarantees may be released under certain
circumstances. The Guarantees will be senior
unsecured obligations of each respective
Guarantor and will rank pari passu in right of
payment with all other Indebtedness and
liabilities of such Guarantor that are not
subordinated by their express terms to the
Guarantees and other Indebtedness of such
Guarantor. The Guarantees will be effectively
subordinated to all existing and future secured
Indebtedness of the Guarantors to the extent of
the value of the assets securing such
Indebtedness. In addition, Schuff's obligations
under the Notes will be effectively
subordinated to existing and future claims of
creditors (other than Schuff and the
Guarantors) of Schuff's subsidiaries other than
the Guarantors. Claims of creditors (other than
Schuff and the Guarantors) of such
subsidiaries, including trade creditors, tort
claimants, secured creditors, taxing
authorities and creditors holding guarantees,
generally will have priority as to assets of
such subsidiaries over the claims and equity
interest of Schuff and thereby, indirectly, the
holders of Indebtedness of Schuff, including
the Notes and the Guarantees. See "Description
of Exchange Notes -- Guarantees of Notes."
Optional Redemption........... On or after June 1, 2003, Schuff may redeem the
Notes, in whole or in part, at the redemption
prices set forth herein, plus accrued and
unpaid interest to the date of redemption.
Notwithstanding the foregoing, at any time
prior to June 1, 2001, Schuff may redeem up to
35% of the original aggregate principal amount
of the Notes with the net cash proceeds of one
or more Public Equity Offerings at a redemption
price equal to 110.5% of the principal amount
thereof, plus accrued and unpaid interest to
the date of redemption; provided that at least
65% of the original aggregate principal
12
<PAGE> 17
amount of the Notes remains outstanding
immediately after such redemption. See
"Description of Exchange Notes -- Optional
Redemption."
Ranking....................... The Outstanding Notes are, and the Exchange
Notes will be, senior unsecured obligations of
Schuff and will rank pari passu in right of
payment to all Indebtedness and other
liabilities of Schuff that are not subordinated
by their terms to the Notes and other
Indebtedness of Schuff and senior in right of
payment to all Indebtedness of Schuff that by
its terms is so subordinated. The Outstanding
Notes are, and the Exchange Notes will be,
effectively subordinated to all existing and
future secured Indebtedness of Schuff to the
extent of the value of the assets securing such
Indebtedness and will be structurally
subordinated to all existing and future
Indebtedness, if any, and other liabilities of
its Subsidiaries that are not Guarantors. As of
March 31, 1998, on a pro forma basis after
giving effect to the issuance of the
Outstanding Notes and the application of the
proceeds therefrom and the Acquisition, Schuff
and its subsidiaries would have had outstanding
$3.2 million of secured Indebtedness and $119.1
million of unsecured senior Indebtedness and
other liabilities. The Indenture will permit
Schuff and its subsidiaries to incur additional
Indebtedness, subject to certain limitations,
including additional secured Indebtedness under
existing and proposed credit facilities.
Change of Control............. Upon a Change of Control (as defined below),
each holder of Notes will have the right to
require Schuff to repurchase all or a portion
of such holder's Notes at a purchase price
equal to 101% of the principal amount thereof
plus accrued and unpaid interest to the date of
repurchase. See "Description of Exchange
Notes -- Change of Control."
Certain Covenants............. The Indenture contains certain covenants which,
among other things, will limit the ability of
Schuff and its subsidiaries to: (i) incur
additional Indebtedness and issue Preferred
Stock; (ii) pay dividends or make other
Restricted Payments, including certain
Investments; (iii) consummate certain Asset
Sales; (iv) enter into certain transactions
with Affiliates; (v) enter into Sale and
Lease-Back Transactions; (vi) incur Liens;
(vii) merge or consolidate with any other
Person; (viii) sell, assign, transfer, lease,
convey or otherwise dispose of all or
substantially all of the assets of Schuff and
its Subsidiaries, taken as a whole; or (ix)
engage in lines of business other than a
Related Business. Under certain circumstances,
Schuff will be required to make an offer to
purchase the Notes at a price equal to 100% of
the principal amount thereof, plus accrued and
unpaid interest to the date of purchase, with
the proceeds from certain Asset Sales. In
addition, the Indenture imposes restrictions on
the ability of the Subsidiaries to issue
guarantees or to create restrictions on their
ability to make distributions on their capital
stock or make loans to Schuff and its
Subsidiaries. These covenants are subject to
important exceptions and qualifications. See
"Description of Exchange Notes -- Certain
Covenants."
13
<PAGE> 18
Transferability............... The Exchange Notes, if issued, will generally
be freely transferable (subject to the
restrictions discussed elsewhere herein) but
will be new securities for which there will not
initially be a trading market. The Outstanding
Notes have been designated for trading in the
PORTAL market. Schuff and the Guarantors do not
intend to apply for a listing of the Exchange
Notes on any securities exchange. See "Plan of
Distribution."
RISK FACTORS
Holders of the Outstanding Notes should carefully consider all of the
information set forth in this Prospectus, and in particular, the information set
forth on page 17 under "Risk Factors" before tendering the Outstanding Notes in
exchange for the Exchange Notes.
14
<PAGE> 19
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following table sets forth summary unaudited pro forma condensed
combined income statement data and supplemental information of the Company for
the year ended December 31, 1997, the last twelve months ended March 31, 1998
and the three months ended March 31, 1998, and the summary unaudited pro forma
condensed combined balance sheet data of the Company at March 31, 1998. The pro
forma condensed combined income statement data and supplemental information give
effect to (i) the Acquisition and related pro forma adjustments and (ii) the
offering of the Outstanding Notes (the "Offering") and the application of the
net proceeds therefrom as if they had occurred on January 1, 1997 for the year
ended December 31, 1997, April 1, 1997 for the last twelve months ended March
31, 1998 and January 1, 1998 for the three months ended March 31, 1998. The pro
forma condensed combined balance sheet data gives effect to (i) the Acquisition
and related pro forma adjustments and (ii) the Offering and the application of
the net proceeds therefrom as if they had occurred on March 31, 1998. The
following information should be read in conjunction with, and is qualified by
reference to, the Consolidated Financial Statements of each of Schuff and
Addison, including the Notes thereto, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Unaudited Pro Forma
Condensed Combined Financial Statements" included elsewhere herein.
<TABLE>
<CAPTION>
LAST TWELVE
YEAR ENDED MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998 MARCH 31, 1998
----------------- -------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................................... $205,220 $206,075 $ 41,405
Gross profit............................... 36,068 36,953 7,962
General and administrative expenses........ 14,275 14,464 3,599
Operating income........................... 20,688 21,384 4,086
SUPPLEMENTAL INFORMATION:
EBITDA(1).................................. $ 24,293 $ 25,054 $ 5,031
Depreciation and amortization.............. 3,605 3,670 945
Cash interest expense(2)................... 10,939 10,903 2,706
EBITDA/cash interest expense(2)............ 2.2x 2.3x 1.9x
Backlog (at end of period)................. $ 80,574 $ 97,408 $ 97,408
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents(3)............... $ 47,536
Working capital............................ 81,098
Total assets............................... 148,542
Total debt, including current portion...... 103,853
Stockholders' equity....................... 26,278
</TABLE>
- ---------------
(1) EBITDA for the relevant period presented above is defined as net income plus
interest expense, income taxes, depreciation, amortization and other
expenses less other income. EBITDA should not be construed as a substitute
for operating income, as an indicator of liquidity or as a substitute for
net cash provided by operating activities, which are determined in
accordance with generally accepted accounting principles. EBITDA is included
because management believes that certain investors may find it to be a
useful tool for analyzing operating performance, leverage, liquidity and the
Company's ability to service debt.
(2) Cash interest expense represents total interest expense less amortization of
deferred financing costs.
(3) Excludes $2.7 million of restricted funds on deposit at March 31, 1998.
Restricted funds on deposit represent funds on deposit in an interest
bearing escrow account which are maintained in lieu of retentions for
specific contracts. Retentions on contract receivables are amounts which are
withheld until the completed project has been accepted by the customer in
accordance with the contract. See Note 1 to Schuff's Consolidated Financial
Statements included elsewhere herein.
15
<PAGE> 20
SUMMARY HISTORICAL FINANCIAL DATA
The following information should be read in conjunction with, and is
qualified by reference to, the Consolidated Financial Statements of each of
Schuff and Addison, including the Notes thereto, and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere herein. The summary historical consolidated financial data for each of
the three years ended December 31, 1997 for Schuff and for each of the three
fiscal years ended June 30, 1997 for Addison set forth below have been derived
from the respective audited consolidated financial statements of Schuff and
Addison. The summary historical consolidated financial data for Schuff set forth
below for the three months ended March 31, 1997 and 1998 have been derived from
the unaudited consolidated financial statements of Schuff. The summary
historical consolidated financial data for Addison set forth below for the nine
months ended March 31, 1997 and 1998 have been derived from the unaudited
consolidated financial statements of Addison. The historical consolidated
financial data for Schuff for the three months ended March 31, 1997 and 1998 and
for Addison for the nine months ended March 31, 1997 and 1998 are unaudited and
are not necessarily indicative of the results of operations of Schuff or Addison
for the full year. The unaudited historical consolidated financial data reflects
all adjustments (consisting of normal, recurring adjustments) which are, in the
opinion of management of the Company, necessary for a fair presentation of
Schuff's and Addison's results of operations for the periods presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- ------------------
SCHUFF 1995 1996 1997 1997 1998
- ------ ------- -------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................... $62,090 $103,912 $138,218 $25,507 $27,426
Gross profit........................... 7,868 16,914 20,263 3,852 4,992
Operating income....................... 2,584 10,199 11,383 1,771 2,598
SUPPLEMENTAL INFORMATION:
EBITDA(1).............................. $ 3,832 $ 11,466 $ 12,903 $ 2,132 $ 3,021
Depreciation and amortization.......... 1,248 1,267 1,520 361 423
Capital expenditures................... 814 2,337 3,188 310 592
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, MARCH 31,
----------------------------- ------------------
ADDISON 1995 1996 1997 1997 1998
- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................................. $50,463 $57,638 $63,700 $46,195 $48,880
Gross profit............................. 11,488 14,224 15,926 11,314 11,179
Operating income......................... 5,906 8,223 9,394 6,672 6,007
SUPPLEMENTAL INFORMATION:
EBITDA(1)................................ $ 6,797 $ 9,145 $10,372 $ 7,404 $ 6,744
Depreciation and amortization............ 891 922 978 732 737
Capital expenditures(2).................. 690 2,665 4,620 1,580 1,132
</TABLE>
- ---------------
(1) EBITDA for the relevant period presented above is defined as net income plus
interest expense, income taxes, depreciation, amortization, and other
expenses less other income. EBITDA should not be construed as a substitute
for operating income, as an indicator of liquidity or as a substitute for
net cash provided by operating activities, which are determined in
accordance with generally accepted accounting principles. EBITDA is included
because management believes that certain investors may find it to be a
useful tool for analyzing operating performance, leverage, liquidity, and
the Company's ability to service debt.
(2) Includes expenditures of $2.0 million for the fiscal year ended June 30,
1997 and $716,000 for the nine months ended March 31, 1998 for non-business
related assets sold to Addison's majority stockholder upon consummation of
the Acquisition.
16
<PAGE> 21
RISK FACTORS
The Exchange Notes offered hereby involve a high degree of risk. In
addition to the other information contained or incorporated by reference in this
Prospectus, Holders of Outstanding Notes should carefully consider the following
factors together with other information contained herein before tendering their
Outstanding Notes in the Exchange Offer.
RISKS RELATED TO THE NOTES
Substantial Leverage and Ability to Service Debt
Following the consummation of the Offering, the Company is highly
leveraged, with substantial debt service in addition to operating expenses and
planned capital expenditures. At March 31, 1998, as adjusted to give effect to
the issuance of the Outstanding Notes, the total Indebtedness of the Company
would have been approximately $103.9 million. The Indenture will permit the
Company to incur additional Indebtedness, subject to certain limitations,
including additional secured Indebtedness under existing and proposed credit
facilities. See "Description of Existing Indebtedness" and "Description of
Exchange Notes -- Certain Covenants."
Schuff has historically operated at substantially lower levels of debt than
are currently outstanding after giving effect to the Acquisition and the
Offering and the application of the net proceeds therefrom. The Company's level
of indebtedness will have several important effects on its future operations,
including, without limitation, (i) a substantial portion of the Company's cash
flow from operations must be dedicated to the payment of interest and principal
on its indebtedness, reducing the funds available for operations and for capital
expenditures, including acquisitions, (ii) covenants contained in the Indenture
or the Existing Credit Facility (as defined below) or other credit facilities
will require the Company to meet certain financial tests, and other restrictions
will limit its ability to borrow additional funds or to dispose of assets, and
may affect the Company's flexibility in planning for, and reacting to, changes
in its business, including possible acquisition activities, (iii) the Company's
leveraged position will substantially increase its vulnerability to adverse
changes in general economic, industry and competitive conditions, (iv) the
Company's ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate and other purposes may be limited,
and (v) the Company's leveraged position and the various covenants contained in
the Indenture and the Existing Credit Facility may place the Company at a
relative competitive disadvantage as compared to certain of its competitors. The
Company's ability to meet its debt service obligations and to reduce its total
indebtedness will be dependent upon the Company's future performance, which will
be subject to general economic, industry and competitive conditions and to
financial, business and other factors affecting the operations of the Company,
many of which are beyond its control. There can be no assurance that the
Company's business will continue to generate cash flow at or above current
levels. If the Company is unable to generate sufficient cash flow from
operations in the future to service its debt, it may be required, among other
things, to seek additional financing in the debt or equity markets, to refinance
or restructure all or a portion of its indebtedness, including the Notes, to
sell selected assets, or to reduce or delay planned capital expenditures and
growth or business strategies. There can be no assurance that any such measures
would be sufficient to enable the Company to service its debt, or that any of
these measures could be effected on satisfactory terms, if at all. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Restrictions Imposed by Terms of Indebtedness
The Indenture contains certain covenants that, among other things, will
limit the ability of the Company and its subsidiaries to make restricted
payments, to incur additional indebtedness, to pay dividends and make certain
other distributions, payments and investments, to create liens, to issue
preferred or other capital stock of subsidiaries, to sell assets, to permit
restrictions on dividend and other payments by subsidiaries to the Company, to
consolidate, merge or sell all or substantially all of its assets, to engage in
transactions with affiliates or to engage in unrelated businesses. In addition,
the Existing Credit Facility contains other, more restrictive covenants (and
other new credit facilities may contain more restrictive covenants), and, under
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certain circumstances, may prohibit the Company from prepaying the Notes. There
can be no assurance that the Company's leverage and such restrictions will not
materially and adversely affect the Company's ability to finance its future
operations or capital needs or to engage in other business activities, including
implementation of its business and growth strategies.
The Existing Credit Facility requires the Company to maintain specified
financial ratios and satisfy certain financial tests. The Company's ability to
maintain or meet such financial ratios and tests may be affected by events
beyond its control, and there can be no assurance that the Company will maintain
or meet such ratios and tests. A breach of any of these covenants could result
in an event of default under the Existing Credit Facility in which case the
lender could elect to declare all amounts borrowed, together with accrued
interest, to be immediately due and payable and to terminate all commitments
under the Existing Credit Facility. If the Company were unable to repay all
amounts declared due and payable, the lender could proceed against the
collateral granted to satisfy the indebtedness and other obligations due and
payable. Substantially all of the assets of the Company and its subsidiaries are
pledged as security under the Existing Credit Facility. An acceleration of the
indebtedness under the Existing Credit Facility will also trigger an event of
default under the Indenture. If the obligations under the Existing Credit
Facility or the Notes were to be accelerated, there can be no assurance that the
assets of the Company and its subsidiaries would be sufficient to repay in full
such indebtedness and the other indebtedness of the Company, including the
Notes. See "Description of Existing Indebtedness" and "Description of Exchange
Notes -- Certain Covenants."
Effective Subordination; Future Dependence on Subsidiaries
The Notes and the Guarantees will be effectively subordinated to all
current and future senior secured indebtedness, including indebtedness under the
Existing Credit Facility, to the extent of any pledged assets. The Company's
obligations under the Existing Credit Facility are secured by a pledge of
substantially all of the assets of the Company. In the event of a bankruptcy,
liquidation or reorganization of the Company, the assets of the Company would be
available to pay obligations on the Notes only after all indebtedness under the
Existing Credit Facility has been paid in full, and there may not be sufficient
assets remaining to pay amounts due on any or all of the Notes then outstanding.
The indebtedness under the Existing Credit Facility will become due prior to the
time the principal obligations under the Notes become due. Schuff's subsidiary
has issued a guarantee under the Existing Credit Facility, and upon consummation
of the Acquisition, Addison and its subsidiaries issued guarantees under the
Existing Credit Facility. As of March 31, 1998, on a pro forma basis, the
Company would have had $20.0 million of unused senior secured borrowing capacity
under the Existing Credit Facility.
In addition, following the Acquisition, a substantial portion of the
operations of the Company will be conducted through its subsidiaries. Therefore,
the Company's ability to make required principal and interest payments with
respect to the Company's indebtedness, including the Notes, will depend on the
earnings of its direct and indirect subsidiaries and on its ability to receive
funds from such subsidiaries through dividends or other payments. Other than the
Guarantees by the Guarantors, the Company's subsidiaries are not obligated or
required to pay any amounts due pursuant to the Notes or to make funds available
therefor in the form of dividends or advances to the Company. Furthermore, the
Notes and the Guarantees effectively will be subordinated to all outstanding
indebtedness and other liabilities and commitments (including trade payables and
operating lease obligations) of the Company's subsidiaries other than the
Guarantors. Any right of the Company to receive assets of any of its
subsidiaries that are not Guarantors upon their liquidation or reorganization
(and the consequent right of holders of Notes to participate in those assets)
effectively will be subordinated to the claims of that subsidiary's creditors,
except to the extent that the Company or a Guarantor itself is recognized as a
creditor of such subsidiary, in which case the claims of the Company or such
Guarantor would still be subordinate to any security interest in the assets of
such subsidiary and any indebtedness of such subsidiary senior to that held by
the Company.
Fraudulent Transfer Statutes
Various fraudulent conveyance laws enacted for the protection of creditors
may apply to the issuance of the Notes or the Guarantors' issuance of the
Guarantees. Under federal or state fraudulent transfer laws, if a
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court were to find that, at the time the Notes were issued or the Guarantees
were incurred, the Company or the Guarantor (i) issued the Notes or incurred the
Guarantees with the intent of hindering, delaying or defrauding current or
future creditors or (ii)(A) received less than fair consideration or reasonably
equivalent value for incurring the indebtedness represented by the Notes or for
issuing its Guarantee and (B)(1) was insolvent or was rendered insolvent or
contemplated insolvency by reason of the issuance of the Notes or the issuance
of such Guarantee, (2) was engaged, or about to engage, in a business or
transaction for which its assets or capital were unreasonably small or (3)
intended to incur, or believed (or should have believed) it would incur, debts
beyond its ability to pay as such debts mature (as all of the foregoing terms
are defined in or interpreted under such fraudulent transfer statutes), such
court could avoid all or a portion of the Company's or the Guarantors'
obligations to the holders of the Notes, avoid or subordinate the Company's
obligations to the holders of the Notes or avoid or subordinate such Guarantee
in favor of the Company's or the Guarantor's creditors or to other existing and
future indebtedness of the Company or such Guarantors, the effect of which would
be to entitle such other creditors to be paid in full before any payment could
be made on the Notes, and take other action detrimental to the holders of the
Notes, including in certain circumstances, invalidating the Notes. In that
event, there would be no assurance that any repayment on the Notes would ever be
recovered by the holders of the Notes.
In addition, a legal challenge of a Guarantee on fraudulent conveyance
grounds may focus on the benefits, if any, realized by the Guarantor as a result
of the Company's issuance of the Notes. The Indenture will contain a savings
clause, which generally will limit the obligations of each Guarantor under its
Guarantee to the maximum amount as will, after giving effect to all of the
liabilities of such Guarantor, result in such obligations not constituting a
fraudulent conveyance. To the extent a Guarantee of any Guarantor was avoided or
limited as a fraudulent conveyance or held unenforceable for any other reason,
holders of the Notes would cease to have any claim against such Guarantor and
would be creditors solely of the Company and any Guarantor whose Guarantee was
not avoided or held unenforceable. In such event, the claims of the holders of
the Notes against the issuer of an invalid Guarantee would be subject to the
prior payment of all liabilities (including trade payables) of such Guarantor.
There can be no assurance that, after providing for all prior claims, there
would be sufficient assets to satisfy the claims of the holders of the Notes
relating to any avoided portions of any of the Guarantees.
The definition of insolvency for purposes of the foregoing consideration
varies among jurisdictions depending upon the federal or state law that is being
applied in any such proceeding. Generally, however, the Company or a Guarantor
would be considered insolvent at the time it incurs the indebtedness
constituting the Notes or the Guarantees, if (i) the fair market value (or fair
saleable value) of its assets is less than the amount required to pay its total
existing debts and liabilities (including the probable liability on contingent
liabilities) as they become absolute or matured or (ii) it is incurring debts
beyond its ability to pay as such debts mature. Based upon financial and other
information, the Company and the Guarantors believe that they are solvent and
will continue to be solvent following the issuance of the Notes and the
Guarantees, will have sufficient capital for carrying on their business after
such issuance, will be able to pay their debts as they mature and that the
Guarantees are being incurred for proper purposes and in good faith. There can
be no assurance, however, that a court passing on such standards would agree
with the Company. There can also be no assurance as to what standard a court
would apply in order to determine whether the Company or a Guarantor was
"insolvent" as of the date the Notes were issued, or that, regardless of the
method of valuation, a court would not determine that the Company or a Guarantor
was insolvent on that date or otherwise agree with the Company with respect to
the above standards. Nor can there be any assurance that a court would not
determine, regardless of whether the Company or a Guarantor was insolvent on the
date the Notes were issued, that the payments constituted fraudulent transfers
on another ground. To the extent that proceeds from the sale of the Notes were
or are used to repay indebtedness under the Company's existing indebtedness, a
court may find that the Company did not receive fair consideration or reasonably
equivalent value for the incurrence of the indebtedness represented by the
Notes.
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Preferential Transfer
The Indenture will require the Subsidiaries created or acquired after the
issuance of the Notes to guarantee the Notes. If bankruptcy or insolvency
proceedings were initiated by or against the Company or any Subsidiary Guarantor
within 90 days (or, in certain cases, one year) after any such guarantee, or if
any such guarantee were made in contemplation of insolvency, such guarantee
would be vulnerable to avoidance as a preferential transfer. In addition, a
court could require holders of the Notes to return any payments made during the
90-day (or one-year) period.
Consequences of Failure to Exchange
The Outstanding Notes have not been registered under the Securities Act or
any state securities laws, and therefore, may not be offered, sold or otherwise
transferred except in compliance with the registration requirements of the
Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case in
compliance with certain other conditions and restrictions, including the right
of the Company and the Trustee (as defined) in certain cases to require the
delivery of opinions of counsel, certifications and other information prior to
any such transfer. Outstanding Notes that remain outstanding after the
consummation of the Exchange Offer will continue to bear a legend reflecting
such restrictions on transfer. In addition, upon consummation of the Exchange
Offer, Holders of Outstanding Notes that remain outstanding will not be entitled
to any rights to have such Outstanding Notes registered under the Securities Act
or to any similar rights under the Registration Rights Agreement (subject to
certain limited exceptions). The Company currently intends to register under the
Securities Act Outstanding Notes that remain outstanding after consummation of
the Exchange Offer only if such Outstanding Notes are held by Initial Purchasers
or persons ineligible to participate in the Exchange Offer (other than due
solely to the status of such holder as an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act). If Outstanding Notes are tendered
and accepted in the Exchange Offer, the market for untendered Outstanding Notes
is likely to diminish accordingly. Holders who do not tender their Outstanding
Notes may encounter difficulties in selling such Outstanding Notes following the
Exchange Offer. The Exchange Notes and any Outstanding Notes that remain
outstanding after consummation of the Exchange Offer will constitute a single
series of debt securities under the Indenture and, accordingly, will vote
together as a single class for purposes of determining whether holders of the
requisite percentage in outstanding principal amount of the Notes have taken
certain actions or exercised certain rights under the Indenture.
Lack of Public Market for the Notes; Possible Volatility of Note Price
The Outstanding Notes were issued to, and the Company believes are
currently owned by, a relatively small number of beneficial owners. The
Outstanding Notes have not been registered under the Securities Act and will be
subject to restrictions on transferability to the extent that they are not
exchanged for the Exchange Notes. See "-- Consequences of Failure to Exchange."
Although the Exchange Notes generally will be permitted to be resold or
otherwise transferred by the holders (who are not affiliates of the Company)
without compliance with the registration and prospectus delivery requirements
under the Securities Act, they will constitute a new issue of securities with no
established trading market. In addition, the Company does not intend to apply
for listing of the Exchange Notes on any securities exchange or to seek approval
for quotation through any automated quotation system. If an active market for
the Exchange Notes does not develop, the market price and liquidity of the
Exchange Notes will be adversely affected. Even if such a market were to
develop, the Exchange Notes could trade at prices that may be higher or lower
than their initial offering price depending upon many factors, including
prevailing interest rates, the Company's operating results and the markets for
similar securities. Although the Initial Purchasers have informed the Company
that they currently intend to make a market in the Outstanding Notes and
Exchange Notes, the Initial Purchasers are not obligated to do so and any such
market-making activity may be discontinued at any time without notice.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of securities
similar to the Exchange Notes. In addition, such market-
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making activity may be limited during the Exchange Offer and the pendency of any
shelf registration statement.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Outstanding Notes, where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes. Subject to certain provisions set forth in the Registration
Rights Agreement, the Company has agreed that, for a period of up to one year
after the consummation of the Exchange Offer, it will make this Prospectus
available to any participating broker-dealer for use in connection with any such
resale. However, under certain circumstances, the Company has the right to
require that participating broker-dealers suspend the resale of Exchange Notes
pursuant to this Prospectus. Notwithstanding that the Company may cause the
resale of Exchange Notes pursuant to this Prospectus to be suspended, the
Company has no obligation to extend the one year period referred to above during
which participating broker-dealers are entitled to use this Prospectus in
connection with such resales. See "The Exchange Offer -- Resale of the Exchange
Notes."
Exchange Offer Eligibility and Procedures
Any Holder of the Outstanding Notes who is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act or any broker-dealer who
purchased Outstanding Notes from the Company to resell pursuant to Rule 144A or
any other available exemption under the Securities Act will not be permitted or
entitled to tender such Outstanding Notes in the Exchange Offer and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any sale or other transfer of such Outstanding Notes unless
such sale or transfer is made pursuant to an exemption from such requirements.
See "The Exchange Offer -- Resale of the Exchange Notes."
Each holder of Outstanding Notes who wishes to exchange its Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company set forth in "The Exchange Offer -- Purpose and
Effect of the Exchange Offer."
Issuance of the Exchange Notes in exchange for the Outstanding Notes
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of the required documents. Therefore, Holders of the Outstanding
Notes desiring to tender such Outstanding Notes in exchange for Exchange Notes
should allow sufficient time to ensure timely delivery. The Company is under no
duty to give notification of defects or irregularities with respect to tenders
of Outstanding Notes for exchange. See "The Exchange Offer -- Procedures for
Tendering."
Possible Inability to Repurchase Notes Upon a Change of Control
Upon a Change of Control, each holder of the Notes will have the right to
require the Company to repurchase any or all of the Notes owned by such holder
at a price equal to 101% of the principal amount thereof, together with accrued
and unpaid interest. However, the Company's ability to repurchase the Notes upon
a Change of Control may be limited by the terms of then existing contractual
obligations of the Company and its subsidiaries. Furthermore, under the Existing
Credit Facility, an event constituting a Change in Control would likely
constitute an event of default, thereby giving the lender the right to require
the Company to repay all Indebtedness outstanding thereunder. In addition, the
Company may not have adequate financial resources to effect such a repurchase,
and there can be no assurance that the Company would be able to obtain such
resources through a refinancing of the Notes to be repurchased or otherwise. If
the Company fails to repurchase all of the Notes tendered for purchase upon the
occurrence of a Change of Control, such failure will constitute an Event of
Default under the Indenture. See "Description of Exchange Notes -- Change of
Control."
With respect to the sale of assets referred to in the definition of "Change
of Control," the phrase "all or substantially all" as used in such definition
varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under the relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a
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particular transaction would involve a disposition of "all or substantially all"
of the assets of a person and therefore it may be unclear whether a Change of
Control has occurred and whether the Notes are subject to an offer to purchase.
The Change of Control provision may not necessarily afford the holders
protection in the event of a highly leveraged transaction, including a
reorganization, restructuring, merger or other similar transaction involving the
Company that may adversely affect the holders, because such transactions may not
involve a shift in voting power of beneficial ownership or, even if they do, may
not involve a shift of the magnitude required under the definition of Change of
Control to trigger such provisions. Except as described under "Description of
Exchange Notes -- Change of Control," the Indenture does not contain provisions
that permit the holders of the Notes to require the Company to repurchase or
redeem the Notes in the event of a takeover, recapitalization or similar
transaction.
RISKS RELATED TO THE COMPANY
Dependence on Construction Industry
The Company earns virtually all of its revenues in the building
construction industry, which is subject to local, regional and national economic
cycles. The Company's revenues and cash flows depend to a significant degree on
major construction projects in various industries, including the hotel and
casino, retail shopping, entertainment, health care, mining, computer chip
manufacturing, public works and other industries, each of which industries may
be adversely affected by general or specific economic conditions. If
construction activity declines significantly in the Company's principal markets,
the Company's business, financial condition and results of operations would be
adversely affected.
No Assurance of Successful Acquisitions
In addition to the acquisition of Addison, the Company intends to consider,
and is currently pursuing, acquisitions of and alliances with other companies in
its industry that could complement the Company's business, including the
acquisition of entities in diverse geographic regions and entities offering
greater access to industries and markets not currently served by the Company.
There can be no assurance that suitable acquisition or alliance candidates can
be identified or, if identified, that the Company will be able to consummate
such transactions or obtain the necessary funding for such acquisitions. In
addition, the covenants contained in the Indenture or any other agreement
governing indebtedness of the Company may directly or indirectly limit the
ability of the Company to consummate such transactions. Further, there can be no
assurance that the Company will be able to integrate successfully any acquired
companies into its existing operations or to retain key customers and employees
of acquired businesses. If the costs of such integration exceed expectations or
if the Company experiences unexpected costs or liabilities in the acquired
businesses, the Company's operating results and financial condition could be
materially and adversely affected. In addition, any acquisition may result in
incurrence of additional debt and assumption of additional liabilities,
including contingent liabilities, all of which could adversely affect the
Company's cash flow. Acquisitions involve numerous other risks, such as
diverting attention of the Company's management from other business concerns,
the entrance of the Company into markets in which it has had no or only limited
experience, and the potential loss of key employees of the acquired company, any
of which could have a material adverse effect on the Company's business,
financial condition and results of operations.
The acquisition of Addison has consumed and will continue to consume
substantial management attention and resources of the Company, and will require
substantial efforts and entail certain risks in the integration of its
operations. There can be no assurance that anticipated cost savings or synergies
will be achieved. The Company will be dependent on the retention and performance
of Addison's existing management and employees for the day-to-day management and
future operating results of Addison.
Fluctuating Quarterly Results of Operations
The Company has experienced, and in the future is expected to continue to
experience, substantial variations in its results of operations as a result of a
number of factors, many of which are outside the
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Company's control. In particular, the Company's operating results may vary
because of downturns in one or more segments of the building construction
industry, changes in economic conditions, the Company's failure to obtain, or
delays in awards of, major projects or the cancellation of major projects or the
Company's failure to timely replace projects that have been completed or are
nearing completion. Any of these factors could result in the periodic
inefficient or underutilization of the Company's resources and could cause the
Company's operating results to fluctuate significantly from period to period,
including on a quarterly basis.
Fixed Price Contracts
Of the Company's $97.4 million backlog at March 31, 1998 (on a pro forma
basis giving effect to the Acquisition), most consisted of projects being
performed on a fixed price basis. In bidding on projects, the Company estimates
its costs, including projected increases in costs of labor, material and
services. Despite these estimates, costs and gross profit realized on a fixed
price contract may vary from estimated amounts because of unforeseen conditions
or changes in job conditions, variations in labor and equipment productivity
over the terms of contracts, increases in labor or material costs and other
factors. These variations could have a material adverse effect on the Company's
business, financial condition and results of operations for any period. See
"Business -- Contracting Methods and Performance Bonding."
Variations in Backlog; Dependence on Large Contracts
The Company's backlog can be significantly affected by the receipt, or
loss, of individual contracts. For example, approximately $24.5 million, or
25.2%, of the Company's backlog at March 31, 1998 (on a pro forma basis giving
effect to the Acquisition) was attributable to two contracts. In the event one
or more large contracts were terminated or their scope reduced, the Company's
backlog would decrease substantially. The Company's future business and results
of operations may be adversely affected if it is unable to replace significant
contracts when lost or completed, or if it otherwise fails to maintain a
sufficient level of backlog. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Backlog."
Capacity Constraints; Dependence on Subcontractors
Schuff routinely relies on subcontractors to perform a significant portion
of its fabrication and project detailing to fulfill projects that Schuff cannot
fulfill in-house due to capacity constraints or that are in markets in which
Schuff has not established a strong local presence. Addison currently
subcontracts to others all of its erection services and most of its project
detailing. With respect to these projects, the Company's success depends on its
ability to retain and successfully manage these subcontractors. Any difficulty
in attracting and retaining qualified subcontractors on terms and conditions
favorable to the Company could have an adverse effect on the Company's ability
to complete these projects in a timely and cost effective manner.
Union Contracts
The Company currently is a party to a number of collective bargaining
agreements with various unions representing the Company's fabrication and
erection employees. These contracts expire or are subject to expiration at
various times in the future prior to the maturity of the Notes. The inability of
the Company to renew such contracts could result in work stoppages and other
labor disturbances, which could disrupt the Company's business and adversely
affect the Company's results of operations. See "Business -- Employees."
Revenue Recognition Estimates
The Company recognizes revenues using the percentage of completion
accounting method. Under this method, revenues are recognized based on the ratio
that costs incurred to date bear to the total estimated costs to complete the
project. Estimated losses on contracts are recognized in full when the Company
determines that a loss will be incurred. The Company frequently reviews and
revises revenues and total cost estimates as work progresses on a contract and
as contracts are modified. Accordingly, revenue adjustments based upon the
revised completion percentage are reflected in the period that estimates are
revised. Although revenue
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estimates are based upon management assumptions supported by historical
experience, these estimates could vary materially from actual results. To the
extent percentage of completion adjustments reduce previously reported revenues,
the Company would recognize a charge against operating results, which could have
a material adverse effect on the Company's results of operations for the
applicable period. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."
Geographic Concentration
The Company's fabrication and erection operations currently are conducted
primarily in Arizona, Nevada, Florida and Georgia, states in which the
construction industry has experienced substantial growth during recent years. Of
the $138.2 million in revenues earned by Schuff in 1997, management estimates
that approximately $120.6 million, or 87.3%, of those revenues were related to
projects in Arizona and Nevada. Of the $67.3 million in revenues earned by
Addison in fiscal 1997, a substantial majority were related to projects in
Florida and Georgia. Because of this concentration, future construction activity
and the Company's business may be adversely affected in the event of a downturn
in economic conditions existing in these states and in the southwestern and
southeastern United States generally. Factors that may affect economic
conditions include increases in interest rates or limitations in the
availability of financing for construction projects, decreases in the amount of
funds budgeted for governmental projects, decreases in capital expenditures
devoted to the construction of plants, distribution centers, retail shopping
centers, industrial facilities, hotels and casinos, convention centers and other
facilities, the prevailing market prices of copper, gold and other metals that
impact related mining activity and downturns in occupancy rates, office space
demand, tourism and convention related activity and population growth. See
"Business -- Primary Markets" and "-- Representative Projects."
Operating Risks; Litigation
Construction and heavy steel plate weldments involve a high degree of
operational risk. Natural disasters, adverse weather conditions, design,
fabrication and erection errors and work environment accidents can cause death
or personal injury, property damage and suspension of operations. The occurrence
of any of these events could result in loss of revenues, increased costs and
liability to third parties. The Company is subject to litigation claims in the
ordinary course of business, including lawsuits asserting substantial claims.
Currently, the Company does not maintain any reserves for its ongoing
litigation, and expenses litigation costs as incurred. The Company periodically
reviews the need to maintain a litigation reserve. The Company maintains risk
management, insurance and safety programs intended to prevent or mitigate
losses. There can be no assurance that any of these programs will be adequate or
that the Company will be able to maintain adequate insurance in the future at
rates that it considers reasonable. See "Business -- Legal Proceedings" and
"-- Insurance."
Risks of International Operations
The Company currently operates in selected international markets and is
seeking to further expand its presence in these markets. Approximately 3.7% of
Schuff's revenues in 1997 were related to projects outside the United States.
Addison's revenues in 1997 related to projects outside the United States were
not significant. The Company's international operations are subject to certain
political, economic and other uncertainties, including risks of war,
nationalization of assets, renegotiation or nullification of existing contracts,
changing political conditions, changing laws and policies affecting trade and
investment and overlap of different tax structures. Although the Company
currently attempts to limit its exposure to currency fluctuations by dealing
solely in United States dollars, there can be no assurance that the Company's
international operations will escape the risks of fluctuating currency values,
hard currency shortages or controls on currency exchange.
Competition
Many small and various large companies offer fabrication, erection and
related services that compete with those provided by the Company. Local and
regional companies offer competition in one or more of the
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Company's geographic markets or product segments. Out of state or international
companies may provide competition in any market. The Company competes for every
project it obtains. Although the Company believes customers consider, among
other things, the availability and technical capabilities of equipment and
personnel, efficiency, safety record and reputation, price competition usually
is the primary factor in determining which qualified contractor with available
equipment is awarded a contract. Competition has resulted in pressure on pricing
and operating margins, and the effects of competitive pressure in the industry
may continue. Some of the Company's competitors have greater capital and other
resources and are less leveraged than the Company and are well established in
their respective markets. There can be no assurance that the Company's
competitors will not substantially increase their commitment of resources
devoted to competing aggressively with the Company or that the Company will be
able to compete profitably with its competitors.
Substantial Liquidity Requirements
The Company's operations require significant amounts of working capital to
procure materials for contracts to be performed over relatively long periods,
and for purchases and modifications of heavy-duty and specialized fabrication
equipment. In addition, the Company's contract arrangements with customers
sometimes require the Company to provide payment and performance bonds and, in
selected cases, letters of credit, to partially secure the Company's obligations
under its contracts, which may require the Company to incur significant
expenditures prior to receipt of payments. Furthermore, the Company's customers
often will retain a portion of amounts otherwise payable to the Company during
the course of a project as a guarantee of completion of that project. To the
extent the Company is unable to receive project payments in the early stages of
a project, the Company's cash flow would be reduced, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
Dependence Upon Key Personnel
The Company's success depends on the continued services of the Company's
senior management and key employees as well as the Company's ability to attract
additional members to its management team with experience in the steel
fabrication and erection industry. The unexpected loss of the services of any of
the Company's management or other key personnel, or its inability to attract new
management when necessary, could have a material adverse effect upon the
Company. See "Management."
Potential Environmental Liability
The Company's operations and properties are affected by numerous federal,
state and local environmental protection laws and regulations, such as those
governing discharges to air and water and the handling and disposal of solid and
hazardous wastes. Compliance with these laws and regulations has become
increasingly stringent, complex and costly. There can be no assurance that such
laws and regulations or their interpretation will not change in a manner that
could materially and adversely affect the Company. Certain environmental laws,
such as the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") and its state law counterparts, provide for strict and joint and
several liability for investigation and remediation of spills and other releases
of toxic and hazardous substances. These laws may apply to conditions at
properties currently or formerly owned or operated by an entity or its
predecessors, as well as to conditions at properties at which wastes or other
contamination attributable to an entity or its predecessors come to be located.
Although the Company has not incurred any material environmental related
liability in the past and believes that it is in material compliance with
environmental laws, there can be no assurance that the Company, or entities for
which it may be responsible, will not incur such liability in connection with
the investigation and remediation of facilities it currently operates (or
formerly owned or operated) or other locations in a manner that could materially
and adversely affect the Company. See "Business -- Environmental Regulation."
25
<PAGE> 30
Governmental Regulation
Many aspects of the Company's operations are subject to governmental
regulations in the United States and in other countries in which the Company
operates, including regulations relating to occupational health and workplace
safety, principally the Occupational Safety and Health Act and regulations
thereunder. In addition, the Company is subject to licensure and holds licenses
in each of the states in the United States in which it operates and in certain
local jurisdictions within such states. Although the Company believes that it is
in material compliance with applicable laws and permitting requirements, there
can be no assurance that it will be able to maintain this status. Further, the
Company cannot determine to what extent future operations and earnings of the
Company may be affected by new legislation, new regulations or changes in or new
interpretations of existing regulations. See "Business -- Governmental
Regulation."
THE ACQUISITION
On June 4, 1998, Schuff acquired all of the capital stock of Addison. The
purchase price, net of estimated excess cash on hand of Addison at the closing
and non-business related assets sold at closing to Addison's majority
stockholder, was approximately $50.4 million, of which approximately $47.2
million was payable in cash at the closing (approximately $3.5 million of which
was paid into escrow accounts) and $3.2 million was paid by delivery of the
Holdback Note. See "Use of Proceeds." The Acquisition closed contemporaneously
with the consummation of the Offering. The Acquisition was accounted for under
the purchase method of accounting and Schuff did not acquire any long-term
indebtedness of Addison.
The Holdback Note bears interest at 1% below the floating prime rate and is
secured by a letter of credit. The Holdback Note is due and payable to the
majority stockholder of Addison in three equal annual installments of principal
plus accrued interest, subject to any indemnity claims against or amounts
deducted from the Holdback Note and retained by Schuff. Of the escrowed amounts,
$2.8 million is due and payable to the participants of Addison's Leveraged
Employee Stock Ownership Plan (the "ESOP") in the same manner as the Holdback
Note and is subject to the same indemnity offsets, all of which will be made on
a ratable basis, and approximately $740,000 was paid into a separate escrow
account to cover environmental remediation and related costs with respect to
certain of the properties of Addison acquired by Schuff (with the balance, if
any, payable on a proportionate basis to Addison's stockholders). Schuff may
only offset against the Holdback Note and the $2.8 million escrowed amount for
claims related to the operations of Addison prior to the closing, except with
respect to title or tax matters or in the event of fraud or intentional
misrepresentation or omission, in which case the stockholders of Addison have
agreed to indemnify the Company for all damages arising therefrom.
26
<PAGE> 31
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. The Exchange Offer is intended to satisfy certain
of the Company's obligations under the Registration Rights Agreement.
The net proceeds from the issuance and sale of the Outstanding Notes were
used (i) to pay the cash portion of the purchase price of the Acquisition
payable at the closing, (ii) to repay certain existing indebtedness of Schuff
and (iii) the balance for working capital and general corporate purposes of the
Company, including, when and if available, the acquisition of additional
businesses complementary to the Company's business. Schuff is engaged in
negotiations in connection with potential acquisitions but has no pending
binding commitments as of the date hereof.
The following table summarizes the estimated sources and uses of funds
contemplated from the Offering:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
SOURCES OF FUNDS:
Sale of Outstanding Notes................................. $100.0
Holdback Note............................................. 3.2
Addison cash on hand at closing available to fund purchase
price of Acquisition(1)................................ 6.0
Proceeds from sale of non-business related assets......... 2.8
------
$112.0
======
USES OF FUNDS:
Total Addison purchase price(1)........................... $ 59.4
Fees and expenses of Acquisition.......................... 1.1
Repayment of existing Schuff indebtedness(2).............. 3.3
Offering expenses(3)...................................... 4.0
Working capital, including for future acquisitions(4)..... 44.2
------
$112.0
======
</TABLE>
- ---------------
(1) The total purchase price of the Acquisition includes the sum of (i) $50.4
million plus (ii) $9.0 million, the amount of Addison's cash on hand at the
closing (subject to certain adjustments). The above table reflects a total
purchase price of $59.4 million and that Addison had $9.0 million of cash on
hand at the closing, of which $6.0 million was used by Schuff to fund part
of the purchase price and $3.0 million will remain with Addison for working
capital.
(2) The existing indebtedness of Schuff as of March 31, 1998 repaid by it from
the proceeds of the Offering includes (i) approximately $1.6 million that
was outstanding under the revolving line of credit portion of its Existing
Credit Facility, which bears interest at a variable rate per annum equal to
the lender's floating prime rate (which effective rate was 8.50% per annum
as of March 31, 1998) and matures (subject to renewal) on June 30, 1999 and
(ii) approximately $1.7 million that was outstanding under a subordinated
note payable to certain affiliates of Schuff, which accrued interest at a
variable rate per annum equal to the prime rate plus 0.75% (which effective
rate was 9.25% per annum as of March 31, 1998) and was scheduled to mature
on April 30, 2003. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources,"
"Certain Relationships and Related Transactions" and "Description of
Existing Indebtedness."
(3) Includes discounts and commissions paid to the Initial Purchasers of
approximately $3.0 million and expenses incurred by Schuff in connection
with the Offering, which were approximately $1.0 million. See "Plan of
Distribution."
(4) Until applied as set forth above, all proceeds will be invested in
short-term, interest bearing investment grade or equivalent securities or
deposits.
27
<PAGE> 32
CAPITALIZATION
The following table sets forth the actual and pro forma cash and
equivalents, long-term debt and total capitalization of the Company as of March
31, 1998. The actual capitalization reflects such data of Schuff at March 31,
1998. The pro forma capitalization gives effect to (i) the Acquisition and (ii)
the issuance of the Outstanding Notes and the application of the net proceeds
therefrom as if they had occurred on March 31, 1998. This table should be read
in conjunction with "Use of Proceeds," "Unaudited Pro Forma Condensed Combined
Financial Statements," "Schuff Steel Company Selected Historical Financial
Data," "Addison Structural Services, Inc. Selected Historical Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements, including the Notes
thereto, of each of Schuff and Addison included elsewhere herein.
<TABLE>
<CAPTION>
AT MARCH 31, 1998
--------------------
ACTUAL PRO FORMA
------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents(1)............................ $ 303 $ 47,536
Long-term debt, including current maturities:
Existing Credit Facility(2)........................ 1,573 --
Existing notes payable(2).......................... 2,396 639
Holdback Notes, including current portion.......... -- 3,214
Senior Notes due 2008.............................. -- 100,000
------- --------
Total long-term debt, including current
maturities.................................. 3,969 103,853
Stockholders' equity.................................... 26,278 26,278
------- --------
Total capitalization.......................... $30,247 $130,131
======= ========
</TABLE>
- ---------------
(1) Excludes $2.7 million of restricted funds on deposit at March 31, 1998.
Restricted funds on deposit represent funds on deposit in interest bearing
accounts which are maintained in lieu of retention for specific contracts.
Retentions on contract receivables are amounts which are withheld until the
completed project has been accepted by the customer in accordance with the
contract. See Note 1 to Schuff's Consolidated Financial Statements.
(2) See "Use of Proceeds," "Description of Existing Indebtedness" and Note 5 to
Schuff's Consolidated Financial Statements. On an actual basis as of March
31, 1998, the Company had approximately $18.4 million of unused senior
secured borrowing capacity under its Existing Credit Facility.
28
<PAGE> 33
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined statement of income data and
supplemental information gives effect to (i) the Acquisition and (ii) the
Offering and the application of the net proceeds therefrom, as if they had
occurred on January 1, 1997 for the year ended December 31, 1997, April 1, 1997
for the last twelve months ended March 31, 1998 and January 1, 1998 for the
three months ended March 31, 1998. The unaudited pro forma condensed combined
balance sheet as of March 31, 1998 gives effect to (i) the Acquisition and (ii)
the Offering and the application of the net proceeds therefrom, as if they had
occurred on March 31, 1998. The unaudited pro forma condensed combined
statements of income are derived from the historical and calendarized financial
statements of Schuff and Addison for the periods indicated. Addison's 1997
fiscal year end was June 30, 1997 and Schuff's 1997 year end was December 31,
1997. Accordingly, for the statement of income for the period ended December 31,
1997, the unaudited six month period ended December 31, 1997 has been added to
Addison's statement of income for the fiscal year ended June 30, 1997 and the
unaudited results for the six month period ended December 31, 1996 have been
deducted. For the statement of income for the twelve month period ended March
31, 1998, (i) the unaudited three month period ended March 31, 1998 has been
added to Schuff's statement of income for the year ended December 31, 1997 and
the unaudited results for the three month ended March 31, 1997 have been
deducted and (ii) the unaudited nine month period ended March 31, 1998 has been
added to Addison's statement of income for the fiscal year ended June 30, 1997
and the unaudited results for the nine month period ended March 31, 1997 have
been deducted.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the notes thereto and the assumptions and adjustments
set forth therein, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements of each of
Schuff and Addison, including the Notes thereto, included elsewhere herein.
The pro forma adjustments which give effect to the various events described
above are based upon currently available information and upon certain
assumptions and adjustments that management of the Company believes are
reasonable and that meet the factually supportable criteria of the Commission
for pro forma financial information. The Acquisition was accounted for by the
Company under the purchase method and the resulting assets acquired and
liabilities assumed were recorded at their estimated fair market values at the
date of acquisition. No interest income was assumed to have been earned on the
portion of the proceeds of the Offering that were not used to fund the cash
portion of the purchase price of the Acquisition or to pay other existing
indebtedness of Schuff, although such funds were available to the Company for
investment purposes. The adjustments included in the unaudited pro forma
condensed combined financial statements reflect the Company's preliminary
assumptions and estimates based upon available information. There can be no
assurance that the actual adjustments will not vary significantly from the
estimated adjustments reflected in the unaudited pro forma condensed combined
financial statements.
The unaudited pro forma condensed combined financial statements do not
purport to be indicative of the results of operations that would have occurred
or that may be obtained in the future if the transactions described above had
occurred as presented in such statements. In addition, future results may vary
significantly from the results reflected in such statements due to general
economic conditions, labor and materials costs, competition, Schuff's ability to
successfully integrate the operations of Addison with its current business and
several other factors, many of which are beyond the Company's control. See "Risk
Factors."
29
<PAGE> 34
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
SCHUFF ADDISON PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 303 $ 7,346 $ 39,887(1) $ 47,536
Receivables.................................. 21,904 8,767 -- 30,671
Restricted funds on deposit.................. 2,662 -- -- 2,662
Costs and recognized earnings in excess of
billings on uncompleted contracts......... 6,129 3,928 -- 10,057
Inventories.................................. 2,463 3,929 -- 6,392
Other current assets......................... 827 393 -- 1,220
------- ------- -------- --------
Total current assets................. 34,288 24,363 39,887 98,538
Property and equipment, net.................... 7,583 12,114 (2,657)(2) 17,040
Goodwill....................................... -- -- 27,633(3) 27,633
Other assets................................... 100 1,231 4,000(4) 5,331
------- ------- -------- --------
Total assets......................... $41,971 $37,708 $ 68,863 $148,542
======= ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................. $ 2,796 $ 2,872 $ -- $ 5,668
Billings in excess of costs and recognized
earnings on uncompleted contracts......... 4,290 1,348 -- 5,638
Accrued expenses............................. 4,142 1,831 -- 5,973
Notes payable and current portion of
long-term debt............................ 304 169 (312)(5) 161
------- ------- -------- --------
Total current liabilities............ 11,532 6,220 (312) 17,440
Other liabilities.............................. 496 636 -- 1,132
Bank indebtedness.............................. 3,665 882 (4,069)(5) 478
Holdback Notes payable......................... -- -- 3,214(6) 3,214
Senior Notes................................... -- -- 100,000(7) 100,000
------- ------- -------- --------
Total long-term debt................. 3,665 882 99,145 103,692
------- ------- -------- --------
Stockholders' equity........................... 26,278 29,970 (29,970)(8) 26,278
------- ------- -------- --------
Total liabilities and stockholders'
equity............................. $41,971 $37,708 $ 68,863 $148,542
======= ======= ======== ========
</TABLE>
- ---------------
(1) Represents $96,000 of net proceeds from the issuance of Outstanding Notes
less repayments of existing indebtedness of Schuff of $3,330, net cash paid
in connection with the Acquisition of $51,683 (cash portion of Acquisition
based on March 31, 1998 financial information, less $2,750 of proceeds from
sale of certain assets of Addison sold to Addison's majority stockholder
contemporaneously with the closing of the Acquisition), and $1,100 cash paid
for the Company's estimate of direct acquisition costs.
(2) Represents the net book value of certain assets of Addison sold to Addison's
majority stockholder contemporaneously with the closing of the Acquisition.
(3) Schuff has not completed its assessment of the fair value of the net assets
being acquired for purposes of allocating the purchase price. Accordingly,
the excess of the purchase price over the historic net asset value of the
acquired companies has been allocated entirely to goodwill which will be
amortized over a
30
<PAGE> 35
25-year period. The estimated purchase price allocation based upon balances
as of March 31, 1998 is as follows:
<TABLE>
<S> <C>
Cash consideration.......................................... $54,433
Holdback Note............................................... 3,214
Direct acquisition costs.................................... 1,100
-------
Total purchase price........................................ 58,747
Net book value of net assets acquired....................... 31,114
-------
Goodwill.................................................... $27,633
=======
</TABLE>
The net book value of net assets acquired entities represents the historic
net book value of Addison increased by the elimination of the $1,051 ESOP
debt guarantee reflected historically as a reduction of equity and the $93
excess of the sales price of the assets not being acquired over the
related net book value.
(4) Represents debt issuance costs related to the Outstanding Notes.
(5) Represents elimination of ESOP debt guaranteed by Addison of $1,051 and the
repayment of $3,330 of other existing indebtedness.
(6) Represents the Holdback Note delivered as part of the purchase price of the
Acquisition. See "The Acquisition."
(7) Represents face value of the Outstanding Notes.
(8) Represents elimination of net book value of acquired entities.
31
<PAGE> 36
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SCHUFF ADDISON PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues..................................... $138,218 $67,285 $ (283)(1) $205,220
Cost of revenues............................. 117,955 51,314 (117)(1) 169,152
-------- ------- -------- --------
Gross profit............................... 20,263 15,971 (166) 36,068
General and administrative expenses........ 8,880 7,002 (1,607)(2) 14,275
Goodwill amortization...................... -- -- 1,105(3) 1,105
-------- ------- -------- --------
Operating income........................ 11,383 8,969 336 20,688
Interest expense............................. (348) (15) (10,976)(4) (11,339)
Other income................................. 520 1,011 -- 1,531
-------- ------- -------- --------
Income before income taxes................. 11,555 9,965 (10,640) 10,880
Provision for income taxes................... 2,823 3,836 (3,814)(5) 2,845
-------- ------- -------- --------
Net income................................. 8,732 6,129 (6,826) 8,035
Pro forma income taxes....................... 1,513 -- -- 1,513
-------- ------- -------- --------
Pro forma net income....................... $ 7,219 $ 6,129 $ (6,826) $ 6,522
======== ======= ======== ========
SUPPLEMENTAL INFORMATION:
EBITDA....................................... $ 12,903 $ 9,949 $ 1,441 $ 24,293
Depreciation and amortization................ 1,520 980 1,105 3,605
Cash interest expense........................ 348 15 10,576 10,939
EBITDA/cash interest expense................. 2.2x
Backlog...................................... $ 56,793 $23,781 $ -- $ 80,574
</TABLE>
- ---------------
(1) Represents historic revenues and expenses of operating certain assets of
Addison sold to Addison's majority stockholder contemporaneously with the
closing of the Acquisition.
(2) Represents cost reductions of $850 for chief executive officer salary in
excess of future consulting contract costs, $300 for costs related to the
ESOP of Addison that is being terminated and $457 for costs related to
certain assets of Addison sold to Addison's majority stockholder
contemporaneously with the closing of the Acquisition.
(3) Represents amortization of excess of purchase price over fair value of net
assets acquired related to the Acquisition.
(4) Represents interest expense on the Outstanding Notes at an interest rate of
10.5% per annum, the Holdback Note and the amortization of the related debt
issuance costs over a ten-year period offset by the elimination of interest
on existing indebtedness of Schuff repaid from the proceeds of the Offering.
See "Use of Proceeds."
(5) Represents income tax expense on the pro forma adjustments at an effective
rate of 40%, except for goodwill amortization which is not deductible for
financial reporting or tax purposes.
32
<PAGE> 37
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE LAST TWELVE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SCHUFF ADDISON PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues..................................... $140,137 $66,385 $ (447)(1) $206,075
Cost of revenues............................. 118,734 50,595 (207)(1) 169,122
-------- ------- -------- --------
Gross profit............................... 21,403 15,790 (240) 36,953
General and administrative expenses........ 9,193 7,061 (1,790)(2) 14,464
Goodwill amortization...................... -- -- 1,105(3) 1,105
-------- ------- -------- --------
Operating income........................ 12,210 8,729 445 21,384
Interest expense............................. (351) (20) (10,932)(4) (11,303)
Other income................................. 665 1,071 -- 1,736
-------- ------- -------- --------
Income before income taxes................. 12,524 9,780 (10,487) 11,817
Provision for income taxes................... 3,969 3,858 (3,752)(5) 4,075
-------- ------- -------- --------
Net income................................. 8,555 5,922 (6,735) 7,742
Pro forma income taxes....................... 803 -- -- 803
-------- ------- -------- --------
Pro forma net income....................... $ 7,752 $ 5,922 $ (6,735) $ 6,939
======== ======= ======== ========
SUPPLEMENTAL INFORMATION:
EBITDA....................................... $ 13,792 $ 9,712 $ 1,550 $ 25,054
Depreciation and amortization................ 1,582 983 1,105 3,670
Cash interest expense........................ 351 20 10,532 10,903
EBITDA/cash interest expense................. 2.3x
Backlog...................................... $ 66,539 $30,869 $ -- $ 97,408
</TABLE>
- ---------------
(1) Represents historic revenues and expenses of operating certain assets of
Addison sold to Addison's majority stockholder contemporaneously with the
closing of the Acquisition.
(2) Represents cost reductions of $850 for chief executive officer salary in
excess of future consulting contract costs, $300 for costs related to the
ESOP of Addison that is being terminated and $640 for costs related to
certain assets of Addison sold to Addison's majority stockholder
contemporaneously with the closing of the Acquisition.
(3) Represents amortization of excess of purchase price over fair value of net
assets acquired related to the Acquisition.
(4) Represents interest expense on the Outstanding Notes at a rate of 10.5% per
annum, the Holdback Note and the amortization of the related debt issuance
costs over a ten-year period offset by the elimination of interest on
existing indebtedness of Schuff repaid from the proceeds of the Offering.
See "Use of Proceeds."
(5) Represents income tax expense on the pro forma adjustments at an effective
rate of 40%, except for goodwill amortization which is not deductible for
financial reporting or tax purposes.
33
<PAGE> 38
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SCHUFF ADDISON PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues...................................... $27,426 $14,141 $ (162)(1) $41,405
Cost of revenues.............................. 22,434 11,100 (91)(1) 33,443
------- ------- ------- -------
Gross profit................................ 4,992 3,041 (71) 7,962
General and administrative expenses......... 2,394 1,679 (474)(2) 3,599
Goodwill amortization....................... -- -- 277(3) 277
------- ------- ------- -------
Operating income......................... 2,598 1,362 126 4,086
Interest expense.............................. (98) (5) (2,703)(4) (2,806)
Other income.................................. 241 132 -- 373
------- ------- ------- -------
Income before income taxes.................. 2,741 1,489 (2,577) 1,653
Provision for income taxes.................... 1,146 559 (920)(5) 785
------- ------- ------- -------
Net income.................................. $ 1,595 $ 930 $(1,657) $ 868
======= ======= ======= =======
SUPPLEMENTAL INFORMATION:
EBITDA........................................ $ 3,021 $ 1,607 $ 403 $ 5,031
Depreciation and amortization................. 423 245 277 945
Cash interest expense......................... 98 5 2,603 2,706
EBITDA/cash interest expense.................. 1.9x
Backlog....................................... $66,539 $30,869 $ -- $97,408
</TABLE>
- ---------------
(1) Represents historic revenues and expenses of operating certain assets of
Addison sold to Addison's majority stockholder contemporaneously with the
closing of the Acquisition.
(2) Represents cost reductions of $213 for chief executive officer salary in
excess of future consulting contract costs, $75 for costs related to the
ESOP of Addison that is being terminated and $186 for costs related to
certain assets of Addison sold to Addison's majority stockholder
contemporaneously with the closing of the Acquisition.
(3) Represents amortization of excess of purchase price over fair value of net
assets acquired related to the Acquisition.
(4) Represents interest expense on the Outstanding Notes at a rate of 10.5% per
annum, the Holdback Note and the amortization of the related debt issuance
costs over a ten-year period offset by the elimination of interest on
existing indebtedness of Schuff repaid from the proceeds of the Offering.
See "Use of Proceeds."
(5) Represents income tax expense on the pro forma adjustments at an effective
rate of 40%, except for goodwill amortization which is not deductible for
financial reporting or tax purposes.
34
<PAGE> 39
SCHUFF STEEL COMPANY
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical financial data derived
from the audited financial statements of Schuff as of and for the years ended
December 31, 1993 through 1997 and contains selected financial data derived from
the unaudited financial statements of Schuff for the three months ended March
31, 1997 and 1998 and as of March 31, 1997 and 1998. The unaudited financial
statements of Schuff as of and for the three months ended March 31, 1997 and
1998 reflect all adjustments necessary in the opinion of management of Schuff
(consisting only of normal recurring adjustments) for a fair presentation of
such data. The following information should be read in conjunction with Schuff's
Consolidated Financial Statements, including the Notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- -------- -------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues.................... $58,640 $68,199 $62,090 $103,912 $138,218 $25,507 $27,426
Cost of revenues............ 50,376 58,874 54,222 86,998 117,955 21,655 22,434
------- ------- ------- -------- -------- ------- -------
Gross profit.............. 8,264 9,325 7,868 16,914 20,263 3,852 4,992
General and administrative
expenses................ 4,367 4,915 5,284 6,715 8,880 2,081 2,394
------- ------- ------- -------- -------- ------- -------
Operating income.......... 3,897 4,410 2,584 10,199 11,383 1,771 2,598
Interest expense............ (627) (718) (752) (452) (348) (95) (98)
Other income................ 60 67 618 303 520 96 241
------- ------- ------- -------- -------- ------- -------
Income before income
taxes................... 3,330 3,759 2,450 10,050 11,555 1,772 2,741
Provision for income
taxes(1).................. -- -- -- -- 2,823 -- 1,146
------- ------- ------- -------- -------- ------- -------
Net income.................. 3,330 3,759 2,450 10,050 8,732 1,772 1,595
Pro forma income taxes(1)... 1,330 1,500 980 4,020 1,513 710 --
------- ------- ------- -------- -------- ------- -------
Pro forma net income(1)..... $ 2,000 $ 2,259 $ 1,470 $ 6,030 $ 7,219 $ 1,062 $ 1,595
======= ======= ======= ======== ======== ======= =======
SUPPLEMENTAL INFORMATION:
EBITDA(2)................... $ 4,765 $ 5,658 $ 3,832 $ 11,466 $ 12,903 $ 2,132 $ 3,021
Depreciation and
amortization.............. 868 1,248 1,248 1,267 1,520 361 423
Capital expenditures........ 3,290 1,615 814 2,337 3,188 310 592
Ratio of earnings to fixed
charges(3)................ 5.0x 4.8x 3.4x 14.0x 10.3x 10.4x 9.1x
BALANCE SHEET DATA
(AT END OF PERIOD):
Working capital............. $ 4,804 $ 8,498 $ 7,965 $ 8,476 $ 22,548 $ 8,598 $22,756
Total assets................ 25,387 26,244 25,260 36,397 42,038 48,160 41,971
Total debt.................. 10,130 7,554 5,676 2,897 5,231 3,094 3,969
Stockholders' equity........ 5,320 6,032 6,768 10,682 24,673 11,436 26,278
</TABLE>
- ---------------
(1) Prior to the completion of its initial public offering, Schuff elected to be
treated as an S corporation under the Internal Revenue Code of 1986, as
amended. As an S corporation, Schuff was not subject to income taxes. Pro
forma net income reflects the provision for income taxes that would have
been recorded had Schuff been subject to income taxes as a C corporation for
all periods, assuming an effective tax rate of 40%. Provision for income
taxes for 1997 includes credits of $300,000 to income recorded upon Schuff's
revocation of its S corporation election in June 1997.
35
<PAGE> 40
(2) EBITDA for any relevant period presented above is defined as net income plus
interest expense, income taxes, depreciation, amortization, and other
expenses less other income. EBITDA should not be construed as a substitute
for operating income, as an indicator of liquidity or as a substitute for
net cash provided by operating activities, which are determined in
accordance with generally accepted accounting principles. EBITDA is included
because management of Schuff believes that certain investors may find it to
be a useful tool for analyzing operating performance, leverage, liquidity
and Schuff's ability to service debt.
(3) Ratio of earnings to fixed charges is computed by dividing fixed charges
into earnings from continuing operations before income tax and minority
interests plus fixed charges. Fixed charges consist of interest expense,
amortization of financing costs and the estimated interest component of rent
expense.
36
<PAGE> 41
ADDISON STRUCTURAL SERVICES, INC.
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical financial data derived
from the audited financial statements of Addison as of and for the fiscal years
ended June 30, 1993 through 1997 and contains selected financial data derived
from the unaudited financial statements of Addison for the nine months ended
March 31, 1997 and 1998 and as of March 31, 1997 and 1998. The unaudited
financial statements of Addison as of and for the nine months ended March 31,
1997 and 1998 reflect all adjustments necessary in the opinion of management of
the Company (consisting only of normal recurring adjustments) for a fair
presentation of such data. The following information should be read in
conjunction with the Addison's Consolidated Financial Statements, including the
Notes thereto, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, MARCH 31,
--------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................................... $32,509 $52,831 $50,463 $57,638 $63,700 $46,195 $48,880
Cost of revenues........................... 27,610 46,159 38,975 43,414 47,774 34,881 37,701
------- ------- ------- ------- ------- ------- -------
Gross profit............................. 4,899 6,672 11,488 14,224 15,926 11,314 11,179
General and administrative expenses...... 3,860 4,655 5,582 6,001 6,532 4,642 5,172
------- ------- ------- ------- ------- ------- -------
Operating income......................... 1,039 2,017 5,906 8,223 9,394 6,672 6,007
Interest expense........................... (521) (312) (236) (153) (38) (30) (12)
Other income............................... 376 75 195 421 737 442 775
------- ------- ------- ------- ------- ------- -------
Income before income taxes............... 894 1,780 5,865 8,491 10,093 7,084 6,770
Provision for income taxes................. 319 741 2,178 3,186 4,033 2,715 2,539
------- ------- ------- ------- ------- ------- -------
Net income................................. $ 575 $ 1,039 $ 3,687 $ 5,305 $ 6,060 $ 4,369 $ 4,231
======= ======= ======= ======= ======= ======= =======
SUPPLEMENTAL INFORMATION:
EBITDA(1)................................ $ 1,975 $ 2,955 $ 6,797 $ 9,145 $10,372 $ 7,404 $ 6,744
Depreciation and amortization............ 936 938 891 922 978 732 737
Capital expenditures..................... 485 769 690 2,665 4,620 1,580 1,132
Ratio of earnings to fixed charges(2).... 2.6x 5.9x 21.4x 42.4x 125.6x 113.4x 136.4x
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital.......................... $ 5,906 $ 6,801 $ 9,498 $12,516 $15,298 $15,533 $18,142
Total assets............................. 24,001 20,276 23,949 29,346 34,539 28,769 37,708
Total debt............................... 6,087 3,117 1,898 1,791 1,277 1,230 1,050
Stockholders' equity..................... 10,422 11,591 15,365 19,593 25,656 22,911 29,970
</TABLE>
- ---------------
(1) EBITDA for any relevant period presented above is defined as net income plus
interest expense, income taxes, depreciation, amortization, and other
expenses less other income. EBITDA should not be construed as a substitute
for operating income, as an indicator of liquidity or as a substitute for
net cash provided by operating activities, which are determined in
accordance with generally accepted accounting principles. EBITDA is included
because management of the Company believes that certain investors may find
it to be a useful tool for analyzing operating performances, leverage,
liquidity and the ability to service debt.
(2) Ratio of earnings to fixed charges is computed by dividing fixed charges
into earnings from continuing operations before income taxes and minority
interests plus fixed charges. Fixed charges consist of interest expense,
amortization of financing costs and the estimated interest component of rent
expense.
37
<PAGE> 42
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Schuff
Steel Company Selected Historical Financial Data," "Addison Structural Services,
Inc. Selected Historical Financial Data" and Consolidated Financial Statements
and Notes thereto of each of Schuff and Addison included elsewhere herein.
OVERVIEW
The Company's results of operations are affected primarily by (i) the level
of commercial and industrial construction in its principal markets, (ii) its
ability to win project contracts, (iii) the amount and complexity of project
changes requested by customers or general contractors, (iv) its success in
utilizing its resources at or near full capacity and (v) its ability to complete
contracts on a timely and cost effective basis. The level of commercial and
industrial construction activity is subject to several factors, including local,
regional and national economic conditions, interest rates, availability of
financing and the supply of existing facilities relative to demand. Schuff's
results of operations in 1997 were affected by the acquisition of B&K Steel
Fabrications, Inc. ("B&K Steel") on January 31, 1997. Included in Schuff's
revenues for the year ended December 31, 1997 were $10.1 million of revenues of
B&K Steel from the date of acquisition.
The Company obtains contracts through competitive bidding or negotiation,
which generally are either fixed price or cost-plus arrangements. Schuff's
project duration typically lasts from three to twelve months. During the year
ended 1997 and the three months ended March 31, 1998, approximately $134.6
million (97.4%) and $26.5 million (96.5%), respectively, of Schuff's revenues
were derived from projects performed pursuant to fixed price contracts. Addison
has two distinct construction capabilities: fabrication and erection operations
and joist manufacturing. All of Addison's revenues in fiscal 1997 and in the
nine months ended March 31, 1998 were derived from projects performed pursuant
to fixed price arrangements. Addison's fabrication projects typically approach
six months in duration from bid acceptance through completion, while its joist
manufacturing contracts are typically much shorter in duration and for smaller
average amounts. While Addison utilizes its joists in fulfilling some of its
fabrication and erection contracts, a majority of its joist sales are to third
party fabricators and erectors. In bidding or negotiating contracts, the Company
must estimate its costs, including projected increases in labor, material and
service costs.
Both Schuff and Addison recognize revenues using the percentage of
completion accounting method. Under this method, revenues are recognized based
upon the ratio of costs incurred to date to the estimated total cost to complete
the project. Revenues for both Schuff and Addison relating to changes in the
scope of a contract are recognized when the customer has authorized the change,
the work is commenced and an estimate is made of the amount that will be paid
for the change. The cumulative impact of revisions in total cost estimates
during the progress of work is reflected by Schuff and Addison in the period in
which these revisions become known.
Revenue recognition for Schuff begins when progress is sufficient to
estimate final results with reasonable accuracy, which typically occurs when
fabricated product is shipped to the project site or when erection of the
project commences. Estimated losses on contracts are recognized by Schuff in
full when it is determined that a loss will be incurred.
Addison applies similar practices in using the percentage of completion
accounting method but generally begins recognizing revenues and expense at an
earlier stage of the fabrication process, ordinarily when material is taken from
inventory. Estimated losses on contracts are generally recognized by Addison
throughout the duration of the contract based on the percentage of completion of
the work to be performed unless it becomes apparent that a loss will be material
to operations, in which case Addison would recognize its estimated total loss on
the contract when it is determined that such loss will be incurred.
The Company has performed an assessment of the estimated impact of the
differences in the timing of recognizing revenue by Schuff and Addison for the
twelve month and three month periods ended December 31, 1997 and March 31, 1998,
respectively, and believes that such differences are not material. Following
38
<PAGE> 43
completion of the Acquisition, the Company will conform Addison's revenue
recognition and other methodologies to those of Schuff.
Cost of revenues consists of the costs of materials, equipment, direct
labor, fringe benefits and indirect costs associated with detailing, fabrication
and erection, including rent, depreciation and supervisory labor. Other costs
not associated with specific projects are included in general and administrative
expenses.
Gross profit margins can be positively affected by large, more complex
projects, the percentage of negotiated contracts relative to competitively bid
contracts, the number and scope of contract modifications and improvements in
operating efficiencies. Gross profit margins can be adversely affected by
construction delays or inefficient use of the Company's resources, availability
and cost of materials and labor, the timing and performance of work by other
contractors, weather conditions and construction site conditions.
Backlog increases as contract commitments are obtained, decreases as
revenues are recognized and increases or decreases to reflect modifications in
the work to be performed under the contract. The timing of contract commitments,
the size of projects and other factors beyond the Company's control can cause
significant fluctuation in the amount of backlog at any given date.
The large, complex projects targeted by the Company have caused, and are
expected to continue to cause, variations in quarterly and annual results of
operations. Such variations are inherent in the nature of such projects due to,
among other things, the timing and terms of major contract awards, the starting
and completion date of such projects and variations in project schedules.
Prior to the completion of Schuff's initial public offering in July 1997,
Schuff was taxed as an S corporation for income tax purposes. Accordingly, its
income was taxed directly to its stockholders. Immediately prior to the initial
public offering, Schuff revoked its S corporation election and became subject to
income tax as a C corporation. For purposes of the financial information
contained in this section, pro forma income tax expense has been included
assuming an income tax rate of 40% and pro forma net income reflects this
provision.
RESULTS OF OPERATIONS
Schuff
The following table sets forth for the periods indicated certain of
Schuff's financial data as a percentage of revenues:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------- ----------------
1995 1996 1997 1997 1998
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Revenues................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........................... 87.3 83.7 85.3 84.9 81.8
----- ----- ----- ----- -----
Gross profit............................. 12.7 16.3 14.7 15.1 18.2
General and administrative expenses........ 8.5 6.5 6.4 8.2 8.7
----- ----- ----- ----- -----
Operating income......................... 4.2 9.8 8.3 6.9 9.5
Interest expense........................... (1.2) (0.4) (0.3) (0.4) (0.4)
Other income............................... 1.0 0.3 0.4 0.4 0.9
----- ----- ----- ----- -----
Income before income taxes............... 4.0 9.7 8.4 6.9 10.0
Provision for income taxes................. -- -- 2.1 -- 4.2
Pro forma income taxes..................... 1.6 3.9 1.1 2.7 --
----- ----- ----- ----- -----
Pro forma net income..................... 2.4% 5.8% 5.2% 4.2% 5.8%
===== ===== ===== ===== =====
</TABLE>
39
<PAGE> 44
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
Revenues. Revenues increased by $1.9 million, or 7.5%, to $27.4 million
for the three months ended March 31, 1998 from $25.5 million for the three
months ended March 31, 1997. The increase was attributable primarily to an
increase in the average revenues for Schuff's top ten contracts. Excluding the
Bank One Ballpark project, the average revenues for Schuff's ten largest revenue
generating contracts for the three month period ended March 31, 1998 increased
to an average of $1.9 million from an average of $1.2 million for the three
months ended March 31, 1997, an aggregate increase of approximately $7.0
million. The increase in average contract revenues was partially offset by a
decrease in the revenues recognized on the Bank One Ballpark project. The Bank
One Ballpark contract contributed revenues of $3.6 million for the first quarter
of 1998 compared to revenues of $9.0 million for the first quarter of 1997.
Gross Profit. Gross profit increased by $1.1 million, or 29.6%, to $5.0
million for the three months ended March 31, 1998 from $3.9 million for the
three months ended March 31, 1997. As a percentage of revenues, gross profit
increased to 18.2% in the first quarter of 1998 from 15.1% in the comparable
1997 period. The increase was primarily attributable to recognition of revenues
related to work performed on the Bank One Ballpark project in prior periods that
became recognizable as an authorized change in the billable scope of the
contract during the quarter.
General and administrative expenses. General and administrative expenses
increased by $313,000, or 15.0%, to $2.4 million for the three months ended
March 31, 1998 from $2.1 million for the three months ended March 31, 1997.
General and administrative expenses as a percentage of revenues increased to
8.7% for the first quarter of 1998 from 8.2% in the comparable 1997 period due
to costs associated with the acquisition of B&K Steel for a full three months in
1998 compared to two months in 1997. B&K Steel has higher general and
administrative costs as a percentage of revenue than Schuff. Other factors
contributing to the increase in general and administrative expenses were
increased lease expenses due to assumption of additional space and increased
costs associated with being a publicly held company. General and administrative
expenses include those for contract bids, estimating, sales and marketing,
facilities, project management and support services. Schuff believes that it
currently has sufficient management and administrative resources to support
continued growth in revenues without a proportionate increase in general and
administrative expenses.
Interest expense. Interest expense increased slightly in the three months
ended March 31, 1998 from the comparable 1997 period.
Income tax expense. Income tax expense increased by $436,000, or 61.4%, to
$1.1 million, or a 41.8% effective tax rate, for the three months ended March
31, 1998 from pro forma income tax expense of $710,000, or a 40.1% effective tax
rate, for the three months ended March 31, 1997.
Net income. Net income increased by $533,000, or 50.2%, to $1.6 million
for the three months ended March 31, 1998 from pro forma net income of $1.1
million for the three months ended March 31, 1997, primarily due to the factors
described above.
Backlog. Backlog at March 31, 1998 was $66.5 million, representing a
$989,000 increase over backlog at March 31, 1997 of $65.5 million. Backlog at
March 31, 1997 included $26.8 million relating to the second and third phases of
the Bank One Ballpark project. The March 31, 1997 backlog that related to the
Bank One Ballpark project was substantially recognized as revenue in 1997 and
the first quarter of 1998, and such backlog was substantially replaced by two
other significant contracts for $13.0 million and $11.5 million at March 31,
1998 with separate customers.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
Revenues. Revenues increased by $34.3 million, or 33.0%, to $138.2 million
in 1997 from $103.9 million in 1996. The increase was largely attributable to an
increase in revenues generated from the Bank One Ballpark project of $19.2
million to $39.0 million in 1997 from revenues of $19.8 million in 1996.
Revenues for 1997 also include $10.1 million of revenues of B&K Steel following
its acquisition by Schuff on January 31,
40
<PAGE> 45
1997 for which there were no respective revenues in 1996, as well as $5.0
million in internal growth. The average revenues for Schuff's ten largest
revenue generating projects was $9.3 million in 1997 versus $7.8 million in
1996, which represents a 19.2% increase.
Gross profit. Gross profit increased by $3.4 million, or 19.8%, to $20.3
million in 1997 from $16.9 million in 1996 primarily due to the 33.0% increase
in revenues. As a percentage of revenues, gross profit decreased to 14.7% in
1997 from 16.3% in 1996. The decrease as a percentage of revenues was primarily
attributable to above average 1996 margins resulting from higher than
anticipated revenues from requested contract modifications and higher than
expected costs in 1997 related to additional construction on the Bank One
Ballpark project for which Schuff is not assured of being reimbursed.
General and administrative expenses. General and administrative expenses
increased by 32.2% to $8.9 million in 1997 from $6.7 million in 1996. Of the
$2.2 million increase in 1997, $1.7 million was attributable to additional
general and administrative costs resulting from the B&K Steel acquisition and
the remaining $500,000 was attributable to increases required to support the
increased revenues in 1997. General and administrative expenses as a percentage
of revenues remained relatively constant at 6.4% in 1997 compared to 6.5% in
1996. General and administrative expenses include those for contract bids,
estimating, sales and marketing, facilities, project management and support
services, none of which increased in proportion to the increase in revenues,
primarily because Schuff's larger average contracts during 1997 did not require
proportionately higher general and administrative expenses.
Interest expense. Interest expense decreased by 23.0% to $348,000 in 1997
from $452,000 in 1996. The decrease was attributable largely to the lower
average monthly line of credit borrowings and more favorable interest rate
terms.
Other income. Other income increased 71.6% to $520,000 in 1997 from
$303,000 in 1996. The increase in other income was primarily attributable to
interest on higher available cash balances.
Income tax expense. Income tax expense for 1997 was $2.8 million, which
represents a 40.0% effective tax rate on earnings of Schuff from the termination
of its S corporation status on June 26, 1997. The 1997 expense is offset by a
$300,000 credit to deferred taxes generated upon Schuff's revocation of its S
corporation status for the effect of cumulative temporary differences as of the
date of the S corporation termination. Prior to 1997, Schuff's earnings were
taxed directly to the stockholders.
Pro forma net income. Pro forma net income increased by 19.7% to $7.2
million in 1997 from $6.0 million in 1996, primarily as a result of the factors
discussed above.
Backlog. Backlog decreased 15.6% to $56.8 million at December 31, 1997
from $67.3 million at December 31, 1996. The $10.5 million net decrease is due
to a decrease of backlog of $32.4 million to $1.9 million at December 31, 1997
from $34.3 million at December 31, 1996 relating to the Bank One Ballpark
project. This decrease was partially offset by an increase in backlog related to
three significant projects awarded in 1997 having a total original contract
amount of $31.5 million for which backlog was approximately $21.6 million at
December 31, 1997. Of the backlog at December 31, 1997, approximately $12.2
million was attributable to two projects for a single customer and approximately
$9.4 million was attributable to one project.
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
Revenues. Revenues increased by $41.8 million, or 67.4%, to $103.9 million
in 1996 from $62.1 million in 1995. The increase was attributable primarily to
larger individual contracts in 1996 compared to 1995, including the Bank One
Ballpark project, which contributed $19.8 million in revenues in 1996. The
average revenues for Schuff's ten largest revenue generating projects was $7.8
million in 1996 versus $3.3 million in 1995. Excluding the Bank One Ballpark
project, the ten largest revenue generating projects averaged $6.4 million in
1996, which represented a 93.9% increase over the 1995 average of $3.3 million.
41
<PAGE> 46
Gross profit. Gross profit increased by $9.0 million, or 115.0%, to $16.9
million in 1996 from $7.9 million in 1995 primarily due to the 67.4% increase in
revenues. As a percentage of revenues, gross profit increased to 16.3% in 1996
from 12.7% in 1995. The increase as a percentage of revenues was attributable
primarily to higher than anticipated revenues from requested contract
modifications. By obtaining larger average value and more complex contracts,
Schuff was able to realize higher gross margins on such projects. In addition,
many of Schuff's fixed costs, such as depreciation, increased proportionately
less than the 67.4% increase in revenues, which further improved gross margins.
General and administrative expenses. General and administrative expenses
increased by 27.1% to $6.7 million in 1996 from $5.3 million in 1995. Of the
$1.4 million increase in 1996, $590,000 was attributable to bonus payments to
employees and $529,000 was attributable to a deferred compensation plan
implemented in 1996. Schuff's deferred compensation plan was terminated in 1997.
General and administrative expenses as a percentage of revenues decreased to
6.5% in 1996 from 8.5% in 1995 due to the benefits of having larger average
contracts in 1996. In 1995, Schuff experienced a 9.0% decrease in revenues from
1994 and elected not to reduce general and administrative costs proportionately
in anticipation of future contract awards, thereby causing higher general and
administrative expenses as a percentage of revenues.
Interest expense. Interest expense decreased by 39.9% to $452,000 from
$752,000 in 1995. The decrease was attributable to the lower average line of
credit borrowings, which reflected in large part Schuff's ability in increase
its billings in excess of costs and recognized earnings on uncompleted
contracts. See "-- Liquidity and Capital Resources" below.
Pro forma net income. Pro forma net income increased by 310.2% to $6.0
million in 1996 from $1.5 million in 1995, primarily as a result of the factors
described above.
Backlog. Backlog decreased 16.7% to $67.3 million at December 31, 1996
from $80.8 million at December 31, 1995. The $13.5 million net decrease was due
to the receipt of four contract awards that collectively represented backlog of
$47.2 million at December 31, 1995. Additionally, the high level of backlog at
the end of the first quarter of 1996 caused Schuff to become more selective in
the pursuit of new contract awards during the remainder of the year. Of the
backlog at December 31, 1996, $13.1 million was attributable to three projects
for a single customer and approximately $34.3 million was attributable to the
Bank One Ballpark project.
Addison
The following table sets forth for the periods indicated certain of
Addison's financial data as a percentage of revenues:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL YEAR ENDED JUNE 30, MARCH 31,
-------------------------- --------------
1995 1996 1997 1997 1998
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Revenues................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........................... 77.2 75.3 75.0 75.5 77.1
----- ----- ----- ----- -----
Gross profit............................. 22.8 24.7 25.0 24.5 22.9
General and administrative expenses........ 11.1 10.4 10.3 10.0 10.6
----- ----- ----- ----- -----
Operating income......................... 11.7 14.3 14.7 14.5 12.3
Other income (expense), net................ (0.1) 0.4 1.1 0.9 1.6
----- ----- ----- ----- -----
Income before taxes........................ 11.6 14.7 15.8 15.4 13.9
Income tax expense......................... 4.3 5.5 6.3 5.9 5.2
----- ----- ----- ----- -----
Net income............................... 7.3% 9.2% 9.5% 9.5% 8.7%
===== ===== ===== ===== =====
</TABLE>
42
<PAGE> 47
COMPARISON OF NINE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
Revenues. Revenues increased by $2.7 million, or 5.8%, to $48.9 million
for the nine month period ended March 31, 1998 from $46.2 million for the
comparable 1997 period. Fabrication and erection operations (excluding joist
portions of fabrication contracts) increased by $200,000, or 0.1%, to $28.6
million. Joist operations (including joists manufactured for its own fabrication
and erection projects) increased by $2.1 million, or 11.8%, to $19.8 million,
with the remainder of the increase relating to $440,000 of revenues from a
property acquired by Addison in 1997 that is unrelated to its steel services and
joist operations. Revenues increased during the nine month period ended March
31, 1998 due to a larger number of projects compared to the comparable 1997
period. The average revenues for the three largest revenue producing contracts
during the nine month period ended March 31, 1998 were $2.4 million.
Gross Profit. Gross profit decreased by $135,000, or 1.2%, to 11.2 million
for the nine month period ending March 31, 1998 from $11.3 million for the nine
month period ended March 31, 1997. As a percentage of revenues, gross profit
declined to 22.9% in the nine month period ended March 31, 1998 from 24.5% in
the comparable 1997 period. The decline in gross profit as a percentage of
revenues was primarily attributable to increased material costs of 12% in joist
operations, which costs were not offset by a corresponding increase in steel
pricing passed on to customers.
General and administrative expenses. General and administrative expenses
increased by 11.4% to $5.2 million for the nine month period ended March 31,
1998, from $4.6 million for the comparable 1997 period. As a percentage of
revenues, general and administrative expenses increased to 10.6% in the nine
month period ended March 31, 1998 from 10.0% in the comparable 1997 period. The
increase in absolute dollars and as a percentage of revenues was attributable to
operating costs of the newly acquired non-business related assets in 1997.
Other income, net. Other income, net, increased $351,000, or 85.3%, to
$763,000 for the nine month period ended March 31, 1998 from $412,000 for the
comparable 1997 period. The increase was primarily attributable to a $430,000
gain on the sale of assets offset by a net decrease in other miscellaneous
income and expense items.
Income tax expense. Income tax expense for the nine month period ended
March 31, 1998 was $2.5 million, which represents an effective tax rate of
37.5%. Income tax expense for the nine month period ended March 31, 1997 was
$2.7 million, which represents an effective tax rate of 38.3%.
Net income. Net income decreased by 3.1% to $4.2 million in the nine month
period ended March 31, 1998 from $4.4 million in the comparable 1997 period,
primarily as a result of the factors described above.
COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1997 AND 1996
Revenues. Revenues increased by $6.1 million, or 10.5%, to $63.7 million
in fiscal 1997 from $57.6 million in fiscal 1996. Fabrication and erection
operations (excluding joist portions of fabrication contracts) increased by $6.5
million, or 18.9%, to $40.8 million in fiscal 1997 from $34.3 million in fiscal
1996. Joist operations (including joists manufactured for its own fabrication
and erection projects) increased by $700,000, or $3.0%, to $24.5 million in
fiscal 1997 from $23.8 million in fiscal 1996. The increase in revenues was
attributable to an increase in the number of projects in 1997 compared to 1996
which was largely a result of increased steel construction demand in Addison's
primary markets.
Gross profit. Gross profit increased by $1.7 million, or 12.0%, to $15.9
million is fiscal 1997 from $14.2 million in fiscal 1996, which was consistent
with the increase in revenues in fiscal 1997 from fiscal 1996. As a percentage
of revenues, gross profit remained relatively stable at 25.0% in fiscal 1997
from 24.7% in fiscal 1996. The stability in gross profit as a percentage of
revenues was primarily attributable to the stability of material and production
costs and the ability to maintain pricing levels.
General and administrative expense. General and administrative expenses
increased by $531,000 million, or 8.8%, to $6.5 million in fiscal 1997 from $6.0
million in fiscal 1996. As a percentage of revenues, general and administrative
expenses decreased slightly to 10.3% in fiscal 1997 from 10.4% in fiscal 1996.
The
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small decrease was the result of Addison's efforts to keep its general and
administrative costs in line with its operating levels.
Other income, net. Other income, net, increased $431,000, or 160.4%, to
$699,000 in fiscal 1997 from $268,000 in fiscal 1996. The increase was primarily
attributable to an increase in interest income of $271,000 as a result of higher
average cash balances in fiscal 1997 compared to fiscal 1996 and other net
increases in miscellaneous income.
Income tax expense. Income tax expense for fiscal 1997 was $4.0 million,
which represents an effective tax rate of 40.0%. Income tax expense for fiscal
1996 was $3.2 million, which represents an effective tax rate of 37.5%.
Net income. Net income increased by $755,000, or 14.2%, to $6.1 million in
fiscal 1997 from $5.3 million in fiscal 1996, primarily as a result of the
factors described above.
COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1996 AND 1995
Revenues. Revenues increased by $7.1 million, or 14.2%, to $57.6 million
in fiscal 1996 from $50.5 million in fiscal 1995. Fabrication and erection
operations (excluding joist portions of fabrication contracts) increased by $2.8
million, or 8.9%, to $34.3 million in fiscal 1996 from $31.5 million in fiscal
1995. Joist operations (including joists manufactured for its own fabrication
and erection projects) increased by $4.4 million, or 22.7%, to $23.8 million in
fiscal 1996 from $19.4 million in fiscal 1995. The increase in revenues was
attributable to an increase in the number of projects in 1996 compared to 1995
which was largely the result of increased demand for steel construction services
in Addison's primary markets and Addison's focus on its joist operations.
Gross profit. Gross profit increased by $2.7 million, or 23.8%, to $14.2
million in fiscal 1996 from $11.5 million in fiscal 1995. As a percentage of
revenues, gross profit increased to 24.7% in fiscal 1996 from 22.8% in fiscal
1995. The increase in gross profit as a percentage of revenues was primarily
attributable to lower than expected fiscal 1995 gross profits, which was caused
by an additional $1.0 million in pricing discounts in fiscal 1995 compared to
fiscal 1996 to meet competitive demands.
General and administrative expenses. General and administrative expenses
increased by $419,000, or 7.5%, to $6.0 million in fiscal 1996 from $5.6 million
in fiscal 1995. As a percentage of revenues, general and administrative expenses
decreased to 10.4% in fiscal 1996 from 11.1% in fiscal 1995. The decrease was
attributable to an increase in revenues in fiscal 1996 without a corresponding
increase in general and administrative expenses to support the increase in
revenues.
Other income, net. Other income, net, in fiscal 1996 was $268,000 compared
to other expense, net, of $41,000 in fiscal 1995. The increase was primarily
attributable to increased interest income due to higher average cash balances.
Income tax expense. Income tax expense for fiscal 1996 was $3.2 million,
which represents an effective tax rate of 37.5%. Income tax expense for fiscal
1995 was $2.2 million, which represents an effective tax rate of 37.1%.
Net income. Net income increased by $1.6 million, or 43.9%, to $5.3
million in fiscal 1996 from $3.7 million in fiscal 1995, primarily as a result
of the factors described above.
LIQUIDITY AND CAPITAL RESOURCES
Schuff completed its initial public offering of 2,000,000 shares of common
stock, $.001 par value (the "Common Stock"), in July 1997. The initial public
offering yielded $14.0 million in proceeds net of underwriting discounts and
other costs. Schuff used approximately $7.0 million of the proceeds to fund S
corporation distributions and used the remaining proceeds to purchase
specialized fabrication equipment and to fund general corporate purposes.
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Schuff attempts to structure the payment arrangements under its contracts
to match costs incurred under the project. To the extent Schuff is able to bill
in advance of costs incurred, it generates working capital through billings in
excess of costs and recognized earnings on uncompleted contracts. To the extent
Schuff is not able to bill in advance of costs, it relies on bank credit
facilities to meet its working capital needs. At March 31, 1998, Schuff had $1.6
million of outstanding indebtedness under its revolving line of credit. At March
31, 1998, Schuff had working capital of approximately $22.8 million.
Schuff's short term cash needs are primarily for working capital to support
operations including receivables, inventories and other costs incurred in
performing its contracts. Operating activities required cash flows of $4.5
million for the year ended December 31, 1997 and provided cash flows of $1.8
million for the three months ended March 31, 1998. For the year ended December
31, 1997, operating cash flows were less than net income (excluding pro forma
income taxes) due to the $8.3 million decrease in billings in excess of costs
and recognized earnings on uncompleted contracts, a $6.6 million increase in
receivables and other net working capital fluctuations. The decrease in billings
in excess of costs and recognized earnings on uncompleted contracts was a result
of project advance billings being recognized as revenues under percentage of
completion accounting as the contracts move toward completion. The increase in
receivables was due to an increase of $1.5 million in retentions as projects
move toward total completion and the continued growth of revenues. For the three
months ended March 31, 1998, operating cash flows approximated net income for
the period. Investing activities required $3.6 million for the year ended
December 31, 1997 and $452,000 during the three months ended March 31, 1998,
substantially all of which were related to purchases of property and equipment
in 1997 and 1998 and the cash portion of the acquisition of B&K Steel in 1997.
Financing activities provided $1.0 million for the year ended December 31, 1997
and consumed $1.3 million for the three months ended March 31, 1998. Cash
provided by financing activities in 1997 was primarily a result of $14.0 million
net proceeds from the issuance of 2,000,000 additional shares of Common Stock
offset by $13.8 million in S corporation stockholder distributions, of which
$7.0 million was distributed at the closing date of the offering. Cash consumed
by financing activities in 1998 was related primarily to repayments of long-term
debt and line of credit balances.
Schuff's Existing Credit Facility consists of a $10.0 million revolving
line of credit that is subject to renewal on June 30, 1999 and is collateralized
by contract receivables, equipment and inventory, and, effective December 10,
1997, an additional $10.0 million line of credit solely to finance the
acquisition of other companies. Schuff has two other long-term debt commitments
that are related to its property and equipment and to the acquisition of B&K
Steel. See "Certain Relationships and Related Transactions" and "Description of
Existing Indebtedness." Schuff leases its fabrication and office facilities from
a partnership in which certain executive officers of Schuff and their family
members are the general and limited partners. See "Certain Relationships and
Related Transactions."
Addison has historically funded its growth through cash flow from
operations. Net cash provided by operating activities was $9.5 million for the
fiscal year ended June 30, 1997 and $551,000 for the nine months ended March 31,
1998. Investing activities required $4.6 million during the fiscal year ended
June 30, 1997 and $1.6 million for the nine months ended March 31, 1998.
Financing activities utilized approximately $511,000 for debt repayments for the
fiscal year ended June 30, 1997 and $144,000 for the nine month period ended
March 31, 1998. The primary reason for the large level of investing activities
during the fiscal year ended June 30, 1997 was a $2.7 million purchase of
certain real property not used in the operations of the business (and which was
not acquired by Schuff in the Acquisition).
The Company estimates that its combined capital expenditures for 1998 will
be approximately $3.0 million. Of these combined capital expenditures,
approximately $1.5 million will be expended on Schuff's routine maintenance,
$750,000 on maintenance at Quincy and the completion of the Quincy joist plant
expansion and $750,000 on maintenance and computer system upgrades of Addison.
The Company believes that its available funds, cash generated by operating
activities, the net proceeds of the Offering and funds available under its
Existing Credit Facility (or a replacement credit facility) will be sufficient
to fund these capital expenditures and its operating needs. However, the Company
may expand its operations through future acquisitions and may require additional
equity or debt financing.
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Schuff consummated the Acquisition with Addison on June 4, 1998. The
purchase price of the Acquisition, net of excess cash on hand at Addison at the
closing and non-business related assets sold to Addison's majority stockholder,
was $50.4 million, all but $3.2 million of which was paid in cash. As a result
of the Acquisition and the Offering and the application of the net proceeds
therefrom, the Company currently has a substantial amount of indebtedness. As of
March 31, 1998, after giving pro forma effect to the Acquisition and the
Offering and the use of proceeds therefrom, the Company had consolidated debt of
$103.9 million, consisting of (i) $639,000 under existing notes payable, (ii)
$3.2 million outstanding (subject to adjustment) under the Holdback Note and
(iii) $100.0 million outstanding under the Notes. See "Use of Proceeds" and
"Capitalization."
On May 27, 1998, the Company executed a letter of commitment with Wells
Fargo Bank, N.A., relating to a proposed credit facility, which the Company
anticipates will replace the Company's Existing Credit Facility. See
"Description of Existing Indebtedness -- Proposed Credit Facility."
YEAR 2000
Schuff has determined that it will need to modify or replace portions of
its software so that its computer systems will function properly with respect to
dates in the year 2000 and beyond. Schuff also has initiated discussions with
its significant suppliers, large customers and financial institutions to ensure
that those parties have appropriate plans to remediate year 2000 issues where
their systems interface with the Company's systems or otherwise impact is
operations. Schuff is assessing the extent to which its operations are
vulnerable should those organizations fail to remediate properly their computer
systems.
Schuff's assessment and necessary modifications for the year 2000 issue is
estimated to be completed in early 1999. Schuff believes that with current
systems and anticipated modifications, the year 2000 issue will not pose
significant operational problems for its computer systems. However, if such
modifications and necessary conversions are not made or are not completed in a
timely manner, the year 2000 issue could have a material impact on the
operations of Schuff. There can also be no assurance that the systems of any
other companies on which the Company's systems and operations rely will be
converted on a timely basis and will not have a material effect on Schuff. Any
remaining costs of year 2000 initiatives are not expected to be material to
Schuff's results of operation or financial position.
Addison has determined that the majority of its financial accounting,
inventory and other software and its computer systems are not year 2000
compliant. Addison has not assessed the necessary modifications and costs
associated with the year 2000 issue and has not assessed the compliance of its
customers' and suppliers' software and computer systems or the steps, if any,
taken or expected to be taken by them to remediate potential year 2000 issues
where their systems interface with Addison's systems. Following the Acquisition,
Schuff intends to upgrade Addison's software and computer systems and to
integrate such software and systems with those utilized by Schuff.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share" ("SFAS No. 128"), which was adopted by Schuff on December 31, 1997. SFAS
No. 128 replaced the previously reported primarily or fully diluted pro forma
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share exclude any dilutive effects of
options, warrants and convertible securities.
Diluted earnings per share is very similar to the previously reported
primary earnings per share. All earnings per share amounts for all periods have
been presented, and where necessary, restated to conform to the SFAS No. 128
requirements. The impact of SFAS No. 128 on the calculation of fully diluted
earnings per share for each of the periods presented was not material.
SFAS No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"), was issued
by the FASB in June 1997, and is effective for periods beginning after December
15, 1997. For periods after that time, the Company will be required to change
the method currently used to compute income and to restate all prior
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periods. Under the new requirements for calculating income, SFAS No. 130
requires that an enterprise (a) classify items of other comprehensive income by
their nature in a financial statement and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of a statement of financial position. The
impact of SFAS No. 130 on the calculation of comprehensive income for these
periods was not material.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS No. 131"), which establishes
standards for the manner in which public business enterprises report information
about operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. SFAS No. 131 is effective for financial statements for fiscal years
beginning after December 15, 1997. The adoption of SFAS No. 131 will have no
impact on the Company's consolidated results of operations, financial position
or cash flows.
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BUSINESS
OVERVIEW
The Company is one of the leading industrial and commercial steel services
firms in the United States. The Company differentiates itself from its
competitors by providing not only fabrication services but also a fully
integrated range of steel services, including design engineering, detailing,
joist manufacturing and erection, and by providing a level of project management
expertise necessary to accommodate fast track, design-as-you-go projects. The
Company believes it has a competitive advantage over many of its smaller
competitors in that its ability to manage all steel related aspects of a project
in-house lowers overall project cost, provides attractive margins to the Company
and offers maximum flexibility and efficiency to the respective general
contractor or project owner. Founded in 1976, the Company operates primarily in
the southwestern and southeastern United States, and has recently expanded its
operations into selected international markets, including South America, Mexico
and the Caribbean. The Company believes it is the largest steel fabrication and
erection firm serving the Arizona industrial and commercial markets, the leading
steel fabricator and erector for the hotel, entertainment and gaming industry in
Nevada and a leading steel fabricator and joist manufacturer serving the Central
Florida and Georgia industrial and commercial markets. On a pro forma basis, for
the last twelve months ended March 31, 1998, the Company's revenues were $206.1
million and its EBITDA was $25.1 million.
The Company provides its integrated steel services primarily to general
contractors and engineering firms, including, among others, Fluor Daniel, Inc.,
Bechtel Group Inc. and Perini Corporation, who focus on a wide variety of
projects, including hotels and casinos, office complexes, hospitals, mining
facilities, manufacturing plants, shopping malls and centers, sports stadiums,
large diameter water pipes, power plants, dams, bridges, restaurants, convention
facilities, entertainment complexes, airports, schools, churches and warehouses.
The Company maintains relationships with a number of national and multi-national
general contracting and engineering firms and is a preferred subcontractor to
several national and regional companies.
The Company was incorporated in Arizona in 1976 and was reincorporated in
Delaware in 1997. The Company's principal executive offices are located at 1841
West Buchanan Street, Phoenix, Arizona 85009, and its telephone number is (602)
252-7787.
On July 7, 1997, the Company completed the initial public offering of its
Common Stock. The Common Stock trades on the Nasdaq National Market under the
symbol "SHUF."
OVERVIEW OF INDUSTRY
Companies engaged in the steel fabrication and erection industry prepare
detailed shop drawings, fabricate and erect structural steel and steel plate
weldments, and perform related engineering services for the construction of
various facilities. The primary customers for these services include private
developers, general contractors, engineering firms, private corporations,
including those with multiple national or international locations, and
governmental agencies involved in a variety of large scale construction
projects. Historically, these customers have relied on multiple subcontractors
to perform various services to complete a single project, primarily because few
companies in this industry offer fully integrated engineering, detailing,
fabrication and erection services.
The Company believes that there is an increasing trend in the industry to
design and build projects according to accelerated time schedules. In many large
projects, only a portion of the detail design drawings are completed when
construction begins. The remaining drawings are completed, with numerous design
changes being implemented, throughout the construction process. The fast track,
design-as-you-go nature of these projects creates a demand for service providers
such as the Company that can perform the work of numerous subcontractors. By
integrating multiple services, the Company can facilitate rapid and multiple
design changes, reduce logistical problems and minimize project delays and cost
overruns.
The steel services industry is highly fragmented. Management estimates that
there are in excess of 1,000 detailing, fabricating and erection firms in the
United States. Many of these firms are small, family-operated
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businesses that offer limited services and confine operations to local or
regional markets. In addition, these firms generally do not have the financial
resources to address large, fast track projects, are unable to buy raw materials
in volume directly from steel mills at advantageous pricing and lack
state-of-the-art information systems and shop fabrication equipment. The Company
believes these market dynamics afford an opportunity for businesses like the
Company to make strategic and consolidating acquisitions while providing an
attractive exit strategy for small business owners serving these markets.
BUSINESS STRENGTHS AND STRATEGY
The Company's objective is to achieve and maintain a leading position in
the geographic and project markets in which it competes by providing timely,
high quality services to its customers, continuing to grow internally and making
selected strategic and consolidating acquisitions. The Company is pursuing this
objective with a strategy comprised of the following components:
- Pursue Design-As-You-Go Projects. The Company pursues fast track,
design-as-you-go projects as a significant portion of its overall
business. The Company's unique ability to offer a full range of steel
services and project management capabilities makes it a preferred
subcontractor for fast track projects in the markets it serves. This
capability often enables the Company to compete against a few, select
firms in a less traditional, more negotiated selection process on such
projects, thereby allowing the Company to realize attractive margins
while providing overall cost savings and project flexibility and
efficiencies to its customers.
- Expand Revenue Base. The Company is seeking to expand its revenue base
by leveraging its long term relationships with national and
multi-national construction and engineering firms, national and regional
accounts and other customers. The Company also intends to grow its
operations by developing new project capabilities and services and by
targeting specific types of projects in which it has an existing
reputation for expertise, such as semiconductor facilities, sports
stadiums, airports, hotels and casinos and specialty projects such as
large diameter water pipes. The Company believes that continuing to
diversify its revenue base will reduce the impact of periodic adverse
market or economic conditions.
- Manage Capacity Through Outsourcing. The Company increases its project
capacity by outsourcing a significant amount of its detailing and
fabrication work to reputable subcontractors. Outsourcing has enabled the
Company to effectively double the capacity of its Phoenix fabrication
facilities while maintaining margins comparable to in-house services. The
Company believes outsourcing will play a key role in its strategy to
expand its presence in selected international markets, where it typically
provides design engineering and project management services and utilizes
local subcontractors for fabrication and erection. The ability to expand
or contract capacity through the use of outsourcing provides the Company
flexibility to meet changing market demands in a cost effective manner.
- Make Strategic and Consolidating Acquisitions. The Company intends to
pursue selected acquisitions that offer the Company (i) strategically
located facilities, (ii) expansion into new geographic markets, (iii)
access to new domestic and international customers and (iv) penetration
of new product market segments. Such acquisitions may also provide the
additional benefits of increasing purchasing efficiencies with respect to
steel and other raw materials, bonding and insurance, more efficiently
allocating and utilizing its resources and integrating the "best
practices" of the Company and acquired companies throughout the combined
organization. The Company is in preliminary negotiations with several
potential acquisition candidates and expects to close additional
acquisitions by the end of 1998.
- Maintain Entrepreneurial Environment. The Company believes its
management and operating structure, which emphasizes quality, innovation,
flexibility, performance and safety, has contributed significantly to
increased profitability and the ability to develop new business in
competitive or difficult economic environments. The Company's operating
structure provides incentives to employees at all levels to focus on
pursuing profitable growth opportunities, attaining financial objectives
and delivering superior customer service.
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THE ACQUISITION AND EXPECTED BENEFITS
Schuff consummated the Acquisition with Addison on June 4, 1998. The
purchase price for Addison, net of cash on hand of Addison at closing and
non-business related assets sold to Addison's majority stockholder, was $50.4
million, of which $47.2 million was paid in cash at closing (approximately $3.5
million of which was paid to escrow accounts) and $3.2 million was paid by
delivery of the Holdback Note. See "The Acquisition" and "Use of Proceeds." The
Acquisition was recorded under the purchase method of accounting.
Founded in 1960, Addison was a privately held company which operated
through its two wholly-owned subsidiaries, Addison Steel, Inc. ("Addison Steel")
and Quincy. Addison Steel provides structural steel fabrication, erection and
design detailing services and maintains fabrication facilities in both Lockhart,
Florida and Albany, Georgia. Quincy manufactures short and long span joists,
trusses and girders and operates an advanced joist manufacturing plant in
Quincy, Florida. Addison operates primarily in the southeastern United States in
the industrial and commercial markets, with a concentration in Central Florida
and Georgia. Addison's revenues for the twelve months ended March 31, 1998 were
$66.4 million and its EBITDA, as adjusted for owners compensation, expenses of
its employee stock ownership plan and other net expenses, was $11.3 million for
this period.
The Company believes that the Acquisition provides the following strategic
and operating benefits:
- Access Joist Manufacturing. Quincy, a subsidiary of Addison,
manufactures steel joists, trusses, girders and related products which
are complementary to the steel fabrication and erection services provided
by Schuff and Addison's other operations. Joists are currently delivered
in 16 to 18 weeks from date of order from third party specialty
manufacturers. The Company believes that its ability to obtain joists
from a captive manufacturer will significantly reduce the lead time for
delivery of these products and will enable it to compete more effectively
for fast track projects where the reliable and timely supply of joists
and related products is critical. With Quincy's recent plant expansion,
the Company believes that Quincy has the capacity to meet the Company's
anticipated internal joist demand for selected fast track projects as
well as continue to grow its own joist business through sales to other
steel fabricators and erectors, which currently comprise the majority of
Quincy's revenues.
- Expand Geographic Reach. The Acquisition provides the Company with an
operating platform in the growing southeastern United States market,
where Schuff's ability to compete has previously been limited by
transportation costs. In addition, the Company believes expansion into
new geographic markets will increase the Company's resilience to economic
downturns and other conditions that could negatively affect a
geographically focused operation.
- Acquire Growing Revenue Stream and Experienced Management. Addison's
revenues grew from $32.5 million for the fiscal year ended June 30, 1993
to $63.7 million for the fiscal year ended June 30, 1997, a compound
annual growth rate of 18.3%, and its unadjusted EBITDA increased from
$2.0 million to $10.4 million in that same period, a compound annual
growth rate of 51.4%. Addison has an experienced management team with the
top four managers having over 75 years of combined experience in the
steel fabrication, erection and joist manufacturing business with an
average tenure at Addison of approximately 19 years. Addison management's
quality reputation, knowledge of its markets and strong relationships
with its key customers should continue to enhance its operations and
outsourcing expertise. Addison fabricates all of its steel in-house,
while Schuff outsources approximately half of its fabrication services to
third party fabricators. Schuff believes that these strategies will more
efficiently utilize the Company's infrastructure and plant capacities.
- Leverage Operating Capabilities. Schuff believes that it can leverage
its fast track, design-as-you-go expertise to increase the number of
larger, high margin project opportunities for Addison. In addition,
Schuff believes that Addison can increase its fabrication revenues
through the utilization of Schuff's outsourcing expertise. Addison
fabricates all of its steel in-house, while Schuff outsources
approximately half of its fabrication services to third party
fabricators. Schuff believes that these strategies will more efficiently
utilize the Company's infrastructure and plant capacities.
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- Capitalize on Cross-Selling Opportunities. Management believes that
there are numerous cross-selling opportunities between Schuff and
Addison. In particular, Addison is a preferred subcontractor to a number
of national and regional accounts in the southeastern United States and,
in some cases, across the country. Schuff has strong strategic
relationships with several national and multi-national contractors and
engineering firms. The Company believes that each company will be able to
utilize these relationships to expand the Company's overall business
operations.
PRODUCTS AND SERVICES
The primary services provided by the Company are engineering and
preparation of detail drawings, shop fabrication and field erection. The primary
products provided by the Company are steel joists, trusses and girders.
Following is a description of the Company's principal products and services.
Engineering and Detailing. The Company maintains significant in-house
structural engineering and detailing capabilities which enable it to implement
and coordinate with its shop and field personnel changes to building and
structural designs sought by project owners or general contractors, and to help
influence critical determinations as to the most cost effective systems,
designs, connections and erection procedures for a particular project. The
Company's detailers prepare detail shop drawings of the dimensions, positions,
locations and connections, and the fabrication and erection sequences, of each
piece of steel utilized in a project, and continually update these drawings to
accommodate design and other changes. The Company utilizes both Stru-CAD and
AutoCad automated detailing systems that interact electronically with the
Company's numerically controlled fabrication equipment and produce updated
detail drawings electronically, which can then be delivered to each of the
Company's domestic and foreign field locations. The Company's detailing division
initially prepares advance materials bills by size and length of each steel
piece within pre-defined areas or sequences of erection for each project.
Detailers coordinate directly with customers and the Company's fabrication and
erection teams to determine and plan the order of fabrication and erection of a
project and associated personnel and equipment requirements. Schuff subcontracts
to others detailing services from time to time when it lacks available in-house
capacity for such services. A majority of Addison's detailing services are
subcontracted to others.
Shop Fabrication. The Company's fabrication services consist of the
procurement from steel producers of raw steel shapes in different sizes and
lengths. These shapes vary in cross-section from I-beams to angle, channel,
tube, pipe and plate. Upon delivery of these steel shapes, and prior to
fabrication, the Company prepares load lists that identify the sequence and date
that each individual piece of steel is required on a project, a procedure that
reduces the handling of and the need to store materials in the field. Upon
completion of detail shop drawings, the Company's fabrication shop cuts the raw
steel pieces to length, drills and punches holes through the use of numerically
controlled beam lines and completes coping and beveling with its numerically
controlled machinery and automated burning equipment. The Company then
fabricates fittings and completes welding and inspection of each finished
structural piece. The Company utilizes advanced technologies to inspect weld
seams, which significantly reduces costs, fabrication hours and the likelihood
of structural defects. After the completion of processing to customer
specifications, finished pieces are loaded for shipment to the construction
site, often pursuant to just-in-time delivery schedules. Schuff utilizes third
party fabrication subcontractors on many of its projects.
Field Erection. The erection process typically consists of pre-assembly of
steel component parts at the project site, the lifting of components by crane to
the appropriate location at the site and the final assembly of major components
to form the steel backbone of the project. The Company's field erection crews
erect fabricated steel components in accordance with erection drawings prepared
and updated by the Company's detailers. The erection process for each project is
managed by experienced field supervisors and the Company employs local union
erection personnel on an as needed basis in areas near the project sites.
Addison currently subcontracts to others all of its field erection services.
Joist Manufacturing. Joist manufacturing entails the fabrication and shop
or field assembly of various steel pieces used to make short and long span
joists, trusses and girders, which are utilized to support the roof or higher
floor levels of most commercial and industrial buildings and similar facilities.
Steel joists and similar
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assemblies are commonly supplied and are complementary to the products and
services provided by steel fabrication and erection firms for use in projects
such as retail and strip shopping centers, schools, churches and similar
structures. Quincy currently is nearing completion of an expansion of its joist
manufacturing facility which will house a new long-span joist and truss line and
increase existing plant capacity by approximately 70%. With the expansion of
Quincy's joist facility, the Company believes that Quincy has the capacity to
meet the Company's anticipated internal joist demand for selected fast track
projects as well as continue to grow its own joist business through sales to
other steel fabricators and erectors, which currently comprise a majority of
Quincy's revenues.
Project Management. All contract awards to the Company are assigned a
project number which is used to track each steel component and man-hour
associated with the project through the entire construction process. Project
drawings, specifications and completion schedules on a project are reviewed by
the Company's Vice President of Project Coordination and all projects are
assigned to one or more Project Managers who assume primary responsibility for
all aspects of the project. Often a Project Manager assigned to a given project
will have significant experience in similar projects. A Project Manager
generally will be responsible for one to five projects in various stages of
completion at any given time, depending on the scope, complexity and geographic
location of such projects. Each project is divided into critical sequences of
steel groups that follow the anticipated erection or fabrication path. Each
sequence follows a timeline and the status is continually monitored. The Vice
President of Project Coordination and Project Manager for each project
coordinate and manage design changes or other changes in scheduled completion
deadlines in an effort to minimize overall project delays. The Company provides
production bonuses to its Project Managers based on, among other factors, the
achievement of lower costs on a project than the estimated costs used to
formulate the initial bid or price or prices of subsequent change orders, and
the ability to minimize costs or cost overruns on particularly complex projects
or on projects that exceed initial cost estimates.
The Company believes that a key factor in its success has been its ability
to provide through its in-house personnel valuable input and assistance to
general contractors, engineering firms and other customers with respect to
overall project design of fabrication and erection sequences and other critical
project decisions, which often results in overall project cost savings and
efficiencies and helps to solidify key customer relationships. In addition to
its centralized project management, the Company also uses a high percentage of
skilled erection employees local to projects and utilizes advanced scheduling
systems to enhance its ability to provide project management services to
customers complementary to its core engineering, detail drawing, shop
fabrication and field erection services.
PRIMARY MARKETS
The Company's current principal geographic markets include the southwestern
United States, primarily Arizona, Nevada, and Southern California, and the
southeastern United States, primarily Florida and Georgia. The Company currently
is expanding into other western United States regions and into selected
international markets.
The Company is the leading steel fabrication and erection firm in Arizona
and has been a prominent participant in many of Arizona's largest and most
visible public and private projects. The Company has completed projects in
Arizona in a variety of industries, including the semiconductor and computer
chip industry and the copper and other mining industries. In Nevada, the Company
is the leading steel fabricator and erector in the hotel, entertainment and
gaming construction industry, which has experienced rapid expansion over the
past several years and is expected to continue its expansion for the foreseeable
future. The Company also has maintained a strong presence in the California
market and intends to achieve a greater share of this geographic market as it
experiences an increase in new construction activity. The Company's typical
projects in California include the fabrication and erection of new and expanded
hospital facilities, large shopping malls, sports arenas and commercial and
industrial manufacturing, distribution and warehouse facilities, including those
for several national and multinational customers.
Within the southwestern and western United States geographic markets, the
Company has also developed a leading market share in distinct product segments,
particularly in the construction of large
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<PAGE> 57
diameter water pipes used in governmental aqueduct systems. These projects
require the complex formation and welding of steel plate into large diameter
pipe sections that are used to transport water from major supply sources to
various population centers. The Company has developed in-house specialized
fabrication equipment used to construct and weld these pipe sections, a unique
coal tar and fiberglass enamel application system used to coat the pipe and
customized transportation equipment necessary to deliver the system to its
ultimate destination.
The Company is a leading steel fabrication, erection and joist
manufacturing firm in Central Florida and Georgia. Many of the Company's
projects in these areas are in the commercial and industrial markets and
typically range in size from $50,000 to $1.0 million for structural steel
fabrication projects and from $5,000 to $500,000 for steel joist manufacturing
products. The Company has completed several steel fabrication and erection and
joist manufacturing projects, both in the southeastern United States and
nationwide, for a variety of national and regional retail, grocery, restaurant
and similar customers.
The Company recently has focused its expansion into selected international
markets such as South America and Mexico. In South America and Mexico, the
Company's projects have been focused on large copper, gold and aluminum mining
and related projects, primarily in Argentina and Chile. In addition, the Company
has completed construction of several airport concourse and terminal facilities
in the Caribbean.
REPRESENTATIVE PROJECTS
Among the Company's noteworthy or recently completed or awarded projects
and key national and regional customers are the following:
- Bank One Ballpark. In 1995, the Company was awarded a contract to
provide steel fabrication and erection services for the Bank One Ballpark
in Phoenix, a new state of the art baseball stadium for Major League
Baseball's Arizona Diamondbacks franchise that features, among other
things, a fully retractable roof consisting of steel components detailed,
fabricated and erected by the Company. The stadium contract is divided
into three phases representing a total of approximately $61 million in
revenues to the Company, of which approximately $59 million had been
earned as of December 31, 1997. The stadium required over 20,000 tons of
structural steel and employed approximately 160 iron workers at the peak
of construction.
- Atlas Missile Launch Complex. The Company provided the steel fabrication
and erection services for the Atlas Missile Launch Complex at Vandenberg
Air Force Base in California.
- Bajo de la Alumbrera. The Company provided the design consultation,
fabrication and delivery of approximately 7,200 tons of structural steel
for the Bajo de la Alumbrera mining project in Argentina, which is one of
the largest copper mines in the world.
- MGM Grand Hotel and Casino Renovation. This structure is presently the
world's largest hotel and casino with 5,005 hotel rooms and one million
square feet of retail and casino space. The Company's participation
includes the completion of a facade renovation and the provision of
fabrication and erection services for the new MGM Convention Center,
which will consist of over 250,000 square feet of convention area.
- New York, New York Hotel and Casino. The Company was the fabricator and
erector for the New York, New York Hotel and Casino, which required
approximately 6,500 tons of structural steel. The hotel was constructed
to resemble the New York City skyline, including replicas of the Statute
of Liberty, the Brooklyn Bridge and other New York City landmarks.
- Paris Hotel & Casino. The Company was recently awarded two contracts for
the fabrication and erection of the structural steel for the 1.2 million
square foot low-rise area and the 34 story tower of the new Paris Hotel
and Casino in Las Vegas, which will include hotel, casino, showroom,
convention center and retail shopping areas. The project also entails the
fabrication and erection by the Company of a 540 foot tall scale replica
of the Eiffel Tower which will be built over and penetrate into the
casino
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<PAGE> 58
area and include restaurant and retail areas and an observation desk. The
replica will be designed and constructed by the Company based on the
original engineering drawings for the Eiffel Tower.
- Salt River Siphon Replacement Project. The Company served as the
fabricator and erector for the Salt River Siphon Replacement project, a
project requiring the fabrication of over 8,500 feet of 21 foot diameter
pipe for the U.S. Bureau of Reclamation. The system transports water from
the Salt River near Phoenix, Arizona to the major population centers of
Arizona.
- Walt Disney World Projects. The Company has provided the structural
steel fabrication and erection services for several Walt Disney World
projects in Orlando, Florida, including the United Kingdom and Canada
Pavilions at Epcot Center, the Splash Mountain amusement park ride and
the Planet Hollywood Restaurant and Bar, which involved the fabrication
of a unique multi-leg spherical steel crown covering the main building.
- Orange County, Florida Convention Center. The Company provided the steel
fabrication and erection services and manufactured and erected the steel
joists and trusses for Phases II and III of this one million square foot
modern convention center, a complex multi-level facility recently
constructed in the Orlando, Florida area.
- Tropicana Storage Facility. The Company provided the fabrication and
erection of the structural steel housing facility for several one-million
gallon steel fruit juice storage tanks for Tropicana Products, Inc.'s
juice storage center in Fort Pierce, Florida.
- Universal Studios. The Company was a steel fabricator and joist
manufacturer for the Universal Studios complex in Orlando, Florida, a
large working movie studio and tourist attraction.
- National and Regional Customers. The Company is a preferred
subcontractor for steel fabrication and erection services and joist
products on a variety of repeat projects for several national and
regional customers, including PETsMART, Inc. and Albertson's, Inc.
SAFETY AND QUALITY ASSURANCE
Schuff has adopted and maintains important safety policies that are
administered and enforced by its top management. Schuff considers workplace
accident prevention to be of primary importance in all phases of its operations
and provides continual training on safety procedures and techniques to all of
its shop and field personnel. Following the Acquisition, Schuff intends to adopt
and implement its safety policies and practices at Addison.
Schuff uses advanced welding and fabrication technologies and all of
Schuff's products are fabricated in accordance with applicable industry and
specific customer standards and specifications. Schuff has achieved and
maintains a level three certification by the American Institute of Steel
Construction ("AISC") with respect to its fabrication operations, the highest
level of certification available from AISC. In addition, Schuff's welding
employees are certified in accordance with the American Society of Mechanical
Engineers Section IX, Non-Destructive Examination Inspector Certification to
Society Non-Destructive Testing TC-IA Standards. Schuff has developed
project-specific and Company-wide quality assurance and quality control
programs, and utilizes sophisticated x-ray and ultra-sonic systems to inspect
weld seams.
Addison Steel has received a level two certification from AISC and is a
certified steel fabricator for the cities of Houston, Texas and Los Angeles,
California, which maintain some of the highest construction quality standards in
the United States. All Addison welders are certified in-house by Commercial
Welding Institute inspectors. Quincy is one of only fifteen certified members of
the Steel Joist Institute and is also a certified joist manufacturer in Houston
and Los Angeles. Most steel joist projects in the United States require Steel
Joist Institute certified contractors.
SALES AND ESTIMATING
The Company's domestic sales and marketing efforts are led by three sales
managers and 18 sales persons and representatives. Each sales manager is
responsible primarily for the Company's sales and marketing efforts
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<PAGE> 59
in defined geographic areas. The Company also employs one full-time
international marketing representative responsible primarily for the development
of the emerging South American and Mexican markets. In addition, the Company
employs 19 full-time project estimators and five chief estimators. The Company's
sales representatives maintain relationships with and make personal and other
sales calls on general contractors, architects, engineers and other potential
sources of business to determine potential new projects under consideration,
which provides the Company with valuable market information and new project
opportunities. The Company maintains future projects reports in order to track
the weekly progress of new opportunities. The Company's sales efforts are
further supported by most of its executive officers and by its engineering
personnel, who have substantial experience in the design, fabrication and
erection of structural steel and heavy steel plate.
The Company competes for new project opportunities through its
relationships and interaction with its active and prospective customer base,
which provides the Company with valuable current market information and sales
opportunities. In addition, the Company frequently is contacted by governmental
agencies in connection with public construction projects, and by large private
sector project owners and by general contractors and engineering firms in
connection with new building projects such as plants, warehouse and distribution
centers and other industrial and commercial facilities.
Upon selection of projects to bid or price, the Company's estimating
division reviews and prepares projected costs of shop, field, detail drawing
preparation and crane hours, steel and other raw materials and other costs. On
bid projects, a formal bid is prepared detailing the specific services and
materials to be provided by the Company, payment terms and project completion
timelines. Upon acceptance, the Company's bid proposal is finalized in a
definitive contract.
CONTRACTING METHODS AND PERFORMANCE BONDING
The Company's projects are awarded through a competitive bid process or are
obtained through negotiation, in either case generally using one of two types of
contract pricing approaches: fixed price or cost-plus pricing. Under the fixed
price approach, the Company receives the price fixed in the contract, subject to
adjustment only for change orders placed by the customer. As a result, the
Company retains all cost savings but is also responsible for cost overruns.
Under the cost-plus arrangement, the Company receives a specified fee in excess
of its direct labor and material cost, up to a maximum amount, and thus seeks to
gain protection against cost overruns and sometimes benefits directly from cost
savings. Historically, a substantial majority of the Company's contracts have
been fixed price arrangements.
While customers may consider a number of factors, including availability,
capability, reputation and safety record, price and the ability to meet customer
imposed project schedules are the principal factors on which the Company obtains
contracts. Generally, the Company's contracts and projects vary in length from
three to twelve months depending on the size and complexity of the project,
project owner demands and other factors.
The Company's contract arrangements with customers sometimes require the
Company to provide payment and performance bonds and, in selected cases
typically associated with international projects, letters of credit, to
partially secure the Company's obligations under its contracts. Bonding
requirements typically arise in connection with public works projects and
sometimes with respect to certain private contracts. The Company's payment and
performance bonds are obtained through surety companies and typically cover the
entire contract price on a project. The Company believes that its bonding
capacity provides a competitive advantage in some cases due to the Company's
ability to obtain large bonds and to negotiate more favorable pricing of bonds.
BACKLOG
The Company considers backlog an important indicator of its operating
condition because its engineering, detailing, fabrication and erection services
are characterized by long lead times for projects and orders. The Company
defines its backlog of contract commitments as the potential future revenues to
be recognized upon performance of contracts awarded to the Company. Backlog
increases as new contract commitments are obtained, decreases as work is
performed and the related revenues are recognized and increases or decreases as
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<PAGE> 60
modifications in work are performed under a contract. As of March 31, 1998, the
Company's backlog (on a pro forma basis giving effect to the Acquisition) was
$97.4 million, of which approximately $24.5 million was attributable to two
contracts. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The Company expects approximately 95% of its backlog as
of March 31, 1998 to be recognized as revenues in 1998.
COMPETITION
The Company competes with other steel services companies and joist
manufacturers on a local, regional or national basis, and, in certain cases, on
an international basis. The Company has different competitors for each of its
services and product segments and within each geographic market served by the
Company. The Company believes that it can compete effectively for new projects
both nationally and internationally and that it is among the largest competitors
in its industry. Among the principal competitive factors within the industry are
price, timeliness of completion of projects, quality, reputation and the desire
of customers to utilize specific contractors with whom they have favorable
relationships and prior experience. Certain of the Company's competitors have
financial and operating resources greater than those of the Company.
GOVERNMENTAL REGULATION
The Company's operations are governed by and subject to government
regulations in the United States and in foreign countries in which the Company
operates, including laws and regulations relating to workplace safety and worker
health, principally the Occupational Safety and Health Act and regulations
thereunder in the United States. With respect to its international operations,
the Company is subject to a number of laws and regulations, including those
relating to taxation of its earnings and earnings of its personnel and its use
of local personnel and suppliers. The Company's operations are subject to the
risk of changes in federal, state, and local laws and policies which may impose
restrictions on the Company, including trade restrictions, expropriation or
nationalization decrees, confiscatory tax systems, primary or secondary boycotts
or embargos directed at specific countries, import restrictions or other trade
barriers and mandatory sourcing rules, any of which could, if adopted or
implemented, materially and adversely affect the Company. The Company believes
that it is in material compliance with the laws and regulations under which it
and its operations are currently governed and does not believe that future
compliance with such laws and regulations will have a material and adverse
effect on it. The Company cannot determine, however, to what extent future
operations and earnings of the Company may be affected by new legislation, new
regulations or changes in or new interpretations of existing regulations.
The Company is subject to licensure and holds licenses in each of the
states in the United States in which it operates and in certain local
jurisdictions within such states. The Company believes that it is in material
compliance with all contractor licensing requirements in the various states in
which it operates. The loss or revocation of any license or the limitation on
any of the Company's primary services thereunder in any state in which the
Company conducts substantial operations could prevent the Company from
conducting further operations in such jurisdiction and would have a material
adverse effect on the Company.
ENVIRONMENTAL REGULATION
The Company's operations and properties are affected by numerous federal,
state and local environmental protection laws and regulations, such as those
governing discharges into air and water, and the handling and disposal of solid
and hazardous waste. The requirements of these laws and regulations have become
increasingly stringent, complex and costly to comply with. In addition, the
Company may be subject to claims alleging personal injury or property damage as
a result of alleged exposure to hazardous substances. The Company is not aware
of any non-compliance with environmental laws that could have a material adverse
effect on the Company's business or operations. There can be no assurance,
however, that such laws, regulations, or their interpretation will not change in
the future in a manner that could materially and adversely affect the Company.
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Certain environmental laws, such as CERCLA, provide for strict and joint
and several liability for investigation and/or remediation of spills and other
releases of hazardous substances. Such laws may apply to conditions at
properties presently owned or operated by the Company or its predecessors, as
well as to conditions at properties at which waste or other contamination
attributable to an entity or its predecessors come to be located. The Company's
facilities have been operated for many years, and substances that are or might
be considered hazardous were used at such locations. The Company does not
anticipate incurring material capital expenditures for environmental controls or
for investigation or remediation of environmental conditions during the current
or succeeding fiscal year. Nevertheless, the Company can give no assurance that
it, or entities for which it may be responsible, will not incur liability in
connection with the investigation and remediation of facilities it currently
owns or operates or other locations in a manner that could materially and
adversely affect the Company.
EMPLOYEES
As of March 31, 1998, the Company had approximately 1,072 employees (on a
pro forma basis giving effect to the Acquisition). The number of persons
employed by the Company on an hourly basis fluctuates directly in relation to
the amount of business performed by the Company. Certain of the fabrication
personnel employed by Schuff are represented by the United Steelworkers of
America, with which Schuff negotiates directly, and certain of its erection and
other employees are represented by a variety of local ironworkers unions, as to
which Schuff and other contractors bargain collectively. As of March 31, 1998,
of the Company's 898 hourly employees, approximately 441, or 49%, were members
of labor unions. The Company is a party to several separate collective
bargaining agreements with such unions in certain of the Company's current
operating regions, which expire (if not renewed) at various times in the future
prior to maturity of the Notes. Most of the Company's collective bargaining
agreements are subject to automatic annual or other renewal unless either party
elects to terminate the agreement on the scheduled expiration date. None of
Addison's employees are members of a labor union. The Company considers its
relationship with its employees to be good and, other than sporadic and
unauthorized work stoppages of an immaterial nature, none of which have been
related to the Company's own labor relations, the Company has not experienced a
work stoppage or other labor disturbance.
SUPPLIERS
The Company currently purchases a majority of its steel and steel
components from several domestic and foreign steel producers and suppliers.
However, steel is readily available from numerous foreign and domestic steel
producers. The Company is not dependent on any one supplier. The Company
believes that its relationships with its suppliers are good and has no long term
commitments with any of its suppliers. In recent periods, the steel construction
market in general has experienced a shortage of steel as demand from the
domestic mills has increased, and in recent periods the Company has purchased
portions of its steel supply from Asian suppliers.
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PROPERTIES
The Company's manufacturing facilities and executive and administrative
offices (after giving effect to the Acquisition) are located at the following
sites:
<TABLE>
<CAPTION>
LOCATION SIZE (SQ. FT.) OWNED/LEASED PRODUCTS/SERVICES
- -------- -------------- ------------ --------------------------------------
<S> <C> <C> <C>
Phoenix, Arizona..... 400,000 Leased Fabrication shop; operations,
erection, engineering and detailing
offices
Gilbert, Arizona..... 145,000 Leased Fabrication shop; administrative
engineering and detailing offices
Phoenix, Arizona..... 22,000 Leased Executive, finance, administration,
estimating and sales offices
Lockhart, Florida.... 144,000 Owned Fabrication shop; sales and operations
offices; maintenance yard; steel truss
plant
Albany, Georgia...... 102,000 Owned Fabrication shop; executive offices
Quincy, Florida...... 140,000 Owned Steel joist and long span truss
manufacturing plant
</TABLE>
The Company's leased facilities are leased from a partnership the general
and limited partners of which consist of certain affiliates of Schuff and their
family members. See "Certain Relationships and Related Transactions."
LEGAL PROCEEDINGS
The fabrication and erection of structural steel and heavy steel plate
involves a high degree of operational risk. Adverse weather conditions, operator
and other error, and other unforeseen factors can cause personal injury or loss
of life, severe damage to or destruction of property and equipment and
suspension of operations. Litigation arising from such occurrences may result in
the Company being named as a party to lawsuits asserting substantial claims or
to administrative or criminal actions that may involve substantial monetary
penalties or the restriction of the Company's operations in one or more
jurisdictions. The Company is a defendant in lawsuits from time to time,
including lawsuits arising in the normal course of its business. While it is
impossible at this time to determine with certainty the ultimate outcome of
these lawsuits, the Company's management believes that the ultimate outcome will
not have a material adverse effect on the Company.
Currently, the Company does not maintain any reserves for its ongoing
litigation. The Company periodically reviews the need to maintain a litigation
reserve. The Company seeks to mitigate the effects of loss or damage through the
maintenance of risk management, insurance and safety programs. There can be no
assurance, however, that the Company's efforts to mitigate losses will be
successful or that any losses incurred will not exceed the Company's insurance
or estimated reserves therefor.
INSURANCE
The Company maintains workers compensation insurance that provides full
coverage of statutory workers compensation benefits. The Company also maintains
employer liability insurance in its principal geographic markets, contractors
commercial general liability insurance and insurance against property damage
caused by fire, flood, explosion and similar catastrophic events that may result
in physical damage or destruction of the Company's facilities and property. All
policies are subject to various deductibles and coverage limitations. Although
management of the Company believes that the Company's insurance is adequate for
its present needs and is consistent with industry practice, there can be no
assurance that the Company will be able to maintain adequate insurance at
premium rates that management considers commercially reasonable, nor can there
be any assurance that such coverage will be adequate to cover all claims that
may arise.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Company's current directors and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David A. Schuff................................. 67 Chairman of the Board of Directors
Scott A. Schuff................................. 39 President, Chief Executive Officer and
Director
Kenneth F. Zylstra.............................. 56 Vice President, Chief Financial Officer,
Secretary, Treasurer and Director
Edward M. Carson................................ 68 Director
Dennis DeConcini................................ 60 Director
</TABLE>
The following is a brief description of the background and principal
occupation of each director and executive officer of the Company.
DAVID A. SCHUFF is the Chairman of the Board of Directors, a position he
has served in at Schuff since its inception, and is a co-founder of Schuff. Mr.
Schuff served as President and Chief Executive Officer of Schuff from its
founding in 1976 to 1995. Mr. Schuff has been involved in the steel fabrication
and erection business in a number of capacities since 1958. David A. Schuff is
the father of Scott A. Schuff.
SCOTT A. SCHUFF is the President and Chief Executive Officer of the
Company, a co-founder of Schuff, and a member of the Board of Directors. Mr.
Schuff has served in numerous capacities with Schuff since its founding in 1976,
has been a member of the Board of Directors since 1976 and has been the
President and Chief Executive Officer since 1995. Scott A. Schuff is the son of
David A. Schuff.
KENNETH F. ZYLSTRA is Vice President and Chief Financial Officer of the
Company and has held such positions at Schuff since 1983. Mr. Zylstra has been
an officer of Schuff since 1979. Mr. Zylstra has served as a director since the
closing of Schuff's initial public offering in July 1997. Prior to 1979, Mr.
Zylstra was associated with Ernst & Young (then Ernst & Ernst). Mr. Zylstra
received a B.B.A. Degree in Public Accounting from Loyola University Chicago,
and is a member of the American Institute of Certified Public Accountants, the
Illinois CPA Society, and the Construction Financial Management Association.
EDWARD M. CARSON has served as a director since the closing of Schuff's
initial public offering in July 1997. Mr. Carson was the Chairman of the Board
of Directors of First Interstate Bancorp, a bank holding company, from 1990
through April 1996, and was its Chief Executive Officer from 1990 through 1994.
Mr. Carson currently is a director of Wells Fargo & Co., one of the largest bank
holding companies in the western United States. Mr. Carson also serves as a
director of Aztar Corporation, Castle & Cooke, Inc., and Terra Industries, Inc.
DENNIS DECONCINI has served as a director since the closing of Schuff's
initial public offering in July 1997. Mr. DeConcini is a former United States
Senator for Arizona and currently is a partner of Parry and Romani Associates,
Inc., a consulting firm based in Washington, D.C., and is a partner of DeConcini
McDonald Yetwin & Lacy, P.C., a law firm with offices in Tucson and Phoenix,
Arizona, and in Washington, D.C. Mr. DeConcini is a director of Saf T Lok
Incorporated. Mr. DeConcini also serves by appointment of the President of the
United States on the Board of Directors of the Federal Home Loan Mortgage
Corporation (Freddie Mac), a federally chartered mortgage finance corporation.
COMPENSATION OF DIRECTORS
As compensation for their services to the Company, including their
attendance at meetings of the Board of Directors and committees of the Board of
which they are members, each non-employee director of the Company received
options to purchase 7,500 shares of Common Stock upon his appointment to the
Board of Directors at the closing of Schuff's initial public offering in July
1997. The exercise price of such options is $8.00 per share, the initial public
offering price of the Common Stock. All of the stock options vest one year
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after the date of grant. The options were granted pursuant to Schuff's 1997
Stock Option Plan. Each non-employee director is also reimbursed for reasonable
travel expenses incurred in connection with attendance at each Board and
committee meeting.
In June 1998, Schuff's Board of Directors and stockholders approved the
1998 Director Compensation Plan to be effective in 1998 and thereafter. Pursuant
to this plan, non-employee directors of the Company are eligible to receive an
annual retainer of $20,000, or such other amount as determined from time to time
by the Board, which will be paid quarterly in either cash or in shares of the
Company's Common Stock at the non-employee director's election. In addition to
the annual retainer, each non-employee director is entitled to a $1,000 fee for
each Board meeting attended and a $700 fee for each Board committee meeting
attended that is not held in conjunction with a Board meeting. Non-employee
directors are also entitled to reimbursement by the Company for reasonable
expenses incurred in connection with traveling to and attending Board and Board
committee meetings.
Under the new director plan, non-employee directors also are entitled to a
grant of 500 shares of the Company's Common Stock and nonqualified options to
purchase 500 additional shares of the Company's Common Stock each year as of the
third business day following the public release of the Company's fiscal year-end
earnings information. The annual option grants will be immediately vested and
exercisable and the exercise price will be equal to the fair market value of the
per share price of the Company's Common Stock on the date of grant.
Directors who are employees of the Company are not entitled to additional
compensation for their service as directors of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Messrs.
Carson and DeConcini. No member of the Compensation Committee was an officer or
employee of the Company or its subsidiary during the prior year or was formerly
an officer or employee of the Company or any of its subsidiaries. During the
year ended December 31, 1997, none of the executive officers of the Company
served on the compensation committee of any other entity, any of whose directors
or executive officers served either on the Board of Directors of the Company or
on the Compensation Committee of the Company.
EXECUTIVE COMPENSATION
The table below sets forth information concerning the annual and long-term
compensation for services rendered in all capacities to Schuff during the years
ended December 31, 1997 and 1996 of those persons who were, at December 31,
1997: (i) the Chief Executive Officer of Schuff, and (ii) the other executive
officers of Schuff whose annual salary and bonus exceeded $100,000
(collectively, the "Named Executive Officers").
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- ------------------------- -------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION(1)
- --------------------------- ---- -------- ------- ------------ ---------- ------------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scott A. Schuff........... 1997 $260,010 $30,000 $5,334 -- -- -- --
President and 1996 260,008 22,000 5,089 -- -- -- --
Chief Executive Officer
David A. Schuff........... 1997 $296,412 $30,000 $4,861 -- -- -- --
Chairman of the Board 1996 296,411 22,825 4,890 -- -- -- --
of Directors
Kenneth F. Zylstra(2)..... 1997 $123,193 $40,000 $4,212 -- -- -- $1,593
Vice President, 1996 115,155 51,025 4,615 -- -- -- 1,218
Chief Financial Officer,
Treasurer and Secretary
</TABLE>
- ---------------
(1) The amounts shown in this column represent the dollar value of contributions
made by Schuff to Schuff's 401(k) retirement savings plan for the benefit of
the Named Executive Officers.
(2) The amounts shown exclude $62,445 paid in 1997 to Mr. Zylstra pursuant to
Schuff's Supplemental Retirement and Deferred Compensation Plan, which was
terminated in 1997.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning grants of stock
options to the Named Executive Officers of the Company during the year ended
December 31, 1997. The Company does not maintain an option or other stock based
plan that provides for the grant of stock appreciation rights ("SARs").
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES PERCENT OF TOTAL ANNUAL RATE OF STOCK
UNDERLYING OPTIONS/SARS APPRECIATION FOR
OPTIONS/ GRANTED TO OPTION TERM(2)
SARS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR (PER SHARE) DATE 5% 10%
- ---- ---------- ---------------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Scott A. Schuff(1)...... -- -- -- -- -- --
David A. Schuff(1)...... -- -- -- -- -- --
Kenneth F. Zylstra...... 40,000 11.57% $5.00 02/05/07 $125,779 $318,748
</TABLE>
- ---------------
(1) Neither Scott A. Schuff nor David A. Schuff participated in Schuff's 1997
Stock Option Plan in 1997.
(2) In accordance with Commission rules, the figures in the first row of the
"5%" and "10%" columns of this table for Mr. Zylstra assume compounded
annual stock price appreciation of 5% and 10%, respectively, based on a
stock price of $5.00 per share, which was the assumed fair market value per
share of the Common Stock on February 5, 1997.
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AGGREGATE OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning the value of each
Named Executive Officer's unexercised options at December 31, 1997. None of the
Named Executive Officers exercised any stock options in 1997 and the Company
does not maintain an option or other stock based plan that provides for the
grant of SARs.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED FISCAL YEAR-END FISCAL YEAR-END(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Scott A. Schuff............ -- -- -- -- -- --
David A. Schuff............ -- -- -- -- -- --
Kenneth F. Zylstra......... -- -- -- 40,000 -- $235,000
</TABLE>
- ---------------
(1) Options are considered "in the money" if the fair market value of the
underlying securities exceeds the exercise price of the options on a
specified date. The values reported are based on a closing price per share
of the Common Stock on the Nasdaq National Market of $10.875 at December 31,
1997 and an exercise price of $5.00 per share for all of Mr. Zylstra's stock
options.
EMPLOYMENT AND CONSULTING AGREEMENTS
Schuff currently does not have any employment contracts or severance
agreements with any of its executive officers.
In connection with the Acquisition, the Company entered into employment
agreements with Glen S. Davis, the President and Sales Manager of Addison Steel
since 1989, Sam Mahdavi, the President of Quincy since 1990, and T. Michael
Phagans, the Treasurer and principal financial and accounting officer of Addison
and the Plant Manager of its Albany, Georgia fabrication facility. Each
employment agreement is for a period of five years and is terminable by either
party at any time. If the employment of Messrs. Davis, Mahdavi or Phagans is
terminated without cause, such employee will be entitled to receive a guaranteed
severance amount and any benefits due him for twelve months. Each agreement
provides for a base salary and guaranteed cash bonus and, in addition, equity
and annual cash incentive bonuses based on the financial performance of Addison
Steel, in the case of Messrs. Davis and Phagans, and Quincy, in the case of Mr.
Mahdavi. Each agreement includes noncompetition covenants during the term of the
agreement and for a period of twelve months after termination of the employment
of such employees, as well as confidentiality provisions.
The Company also entered into a consulting agreement with Mr. E. Chris
Addison, the founder, chairman of the board of directors, and majority
stockholder of Addison. Pursuant to the consulting agreement, Mr. Addison is
required to provide upon the Company's request consulting services relating to
Addison's operations and related matters. In consideration for such services,
Mr. Addison will receive either options to purchase 100,000 shares of the
Company's Common Stock at an exercise price equal to the then current market
price, plus cash payments of $100,000 per year for two years, or cash payments
of $150,000 per year for three years. In addition, the Company continued to pay
Mr. Addison through June 30, 1998 an additional amount equal to 1.5% of
Addison's net revenues in accordance with his compensation arrangements with
Addison prior to the Acquisition.
1997 STOCK OPTION PLAN
In February 1997, Schuff's Board of Directors and stockholders approved the
Schuff Steel Company 1997 Stock Option Plan (the "Option Plan"). Under the
Option Plan, the Company may grant incentive stock options or non-qualified
stock options to directors, employees, consultants, and advisors of the Company.
The Company believes that the Option Plan promotes the success and enhances the
value of the Company by linking the personal interests of participants to those
of the Company's stockholders and providing participants
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<PAGE> 67
with an incentive for outstanding performance. The total number of shares of
Common Stock available for awards under the Option Plan is 600,000, subject to a
proportionate increase or decrease in the event of a stock split, reverse stock
split, stock dividend, or other adjustment to the Company's total number of
issued and outstanding shares of Common Stock.
In June 1998, Schuff's Board of Directors and stockholders approved an
amendment to the Option Plan to increase the number of shares available for
awards from 600,000 to 1,600,000. The Option Plan is administered by the
Compensation Committee.
The Compensation Committee has the exclusive authority to administer the
Option Plan, including the power to determine eligibility, the type and number
of awards to be granted, and the terms and conditions of any award granted,
including the price and timing of awards. As of June 15, 1998, the Company had
granted options currently outstanding to purchase 623,700 shares of Common Stock
to various of its employees. Generally, such options are subject to vesting over
a five-year period, with 20% of the options becoming exercisable by the holder
thereof on each successive anniversary date of the grant. The exercise price of
the options granted is equal to the fair market value of the Common Stock on the
date of grant, except 50,000 non-qualified stock options granted to Mr. Zylstra,
which were granted with an exercise price of $10 per share at the time the fair
market value of the Common Stock was approximately $13.50 per share.
401(k) PLAN
Under Schuff's 401(k) retirement savings plan, eligible employees may
direct that a portion of their compensation, up to a maximum of $10,000 per
year, be withheld by the Company and contributed to their account. All 401(k)
plan contributions are placed in a trust fund to be invested by the 401(k)
plan's trustee, except that the 401(k) plan may permit participants to direct
the investment of their account balances among mutual or investment funds
available under the plan. The 401(k) plan permits the Company to provide
discretionary matching contributions not to exceed 25% of the amount deferred up
to 5% of a participant's compensation. Amounts contributed to participant
accounts under the 401(k) plan and any earnings or interest accrued on the
participant accounts are generally not subject to federal income tax until
distributed to the participant and may not be withdrawn until death, retirement
or termination of employment.
DEFERRED COMPENSATION PLAN
In 1996, Schuff maintained a Supplemental Retirement and Deferred
Compensation Plan, pursuant to which it contributed on a discretionary basis to
certain key employees 10% of annual net profits, which amount was allocated
among participants in accordance with individual agreements between Schuff and
such participants. In 1996, Schuff recorded expenses of $528,900 in accordance
with this Plan. This Plan was terminated in 1997.
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<PAGE> 68
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of June 15, 1998 with
respect to the beneficial ownership of the Company's Common Stock by (i) each
director of the Company, (ii) each Named Executive Officer of the Company, (iii)
each other person known to hold 5% or more of the outstanding shares of Common
Stock and (iv) all current executive officers (regardless of salary and bonus
level) and directors of the Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER(1)(2) SHARES BENEFICIALLY OWNED PERCENT OWNED
- ------------------------------------------ ------------------------- -------------
<S> <C> <C>
David A. Schuff and Nancy A. Schuff(3)........... 2,550,000 36.4%
Scott A. Schuff(4)............................... 2,450,000 35.0%
Kenneth F. Zylstra(5)............................ 8,000 *
Edward M. Carson(6).............................. 7,500 *
Dennis DeConcini(6).............................. 7,500 *
All directors and executive officers as a group
(five persons)(7).............................. 5,023,000 71.7%
</TABLE>
- ---------------
* Represents less than 1% of the Company's outstanding Common Stock.
(1) This information regarding beneficial ownership of the Company's Common
Stock by certain beneficial owners and management of the Company is as of
June 15, 1998. A person is deemed to be the beneficial owner of securities
that can be acquired within 60 days from the date set forth above through
the exercise of any option, warrant or right. Shares of Common Stock subject
to options, warrants or rights that are currently exercisable or exercisable
within 60 days are deemed outstanding for the purpose of computing the
percentage of the person holding such options, warrants or rights, but are
not deemed outstanding for computing the percentage of any other person. The
amounts and percentages are based upon 7,003,700 shares of Common Stock
outstanding as of June 15, 1998. The persons named in the table, to the
Company's knowledge, have sole voting and sole dispositive power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and the information
contained in the footnotes hereunder.
(2) The address of each of the listed stockholders is 1841 West Buchanan Street,
Phoenix, Arizona 85009.
(3) 2,050,000 of these shares are owned by the Schuff Family Trust Under Trust
Agreement dated June 28, 1983, as amended, and 500,000 of these shares are
owned by the Schuff Irrevocable Trust Under Trust Agreement Dated December
31, 1996. David A. Schuff and Nancy A. Schuff, husband and wife, are co-
trustees of each of the trusts and exercise voting and investment power over
such shares.
(4) 2,250,000 of these shares are owned by the Scott A. Schuff Family Trust
Under Trust Agreement dated March 12, 1992, as amended, and 200,000 of these
shares are owned by the Scott A. Schuff Irrevocable Trust Under Trust
Agreement dated December 31, 1996, as amended. Scott A. Schuff is the
trustee of each of these trusts and exercises voting and investment power
over such shares.
(5) The total for Mr. Zylstra includes 8,000 shares subject to outstanding
options.
(6) The total for each of Messrs. Carson and DeConcini includes 7,500 shares
subject to outstanding options.
(7) The total for all directors and officers as a group includes 23,000 shares
subject to outstanding options.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since its inception, Schuff has maintained business relationships and
engaged in certain transactions with the affiliated companies and parties
described below. Since the closing of its initial public offering in July 1997,
all transactions between Schuff and its affiliated entities, executive officers,
directors or significant stockholders require the approval of a majority of its
non-employee directors and are on terms that will be no less favorable to Schuff
than Schuff could obtain from non-affiliated parties.
Schuff and B&K Steel lease their respective fabrication and office
facilities from 19th Avenue/ Buchanan Limited Partnership, an Arizona limited
partnership (the "Schuff Partnership"). The general and limited partners of the
Schuff Partnership are David A. Schuff, Scott A. Schuff, and certain of their
family members. David A. Schuff is a co-founder of Schuff and the Chairman of
the Board of Directors of the Company, and Scott A. Schuff is a Director and the
President and Chief Executive Officer of the Company. David A. Schuff and Scott
A. Schuff presently are the beneficial owners of approximately 71.4% of the
issued and outstanding Common Stock of the Company. See "Principal
Stockholders."
In March 1997, Schuff entered into a new lease agreement with the Schuff
Partnership with respect to its primary fabrication facilities. These facilities
include approximately 400,000 square feet of shop space under roof situated on
approximately 26 acres. This new lease agreement was based upon a third party
appraisal of the property and an assumed annual rate of return of 10%, which
took into account the location and use of the property, potential tenants,
comparable returns on similar properties, and other relevant factors. The new
lease increased Schuff's annual rent payments from $264,000 in 1996 to $295,000
for 1997, $414,000 for 1998, $556,000 for 1999, $601,000 for 2000, and $605,000
for each year thereafter, subject to increase in 2002 and every five years
thereafter based on a Consumer Price Index formula, which represents an annual
rent per square foot of improved space for 1997, 1998, 1999, 2000 and 2001 of
$0.73, $1.04, $1.39, $1.50 and $1.51, respectively. The agreement also enabled
Schuff to extend the lease term to 20 years. Schuff also is obligated under the
lease to reimburse the Schuff Partnership an additional amount equal to any
taxes incurred by it in connection with the lease payments, and is obligated to
pay insurance and maintenance expenses. The term of this lease expires on
February 28, 2017.
In March 1997, Schuff also entered into a lease agreement with the Schuff
Partnership with respect to the recently acquired B&K Steel property, consisting
of approximately 145,000 square feet of covered fabrication, office, engineering
and detailing facilities on approximately 23 acres. Based upon the same
methodology described above, Schuff entered into a lease with substantially
similar terms for the property and equipment with annual rent payments of
approximately $340,000 over 20 years, subject to increase every five years based
on a Consumer Price Index formula, representing an annual rent per square foot
of improved space of approximately $2.34. The rent was based upon a recent
appraisal of the underlying property. Schuff also is obligated to reimburse the
Schuff Partnership for taxes incurred by it in connection with the lease
payments. The term of the lease expires on February 28, 2017.
Effective May 1, 1997, the Schuff Partnership leased to Schuff
approximately 22,000 square feet of additional office facilities adjacent to
Schuff's existing principal office and shop facilities. Based upon the same
methodology described above, Schuff entered into a lease with substantially
similar terms for the property with annual rent payments of $135,000 over 20
years, subject to increase every five years based on a Consumer Price Index
formula, representing an annual rent per square foot of improved space of
approximately $6.14. The rent was based upon the purchase price of the property,
which was determined by arm's-length negotiation with an unrelated seller.
Schuff is also obligated to reimburse the Schuff Partnership for taxes incurred
by it in connection with the lease and is obligated to pay insurance and
maintenance costs. This lease expires on April 30, 2017.
In 1989, the Schuff Partnership borrowed $5,000,000 from a commercial bank
in connection with its refinancing of the property on which Schuff's principal
facilities are located (the "Partnership Loan"). The Schuff Partnership in turn
loaned $4,249,062 to Schuff and Schuff delivered to the Schuff Partnership a
subordinated promissory note in that amount (the "Subordinated Loan"). As of
March 31, 1997, the principal balance of the Subordinated Loan was $2,265,016.
In April 1996, in connection with the refinancing of the
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<PAGE> 70
Partnership Loan, Schuff guaranteed repayment of the Schuff Partnership's
indebtedness under that loan, which guarantee was released following the closing
of Schuff's initial public offering.
Schuff historically has made cash advances to its principal stockholders.
Such advances have been evidenced by recourse promissory notes that are payable
on demand after one year. As of December 31, 1997, there were no amounts owed by
David A. Schuff or Scott A. Schuff under such notes. Schuff discontinued the
practice of advancing funds to its stockholders after the closing of its initial
public offering in July 1997.
Schuff currently purchases a portion of its steel inventory from Arizona
Steel, Inc., an Arizona corporation ("Arizona Steel"). During 1997, Scott A.
Schuff owned a 75% interest in Arizona Steel. On January 1, 1998 Mr. Schuff sold
his entire interest in Arizona Steel and is no longer is affiliated with that
entity. Arizona Steel is a steel distribution center formed in January 1997 that
sells steel pieces to a number of fabrication contractors, one of approximately
twenty from which Schuff purchases steel from time to time. Schuff purchases
most of its steel inventory directly from various steel mills but from time to
time purchases small quantities of steel from local steel distribution centers
as a result of special needs that do not permit the lead time or volumes
normally associated with mill purchases. Schuff currently includes Arizona Steel
among its list of suppliers, all of which bid for purchase orders by Schuff on
the basis of cost, availability and delivery. It has been and continues to be
Schuff's policy not to make purchases from Arizona Steel unless it offers the
most competitive terms based on the factors listed above. In 1997, Schuff
purchased approximately $374,000 of steel from Arizona Steel, representing less
than 2% of the steel purchased from all suppliers during that period.
DESCRIPTION OF EXISTING INDEBTEDNESS
The following summary does not purport to be complete and is qualified in
its entirety by the loan agreements relating to the Existing Credit Facility,
copies of which may be obtained upon request from the Company.
Bank One, Arizona, N.A. (the "Bank"), has provided Schuff with a credit
facility (the "Revolving Facility") that is subject to renewal on June 30, 1999
and is collateralized by contract receivables, equipment and inventory. Schuff's
credit facility requires that the Company maintain minimum tangible net worth of
$19.0 million, minimum owners equity (the sum of capital, capital surplus and
retained earnings divided by total assets) of 40%, a minimum current ratio of
1.25 to 1.0 and minimum debt coverage ratio of 1.5 to 1.0 (net profit after tax
plus depreciation and amortization plus changes in deferred taxes divided by
long-term debt including current maturities). The Revolving Facility also
contains other covenants that, among other things, limit the Company's ability
to pay cash dividends or make other distributions, change its business or merge,
consolidate or dispose of material portions of its assets. The security
agreements pursuant to which the Company's assets are pledged prohibit any
further pledge of such assets without the written consent of the Bank. Under the
Revolving Facility, the Company may borrow up to an amount equal to the greater
of (a) 75% of qualifying contracts receivable up to a maximum of $10.0 million,
or (b) a maximum of $5.0 million based on the greater of (i) 50% of the net book
value of fixed assets or (ii) 75% of the fair market value of fixed assets. The
Company's ability to borrow is subject to, among other restrictions, the amount
of billings in excess of costs and recognized earnings on uncompleted contracts.
At March 31, 1998, other than the minimum borrowing amount, there was $8.4
million credit available under the line for future borrowings.
At March 31, 1998, Schuff had two other long-term debt commitments related
to its property and equipment. One was a subordinated note in the original
principal amount of $4.2 million payable to a limited partnership comprised of
Schuff's present stockholders and certain of their family members and which was
scheduled to mature in 2003. The balance on this loan was approximately $1.7
million at March 31, 1998. Schuff paid the entire principal balance of this loan
with a portion of the proceeds of the Offering. The other long-term debt of
Schuff consists of two notes in the aggregate principal amount of $796,250
incurred as part of the consideration paid to the sellers in the B&K Steel
acquisition. The balance of these notes was approximately $639,000 at March 31,
1998. Such notes are payable in five equal annual installments ending in 2002.
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<PAGE> 71
Effective December 10, 1997, the Company also entered into a $10.0 million
line of credit (the "Acquisition Facility' and, together with the Revolving
Facility, the "Existing Credit Facility") with the Bank solely to finance the
acquisition of other companies. The covenants of this facility are similar to
the covenants of the Revolving Facility described above. The Acquisition
Facility is collateralized by accounts receivable, inventory and equipment; any
real property purchased with the credit agreement or owned by a purchased
subsidiary and other items as defined in the credit agreement. Interest is
payable in one, two, or three month periods at the LIBOR or prime rate plus
0.25%. Principal on the Acquisition Facility will be payable in installments
commencing on January 30, 1999. At June 15, 1998, no amounts were outstanding
under the Acquisition Facility.
The Existing Credit Facility contains events of default customary for
facilities of this type, including without limitation, Schuff's failure to pay
principal, interest, fees or other amounts when due, the breach of any covenant,
representation or warranty, cross default and cross acceleration, bankruptcy,
insolvency or similar events involving Schuff or its subsidiaries, the
unenforceability of any of the credit facility agreements or liens securing
payment obligations under the Existing Credit Facility, and the occurrence or
existence of any event or circumstance which has a material adverse effect upon
the Company.
In connection with the issuance of the Outstanding Notes, Schuff and the
Bank executed and delivered an amendment to the Existing Credit Facility to
permit the Notes and the Guarantees, to the extent required under the Existing
Credit Facility.
Proposed Credit Facility. On May 27, 1998, the Company executed a letter
of commitment with Wells Fargo Bank, N.A. ("Wells Fargo"), relating to a
proposed credit facility that the Company anticipates will replace the Company's
Existing Credit Facility. Pursuant to the credit facility, Wells Fargo will
provide, together with other financial institutions, up to $25.0 million under a
senior secured revolving credit facility (the "Revolver"), which became
available upon the issuance of the Outstanding Notes, subject to certain
contingencies and due diligence. The term of the Revolver will be three years
from the funding of the Outstanding Notes. The Revolver will be secured by a
first priority, perfected security interest in all assets of the Company and its
present and future subsidiaries and will be available for working capital and
general corporate purposes. Interest payable on borrowings outstanding under the
Revolver initially will be equal to either the Wells Fargo base rate plus 0.50%
or LIBOR plus 2.50%, at the Company's option. The Company will be eligible for
reductions in the initial margins on the Revolver if the Company achieves
certain performance targets based upon its ratio of certain debt to EBITDA.
The Company may prepay any Base Rate loan or any LIBOR loan without
penalty. The Revolver will also contain certain affirmative and negative
covenants, including a maximum leverage ratio, a minimum interest coverage
ratio, a minimum fixed charge coverage ratio, a minimum EBITDA and certain other
customary restrictive covenants.
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DESCRIPTION OF EXCHANGE NOTES
The Outstanding Notes were, and the Exchange Notes will be, issued under an
indenture, dated as of June 4, 1998 (the "Indenture") by and among Schuff, the
Guarantors and Harris Trust Company of California, as trustee under the
Indenture (the "Trustee"). The Outstanding Notes and the Exchange Notes will
constitute a single series of debt securities under the Indenture. Unless the
context requires otherwise, the Outstanding Notes and the Exchange Notes are
together referred to as the "Notes." The Notes are subject to the terms stated
in the Indenture and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Holders of the Notes are referred to the Indenture and the
Trust Indenture Act for a statement of those terms. The statements and
definitions of terms under this caption relating to the Notes, the Guarantees
and the Indenture described below are summaries and do not purport to be
complete. Such summaries make use of certain terms defined in the Indenture and
are qualified in their entirety by express reference to the Indenture. A copy of
the proposed Indenture is available as set forth under "-- Additional
Information." For purposes of this section of the Prospectus, references to
"Schuff" means Schuff Steel Company, excluding its subsidiaries. Certain terms
used herein are defined below under "-- Certain Definitions."
GENERAL
The Outstanding Notes are, and the Exchange Notes will be, general
unsecured senior obligations of Schuff, limited in aggregate principal amount at
Stated Maturity to $100.0 million. The Indebtedness evidenced by the Notes will
rank pari passu in right of payment with all existing and future indebtedness
and other liabilities of Schuff that are not subordinated by their express terms
to other Indebtedness of Schuff and senior to all Indebtedness of Schuff that by
its terms is so subordinated. The Notes will be effectively subordinated to all
existing and future secured Indebtedness of Schuff to the extent of the value of
the assets securing such Indebtedness, including Schuff's Existing Credit
Facility (or its proposed replacement facility), which is secured by a pledge of
Schuff's and its Subsidiary's receivables, inventory and equipment. To the
extent that the value of such collateral is not sufficient to satisfy the
Indebtedness secured thereby, the claims for the amounts thereafter remaining
outstanding on such Indebtedness would be entitled to share with the claims of
holders of the Notes and the Trustee with respect to any other assets of Schuff.
As of March 31, 1998, after giving effect to the issuance of the Notes and the
application of the proceeds therefrom and the Acquisition, Schuff and its
subsidiaries would have had outstanding approximately $3.2 million of secured
Indebtedness and approximately $119.1 million of unsecured senior Indebtedness
and other liabilities. See "-- Certain Covenants -- Limitation on Indebtedness"
and "-- Limitation on Subsidiary Indebtedness and Preferred Stock."
The Indenture provides that each of Schuff's existing subsidiaries (and any
other Subsidiary that guarantees any Indebtedness of Schuff or other Obligor in
the future) shall be a Guarantor. The Guarantees will be senior unsecured
obligations of each respective Guarantor and will rank pari passu in right of
payment with all other Indebtedness and liabilities of such Guarantor that are
not subordinated by their terms to other existing and future Indebtedness of
such Guarantor, and senior in right of payment to all Subordinated Indebtedness
of such Guarantor. However, the Guarantees will be effectively subordinated to
secured Indebtedness of the Guarantors to the extent of the value of the assets
securing such Indebtedness. In the event of a bankruptcy, liquidation or
reorganization of a Guarantor, the assets of such Guarantor securing such
secured Indebtedness will be available to satisfy obligations with respect to
such secured Indebtedness before any payment therefrom could be made on the
Notes or the Guarantees.
The Notes will be effectively subordinated to claims of creditors (other
than Schuff or any Guarantor) of Schuff's Subsidiaries other than the
Guarantors. Claims of creditors (other than Schuff or a Guarantor) of such
Subsidiaries, including trade creditors, tort claimants, secured creditors,
taxing authorities and creditors holding guarantees, will generally have
priority as to assets of such Subsidiaries over the claims and equity interests
of Schuff and/or the Guarantors and, thereby indirectly, the holders of the
indebtedness of Schuff or the Guarantors, as applicable, including the Notes and
the Subsidiary Guarantees. Under limited circumstances the Indenture permits the
creation of, or the designation of existing Subsidiaries as, Unrestricted
Subsidiaries. The Notes will be effectively subordinated to claims of creditors
(other than Schuff or a Guarantor) of any Unrestricted Subsidiaries.
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PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $100.0 million
and will mature on June 1, 2008. The Notes will bear interest at the rate per
annum stated on the cover page hereof from the most recent interest payment date
to which interest has been paid or provided for, or, if no interest has been
paid, from the date of original issuance. Interest on the Notes will be payable
semi-annually in arrears on June 1 and December 1 of each year, commencing
December 1, 1998, to the Persons in whose names such Notes are registered at the
close of business on the May 15 or November 15 immediately preceding such
interest payment date. Interest will be calculated on the basis of a 360-day
year consisting of twelve 30-day months.
The Notes may be presented or surrendered for payment of principal,
premium, if any, and interest, and for registration of transfer or exchange, at
the office or agency of Schuff within the City and State of New York maintained
for such purpose. In addition, in the event the Notes do not remain in
book-entry form, interest may be paid, at the option of Schuff, by check mailed
to the registered holders of the Notes at the respective addresses as set forth
on the Securities Register. The Notes will be issued only in fully registered
form, without coupons, in denominations of $1,000 and integral multiples
thereof. No service charge will be made for any registration of transfer or
exchange or redemption of Notes, but Schuff or the Trustee may require in
certain circumstances payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
GUARANTEES OF NOTES
Each Guarantor will unconditionally guarantee, jointly and severally, to
each holder and the Trustee, the full and prompt performance of Schuff's
Obligations under the Indenture and the Notes, including the payment of
principal of, premium, if any, on and interest on the Notes pursuant to its
Guarantee. As of the Issue Date after giving effect to the consummation of the
Acquisition, the Initial Guarantors will be the only Guarantors. All such
Guarantors will also guarantee the obligations of Schuff under Schuff's Existing
Credit Facility. Schuff will cause each Subsidiary that guarantees any
Indebtedness of Schuff or any other Obligor to execute and deliver a supplement
to the Indenture pursuant to which such Subsidiary will guarantee the payment of
the Notes on the same terms and conditions as the Guarantees by the Initial
Guarantors.
The Obligations of each Guarantor will be limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the Obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations under
the Indenture, result in the Obligations of such Guarantor under the Guarantee
not constituting a fraudulent conveyance or fraudulent transfers under federal
or state law or otherwise not being void, voidable or unenforceable under any
bankruptcy reorganization, receivership, insolvency, liquidation or other
similar legislation or legal principles under any applicable foreign law. Each
Guarantor that makes a payment or distribution under a Guarantee shall be
entitled to a contribution from each other Guarantor in a pro rata amount based
on the Adjusted Net Assets of each Guarantor. See "Risk Factors -- Fraudulent
Transfer Statutes."
Each Guarantor may consolidate with or merge into or sell or otherwise
dispose of all or substantially all of its Property and assets to Schuff or
another Guarantor without limitation, except to the extent any such transaction
is subject to the "Consolidation, Merger, Conveyance, Lease or Transfer"
covenant of the Indenture. Each Guarantor may consolidate with or merge into or
sell all or substantially all of its Property and assets to a Person other than
Schuff or another Guarantor (whether or not Affiliated with the Guarantor),
provided that (a) if the surviving Person is not the Guarantor, the surviving
Person agrees to assume such Guarantor's Guarantee and all its Obligations
pursuant to the Indenture (except to the extent the following paragraph would
result in the release of such Guarantee) and (b) such transaction does not (i)
violate any of the covenants described below under "-- Certain Covenants" or
(ii) result in a Default or Event of Default being in existence or continuing
immediately thereafter.
Upon the sale or other disposition (by merger or otherwise) of a Guarantor
(or all or substantially all of its Property and assets) to a Person other than
Schuff or another Guarantor and pursuant to a transaction that is otherwise in
compliance with the Indenture (including as described in clause (b) of the
foregoing paragraph
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and as described below in the covenant described "-- Certain
Covenants -- Limitation on Asset Sales"), such Guarantor (unless it otherwise
remains a Subsidiary) shall be deemed released from its Guarantee and the
related Obligations set forth in the Indenture, provided that any such
termination shall occur only to the extent that all Obligations of such
Guarantor under all of its guarantees of, and under all of its pledges of assets
or other security interests which secure, other Indebtedness of Schuff or any
other Subsidiary shall also terminate or be released upon such sale or other
disposition. Each Guarantor that is designated as an Unrestricted Subsidiary in
accordance with the Indenture shall be released from its Guarantee and the
related Obligations set forth in the Indenture so long as it remains an
Unrestricted Subsidiary.
The Indenture provides that any Guarantee by a Subsidiary (other than an
Initial Guarantor) shall be automatically and unconditionally released and
discharged, as evidenced by a supplemental indenture executed by Schuff, the
Guarantors, if any, and the Trustee, upon the release or discharge of the
guarantee which resulted in the creation of such Subsidiary's Guarantee and all
other guarantees of the Obligations of any Obligor on the Notes, except a
discharge or release by, or as a result of, payment under such Guarantee.
OPTIONAL REDEMPTION
Except as provided in the next paragraph, the Notes will not be redeemable
at the option of Schuff prior to June 1, 2003. On or after such date, the Notes
will be redeemable at the option of Schuff, in whole at any time or in part from
time to time, upon not less than 30 nor more than 60 days notice, at the
following prices (expressed in percentages of the principal amount thereof), if
redeemed during the twelve-month period beginning June 1 of the years indicated
below, in each case together with interest accrued to the redemption date
(subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003............................................ 105.250%
2004............................................ 103.938%
2005............................................ 102.625%
2006............................................ 101.313%
2007 and thereafter............................. 100.000%
</TABLE>
Notwithstanding the foregoing, at any time during the first 36 months after
the Issue Date, Schuff may, at its option, redeem up to a maximum of 35% of the
original aggregate principal amount of the Notes with the net cash proceeds of
one or more Public Equity Offerings at a redemption price equal to 110.5% of the
principal amount thereof, plus accrued and unpaid interest thereon to the
redemption date; provided that at least 65% of the original aggregate principal
amount of Notes originally issued shall remain outstanding immediately after the
occurrence of any such redemption; and provided, further, that each such
redemption shall occur within 90 days of the closing of such Public Equity
Offering.
If fewer than all the Notes are redeemed, selection for redemption will be
made by the Trustee in accordance with the principal stock exchange, if any, on
which the Notes are listed, or, if the Notes are not so listed, on a pro rata
basis, by lot or by any other means which the Trustee determines to be fair and
appropriate.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder will have the right
to require Schuff to repurchase such holder's Notes in whole or in part (the
"Change of Control Offer") at a purchase price (the "Change of Control Purchase
Price") in cash equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the Change of Control Payment
Date (as defined below) on the terms described below.
Within 30 days following any Change of Control, Schuff or the Trustee (at
the expense of Schuff) will mail a notice to each holder and to the Trustee
stating, among other things, (i) that a Change of Control has
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occurred and a Change of Control Offer is being made as provided for in the
Indenture, and that, although holders are not required to tender their Notes,
all Notes that are validly tendered will be accepted for payment; (ii) the
Change of Control Purchase Price and the repurchase date, which will be no
earlier than 30 days and no later than 60 days after the date such notice is
mailed (the "Change of Control Payment Date"); (iii) that any Note accepted for
payment pursuant to the Change of Control Offer (and duly paid for on the Change
of Control Payment Date) will cease to accrue interest after the Change of
Control Payment Date; (iv) that any Notes (or portions thereof) not validly
tendered will continue to accrue interest; (v) the procedures that holders of
Notes must follow to withdraw an election to tender Notes (or portions thereof);
and (vi) the instructions and any other information necessary to enable holders
to tender their Notes (or portions thereof) and have such Notes (or portions
thereof) purchased pursuant to the Change of Control Offer. Schuff will comply
with any applicable tender offer rules (including, without limitation, any
applicable requirements of Rule 14e-1 under the Exchange Act) in the event that
the Change of Control Offer is triggered under the circumstances described
herein.
The existence of the holders' rights to require, subject to certain
conditions, Schuff to repurchase Notes upon a Change of Control may deter a
third party from acquiring Schuff in a transaction that constitutes a Change of
Control. The source of funds for the repurchase of Notes upon a Change of
Control will be Schuff's cash or cash generated from operations or other
sources, including borrowings or sales of assets; however, a change of control
event (as described in the Existing Credit Facility) constitutes an event of
default thereunder, and might constitute an event of default under other
Indebtedness, that alleviates the lenders of the relevant Indebtedness from any
obligation to make loans and allowing them to accelerate the Indebtedness
outstanding thereunder. There can be no assurance that sufficient funds will be
available at the time of any Change of Control to repay all amounts owing under
such other Indebtedness or to make the required payments of the Notes. See "Risk
Factors -- Possible Inability to Repurchase Notes Upon a Change of Control." In
the event that a Change of Control Offer occurs at a time when Schuff does not
have sufficient available funds to pay the Change of Control Purchase Price for
all Notes validly tendered pursuant to such offer or at a time when Schuff is
prohibited from purchasing the Notes (and Schuff is unable either to obtain the
consent of the holders of the relevant Indebtedness or to repay such
Indebtedness), an Event of Default would occur under the Indenture. In addition,
one of the events that constitutes a Change of Control under the Indenture is a
sale, conveyance, transfer or lease of all or substantially all of the assets of
Schuff or Schuff and the Subsidiaries, taken as a whole. The Indenture will be
governed by New York law, and there is no established quantitative definition
under New York law of "substantially all' of the assets of a corporation.
Accordingly, if Schuff or its Subsidiaries were to engage in a transaction in
which it or they disposed of less than all of the assets of Schuff or Schuff and
its Subsidiaries taken as a whole, as applicable, a question or interpretation
would arise as to whether such disposition was of "substantially all" of its
assets and whether Schuff was required to make a Change of Control Offer.
Schuff will not be required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
Indenture applicable to a Change of Control Offer made by Schuff and repurchases
all Notes validly tendered and not withdrawn under such Change of Control Offer.
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the holders to require Schuff
to repurchase or redeem the Notes in the event of a takeover, recapitalization
or similar restructuring. The provisions of the Indenture may not afford holders
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction affecting Schuff that may adversely
affect holders because (i) such transactions may not involve a shift in voting
power or beneficial ownership or, even if they do, may not involve a shift of
the magnitude required under the definition of Change of Control to require
Schuff to make a Change of Control Offer or (ii) such transactions may include
an actual shift in voting power or beneficial ownership to a Permitted Holder
which is excluded under the definition of Change of Control from the amount of
shares involved in determining whether or not the transaction involves a shift
of the magnitude required to trigger the provisions. A transaction involving the
management of Schuff or its Affiliates, or a transaction involving a
recapitalization of Schuff, will result in a Change of Control only if it is the
type of transaction specified in such definition.
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CERTAIN COVENANTS
Set forth below are certain covenants contained in the Indenture.
Transactions with Affiliates. Subsequent to the Issue Date, Schuff will
not, and will not permit any Subsidiary to, directly or indirectly, enter into
or permit to exist any transaction or series of related transactions (including,
but not limited to, the purchase, sale, lease or exchange of Property, the
making of any Investment, the giving of any guarantee or the rendering of any
service) with any Affiliate of Schuff, other than transactions among Schuff and
any Subsidiaries, unless (i) such transaction or series of related transactions
is on terms no less favorable to Schuff or such Subsidiary than those that could
be obtained in a comparable arm's length transaction with a Person that is not
such an Affiliate, and (ii) (a) with respect to a transaction or series of
related transactions that has a Fair Market Value in excess of $1.0 million, the
transaction or series of related transactions is approved by a majority of the
Board of Directors of Schuff (including a majority of the disinterested
directors), which approval is set forth in a Board Resolution certifying that
such transaction or series of transactions complies with clause (i) above, and
(b) with respect to a transaction or series of related transactions that has a
Fair Market Value in excess of $3.0 million, Schuff delivers an opinion as to
the fairness from a financial point of view to Schuff or such Subsidiary issued
by an investment banking firm of nationally recognized standing or other
independent appraisal firm or expert of nationally recognized standing that is
qualified, in the reasonable and good faith judgment of the Board of Directors,
to perform the task for which it has been engaged. The foregoing provisions
shall not be applicable to (i) reasonable and customary compensation,
indemnification and other benefits paid or made available to an officer,
director or employee of Schuff or a Subsidiary for services rendered in such
person's capacity as an officer, director or employee (including reimbursement
or advancement of reasonable out-of-pocket expenses and provisions of directors'
and officers' liability insurance), (ii) the making of any Restricted Payment
otherwise permitted by the Indenture, (iii) transactions and agreements existing
on the Issue Date and described in this Prospectus under the caption "Certain
Relationships and Related Transactions" and (iv) loans to officers and employees
of Schuff and its Subsidiaries made in the ordinary course of business and in
furtherance of Schuff's business in an aggregate amount not to exceed $500,000
at any one time outstanding.
Limitation on Restricted Payments. Schuff will not and will not permit any
Subsidiary to make any Restricted Payment, directly or indirectly, unless at the
time of and after giving effect to the proposed Restricted Payment, (a) no
Default shall have occurred and be continuing (or would result therefrom), (b)
Schuff could incur at least $1.00 of additional Indebtedness under the test
described in the first sentence under the caption "-- Certain
Covenants -- Limitation on Indebtedness" and (c) the aggregate amount of all
Restricted Payments declared or made on or after the Issue Date by Schuff or any
Subsidiary shall not exceed the sum of (i) $1.0 million, plus (ii) 50% (or if
such Consolidated Net Income shall be a deficit, minus 100% of such deficit) of
the aggregate Consolidated Net Income accrued during the period beginning on the
first day of the fiscal quarter in which the Issue Date falls and ending on the
last day of the fiscal quarter ending immediately prior to the date of such
proposed Restricted Payment, minus 100% of the amount of any writedowns,
write-offs and other negative extraordinary charges not otherwise reflected in
Consolidated Net Income during such period, plus (iii) an amount equal to the
aggregate net cash proceeds received by Schuff, subsequent to the Issue Date,
from the issuance or sale (other than to a Subsidiary) of shares of its Capital
Stock (excluding Redeemable Stock, but including Capital Stock issued upon the
exercise of options, warrants or rights to purchase Capital Stock (other than
Redeemable Stock) of Schuff) subsequent to the Issue Date, plus (iv) 100% of the
liability (expressed as a positive number) as expressed on the face of a balance
sheet in accordance with GAAP in respect of any Indebtedness of Schuff or any of
its Subsidiaries, or the carrying value of Redeemable Stock, which has been
converted into, exchanged for or satisfied by the issuance of shares of Capital
Stock (other than Redeemable Stock) of Schuff, subsequent to the Issue Date,
plus (v) 100% of the net reduction in Restricted Investments, subsequent to the
Issue Date, in any Person, resulting from payments of interest on Indebtedness,
dividends, repayments of loans or advances, or other transfers of Property (but
only to the extent such interest, dividends, repayments or other transfers of
Property are not included in the calculation of Consolidated Net Income), in
each case to Schuff or any Subsidiary from any Person (including, without
limitation, from Unrestricted Subsidiaries) or from redesignations of
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<PAGE> 77
Unrestricted Subsidiaries as Subsidiaries (valued in each case as provided in
the definition of "Investment"), not to exceed in the case of any Person the
amount of Restricted Investments previously made by Schuff or any Subsidiary in
such Person and in each such case which was treated as a Restricted Payment.
The foregoing provisions will not prevent: (A) the payment of any dividend
on Capital Stock of any class within 60 days after the date of its declaration
if at the date of declaration such payment would have been permitted by the
Indenture; (B) any repurchase or redemption of Capital Stock or Subordinated
Indebtedness of Schuff or a Subsidiary made by exchange for Capital Stock of
Schuff (other than Redeemable Stock), or out of the net cash proceeds from the
substantially concurrent issuance or sale (other than to a Subsidiary) of
Capital Stock of Schuff (other than Redeemable Stock), provided that the net
cash proceeds from such sale are excluded from computations under clause
(c)(iii) above to the extent that such proceeds are applied to purchase or
redeem such Capital Stock or Subordinated Indebtedness; (C) so long as no
Default shall have occurred and be continuing or should occur as a consequence
thereof, any repurchase or redemption of Subordinated Indebtedness of Schuff or
a Subsidiary solely in exchange for, or out of the net cash proceeds from the
substantially concurrent sale of, new Subordinated Indebtedness of Schuff or a
Subsidiary, so long as such Subordinated Indebtedness is permitted under the
covenant described under "-- Limitation on Indebtedness" and (x) is subordinated
to the Notes at least to the same extent as the Subordinated Indebtedness so
exchanged, purchased or redeemed, (y) has a stated maturity later than the
stated maturity of the Subordinated Indebtedness so exchanged, purchased or
redeemed and (z) has an Average Life at the time incurred that is greater than
the remaining Average Life of the Subordinated Indebtedness so exchanged,
purchased or redeemed; (D) Investments in any Joint Ventures in an aggregate
amount not to exceed $2.0 million; (E) existing affiliate leases set forth on a
schedule to the Indenture and renewals and extensions thereof not involving
changes in the terms thereof materially adverse to Schuff; (F) any dividend,
obligation or other payment by any Subsidiary on shares of its Common Stock that
is paid pro rata to all holders of such Common Stock; and (G) so long as no
Default or Event of Default shall have occurred and be continuing, repurchases
by the Company of Capital Stock (other than Preferred Stock) of the Company from
officers and employees of the Company or any of its Subsidiaries or their
authorized representatives upon the death, disability or termination of
employment of such employees, in an aggregate amount not to exceed $1.0 million
in any calendar year. See "Certain Relationships and Related Transactions."
Notwithstanding the foregoing, the amount available for Investments in Joint
Ventures pursuant to clause (D) of the preceding sentence may be increased by
the aggregate amount received by Schuff and its Subsidiaries from a Joint
Venture on or before such date resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advance or other transfers of
Property made to such Joint Venture (but only to the extent such interest,
dividends, repayments or other transfers of Property are not included in the
calculation of Consolidated Net Income). Restricted Payments permitted to be
made as described in the first sentence of this paragraph will be excluded in
calculating the amount of Restricted Payments thereafter, except that any
dividends, distributions or other payments made to a Person other than to Schuff
or a Wholly Owned Subsidiary permitted to be made pursuant to clause (F) and any
repurchase of Capital Stock of the Company permitted to be made pursuant to
clause (G) will be included in calculating the amount of Restricted Payments
thereafter and except that any such Restricted Payments permitted to be made
pursuant to clause (D) will be included in calculating the amount of Restricted
Payments made pursuant to such clause (D) thereafter.
For purposes of this covenant, if a particular Restricted Payment involves
a non-cash payment, including a distribution of assets, then such Restricted
Payment shall be deemed to be an amount equal to the cash portion of such
Restricted Payment, if any, plus an amount equal to the Fair Market Value of the
non-cash portion of such Restricted Payment.
Limitation on Indebtedness. Schuff will not, and will not permit any
Subsidiary to, directly or indirectly, incur any Indebtedness (including
Acquired Indebtedness), unless after giving pro forma effect to the incurrence
of such Indebtedness, the Consolidated Interest Coverage Ratio for the
Determination Period preceding the Transaction Date is at least 2.0 to 1.0.
Notwithstanding the foregoing, Schuff or any Subsidiary may incur Permitted
Indebtedness which such Person is permitted thereby to incur. Any Indebtedness
of a Person existing at the time at which such Person becomes a Subsidiary
(whether by merger, consolidation,
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acquisition or otherwise) shall be deemed to be incurred by such Subsidiary at
the time at which it becomes a Subsidiary.
Limitation on Subsidiary Indebtedness and Preferred Stock. Schuff will not
permit any Subsidiary to, directly or indirectly, incur any Indebtedness or
issue any Preferred Stock except:
(a) Indebtedness or Preferred Stock issued to and held by Schuff or a
Subsidiary, so long as any transfer of such Indebtedness or Preferred Stock
to a Person other than Schuff or a Subsidiary will be deemed to constitute
an incurrence of such Indebtedness or Preferred Stock by the issuer thereof
as of the date of such transfer;
(b) Acquired Indebtedness or Preferred Stock of a Subsidiary issued
and outstanding prior to the date on which such Subsidiary was acquired by
Schuff (other than Indebtedness or Preferred Stock issued in connection
with or in anticipation of such acquisition);
(c) Indebtedness or Preferred Stock outstanding on the Issue Date and
listed in a schedule attached to the Indenture;
(d) Indebtedness permitted to be incurred by the first sentence of the
covenant described in "Limitation on Indebtedness" and Indebtedness
described in clauses (b), (c), (d), (e), (f), (g), (h) and (l) under the
definition of "Permitted Indebtedness";
(e) Permitted Subsidiary Refinancing Indebtedness of such Subsidiary;
and
(f) Indebtedness of a Subsidiary which represents the assumption by
such Subsidiary of Indebtedness of another Subsidiary in connection with a
merger of such Subsidiaries, provided that no Subsidiary or any successor
(by way of merger) thereto existing on the Issue Date shall assume or
otherwise become responsible for any Indebtedness of an entity which is not
a Subsidiary on the Issue Date, except to the extent that a Subsidiary
would be permitted to incur such Indebtedness under this paragraph.
Limitations on Dividends and Other Payment Restrictions Affecting
Subsidiaries. Schuff will not, and will not permit any Subsidiary, directly or
indirectly, to create, enter into any agreement with any Person or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind which by its terms restricts the ability of any
Subsidiary to (a) pay dividends, in cash or otherwise, or make any other
distributions on its Capital Stock to Schuff or any Subsidiary, (b) pay any
Indebtedness owed to Schuff or any Subsidiary, (c) make loans or advances to
Schuff or any Subsidiary or (d) transfer any of its Property or assets to Schuff
or any Subsidiary except any encumbrance or restriction contained in any
agreement or instrument:
(i) existing on the Issue Date;
(ii) relating to any Property or assets acquired after the Issue Date,
so long as such encumbrance or restriction relates only to the Property or
assets so acquired and is not and are not created in anticipation of such
acquisition;
(iii) relating to any Acquired Indebtedness of any Subsidiary at the
date on which such Subsidiary was acquired by Schuff or any Subsidiary
(other than Indebtedness incurred in anticipation of such acquisition);
(iv) effecting a refinancing of Indebtedness incurred pursuant to an
agreement referred to in the foregoing clauses (i) through (iii), so long
as the encumbrances and restrictions contained in any such refinancing
agreement are no more restrictive than the encumbrances and restrictions
contained in such agreements;
(v) constituting customary provisions restricting subletting or
assignment of any lease of Schuff or any Subsidiary or provisions in
license agreements or similar agreements that restrict the assignment of
such agreement or any rights thereunder,
(vi) constituting restrictions on the sale or other disposition of any
Property securing Indebtedness as a result of a Permitted Lien on such
Property;
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(vii) constituting any temporary encumbrance or restriction with
respect to a Subsidiary pursuant to an agreement that has been entered into
for the sale or disposition of all or substantially all of the Capital
Stock of, or Property and assets of, such Subsidiary; or
(viii) governing Senior Debt permitted to be incurred under the
Indenture, provided that the terms and conditions of any such restrictions
and encumbrances are not materially more restrictive than those contained
in the Indenture.
Limitation on Asset Sales. Schuff will not engage in, and will not permit
any Subsidiary to engage in, any Asset Sale unless: (a) except in the case of an
Asset Sale resulting from the requisition of title to, seizure or forfeiture of
any Property or assets or any actual or constructive total loss or an agreed or
compromised total loss, Schuff or such Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the Property; (b) at least 75% of such consideration consists of Cash
Proceeds (or the assumption of Indebtedness of Schuff or such Subsidiary
relating to the Capital Stock or Property or asset that was the subject of such
Asset Sale and the unconditional release of Schuff or such Subsidiary from such
Indebtedness); (c) after giving effect to such Asset Sale, the total non-cash
consideration held by Schuff from all such Asset Sales does not exceed $2.0
million; and (d) Schuff delivers to the Trustee an Officers' Certificate
certifying that such Asset Sale complies with clauses (a), (b) and (c). Schuff
or such Subsidiary, as the case may be, may apply the Net Available Proceeds
from each Asset Sale (x) to the acquisition of one or more Replacement Assets or
(y) to repurchase or repay Senior Debt (with a permanent reduction of
availability in the case of revolving credit borrowings); provided that such
acquisition or such repurchase or repayment shall be made within 270 days after
the consummation of the relevant Asset Sale; provided, further, that any such
Net Available Proceeds that are applied to the acquisition of Replacement Assets
useful in the business of Schuff or any of its Subsidiaries pursuant to any
binding agreement relating thereto shall be deemed to have been applied for such
purpose within such 270-day period so long as they are so applied within 30 days
of the effective date of such agreement.
Any Net Available Proceeds from any Asset Sale that are not used so to
acquire Replacement Assets or to repurchase or repay Senior Debt within 270 days
after consummation of the relevant Asset Sale constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $5.0 million, Schuff shall
within 270 days thereafter, or at any time after receipt of Excess Proceeds but
prior to there being $5.0 million of Excess Proceeds, Schuff may, at its option,
make a pro rata offer (an "Asset Sale Offer") to all holders of Notes and
holders of Senior Debt, if and to the extent Schuff is required by the
instruments governing such Senior Debt to make such an offer, to purchase Notes
and such Senior Debt in an aggregate amount equal to the Excess Proceeds, at a
price in cash (the "Asset Sale Offer Purchase Price") equal to 100% of the
outstanding principal amount of the Notes plus accrued interest and Special
Interest, if any, to the date of purchase and, in the case of such other Senior
Debt, 100% of the principal amount thereof, plus accrued and unpaid interest, if
any, thereon to the date of purchase, in accordance with the procedures set
forth in the Indenture. Upon completion of such Asset Sale Offer, the amount of
Excess Proceeds shall be reset to zero and Schuff may use any remaining amount
for general corporate purposes.
Schuff will comply with any applicable tender offer rules (including,
without limitation, any applicable requirements of Rule 14e-1 under the Exchange
Act) in the event that an Asset Sale Offer is required under the circumstances
described herein.
Limitation on Sale and Lease-Back Transactions. Schuff will not, and will
not permit any Subsidiary to, directly or indirectly, enter into, assume,
guarantee or otherwise become liable with respect to any Sale and Lease-Back
Transaction unless (i) the proceeds from such Sale and Lease-Back Transaction
are at least equal to the Fair Market Value of such Property being transferred
and (ii) Schuff or such Subsidiary would have been permitted to enter into such
transaction under the covenants described in "-- Limitation on Indebtedness,"
"-- Limitation or Liens" and "-- Limitation on Subsidiary Indebtedness and
Preferred Stock."
Limitation on Liens. Schuff will not, and will not permit any Subsidiary
to, directly or indirectly, create, affirm, incur, assume or suffer to exist any
Liens of any kind other than Permitted Liens on or with respect to any Property
or assets of Schuff or such Subsidiary or any interest therein or any income or
profits therefrom, whether owned at the Issue Date or thereafter acquired,
without effectively providing that the Notes or the
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Guarantees, as applicable, shall be secured equally and ratably with (or prior
to) the Indebtedness so secured for so long as such obligations are so secured.
Limitation on Guarantees by Subsidiaries. Schuff may not permit any
Subsidiary which is not already a Guarantor, directly or indirectly, to
guarantee any Indebtedness of Schuff or any other Obligor ("Guaranteed
Indebtedness") unless (i) such Subsidiary simultaneously executes and delivers a
supplemental indenture to the Indenture providing for a Guarantee of payment of
the Notes by such Subsidiary and (ii) such Subsidiary waives and will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against Schuff or
any other Subsidiary as a result of any payment by such Subsidiary under its
Guarantee. If the Guaranteed Indebtedness is pari passu with the Notes, then the
guarantee of such Guaranteed Indebtedness shall be pari passu with or
subordinated to the Guarantee; and if the Guaranteed Indebtedness is
subordinated to the Notes, then the guarantee of such Guaranteed Indebtedness
shall be subordinated to the Guarantee at least to the extent that all
Guaranteed Indebtedness is subordinated to the Notes.
Notwithstanding the foregoing, any Guarantee by a Subsidiary that was
incurred pursuant to the terms of the preceding paragraph (but not otherwise)
shall provide by its terms that it shall be automatically and unconditionally
released and discharged upon the release or discharge of the guarantee which
resulted in the creation of such Subsidiary's Guarantee, except a discharge or
release by, or as a result of, payment under such guarantee.
Unrestricted Subsidiaries. The Indenture provides that Schuff may
designate a subsidiary (including a newly formed or newly acquired subsidiary)
of Schuff or any of its Subsidiaries as an Unrestricted Subsidiary; provided
that (i) immediately after giving effect to the transaction, Schuff could incur
$1.00 of additional Indebtedness pursuant to the first sentence of
"-- Limitation on Indebtedness" and (ii) such designation is at the time
permitted under "-- Limitation on Restricted Payments." Notwithstanding any
provisions of this covenant all subsidiaries of an Unrestricted Subsidiary will
be Unrestricted Subsidiaries.
The Indenture further provides that Schuff will not, and will not permit
any of its Subsidiaries to, take any action or enter into any transaction or
series of transactions that would result in a Person (other than a newly formed
subsidiary having no outstanding Indebtedness (other than Indebtedness to Schuff
or a Subsidiary) at the date of determination) becoming a Subsidiary (whether
through an acquisition, the redesignation of an Unrestricted Subsidiary or
otherwise) unless, after giving effect to such action, transaction or series of
transactions on a pro forma basis, (i) Schuff could incur at least $1.00 of
additional Indebtedness pursuant to the first sentence of "-- Limitation on
Indebtedness" and (ii) no Default or Event of Default would occur.
Subject to the preceding paragraphs, an Unrestricted Subsidiary may be
redesignated as a Subsidiary. The designation of a subsidiary as an Unrestricted
Subsidiary or the designation of an Unrestricted Subsidiary as a Subsidiary in
compliance with the preceding paragraphs shall be made by the Board of Directors
pursuant to a Board Resolution delivered to the Trustee and shall be effective
as of the date specified in such Board Resolution, which shall not be prior to
the date such Board Resolution is delivered to the Trustee. Any Unrestricted
Subsidiary shall become a Subsidiary if it incurs any Indebtedness other than
Non-Recourse Indebtedness. If at any time Indebtedness of an Unrestricted
Subsidiary which was Non-Recourse Indebtedness no longer so qualifies, such
Indebtedness shall be deemed to have been incurred when such Non-Recourse
Indebtedness becomes Indebtedness.
Limitations on Line of Business. The Indenture provides that neither
Schuff nor any of its Subsidiaries will directly or indirectly engage to any
substantial extent in any line or lines of business activity other than a
Related Business.
Reports. The Indenture provides that, whether or not Schuff is subject to
Section 13(a) or 15(d) of the Exchange Act, or any successor provision thereto,
Schuff shall file with the Commission the annual reports, quarterly reports and
other documents which Schuff would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d) or any successor provision
thereto if Schuff were subject thereto, such documents to be filed with the
Commission on or prior to the respective dates (the "Required Filing
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Dates") by which Schuff would have been required to file them. Schuff shall also
(whether or not it is required to file reports with the Commission), within 30
days of each Required Filing Date, (i) transmit by mail to all holders of Notes,
as their names and addresses appear in the applicable Security Register, without
cost to such holders or Persons, and (ii) file with the Trustee, copies of the
annual reports, quarterly reports and other documents (without exhibits) which
Schuff has filed or would have filed with the Commission pursuant to Section
13(a) or 15(d) of the Exchange Act, any successor provisions thereto or this
covenant. Schuff shall not be required to file any report with the Commission if
the Commission does not permit such filing. In addition, Schuff shall furnish to
the Trustee, the holders of the Notes and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144(d)(4) under the Securities Act and the exhibits omitted from the
information furnished pursuant to the preceding sentence, for so long as the
Notes are not freely transferable under the Securities Act.
CONSOLIDATION, MERGER, CONVEYANCE, LEASE OR TRANSFER
Schuff will not, in any transaction or series of transactions, consolidate
with or merge into any other Person (other than a merger of a Wholly Owned
Subsidiary into Schuff in which Schuff is the continuing corporation), continue
in a new jurisdiction or sell, convey, assign, transfer, lease or otherwise
dispose of all or substantially all of the Property and assets of Schuff and the
Subsidiaries, taken as a whole, to any Person, unless
(i) either (a) Schuff shall be the continuing corporation or (b) the
corporation (if other than Schuff) formed by such consolidation or into which
Schuff is merged, or the Person which acquires, by sale, assignment, conveyance,
transfer, lease or disposition, all or substantially all of the Property and
assets of Schuff and the Subsidiaries, taken as a whole (such corporation or
Person, the "Surviving Entity"), shall be a corporation organized and validly
existing under the laws of the United States of America, any political
subdivision thereof or any state thereof or the District of Columbia, and shall
expressly assume, by a supplemental indenture, the due and punctual payment of
the principal of (and premium, if any) and interest (including Special Interest,
if any) on all the Notes and the performance of Schuff's covenants and
obligations under the Indenture;
(ii) immediately before and after giving effect to such transaction or
series of transaction on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), no Event of Default or
Default shall have occurred and be continuing or would result therefrom;
(iii) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), Schuff (or the Surviving
Entity if Schuff is not continuing) shall have a Consolidated Net Worth equal to
or greater than the Consolidated Net Worth of Schuff immediately prior to such
transactions; and
(iv) immediately after giving effect to any such transaction or series of
transactions on a pro forma basis as if such transaction or series of
transactions had occurred on the first day of the Determination Period, Schuff
(or the Surviving Entity if Schuff is not continuing) would be permitted to
incur $1.00 of additional Indebtedness pursuant to the test described in the
first sentence under the caption "-- Certain Covenants -- Limitation on
Indebtedness."
The provision of clause (iv) shall not apply to any merger or consolidation
into or with, or any such transfer of all or substantially all of the Property
and assets of Schuff and the Subsidiaries taken as a whole into, Schuff.
In connection with any consolidation, merger, continuance, transfer of
assets or other transactions contemplated by this provision, Schuff shall
deliver, or cause to be delivered, to the Trustee, in form and substance
reasonably satisfactory to the Trustee, an Officers' Certificate and an opinion
of counsel, each stating that such consolidation, merger, continuance, sale,
assignment, conveyance or transfer and the
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supplemental indenture in respect thereto comply with the provisions of the
Indenture and that all conditions precedent in the Indenture relating to such
transactions have been complied with.
Upon any transaction or series of transactions that are of the type
described in, and are effected in accordance with, the foregoing paragraphs, the
Surviving Entity shall succeed to, and be substituted for, and may exercise
every right and power of, Schuff under the Indenture and the Notes with the same
effect as if such Surviving Entity had been named as Schuff in the Indenture;
and when a Surviving Person duly assumes all of the obligations and covenants of
Schuff pursuant to the Indenture and the Notes, except in the case of a lease,
the predecessor Person shall be relieved of all such obligations.
EVENTS OF DEFAULT
Each of the following is an "Event of Default" under the Indenture:
(a) default in the payment of interest on any Note issued pursuant to
the Indenture when the same becomes due and payable, and the continuance of
such default for a period of 30 days;
(b) default in the payment of principal of (or premium, if any, on)
any Note issued pursuant to the Indenture at its Maturity, whether upon
optional redemption, required repurchase (including pursuant to a Change of
Control Offer or an Asset Sale Offer) or otherwise or the failure to make
an offer to purchase any such Note as required;
(c) Schuff fails to comply with any of its covenants or agreements
contained in "-- Change of Control," "-- Certain Covenants -- Limitation on
Restricted Payments," "-- Certain Covenants -- Limitation on Asset Sales,"
"-- Certain Covenants -- Limitation on Indebtedness," "-- Certain
Covenants -- Limitation on Subsidiary Indebtedness and Preferred Stock,"
"-- Certain Covenants -- Limitation on Sale and Lease-Back Transactions" or
"-- Consolidation, Merger, Conveyance, Lease or Transfer";
(d) default in the performance, or breach, of any covenant of Schuff
in the Indenture (other than a covenant addressed in clause (a), (b) or (c)
above) and continuance of such Default or breach, for a period of 30 days
after written notice thereof has been given to Schuff by the Trustee or to
Schuff and the Trustee by holders of at least 25% of the aggregate
principal amount at Stated Maturity of the outstanding Notes;
(e) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Schuff or any of its Subsidiaries (or
the payment of which is guaranteed by Schuff or any of its Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after the
date of the Indenture, which default (a) is caused by a failure to pay
principal of or premium, if any, or interest on such Indebtedness prior to
the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been
a Payment Default or the maturity of which has been so accelerated,
aggregates $10.0 million or more;
(f) the entry by a court of competent jurisdiction of one or more
final judgments against Schuff or any Subsidiary in an uninsured or
unindemnified aggregate amount in excess of $5.0 million which is not
discharged, waived, appealed, stayed, bonded or satisfied for a period of
60 consecutive days;
(g) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of Schuff or any Significant
Subsidiary in an involuntary case or proceeding under U.S. bankruptcy laws,
as now or hereafter constituted, or any other applicable Federal, state, or
foreign bankruptcy, insolvency, or other similar law or (ii) a decree or
order adjudging Schuff or any Significant Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of
Schuff or any Significant Subsidiary under U.S. bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal, state or foreign
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bankruptcy, insolvency, or similar law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of Schuff or any Significant Subsidiary or of any substantial part
of the Property or assets of Schuff or any Significant Subsidiary, or
ordering the winding up or liquidation of the affairs of Schuff or any
Significant Subsidiary, and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive days;
(h) (i) the commencement by Schuff or any Significant Subsidiary of a
voluntary case or proceeding under U.S. bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal, state or foreign
bankruptcy, insolvency or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent; or (ii) the consent
by Schuff or any Significant Subsidiary to the entry of a decree or order
for relief in respect of Schuff or any Significant Subsidiary in an
involuntary case or proceeding under U.S. bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal, state, or foreign
bankruptcy, insolvency or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against Schuff or any
Significant Subsidiary; or (iii) the filing by Schuff or any Significant
Subsidiary of a petition or answer or consent seeking reorganization or
relief under U.S. bankruptcy laws, as now or hereafter constituted, or any
other applicable Federal, state or foreign bankruptcy, insolvency or other
similar law; or (iv) the consent by Schuff or any Significant Subsidiary to
the filing of such petition or to the appointment of or taking possession
by a custodian, receiver, liquidator, assignee, trustee, sequestrator or
similar officer of Schuff or any Significant Subsidiary or of any
substantial part of the Property or assets of Schuff or any Significant
Subsidiary, or the making by Schuff or any Significant Subsidiary of an
assignment for the benefit of creditors; or (v) the admission by Schuff or
any Significant Subsidiary in writing of its inability to pay its debts
generally as they become due; or (vi) the taking of corporate action by
Schuff or any Significant Subsidiary in furtherance of any such action; or
(i) any Guarantee shall for any reason cease to be, or be asserted by
Schuff or any Guarantor, as applicable, not to be, in full force and effect
(except pursuant to the release of any such Guarantee in accordance with
the Indenture).
If any Event of Default (other than an Event of Default specified in clause
(g) or (h) above) occurs and is continuing, then and in every such case the
Trustee or the holders of not less than 25% of the outstanding aggregate
principal amount at Stated Maturity of the Notes, may declare the principal
amount at Stated Maturity of, premium, if any, and any accrued and unpaid
interest on, all such Notes then outstanding to be immediately due and payable
by a notice in writing to Schuff (and to the Trustee if given by holders of such
Notes), and upon any such declaration all amounts payable in respect of the
Notes will become and be immediately due and payable. If any Event of Default
specified in clause (g) or (h) above occurs, the principal amount at Stated
Maturity of, premium, if any, and any accrued and unpaid interest on, the Notes
then outstanding shall be come immediately due and payable without any
declaration or other act on the part of the Trustee or any holder of such Notes.
In the event of a declaration of acceleration because an Event of Default set
forth in clause (e) above has occurred and is continuing, such declaration of
acceleration shall be automatically rescinded and annulled if the event of
default triggering such Event of Default pursuant to clause (e) shall be
remedied or cured or waived by the holders of the relevant Indebtedness within
30 days after such event of default; provided that no judgment or decree for the
payment of the money due on the Notes has been obtained by the Trustee as
provided in the Indenture. Under certain circumstances, the holders of a
majority in principal amount at Stated Maturity of the outstanding Notes by
notice to Schuff and the Trustee may rescind an acceleration and its
consequences.
The holders of a majority in aggregate principal amount at Stated Maturity
of the Notes then outstanding by notice to the Trustee may on behalf of the
holders of all such Notes waive any existing Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, premium, if any on or the principal of, such Notes. Subject to the
provisions of the Indenture relating to the duties of the Trustee, the Trustee
is under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the holders, unless such
holders have offered to such Trustee reasonable security or indemnity. Subject
to the provisions of the Indenture and applicable law, the holders of a majority
in aggregate principal amount at Stated Maturity of the Notes at the time
outstanding
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have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee.
Schuff is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and Schuff is required within five Business Days
after becoming aware of any Default or Event of Default, to deliver to the
Trustee a statement describing such Default or Event of Default, its status and
what action Schuff is taking or proposes to take with respect thereto.
AMENDMENT, SUPPLEMENT AND WAIVER
Schuff, the Guarantors and the Trustee may, at any time and from time to
time, without notice to or consent of any holder, enter into one or more
indentures supplemental to the Indenture (a) to evidence the succession of
another Person to Schuff and the Guarantors and the assumption by such successor
of the covenants and Obligations of Schuff under the Indenture and contained in
the Notes and of the Guarantors contained in the Indenture and the Guarantees,
(b) to add to the covenants of Schuff, for the benefit of the holders, or to
surrender any right or power conferred upon Schuff or the Guarantors by the
Indenture, (c) to add any additional Events of Default, (d) to provide for
uncertificated Notes in addition to or in place of certificated Notes, (e) to
evidence and provide for the acceptance of appointment under the Indenture by
the successor Trustee, (f) to secure the Notes and/or the Guarantees, (g) to
cure any ambiguity, to correct or supplement any provision in the Indenture
which may be inconsistent with any other provision therein or to add any other
provisions with respect to matters or questions arising under the Indenture,
provided that such actions will not adversely affect the interests of the
holders in any material respect, (h) to add or release any Guarantor pursuant to
the terms of the Indenture or (i) to comply with the requirements of the
Commission to effect or maintain the qualification of the Indenture under the
Trust Indenture Act.
With the consent of the holders of not less than a majority in aggregate
principal amount at Stated Maturity of the outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for the Notes),
Schuff, the Guarantors and the Trustee may enter into one or more indentures
supplemental to the Indenture for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Indenture or
of modifying in any manner the rights of the holders; provided that no such
supplemental indenture will, without the consent of the holder of each
outstanding Note affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of interest on, any Note, or reduce the
principal amount thereof (or premium, if any), or the interest thereon that
would be due and payable upon Maturity thereof, or change the place of payment
where, or the coin or currency in which, any Note or any premium or interest
thereon is payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof, (b) reduce the
percentage in principal amount at Stated Maturity of the outstanding Notes, the
consent of whose Holders is necessary for any such supplemental indenture or
required for any waiver of compliance with certain provisions of the Indenture,
or certain Defaults thereunder, (c) modify the Obligations of Schuff to make
offers to purchase Notes upon a Change of Control or from the proceeds of Asset
Sales, (d) subordinate in right of payment, or otherwise subordinate, the Notes
or the Guarantees to any other Indebtedness, (e) amend, supplement or otherwise
modify the provisions of the Indenture relating to Guarantees or (f) modify any
of the provisions of this paragraph (except to increase any percentage set forth
herein).
The holders of not less than a majority in aggregate principal amount at
Stated Maturity of the outstanding Notes may on behalf of the holders of all the
Notes waive any past Default or Event of Default under the Indenture and its
consequences, except a Default or Event of Default (a) in the payment of the
principal of or premium, if any) or interest on any Note or (b) in respect of a
covenant or provision hereof which under the provision to the prior paragraph
cannot be modified or amended without the consent of the Holder of each
outstanding Note affected thereby.
SATISFACTION AND DISCHARGE OF THE INDENTURE; DEFEASANCE
Schuff may terminate its obligations and the obligations of the Guarantors
under the Notes, the Indenture and the Guarantees when (i) either (A) all
outstanding Notes have been delivered to the Trustee
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for cancellation or (B) all such Notes not therefore delivered to the Trustee
for cancellation have become due and payable, will become due and payable within
one year or are to be called for redemption within one year under irrevocable
arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name and at the expense of Schuff, and Schuff has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of
(premium, if any, on) and interest to the date of deposit or Maturity or date of
redemption; (ii) Schuff has paid or caused to be paid all sums then due and
payable by Schuff under the Indenture; and (iii) Schuff has delivered an
Officers' Certificate and an opinion of counsel relating to compliance with the
conditions set forth in the Indenture.
Schuff, at its election, shall (a) be deemed to have paid and discharged
its debt on the Notes and the Indenture and Guarantees shall cease to be of
further effect as to all outstanding Notes (except as to (i) rights of
registration of transfer, substitution and exchange of Notes, (ii) Schuff's
right of optional redemption, (iii) rights of holders to receive payments of
principal of, premium, if any, and interest on the Notes (but not the Change of
Control Purchase Price or the Asset Sale Offer Purchase Price) and any rights of
the holders with respect to such amounts, (iv) the rights, obligations and
immunities of the Trustee under the Indenture, and (v) certain other specified
provisions in the Indenture) or (b) cease to be under any obligation to comply
with certain restrictive covenants that are described in the Indenture, after
the irrevocable deposit by Schuff with the Trustee, in trust for the benefit of
the holders, at any time prior to the Stated Maturity of the Notes, of (A) money
in an amount, (B) U.S. Government Obligations which through the payment of
interest and principal will provide, not later than one Business Day before the
due date of payment in respect of such Notes, money in an amount or (c) a
combination thereof sufficient to pay and discharge the principal of, premium,
if any on, and interest on, such Notes then outstanding on the dates on which
any such payments are due in accordance with the terms of the Indenture and of
such Notes. Such defeasance or covenant defeasance shall be deemed to occur only
if certain conditions are satisfied, including, among other things, delivery by
Schuff to the Trustee of an opinion of outside counsel acceptable to the Trustee
to the effect that (i) such deposit, defeasance and discharge will not be
deemed, or result in, a taxable event for federal income tax purposes with
respect to the holders and (ii) Schuff's deposit will not result in the trust or
such Trustee being subject to regulation under the Investment Company Act of
1940, as amended.
ADDITIONAL INFORMATION
A copy of the Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part or anyone who receives this
Prospectus may obtain a copy of the Indenture without charge by writing to
Schuff at 1841 West Buchanan Street, Phoenix, Arizona 85009.
BOOK-ENTRY; DELIVERY; FORM AND TRANSFER
The Notes initially will be in the form of one or more registered global
notes without interest coupons (collectively, the "Global Exchange Notes"). Upon
issuance, the Exchange Notes will be deposited with the Trustee, as custodian
for DTC, in New York, New York, and registered in the name of DTC or its
nominee, in each case for credit to the accounts of DTC's Direct and Indirect
Participants (as defined below). Notes will be subject to the applicable rules
and procedures of DTC and its Direct or Indirect Participants (including, if
applicable, those of Euroclear and Cedel), which may change from time to time.
See "-- Transfers of Interests in One Global Note for Interests in Another
Global Note." All registered global notes are referred to herein collectively as
the "Global Notes."
Initially, the Trustee will act as Paying Agent and Registrar. The Notes
may be presented for registration of transfer and exchange at the offices of the
Registrar.
Depositary Procedures
DTC has advised Schuff that DTC is a limited-purpose trust company created
to hold securities for its participating organizations (collectively, the
"Direct Participants") and to facilitate the clearance and settlement of
transactions in those securities between Direct Participants through electronic
book-entry
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changes in accounts of Participants. The Direct Participants include securities
brokers and dealers (including the Initial Purchasers), banks, trust companies,
clearing corporations and certain other organizations, including Euroclear and
Cedel. Access to DTC's system is also available to other entities that clear
through or maintain a direct or indirect, custodial relationship with a Direct
Participant (collectively, the "Indirect Participants").
DTC has advised Schuff that, pursuant to DTC's procedures, (i) upon deposit
of the Global Exchange Notes, DTC will credit the accounts of the Direct
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Exchange Notes allocated by the Initial Purchasers to such
Direct Participants, and (ii) DTC will maintain records of the ownership
interests of such Direct Participants in the Global Exchange Notes and the
transfer of ownership interests by and between Direct Participants. DTC will not
maintain records of the ownership interests of, or the transfer of ownership
interests by and between, Indirect Participants or other owners of beneficial
interests in the Global Exchange Notes. Direct Participants and Indirect
Participants must maintain their own records of the ownership interests of, and
the transfer of ownership interests by and between, Indirect Participants and
other owners of beneficial interests in the Global Exchange Notes.
Investors in the U.S. Global Notes may hold their interests therein
directly through DTC if they are Direct Participants in DTC or indirectly
through organizations that are Direct Participants in DTC. Investors in the Reg
S Global Notes may hold their interests therein directly through Euroclear or
Cedel or indirectly through organizations that are participants in Euroclear or
Cedel. After the expiration of the 40-Day Restricted Period (but not earlier),
investors may hold interests in the Reg S Global notes through organizations
other than Euroclear and Cedel that are Direct Participants in the DTC system.
Morgan Guaranty Trust Company of New York, Brussels office, is the operator and
depositary of Euroclear and Citibank, N.A. is the operator and depositary of
Cedel (each, a "Nominee" of Euroclear and Cedel, respectively). Therefore, they
will each be recorded on DTC's records as the holders of all ownership interests
held by them on behalf of Euroclear and Cedel, respectively. Euroclear and Cedel
will maintain on their records the ownership interests, and transfer of
ownership interests by and between, their own customer's securities accounts.
DTC will not maintain records of the ownership interests of, or the transfer of
ownership interests by and between, customers of Euroclear or Cedel. All
ownership interests in any Global Exchange Notes, including those of customers'
securities accounts held through Euroclear or Cedel, may be subject to the
procedures and requirements of DTC.
The laws of some states in the United States require that certain persons
take physical delivery in definitive, certificated form, of securities that they
own. This may limit or curtail the ability to transfer beneficial interests in a
Global Note to such persons. Because DTC can act only on behalf of Direct
Participants, which in turn act on behalf of Indirect Participants and others,
the ability of a person having a beneficial interest in a Global Exchange Note
to pledge such interest to persons or entities that are not Direct Participants
in DTC, or to otherwise take actions in respect of such interests, may be
affected by the lack of physical certificates evidencing such interests. For
certain other restrictions on the transferability of the Notes see "-- Transfers
of Interests in Global Notes for Certificated Notes."
Except as described in "-- Transfer of Interests in Global Notes for
Certificated Notes," owners of beneficial interests in the Global Exchange Notes
will not have Notes registered in their names, will not receive physical
delivery of Notes in certificated form and will not be considered the registered
owners or holders thereof under the Indenture for any purpose.
Under the terms of the Indenture, Schuff, the Guarantors and the Trustee
will treat the persons in whose names the Notes are registered (including Notes
represented by Global Notes) as the owners thereof for the purpose of receiving
payments and for any and all other purposes whatsoever. Payments in respect of
the principal, premium, and interest on Global Exchange Notes registered in the
name of DTC or its nominee will be payable by the Trustee to DTC or its nominee
as the registered holder under the Indenture. Consequently, neither Schuff, the
Trustee nor any agent of Schuff, or the Trustee has or will leave any
responsibility or liability for (i) any aspect of DTC's records or any Direct
Participant's or Indirect Participant's records relating to or payments made on
account of beneficial ownership interests in the Global Exchange Notes or for
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maintaining, supervising or reviewing any of DTC's records or any Direct
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in any Global Exchange Note or (ii) any other matter
relating to the actions and practices of DTC or any of its Direct Participants
or Indirect Participants.
DTC has advised Schuff that its current payment practice (for payments of
principal, interest and the like) with respect to securities such as the Notes
is to credit the accounts of the relevant Direct Participants with such payment
on the payment date in amounts proportionate to such Direct Participant's
respective ownership interests in the Global Exchange Notes as shown on DTC's
records. Payments by Direct Participants and Indirect Participants to the
beneficial owners of the Notes will be governed by standing instructions and
customary practices between them and will not be the responsibility of DTC, the
Trustee, Schuff or the Guarantors. Neither Schuff, the Guarantors nor the
Trustee will be liable for any delay by DTC or its Direct Participants or
Indirect Participants in identifying the beneficial owners of the Notes and
Schuff and the Trustee may conclusively rely on and will be protected in relying
on instructions from DTC or its nominee as the registered owner of the Notes for
all purposes.
The Global Exchange Notes will trade in DTC's Same-Day Funds Settlement
System and, therefore, transfers between Direct Participants in DTC will be
effected in accordance with DTC's procedures, and will be settled in immediately
available funds. Transfers between Indirect Participants (other than Indirect
Participants who hold an interest in the Notes through Euroclear or Cedel) who
hold an interest through a Direct Participant will be effected in accordance
with the procedures of such Direct Participant but generally will settle in
immediately available funds. Transfers between and among Indirect Participants
who hold interest in the Notes through Euroclear and Cedel will be effected in
the ordinary way in accordance with their respective rules and operating
procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes described herein, crossmarket transfers between Direct Participants in
DTC, on the one hand, and Indirect Participants who hold interests in the Notes
through Euroclear or Cedel, on the other hand, will be effected by Euroclear or
Cedel's respective nominee through DTC in accordance with DTC's rules on behalf
of Euroclear or Cedel; however, delivery of instructions relating to
cross-market transactions must be made directly to Euroclear or Cedel, as the
case may be, by the counterparty in accordance with the rules and procedures of
Euroclear or Cedel and within their established deadlines (Brussels time for
Euroclear and UK time for Cedel). Indirect Participants who hold interest in the
Notes through Euroclear and Cedel may not deliver instructions directly to
Euroclear's or Cedel's Nominee. Euroclear or Cedel will, if the transaction
meets its settlement requirements, deliver instructions to its respective
Nominee to deliver or receive interests on Euroclear's or Cedel's behalf in the
relevant Global Note in DTC, and make or receive payment in accordance with
normal procedures for same-day fund settlement applicable to DTC.
Because of time zone differences, the securities accounts of an Indirect
Participant who holds an interest in the Notes through Euroclear or Cedel
purchasing an interest in a Global Note from a Direct Participant in DTC will be
credited, and any such crediting will be reported to Euroclear or Cedel during
the European business day immediately following the settlement date of DTC in
New York. Although recorded in DTC's accounting records as of DTC's settlement
date in New York, Euroclear and Cedel customers will not have access to the cash
amount credited to their accounts as a result of a sale of an interest in a Reg
S Global Note to a DTC Participant until the European business day for Euroclear
or Cedel immediately following DTC's settlement date.
DTC has advised Schuff that it will take any action permitted to be taken
by a holder of Notes only at the direction of one or more Direct Participants to
whose accounts interests in the Global Exchange Notes are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Direct Participant or Direct Participants has or have given
direction. However, if there is an Event of Default under the Notes, DTC
reserves the right to exchange Global Notes (without the direction of one or
more of its Direct Participants) for legended Notes in certificated form, and to
distribute such certificated forms of Notes to its Direct Participants. See
"-- Transfers of Interests in Global Notes for Certificated Notes."
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures
to facilitate transfers of interests in the Reg S Global Notes and in the U.S.
Global Notes among Direct Participants, Euroclear and
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Cedel, they are under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. None of Schuff,
the Guarantors, the Initial Purchasers or the Trustee will have any
responsibility for the performance by DTC, Euroclear and Cedel or their
respective Direct and Indirect Participants of their respective obligations
under the rules and procedures governing any of their operations.
The information in this section concerning DTC, Euroclear and Cedel and
their book-entry systems has been obtained from sources that Schuff believes to
be reliable, but Schuff takes no responsibility for the accuracy thereof.
TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
An entire Global Note may be exchanged for definitive Notes in registered,
certificated form without interest coupons ("Certificated Notes") if (i) DTC (x)
notifies Schuff that it is unwilling or unable to continue as depositary for the
Global Notes and Schuff thereupon fails to appoint a successor depositary within
90 days or (y) has ceased to be a clearing agency registered under the Exchange
Act, (ii) Schuff, at its option, notifies the Trustee in writing that it elects
to cause the issuance of Certificated Notes or (iii) there shall have occurred
and be continuing a Default or an Event of Default with respect to the Notes. In
any such case, Schuff will notify the Trustee in writing that, upon surrender by
the Direct and Indirect Participants of their interest in such Global Note,
Certificated Notes will be issued to each person that such Direct and Indirect
Participants and the DTC identify as being the beneficial owner of the related
Notes.
Beneficial interests in Global Notes held by any Direct or Indirect
Participant may be exchanged for Certificated Notes upon request to DTC, by such
Direct Participant (for itself or on behalf of an Indirect Participant), to the
Trustee in accordance with customary DTC procedures. Certificated Notes
delivered in exchange for any beneficial interest in any Global Note will be
registered in the names, and issued in any approved denominations, requested by
DTC on behalf of such Direct and Indirect Participants (in accordance with DTC's
customary procedures).
Neither Schuff, the Guarantors nor the Trustee will be liable for any delay
by the holder of the Notes or the DTC in identifying the beneficial owners of
Notes, and Schuff, the Guarantors and the Trustee may conclusively rely on, and
will be protected in relying on, instructions from the holder of the Global Note
or the DTC for all purposes.
Transfers of Certificated Notes for Interests in Global Notes
Certificated Notes may only be transferred if the transferor first delivers
to the Trustee a written certificate (and in certain circumstances, an opinion
of counsel) confirming that, in connection with such transfers, it has complied
with applicable restrictions on transfer.
Same Day Settlement and Payment
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, and interest be made by
wire transfer of immediately available same day funds to the accounts specified
by the holder of interests in such Global Note. With respect to Certificated
Notes, Schuff will make all payments of principal, premium, if any, interest by
wire transfer of immediately available same day funds to the accounts specified
by the holders thereof or, if no such account is specified, by mailing a check
to each such holder's registered address. Schuff expects that secondary trading
in the Certificated Notes will also be settled in immediately available funds.
EXCHANGE OFFER; REGISTRATION RIGHTS
Schuff and the Initial Guarantors agreed pursuant to the Registration
Rights Agreement with the Initial Purchaser, for the benefit of the holders of
the Notes, that Schuff would, at its cost, (i) within 60 days after the Issue
Date, file the Exchange Offer Registration Statement with the Commission with
respect to the Exchange Offer for the Exchange Notes having terms substantially
identical in all material respects to the
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Notes (except that the Exchange Notes will not contain terms with respect to
transfer restrictions and registration under the Securities Act) and (ii) use
its best efforts to cause the Exchange Offer Registration Statement to be
declared effective under the Securities Act within 150 days after the Issue
Date. Upon the effectiveness of the Exchange Offer Registration Statement,
Schuff will offer the Exchange Notes in exchange for surrender of the
Outstanding Notes. Schuff will keep the Exchange Offer open for not less than 20
Business Days (or longer if required by applicable law) after the date notice of
the Exchange Offer is mailed to the holders of the Outstanding Notes. For each
Outstanding Note surrendered to Schuff pursuant to the Exchange Offer, the
holder of such Note will receive an Exchange Note having a principal amount
equal to that of the surrendered Outstanding Note. Interest on each Exchange
Note will accrue from the last interest payment date on which interest was paid
on the Outstanding Note surrendered in exchange thereof or, if no interest has
been paid on such Note, from the date of its original issue. Under existing
Commission interpretations, the Exchange Notes would be freely transferable by
holders other than affiliates of Schuff after the Exchange Offer without further
registration under the Securities Act if the holder of the Exchange Notes
represents that it is acquiring the Exchange Notes in the ordinary course of its
business, that it has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes and that it is not an
affiliate of Schuff, as such terms are interpreted by the Commission; provided,
however, that broker-dealers ("Participating Broker-Dealers") receiving Exchange
Notes in the Exchange Offer will have a prospectus delivery requirement with
respect to resales of such Exchange Notes. The Commission has taken the position
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to Exchange Notes (other than a resale of an unsold
allotment from the original sale of the Outstanding Notes) with the prospectus
contained in the Exchange Offer Registration Statement. Under the Registration
Rights Agreement, Schuff is required to allow Participating Broker-Dealers and
other persons, if any, with similar prospectus delivery requirements to use the
prospectus contained in the Exchange Offer Registration Statement in connection
with the resale of such Exchange Notes.
A Holder of Outstanding Notes (other than certain specified holders) who
wishes to exchange such Notes for Exchange Notes in the Exchange Offer will be
required to represent that any Exchange Notes to be received by it will be
acquired in the ordinary course of its business and that at the time of the
commencement of the Exchange Offer it has no arrangement or understanding with
any person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes and that it is not an "affiliate" of
Schuff, as defined in Rule 405 of the Securities Act, or if it is an affiliate,
that it will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable.
In the event that applicable interpretations of the staff of the Commission
do not permit Schuff to effect such an Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 180 days of the date of the
Registration Rights Agreement, or if the Initial Purchasers so request with
respect to Outstanding Notes not eligible to be exchanged for Exchange Notes in
the Exchange Offer, or if any Holder of Outstanding Notes is not eligible to
participate in the Exchange Offer or does not receive freely tradable Exchange
Notes in the Exchange Offer, Schuff will, at its cost, (a) as promptly as
practicable, file a Shelf Registration Statement covering resales of the
Outstanding Notes or the Exchange Notes, as the case may be, (b) use its best
efforts to cause the Shelf Registration Statement to be declared effective under
the Securities Act and (c) keep the Shelf Registration Statement effective until
the earlier of (i) the time when the Notes covered by the Shelf Registration
Statement can be sold pursuant to Rule 144 without any limitations under clauses
(c), (e), (f) and (h) of Rule 144 and (ii) two years from the Issue Date. Schuff
will, in the event a Shelf Registration Statement is filed, among other things,
provide to each holder for whom such Shelf Registration Statement was filed
copies of the prospectus which is a part of the Shelf Registration Statement,
notify each such holder when the Shelf Registration Statement has become
effective and take certain other actions as are required to permit unrestricted
resales of the Outstanding Notes or the Exchange Notes, as the case may be. A
holder selling such Outstanding Notes or Exchange Notes pursuant to the Shelf
Registration Statement generally would be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Agreement which are applicable to such holder
(including certain indemnification obligations).
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Holders of Notes will be required to make certain representations to Schuff
(as described in the Registration Rights Agreement) in order to participate in
the Exchange Offer and will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on the
Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Notes included in the Shelf
Registration Statement.
If Schuff effects the Exchange Offer, it will be entitled to close the
Exchange Offer 20 Business Days after the commencement thereof (unless a longer
period is required by applicable law); provided that it has accepted all
Outstanding Notes heretofore validly tendered in accordance with the terms of
the Exchange Offer.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Agreement,
a copy of which is available upon request to Schuff.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any capitalized terms used herein for which no definition
is provided.
"Acquired Indebtedness" means, with respect to any specified Person,
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a subsidiary of such specified Person,
but excluding Indebtedness which is extinguished, retired or repaid in
connection with such other Person merging with or into or becoming a subsidiary
of such specified Person.
"Adjusted Net Assets" of a Guarantor at any date shall mean the amount by
which the fair value of the Property and other assets of such Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), but excluding liabilities under the Guarantee
of such Guarantor.
"Affiliate" of any specified Person means another Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Asset Acquisition" means (a) an Investment by Schuff or any Subsidiary of
Schuff in any other Person pursuant to which such Person becomes a Subsidiary or
is merged with or into Schuff or any Subsidiary or (b) the acquisition by Schuff
or any Subsidiary of the assets of any Person (other than a Subsidiary) which
constitute all or substantially all of the assets of such Person or comprise any
division or line of business of such Person.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
or other disposition (including, without limitation, by way of merger or
consolidation or by means of a Sale and Lease-Back Transaction) by Schuff or any
Subsidiary to any Person other than Schuff or a Subsidiary, in one transaction,
or a series of related transactions, of (i) any Capital Stock of any Subsidiary
(except for directors' qualifying shares or certain minority interests sold to
other Persons solely due to local law requirements that there be more than one
stockholder, but which are not in excess of what is required for such purpose),
or (ii) any other Property or assets of Schuff or any Subsidiary, other than (A)
sales of obsolete or worn out equipment in the ordinary course of business or
other assets that, in Schuff's reasonable judgment, are no longer used or useful
in the conduct of the business of Schuff and its Subsidiaries, (B) a Restricted
Payment or Restricted Investment permitted under "-- Certain
Covenants -- Limitation on Restricted Payments," (C) a Change of Control, (D) a
consolidation, merger, continuance or the disposition of all or substantially
all of the assets of Schuff
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and the Subsidiaries, taken as a whole, in compliance with the provision of the
Indenture described in "-- Consolidation, Merger, Conveyance, Lease or Transfer"
and (E) any transfer, conveyance, sale, lease or other disposition of Property
or assets, the gross proceeds of which (exclusive of indemnities) do not exceed
$25,000. An Asset Sale shall include the requisition of title to, seizure of or
forfeiture of any Property or assets, or any actual or constructive total loss
or an agreed or compromised total loss of any Property or assets.
"Attributable Indebtedness" in respect of a Sale and Lease-Back Transaction
means, at any date of determination, the present value (discounted at the
interest rate borne by the Notes, compounded annually) of the total obligations
of the lessee for rental payments during the remaining term of the lease (or to
the first date on which the lessee is permitted to terminate such lease without
the payment of a penalty) included in such Sale and Lease-Back Transaction
(including any period for which such lease has been extended).
"Average Life" means, as of any date, with respect to any debt security,
the quotient obtained by dividing (i) the sum of the products of (x) the number
of years from such date to the date of each scheduled principal payment
(including any sinking fund or mandatory redemption payment requirements) of
such debt security multiplied in each case by (y) the amount of such principal
payment by (ii) the sum of all such principal payments.
"Board of Directors" of any Person means the Board of Directors of such
Person, or any authorized committee of such Board of Directors.
"Board Resolution" means a duly authorized resolution of the Board of
Directors in full force and effect as of the time of determination and certified
as such.
"Borrowing Base" means, at any date of determination, an amount equal to
75% of the accounts receivable owned by Schuff and its Subsidiaries that are not
more than 90 days past due and 60% of the inventory of Schuff and its
Subsidiaries, each as calculated on a consolidated basis in accordance with GAAP
as shown on the last financial statements delivered to the Trustee pursuant to
the covenant described in "--Certain Covenants -- Reports."
"Capital Lease Obligation" means, at any time as to any Person with respect
to any Property leased by such Person as lessee, the amount of the liability
with respect to such lease that would be required at such time to be capitalized
and accounted for as a capital lease on the balance sheet of such Person on
prepared in accordance with GAAP.
"Capital Stock" in any Person means any and all shares, interests,
partnership interests, participations or other equivalents in the equity
interest (however designated) in such Person and any rights (other than debt
securities convertible into an equity interest), warrants or options to acquire
any equity interest in such Person.
"Cash Proceeds" means, with respect to any Asset Sale by any Person, the
aggregate consideration received for such Asset Sale by such Person in the form
of cash or cash equivalents (including any amounts of insurance or other
proceeds received in connection with an Asset Sale of the type described in the
last sentence of the definition thereof or marketable securities that are
converted into cash or cash equivalents within 30 days of an Asset Sale),
including payments in respect of deferred payment obligations when received in
the form of cash or cash equivalents (except to the extent that such obligations
are financed or sold with recourse to such Person or any subsidiary thereof).
"Change of Control" means (i) any Person or group (as defined in Section
13(d)(3) or 14(d)(2) of the Exchange Act) other than Permitted Holders becomes
the direct or beneficial owner (as defined in Rule 13d-3 under the Exchange Act)
of more than 50% of the voting power of the outstanding Voting Stock of Schuff;
(ii) Schuff is merged with or into or consolidated with another corporation and,
immediately after giving effect to the merger or consolidation, less than 50% of
the outstanding voting securities entitled to vote generally in the election of
directors or persons who serve similar functions of the surviving or resulting
entity are then beneficially owned (within the meaning of Rule 13d-3 of the
Exchange Act) in the aggregate by (x) the stockholders of Schuff immediately
prior to such merger or consolidation, or (y) if the record date has been set to
determine the stockholders of Schuff entitled to vote on such merger or
consolidation, the stockholders of Schuff as of such record date; (iii) Schuff,
either individually or in conjunction with one or
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more Subsidiaries, sells, conveys, transfers or leases, or the Subsidiaries
sell, convey, transfer or lease, all or substantially all of the assets of
Schuff or Schuff and the Subsidiaries, taken as a whole (either in one
transaction or a series of related transactions), including Capital Stock of the
Subsidiaries, to any Person (other than a Wholly Owned Subsidiary); (iv) the
liquidation or dissolution of Schuff; or (v) the first day on which a majority
of the individuals who constitute the Board of Directors of Schuff are not
Continuing Directors.
"Consolidated Interest Coverage Ratio" means as of the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date"), the ratio of (a) the aggregate amount
of EBITDA of Schuff and its consolidated Subsidiaries for the four fiscal
quarters for which financial information in respect thereof is available
immediately prior to the applicable Transaction Date (the "Determination
Period") to (b) the aggregate Consolidated Interest Expense of Schuff and its
consolidated Subsidiaries for such Determination Period. In addition to and
without limitation of the foregoing, for purposes of this definition, "EBITDA"
and "Consolidated Interest Expense" shall be calculated after giving effect on a
pro forma basis to (i)(a) the incurrence of any Indebtedness of Schuff or any of
its Subsidiaries (and the application of the proceeds thereof) giving rise to
the need to make such calculation and (b) any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof) occurring on or after
the first day of the Determination Period and on or prior to the Transaction
Date, in each case set forth in clauses (i)(a) and (b), as if such incurrence or
repayment, as the case may be, (and the application of proceeds thereof)
occurred on the first day of the Determination Period (except that Indebtedness
under any revolving credit facility shall be deemed to be the average daily
balance of such Indebtedness during such Determination Period) and (ii) any
Asset Sales or Asset Acquisitions (including (x) any Person who becomes a
Subsidiary as a result of any such Asset Acquisition and including any Asset
Sale or Asset Acquisition during such Determination Period by any such Person
determined as if such Person had been a Subsidiary at the time of such
transaction; provided that all Indebtedness of Schuff and any such Subsidiaries
shall be deemed to have been incurred on the first day of the Determination
Period and (y) the increase or decrease, as the case may be, in EBITDA directly
attributable to such Asset Sale or Asset Acquisition, as the case may be)
occurring on or after the first day of the Determination Period and on or prior
to the Transaction Date, as if such Asset Sale or Asset Acquisition, as the case
may be, (including the issuance, assumption or liability for any such Acquired
Indebtedness) occurred on the first day of the Determination Period. For
purposes of this definition, whenever pro forma effect is to be given to an
Asset Acquisition, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
incurred in connection therewith shall be determined in good faith by a
responsible financial or accounting officer of Schuff.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication (A) the sum of (i) the aggregate amount of cash and
noncash interest expense (including capitalized interest) of such Person and its
subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP in respect of Indebtedness (including, without limitation, (x) net
costs associated with Interest Swap Obligations (including any amortization of
discounts), (y) the interest portion of any deferred payment obligation
calculated in accordance with the effective interest method, and (z) all accrued
interest paid or accrued, or scheduled to be paid or accrued, during such
period); (ii) dividends on Preferred Stock or Redeemable Stock of such Person
(and Preferred Stock or Redeemable Stock of its subsidiaries if paid to a Person
other than such Person or its subsidiaries) declared and payable in cash; (iii)
the portion of any rental obligation of such Person or its subsidiaries in
respect of any Capital Lease Obligation allocable to interest expense in
accordance with GAAP; (iv) the portion of any rental obligation of such Person
or its subsidiaries in respect of any Sale and Lease-Back Transaction allocable
to interest expense (determined as if such were treated as a Capital Lease
Obligation); and (v) to the extent any debt of any other Person is guaranteed by
such Person or any of its subsidiaries, the aggregate amount of interest paid,
accrued or scheduled to be paid or accrued, by such other Person during such
period attributable to any such debt, less (B) to the extent included in (A)
above, amortization or write-off of deferred financing costs of such Person and
its subsidiaries during such period and any charge related or any premium or
penalty paid in connection with redeeming or retiring any Indebtedness of such
Person and its subsidiaries prior to its stated maturity; in the case of both
(A) and (B) above, after elimination of intercompany accounts among such Person
and its
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subsidiaries and as determined in accordance with GAAP. For purposes of clause
(ii) above, dividend requirements attributable to any Preferred Stock or
Redeemable Stock shall be deemed to be an amount equal to the amount of dividend
requirements on such Preferred Stock or Redeemable Stock times a fraction, the
numerator of which is one, and the denominator of which is one minus the
applicable combined federal, state, local and foreign income tax rate of Schuff
and its Subsidiaries (expressed as a decimal), on a consolidated basis for the
fiscal year immediately preceding the date of the transaction giving rise to the
need to calculate Consolidated Interest Expense.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or net loss, as the case may be) of such Person and its
subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP, provided that there shall be excluded therefrom, without duplication,
(i) any net income of any Unrestricted Subsidiary, except that Schuff's or any
Subsidiary's interest in the net income of such Unrestricted Subsidiary for such
period shall be included in such Consolidated Net Income up to the aggregate
amount of cash or cash equivalents actually distributed by such Unrestricted
Subsidiary during such period to Schuff or a Subsidiary as a dividend or other
distribution, (ii) gains and losses, net of taxes, from Asset Sales or reserves
relating thereto, (iii) the net income of any Person that is not a subsidiary or
that is accounted for by the equity method of accounting which shall be included
only to the extent of the amount of dividends or distributions paid to such
Person or its subsidiaries, (iv) items (but not loss items) classified as
extraordinary, unusual or nonrecurring (other than the tax benefit, if any, of
the utilization of net operating loss carryforwards or alternative minimum tax
credits), (v) the net income (or net loss) of any Person acquired by such
specified Person or any of its subsidiaries in a pooling of interests
transaction for any period prior to the date of such acquisition, (vi) any gain
or loss, net of taxes, realized on the termination of any employee pension
benefit plan, (vii) the net income (but not net loss) of any subsidiary of such
specified Person to the extent that the transfer to that Person of that income
is not at the time permitted, directly or indirectly, by any means (including by
dividend, distribution, advance or loan or otherwise), or by operation of the
terms of its charter or any agreement with a Person other than with such
specified Person, instrument held by a Person other than by such specified
Person, judgment, decree, order, statute, law, rule or governmental regulations
applicable to such subsidiary or its stockholders, except for any dividends or
distributions actually paid by such subsidiary to such Person, and (viii) with
regard to a non-Wholly Owned Subsidiary, any aggregate net income (or loss) in
excess of such Person's or such subsidiary's pro rata share of such non-Wholly
Owned Subsidiary's net income (or loss).
"Consolidated Net Worth" of any Person means, as of any date, the sum of
the Capital Stock and additional paid-in capital plus retained earnings (or
minus accumulated deficit) of such Person and its subsidiaries on a consolidated
basis at such date, each item determined in accordance with GAAP, less amounts
attributable to Redeemable Stock of such Person or any of its subsidiaries.
"Continuing Director" means an individual who (i) is a member of the Board
of Directors of Schuff and (ii) either (A) was a member of the Board of
Directors of Schuff on the Issue Date or (B) whose nomination for election or
election to the Board of Directors of Schuff was approved by vote of at least a
majority of the directors then still in office who were either directors on the
Issue Date or whose election or nomination for election was previously so
approved.
"Currency Hedge Obligations" means, at any time as to any Person, the
obligations of such Person at such time which were incurred in the ordinary
course of business pursuant to any foreign currency exchange agreement, option
or future contract or other similar agreement or arrangement designed to protect
against or manage such Person's or any of its subsidiaries' exposure to
fluctuations in foreign currency exchange rates.
"Default" means any event, act or condition the occurrence of which is, or
after notice or the passage of time or both would be, an Event of Default.
"Determination Period" has the meaning specified in clause (a) of the
definition of "Consolidated Interest Coverage Ratio."
"EBITDA" means, with respect to any Person for any period, the Consolidated
Net Income of such Person for such period, plus to the extent reflected in the
income statement of such Person for such period
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from which Consolidated Net Income is determined, without duplication, (i)
Consolidated Interest Expense, (ii) income tax expense, (iii) depreciation
expense, (iv) amortization expense, (v) any charge related to any premium or
penalty paid in connection with redeeming or retiring any Indebtedness prior to
its stated maturity, (vi) any one-time write-off of non-recurring closing costs
incurred in connection with any merger consummated after the Issue Date and
(vii) any other noncash charges minus, to the extent reflected in such income
statement, any noncash credits that had the effect of increasing Consolidated
Net Income of such Person for such period.
"Fair Market Value" means, with respect to consideration received or to be
received pursuant to any transaction by any Person, the fair market value of
such consideration as determined in good faith by the Board of Directors of
Schuff and, in the case of a determination including a Fair Market Value in
excess of $1.0 million, shall be evidenced by a resolution of the Board of
Directors of Schuff delivered to the Trustee.
"Fair Value" means, with respect to any asset or Property, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction.
"GAAP" means, at any date, United States generally accepted accounting
principles, consistently applied, as set forth in the opinions of the Accounting
Principles Board of the American Institute of Certified Public Accountants
("AICPA") and statements of the Financial Accounting Standards Board, or in such
other statements by such other entity as may be designated by the AICPA, that
are applicable to the circumstances as of the date of determination; provided,
however, that all calculations made for purposes of determining compliance with
the provisions set forth in the Indenture shall utilize GAAP in effect at the
Issue Date.
"Guarantee" means any guarantee of the Notes by any Guarantor in accordance
with the provisions described under "-- Guarantees of Notes."
"Guarantor" means the Initial Guarantors and each other future Subsidiary
of Schuff that is required to guarantee Schuff's Obligations under the Notes and
the Indenture as described in "-- Guarantees of Notes" and "-- Certain
Covenants -- Limitation on Guarantees by Subsidiaries" and any other Subsidiary
of Schuff that executes a supplemental indenture in which such Subsidiary agrees
to guarantee Schuff's Obligations under the Notes and the Indenture.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, suffer to exist, incur (by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or obligation on the balance sheet of
such Person (and "incurrence," "incurred," "incurrable" and "incurring" shall
have meanings correlative to the foregoing); provided that a change in GAAP that
results in an obligation of such Person that exists at such time becoming
Indebtedness shall not be deemed an incurrence of such Indebtedness.
Indebtedness otherwise incurred by a Person before it becomes a Subsidiary shall
be deemed to have been incurred at the time at which it becomes a Subsidiary. A
guarantee otherwise permitted by the Indenture to be incurred by Schuff or a
Subsidiary of Schuff of Indebtedness incurred in compliance with the terms of
the Indenture by Schuff or a Subsidiary of Schuff, as applicable, shall not
constitute a separate incurrence of Indebtedness.
"Indebtedness" as applied to any Person means, at any time, without
duplication, whether recourse is to all or a portion of the assets of such
Person, and whether or not contingent, (i) any obligation of such Person for
borrowed money; (ii) any obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including, without limitation,
any such obligations incurred in connection with acquisition of Property, assets
or businesses, excluding accounts payable made in the ordinary course of
business which are not more than 90 days overdue or which are being contested in
good faith and by appropriate proceedings; (iii) any obligation of such Person
for all or any part of the purchase price of Property or assets, or for the cost
of Property constructed or of improvements thereto (including any obligation
under or in connection with any letter of credit related thereto), other than
accounts payable incurred in respect of Property and services purchased in the
ordinary course of business which are no more than 90 days overdue or which are
being contested in good faith and by appropriate proceedings; (iv) any
obligation of such Person upon which interest
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charges are customarily paid (other than accounts payable incurred in the
ordinary course of business); (v) any obligation of such Person under
conditional sale or other title retention agreements relating to purchased
Property; (vi) any obligation of such Person issued or assumed as the deferred
purchase price of Property or assets (other than accounts payable incurred in
the ordinary course of business which are no more than 90 days overdue or which
are being contested in good faith and by appropriate proceedings); (vii) any
Capital Lease Obligation or Attributable Indebtedness pursuant to any Sale and
Lease-Back Transaction of such Person; (viii) any obligation of any other Person
secured by (or for which the obligee thereof has an existing right, contingent
or otherwise, to be secured by) any Lien on Property owned or acquired, whether
or not any obligation secured thereby has been assumed, by such Person; (ix) any
obligation of such Person in respect of any letter of credit supporting any
obligation of any other Person; (x) the maximum fixed repurchase price of any
Redeemable Stock of such Person (or if such Person is a subsidiary, any
Preferred Stock of such Person); (xi) the notional amount of any Interest Swap
Obligation or Currency Hedge Obligation of such Person at the time of
determination; and (xii) any obligation which is in economic effect a guarantee,
regardless of its characterization (other than an endorsement in the ordinary
course of business), with respect to any Indebtedness of another Person, to the
extent guaranteed. For purposes of the preceding sentence, the maximum fixed
repurchase price of any Redeemable Stock or subsidiary Preferred Stock that does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Redeemable Stock or subsidiary Preferred Stock as if such
Redeemable Stock or subsidiary Preferred Stock were repurchased on any date on
which Indebtedness shall be required to be determined pursuant to the Indenture;
provided that if such Redeemable Stock or subsidiary Preferred Stock is not then
permitted to be repurchased, the repurchase price shall be the book value of
such Redeemable Stock or subsidiary Preferred Stock. The amount of Indebtedness
of any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability of any
guarantees at such date; provided, further, that for purposes of calculating the
amount of any non-interest bearing or other discount security, such Indebtedness
shall be deemed to be the principal amount thereof that would be shown on the
balance sheet of the issuer dated such date prepared in accordance with GAAP but
that such security shall be deemed to have been incurred only on the date of the
original issuance thereof.
"Initial Guarantors" means all of Schuff's subsidiaries as of the close of
business on the Issue Date.
"Interest Swap Obligations" means, with respect to any Person, the
obligation of such Person pursuant to any interest rate swap agreement, interest
rate cap, collar or floor agreement or other similar agreement or arrangement
designed to protect against or manage such Person's or any of its subsidiaries'
exposure to fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct, indirect or
contingent investment in another Person, whether by means of a share purchase,
capital contribution, loan, advance (other than advances to employees for moving
and travel expenses, drawing accounts and similar expenditures in the ordinary
course of business) or similar credit extension constituting Indebtedness of
such other Person, and any guarantee of Indebtedness of any other Person;
provided that the term "Investment" shall not include any transaction involving
the purchase or other acquisition (including by way of merger) of Property or
assets (including Capital Stock) by Schuff or any Subsidiary in exchange for
Capital Stock (other than Redeemable Stock) of Schuff. The amount of any
Person's Investment shall be the original cost of such Investment to such
Person, plus the cost of all additions thereto paid by such Person, and minus
the amount of any portion of such Investment repaid to such Person in cash as a
repayment of principal or a return of capital, as the case may be, but without
any other adjustments for increases or decreases in value, or write-ups,
writedowns, or write-offs with respect to such Investment. In determining the
amount of any Investment involving a transfer of any Property or assets other
than cash, such Property or assets shall be valued at its Fair Value at the time
of such transfer as determined in good faith by the board of directors (or
comparable body) of the Person making such transfer. Schuff shall be deemed to
make an "Investment" in the amount of the Fair Value of the Property and assets
of a Subsidiary at the time such Subsidiary is designated an Unrestricted
Subsidiary.
"Issue Date" means the date on which the Notes are first authenticated and
delivered under the Indenture.
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"Joint Venture" means any Person (other than a Subsidiary) designated as
such by a resolution of the Board of Directors of Schuff and as to which (i)
Schuff, any Subsidiary or any Joint Venture owns less than 50% of the Capital
Stock of such Person; (ii) no more than ten unaffiliated Persons own of record
any Capital Stock of such Person; (iii) at all times, each such Person owns the
same proportion of each class of Capital Stock of such Person outstanding at
such time; (iv) no Indebtedness of such Person is or becomes outstanding other
than Non-Recourse Indebtedness; (v) there exist no consensual encumbrances or
restrictions on the ability of such Person to (x) pay, directly or indirectly,
dividends or make any other distributions in respect of its Capital Stock to the
holders of its Capital Stock or (y) pay any Indebtedness or other obligation
owed to the holders of its Capital Stock or (z) make any Investment in the
holders of its Capital Stock, in each case other than the types of consensual
encumbrances or restrictions that would be permitted by the "Limitations on
Dividends and Other Payment Restrictions Affecting Subsidiaries" covenant if
such Person were a Subsidiary; and (vi) the business engaged in by such Person
is a Related Business.
"Lien" means any mortgage, pledge, hypothecation, charge, assignment,
deposit arrangement, encumbrance, security interest, lien (statutory or other),
or preference, priority or other security or similar agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
agreement to give or grant a Lien or any lease, conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing).
"Maturity" means the date on which the principal of a Note becomes due and
payable as provided therein or in the Indenture, whether at the Stated Maturity
or the Change of Control Payment Date or purchase date established pursuant to
the terms of the Indenture for an Asset Sale Offer or by declaration of
acceleration, call for redemption or otherwise.
"Net Available Proceeds" means, as to any Asset Sale, the Cash Proceeds
therefrom, net of all legal and title expenses, commissions and other fees and
expenses incurred, and all Federal, state, foreign, recording and local taxes
payable, as a consequence of such Asset Sale, net of all payments made to any
Person other than Schuff or a Subsidiary on any Indebtedness which is secured by
such assets, in accordance with the terms of any Lien upon or with respect to
such assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Sale, or by applicable law, be repaid out of the proceeds
from such Asset Sale and, as for any Asset Sale by a Subsidiary, net of the
equity interest in such Cash Proceeds of any holder of Capital Stock of such
Subsidiary (other than Schuff, any other Subsidiary or any Affiliate of Schuff
or any such other Subsidiary).
"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of an Unrestricted Subsidiary as to which (a) neither Schuff nor
any other Subsidiary (other than an Unrestricted Subsidiary) (i) provides credit
support including any undertaking, agreement or instrument which would
constitute Indebtedness or (ii) is directly or indirectly liable for such
Indebtedness and (b) no default with respect to such Indebtedness (including any
rights which the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any other Indebtedness of Schuff or its other Subsidiaries to declare
a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"Obligations" means, with respect to any Indebtedness, any obligation
thereunder, including, without limitation, principal, premium and interest
(including post petition interest thereon), penalties, fees, costs, expenses,
indemnifications, reimbursements, damages and other liabilities.
"Obligors" means Schuff and the Guarantors, collectively; "Obligor" means
Schuff or any Guarantor.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board, the President, the Chief Executive Officer
or a Vice President, and by the Chief Financial Officer, the Chief Accounting
Officer, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of Schuff or a Subsidiary and delivered to the Trustee, which shall
comply with the Indenture.
"Permitted Holders" means David A. Schuff and Scott A. Schuff and any
person related to such persons by kinship or marriage, trusts or similar
arrangements established solely on the behalf of one or more of them, and
partnerships and other entities that are controlled by them.
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"Permitted Indebtedness" means (a) Indebtedness of Schuff under the Notes;
(b) Indebtedness (and any guarantee thereof) under one or more credit or
revolving credit facilities with a bank or syndicate of banks or financial
institutions, including the Existing Credit Facility, as such may be amended,
modified, revised, extended, replaced, or refunded from time to time, in an
aggregate principal amount at any one time outstanding not to exceed at the time
of incurrence the greater of (i) $25.0 million or (ii) the Borrowing Base, less
any amounts derived from Asset Sales and applied to the required permanent
reduction of Senior Debt (and a permanent reduction of the related commitment to
lend or amount available to be reborrowed in the case of a revolving credit
facility) under such credit facilities as contemplated by the "Limitation on
Asset Sales" covenant; (c) Indebtedness of Schuff or any Subsidiary under
Interest Swap Obligations, provided that (i) such Interest Swap Obligations are
related to payment obligations on Indebtedness otherwise permitted under the
covenants described in "-- Certain Covenants -- Limitation on Indebtedness" and
"-- Limitation on Subsidiary Indebtedness and Preferred Stock" and (ii) the
notional principal amount of such Interest Swap Obligations does not exceed the
principal amount of the Indebtedness to which such Interest Swap Obligations
relate; (d) Indebtedness of Schuff or any Subsidiary under Currency Hedge
Obligations, provided that (i) such Currency Hedge Obligations are related to
payment obligations on Indebtedness otherwise permitted under the covenants
described in "-- Certain Covenants -- Limitation on Indebtedness" and
"-- Limitation on Subsidiary Indebtedness and Preferred Stock" or to the foreign
currency cash flows reasonably expected to be generated by Schuff and the
Subsidiary and (ii) the notional amount of such Currency Hedge Obligations does
not exceed the principal amount of the Indebtedness and the amount of foreign
currency cash flows to which such Currency Hedge Obligations relate; (e)
Indebtedness of Schuff or any Subsidiary outstanding on the Issue Date and
listed on a schedule to the Indenture (excluding Indebtedness under the Existing
Credit Facility which is permitted under clause (b) of this definition), (f) the
Guarantees of the Notes (and any assumption of the Obligations guaranteed
thereby); (g) Indebtedness of Schuff or any Subsidiary in respect of bid and
performance bonds, surety bonds, appeal bonds and letters of credit or similar
arrangements issued for the account of Schuff or any Subsidiary, in each case in
the ordinary course of business and other than for an obligation for money
borrowed; (h) Indebtedness of Schuff to a Subsidiary and Indebtedness of a
Subsidiary to Schuff or another Subsidiary; provided that upon any subsequent
event which results in any such Subsidiary ceasing to be a Subsidiary or any
other subsequent transfer of any such Indebtedness (except to Schuff or a
Subsidiary), such Indebtedness shall be deemed, in each case, to be incurred and
shall be treated as an incurrence for purposes of the "Limitation on
Indebtedness" and "-- Limitation on Subsidiary Indebtedness and Preferred Stock"
covenants at the time the Subsidiary in question ceased to be a Subsidiary or on
which such subsequent transfer occurred; (i) Indebtedness of Schuff in
connection with a purchase of the Notes pursuant to a Change of Control Offer,
provided that the aggregate principal amount of such Indebtedness does not
exceed 101% of the aggregate principal amount at Stated Maturity of the Notes
purchased pursuant to such Change of Control Offer, provided, further, that such
Indebtedness (A) has an Average Life equal to or greater than the remaining
Average Life of the Notes and (B) does not mature prior to one year following
the Stated Maturity of the Notes; (j) Permitted Refinancing Indebtedness; (k)
Permitted Subsidiary Refinancing Indebtedness; and (l) additional Indebtedness
in an aggregate principal amount not to exceed $5.0 million at any time
outstanding. So as to avoid duplication in determining the amount of Permitted
Indebtedness under any clause of this definition, guarantees permitted to be
incurred pursuant to the Indenture of, or obligations permitted to be incurred
pursuant to the Indenture in respect of letters of credit supporting,
Indebtedness otherwise included in the determination of such amount shall not
also be included.
"Permitted Investments" means (a) certificates of deposit, bankers
acceptances, time deposits, Eurocurrency deposits and similar types of
Investments routinely offered by commercial banks with final maturities of one
year or less issued by commercial banks organized in the United States, or
foreign branches thereof, having capital and surplus in excess of $500 million
or any commercial bank of any other country that is a member of the Organization
for Economic Cooperation and Development ("OECD") and has total assets in excess
of $500 million; (b) commercial paper issued by any corporation, if such
commercial paper has credit ratings of at least "A-1" or its equivalent by S&P
and at least "P-1" or its equivalent by Moody's; (c) U.S. Government Obligations
with a maturity of one year or less; (d) repurchase obligations for instruments
of the type described in clause (c) with any bank meeting the qualifications
specified in clause (a) above; (e) shares
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of money market mutual or similar funds having assets in excess of $500 million;
(f) payroll advances in the ordinary course of business and other advances and
loans to officers and employees of Schuff or any Subsidiary, so long as the
aggregate principal amount of such advances and loans, does not exceed $1.0
million at any one time outstanding; (g) Investments represented by that portion
of the proceeds from Asset Sales that is not required to be Cash Proceeds by the
covenant described in "-- Certain Covenants -- Limitation on Asset Sales"; (h)
Investments made by Schuff in Subsidiaries (or any Person that will be a
Subsidiary as a result of such Investment) or by a Subsidiary in Schuff or in
one or more Subsidiaries (or any Person that will be a Subsidiary as a result of
such Investment); (i) Investments in stock, obligations or securities received
in settlement of debts owing to Schuff or any Subsidiary as a result of
bankruptcy or insolvency proceedings or upon the foreclosure, perfection or
enforcement of any Lien in favor of Schuff or any Subsidiary, in each case as to
debt owing to Schuff or any Subsidiary that arose in the ordinary course of
business of Schuff or any such Subsidiary; (j) Interest Swap Obligations with
respect to any floating rate Indebtedness that is permitted by the terms of the
Indenture to be outstanding; (k) Currency Hedge Obligations, provided that such
Currency Hedge Obligations constitute Permitted Indebtedness permitted by clause
(d) of the definition thereof; (l) foreign bank deposits and cash equivalents in
jurisdictions where Schuff or its Subsidiaries are then actively conducting
business provided that (i) all such deposits are required to be made in the
ordinary course of business, (ii) such deposits do not exceed $1.0 million in
the aggregate and (iii) the funds so deposited do not remain in such bank for
more than 30 days; (m) Investments in prepaid expenses, negotiable instruments
held for collection and lease, utility, worker's compensation and performance
and other similar deposits in the ordinary course of business; and (n)
Investments pursuant to any agreement or obligation of Schuff or any Subsidiary
in effect on the Issue Date and listed on a schedule attached to the Indenture.
"Permitted Liens" means (a) Liens in existence on the Issue Date; (b) Liens
created for the benefit of the Notes and/or the Guarantees; (c) Liens on
Property of a Person existing at the time such Person is merged or consolidated
with or into Schuff or a Subsidiary (and not incurred as a result of, or in
anticipation of, such transaction), provided that any such Lien relates solely
to such Property; (d) Liens on Property existing at the time of the acquisition
thereof (and not incurred as a result of, or in anticipation of such
transaction), provided that any such Lien relates solely to such Property; (e)
Liens incurred or pledges and deposits made in connection with worker's
compensation, unemployment insurance and other social security benefits,
statutory obligations, bid, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (f)
Liens imposed by law or arising by operation of law, including, without
limitation, landlords', mechanics', carriers', warehousemen's, materialmen's,
suppliers' and vendors' Liens and incurred in the ordinary course of business
for sums not delinquent or being contested in good faith, if such reserves or
other appropriate provisions, if any, as shall be required by GAAP shall have
been made with respect thereof; (g) zoning restrictions, easements, licenses,
covenants, reservations, restrictions on the use of real property and defects,
irregularities and deficiencies in title to real property that do not,
individually or in the aggregate, materially affect the ability of Schuff or any
Subsidiary to conduct its business as presently conducted; (h) Liens for taxes
or assessments or other governmental charges or levies not yet due and payable,
or the validity of which is being contested by Schuff or a Subsidiary in good
faith and by appropriate proceedings upon stay of execution or the enforcement
thereof and for which adequate reserves in accordance with GAAP or other
appropriate provision has been made; (i) Liens to secure Indebtedness incurred
for the purpose of financing all or a part of the purchase price or construction
cost of Property or assets acquired or constructed after the Issue Date,
provided that (1) the principal amount of Indebtedness secured by such Liens
shall not exceed 100% of the lesser of cost or Fair Market Value of the Property
or assets so acquired or constructed plus transaction costs related thereto, (2)
such Liens shall not encumber any other assets or Property of Schuff or any
Subsidiary (other than the proceeds thereof and accessions and upgrades thereto)
and (3) such Liens shall attach to such Property or assets within 120 days of
the date of the completion of the construction or acquisition of such Property
or assets; (j) Liens securing Capital Lease Obligations, provided that such
Liens secure Capital Lease Obligations in an aggregate principal amount not
exceeding $1.0 million at any one time outstanding; (k) Liens to secure any
extension, renewal, refinancing or refunding (or successive extensions,
renewals, refinancings or refundings), in whole or in part, of any Indebtedness
secured by Liens referred to in the foregoing clauses (a), (c) and (d), provided
that such Lien does not extend to any other Property or assets of Schuff or any
Subsidiary and the principal amount of the
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Indebtedness secured by such Lien is not increased; (l) leases or subleases of
real property to other Persons; (m) judgment liens not giving rise to an Event
of Default so long as any appropriate legal proceedings which may have been
initiated for the review of such judgment shall not have been finally terminated
or the period within which such proceeding may be initiated shall not have
expired; (n) rights of off-set of banks and other Persons; (o) liens in favor of
Schuff; (p) Liens securing Indebtedness described under clause (b) and clause
(l) of the definition of Permitted Indebtedness and (q) Liens securing other
Indebtedness in an aggregate principal amount not exceeding $1.0 million at any
one time outstanding.
"Permitted Refinancing Indebtedness" means Indebtedness of Schuff, incurred
in exchange for, or the net proceeds of which are used to renew, extend,
refinance, refund or repurchase, outstanding Indebtedness of Schuff which
outstanding Indebtedness was incurred in accordance with, or is otherwise
permitted by, the terms of clauses (a) and (e) of the definition of "Permitted
Indebtedness; provided that (i) if the Indebtedness being renewed, extended,
refinanced, refunded or repurchased is pari passu with or subordinated in right
of payment (without regard to its being secured) to the Notes, then such new
Indebtedness is pari passu with or subordinated in right of payment (without
regard to its being secured) to, as the case may be, the Notes at least to the
same extent as the Indebtedness being renewed, extended, refinanced, refunded or
repurchased, (ii) such new Indebtedness is scheduled to mature later than the
Indebtedness being renewed, extended, refinanced, refunded or repurchased, (iii)
such new Indebtedness has an Average Life at the time such Indebtedness is
incurred that is greater than the Average Life of the Indebtedness being
renewed, extended, refinanced, refunded or repurchased, and (iv) such new
Indebtedness is in aggregate principal amount (or, if such Indebtedness is
issued at a price less than the principal amount thereof, the aggregate amount
of gross proceeds therefrom is) not in excess of the aggregate principal amount
then outstanding of the Indebtedness being renewed, extended, refinanced,
refunded or repurchased (or if the Indebtedness being renewed, extended,
refinanced, refunded or repurchased was issued at a price less than the
principal amount thereof, then not in excess of the amount of liability in
respect thereof determined in accordance with GAAP) plus the amount of
reasonable fees, expenses and premium, if any, incurred by Schuff or such
Subsidiary in connection therewith.
"Permitted Subsidiary Refinancing Indebtedness" means Indebtedness of any
Subsidiary, incurred in exchange for, or the net proceeds of which are used to
renew, extend, refinance refund or repurchase, outstanding Indebtedness of such
Subsidiary which outstanding Indebtedness was incurred in accordance with, or is
otherwise permitted by, the terms of clauses (e) and (f) of the definition of
Permitted Indebtedness, provided that (i) if the Indebtedness being renewed,
extended, refinanced, refunded or repurchased is pari passu with or subordinated
in right of payment (without regard to its being secured) to the Guarantee of
such Subsidiary, then such new Indebtedness is pari passu with or subordinated
in right of payment (without regard to its being secured) to, as the case may
be, the Guarantee of such Subsidiary at least to the same extent as the
Indebtedness being renewed, extended, refinanced, refunded or repurchased, (ii)
such new Indebtedness is scheduled to mature later than the Indebtedness being
renewed, extended, refinanced, refunded or repurchased, (iii) such new
Indebtedness has an Average Life at the time Indebtedness is incurred that is
greater than the Average Life of the Indebtedness being renewed, extended,
refinanced, refunded or repurchased, and (iv) such new Indebtedness is in an
aggregate principal amount (or, if such Indebtedness is issued at a price less
than the principal amount thereof, the aggregate amount of gross proceeds
therefrom is) not in excess of the aggregate principal amount then outstanding
of the Indebtedness being renewed, extended, refinanced, refunded or repurchased
(or if the Indebtedness being renewed, extended, refinanced, refunded or
repurchased was issued at a price less than the principal amount hereof, then
not in excess of the amount of liability in respect thereof determined in
accordance with GAAP) plus the amount of reasonable fees, expenses and premium,
if any, incurred by Schuff or such Subsidiary in connection therewith.
"Person" means any individual, corporation, partnership, joint venture,
incorporated or unincorporated association, joint stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends and/or as to the distribution of assets upon any
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voluntary or involuntary liquidation, dissolution or winding up of such Person,
to shares of Capital Stock of at least one other class of such Person.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, excluding Capital Stock in any other Person.
"Public Equity Offering" means an offering of Capital Stock (other than
Redeemable Stock) of Schuff for cash pursuant to an effective registration
statement (other than on a Form S-4 or a Form S-8 or any other form relating to
securities issuable under any employee benefit plan of Schuff) under the
Securities Act.
"Redeemable Stock" means, with respect to any Person, any equity security
that by its terms or otherwise is required to be redeemed, or is redeemable at
the option of the holder thereof, at any time prior to one year following the
Stated Maturity of the Notes or is exchangeable into Indebtedness of such Person
or any of its subsidiaries.
"Related Business" means the steel fabrication, erection, engineering and
detailing business and activities incidental thereto and any business reasonably
complementary, related or ancillary thereto.
"Replacement Asset" means a Property or asset that, as determined by the
Board of Directors of Schuff as evidenced by a Board Resolution, is used or is
useful in a Related Business.
"Restricted Investment" means any Investment in any Person, including an
Unrestricted Subsidiary or the designation of a Subsidiary as an Unrestricted
Subsidiary, other than a Permitted Investment.
"Restricted Payment" means to (i) declare or pay any dividend on, or make
any distribution in respect of, or purchase, redeem, retire or otherwise acquire
for value, any Capital Stock of Schuff or any Affiliate of Schuff, or warrants,
rights or options to acquire such Capital Stock, other than (x) dividends
payable solely in the Capital Stock (other than Redeemable Stock) of Schuff or
such Affiliate, as the case may be, or in warrants, rights or options to
purchase or acquire such Capital Stock and (y) dividends or distributions by a
Subsidiary to Schuff or to a Wholly Owned Subsidiary; (ii) make any principal
payment on, or redeem, repurchase, defease (including an in-substance or legal
defeasance) or otherwise acquire or retire for value (including pursuant to
mandatory repurchase covenants), prior to any scheduled principal payment,
scheduled sinking fund payment or other stated maturity, Indebtedness of Schuff
or any Subsidiary which is subordinated (whether pursuant to its terms or by
operation of law) in right of payment to the Notes or the Guarantees, as
applicable; or (iii) make any Restricted Investment in any Person; (iv)
designate (other than pursuant to clause (xi) of the definition of Permitted
Investments) a Subsidiary as an Unrestricted Subsidiary, provided that such a
designation of a Subsidiary of Schuff as an Unrestricted Subsidiary shall be
deemed to include the designation of all of the subsidiaries of such Subsidiary
that were Subsidiaries and (v) forgive any Indebtedness of an Affiliate of
Schuff to Schuff or a Restricted Subsidiary. For purposes of determining the
amount expended for Restricted Payments, cash distributed or invested shall be
valued at the face amount thereof and Property other than cash shall be valued
at its Fair Market Value, except that in determining the amount of any
Restricted Payment made under clause (iv) above, the amount of such Restricted
Payment shall be equal to the greater of (i) the book value or (ii) the Fair
Market Value of Schuff's direct and indirect proportionate interest in such
Subsidiary on such date or the date of the acquisition by Schuff.
"Sale and Lease-Back Transaction" means, with respect to any Person, any
direct or indirect arrangement pursuant to which Property is sold or transferred
by such Person or a subsidiary of such Person and is thereafter leased back from
the purchaser or transferee thereof by such Person or one of its subsidiaries.
"Senior Debt" means any Indebtedness incurred by Schuff or a Guarantor,
unless the instrument under which such Indebtedness is incurred expressly
provides that it is subordinated in right of payment to the Notes or such
Guarantor's Guarantee, as applicable, provided that Senior Debt will not include
(a) any liability for federal, state, local or other taxes owed or owing, (b)
any Indebtedness owing to any Subsidiaries of Schuff, (c) any trade payables or
(d) any Indebtedness that is incurred in violation of the Indenture.
"Significant Subsidiary" means any Guarantor or any other Subsidiary that
is a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under
the Securities Act and the Exchange Act.
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"Stated Maturity" when used with respect to a Note or any installment of
interest thereon, means the date specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable.
"Subordinated Indebtedness" means any Indebtedness of Schuff or any
Guarantor that is subordinated in right of payment to the Notes or the
Guarantees, as the case may be, and does not mature prior to one year following
the Stated Maturity of the Notes.
"subsidiary" means, with respect to any Person, (i) any corporation more
than 50% of the outstanding Voting Stock of which is owned, directly or
indirectly, by such Person, or by one or more other subsidiaries of such Person,
or by such Person and one or more other subsidiaries of such Person, (ii) any
general partnership, joint venture or similar entity, more than 50% of the
outstanding partnership or similar interest of which is owned, directly or
indirectly, by such Person, or by one or more other subsidiaries or such Person,
or by such Person and one or more other subsidiaries of such Person and (iii)
any limited partnership of which such Person or any subsidiary of such Person is
a general partner.
"Subsidiary" means a subsidiary of Schuff other than an Unrestricted
Subsidiary.
"Transaction Date" has the meaning specified within the definition of
Consolidated Interest Coverage Ratio.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged; (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clauses (i) or (ii) above, are not callable or redeemable at the option of the
issuers thereof; or (iii) depository receipts issued by a bank or trust company
as custodian with respect to any such U.S. Government Obligations or a specific
payment of interest on or principal of any such U.S. Government Obligation held
by such custodian for the account of the holder of a depository receipt,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation evidenced by such Depository receipt.
"Unrestricted Subsidiary" means any subsidiary of Schuff that Schuff has
classified as an Unrestricted Subsidiary, and that has not been reclassified as
a Subsidiary, pursuant to the terms of the Indenture.
"Voting Stock" means with respect to any Person, securities of any class or
classes of Capital Stock in such Person entitling the holder thereof (whether at
all times or at the times that such class of Capital Stock has voting power by
reason of the happening of any contingency) to vote in the election of members
of the board of directors or comparable body of such Person.
"Wholly Owned Subsidiary" means any Subsidiary to the extent (i) all of the
Capital Stock or other ownership interests in such Subsidiary, other than any
directors' qualifying shares mandated by applicable law, is owned directly or
indirectly by Schuff or (ii) such Subsidiary is organized in a foreign
jurisdiction and is required by the applicable laws and regulations of such
foreign jurisdiction to be partially owned by the government of such foreign
jurisdiction or individual or corporate citizens of such foreign jurisdiction in
order for such Subsidiary to transact business in such foreign jurisdiction,
provided that Schuff, directly or indirectly, owns the remaining Capital Stock
or ownership interest in such Subsidiary and, by contract or otherwise, controls
the management and business of such Subsidiary and derives the economic benefits
of ownership of such Subsidiary to substantially the same extent as if such
Subsidiary were a Wholly Owned Subsidiary.
DESCRIPTION OF OUTSTANDING NOTES
The terms of the Outstanding Notes are identical in all material respects
to the Exchange Notes, except that the Outstanding Notes have not been
registered under the Securities Act, are subject to certain restrictions on
transfer and are entitled to certain registration rights under the Registration
Rights Agreement (which rights terminate upon the consummation of the Exchange
Offer, except under limited circumstances).
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See "Description of Exchange Notes." In addition, the Registration Rights
Agreement provides that if (i) within 60 days of the Issue Date (as defined
herein) or a Shelf Request (as defined herein), neither an exchange offer
registration statement nor a resale shelf registration statement has been filed,
(ii) within 150 days of the Issue Date or a Shelf Request, neither an exchange
offer registration statement nor a resale shelf registration statement has been
declared effective, (iii) within 180 days of the Issue Date, an exchange offer
has not been consummated or (iv) either the exchange offer registration
statement or the resale shelf registration statement has been declared effective
and such registration statement ceases to be effective or usable (subject to
certain exceptions) in connection with resales of Outstanding Notes during
periods specified in the Registration Rights Agreement (each such event referred
to in clauses (i) through (iv), a "Registration Default"), Schuff will pay
additional interest ("Special Interest") to each holder of Notes, with respect
to the first 90-day period immediately following the occurrence of such
Registration Default in an amount equal to $.05 per week per $1,000 principal
amount of Notes held by such holder. The amount of the Special Interest will
increase by an additional $.05 per week per $1,000 principal amount of Notes
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of Special Interest of $.50 per week per
$1,000 principal amount of Notes. All accrued Special Interest will be paid by
Schuff on each interest payment date to the Global Note holder by wire transfer
of immediately available funds or by federal funds check and to holders of
Certificated Securities by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified. Following the cure of all Registration Defaults, the accrual of
Special Interest will cease. The Outstanding Notes and the Exchange Notes will
constitute a single series of debt securities under the Indenture. See
"Description of Exchange Notes."
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Outstanding Notes were originally sold by the Company on June 4, 1998,
to the Initial Purchasers pursuant to the Purchase Agreement among the Company
and the Initial Purchasers. The Initial Purchasers subsequently resold the
Outstanding Notes to qualified institutional buyers pursuant to Rule 144A under
the Securities Act or institutional "accredited investors" (as defined in Rule
501(a) (1), (2), (3) or (7) of Regulation D under the Securities Act). In
connection with issuance and sales of the outstanding notes, Schuff and the
Initial Purchasers entered into the Registration Rights Agreement, pursuant to
which the Company has agreed, for the benefit of the holders of the Outstanding
Notes, at the Company's cost, to use its best efforts to (i) file a registration
statement with the Commission within 60 days after the Issue Date of the
Outstanding Notes with respect to the Exchange Offer for the Outstanding Notes,
and (ii) cause the registration statement to be declared effective under the
Securities Act within 150 days after the Issue Date. Upon the registration
statement being declared effective, the Company will offer the Exchange Notes in
exchange for the Outstanding Notes. The Company will keep the Exchange Offer
open for no less than 20 Business Days (or longer if required by applicable law)
after the date on which notice of the Exchange Offer is mailed to the holders of
the Outstanding Notes.
For each Outstanding Note properly tendered and accepted pursuant to the
Exchange Offer, the holder of such Outstanding Note will receive an Exchange
Note having a principal amount equal to that of the Outstanding Note tendered.
Interest on each Exchange Note will accrue from the last respective interest
date on which interest was paid on the Outstanding Note tendered in exchange
therefor or, if no interest has been paid on such Outstanding Note, from the
Issue Date.
Each holder of the Outstanding Notes who wishes to exchange the Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to represent in
the Letter of Transmittal that (i) it is not an affiliate of the Company or the
Guarantors, (ii) the Exchange Notes to be received by it were acquired in the
ordinary course of its business and (iii) at the time of commencement of the
Exchange Offer, it has no arrangement with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes.
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In the event that applicable interpretations of the staff of the Commission
do not permit the Company to effect the Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 150 days after the Issue
Date, or, under certain circumstances, if the Initial Purchasers or any holder
of Outstanding Notes (other than the Initial Purchasers) who is not eligible to
participate in the Exchange Offer shall so request (each a "Shelf Request"), the
Company will at its cost, (a) within 30 days of such Shelf Request, file a shelf
registration statement covering resales of the Outstanding Notes (a "Shelf
Registration Statement"), (b) use its best efforts to cause such Shelf
Registration Statement to be declared effective under the Securities Act no
later than 60 days following a Shelf Request and (c) use its best efforts to
keep effective such Shelf Registration Statement until the earlier of two years
after the Issue Date and such time as all of the applicable Outstanding Notes
have been sold thereunder. The Company will, in the event of the filing of a
Shelf Registration Statement, provide to each Holder of the Outstanding Notes
copies of the prospectus which is a part of such Shelf Registration Statement,
notify each such Holder when such Shelf Registration Statement has become
effective and take certain other actions as are required to permit unrestricted
resales of the Outstanding Notes. A Holder that sells its Outstanding Notes
pursuant to a Shelf Registration Statement generally will be required to be
named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement which are
applicable to such Holder (including certain indemnification obligations).
If (a) Schuff fails to file any of the Registration Statements required by
the Registration Agreement on or before the date specified above for such
filing, (b) any of such Registration Statements is not declared effective by the
Commission on or prior to the date specified above for such effectiveness (the
"Effectiveness Target Date"), (c) Schuff fails to consummate the Exchange Offer
within 30 days of the Effectiveness Target Date with respect to the Exchange
Offer Registration Statement, or (d) the Shelf Registration Statement or the
Exchange Offer Registration Statement is declared effective but thereafter
ceases to be effective or usable in connection with resales of Outstanding Notes
or Exchange Notes during the period specified in the Registration Agreement
(each such event referred to in clauses (a) through (c) above, a "Registration
Default"), then Schuff will pay additional interest ("Special Interest") to each
holder of Notes, with respect to the first 90-day period immediately following
the occurrence of such Registration Default in an amount equal to $.05 per week
per $1,000 principal amount of Notes held by such holder. The amount of the
Special Interest will increase by an additional $.05 per week per $1,000
principal amount of Notes with respect to each subsequent 90-day period until
all Registration Defaults have been cured, up to a maximum amount of Special
Interest of $.50 per week per $1,000 principal amount of Notes. All accrued
Special Interest will be paid by Schuff on each interest payment date to the
Global Note holder by wire transfer of immediately available funds or by federal
funds check and to holders of Certificated Securities by wire transfer to the
accounts specified by them or by mailing checks to their registered addresses if
no such accounts have been specified. Following the cure of all Registration
Defaults, the accrual of Special Interest will cease.
The summary herein of all material provisions of the Registration Rights
Agreement does not purport to be exhaustive and is subject to, and is qualified
in its entirety by, all the provisions of the Registration Rights Agreement, a
copy of which has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part or a copy of which is also available upon
request to the Company.
Following the consummation of the Exchange Offer, holders of the
Outstanding Notes who were eligible to participate in the Exchange Offer but who
did not tender their Outstanding Notes will not have any further exchange or
registration rights and such Outstanding Notes will continue to be subject to
certain restrictions on transfer. Accordingly, the liquidity of the market for
such Outstanding Notes could be adversely affected. See "-- Consequences of
Failure to Exchange" and "Risk Factors -- Consequences of Failure to Exchange."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all
Outstanding Notes validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date. The Company will issue $1,000 principal
amount of Exchange Notes in exchange for each $1,000 principal amount of
Outstanding Notes accepted in the Exchange Offer.
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Holders may tender some or all of their Outstanding Notes pursuant to the
Exchange Offer. However, Outstanding Notes may be tendered only in integral
multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Outstanding Notes except that the Exchange Notes have been registered
under the Securities Act and hence will not bear legends restricting the
transfer thereof. The Exchange Notes will evidence the same debt as the
Outstanding Notes and will be entitled to the benefits of the Indenture.
As of the date of this Prospectus, $100,000,000 aggregate principal amount
of Outstanding Notes are outstanding. The Company has fixed the close of
business , 1998 as the record date for the Exchange Offer for
purposes of determining the person to whom this Prospectus and the Letter of
Transmittal will be mailed initially.
Holders of the Outstanding Notes do not have any appraisal or dissenters'
rights under the General Corporation Law of Delaware or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Outstanding
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders for the purpose of receiving the Outstanding Notes from the Company.
If any tendered Outstanding Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Outstanding Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Outstanding Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions of
the Letter of Transmittal, transfer taxes with respect to the exchange of
Outstanding Notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than the transfer taxes in certain circumstances, in
connection with the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
The Company reserves the right (i) to delay accepting any Outstanding
Notes, to extend the Exchange Offer or to terminate the Exchange Offer if any of
the conditions set forth below under "-- Conditions" shall not have been
satisfied, by giving oral or written notice of such delay, extension or
termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered holders.
Without limiting the manner in which the Company may chose to make public
announcement of any delay in acceptance, extension, amendment or termination of
the Exchange Offer, the Company shall have no obligation to publish, advertise,
or otherwise communicate any public announcement, other than making a timely
release to the Dow Jones News Service.
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PROCEDURES FOR TENDERING
The tender of Outstanding Notes pursuant to any of the procedures set forth
in this Prospectus and in the Letter of Transmittal will constitute a binding
agreement between the Tendering Holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal. The tender of Outstanding Notes will constitute an agreement to
deliver good and marketable title to all tendered Outstanding Notes prior to the
Expiration Date free and clear of all liens, charges, claims, encumbrances,
interests and restrictions of any kind. Holders must follow the procedures set
forth in this Prospectus in order to properly and effectively tender Outstanding
Notes.
EXCEPT AS PROVIDED IN "-- GUARANTEED DELIVERY PROCEDURES," UNLESS THE
OUTSTANDING NOTES BEING TENDERED ARE DEPOSITED BY THE HOLDER WITH THE EXCHANGE
AGENT PRIOR TO THE EXPIRATION DATE (ACCOMPANIED BY A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL), THE COMPANY MAY, AT ITS OPTION, REJECT SUCH
TENDER. ISSUANCE OF EXCHANGE NOTES WILL BE MADE ONLY AGAINST DEPOSIT OF TENDERED
OUTSTANDING NOTES AND DELIVERY OF ALL OTHER REQUIRED DOCUMENTS. NOTWITHSTANDING
THE FOREGOING, DTC PARTICIPANTS TENDERING THROUGH ATOP WILL BE DEEMED TO HAVE
MADE VALID DELIVERY WHERE THE EXCHANGE AGENT RECEIVES AN AGENT'S MESSAGE
(DEFINED BELOW) PRIOR TO THE EXPIRATION DATE.
Outstanding Notes held through DTC. Each Beneficial Owner holding
Outstanding Notes through a DTC Participant must instruct such DTC Participant
to cause its Outstanding Notes to be tendered in accordance with the procedures
set forth in this Prospectus.
Pursuant to an authorization given by DTC to the DTC Participants, each DTC
Participant holding Outstanding Notes through DTC must (i) electronically
transmit its acceptance through ATOP, and DTC will then verify the acceptance,
execute a book-entry delivery to the Exchange Agent's account at DTC and send an
Agent's Message to the Exchange Agent for its acceptance, or (ii) comply with
the guaranteed delivery procedures set forth below and in the Notice of
Guaranteed Delivery. See "-- Guaranteed Delivery Procedures."
The Exchange Agent will (promptly after the date of this Prospectus)
establish accounts at DTC for purposes of the Exchange Offer with respect to
Outstanding Notes held through DTC, and any financial institution that is a DTC
Participant may make book-entry delivery of interests in Outstanding Notes into
the Exchange Agent's account through ATOP. However, although delivery of
interests in the Outstanding Notes may be effected through book-entry transfer
into the Exchange Agent's account through ATOP, an Agent's Message in connection
with such book-entry transfer, and any other required documents, must be
transmitted to and received by the Exchange Agent at its address set forth under
"-- Exchange Agent," or the guaranteed delivery procedures set forth below must
be complied with, in each case, prior to the Expiration Date. Delivery of
documents to DTC does not constitute delivery to the Exchange Agent. The
confirmation of a book-entry transfer into the Exchange Agent's account at DTC
as described above is referred to herein as a "Book-Entry Confirmation."
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that DTC has received an express acknowledgment from
each DTC Participant tendering through ATOP that such DTC Participants have
received a Letter of Transmittal and agree to be bound by the terms of the
Letter of Transmittal and that the Company may enforce such agreement against
such DTC Participants.
Cede & Co., as the Holder of the global certificates representing the
Outstanding Notes (a "Global Security"), will tender a portion of each Global
Security equal to the aggregate principal amount due at the stated maturity or
number of shares for which instructions to tender are given by DTC Participants.
Outstanding Notes held by Holders. Each Holder must (i) complete and sign
and mail or deliver the accompanying Letter of Transmittal, and any other
documents required by the Letter of Transmittal, together with certificate(s)
representing all tendered Outstanding Notes, to the Exchange Agent at its
address set forth
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under "-- Exchange Agent," or (ii) comply with the guaranteed delivery
procedures set forth below and in the Notice of Guaranteed Delivery. See
"--Guaranteed Delivery Procedures."
All signatures on a Letter of Transmittal must be guaranteed by any member
firm of a registered national securities exchange or of the National Association
of Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor" institution
within the meaning of Rule 17Ad-15 under the Exchange Act (each an "Eligible
Institution"); provided, however, that signatures on a Letter of Transmittal
need not be guaranteed if such Outstanding Notes are tendered for the account of
an Eligible Institution including (as such terms are defined in Rule 17Ad-15):
(i) a bank; (ii) a broker, dealer, municipal securities dealer, municipal
securities broker, government securities dealer or government securities broker;
(iii) a credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings institution that is a
participant in a Securities Transfer Association recognized program.
If a Letter of Transmittal or any Outstanding Note is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, agent, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person must so indicate when signing, and proper evidence satisfactory to
the Company of the authority of such person so to act must be submitted.
Holders should indicate in the applicable box in the Letter of Transmittal
the name and address to which substitute certificates evidencing Outstanding
Notes for amounts not tendered are to be issued or sent, if different from the
name and address of the person signing the Letter of Transmittal. In the case of
issuance in a different name, the employer identification or social security
number of the person named must also be indicated. If no instructions are given,
such Outstanding Notes not tendered, as the case may be, will be returned to the
person signing the Letter of Transmittal.
By tendering, each Holder and each DTC Participant will make to the Company
the representations set forth in the third paragraph under the heading
"-- Purpose and Effect of the Exchange Offer."
No alternative, conditional, irregular or contingent tenders will be
accepted (unless waived). By executing a Letter of Transmittal or transmitting
an acceptance through ATOP, as the case may be, each Tendering Holder waives any
right to receive any notice of the acceptance for purchase of its Outstanding
Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Outstanding Notes will be resolved by the
Company, whose determination will be final and binding. The Company reserves the
absolute right to reject any or all tenders that are not in proper form or the
acceptance of which may, in the opinion of counsel for the Company, be unlawful.
The Company also reserves the absolute right to waive any condition to the
Exchange Offer and any irregularities or conditions of tender as to particular
Outstanding Notes. The Company's interpretation of the terms and conditions of
the Exchange Offer (including the instructions in the Letter of Transmittal)
will be final and binding. Unless waived, any irregularities in connection with
tenders must be cured within such time as the Company shall determine. The
Company and the Exchange Agent shall not be under any duty to give notification
of defects in such tenders and shall not incur liabilities for failure to give
such notification. Tenders of Outstanding Notes will not be deemed to have been
made until such irregularities have been cured or waived. Any Outstanding Notes
received by the Exchange Agent that are not properly tendered and as to which
the irregularities have not been cured or waived will be returned by the
Exchange Agent to the tendering Holder, unless otherwise provided in the Letter
of Transmittal, as soon as practicable following the Expiration Date.
LETTERS OF TRANSMITTAL AND OUTSTANDING NOTES MUST BE SENT ONLY TO THE
EXCHANGE AGENT. DO NOT SEND LETTERS OF TRANSMITTAL OR OUTSTANDING NOTES TO THE
COMPANY OR DTC.
The method of delivery of Outstanding Notes and Letters of Transmittal, any
required signature guarantees and all other required documents, including
delivery through DTC and any acceptance through ATOP, is at the election and
risk of the persons tendering and delivering acceptances or Letters of
Transmittal and, except as otherwise provided in the applicable Letter of
Transmittal, delivery will be deemed made only
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when actually received by the Exchange Agent. If delivery is by mail, it is
suggested that the Holder use properly insured, registered mail with return
receipt requested, and that the mailing be made sufficiently in advance of the
Expiration Date to permit delivery to the Exchange Agent prior to the Expiration
Date.
GUARANTEED DELIVERY PROCEDURES
Outstanding Notes held through DTC. DTC Participants holding Outstanding
Notes through DTC who wish to cause their Outstanding Notes to be tendered, but
who cannot transmit their acceptances through ATOP prior to the Expiration Date,
may cause a tender to be effected if:
(a) guaranteed delivery is made by or through an Eligible Institution;
(b) prior to 5:00 p.m., New York City time on the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by mail, hand delivery,
facsimile transmission or overnight courier) substantially in the form
provided by the Company herewith; and (c) Book-Entry Confirmation and an
Agent's Message in connection therewith (as described above) are received
by the Exchange Agent within three New York Stock Exchange ("NYSE") trading
days after the date of the execution of the Notice of Guaranteed Delivery.
Outstanding Notes held by Holders. Holders who wish to tender their
Outstanding Notes and (i) whose Outstanding Notes are not immediately available,
(ii) who cannot deliver their Outstanding Notes, the Letter of Transmittal or
any other required documents to the Exchange Agent or (iii) who cannot complete
the procedures for book-entry transfer, prior to the Expiration Date, may effect
a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to 5:00 p.m., New York City time on the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the holder,
the certificate number(s) of such Outstanding Notes and the principal
amount of Outstanding Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three NYSE trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof) together
with the certificate(s) representing the Outstanding Notes (or a
confirmation of book-entry transfer of such Outstanding Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility), and any
other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Outstanding Notes in proper form for transfer (or a confirmation or
book-entry transfer of such Outstanding Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility), and all other documents
required by the Letter of Transmittal are received by the Exchange Agent
upon three NYSE trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Outstanding Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
Outstanding Notes held through DTC. DTC Participants holding Outstanding
Notes who have transmitted their acceptances through ATOP may, prior to 5:00
p.m., New York City time, on the Expiration Date, withdraw the instruction given
thereby by delivering to the Exchange Agent, at its address set forth under
"-- Exchange Agent," a written, telegraphic or facsimile notice of withdrawal of
such instruction. Such notice of withdrawal must contain the name and number of
the DTC Participant, the principal amount due at the Stated Maturity date of the
Outstanding Notes to which such withdrawal related and the signature of the
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DTC Participant. Withdrawal of such an instruction will be effective upon
receipt of such written notice of withdrawal by the Exchange Agent.
Outstanding Notes held by Holders. Holders may withdraw a tender of
Outstanding Notes in the Exchange Offer, by a telegram, telex, letter or
facsimile transmission notice of withdrawal received by the Exchange Agent at
its address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Outstanding Notes to be withdrawn (the "Depositor"),
(ii) identify the Outstanding Notes to be withdrawn (including the certificate
number(s) and principal amount due at the Stated Maturity of such Outstanding
Notes, or, in the case of Outstanding Notes transferred by book-entry transfer,
the name and number of the account at the Book-Entry Transfer Facility to be
credited), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Outstanding Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the
Outstanding Notes register the transfer of such Outstanding Notes into the name
of the person withdrawing the tender and (iv) specify the name in which any such
Outstanding Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Outstanding Notes so withdrawn
will be deemed not to have been validly tendered for purposes of the Exchange
Offer and no Exchange Notes will be issued with respect thereto unless the
Outstanding Notes so withdrawn are validly retendered. Any Outstanding Notes
which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Outstanding Notes may be retendered by following one
of the procedures described above under "-- Procedures for Tendering" at any
time prior to the Expiration Date.
All signatures on a notice of withdrawal must be guaranteed by an Eligible
Institution; provided, however, that signatures on the notice of withdrawal need
not be guaranteed if the Outstanding Notes being withdrawn are held for the
account of an Eligible Institution.
A withdrawal of an instruction or a withdrawal of a tender must be executed
by a DTC Participant or a Holder, as the case may be, in the same manner as the
person's name appears on its transmission through ATOP or Letter of Transmittal,
as the case may be, to which such withdrawal relates. If a notice of withdrawal
is signed by a trustee, partner, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person must so indicate when signing
and must submit with the revocation appropriate evidence of authority to execute
the notice of withdrawal. A DTC Participant or a Holder may withdraw an
instruction or a tender, as the case may be, only if such withdrawal complies
with the provisions of this Prospectus.
A withdrawal of a tender of Outstanding Notes by a DTC Participant or a
Holder, as the case may be, may be rescinded only by a new transmission of an
acceptance through ATOP or execution and delivery of a new Letter of
Transmittal, as the case may be, in accordance with the procedures described
herein.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange securities for, any Outstanding
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Outstanding Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the judgment of the Company upon written advice of counsel, could
reasonably be expected to materially impair the ability of the Company to
proceed with the Exchange Offer or any material adverse development has
occurred in any existing action or proceeding with respect to the Company
or any of the subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the judgment
of the company and based on written advice of counsel, could
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reasonably be expected to materially impair the ability of the Company to
proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in its discretion and based on written advice of
counsel, deem necessary for the consummation of the Exchange Offer as
contemplated hereby.
If any of the conditions are not satisfied, the Company may (i) refuse to
accept any Outstanding Notes and return all tendered Outstanding Notes to the
tendering holders, (ii) extend the Exchange Offer and retain all Outstanding
Notes tendered prior to the expiration of the Exchange Offer, subject, however,
to the rights of holders to withdraw such Outstanding Notes (see "-- Withdrawal
of Tenders") or (iii) waive such unsatisfied conditions with respect to the
Exchange Offer and accept all properly tendered Outstanding Notes which have not
been withdrawn.
EXCHANGE AGENT
has been appointed as Exchange Agent for the Exchange Offer. Questions
and requests for assistance, requests for additional copies of this Prospectus
or of the Letter of Transmittal and requests for Notice of Guaranteed Delivery
should be directed to the Exchange Agent addressed as follows:
Delivery to an address other than as set forth above, or transmission of
instructions via a facsimile number other than the one set forth above, will not
constitute a valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company will pay the Exchange
Agent reasonable and customary fees for its services and will reimburse it for
its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Outstanding Notes, as reflected in the Company's accounting records on the date
of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Outstanding Notes that are not exchanged for Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such
Outstanding Notes may be resold only (i) to the Company (upon redemption thereof
or otherwise), (ii) so long as the Outstanding Notes are eligible for resale
pursuant to Rule 144A, to a person inside the United States whom the seller
reasonably believes is a qualified institutional buyer within the meaning of
Rule 144A under the Securities Act in a transaction meeting the requirements of
Rule 144A, in accordance with Rule 144 under the Securities Act, or pursuant to
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel reasonably acceptable to the Company), (iii)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, or (iv) pursuant to an
effective registration
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statement under the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that a holder or other person who receives Exchange Notes
in the ordinary course of business, whether or not such person is the holder
(other than (i) a broker-dealer who purchases such Exchange Notes from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act) who receives Exchange Notes in
exchange for Outstanding Notes, and who is not participating, does not intend to
participate, and has no arrangement or understanding with person to participate,
in the distribution of the Exchange Notes, will be allowed to resell the
Exchange Notes to the public without further registration under the Securities
Act and without delivering to the purchasers of the Exchange Notes a prospectus
that satisfies the requirements of Section 10 of the Securities Act. However, if
any holder acquires Exchange Notes in the Exchange Offer for the purpose of
distributing or participating in a distribution of the Exchange Notes, such
holder cannot rely on the position of the staff of the Commission enunciated in
such no-action letters or any similar interpretive letters, and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Further, each broker-dealer that receives Exchange Notes
for its own account in exchange for Outstanding Notes, where such Securities
were acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the Exchange Notes are to be
acquired by the holder or the person receiving such Exchange Notes, whether or
not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, and (v) the holder or any such other person acknowledges that if
such holder or other person participates in the Exchange Offer for the purpose
of distributing the Exchange Notes it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the Exchange Notes and cannot rely on those no-action letters. As
indicated above, each broker-dealer that receives Exchange Notes for its own
account in exchange for Outstanding Notes must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. For a
description of the procedures for such resales by broker-dealers, see "Plan of
Distribution."
PLAN OF DISTRIBUTION
Based on interpretations of the staff of the Division of Corporation
Finance of the Commission set forth in no-action letters issued to third
parties, the Company believes that, except as described below, Exchange Notes
issued pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by the respective holders thereof without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that (i) such Exchange Notes are acquired in the
ordinary course of such holder's business and (ii) such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution of the Exchange Notes. A holder of Outstanding
Notes that is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act or that is a broker-dealer that purchased Outstanding Notes
from the Company to resell pursuant to an exemption from registration under the
Securities Act (a) cannot rely on such interpretations by the staff of the
Division of Corporation Finance of the Commission, (b) will not be permitted or
entitled to tender such Outstanding Notes in the
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Exchange Offer and (c) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Outstanding Notes unless such sale or transfer is made pursuant to an
exemption from such requirements. In addition, any holder who tenders
Outstanding Notes in the Exchange Offer with the intention or for the purpose of
participating in a distribution of the Exchange Notes cannot rely on such
interpretations by the staff of the Division of Corporation Finance of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with the secondary resale
transaction. Unless an exemption from registration is otherwise available, any
such resale transaction should be covered by an effective registration statement
containing selling security holders information required by Item 507 of
Regulation S-K under the Securities Act. To date, the staff of the Division of
Corporation Finance of the Commission has taken the position that a
broker-dealer that has acquired securities in exchange for securities that were
acquired by such broker-dealer as a result of market-making activities or other
trading activities may fulfill the prospectus delivery requirements with the
prospectus contained in an exchange offer registration statement.
Each Holder of Outstanding Notes who wishes to exchange its Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company set forth in "The Exchange Offer -- Purpose and
Effect of the Exchange Offer."
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. This Prospectus may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Outstanding
Notes where such Outstanding Notes were acquired as a result of market-making
activities or other trading activities. Subject to certain provisions set forth
in the Registration Rights Agreement, the Company has agreed that it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Risk Factors -- Lack of Public Market for the Notes; Possible
Volatility of Note Price" and "The Exchange Offer -- Resale of the Exchange
Notes."
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit from any
such resale of Exchange Notes and any commissions or concessions received by any
such person may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
Subject to certain provisions set forth in the Registration Rights
Agreement, the Company will promptly send additional copies of this Prospectus
and any amendment or supplement to this Prospectus to any broker-dealer that
requests such documents in the Letter of Transmittal. The Company has agreed to
pay the expenses incident to the Exchange Offer, other than any discounts or
commissions incurred upon the sale of the Exchange Notes. The Company will
indemnify each broker-dealer selling Exchange Notes against certain liabilities,
including liabilities under the Securities Act.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material United States federal income tax
considerations applicable to a holder that exchanges Outstanding Notes for
Exchange Notes pursuant to the Exchange Offer, but does not purport to be a
complete analysis of all of the tax considerations relating thereto. The tax
consequences to a
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holder of the Exchange Notes may vary depending upon the particular situation of
such holder. The legal conclusions expressed in this summary are based upon
current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), applicable Treasury regulations ("Regulations"), judicial authority and
administrative rulings and practice, all as in effect as of the date of this
Prospectus and all of which are subject to change, either prospectively or
retroactively. These authorities are subject to various interpretations and it
is therefore possible that the tax treatment of the Exchange Notes may differ
from the treatment described below. Legislative, judicial or administrative
changes or interpretations may be forthcoming that could alter or modify the
statements and conclusions set forth herein. Any such changes or interpretations
may or may not be retroactive and could affect the tax consequences to holders.
This summary deals only with persons who will hold the Exchange Notes as
capital assets, and does not address tax considerations applicable to investors
who may be subject to special tax rules, such as financial institutions,
tax-exempt organizations, insurance companies, dealers in securities or
currencies, persons who hold Exchange Notes as a hedge or as a position in a
"straddle" for tax purposes and persons who have a "functional currency" other
than the U.S. dollar. As used herein, a U.S. Holder of an Exchange Note means a
citizen or resident of the United States, a corporation, partnership or other
entity created or organized under the laws of the U.S. or of any state (unless,
in the case of a partnership, the Treasury Department provides otherwise in
regulations), an estate the income of which is includable in gross income for
U.S. federal income tax purposes regardless of its source, or a trust if a court
within the U.S. is able to exercise primary supervision over the administration
of the trust and one or more U.S. persons have the authority to control all
substantive decisions of the trust. A Non-U.S. Holder is a holder not classified
as a U.S. Holder (as defined in the Code) for U.S. federal income and estate tax
purposes. In addition, the description does not consider the effect of any
applicable foreign, state, local or other tax laws or estate or gift tax
considerations. The Company has not sought any ruling from the Internal Revenue
Service (the "IRS") with respect to the statements made and conclusions reached
in the following summary, and there can be no assurance that the IRS will agree
with such statements and conclusions.
HOLDERS OF THE OUTSTANDING NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS AS
TO HOW THEIR OWN PARTICULAR TAX SITUATION MIGHT BE AFFECTED BY THE EXCHANGE OF
OUTSTANDING NOTES FOR EXCHANGE NOTES AND THE PURCHASE, HOLDING AND DISPOSITION
OF THEIR EXCHANGE NOTES.
U.S. HOLDERS
The Exchange Offer
The exchange of Outstanding Notes for Exchange Notes pursuant to the
Exchange Offer should not constitute a significant modification of the terms of
the Outstanding Notes and, accordingly, such exchange should not be treated as a
taxable event for U.S. federal income tax purposes. Therefore, a U.S. Holder of
Outstanding Notes (i) should not recognize taxable gain or loss as a result of
exchanging Outstanding Notes for Exchange Notes, (ii) the holding period of the
Exchange Notes should include the holding period of the Outstanding Notes
exchanged therefor, and (iii) the adjusted tax basis of the Exchange Notes
should be the same as the adjusted tax basis of the Outstanding Note exchanged
therefor immediately before such exchange. Further, U.S. Holders of Exchange
Notes would continue to be required to include interest on the Exchange Notes in
their gross income in accordance with their method of accounting for United
States federal tax purposes.
Payment of Interest
Subject to the discussion of original issue discount ("OID") below,
interest on an Exchange Note generally will be includable in the income of a
U.S. Holder as ordinary income at the time such interest is received or accrued,
in accordance with such U.S. Holder's method of accounting for United States
federal income tax purposes.
The Company is obligated to pay Special Interest amounts in the event of a
Registration Default. Under the Regulations, certain contingent payments on debt
instruments (like the Special Interest amounts payable
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in the event of a Registration Default) must be accrued into gross income by a
holder (regardless of such holder's method of accounting). However, any payment
subject to a remote or incidental contingency (i.e, there is a remote likelihood
that the contingency will occur or the potential amount of the contingent
payment is insignificant relative to the total expected amount of remaining
payments) is not treated as a contingent payment and is ignored until payment,
if any is actually made. The determination of whether a contingency is remote or
incidental is made as of the issue date. The Company intends to take the
position that the Special Interest payments resulting from a Registration
Default are subject to a remote or incidental contingency. Accordingly, any
Special Interest payments resulting from a Registration Default should be
includable in the income of a U.S. Holder in accordance with such holder's
method of accounting for United States federal income tax purposes.
Original Issue Discount
If the Outstanding Notes were not issued at a discount or are deemed to be
issued with no discount because such discount is de minimis, a U.S. Holder will
include in income as ordinary interest income the gross amount of interest paid
or payable in respect of the Exchange Notes as provided above in "Description of
the Notes -- Principal, Maturity and Interest." Original issue discount will be
considered de minimis and, thus, will be treated as zero discount if the
original issue discount is less than one-fourth ( 1/4) of one percent of the
stated redemption price at maturity, multiplied by the number of complete years
to maturity.
If the Outstanding Notes were issued at a discount equal to more than a de
minimis, amount, the Outstanding Notes and, hence, the Exchange Notes, would be
treated as having original issue discount. In such circumstance, each U.S.
Holder of Exchange Notes would include in his income as ordinary income each
year (in addition to the amount of cash interest) a portion of the original
issue discount on the Exchange Notes so as to provide a constant yield to
maturity. The total amount of original issue discount with respect to each
Exchange Note would equal the excess of its stated redemption price at maturity
over its issue price, as defined in Section 1273 of the Code. The stated
redemption price at maturity is the sum of all payments to be made on the
Exchange Notes other than qualified stated interest payments. Interest payments
paid on the Notes will likely be qualified stated interest payments, and,
accordingly, the stated redemption price at maturity of the Exchange Notes will
equal their face amount. The Company is obligated to pay Special Interest to the
U.S. Holders of Exchange Notes in the event of a Registration Default. Amounts
of Special Interest that are contingent on a Registration Default will likely
not be considered qualified stated interest. Because there is only a remote
possibility that a Registration Default will occur, the Company believes that
any Special Interest paid to U.S. Holders as a result of a Registration Default
will not be included in the calculation of stated redemption price at maturity,
but will be taken into account by each U.S. Holder as ordinary income only to
the extent and at such time that such amount becomes fixed or is actually paid.
The IRS could disagree with this characterization. Each U.S. Holder should
consult his own tax advisor with respect to accrual of original issue discount
on the Exchange Notes and treatment of the contingent interest resulting from a
Registration Default.
Pursuant to the Regulations, if the Company determines that the U.S. Notes
have original issue discount, the Company will provide certain information to
the Service and/or holders that is relevant to determining the amount of
original issue discount in each accrual period. A U.S. Holder's adjusted tax
basis in an Exchange Note will be increased by the amount of any original issue
discount included in its gross income and decreased by any payments on such
Exchange Note (other than qualified stated interest).
Effect of Change of Control
Upon a Change of Control, the Company is required to offer to redeem all
outstanding Exchange Notes for a price equal to 101% of the principal amount
thereof plus accrued and unpaid interest. Under the Regulations, such Change of
Control redemption requirements will not affect the yield or maturity date of
the Exchange Notes unless, based on all the facts and circumstances of the Issue
Date, it was more likely than not that a Change of Control giving rise to the
redemption would occur. The Company will not treat the Change of Control
redemption provisions of the Exchange Notes as affecting the calculation of the
yield to maturity of any Exchange Note.
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Market Discount
If a U.S. Holder purchases an Outstanding Note or an Exchange Note for less
than the stated redemption price at maturity (the sum of all payments on the
Note other than qualified stated interest), the difference is considered "market
discount," unless such difference is de minimis. A discount will be considered
de minimis if it is less than one-fourth ( 1/4) of one percent of the issue
price of the debt instrument multiplied by the number of complete years to
maturity (after the holder acquires such debt instrument). Under the market
discount rules, any gain realized by the U.S. Holder on the sale, exchange,
retirement or other disposition of a Exchange Note having "market discount," as
well as on any partial principal payment made with respect to such Exchange
Note, will be treated as ordinary income to the extent of the market discount
which has not previously been included in income and is treated as having
accrued on such Exchange Note on or prior to the time of such payment or
disposition. An overview of the rules concerning the calculation of "accrued
market discount" is set forth in the paragraph immediately below. In addition, a
U.S. Holder of such Exchange Note may be required to defer the deduction of all
or a portion of the interest expense on any indebtedness incurred or continued
to purchase or carry a Exchange Note.
Any market discount will accrue ratably from the date of acquisition to the
maturity date of the Exchange Note, unless the U.S. Holder elects, irrevocably,
to accrue market discount on a constant interest rate method. The constant
interest rate method generally accrues interest at times and in amounts
equivalent to the result which would have occurred had the market discount been
original issue discount computed from the U.S. Holder's acquisition of the
Exchange Note through the maturity date. Accrual of market discount will not
cause the accrued amounts to be included currently in a U.S. Holder's taxable
income in the absence of a disposition of, or principal payment on, the Exchange
Note. However, a U.S. Holder of an Exchange Note may elect to include market
discount in income currently as it accrues on either a ratable or constant
interest rate method. In such event, interest expense relating to the
acquisition of an Exchange Note which would otherwise be deferred would be
currently deductible to the extent otherwise permitted by the Code. The election
to include market discount in income currently, once made, applies to all market
discount obligations acquired by such holder on or after the first day of the
first taxable year to which the election applies, and may not be revoked without
the consent of the IRS.
Acquisition Premium
A U.S. Holder of Exchange Notes will be entitled to a reduction in the
amount of OID required to be included in its income if such holder purchases an
Outstanding Note or an Exchange Note with "acquisition premium." A U.S. Holder
of an Exchange Note will have acquisition premium if its adjusted tax basis in
the Exchange Note is less than or equal to the stated redemption price at
maturity and exceeds the adjusted issue price of such Exchange Note. The
acquisition premium is the amount by which the purchase price exceeds the
adjusted issue price. The adjusted issue price of a Exchange Note will be the
issue price increased by the amount of OID previously includable in the gross
income of any U.S. Holder (determined without regard to any reduction for
acquisition premium or amortizable bond premium (as defined below)) reduced by
any payments on the Exchange Notes (other than payments of qualified stated
interest). The amount of the reduction to which a U.S. Holder may be entitled in
any given year is equal to a fraction, the numerator of which is the amount of
the acquisition premium and the denominator of which is the excess of the sum of
all amounts payable on the Exchange Note (other than payments of qualified
stated interest) over the adjusted issue price of the Exchange Note on the date
of purchase.
Amortizable Bond Premium
If a subsequent U.S. Holder acquires an Outstanding Note or an Exchange
Note for an amount which is greater than the amount payable at maturity, such
holder will be considered to have purchased such Note with "amortizable bond
premium" equal to the amount of such excess. The U.S. Holder of an Exchange Note
may elect to amortize the premium, using a constant yield method employing
six-month compounding, over the period from the acquisition date to the maturity
date of the Exchange Note. The "amount payable at maturity" will be determined
as of an earlier call date, using the call price payable on such earlier date,
if the
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combination of such earlier date and call price will produce a smaller
amortizable bond premium than would result from using the scheduled maturity
date and its amount payable.
If an earlier call date is used and the Exchange Note is not called, the
Exchange Note will be treated as having matured on such earlier call date and
then as having been reissued on such date for the amount so payable. Amortized
amounts may be offset only against interest payments due under the Exchange Note
and will reduce the U.S. Holder's adjusted tax basis in the Exchange Note to the
extent so used.
Once made, an election to amortize and offset interest on the Exchange
Notes, will apply to all notes in respect of which the election was made that
were owned by the taxpayer on the first day of the taxable year to which the
election relates and to all notes of such class or classes subsequently acquired
by such taxpayer. Such election may only be revoked with the consent of the IRS.
If a U.S. Holder of a Exchange Note does not elect to amortize the premium, the
premium will decrease the gain or increase the loss which would otherwise be
recognized upon disposition of the Exchange Note.
Sale, Exchange or Retirement of Exchange Notes
Upon the sale, exchange or retirement (including redemption) of an Exchange
Note, a U.S. Holder of an Exchange Note generally will recognize gain or loss in
an amount equal to the difference between the amount of cash and the fair market
value of any property received on the sale, exchange or retirement of the
Exchange Note (other than in respect of accrued and unpaid interest on the
Exchange Note, which such amounts are treated as ordinary interest income) and
such U.S. Holder's adjusted tax basis in the Exchange Note. Such gain or loss
will be capital gain or loss, except to the extent of any accrued market
discount and will generally be long-term capital gain taxable at a rate of 20%
if the Exchange Note is held for more than 18 months, mid-term capital gain
taxable at a rate of 28% if the Exchange Note is held for 18 months or less but
more than 12 months, and short-term capital gain taxable at ordinary income tax
rates if the Exchange Note is held for 12 months or less. Subsequent to December
31, 2000, the capital gain rate would be reduced to 18% if an Exchange Note has
been held for more than five years. The deductibility of capital losses is
subject to limitations.
NON-U.S. HOLDERS
Payment of Interest
Payments of interest on the Exchange Notes by the Company or any agent of
the Company to any Non-U.S. Holder will not be subject to U.S. federal
withholding tax, provided that such interest income is not effectively connected
with the conduct of a United States trade or business of the Non-U.S. Holder and
provided that (i) the Non-U.S. Holder does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of the
Company entitled to vote; (ii) the Non-U.S. Holder is not a controlled foreign
corporation that is related to the Company through stock ownership; (iii) either
(A) the beneficial owner of the Exchange Notes certifies (by submitting to the
Company or its agent a Form W-8 (or a suitable substitute form)) in compliance
with applicable laws and regulations to the Company or its agent, under
penalties of perjury, that it is not a "United States person" as defined in the
Code and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution"), holds the Notes on behalf of the beneficial owner and provides a
statement to the Company or its agent in which it certifies that a Form W-8 (or
a suitable substitute form) has been received from the beneficial owner by it or
by a financial institution between it and the beneficial owner and furnishes the
payor with a copy thereof; and (iv) the Non-U.S. Holder is not a bank which
acquired the Notes in consideration for an extension of credit made pursuant to
a loan agreement entered into in the ordinary course of business. Recently
promulgated Treasury regulations that will be effective January 1, 1999 (the
"1999 Regulations") provide alternative methods for establishing exemptions from
withholding on payments to foreign persons. Under the 1999 Regulations, the
furnishing of the names of the beneficial owners of Notes a copy of such
beneficial owner's Form W-8 by a financial institution with respect to
beneficial owners, described in clause (iii)(B) above, will not be required
where the financial institution is a "qualified intermediary" which has entered
into a withholding agreement
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with the IRS pursuant to such regulations. A Non-U.S. Holder that is not exempt
from tax under these rules will be subject to U.S. federal income tax
withholding at a rate of 30% unless the interest is effectively connected with
the conduct of a United States trade or business, in which case the interest
will be subject to the U.S. federal income tax on net income that applies to
United States persons generally.
Non-U.S. Holders should consult applicable income tax treaties, which may
provide different rules, subject to compliance with certain requirements, to
document entitlement to treaty benefits.
Prior to the effective date of the 1999 Regulations, payments of interest
to a Non-U.S. Holder that is a foreign partnership are subject to the rules
described in the prior paragraph. The 1999 Regulations will require, in the case
of Notes held by a foreign partnership, that the certification described in
clause (iii) of the preceding paragraph be provided by the partners rather than
by the foreign partnership unless the foreign partnership has entered into a
withholding agreement with the United States as a "withholding foreign
partnership." A look-through rule will apply in the case of tiered partnerships.
Except to the extent that an applicable treaty otherwise provides, a
Non-U.S. Holder generally will be taxed in the same manner as a U.S. holder with
respect to interest if the interest income is effectively connected with the
conduct of a United States trade or business of the Non-U.S. Holder. Effectively
connected interest received by a corporate Non-U.S. Holder may also, under
certain circumstances, be subject to an additional "branch profits tax" at a 30%
rate (or, if applicable, a lower treaty rate). Even though such effectively
connected interest is subject to income tax, and may be subject to the branch
profits tax, it is not subject to withholding tax if the Non-U.S. Holder
delivers to the payor a withholding certificate stating that the income is
effectively connected with a U.S. trade or business.
Sale, Exchange or Retirement of Notes
A Non-U.S. Holder generally will not be subject to U.S. Federal income tax
on gain recognized, if any, upon the sale or exchange of Exchange Notes unless
(i) the gain is effectively connected with the conduct of a trade or business
within the United States by the Non-U.S. Holder, (ii) in the case of a Non-U.S.
Holder who is a nonresident alien individual and holds the Exchange Notes as a
capital asset, such Non-U.S. Holder is present in the United States for 183 or
more days in the taxable year and certain other circumstances are present or
(iii) the Non-U.S. Holder is subject to tax pursuant to the provisions of the
Code applicable to certain United States expatriates.
The Exchange Offer
The exchange of Outstanding Notes for Exchange Notes pursuant to the
Exchange Offer should not constitute a significant modification of the terms of
the Outstanding Notes and, accordingly, such exchange should not be treated as a
taxable event for U.S. federal income tax purposes. Therefore, a Non-U.S. Holder
of Outstanding Notes (i) should not recognize taxable gain or loss as a result
of exchanging Outstanding Notes for Exchange Notes, (ii) the holding period of
the Exchange Notes should include the holding period of the Outstanding Notes
exchanged therefor, and (iii) the adjusted tax basis of the Exchange Notes
should be the same as the adjusted tax basis of the Outstanding Note exchanged
therefor immediately before such exchange. Further, non-U.S. Holders of Exchange
Notes would continue to be required to include interest on the Exchange Notes in
their gross income in accordance with their method of accounting for United
States federal tax purposes.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information reporting and backup withholding may apply to certain
noncorporate holders with respect to (i) principal and interest payments on a
Note or (ii) proceeds of a sale of a Note. Such payments generally will be
subject to backup withholding at a rate of 31% unless the payee of such payments
supplies the payor or its agent with a taxpayer identification number, certified
under penalties of perjury, and certain other information, or otherwise
establishes, in the manner prescribed by law, an exemption from backup
withholding.
112
<PAGE> 117
The 1999 Regulations would modify certain of the rules discussed above
generally with respect to payments on the Notes made after December 31, 1998. In
particular, in the case of payments of foreign partnerships (other than payments
to foreign partnerships that qualify as "withholding foreign partnerships"
within the meaning of such Treasury regulations and payments to foreign
partnerships that are effectively connected with the conduct of a trade or
business in the United States), the partners of such partnership will be
required to provide the certification discussed above in order to provide an
exemption from backup withholding tax and information reporting requirements.
Any amount withheld under such backup withholding rules from a payment to a
holder will be allowed as a credit against the holder's U.S. federal income tax,
provided that the holder furnishes the required information to the IRS. In
addition, certain penalties may be imposed by the IRS on a holder who is
required to supply information but does not do so in the proper manner.
LEGAL MATTERS
Certain legal matters regarding the Notes will be passed upon for the
Company by Snell & Wilmer L.L.P., Phoenix, Arizona.
EXPERTS
The consolidated financial statements of Schuff Steel Company, at December
31, 1997 and 1996 and for each of the three years in the period ended December
31, 1997, appearing in or incorporated by reference in this Prospectus and
Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing or incorporated by
reference herein, and is included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Addison Structural Services, Inc.
at June 30, 1997 and 1996, and for each of the three years in the period ended
June 30, 1997 appearing in this Prospectus and Registration Statement, have been
audited by Mauldin & Jenkins, LLC, independent public accountants, as set forth
in their report therein appearing elsewhere herein, and is included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
113
<PAGE> 118
AVAILABLE INFORMATION
Schuff and the Guarantors have filed with the Commission a registration
statement on Form S-4 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act for the registration of the
Exchange Notes offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto. For further
information with respect to Schuff, the Guarantors and the Exchange Notes
offered hereby, reference is made to the Registration Statement and to the
exhibits and schedules filed therewith. Statements contained in this Prospectus
concerning the contents of any contract or other document are not necessarily
complete. With respect to each such contract or other document filed with the
Commission as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference.
Schuff is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act") and, in accordance therewith, files reports,
proxy statements and other information with the Commission. The Registration
Statement, the exhibits and schedules forming a part thereof and the reports and
other information filed by Schuff with the Commission in accordance with the
Exchange Act may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and will also be available for inspection and
copying at the regional offices of the Commission located at 7 World Trade
Center, 13th Floor, New York, New York 10048 and at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may also be obtained upon written request from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Commission also maintains a World Wide Web site
(http://www.sec.gov) that contains reports, proxy and other information
regarding registrants that file electronically with the Commission. In addition,
Schuff's Common Stock is traded on the Nasdaq National Market. Reports, proxy
statements, and other information filed by Schuff are also available for
inspection at the offices of the Nasdaq National Market, Reports Section, 1735 K
Street, N.W., Washington, D.C. 20006.
The Indenture provides that, at any time after the consummation of the
Exchange Offer and for so long as any of the Exchange Notes are outstanding,
Schuff will file with the Commission the periodic reports required to be filed
with the Commission under the Exchange Act and make such reports available to
securities analysts and prospective investors upon their request, whether or not
required by the rules and regulations of the Commission. Schuff will also,
within 15 days of filing each such report with the Commission, provide the
Trustee and the holders of the Exchange Notes with annual reports containing the
information required to be contained in Form 10-K promulgated under the Exchange
Act, quarterly reports containing the information required to be contained in
Form 10-Q promulgated under the Exchange Act, and from time to time such other
information as is required to be contained in Form 8-K promulgated under the
Exchange Act. If the Commission does not accept such reports, for so long as any
Exchange Notes remain outstanding, Schuff will provide the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act to holders
of the Exchange Notes and to securities analysts and prospective investors upon
their request.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by Schuff with the Commission and
are hereby incorporated by reference in this Prospectus: (i) the Annual Report
of Schuff on Form 10-K, as amended, for the fiscal year ended December 31, 1997,
(ii) the Quarterly Report of Schuff on Form 10-Q for the fiscal quarter ended
March 31, 1998, (iii) Schuff's Current Report on Form 8-K dated May 12, 1998,
and (iv) Schuff's Current Report on Form 8-K, as amended, dated June 4, 1998.
All other documents filed by Schuff with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this and
prior to the Expiration Date of the Exchange Offer shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of
114
<PAGE> 119
filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
Schuff will furnish without charge, to each person to whom this Prospectus
is delivered, upon written or oral request of such person a copy of any and all
of the information that has been incorporated by reference into this Prospectus
but which has not been delivered with this Prospectus (not including exhibits to
the information that is incorporated by reference unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates by reference). Such requests should be directed to Schuff Steel
Company, 1841 West Buchanan Street, Phoenix, Arizona 85009, Attention: Chief
Financial Officer.
115
<PAGE> 120
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SCHUFF STEEL COMPANY AND SUBSIDIARY
Report of Ernst & Young LLP, Independent Auditors........... F-2
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 1996 and 1997,
and March 31, 1998 (unaudited)......................... F-3
Consolidated Statements of Income for the Years Ended
December 31, 1995, 1996 and 1997, and the Three Months
Ended March 31, 1997 and 1998 (unaudited).............. F-4
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1995, 1996 and 1997,
and the Three Months Ended March 31, 1997 and 1998
(unaudited)............................................ F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1996 and 1997, and the Three Months
Ended March 31, 1997 and 1998 (unaudited).............. F-6
Notes to Consolidated Financial Statements................ F-7
ADDISON STRUCTURAL SERVICES, INC. AND SUBSIDIARIES
Report of Mauldin & Jenkins, Independent Auditors........... F-24
Consolidated Financial Statements:
Consolidated Balance Sheets as of June 30, 1996 and 1997
and March 31, 1998 (unaudited)......................... F-25
Consolidated Statements of Income for the Years Ended June
30, 1995, 1996 and 1997 and the Nine Months Ended March
31, 1997 and 1998 (unaudited).......................... F-26
Consolidated Statements of Stockholders' Equity for the
Years Ended June 30, 1995, 1996 and 1997 and the Nine
Months Ended March 31, 1998 (unaudited)................ F-27
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1995, 1996 and 1997 and the Nine Months Ended
March 31, 1997 and 1998 (unaudited).................... F-28
Notes to Consolidated Financial Statements................ F-29
</TABLE>
F-1
<PAGE> 121
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Schuff Steel Company
We have audited the accompanying consolidated balance sheets of Schuff
Steel Company and subsidiaries as of December 31, 1996 and 1997, and the related
statements of income, changes in stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Schuff Steel
Company and subsidiaries at December 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Phoenix, Arizona
February 20, 1998, except for Note 16 as
to which the date is March 18, 1998
F-2
<PAGE> 122
SCHUFF STEEL COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 7,253 $ 197 $ 303
Restricted funds on deposit............................... 2,249 2,096 2,662
Receivables............................................... 16,885 24,717 21,904
Costs and recognized earnings in excess of billings on
uncompleted contracts.................................. 3,331 3,982 6,129
Inventories............................................... 1,279 2,364 2,463
Prepaid expenses.......................................... 178 750 438
Deferred income taxes..................................... -- 417 389
------- ------- -------
Total current assets................................... 31,175 34,523 34,288
Property and equipment, net................................. 5,116 7,415 7,583
Other assets................................................ 106 100 100
------- ------- -------
$36,397 $42,038 $41,971
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 4,043 $ 5,749 $ 2,796
Accrued payroll and employee benefits..................... 1,539 1,023 2,085
Insurance payable......................................... 181 721 906
Other accrued liabilities................................. 186 420 304
Billings in excess of costs and recognized earnings on
uncompleted contracts.................................. 12,051 3,758 4,290
Income taxes payable...................................... -- -- 847
Stockholder distributions payable......................... 4,555 -- --
Current portion of long-term debt......................... 144 304 304
------- ------- -------
Total current liabilities.............................. 22,699 11,975 11,532
Long-term debt, less current portion........................ 2,753 4,927 3,665
Deferred income taxes....................................... -- 226 199
Other liabilities........................................... 263 237 297
Stockholders' equity
Preferred Stock, $.001 par value -- authorized 1,000,000
shares, none issued.................................... -- -- --
Common Stock, $.001 par value -- authorized 20,000,000
shares; 5,000,000, 7,000,000 and 7,002,000 shares
issued and outstanding at December 31, 1996 and 1997
and at March 31, 1998, respectively.................... 5 7 7
Additional paid-in-capital................................ 15 14,013 14,023
Unfunded pension losses................................... (519) -- --
Retained earnings......................................... 11,181 10,653 12,248
------- ------- -------
10,682 24,673 26,278
------- ------- -------
$36,397 $42,038 $41,971
======= ======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE> 123
SCHUFF STEEL COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- ------------------
1995 1996 1997 1997 1998
------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues............................... $62,090 $103,912 $138,218 $25,507 $27,426
Cost of revenues....................... 54,222 86,998 117,955 21,655 22,434
------- -------- -------- ------- -------
Gross profit...................... 7,868 16,914 20,263 3,852 4,992
General and administrative expenses.... 5,284 6,715 8,880 2,081 2,394
------- -------- -------- ------- -------
Operating income.................. 2,584 10,199 11,383 1,771 2,598
Interest expense....................... (752) (452) (348) (95) (98)
Other income........................... 618 303 520 96 241
------- -------- -------- ------- -------
Net income before taxes........... 2,450 10,050 11,555 1,772 2,741
Provision for income taxes............. -- -- 2,823 -- 1,146
------- -------- -------- ------- -------
Net income........................ $ 2,450 $ 10,050 $ 8,732 $ 1,772 $ 1,595
======= ======== ======== ======= =======
Pro forma net income data (unaudited)
Net income as reported................. $ 10,050 $ 8,732 $ 1,772
Pro forma additional tax provision..... 4,020 1,513 710
-------- -------- -------
Pro forma net income................... $ 6,030 $ 7,219 $ 1,062
======== ======== =======
Pro forma net income per share:
Basic................................ $ 1.02 $ 1.12 $ 0.18 $ 0.23
======== ======== ======= =======
Diluted.............................. $ 1.02 $ 1.10 $ 0.18 $ 0.22
======== ======== ======= =======
Weighted average shares used in
computation:
Basic................................ 5,941 6,457 5,941 7,000
======== ======== ======= =======
Diluted.............................. 5,941 6,556 5,941 7,159
======== ======== ======= =======
</TABLE>
See accompanying notes.
F-4
<PAGE> 124
SCHUFF STEEL COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNFUNDED
--------------- PAID-IN PENSION RETAINED
SHARES AMOUNT CAPITAL LOSSES EARNINGS TOTAL
------ ------ ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1994.............. 5,000 $5 $ 15 $(563) $ 6,575 $ 6,032
Changes in unfunded pension
losses............................ -- -- -- 137 -- 137
Distributions to stockholders........ -- -- -- -- (1,851) (1,851)
Net income........................... -- -- -- -- 2,450 2,450
----- -- ------- ----- ------- -------
Balance December 31, 1995.............. 5,000 5 15 (426) 7,174 6,768
Changes in unfunded pension losses... -- -- -- (93) -- (93)
Distributions to stockholders........ -- -- -- -- (6,043) (6,043)
Net income........................... -- -- -- -- 10,050 10,050
----- -- ------- ----- ------- -------
Balance December 31, 1996.............. 5,000 5 15 (519) 11,181 10,682
Issuance of common stock, net of
offering expenses................. 2,000 2 13,998 -- -- 14,000
Changes in unfunded pension losses... -- -- -- 519 -- 519
Distributions to stockholders........ -- -- -- -- (9,260) (9,260)
Net income........................... -- -- -- -- 8,732 8,732
----- -- ------- ----- ------- -------
Balance December 31, 1997.............. 7,000 7 14,013 -- 10,653 24,673
Exercise of stock options
(unaudited)....................... 2 -- 10 -- -- 10
Net income (unaudited)............... -- -- -- -- 1,595 1,595
----- -- ------- ----- ------- -------
Balance March 31, 1998 (unaudited)..... 7,002 $7 $14,023 $ -- $12,248 $26,278
===== == ======= ===== ======= =======
</TABLE>
See accompanying notes.
F-5
<PAGE> 125
SCHUFF STEEL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1995 1996 1997 1997 1998
-------- -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income........................................... $ 2,450 $ 10,050 $ 8,732 $ 1,772 $ 1,595
Adjustment to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization...................... 1,248 1,267 1,520 361 423
Gain on disposal of property and equipment......... (20) (13) (21) (12) (139)
Deferred income taxes.............................. -- -- (191) -- 1
Loss on pension plan termination................... -- -- 251 -- --
Changes in operating assets and liabilities net of
effects from purchase of B&K Steel Fabrications,
Inc.:
Restricted funds on deposit...................... (220) (2,029) 153 (647) (566)
Receivables...................................... 4,092 (5,598) (6,585) (522) 2,813
Costs and recognized earnings in excess of
billings on uncompleted contracts.............. (1,014) (2,255) (53) 137 (2,147)
Inventories...................................... (2,461) 6,491 (989) (2,757) (99)
Prepaid expenses................................. 47 40 (479) (233) 312
Accounts payable................................. 1,882 58 917 (2,482) (2,953)
Accrued payroll and employee benefits............ (322) 606 (541) 1,266 1,062
Insurance payable................................ (72) 253 540 (404) 185
Other accrued liabilities........................ (290) (448) 205 1,031 (116)
Billings in excess of costs and recognized
earnings on uncompleted contracts.............. (566) 6,111 (8,293) 2,777 532
Income taxes payable............................. -- -- -- -- 847
Other liabilities................................ -- -- 237 -- 60
Accrued pension cost............................. (97) (142) 111 (36) --
-------- -------- -------- ------- --------
Net cash provided by (used in) operating
activities................................ 4,657 14,391 (4,486) 251 1,810
INVESTING ACTIVITIES
Increase in receivables from stockholders............ -- (185) -- -- --
Repayment of receivables from stockholders........... 45 18 -- -- --
Acquisitions of property and equipment............... (814) (2,337) (3,188) (310) (592)
Proceeds from disposals of property and equipment.... 30 189 79 32 140
Increase in other assets............................. -- -- (100) -- --
Purchase of business................................. -- -- (427) (427) --
-------- -------- -------- ------- --------
Net cash used in investing activities....... (739) (2,315) (3,636) (705) (452)
FINANCING ACTIVITIES
Proceeds from revolving line of credit and long-term
borrowings......................................... 64,558 33,500 23,874 -- 13,404
Principal payments on revolving line of credit and
long-term debt..................................... (66,436) (36,278) (22,993) (1,273) (14,666)
Proceeds from issuance of common stock, net of
offering expenses.................................. -- -- 14,000 -- --
Proceeds from exercise of stock options.............. -- -- -- -- 10
Cash distributions to stockholders................... (1,814) (2,334) (13,815) (776) --
-------- -------- -------- ------- --------
Net cash provided by (used in) financing
activities................................ (3,692) (5,112) 1,066 (2,049) (1,252)
-------- -------- -------- ------- --------
Increase (decrease) in cash and cash
equivalents............................... 226 6,964 (7,056) (2,503) 106
Cash and cash equivalents at beginning of period..... 63 289 7,253 7,253 197
-------- -------- -------- ------- --------
Cash and cash equivalents at end of
period.................................... $ 289 $ 7,253 $ 197 $ 4,750 $ 303
======== ======== ======== ======= ========
</TABLE>
See accompanying notes.
F-6
<PAGE> 126
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Schuff Steel Company ("the Company") is a steel fabrication and erection
contractor based in Phoenix, Arizona. The Company's construction projects are
located primarily in Arizona, Nevada, California and South America.
Principles of Consolidation
As more fully described in Note 15, the Company acquired B&K Steel
Fabrications, Inc. (B&K Steel) on January 31, 1997 and accounted for the
transaction using the purchase method. Effective as of that date, B&K Steel
became a wholly owned subsidiary of the Company and began consolidating its
financial statements from the date of acquisition. All intercompany transactions
have been eliminated for the year ended December 31, 1997. Financial statements
for the years ended December 31, 1996 and 1995 are not consolidated since the
Company had no subsidiaries during those periods.
Interim Financial Information
The consolidated financial statements for the three months ended March 31,
1997 and 1998 are unaudited but include all adjustments (consisting only of
normal recurring adjustments) that the Company considers necessary for a fair
presentation of financial position and results of operations. Operating results
for the three months ended March 31, 1998 are not necessarily indicative of the
results that may be expected for any future periods.
Operating Cycle
Balance sheet items expected to be paid or received within one year are
classified as current. Assets and liabilities relating to long-term construction
contracts are included in current assets and current liabilities in the
accompanying consolidated balance sheet, since they will be realized or
liquidated in the normal course of contract completion, although completion may
require more than one year.
Cash and cash equivalents
Cash consists of cash in noninterest bearing checking accounts. Cash
equivalents consist of investments in a money market mutual fund which is
invested in financial instruments and securities issued and guaranteed by the
U.S. Treasury, the U.S. government or its agencies or instrumentalities. All
such investments are completely liquid and are made through the Company's bank
pursuant to an investment and custody agreement.
Restricted Funds on Deposit
Restricted funds on deposit represent funds on deposit in an interest
bearing escrow account which is maintained in lieu of retention for a specific
contract.
Inventories
Inventories, primarily steel components, are stated at the lower of cost or
market under the first-in, first-out method.
F-7
<PAGE> 127
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
Property and Equipment
Property and equipment is stated at cost and is depreciated over the
estimated useful lives, which generally range from five to ten years, of the
related assets using the straight line method. Leasehold improvements are
amortized over the shorter of the lease term or the estimated useful life.
Amortization of leasehold improvements is included in depreciation and
amortization.
Revenue and Cost Recognition
The Company performs its services primarily under fixed-price contracts and
recognizes revenues and costs from construction projects using the percentage of
completion method. Under this method, revenue is recognized based upon the ratio
of the costs incurred to date to the total estimated costs to complete the
project. Revenue recognition begins when progress is sufficient to estimate
final results with reasonable accuracy. Costs include all direct material and
labor costs related to contract performance, subcontractor costs, indirect
labor, and fabrication plant overhead costs, which are charged to contract costs
as incurred. Revenues relating to changes in the scope of a contract are
recognized when the customer has authorized the change, the work is commenced
and the Company has made an estimate of the amount that is probable of being
paid for the change. Revisions in estimates during the course of contract work
are reflected in the accounting period in which the facts requiring the revision
become known. Provisions for estimated losses on uncompleted contracts are made
in the period a loss on a contract becomes determinable.
Construction contracts with customers generally provide that billings are
to be made monthly in amounts which are commensurate with the extent of
performance under the contracts. Contract receivables arise principally from the
balance of amounts due on progress billings on jobs under construction.
Retentions on contract receivables are amounts due on progress billings which
are withheld until the completed project has been accepted by the customer.
Costs and recognized earnings in excess of billings on uncompleted
contracts primarily represent revenue earned under the percentage of completion
method which has not been billed, and also include costs incurred in excess of
the billings on contracts for which sufficient work has not been performed to
allow for the recognition of revenue. Billings in excess of related costs and
recognized earnings on uncompleted contracts represent amounts billed on
contracts in excess of the revenue allowed to be recognized under the percentage
of completion method on those contracts.
Stock Based Compensation
The Company grants stock options for a fixed number of shares to employees
and directors with an exercise price equal to the fair market value of the
shares at the date of grant. The Company accounts for stock option grants to
employees and directors in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," (APB 25) and accordingly,
recognizes no compensation expense for these stock option grants.
Income Taxes
The Company accounts for income taxes under the liability method in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes."
On June 26, 1997, the Company's stockholders elected to terminate the
Company's status to be treated as an S Corporation. As an S Corporation, the
Company was not subject to federal and state income taxes. Pro forma net income
information presented in the consolidated statements of income reflects the
provision for income taxes that would have been recorded had the Company been
taxed on its income through the
F-8
<PAGE> 128
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
S Corporation termination date. As an S Corporation, the Company would from time
to time make S Corporation distributions to its stockholders in amounts
sufficient for the stockholders to pay their income tax liability related to the
earnings of the Company. The actual provisions reported for the periods
subsequent to the S Corporation termination date reflect the Company's C
Corporation status.
Fair Value of Financial Instruments
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments,"
requires that the Company disclose estimated fair values of financial
instruments. Cash and cash equivalents, restricted funds on deposit,
receivables, accounts payable, and other accrued liabilities are carried at
amounts that reasonably approximate their fair values. The Company believes the
carrying amount of its long-term debt approximates fair value at December 31,
1997 largely due to the variable nature of the interest rates.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
receivables. The Company maintains cash and cash equivalents, restricted funds
on deposit and certain other financial instruments with large financial
institutions. The Company performs periodic evaluations of the relative credit
standing of those financial institutions that are considered in the Company's
investment strategy. Concentrations of credit risk with respect to receivables
are limited as the Company's customers tend to be larger general contractors on
adequately funded projects and the Company has certain lien rights.
Use of Estimates
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles necessarily requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the balance sheet date and the reported amounts of revenues and expenses during
the reporting period for long-term contracts.
The Company has a substantial history of making reasonably dependable
estimates of the extent of progress towards completion, contract revenues, and
contract costs on its long-term contracts. The estimates inherent in such
provisions are periodically evaluated and revisions are made as required to
reflect the most up-to-date information. However, due to uncertainties inherent
in the estimation process, actual results could differ materially from those
estimates.
Pro Forma Net Income Data
Basic pro forma net income per share is computed using the weighted average
common shares outstanding, and diluted pro forma net income per share is
computed using the weighted average common shares outstanding and common stock
equivalents if dilutive. Pro forma tax provision is based on the effective tax
rate that the Company believes would have been incurred had the Company not been
an S corporation for income tax purposes. That rate of 40 percent is comprised
of a 34 percent federal statutory rate plus an effective state tax rate net of
federal benefit of six percent.
Impact of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128, "Earnings Per Share" (SFAS No. 128), adopted by the Company on
December 31, 1997. SFAS No. 128 replaced the previously reported primary or
fully diluted pro forma earnings per share with basic and diluted earnings per
F-9
<PAGE> 129
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
share. Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants, and convertible securities. Diluted
earnings per share is very similar to the previously reported primary earnings
per share. All earnings per share amounts for all periods have been presented,
and where necessary, restated to conform to the SFAS No. 128 requirements. The
impact of SFAS No. 128 on the calculation of fully diluted earnings per share
for each of the periods presented was not material.
SFAS No. 130 "Reporting Comprehensive Income" (SFAS No. 130), issued by the
FASB in June 1997, is effective for periods beginning after December 15, 1997.
Under the new requirements for calculating income, this statement requires that
an enterprise (a) classify items of other comprehensive income by their nature
in a financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. The impact
of SFAS No. 130 on the calculation of comprehensive income for these periods is
not expected to be material.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" (SFAS No. 131). SFAS No. 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. SFAS No. 131 is effective for financial statements for fiscal years
beginning after December 15, 1997. The adoption of SFAS No. 131 will have no
impact on the Company's consolidated results of operations, financial position
or cash flows.
Reclassifications
Certain amounts in the 1995 and 1996 consolidated financial statements have
been reclassified to conform with the 1997 presentation.
2. RECEIVABLES AND CONTRACTS IN PROGRESS
Receivables consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1996 1997 1998
------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Contract receivables:
Contracts in progress....................... $11,566 $18,094 $15,874
Unbilled retentions......................... 5,112 6,520 5,954
------- ------- -------
16,678 24,614 21,828
Other receivables............................. 207 103 76
------- ------- -------
$16,885 $24,717 $21,904
======= ======= =======
</TABLE>
Substantially all of the Company's receivables are due from general
contractors located in Arizona, California, Nevada and South America.
F-10
<PAGE> 130
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
Costs and estimated earnings on completed and uncompleted contracts consist
of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1996 1997 1998
-------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Costs incurred on completed and contracts
in progress.............................. $165,108 $222,669 $200,348
Estimated earnings......................... 23,058 32,274 28,541
-------- -------- --------
188,166 254,943 228,889
Less progress billings..................... 196,886 254,719 227,050
-------- -------- --------
$ (8,720) $ 224 $ 1,839
======== ======== ========
Included in the accompanying consolidated
balances sheets under the following
captions:
Costs and recognized earnings in excess
of billings on uncompleted
contracts............................. $ 3,331 $ 3,982 $ 6,129
Billings in excess of costs and
recognized earnings on uncompleted
contracts............................. (12,051) (3,758) (4,290)
-------- -------- --------
$ (8,720) $ 224 $ 1,839
======== ======== ========
</TABLE>
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1996 1997 1998
------ ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials................................... $ 665 $1,846 $1,849
Finished goods.................................. 614 518 614
------ ------ ------
$1,279 $2,364 $2,463
====== ====== ======
</TABLE>
F-11
<PAGE> 131
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1996 1997 1998
------ ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Property and equipment:
Leasehold improvements....................... $2,334 $ 2,647 $ 2,647
Furniture and fixtures....................... 91 309 345
Transportation equipment..................... 1,308 1,547 1,581
Machinery and equipment...................... 7,995 10,274 10,617
Cranes....................................... 654 644 527
Office equipment............................. 285 322 325
Detailing equipment.......................... 83 316 316
EDP equipment................................ 1,524 1,835 1,966
------ ------- -------
14,274 17,894 18,324
Less amortization and accumulated
depreciation.............................. 9,158 10,479 10,741
------ ------- -------
$5,116 $ 7,415 $ 7,583
====== ======= =======
</TABLE>
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1996 1997 1998
------ ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Note payable to a bank under a revolving line of credit
agreement maturing in 1999, with interest payable monthly
at the bank's prime rate.................................. $ -- $2,640 $1,573
Subordinated note payable to a related party, payable in
monthly installments of $12,037, plus interest at the
bank's prime rate plus 0.75 percent, maturing in 2003..... 2,897 1,795 1,757
Notes payable to related parties under a stock purchase
agreement, payable in annual installments of $159,250 plus
interest at 5.73 percent, maturing in 2002................ -- 796 639
------ ------ ------
2,897 5,231 3,969
Less current portion........................................ 144 304 304
------ ------ ------
$2,753 $4,927 $3,665
====== ====== ======
</TABLE>
The Company maintains a $10,000,000 credit facility with a commercial bank
that is subject to renewal on June 30, 1999 and is collateralized by contract
receivables, equipment and inventory. The security agreements pursuant to which
the Company's assets are pledged prohibit any further pledge of such assets
without the written consent of the Company's lender. Under this facility, the
Company may borrow up to an amount equal to the greater of a) 75 percent of
qualified contract receivables up to a maximum of $10,000,000, or b) a maximum
of $5,000,000 based on the greater of i) 50 percent of the net book value of
fixed assets, or ii) 75 percent of the fair market value of fixed assets. The
Company's ability to borrow is also subject to, among other restrictions,
billings in excess of costs and recognized earnings on uncompleted contracts. At
December 31, 1997 and March 31, 1998, there was approximately $6,200,000 and
$8,400,000, respectively, of credit available under the credit facility for
borrowings which has been reduced by approximately $945,000 and $20,000,
respectively, of outstanding letters of credit under which the Company is
committed. The Company's credit facility requires that the Company maintain
certain financial ratios as well
F-12
<PAGE> 132
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
as other covenants. The Company made interest payments on its line of credit of
approximately $272,000, $64,000 and $45,000 for the years ended December 31,
1995, 1996 and 1997, respectively, and $5,000 and $49,000 for the three months
ended March 31, 1997 and 1998. The weighted average interest rate on the
revolving line of credit was approximately 8.5 percent at December 31, 1996 and
1997 and March 31, 1998.
The subordinated note payable to a related party is a long-term loan from a
partnership owned by related parties which includes certain of the Company's
stockholders. The partnership obtained the funds loaned to the Company from a
bank under terms similar to those included in the loan it made to the Company.
Under the terms of the loan agreement between the partnership and the bank,
certain officers and stockholders of the Company have guaranteed repayment of
the partnership's loan.
Effective December 10, 1997, the Company was granted a $10,000,000 line of
credit agreement (Acquisition Line) with a commercial bank solely to finance the
acquisition of other companies and/or their assets. The covenants of this
agreement are consistent with the credit facility mentioned above. The
Acquisition Line is collateralized by the Company's accounts receivable,
inventory and equipment; any real property purchased through the credit
agreement or property owned by an acquired subsidiary; and other items as
defined in the agreement. Interest is payable in one, two, or three month
periods at LIBOR or prime rate plus 0.25 percent. Borrowings under the
Acquisition Line will be payable in installments as defined in the related
agreement commencing on January 30, 1999. At December 31, 1997 and March 31,
1998, no amounts were due under the acquisition line.
Annual principal amounts of long-term debt maturing subsequent to December
31, 1997 are: 1998 -- $304,000, 1999 -- $2,944,000, 2000 -- $304,000,
2001 -- $304,000, 2002 -- $304,000 and thereafter -- $1,071,000. The Company
made interest payments of approximately $449,000, $420,000 and $325,000 for the
years ended December 31, 1995, 1996 and 1997, respectively, and $60,000 and
$135,000 for the three months ended March 31, 1997 and 1998, respectively, on
its long-term debt.
6. STOCKHOLDERS' EQUITY
On May 8, 1997, the Company effected a 50,000 for one common stock split.
Accordingly, all shares of common stock have been retroactively restated in the
consolidated financial statements to reflect the effect of this stock split. At
the same time the Company also reincorporated in Delaware and changed its
authorized shares and classes of stock. The information set forth in the
financial statements reflect the authorized shares after having given effect to
the reincorporation.
On July 7, 1997, the Company sold 2,000,000 common shares pursuant to the
Company's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission. The Company received net proceeds of approximately
$14,000,000 from the sale of the shares of which approximately $7,000,000 was
used to fund S Corporation distributions payable to stockholders of record of
the Company immediately prior to the effective date of the Form S-1.
Prior to June 26, 1997, the Company's principal stockholders were the sole
parties to a share repurchase agreement that was funded by life insurance
proceeds and personal promissory notes in the event of the death of either
stockholder. Under the terms of the Company's bank loan agreement, the Company
was permitted to make distributions to enable the shareholders to pay the
premiums on their life insurance policies. Effective June 26, 1997, with the
termination of the Company's "S" election, this agreement was canceled.
Due to the Company's status as a qualified S corporation through June 26,
1997, there was no income tax expense to the Company for the period from January
1, 1997 through June 26, 1997 or the years ended December 31, 1996 and 1995.
However, it was the policy of the Company to also make distributions to
stockholders in such amounts as were required to enable them to pay income taxes
attributable to their
F-13
<PAGE> 133
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
allocable share of taxable S corporation income from the Company through June
26, 1997. A final accounting was made by the Company in December 1997 for the
period ended June 26, 1997 prior to the preparation and filing of the Company's
final "S" corporation income tax return. Pursuant to provisions in the Company's
bank loan agreement, the Company was also permitted at its discretion to declare
an annual dividend to the stockholders providing the Company maintained certain
financial criteria.
Following is an analysis of stockholder distributions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Stockholder distributions payable at beginning of year...... $1,297 $1,071 $4,555
Additions (deductions):
Life insurance premiums................................... 346 346 173
Current year income taxes................................. 1,217 5,105 2,087
Prior year income taxes................................... (93) (73) --
Less: Prior year refunds applied to current year taxes.... (79) (35) --
Current year dividend..................................... 460 700 7,000
------ ------ ------
1,851 6,043 9,260
------ ------ ------
Cash distributions:
Life insurance premiums................................... 226 226 173
Current year income taxes................................. 369 925 2,087
Prior year income taxes................................... 691 798 4,140
Current year dividend..................................... 128 185 7,000
Prior year dividend....................................... 400 200 415
------ ------ ------
1,814 2,334 13,815
------ ------ ------
Noncash distributions applied to receivables from
stockholders.............................................. 263 225 --
------ ------ ------
Stockholder distributions payable at end of year............ $1,071 $4,555 $ --
====== ====== ======
</TABLE>
7. INCOME TAXES
As discussed in Note 1, on June 26, 1997, the Company's stockholders
elected to terminate the Company's status as an "S" Corporation, and the Company
became subject to federal and state income taxes. Upon revocation of the S
Corporation election, the Company recorded a $300,000 credit to income as a
deferred tax benefit for the effect of cumulative temporary differences as of
the date of the termination. Prior to its termination as an S Corporation, the
Company declared an additional distribution of $7,000,000 to its then current
stockholders. The Company's retained earnings include undistributed S
Corporation earnings of approximately $3,100,000 and certain C Corporation
earnings prior to the Company's election of subchapter S Corporation status in
1987.
F-14
<PAGE> 134
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
Deferred tax assets and liabilities are composed of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Vacation accrual................................... $190 $208
Deferred recognition on contracts in progress...... 174 178
Property tax accrual............................... 53 44
Deferred rents payable............................. 95 119
Other.............................................. 35 36
---- ----
547 585
Deferred tax liabilities:
Depreciation....................................... 158 197
Pension accrual.................................... 48 48
Other.............................................. 150 150
---- ----
356 395
---- ----
Net deferred tax assets............................ $191 $190
==== ====
</TABLE>
Significant components of the income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
1997 1998
------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Current:
Federal................................. $2,562 $ 974
State................................... 452 171
------ ------
3,014 1,145
Deferred:
Federal................................. (163) 1
State................................... (28) --
------ ------
(191) 1
------ ------
$2,823 $1,146
====== ======
</TABLE>
F-15
<PAGE> 135
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
The reconciliation of income tax computed at the U.S. federal statutory
rates to provision for income taxes follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1997 MARCH 31,
ACTUAL PRO FORMA PRO FORMA 1998
------- --------- ------------------ ------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Tax at U.S. federal statutory
rates........................... $ 3,929 $3,929 $602 $ 932
State income taxes, net of federal
tax benefit..................... 280 693 108 113
S Corporation termination......... (300) (300) -- --
Tax attributable to S Corporation
portion of earnings............. (1,213) -- -- --
Other............................. 127 14 -- 101
------- ------ ---- ------
$ 2,823 $4,336 $710 $1,146
======= ====== ==== ======
</TABLE>
Total income tax payments for the period from June 27, 1997 (date of C
Corporation commencement) to December 31, 1997 were approximately $3,012,000 and
for the three months ended March 31, 1998 were approximately $177,000.
8. EMPLOYEE RETIREMENT PLANS
The Company maintains a 401(k) retirement savings plan which covers
eligible employees and which permits participants to contribute to the plan,
subject to Internal Revenue Code restrictions. The plan also permits the Company
to make discretionary matching contributions, which amounted to approximately
$35,000 and $70,000 for the years ended December 31, 1996 and 1997, respectively
(none for 1995) and $10,000 and $16,000 for the three months ended March 31,
1997 and 1998, respectively.
In 1996, the Company adopted the "Supplemental Retirement and Deferred
Compensation Plan" for certain management employees. The Plan was an unfunded
deferred compensation plan whereby the Company contributed an amount equal to 10
percent of annual net profits after deducting taxes to be paid by the
stockholders, as defined in the Plan. During the year ended December 31, 1996,
total expense recognized by the Company was $529,000, which was distributed to
eligible employees in 1997 pursuant to termination of this Plan in January 1997.
Substantially all of the Company's fabrication and erection workforce is
subject to collective bargaining agreements. The Company made contributions to
union sponsored pension plans of $883,000, $1,122,000 and $1,836,000 during the
years ended December 31, 1995, 1996 and 1997, respectively, and $409,000 and
$373,000 for the three months ended March 31, 1997 and 1998, respectively.
Information from the administrators of the plans is not available to permit the
Company to determine its share of accumulated benefits and related assets.
The Company has a 401(k) defined contribution retirement savings plan for
union steelworkers. Currently, only participants contribute to this plan on a
voluntary basis, subject to Internal Revenue Code restrictions. All account
balances are 100 percent vested.
On August 15, 1994, the Company and local representatives of the United
Steelworkers of America reached an agreement whereby the Company became a
participating employer in a multi-employer defined benefit retirement plan.
Effective January 1, 1997, the Company is required to contribute 40 cents to the
plan (compared to 35 cents in 1996 and 30 cents in 1995) for each hour worked in
the preceding month by each plan participant. The Company has also agreed to
increase its hourly contribution by five cents per participant
F-16
<PAGE> 136
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
annually through the year 1999. The Company's funding policy is to make monthly
contributions to the plan. Total cost recognized as expense was approximately
$97,000, $124,000 and $147,000 during the years ended December 31, 1995, 1996
and 1997, respectively, and $36,000 and $52,000 for the three months ended March
31, 1997 and 1998, respectively.
In December 1997, the Company terminated a second, contributory defined
benefit plan that had been maintained to provide pension and disability benefits
to union steelworkers. The plan had previously been curtailed in 1989 when all
pension credits were frozen. At the time of plan termination, all undistributed
benefits were fully vested. Annuities were purchased to settle pension
obligations under the terminated plans. As a result of the settlement, the
Company recorded a loss of approximately $251,000.
Prior to its termination in 1997, the Company accounted for pension expense
under its noncontributory defined benefit pension plan under the provisions of
SFAS No. 87, "Employers' Accounting for Pensions." The weighted average discount
rate used in determining the actuarial present value of accumulated and
projected benefit obligations was 6.5 percent in 1996. The expected long-term
rate of return on plan assets was 8.5 percent in 1996. The weighted average rate
of compensation increase was not applicable because the benefit was not pay
related.
The following table sets forth the funded status of the plan as provided by
consulting actuaries at December 31, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Actuarial present value of accumulated and projected benefit
obligations, all of which are fully vested................ $2,003
Plan assets at fair value................................... 1,740
------
Funded status, projected benefit obligation in excess of
plan assets............................................... $ 263
======
Comprised of:
Prepaid pension cost before adjustment to recognize
additional minimum liability........................... $ 362
Unrecognized net loss..................................... (519)
Unrecognized net obligation............................... (106)
------
Adjustment to recognize minimum liability................... $ (263)
======
Net pension cost includes the following components:
Service costs............................................. $ 50
Interest cost on projected benefit obligation............. 122
Actual return on plan assets.............................. (231)
Net amortization and deferral............................. 128
------
Net period pension cost..................................... $ 69
======
</TABLE>
F-17
<PAGE> 137
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
9. NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted pro
forma net income per share:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
--------------- ------------------
1996 1997 1997 1998
------ ------ ------ ------
(IN THOUSANDS EXCEPT PER SHARE DATE)
<S> <C> <C> <C> <C>
Numerator:
Pro forma net income..................................... $6,030 $7,219 $1,062 $1,595
====== ====== ====== ======
Denominator:
Weighted average shares.................................. 5,000 5,975 5,000 7,000
Net effect of shares issued that are attributed to
stockholder distributions made from initial public
offering proceeds..................................... 941 482 941 --
------ ------ ------ ------
Denominator for basic pro forma net income per share....... 5,941 6,457 5,941 7,000
Effect of dilutive securities:
Employee and director stock options...................... -- 99 -- 159
------ ------ ------ ------
Denominator for diluted pro forma net income per share --
adjusted weighted average shares and assumed
conversions........................................... 5,941 6,556 5,941 7,159
====== ====== ====== ======
Pro forma net income per share:
Basic.................................................... $ 1.02 $ 1.12 $ 0.18 $ 0.23
====== ====== ====== ======
Diluted.................................................. $ 1.02 $ 1.10 $ 0.18 $ 0.22
====== ====== ====== ======
</TABLE>
F-18
<PAGE> 138
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
10. STOCK OPTIONS
The Company established a qualified stock option plan (Plan) effective
February 5, 1997. The exercise price of the options, as well as the vesting
period, are established by the Company's Board of Directors. A summary of
activity under the Plan is as follows:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
--------------------
WEIGHTED-
SHARES AVERAGE
AVAILABLE EXERCISE
UNDER GRANT NUMBER PRICE
----------- ------- ---------
<S> <C> <C> <C>
Balance at February 5, 1997 (inception of Plan)............ -- -- $ --
Authorized............................................... 600,000 -- --
Granted.................................................. (360,500) 360,500 5.12
Exercised................................................ -- -- --
Canceled................................................. 48,500 (48,500) 5.00
-------- ------- -----
Balance at December 31, 1997............................... 288,000 312,000 5.14
Authorized............................................... -- -- --
Granted.................................................. -- -- --
Exercised................................................ -- (2,000) 5.00
Canceled................................................. -- -- --
-------- ------- -----
Balance at March 31, 1997.................................. 288,000 310,000 $5.15
======== ======= =====
Exercisable at December 31, 1997........................... 0
=======
Exercisable at March 31, 1998.............................. 62,000
=======
</TABLE>
The range of exercise prices for options outstanding at December 31, 1997
and March 31, 1998 was $5.00 to $8.00 per option. The weighted-average remaining
contractual life of those options is approximately nine years.
The Company's 1997 Stock Option Plan has authorized the grant of options up
to 600,000 shares to officers, directors or key employees of the Company. All
options have ten year terms and generally vest ratably over five years from the
date of grant. The weighted average fair value of options granted during the
year ended December 31, 1997 was $3.21.
The Company has elected to follow APB 25 and related Interpretations in
accounting for its stock options issued to employees because, as discussed
below, the alternative fair value accounting provided for under SFAS No. 123,
"Accounting for Stock-Based Compensation," (SFAS No. 123) requires use of option
valuation models that were developed for use in valuing stock options. Under APB
25, because the exercise price of the Company's employee stock options equals
the market price of the underlying stock on the date of grant, no compensation
expense is recognized.
F-19
<PAGE> 139
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
Pro forma information regarding net income and pro forma earnings per share
is required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of SFAS No.
123. The fair value for these options was estimated at the date of grant using a
Black Scholes Option pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Expected life of award...................................... 5 years
Volatility.................................................. .699
Risk-free interest rate..................................... 6 percent
Expected dividends yield.................................... 0 percent
</TABLE>
Had compensation cost for the Company's stock option plan been determined
based on the fair value at the grant date for awards in 1997 consistent with the
provisions of SFAS No. 123, the estimated fair value of the options would be
amortized to expense over the option's vesting period and the Company's net
income and net income per share would have been decreased to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
1997 1998
------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Pro forma net income as reported.............. $7,219 $1,595
Pro forma net income including SFAS No. 123 $7,114 $1,565
expense.....................................
Pro forma earnings per share including SFAS
No. 123 expense
Basic....................................... $ 1.10 $ 0.23
Diluted..................................... $ 1.09 $ 0.22
</TABLE>
Pro forma results disclosed are based on the provisions of SFAS 123 using
the Black-Scholes option valuation model and are not likely to be representative
of the effects on the net income for future years. In addition, The
Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the estimating models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
11. RELATED PARTY TRANSACTIONS
The Company leases certain property from a partnership owned by related
parties which includes the Company's principal stockholders. Effective March 1,
1997, the Company terminated the existing lease and executed a new 20-year lease
with the same partnership. The lease requires monthly lease payments ranging
from $24,611 in 1997 to $50,427 in 2000 and thereafter with additional
stipulated rent increases every five years based on the Consumer Price Index.
The Company is also obligated to pay the partnership any taxes related to the
lease payments.
Effective March 1, 1997, the Company also executed a 20-year lease of
certain property with the partnership discussed above. Such property was part of
the acquisition discussed in Note 15. The lease requires monthly lease payments
of $28,333 with additional stipulated rent increases every five years based on
F-20
<PAGE> 140
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
the Consumer Price Index. The Company is also obligated to pay the partnership
any taxes related to the lease payments.
Effective May 1, 1997, the Company also executed a 20-year lease of certain
property with the partnership discussed above. The lease requires monthly lease
payments of $11,250 with additional stipulated rent increases every five years
based on the Consumer Price Index. The Company is also obligated to pay the
partnership any taxes related to the lease payments. In connection with this
lease, the Company was assigned and did assume two sub-lease agreements with an
unrelated party for a portion of the property. The subleases were effective for
the period from April 24, 1997 through June 30, 1997, and called for monthly
rentals totaling $21,076. Effective July 1, 1997, the Company terminated one of
the subleases and renegotiated the other. The new sublease has a term of two
years (with options to extend an additional two years) and calls for monthly
rentals of $7,669.
Rent expense under the related party leases totaled approximately $264,000
in 1995, $274,000 in 1996, and $900,000 in 1997, and $69,000 and $246,000 for
the three months ended March 31, 1997 and 1998, respectively.
Future minimum rentals (excluding taxes), by year, and in the aggregate
under these noncancelable operating leases at December 31, 1997, are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1998........................................................ $ 889
1999........................................................ 1,031
2000........................................................ 1,076
2001........................................................ 1,080
2002........................................................ 1,080
Thereafter.................................................. 15,324
-------
$20,480
=======
</TABLE>
The Company also leases certain property, vehicles, and equipment from
nonrelated parties for which it incurred rent expense of approximately $134,000,
$233,000 and $259,000 for the years ended December 31, 1995, 1996 and 1997,
respectively, and $95,000 and $61,000 for the three months ended March 31, 1997
and 1998.
12. SIGNIFICANT CUSTOMERS
The Company had revenues from certain customers that were in excess of 10
percent of the respective years' revenues as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- ------------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Customer A................................ 10.4% 13.4% 20.4% 18.0% n/a
Customer B................................ n/a 19.5% 31.7% 35.4% 28.8%
Customer C................................ n/a 13.7% n/a n/a n/a
Customer D................................ n/a 11.5% n/a n/a n/a
Customer E................................ 11.2% n/a n/a n/a n/a
Customer F................................ 14.4% n/a n/a n/a n/a
Customer G................................ n/a n/a n/a n/a 10.5%
</TABLE>
F-21
<PAGE> 141
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
During the years ended December 31, 1995, 1996 and 1997, and the three
months ended March 31, 1997 and 1998, the Company's revenues included
approximately $1,894,000, $14,280,000, $5,057,000, $463,000 and $2,185,000,
respectively, relating to projects carried out internationally for which
approximately $1,776,000, $463,369 and $1,145,000 was in accounts receivable at
December 31, 1996 and 1997 and March 31, 1998, respectively.
13. OTHER INCOME
During 1995, the Company received $175,000 as a result of a settlement with
third parties relating to damages to Company equipment. In addition, the Company
received approximately $371,000 from a claim related to misappropriation of
funds by a former employee.
14. CONTINGENCIES
The Company is involved from time to time through the ordinary course of
business in certain claims, litigation, and assessments. Due to the nature of
the construction industry, the Company's employees from time to time become
subject to injury, or even death, while under the employ of the Company. The
Company does not believe there is any such contingencies at December 31, 1997
for which the eventual outcome would have a material adverse impact on the
Company.
During 1996, the primary contractor on the Company's largest contract has
claimed that the Company was liable under delay provisions and is seeking
damages. The Company believes that the reasons for the delay were such that the
Company should not be liable and accordingly no reserves have been created for
this claim.
During 1996, the Company was named as a defendant in a lawsuit relating to
an incident at one of its worksites whereby one of its employees was killed in a
crane accident. The Company believes the loss, if any, relating to the incident
will be fully insured and does not expect the ultimate outcome of the matter to
have a material adverse impact on its financial position.
Relating to the incident set forth in the prior paragraph, the Company has
been named as a defendant in a lawsuit brought on by the crane operator who
claims he was assaulted by employees of the Company after the incident. The
Company's insurance carrier has declined coverage. However, management does not
expect the amount of loss, if any, relating to the ultimate resolution of this
matter to have a material adverse impact on its financial position regardless of
whether or not the insurance carrier ultimately provides coverage.
15. PURCHASE OF SUBSIDIARY
On January 31, 1997, the Company acquired 100 percent of the outstanding
capital stock of B&K Steel Fabrications, Inc. ("B&K"), a steel fabricator
located in Gilbert, Arizona, for $1,223,194, consisting of $426,944 in cash and
$796,250 in two promissory notes payable in annual installments over five years
including interest at 5.73 percent. In addition, the Company prepaid $1,090,000
of the subordinated note payable discussed in Note 5 to enable a related party
lessor to the Company to acquire the real property upon which B&K is located,
and certain equipment attached to the property. The acquisition was not
significant to the Company under the definitions used by the Securities and
Exchange Commission and has been accounted for under the purchase method of
accounting. After assigning fair values to the tangible assets acquired and
liabilities assumed, there was no goodwill generated by the purchase. The
results of operations of B&K have been included in those of the Company
commencing February 1, 1997. Had the purchase taken place as of January 1, 1996,
the combined business would have had revenues of $113,291,000, income before
taxes of $10,165,000, pro forma net income (using a 40 percent effective tax
rate) of $6,099,000 and diluted pro forma net income per share of $1.03.
However, such information may not be indicative of future operations of the
F-22
<PAGE> 142
SCHUFF STEEL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS
UNAUDITED)
combined business. Effective December 31, 1997, B&K was merged into the Company
and, as a result, the corporate entity of B&K was dissolved.
16. SUBSEQUENT EVENTS
On March 18, 1998, the Company announced that it had executed a letter of
intent to acquire all of the outstanding shares of stock of Addison Structural
Services, Inc. (Addison). Addison had revenues of approximately $63.7 million
for its fiscal year ended June 30, 1997. The Company is in the process of
performing its due diligence with respect to the transaction and is attempting
to obtain financing to complete the acquisition. However, there is no assurance
that the transaction will ultimately be completed.
17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
A summary of the quarterly results of operations for the years ended
December 31, 1997 and 1996 follows (in thousands, except for per share amounts):
<TABLE>
<CAPTION>
FISCAL YEAR 1997
-------------------------------------------
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues...................................... $25,507 $37,177 $35,439 $40,095
Gross profit.................................. 3,852 4,438 5,865 6,108
Pro forma net income.......................... 1,034 1,752 2,162 2,271
Pro forma net income per share:
Basic....................................... $ 0.17 $ 0.29 $ 0.31 $ 0.32
Diluted..................................... $ 0.17 $ 0.28 $ 0.30 $ 0.32
Weighted average number of shares outstanding:
Basic....................................... 5,941 5,941 6,931 7,000
Diluted..................................... 6,152 6,286 7,118 7,148
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR 1996
-------------------------------------------
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues...................................... $10,410 $29,691 $38,861 $24,950
Gross profit.................................. 1,992 4,091 5,885 4,946
Pro forma net income.......................... 325 1,547 2,467 1,691
Pro forma net income per share:
Basic....................................... $ 0.05 $ 0.26 $ 0.42 $ 0.28
Diluted..................................... $ 0.05 $ 0.26 $ 0.42 $ 0.28
Weighted average number of shares outstanding:
Basic....................................... 5,941 5,941 5,941 5,941
Diluted..................................... 5,941 5,941 5,941 5,941
</TABLE>
The 1997 quarterly results for basic and diluted pro forma net income per
share, when totaled, do not equal the basic and diluted net income per share for
the year ended December 31, 1997. These variances are due to rounding and
certain options being antidilutive for certain quarters but not for the year.
F-23
<PAGE> 143
REPORT OF MAULDIN & JENKINS, INDEPENDENT AUDITORS
To the Board of Directors
Addison Structural Services, Inc.
and Subsidiaries
Albany, Georgia
We have the audited the accompanying consolidated balance sheets of Addison
Structural Services, Inc. and Subsidiaries as of June 30, 1996 and 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended June 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Addison
Structural Services, Inc. and Subsidiaries as of June 30, 1996 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1997, in conformity with generally accepted accounting
principles.
/s/ MAULDIN & JENKINS, LLC
Albany, Georgia
August 5, 1997, except for Note 10
as to which the date is March 18, 1998
F-24
<PAGE> 144
ADDISON STRUCTURAL SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 4,204,012 $ 8,541,708 $ 7,345,920
Contract receivables, including retentions
1997 -- $2,291,530; 1996 -- $1,846,983;
1998 -- $2,201,039...................................... 10,721,967 8,285,368 8,766,946
Cost and estimated earnings in excess of billings on
uncompleted contracts................................... 3,107,611 2,889,556 3,928,018
Current maturities of real estate mortgage receivable..... 37,417 40,427 80,661
Loans receivable, employees............................... 16,129 17,641 6,299
Inventories, at the lower of cost (first-in, first-out
method) or market....................................... 2,790,453 2,673,995 3,929,338
Income tax receivable..................................... 20,228 -- 276,018
Prepaids.................................................. -- -- 29,291
----------- ----------- -----------
Total current assets.................................... 20,897,817 22,448,695 24,362,491
Investments, long-term receivables and other assets:
Cash surrender value of life insurance.................... 454,357 530,714 530,714
Other investments, at cost................................ 25,000 25,000 25,000
Real estate mortgage receivable, less current
maturities.............................................. 124,859 113,047 661,776
Deposits.................................................. 13,648 13,848 13,848
----------- ----------- -----------
617,864 682,609 1,231,338
Property and equipment:
Land...................................................... 1,733,945 3,589,509 3,411,217
Buildings and improvements................................ 5,163,855 6,145,197 6,368,178
Machinery, equipment and vehicles......................... 7,174,874 7,593,156 7,347,001
Furniture and fixtures.................................... 642,846 625,691 735,693
Construction in progress.................................. 822,731 1,740,309 2,431,399
----------- ----------- -----------
15,538,251 19,693,862 20,293,488
Less accumulated depreciation............................. 7,707,733 8,286,349 8,179,444
----------- ----------- -----------
7,830,518 11,407,513 12,114,044
----------- ----------- -----------
$29,346,199 $34,538,817 $37,707,873
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable............................................. $ 500,000 $ -- $ --
Current maturities on long-term debt...................... 10,809 12,058 --
Current maturities on long-term debt, ESOP stock note..... 110,175 110,175 110,175
Current maturities on long-term debt, ESOP................ 29,506 58,471 58,471
Accounts payable.......................................... 3,168,496 2,905,684 2,872,017
Billings in excess of costs and estimated earnings on
uncompleted contracts................................... 2,315,203 893,660 1,347,947
Accrued expenses.......................................... 2,248,029 2,773,576 1,831,416
Income taxes payable...................................... -- 396,911 --
----------- ----------- -----------
Total current liabilities............................... 8,382,218 7,150,535 6,220,026
Long-term liabilities:
Long-term debt, less current maturities................... 143,764 131,704 --
Long-term debt, ESOP stock note, less current
maturities.............................................. 936,488 826,312 743,681
Long-term debt, ESOP, less current maturities............. 59,898 138,155 138,155
----------- ----------- -----------
1,140,150 1,096,171 881,836
Deferred income taxes....................................... 230,762 636,328 636,328
Stockholders' equity:
Common stock, par value $5 per share; authorized 100,000
shares; issued 51,331 shares............................ 256,654 256,654 256,654
Additional paid in capital................................ 377,114 377,114 377,114
Retained earnings......................................... 20,095,368 26,155,128 30,386,397
----------- ----------- -----------
20,729,136 26,788,896 31,020,165
Less:
ESOP stock note......................................... 1,046,663 936,487 853,856
Deferred compensation related to ESOP guarantee......... 89,404 196,626 196,626
----------- ----------- -----------
19,593,069 25,655,783 29,969,683
----------- ----------- -----------
Total liabilities and stockholders' equity.............. $29,346,199 $34,538,817 $37,707,873
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-25
<PAGE> 145
ADDISON STRUCTURAL SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................... $50,462,695 $57,638,044 $63,700,151 $46,194,902 $48,880,096
Cost of revenues........................... 38,974,570 43,414,287 47,774,377 34,880,775 37,701,434
----------- ----------- ----------- ----------- -----------
Gross profit............................... 11,488,125 14,223,757 15,925,774 11,314,127 11,178,662
General and administrative expenses........ 5,582,433 6,000,956 6,531,854 4,642,536 5,171,633
----------- ----------- ----------- ----------- -----------
Operating income........................... 5,905,692 8,222,801 9,393,920 6,671,591 6,007,029
Nonoperating income (expense):
Interest and dividend income............. 35,448 128,275 349,085 264,064 356,331
Interest expense......................... (236,274) (152,781) (38,181) (30,088) (12,336)
Gain on sale of assets................... 2,594 107,394 21,771 16,793 429,966
Miscellaneous other income (expense)..... 157,405 185,630 366,461 160,963 (10,961)
----------- ----------- ----------- ----------- -----------
(40,827) 268,518 699,136 411,732 763,000
----------- ----------- ----------- ----------- -----------
Income before income taxes................. 5,864,865 8,491,319 10,093,056 7,083,323 6,770,029
Provision for income taxes................. 2,177,989 3,186,471 4,033,296 2,714,610 2,538,760
----------- ----------- ----------- ----------- -----------
Net income................................. $ 3,686,876 $ 5,304,848 $ 6,059,760 $ 4,368,713 $ 4,231,269
=========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-26
<PAGE> 146
ADDISON STRUCTURAL SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL ESOP DEFERRED TOTAL
COMMON PAID IN RETAINED TREASURY STOCK COMPENSATION STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK NOTE ESOP EQUITY
--------- ---------- ----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1994........ $ 389,148 $ 571,795 $12,253,451 $(1,456,710) $ -- $ (166,203) $11,591,481
Net decrease in deferred
compensation related to
ESOP...................... -- -- -- -- -- 86,390 86,390
Net income.................. -- -- 3,686,876 -- -- -- 3,686,876
--------- --------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1995........ 389,148 571,795 15,940,327 (1,456,710) -- (79,813) 15,364,747
Purchase of treasury
shares.................... -- -- -- (20,272) -- -- (20,272)
Retirement of treasury
stock..................... (132,494) (194,681) (1,149,807) 1,476,982 -- -- --
Net increase in deferred
compensation related to
ESOP...................... -- -- -- -- -- (9,591) (9,591)
Net increase in ESOP stock
note...................... -- -- -- -- (1,046,663) -- (1,046,663)
Net income.................. -- -- 5,304,848 -- -- -- 5,304,848
--------- --------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1996........ 256,654 377,114 20,095,368 -- (1,046,663) (89,404) 19,593,069
Net increase in deferred
compensation related to
ESOP...................... -- -- -- -- -- (107,222) (107,222)
Net decrease to ESOP stock
note...................... -- -- -- -- 110,176 -- 110,176
Net income.................. -- -- 6,059,760 -- -- -- 6,059,760
--------- --------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1997........ 256,654 377,114 26,155,128 -- (936,487) (196,626) 25,655,783
Net decrease to ESOP stock
note (unaudited).......... -- -- -- -- 82,631 -- 82,631
Net income (unaudited)...... -- -- 4,231,269 -- -- -- 4,231,269
--------- --------- ----------- ----------- ----------- ----------- -----------
Balance, March 31, 1998
(unaudited)................. $ 256,654 $ 377,114 $30,386,397 $ -- $ (853,856) $ (196,626) $29,969,683
========= ========= =========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-27
<PAGE> 147
ADDISON STRUCTURAL SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED JUNE 30, MARCH 31,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................ $ 3,686,876 $ 5,304,848 $ 6,059,760 $ 4,368,713 $ 4,231,269
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation........................................ 891,261 921,866 978,373 731,953 737,470
Amortization of prepaid loan costs.................. 2,153 2,905 -- -- --
Gain on sale of property and equipment.............. (15,730) (107,394) (21,771) (16,793) (429,966)
Loss on sale of real estate held for sale........... 13,136 -- -- -- --
Changes in assets and liabilities:
(Increase) decrease in contract receivables....... (1,507,123) (2,692,332) 2,436,599 2,200,103 (481,578)
(Increase) decrease in other receivables.......... (15,988) 19,085 (1,512) (3,650) 11,342
(Increase) decrease in costs in excess of billings
or uncompleted contracts........................ (1,429,136) 787,248 218,055 (1,174,862) (1,038,462)
(Increase) decrease in inventories................ (1,063,985) 337,772 116,458 (685,307) (1,255,343)
Increase in prepaids.............................. -- -- -- (59,163) (29,290)
(Increase) decrease in deposits................... 14,600 -- (200) -- --
(Increase) decrease in income taxes receivable.... -- -- -- 20,228 (276,019)
Increase (decrease) in accounts payable........... 34,609 142,320 (262,812) (4,269) (33,667)
Increase (decrease) in billings in excess of costs
on uncompleted contracts........................ 285,989 916,870 (1,421,543) -- 454,287
Increase (decrease) in accrued expenses........... 722,106 595,445 525,547 (519,389) (942,160)
Increase (decrease) in deferred income taxes...... (184,030) 138,545 405,566 -- --
Increase (decrease) in income taxes payable....... 259,009 (536,549) 417,139 64,295 (396,911)
----------- ----------- ----------- ----------- -----------
Net cash provided by operating activities..... 1,693,747 5,830,629 9,449,659 4,921,859 550,972
INVESTING ACTIVITIES
Proceeds from sale of property and equipment.......... 42,054 225,474 86,574 46,655 118,446
Purchase of property and equipment.................... (690,178) (2,665,204) (4,620,171) (1,579,818) (1,132,481)
Proceeds from sale of real estate held for sale....... 109,000 -- -- -- --
Increase in cash surrender value of life insurance.... (66,024) (48,050) (76,357) -- --
(Increase) decrease received on real estate mortgage
receivable.......................................... 7,467 8,115 8,802 6,528 (588,963)
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities......... (597,681) (2,479,665) (4,601,152) (1,526,635) (1,602,998)
FINANCING ACTIVITIES
Principal payments on long-term borrowings............ (1,322,018) (972,908) (10,811) (7,994) (143,762)
Purchase of treasury stock............................ -- (20,272) -- -- --
Increase (decrease) in short-term notes payable....... 190,001 (191,002) (500,000) (500,000) --
----------- ----------- ----------- ----------- -----------
Net cash used in financing activities................. (1,132,017) (1,184,182) (510,811) (507,994) (143,762)
----------- ----------- ----------- ----------- -----------
Net (decrease) increase in cash and cash
equivalents......................................... (35,951) 2,166,782 4,337,696 2,887,230 (1,195,788)
Cash and cash equivalents at beginning of period...... 2,073,181 2,037,230 4,204,012 4,204,012 8,541,708
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period............ $ 2,037,230 $ 4,204,012 $ 8,541,708 $ 7,091,242 $ 7,345,920
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest............................................ $ 227,333 $ 141,279 $ 47,180 $ 55,088 $ 12,336
=========== =========== =========== =========== ===========
Income taxes........................................ $ 2,103,010 $ 3,584,475 $ 3,210,591 $ 2,630,087 $ 3,211,690
=========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-28
<PAGE> 148
ADDISON STRUCTURAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(THE INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Change in Equity Structure
Effective July 1, 1995, but not completed until October 6, 1995, the
stockholders of Addison Steel, Inc. elected to retire all shares of treasury
stock outstanding, exchange their shares of common stock for shares of common
stock of Addison Structural Services, Inc., a newly formed corporation, and
approve a dividend of its equity interest in Quincy Joist Company, a wholly
owned subsidiary, to Addison Structural Services, Inc. The purpose of creating
Addison Structural Services, Inc. is to facilitate the administrative functions
of the two subsidiaries. The combination has been accounted for as a
reorganization with a pooling of interests.
Nature of Business
Addison Structural Services, Inc. (the Company) is a holding company whose
business is presently conducted by its wholly owned subsidiaries, Addison Steel,
Inc. in Albany, Georgia and Orlando, Florida and Quincy Joist Company in Quincy,
Florida. The subsidiaries are principally engaged in the steel fabrication and
erection business throughout the Southeastern United States, but primarily in
Georgia and Florida. Work is normally performed under fixed-price contracts
typically lasting less than one year. Therefore, assets and liabilities relating
to these contracts are all classified as current in the balance sheets.
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. Significant intercompany transactions and accounts are
eliminated in consolidation.
The accounting and reporting policies of the Company conform to generally
accepted accounting principles and general practices within their industry. In
preparing the financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period. Actual
results could differ from those estimates.
Interim Financial Information
The consolidated financial statements for the nine months ended March 31,
1997 and 1998 are unaudited but include all adjustments (consisting only of
normal recurring adjustments) that the Company considers necessary for a fair
presentation of financial position and results of operations. Operating results
for the nine months ended March 31, 1998 are not necessarily indicative of the
results that may be expected for any future period.
Operating Cycle
Balance sheet items expected to be paid or received within one year are
classified as current assets and liabilities relating to long-term construction
contracts are included in current assets and liabilities in the accompanying
balance sheet, since they will be realized or liquidated in the normal course of
contract completion, although completion may require more than one year.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand and in banks as well as highly liquid investments and repurchase
agreements, which are convertible to a known amount of cash and carry an
insignificant risk of change in value.
F-29
<PAGE> 149
ADDISON STRUCTURAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
The Company maintains deposits in banks which, at times, may exceed FDIC
insured limits. The Company has not experienced any losses in such accounts.
Revenue and Cost Recognition
Revenue from fixed-price contracts, except for the steel portion of the
contract, is reflected in the financial statements on the
percentage-of-completion method. The Company's percentage of completion is
measured by the percentage of labor hours incurred to date to estimated total
labor hours for each contract. This method is used because management considers
expended labor hours to be the best available measure of progress on these
contracts. The revenue and cost recognition related to the steel portion of the
contract is based on actual pounds of steel pulled from inventory.
At the time a loss on a contract becomes known, the entire amount of the
estimated ultimate loss is accrued.
Land, Buildings and Equipment
Land, buildings and equipment are stated at cost. Depreciation and
amortization are provided principally on the straight-line method over the
following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
---------
<S> <C>
Buildings and improvements.................................. 15 - 31.5
Machinery, equipment and vehicles........................... 3 - 5
Furniture and fixtures...................................... 5 - 10
</TABLE>
Amortization of Deferred Debt Expense
Deferred debt expense is being amortized by the straight-line method over
the loan period.
Income Taxes
The Company and its subsidiaries file a consolidated income tax return. The
subsidiaries provide for income taxes based on their contribution to income
taxes (benefits) of the consolidated group.
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences and operating loss
and tax credit carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance within, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effect of changes in tax laws on the date of enactment.
Fair Value of Financial Instruments
Financial Accounting Standards Board Statement No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value.
Carrying amounts approximated fair values for the following instruments:
<TABLE>
<S> <C>
Cash and cash equivalents Notes payable
Contracts receivable Cash surrender value of life insurance
Estimated earnings and billings on Accounts payable
uncompleted contracts Accrued interest payable
</TABLE>
F-30
<PAGE> 150
ADDISON STRUCTURAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
For other financial instruments, the determination of a fair value was not
practical for disclosures as they do not represent a significant value to the
Company and any differences from the carrying value of these instruments would
also not be significant.
2. INVENTORIES
Inventories were composed of the following:
<TABLE>
<CAPTION>
JUNE 30,
------------------------ MARCH 31,
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Albany:
Steel................................................ $ 607,409 $ 643,675 $ 900,344
Accessories and supplies............................. 23,455 30,676 26,478
---------- ---------- ----------
630,864 674,351 926,822
Lockhart (Orlando):
Steel................................................ 649,267 738,451 1,171,845
Accessories and supplies............................. 37,142 35,194 34,461
---------- ---------- ----------
686,409 773,645 1,206,306
Quincy:
Steel................................................ 1,351,780 1,078,023 1,532,079
Accessories and supplies............................. 121,400 147,976 240,269
---------- ---------- ----------
1,473,180 1,225,999 1,772,348
Pinewood Plantation:
Accessories and supplies............................. -- -- 23,862
---------- ---------- ----------
$2,790,453 $2,673,995 $3,929,338
========== ========== ==========
</TABLE>
3. COST AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Cost and estimated earnings on uncompleted contracts consisted of the
following:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------- MARCH 31,
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Cost incurred on uncompleted contracts.............. $27,911,919 $31,060,324 $31,820,446
Estimated earnings.................................. 6,866,556 8,839,253 8,873,494
----------- ----------- -----------
34,778,475 39,899,577 40,693,940
Less billings to date............................... 33,986,067 37,903,681 38,113,869
----------- ----------- -----------
$ 792,408 $ 1,995,896 $ 2,580,071
=========== =========== ===========
</TABLE>
Included in the accompanying consolidated balance sheets under the
following captions:
<TABLE>
<CAPTION>
JUNE 30,
------------------------- MARCH 31,
1996 1997 1998
----------- ---------- -----------
<S> <C> <C> <C>
Cost and estimated earnings in excess of billings on
uncompleted contracts.............................. $ 3,107,611 $2,889,556 $ 3,928,018
Billings in excess of costs and estimated earnings on
uncompleted contracts.............................. (2,315,203) (893,660) (1,347,947)
----------- ---------- -----------
$ 792,408 $1,995,896 $ 2,580,071
=========== ========== ===========
</TABLE>
F-31
<PAGE> 151
ADDISON STRUCTURAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
4. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
JUNE 30,
-------------------- MARCH 31,
1996 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
Note payable, E.C. Addison, a related party, due in monthly
installments of $2,273, including interest at 11.0
percent, collateralized by real estate................... $154,573 $143,762 $ --
Less current portion....................................... 10,809 12,058 --
-------- -------- --------
$143,764 $131,704 $ --
======== ======== ========
</TABLE>
Aggregate maturities required on long-term debt at June 30, 1997 are as
follows:
<TABLE>
<S> <C>
1998........................................................ $ 12,058
1999........................................................ 13,456
2000........................................................ 15,013
2001........................................................ 16,750
2002........................................................ 18,689
Later years................................................. 67,796
--------
$143,762
========
</TABLE>
All interest incurred during the years ended June 30, 1995, 1996, and 1997,
and the nine months ended March 31, 1997 and 1998, was expensed.
5. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
-------------------------------------- ------------------------
1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Current...................... $2,362,019 $3,047,926 $3,627,730 $2,714,610 $2,538,760
Deferred..................... (184,030) 138,545 405,566 -- --
---------- ---------- ---------- ---------- ----------
Provision for income taxes... $2,177,989 $3,186,471 $4,033,296 $2,714,610 $2,538,760
========== ========== ========== ========== ==========
</TABLE>
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
JUNE 30,
-------------------- MARCH 31,
1996 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
Deferred tax liabilities:
Property and equipment................................... $230,762 $636,328 $636,328
-------- -------- --------
Net deferred tax liability................................. $230,762 $636,328 $636,328
======== ======== ========
</TABLE>
F-32
<PAGE> 152
ADDISON STRUCTURAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
The reconciliation of income tax computed at the U.S. federal statutory
rates to provision for income taxes follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
--------------------------------------- ------------------------
1995 1996 1997 1997 1998
---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Tax at U.S. federal
statutory rates........... $1,994,000 $ 2,887,000 $3,432,000 $2,408,000 $2,302,000
State income taxes, net of
federal tax benefit....... 322,000 389,000 512,000 401,000 383,000
Other....................... (138,000) (90,000) 89,000 (94,000) (146,000)
---------- ----------- ---------- ---------- ----------
$2,178,000 $43,186,000 $4,033,000 $2,715,000 $2,539,000
========== =========== ========== ========== ==========
</TABLE>
6. EMPLOYEE STOCK OWNERSHIP PLAN
In 1981, the Company established an Employee Stock Ownership Plan (ESOP).
The primary purpose of the plan is to provide retirement benefits to
substantially all employees. Through June 30, 1997, 23,836.22 shares of the
Company's common stock were held by the Employee Stock Ownership Trust, which
was established to administer the ESOP. Contributions to the ESOP are tax
deductible and are accounted for by the Company in the same manner as all of its
other employee fringe benefit expenses. Contributions under the plan amounted to
$175,861, $214,877, and $306,627 for the years ended 1995, 1996, and 1997,
respectively, and $180,899 and $385,625 for the nine months ended March 31, 1997
and 1998, respectively.
The Plan authorizes its Trustee to distribute vested benefits either at
termination of employment or at the normal retirement age of sixty-five (65). An
account becomes fully vested only after a participant has completed seven years
of service with the Company, has retired at normal retirement age or has become
disabled. The distribution can be made in the form of stock, or a cash
settlement evidenced by a promissory note. The promissory note would be payable
in four (4) equal installments plus accrued interest at prime plus one percent.
If the participant elects a stock distribution, he may offer the stock to the
company for purchase. If so offered, the company is required to purchase the
stock at fair market value. The Company pays twenty percent of the total
purchase price at closing, and the balance of the purchase price is evidenced by
a promissory note bearing interest at one percent above prime. The note is paid
in four equal annual installments plus interest beginning one year after the
closing. The Company may grant the Trust an option to assume the Company rights
and obligations at the time a participant exercises this option. Repayment of
the debt is, however, guaranteed by the Company.
Aggregate future principal payments of the notes payable referred to in the
preceding paragraph are due as follows:
<TABLE>
<S> <C>
Year ending June 30,
1998........................................................ $ 58,471
1999........................................................ 54,604
2000........................................................ 49,369
2001........................................................ 34,182
--------
$196,626
========
</TABLE>
This debt was recorded in the accompanying consolidated balance sheets with
a corresponding deduction from stockholders' equity. The debt and the deduction
from stockholders' equity are reduced as the Trust makes principal payments to
the participants.
F-33
<PAGE> 153
ADDISON STRUCTURAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(THE INFORMATION FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
7. ESOP STOCK NOTE
In October 1995, the Trustees of the ESOP authorized $1,101,750 of
borrowings from SunTrust Bank of South Georgia, for the purchase of 5,000 shares
of the Company's common stock previously owned by another stockholder. The note,
payable in 40 quarterly installments of $27,543.75 plus interest at prime, is
collateralized by the 5,000 shares of stock.
Future principal payments of the note payable are due as follows:
<TABLE>
<S> <C>
Year ending June 30,
1998........................................................ $110,175
1999........................................................ 110,175
2000........................................................ 110,175
2001........................................................ 110,175
2002........................................................ 110,175
Later....................................................... 385,612
--------
$936,487
========
</TABLE>
This debt was recorded in the accompanying consolidated balance sheets with
a corresponding deduction from stockholders' equity. The debt and the deduction
from stockholders' equity are reduced as the Trust makes principal payments.
8. STOCK OPTION AGREEMENT
On November 15, 1994, the Company's wholly owned subsidiary, Quincy Joist
Company, entered into a stock option agreement with one of its officers. The
agreement provides that the officer will be granted ten stock options over a
ten-year period to purchase eleven shares each year of its common stock for a
total of 110 shares which will be 10 percent of the Company's shares after the
tenth option is exercised. The exercise price of each share of common stock
subject to this option agreement shall be $1,704 per share. The options, as
granted, will be exercisable at any time before December 31, 2003 subject to the
terms and conditions of the agreement. If the options are exercised, the stock
will be subject to a buy-sell agreement between the Company and the officer.
No options have been exercised as of March 31, 1998, and June 30, 1997, and
no compensation has been recognized for the options.
9. RELATED PARTY TRANSACTIONS
The Company purchases a portion of its steel requirements from Chris-Mar,
Inc., a related party through common control. The Company purchased 8.04
percent, 7.54 percent and 9.10 percent of its steel requirements amounting to
$1,373,669, $1,344,771 and $1,614,944 for the years ended June 30, 1995, 1996
and 1997, respectively.
10. SUBSEQUENT EVENTS
On March 18, 1998, the stockholders of the Company announced that they had
executed a letter of intent to sell all of the outstanding shares of stock of
the Company to Schuff Steel Company (Schuff). Schuff is in the process of
performing its due diligence with respect to the transaction and is attempting
to obtain financing to complete the acquisition. However, there is no assurance
that the transaction will ultimately be completed.
F-34
<PAGE> 154
======================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES DESCRIBED HEREIN BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. UNDER NO CIRCUMSTANCES SHALL THE
DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE PURSUANT TO THIS EXCHANGE OFFER
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS OR THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Disclosure Regarding Forward-Looking
Statements.......................... 2
Summary............................... 3
Risk Factors.......................... 17
The Acquisition....................... 26
Use of Proceeds....................... 27
Capitalization........................ 28
Unaudited Pro Forma Condensed Combined
Financial Statements................ 29
Schuff Steel Company Selected
Historical Financial Data........... 35
Addison Structural Services, Inc.
Selected Historical Financial
Data............................. 37
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 38
Business.............................. 48
Management............................ 59
Principal Stockholders................ 64
Certain Relationships and Related
Transactions........................ 65
Description of Existing
Indebtedness........................ 66
Description of Exchange Notes......... 68
Description of Outstanding Notes...... 97
The Exchange Offer.................... 98
Plan of Distribution.................. 106
Certain Federal Income Tax
Considerations...................... 107
Legal Matters......................... 113
Independent Auditors.................. 113
Available Information................. 114
Incorporation of Certain Documents by
Reference........................... 114
Index to Financial Statements......... F-1
</TABLE>
======================================================
======================================================
$100,000,000
SCHUFF STEEL
COMPANY
10 1/2% SENIOR NOTES DUE 2008
------------------------
PROSPECTUS
------------------------
, 1998
======================================================
<PAGE> 155
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation provides that a director of the
Company shall not be personally liable to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability for: (i) any breach of the director's duty of loyalty to the Company
or its stockholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) liability for
payments of dividends or stock purchases or redemptions in violation of Section
174 of the Delaware General Corporation Law; or (iv) any transaction from which
the director derived an improper personal benefit. In addition, the Company's
Certificate of Incorporation provides that the Company shall to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the corporation to provide broader
indemnification rights than such law permitted the corporation to provide prior
to such amendment), indemnify and hold harmless any person who was or is a
party, or is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that such person
is or was a director or officer of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan (hereinafter an "Indemnitee")
against expenses, liabilities and losses (including attorneys' fees, judgments,
fines, excise taxes or penalties paid in connection with the Employee Retirement
Income Security Act of 1974, as amended, and amounts paid in settlement)
reasonably incurred or suffered by such Indemnitee in connection therewith;
provided, however, that except as otherwise provided with respect to proceedings
to enforce rights to indemnification, the Company shall indemnify any such
Indemnitee in connection with a proceeding (or part thereof) initiated by such
Indemnitee only if such proceeding or part thereof was authorized by the board
of directors of the Company.
The right to indemnification set forth above includes the right to be paid
by the Company the expenses (including attorneys' fees) incurred in defending
any such proceeding in advance of its final disposition; provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an Indemnitee in his capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such
Indemnitee, including, without limitation, service to an employee benefit plan)
shall be made only upon delivery to the Company of an undertaking, by or on
behalf of such Indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is not
further right to appeal that such Indemnitee is not entitled to be indemnified
for such expenses under this section or otherwise. The rights to indemnification
and to the advancement of expenses conferred herewith are contract rights and
continue as to an Indemnitee who has ceased to be a director, officer, employee
or agent and inures to the benefit of the Indemnitee's heirs, executors and
administrators.
The Delaware General Corporation Law provides that indemnification is
permissible only when the director, officer, employee, or agent acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the conduct was unlawful. The
Delaware General Corporation Law also precludes indemnification in respect of
any claim, issue, or matter as to which an officer, director, employee, or agent
shall have been adjudged to be liable to the Company unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine that, despite such adjudication of liability but in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
For information regarding the Company's undertaking to submit to
adjudication the issue of indemnification for violation of the securities laws,
see Item 22 hereof.
II-1
<PAGE> 156
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------- ----------------------
<S> <C>
1.1 Purchase Agreement dated June 1, 1998, by and among the
Registrant, Donaldson, Lufkin & Jenrette Securities
Corporation, Jefferies & Company, Inc., and Friedman,
Billings, Ramsey & Co., Inc.(5)
2.1 Stock Purchase Agreement dated as of May 12, 1998, by and
among the Registrant, E.C. Addison and The Addison
Structural Services, Inc. Leveraged Employee Stock Ownership
Plan, and Addison Structural Services, Inc.(5)
2.2 Amendment to Stock Purchase Agreement dated June 1, 1998, by
and among the Registrant, E.C. Addison and The Addison
Structural Services, Inc. Leveraged Stock Ownership Plan,
and Addison Structural Services, Inc.(5)
2.3 Amendment No. 2 to Stock Purchase Agreement dated June 4,
1998, by and among the Registrant, E.C. Addison and The
Addison Structural Services, Inc. Leveraged Stock Ownership
Plan, and Addison Structural Services, Inc.(5)
3.1(a) Certificate of Incorporation of the Registrant(1)
3.1(b) Certificate of Amendment of Certificate of Incorporation of
the Registrant(1)
3.2 Bylaws of the Registrant(1)
3.3(a) Articles of Incorporation of B & K Steel Fabrications, Inc.
("B & K")
3.3(b) Articles of Amendment of B & K
3.4 Bylaws of B & K
3.5(a) Articles of Incorporation of Addison Structural Services,
Inc. ("Addison")
3.5(b) Articles of Amendment to the Articles of Incorporation of
Addison
3.6 Bylaws of Addison
3.7(a) Articles of Incorporation of Addison Steel, Inc. ("Addison
Steel")
3.7(b) Certificate of Amendment of Articles of Incorporation of
Addison Steel, dated May 26, 1960
3.7(c) Certificate of Amendment of Articles of Incorporation of
Addison Steel, dated September 22, 1961
3.7(d) Certificate of Amendment of Articles of Incorporation of
Addison Steel, dated November 19, 1962
3.7(e) Certificate of Amendment of Articles of Incorporation of
Addison Steel, dated December 20, 1966
3.7(f) Certificate of Amendment of Articles of Incorporation of
Addison Steel, dated September 11, 1968
3.7(g) Certificate of Amendment of Articles of Incorporation of
Addison Steel, dated February 28, 1981
3.8 Bylaws of Addison Steel
3.9(a) Articles of Incorporation of Quincy Joist Company ("Quincy")
3.9(b) Articles of Amendment to the Articles of Incorporation of
Quincy
3.10 Bylaws of Quincy
4.1 Certificate of Incorporation of the Registrant (filed as
Exhibit 3.1)(1)
4.2 Indenture dated June 4, 1998, by and between the Registrant,
the Guarantors (as defined therein) and Harris Trust Company
of California, as Trustee(5)
4.3 Registration Rights Agreement, dated June 4, 1998, by and
among the Registrant, the Guarantors (as defined therein),
Donaldson, Lufkin & Jenrette Securities Corporation,
Jefferies & Company, Inc., and Friedman, Billings, Ramsey &
Co., Inc.(5)
5.1 Form of Opinion of Snell & Wilmer L.L.P. regarding the
legality of the securities being registered
10.1(a) Loan Agreement dated June 30, 1996 between the Registrant
and Bank One, Arizona, NA(1)
10.1(b) Variable Rate Revolving Line of Credit Note dated June 30,
1996(1)
10.2(a) Revolving Line of Credit Loan Agreement and Addendum dated
June 30, 1995 between the Registrant and Bank One, Arizona,
NA(1)
</TABLE>
II-2
<PAGE> 157
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------- ----------------------
<S> <C>
10.2(b) Variable Rate Revolving Line of Credit Note and Addendum
dated June 30, 1995(1)
10.2(c) Modification Agreement dated June 30, 1996 between the
Registrant and Bank One, Arizona, NA(1)
10.2(d) Continuing Guaranty dated June 30, 1995 between David A.
Schuff, Nancy A. Schuff and Bank One, Arizona, NA(1)
10.2(e) Continuing Guaranty dated June 30, 1995 between Scott A.
Schuff and Bank One, Arizona, NA(1)
10.2(f) Modification Agreement dated March 31, 1997 between the
Registrant and Bank One, Arizona, NA(1)
10.2(g) Modification Letter Agreement dated May 7, 1997 between the
Registrant and Bank One, Arizona, NA(1)
10.2(h) Modification Agreement dated June 30, 1997 between the
Registrant and Bank One, Arizona, NA(2)
10.2(i) Continuing Guaranty dated June 30, 1997 between B & K Steel
Fabrications, Inc. and Bank One, Arizona, NA(2)
10.2(j) Subordination of Lien Rights between 19th Avenue/Buchanan
Limited Partnership and Bank One, Arizona, NA Relating to
Real Property Located at 420 South 19th Avenue, Phoenix,
Arizona(2)
10.2(k) Subordination of Lien Rights between 19th Avenue/Buchanan
Limited Partnership and Bank One, Arizona, NA Relating to
Real Property located at 1833-1841 West Buchanan Street,
Phoenix, Arizona(2)
10.2(l) Subordination of Lien Rights between 19th Avenue/Buchanan
Limited Partnership and Bank One, Arizona, NA Relating to
Real Property Located at 619 North Cooper Road, Gilbert,
Arizona(2)
10.2(m) Subordination Agreement dated June 30, 1997 between 19th
Avenue/Buchanan Limited Partnership, the Registrant and Bank
One, Arizona, NA(2)
10.3(a) Loan Agreement and Addendum dated June 30, 1995 between the
Registrant and Bank One, Arizona, NA(1)
10.3(b) Variable Rate Line of Credit Note and Addendum dated June
30, 1995 (1)
10.3(c) Modification Agreement dated June 30, 1996 between the
Registrant and Bank One, Arizona, NA(1)
10.4 Continuing Guaranty dated April 22, 1996 between the
Registrant and Bank One, Arizona, NA(1)
10.5 Guaranty of Payment dated April 22, 1997 between the
Registrant and Bank One, Arizona, NA(1)
10.6 Guaranty of Payment dated January 31, 1997 between the
Registrant and Bank One, Arizona, NA(1)
10.7 Promissory Note dated December 31, 1989 between the
Registrant and 19th Avenue/ Buchanan Limited Partnership(1)
10.7.1 Modification and Extension Agreement dated as of September
30, 1997 between the Registrant and 19th Avenue/Buchanan
Limited Partnership(3)
10.8 Lease dated March 1, 1997 for 420 S. 19th Avenue in Phoenix,
Arizona between 19th Avenue/Buchanan Limited Partnership and
the Registrant(1)
10.9 Lease dated March 1, 1997 for 619 N. Cooper Road in Gilbert,
Arizona between 19th Avenue/Buchanan Limited Partnership and
the Registrant(1)
10.10 Lease dated May 1, 1997 for 1841 W. Buchanan Street in
Phoenix, Arizona between 19th Avenue/Buchanan Limited
Partnership and the Registrant(1)
10.11 Schuff Steel Company Supplemental Retirement and Deferred
Compensation Plan(1)
10.12(a) Schuff Steel Company 1997 Stock Option Plan(1)
10.12(b) Form of Incentive Stock Option Agreement for 1997 Stock
Option Plan(1)
10.12(c) Form of Non-Qualified Stock Option Agreement for 1997 Stock
Option Plan(1)
10.13 Form of Indemnity Agreement between the Registrant and its
directors(1)
</TABLE>
II-3
<PAGE> 158
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------- ----------------------
<S> <C>
10.14(a) Modification and Extension Agreement dated as of September
30, 1997 between the Registrant and 19th Avenue/Buchanan
Limited Partnership(2)
10.15(a) Credit Agreement dated December 10, 1997 between the
Registrant and Bank One, Arizona, NA (4)
10.15(b) Promissory Note dated December 10, 1997 between the
Registrant and Bank One, Arizona, NA (4)
10.16 Purchase Agreement, dated June 1, 1998, by and among the
Registrant, Donaldson, Lufkin & Jenrette Securities
Corporation, Jefferies & Company, Inc., and Friedman,
Billings, Ramsey & Co., Inc.(5)
21.1 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP, independent auditors
23.2 Consent of Mauldin & Jenkins, LLC, independent public
accountants
23.3 Consent of Snell & Wilmer L.L.P. (contained in Exhibit 5.1)
24.1 Power of Attorney of David A. Schuff (see signature page
included in Registration Statement)
24.2 Power of Attorney of Scott A. Schuff (see signature page
included in Registration Statement)
99.1 Form of Letter of Transmittal with respect to the Exchange
Offer
</TABLE>
(b) Financial Statement Schedules:
The financial statement schedules have been omitted since they are not
applicable or the information required to be set forth therein is
contained elsewhere herein.
- ---------------
(1) Previously filed as an exhibit to the Registrant's Registration Statement on
Form S-1 (Registration No. 333-26711) and incorporated herein by reference.
(2) Previously filed as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997, and incorporated herein by
reference.
(3) Previously filed as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997 and incorporated herein by
reference.
(4) Previously filed as an exhibit to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 and incorporated herein by
reference.
(5) Previously filed as an exhibit to the Registrant's Current Report on Form
8-K/A, filed June 19, 1998, and incorporated herein by reference.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant and Co-Registrants hereby undertake as follows:
(1) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this form,
within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(2) To supply by means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved therein, that was not
the subject of and included in this Registration Statement when it became
effective.
(3) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act; (ii) to
reflect in the prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration
Statement; (iii) to
II-4
<PAGE> 159
include any material information with respect to the plan of distribution
not previously disclosed in the Registration Statement or any material
change to such information in the Registration Statement.
(4) That, for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(5) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(6) That, for purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(7) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant and Co-Registrants pursuant to the provisions described in
Item 20 above, or otherwise, the Registrant and Co-Registrants have been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant and
Co-Registrants of expenses incurred or paid by a director, officer, or
controlling person of the Registrant and Co-Registrants in the successful
defense of any action, suit, or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, the Registrant and Co-Registrants will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-5
<PAGE> 160
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
registrants have duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Phoenix,
State of Arizona, on June 29, 1998.
SCHUFF STEEL COMPANY
By: /s/ SCOTT A. SCHUFF
------------------------------------
Scott A. Schuff
President and Chief Executive
Officer
B & K FABRICATIONS, INC.
By: /s/ SCOTT A. SCHUFF
------------------------------------
Scott A. Schuff
President
ADDISON STEEL, INC.
By: /s/ SCOTT A. SCHUFF
------------------------------------
Scott A. Schuff
Chairman and Chief Executive Officer
ADDISON STRUCTURAL SERVICES, INC.
By: /s/ SCOTT A. SCHUFF
------------------------------------
Scott A. Schuff
Chairman, President and Chief
Executive Officer
QUINCY JOIST COMPANY
By: /s/ SCOTT A. SCHUFF
------------------------------------
Scott A. Schuff
Chairman and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David A. Schuff and Scott A. Schuff, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitutions and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement on Form S-4 and to sign any registration statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) of the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith with the Securities and Exchange
Commission, granting under said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises as fully and to all
intents and purposes as he might or could do in person hereby ratifying and
confirming all that said attorneys-in-fact and agents, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
II-6
<PAGE> 161
SCHUFF STEEL COMPANY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
<C> <S> <C>
/s/ DAVID A. SCHUFF Chairman of the Board of Directors June 29, 1998
- ---------------------------------------------------
David A. Schuff
/s/ SCOTT A. SCHUFF President, Chief Executive Officer June 29, 1998
- --------------------------------------------------- and Director (Principal executive
Scott A. Schuff officer)
/s/ KENNETH F. ZYLSTRA Vice President, Chief Financial June 29, 1998
- --------------------------------------------------- Officer and Director (Principal
Kenneth F. Zylstra financial and accounting officer)
/s/ EDWARD M. CARSON Director June 29, 1998
- ---------------------------------------------------
Edward M. Carson
/s/ DENNIS DECONCINI Director June 29, 1998
- ---------------------------------------------------
Dennis DeConcini
</TABLE>
II-7
<PAGE> 162
B & K FABRICATIONS, INC.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
<C> <S> <C>
/s/ DAVID A. SCHUFF Director June 29, 1998
- ---------------------------------------------------
David A. Schuff
/s/ SCOTT A. SCHUFF President and Director (Principal June 29, 1998
- --------------------------------------------------- executive officer)
Scott A. Schuff
/s/ NANCY A. SCHUFF Secretary and Director June 29, 1998
- ---------------------------------------------------
Nancy A. Schuff
/s/ KENNETH F. ZYLSTRA Treasurer (Principal financial June 29, 1998
- --------------------------------------------------- accounting officer)
Kenneth F. Zylstra
</TABLE>
II-8
<PAGE> 163
ADDISON STEEL, INC.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
<C> <S> <C>
/s/ SCOTT A. SCHUFF Chairman, Chief Executive Officer June 29, 1998
- --------------------------------------------------- and Director (Principal executive
Scott A. Schuff officer)
/s/ KENNETH F. ZYLSTRA Secretary, Treasurer, Vice June 29, 1998
- --------------------------------------------------- President and Director (Principal
Kenneth F. Zylstra financial and accounting officer)
/s/ GLEN S. DAVIS President and Director June 29, 1998
- ---------------------------------------------------
Glen S. Davis
/s/ DAVID A. SCHUFF Director June 29, 1998
- ---------------------------------------------------
David A. Schuff
</TABLE>
II-9
<PAGE> 164
ADDISON STRUCTURAL SERVICES, INC.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
<C> <S> <C>
/s/ SCOTT A. SCHUFF Chairman, President, Chief June 29, 1998
- --------------------------------------------------- Executive Officer and Director
Scott A. Schuff (Principal executive officer)
/s/ KENNETH F. ZYLSTRA Secretary, Treasurer, Vice June 29, 1998
- --------------------------------------------------- President and Director (Principal
Kenneth F. Zylstra financial and accounting officer)
/s/ T. MICHAEL PHAGANS Director June 29, 1998
- ---------------------------------------------------
T. Michael Phagans
</TABLE>
II-10
<PAGE> 165
QUINCY JOIST COMPANY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
<C> <S> <C>
/s/ SCOTT A. SCHUFF Chairman, Chief Executive Officer June 29, 1998
- --------------------------------------------------- and Director (Principal executive
Scott A. Schuff officer)
/s/ KENNETH F. ZYLSTRA Secretary, Treasurer, Vice June 29, 1998
- --------------------------------------------------- President and Director (Principal
Kenneth F. Zylstra financial and accounting officer)
/s/ SAM MAHDAVI President and Director June 29, 1998
- ---------------------------------------------------
Sam Mahdavi
</TABLE>
II-11
<PAGE> 166
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
1.1 Purchase Agreement dated June 1, 1998, by and among the
Registrant, Donaldson, Lufkin & Jenrette Securities
Corporation, Jefferies & Company, Inc., and Friedman,
Billings, Ramsey & Co., Inc.(5)
2.1 Stock Purchase Agreement dated as of May 12, 1998, by and
among the Registrant, E.C. Addison and The Addison
Structural Services, Inc. Leveraged Employee Stock Ownership
Plan, and Addison Structural Services, Inc.(5)
2.2 Amendment to Stock Purchase Agreement dated June 1, 1998, by
and among the Registrant, E.C. Addison and The Addison
Structural Services, Inc. Leveraged Stock Ownership Plan,
and Addison Structural Services, Inc.(5)
2.3 Amendment No. 2 to Stock Purchase Agreement dated June 4,
1998, by and among the Registrant, E.C. Addison and The
Addison Structural Services, Inc. Leveraged Stock Ownership
Plan, and Addison Structural Services, Inc.(5)
3.1(a) Certificate of Incorporation of the Registrant(1)
3.1(b) Certificate of Amendment of Certificate of Incorporation of
the Registrant (1)
3.2 Bylaws of the Registrant(1)
3.3(a) Articles of Incorporation of B & K Steel Fabrications, Inc.
("B & K")
3.3(b) Articles of Amendment of B & K
3.4 Bylaws of B & K
3.5(a) Articles of Incorporation of Addison Structural Services,
Inc. ("Addison")
3.5(b) Articles of Amendment to the Articles of Incorporation of
Addison
3.6 Bylaws of Addison
3.7(a) Articles of Incorporation of Addison Steel, Inc. ("Addison
Steel")
3.7(b) Certificate of Amendment of Articles of Incorporation of
Addison Steel, dated May 26, 1960
3.7(c) Certificate of Amendment of Articles of Incorporation of
Addison Steel, dated September 22, 1961
3.7(d) Certificate of Amendment of Articles of Incorporation of
Addison Steel, dated November 19, 1962
3.7(e) Certificate of Amendment of Articles of Incorporation of
Addison Steel, dated December 20, 1966
3.7(f) Certificate of Amendment of Articles of Incorporation of
Addison Steel, dated September 11, 1968
3.7(g) Certificate of Amendment of Articles of Incorporation of
Addison Steel, dated February 28, 1981
3.8 Bylaws of Addison Steel
3.9(a) Articles of Incorporation of Quincy Joist Company ("Quincy")
3.9(b) Articles of Amendment to the Articles of Incorporation of
Quincy
3.10 Bylaws of Quincy
4.1 Certificate of Incorporation of the Registrant (filed as
Exhibit 3.1)(1)
4.2 Indenture dated June 4, 1998, by and between the Registrant,
the Guarantors (as defined therein) and Harris Trust Company
of California, as Trustee(5)
4.3 Registration Rights Agreement, dated June 4, 1998, by and
among the Registrant, the Guarantors (as defined therein),
Donaldson, Lufkin & Jenrette Securities Corporation,
Jefferies & Company, Inc., and Friedman, Billings, Ramsey &
Co., Inc.(5)
5.1 Form of Opinion of Snell & Wilmer L.L.P. regarding the
legality of the securities being registered
10.1(a) Loan Agreement dated June 30, 1996 between the Registrant
and Bank One, Arizona, NA(1)
</TABLE>
II-12
<PAGE> 167
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
10.1(b) Variable Rate Revolving Line of Credit Note dated June 30,
1996(1)
10.2(a) Revolving Line of Credit Loan Agreement and Addendum dated
June 30, 1995 between the Registrant and Bank One, Arizona,
NA(1)
10.2(b) Variable Rate Revolving Line of Credit Note and Addendum
dated June 30, 1995(1)
10.2(c) Modification Agreement dated June 30, 1996 between the
Registrant and Bank One, Arizona, NA(1)
10.2(d) Continuing Guaranty dated June 30, 1995 between David A.
Schuff, Nancy A. Schuff and Bank One, Arizona, NA(1)
10.2(e) Continuing Guaranty dated June 30, 1995 between Scott A.
Schuff and Bank One, Arizona, NA(1)
10.2(f) Modification Agreement dated March 31, 1997 between the
Registrant and Bank One, Arizona, NA(1)
10.2(g) Modification Letter Agreement dated May 7, 1997 between the
Registrant and Bank One, Arizona, NA(1)
10.2(h) Modification Agreement dated June 30, 1997 between the
Registrant and Bank One, Arizona, NA(2)
10.2(i) Continuing Guaranty dated June 30, 1997 between B & K Steel
Fabrications, Inc. and Bank One, Arizona, NA(2)
10.2(j) Subordination of Lien Rights between 19th Avenue/Buchanan
Limited Partnership and Bank One, Arizona, NA Relating to
Real Property Located at 420 South 19th Avenue, Phoenix,
Arizona(2)
10.2(k) Subordination of Lien Rights between 19th Avenue/Buchanan
Limited Partnership and Bank One, Arizona, NA Relating to
Real Property located at 1833-1841 West Buchanan Street,
Phoenix, Arizona(2)
10.2(l) Subordination of Lien Rights between 19th Avenue/Buchanan
Limited Partnership and Bank One, Arizona, NA Relating to
Real Property Located at 619 North Cooper Road, Gilbert,
Arizona(2)
10.2(m) Subordination Agreement dated June 30, 1997 between 19th
Avenue/Buchanan Limited Partnership, the Registrant and Bank
One, Arizona, NA(2)
10.3(a) Loan Agreement and Addendum dated June 30, 1995 between the
Registrant and Bank One, Arizona, NA(1)
10.3(b) Variable Rate Line of Credit Note and Addendum dated June
30, 1995(1)
10.3(c) Modification Agreement dated June 30, 1996 between the
Registrant and Bank One, Arizona, NA(1)
10.4 Continuing Guaranty dated April 22, 1996 between the
Registrant and Bank One, Arizona, NA(1)
10.5 Guaranty of Payment dated April 22, 1997 between the
Registrant and Bank One, Arizona, NA(1)
10.6 Guaranty of Payment dated January 31, 1997 between the
Registrant and Bank One, Arizona, NA(1)
10.7 Promissory Note dated December 31, 1989 between the
Registrant and 19th Avenue/Buchanan Limited Partnership(1)
10.7.1 Modification and Extension Agreement dated as of September
30, 1997 between the Registrant and 19th Avenue/Buchanan
Limited Partnership(3)
10.8 Lease dated March 1, 1997 for 420 S. 19th Avenue in Phoenix,
Arizona between 19th Avenue/ Buchanan Limited Partnership
and the Registrant(1)
10.9 Lease dated March 1, 1997 for 619 N. Cooper Road in Gilbert,
Arizona between 19th Avenue/ Buchanan Limited Partnership
and the Registrant(1)
</TABLE>
II-13
<PAGE> 168
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
10.10 Lease dated May 1, 1997 for 1841 W. Buchanan Street in
Phoenix, Arizona between 19th Avenue/Buchanan Limited
Partnership and the Registrant(1)
10.11 Schuff Steel Company Supplemental Retirement and Deferred
Compensation Plan(1)
10.12(a) Schuff Steel Company 1997 Stock Option Plan(1)
10.12(b) Form of Incentive Stock Option Agreement for 1997 Stock
Option Plan(1)
10.12(c) Form of Non-Qualified Stock Option Agreement for 1997 Stock
Option Plan(1)
10.13 Form of Indemnity Agreement between the Registrant and its
directors(1)
10.14(a) Modification and Extension Agreement dated as of September
30, 1997 between the Registrant and 19th Avenue/Buchanan
Limited Partnership(2)
10.15(a) Credit Agreement dated December 10, 1997 between the
Registrant and Bank One, Arizona, NA(4)
10.15(b) Promissory Note dated December 10, 1997 between the
Registrant and Bank One, Arizona, NA(4)
10.16 Purchase Agreement, dated June 1, 1998, by and among the
Registrant, Donaldson, Lufkin & Jenrette Securities
Corporation, Jefferies & Company, Inc., and Friedman,
Billings, Ramsey & Co., Inc.(5)
21.1 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP, independent auditors
23.2 Consent of Mauldin & Jenkins, LLC, independent public
accountants
23.3 Consent of Snell & Wilmer L.L.P. (contained in Exhibit 5.1)
24.1 Power of Attorney of David A. Schuff (see signature page
included in the Registration Statement)
24.2 Power of Attorney of Scott A. Schuff (see signature page
included in the Registration Statement)
99.1 Form of Letter of Transmittal with respect to the Exchange
Offer
</TABLE>
- ---------------
(1) Previously filed as an exhibit to the Registrant's Registration Statement on
Form S-1 (Registration No. 333-26711) and incorporated herein by reference.
(2) Previously filed as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997, and incorporated herein by
reference.
(3) Previously filed as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997 and incorporated herein by
reference.
(4) Previously filed as an exhibit to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 and incorporated herein by
reference.
(5) Previously filed as an exhibit to the Registrant's Current Report on Form
8-K/A, filed June 19, 1998, and incorporated herein by reference.
II-14
<PAGE> 1
Exhibit 3.3(a)
ARTICLES OF INCORPORATION
OF
B & K STEEL FABRICATIONS, INC.
KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned incorporators,
desiring to form a corporation under the laws of the State of Arizona, adopt the
following Articles of Incorporation.
ARTICLE I
The name of this corporation shall be B & K STEEL FABRICATIONS, INC..
ARTICLE II
The incorporators of this corporation are: GREG BIESEN, 805 S. Horne
St., Mesa, Az 85204 and DAN KNEIFL, 1462 N. 62nd Place, Mesa, Az 85205. All
powers, duties and responsibilities of the incorporators shall cease at the
time of delivery of these Articles of Incorporation to the Arizona
Corporation Commission for filing.
ARTICLE III
The purposes for which this corporation is organized include the
transaction of any or all lawful business for which corporations may be
incorporated under the laws of the State of Arizona.
ARTICLE IV
The character of business which this corporation initially intends to
conduct, shall include, without limitation thereof, steel fabrication of all
types and all related activities.
ARTICLE V
The authorized capital stock of this corporation shall be ten million
(10,000,000) shares of common stock having a par value of One Dollar ($1.00)
each, which shall be issued and paid for in such manner and at such time as the
Board of Directors may designate. Any portion of the capital stock may be issued
in payment for real or personal property, services or any other thing of value
for the uses and purposes for which the corporation is organized, and when so
issued shall be and become fully paid, the same as though paid for in cash, and
the directors shall be the judges of the value of any property, services, right
or thing acquired in exchange for capital stock. The shares of capital stock in
this corporation shall be fully paid and non-assessable and shall have
preemptive rights.
<PAGE> 2
ARTICLE VI
The affairs of the corporation shall be conducted by a Board of Directors,
the number of which shall be determined at the annual meeting of the
shareholders in the manner specified in the By-Laws of the corporation.
Directors shall be elected at the annual meeting of the shareholders to be held
at such time as may be provided in the By-Laws of the corporation, and such
directors shall serve until their successors are elected and qualified. The
following persons shall comprise the initial Board of Directors: GREG BIESEN,
805 S. Horne St., Mesa, Az 85204 and DAN KNEIFL, 1462 N. 62nd Place, Mesa, Az
85205
ARTICLE VII
The private property of the shareholders, directors and officers of this
corporation shall be at all times exempt from all debts and liabilities of the
corporation.
ARTICLE VIII
STEPHEN E. PHELPS, whose address is 1855 E. Southern, #209, Mesa, Az
85204, and who has been a bona fide resident of the State of Arizona for more
than three (3) years, is hereby appointed and designated as Statutory Agent for
the State of Arizona, upon whom service of process may be had. The Board of
Directors of this corporation shall have the power to revoke this appointment of
agent at any time and shall have power to fill any vacancy in such position at
their discretion.
IN WITNESS WHEREOF, we the undersigned, being all of the incorporators
hereinabove named, have hereunto set our hands and seals this 1st day of
October, 1984.
/s/ Greg Biesen
------------------------------
GREG BIESEN
/s/ Dan Kneifl
------------------------------
DAN KNEIFL
2
<PAGE> 3
STATE OF ARIZONA )
: ss
County of Maricopa )
On this 1st day of October, 1984, before me personally appeared GREG
BIESEN and DAN KNEIFL, known to me to be the persons whose names are subscribed
to the within instrument, and acknowledged that they executed the same for the
purposes therein contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
------------------------------
Notary Public
My Commission Expires:
Oct 4, 1985
3
<PAGE> 1
Exhibit 3.3(b)
ARTICLES OF AMENDMENT
OF
B & K STEEL FABRICATIONS, INC.,
an Arizona corporation
Pursuant to Section 10-058 of the Arizona Revised Statutes and any other
applicable Section of the Arizona Revised Statutes as amended, B & K STEEL
FABRICATIONS, INC., an Arizona corporation adopts the following Articles of
Amendment to its Articles of Incorporation.
ONE: The name of the Corporation is B & K STEEL FABRICATIONS, INC.
TWO: The following amendment so adopted is:
A second class of common stock shall be authorized and known as class B
common stock which shall be non voting. All other common stock shall remain
unchanged and be known as class A voting common stock. The authorized amount of
class B stock shall be ten thousand shares. The authorized amount of class A
stock shall remain at ten million.
THREE: The Articles of Amendment were adopted by the Shareholders of
the Corporation on February 21, 1989.
FOUR: The number of shares of the Corporation outstanding presently are
1,000 shares of voting common stock with one vote per share and now classified
as class A common stock.
FIVE: The vote for the amendment by the Shareholders was unanimous.
IN WITNESS WHEREOF, we, the undersigned, have set our hands hereunto in
duplicate this 16th day of May, 1989.
B & K STEEL FABRICATIONS, INC.
an Arizona corporation
BY /s/ Gregory T. Biesen
------------------------------
GREGORY T. BIESEN,
Its President
BY /s/ Daniel Kneifl
------------------------------
DANIEL KNEIFL,
Its Secretary
<PAGE> 2
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument SUBSCRIBED AND SWORN TO before me, the
undersigned Notary Public, by GREGORY T. BIESEN, on this the 16th day of May,
1989.
------------------------------
Notary Public
My Commission Expires:
4/6/91
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument SUBSCRIBED AND SWORN TO before me, the
undersigned Notary Public, by DANIEL KNEIFL, on this the 16 day of May, 1989.
------------------------------
Notary Public
My Commission Expires:
4/6/91
2
<PAGE> 1
Exhibit 3.4
BYLAWS
OF
B & K STEEL FABRICATIONS, INC.
ARTICLE I
Stockholders
Section 1. The annual meeting of the stockholders shall be held at the
principal office of the corporation at ten o'clock, a.m., on the first Monday of
the second calendar month following the end of the corporation's fiscal year, if
not a legal holiday, and, if a legal holiday then on the next succeeding day not
a legal holiday, for the election of directors and the transaction of such other
business as may be brought before the meeting. Notice of the annual meeting
shall be mailed at least ten days prior to the meeting to each stockholder at
his address as the same appears on the books of the corporation. Nevertheless, a
failure to mail such notice or any irregularity in such notice or in the mailing
or giving thereof shall not affect the validity of any annual meeting or of any
of the proceedings at any such meeting held at the time and place herein
specified.
Section 2. Special meetings of the stockholders may be held at the
principal office of the corporation whenever called in writing by the president,
or by a majority of the members of the Board of Directors. Notice of each
special meeting, indicating briefly the purpose or purposes thereof shall be
given by the secretary by depositing a notice in the Post Office addressed to
each stockholder at his last known place of residence, as shown by the stock
register, at least five days next preceding the meetings.
Section 3. No notice to stockholders shall be necessary for any adjourned
annual or special meeting, except the statement at such meeting in making
adjournment.
Section 4. At any meeting of the stockholders the holders of a majority of
all of the shares of the capital stock of the company, issued and outstanding,
present in person or represented by proxy and entitled to vote, shall constitute
a quorum of the stockholders for all purposes, unless the representation of a
larger number shall be required by law or by these bylaws and in these cases the
representation of the number so required shall constitute a quorum. If the
holders of the amount of stock necessary to constitute a quorum shall fail to
attend in person or by proxy at the time and place fixed by these bylaws for an
annual meeting, or fixed by notice as above provided for a special meeting
called by the president or by a majority of the members of the Board of
Directors, a majority in interest of the stockholders present in person or by
proxy may adjourn from time to time, without notice other than by announcement
at the meeting until holders of the amount of stock requisite to constitute a
quorum shall attend. At any such adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted at the
meeting as originally called.
<PAGE> 2
Section 5. Any stockholder may at any time nominate and appoint any person
his attorney and agent, in his name, place and stead, to vote as his proxy at
any meeting of the stockholders and such person named as proxy shall have all
the powers and privileges that the stockholder would have if present in person.
Such appointment of proxy shall be in writing and subscribed by the stockholder
and shall be presented to the meeting for which such proxy is appointed and held
and preserved by the secretary.
Section 6. In voting for members of the Board of Directors, each
stockholder shall be entitled to vote his stock cumulatively, i.e., he shall be
entitled to as many votes as are equal to the number of shares he owns
multiplied by the number of directors to be elected. Each stockholder may
cumulate these votes -- that is, cast all the votes for one candidate, or he may
distribute them among the candidates, or any of them, in any way he sees fit.
ARTICLE II
Directors
Section 1. The Board of Directors of the corporation shall consist of two
or more persons, who shall be stockholders, and who shall be elected annually
and shall hold office until their successors shall have been duly elected and
qualified. The business and affairs of the corporation shall be conducted by the
Board of Directors, a majority of which shall constitute a quorum for the
transaction of business.
Section 2. The annual meeting of Directors shall be held at the principal
office of the corporation on the first Monday of the second calendar month
following the end of the fiscal year, if not a legal holiday, and if a legal
holiday, then on the next succeeding day not a legal holiday, immediately
following adjournment of the annual meeting of stockholders, and no notice
thereof need be given. The Board shall meet for the purpose of the election of
officers and for the transaction of any other business that may come before the
meeting. Such election of officers shall be by ballot, and the affirmative vote
of a majority of the whole Board of Directors shall be required for a choice.
Whenever a vacancy shall occur in such offices, it shall be filled in like
manner, at a special meeting of the Board called for such purposes.
Section 3. In the case of any vacancy existing in the Board of Directors
through death, resignation, disqualification, or other cause, the remaining
directors, by affirmative vote of a majority thereof, may elect a successor to
hold office for the unexpired portion of the term of the Director whose place
shall be vacant, and until the election and qualification of his successor.
Section 4. Special meetings may be called at any time by the president,
and shall be so called at the request in writing of a majority of the members of
the Board of Directors. The Secretary shall give notice of the time and place of
each special meeting by mailing the same at least three days before the meeting
or by telegraphing the same at least two days before the meeting, to each
Director; such notices may be waived by any Director.
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ARTICLE III
Officers
Section 1. The officers of the corporation shall consist of a president,
one or more vice presidents, secretary, and treasurer and such other officers as
from time to time may be determined by the Board of Directors. Each officer
shall hold office during the pleasure of the Board of Directors, provided,
however, that the Board shall have the right to enter into management contracts
with the officers. The Board of Directors may create such offices as they shall
deem necessary, and incumbents thereof shall have such authority and shall
perform such duties as from time to time may be prescribed by the Board of
Directors. The Board of Directors also from time to time may appoint such agents
as it may see fit. Bonds may be required by the Board of Directors in such
amounts as shall be fixed from time to time, from officers, agents or servants
of the corporation. Any one person may hold more than one office, except that of
president and vice president.
Section 2. At least two officers of the corporation shall sign and execute
all contracts and documents of the corporation. The president, with the
secretary, shall sign all certificates of stock of the corporation.
Section 3. The president shall preside at all directors and stockholders
meetings. The president from time to time may call special meetings of the Board
of Directors whenever he shall deem it proper to do so; and shall do so whenever
a majority of the members of the Board of Directors in writing, shall request
him to do so. Subject to the Board of Directors, he shall have general charge of
the business and affairs of the corporation, and shall perform and have such
other powers as may be assigned to him by the Board of Directors.
Section 4. The vice president shall have such powers and shall perform
such duties as may be assigned to him from time to time by the Board of
Directors and as may be delegated to him by the president. The vice president
shall possess the power and may perform the duties of the president in his
absence or disability, unless otherwise prescribed by the Board of Directors. In
case the president shall be absent from any meeting of the stockholders or Board
of Directors, the vice president shall preside. The vice president may (with any
other officer) sign and execute all authorized contracts and documents in the
name of the corporation.
Section 5. The secretary shall issue notices of all directors and
stockholders meetings, and shall attend and keep the minutes of the same; shall
have charge of all corporate books, records and papers; shall be custodian of
the corporate seal; shall attest with his signature and impress with the
corporate seal all stock certificates of the corporation and shall perform all
such other duties as are incident to his office. The secretary may (with another
officer) sign and execute all authorized contracts and documents in the name of
the corporation and shall perform all such other duties as are incident to his
office.
Section 6. The treasurer shall have custody of all moneys and securities
of the corporation. The treasurer may (with another officer) sign and execute
all authorized contracts and documents
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in the name of the corporation and shall keep regular books of accounts and
shall submit them, together with all supporting papers and records, to the
directors for their examination and approval as often as they may require and
shall perform all other duties as are incident to his office.
Section 7. The Board of Directors are authorized at such time as they see
fit to appoint a general manager on a long term contract. At such time a general
manager is appointed the said manager shall be responsible for performing all of
the duties and functions of the above set forth officers. The general manager
shall have power to direct, manage and to carry on the business of the
corporation subject to the control of the Board of Directors. The general
manager shall have power to make and execute all contracts pertaining to the
ordinary business of the corporation. The general manager may be a person or a
management company.
ARTICLE IV
Fiscal Year
Section 1. The fiscal year of this corporation shall be January 1st to
December 31st of each year.
ARTICLE V
Depositaries
Section 1. The Board of Directors, from time to time, may select one or
more banks for the deposit of corporate funds, to be withdrawn as such Board may
direct.
ARTICLE VI
Certificates of Stock
Section 1. The certificates of the capital stock of the corporation shall
be numbered consecutively and a record of each shall be made as issued. The
certificate shall exhibit the holder's name and the number of shares and shall
be signed by the president or vice president and by the secretary and shall bear
the corporate seal.
Section 2. Transfer of stock shall be made only on the books of the
corporation in the presence of the secretary or other authorized officer or
agent of the corporation by the holder in person or by attorney upon surrender
and cancellation of certificates for a like number of shares; and the possession
of a certificate of stock as between the holder and the corporation shall not be
regarded as vesting any ownership of the same in any person other than the
registered owner until transfer thereof is duly made on the books of the
corporation. The Board of Directors shall have power and authority to make all
such rules and regulations not inconsistent with the provisions of
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these bylaws as they may deem expedient concerning the issue, transfer and
registration of the certificates of shares of stock of the corporation.
ARTICLE VII
The Stock Book
Section 1. The stock books of this corporation shall close for ten days
previous to any regular meeting of the stockholders and for ten days previous to
the date of payment of any dividend, and during such periods no stock shall be
transferable, and the list of the stockholders as shown by the books of this
corporation at the time of the close of the books as aforesaid, shall determine
who shall be entitled to vote or to receive dividends.
ARTICLE VIII
Seal
Section 1. The corporate seal of the corporation shall be circular in form
with the name of the corporation and the state of incorporation appearing around
the border, and the year of incorporation in the center thereof.
ARTICLE IX
Waiver of Notice
Section 1. Any stockholder or Director may waive the giving of notice of
any meeting otherwise prescribed hereunder, either before or after the holding
of such meeting. Any meeting at which all stockholders or Directors are present,
or with respect to which notice is waived by any absent stockholder or Director,
may be held at any time, for any purpose, and at any place and shall be deemed
to have been validly called and held; and all acts done and business conducted
at such meeting shall be valid in all respects.
ARTICLE X
Indemnification
Every person who was or is a party or is threatened to be made a party to
or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person of
whom he is the legal representative is or was a director or officer of the
corporation or is or was serving at the request of the corporation or for its
benefit as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
the General Corporation Law of the State of Arizona from time to time against
all expenses, liability and
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loss (including attorneys' fees, judgments, fines and amounts paid or to be paid
in settlement) reasonably incurred or suffered by him in connection therewith.
Such right of indemnification shall be a contract right which may be enforced in
any manner desired by such person. Such right of indemnification shall not be
exclusive of any other right which such directors, officers or representatives
may have or hereafter acquire and, without limiting the generality of such
statement, they shall be entitled to their respective rights of indemnification
under any bylaw, agreement, vote of stockholders, provision of law or otherwise,
as well as their rights under this Article.
The Board of Directors may cause the corporation to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out of
such status, whether or not the corporation would have the power to indemnify
such person.
The Board of Directors may from time to time adopt further bylaws with
respect to indemnification and may amend these and such bylaws to provide at all
times the fullest indemnification permitted by the General Corporation Law of
the State of Arizona.
ARTICLE XI
Amendments
Section 1. These By-Laws may be amended or repealed or new By-Laws
adopted, by affirmative vote of two-thirds of the Directors at any annual
meeting or at any special meeting called for that purpose.
Approved as to form and content this 30th day of November, 1984:
/s/ Greg Biesen
- ------------------------------
GREG BIESEN
/s/ Dan Kneifl
- ------------------------------
DAN KNEIFL
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<PAGE> 1
Exhibit 3.5(a)
ARTICLES OF INCORPORATION
of
ADDISON STRUCTURAL SERVICES, INC.
ARTICLE I - NAME
The name of this corporation is Addison Structural Services, Inc.
ARTICLE II - DURATION
This corporation shall have perpetual existence.
ARTICLE III - PURPOSE
This corporation is organized to transact any and all lawful business.
ARTICLE IV - POWERS
This corporation shall have all of the corporate powers permitted under
the Florida Business Corporation Act.
ARTICLE V - CAPITAL STOCK
A. This corporation is authorized to issue one thousand (1000)
shares of $1.00 par value common stock, which shall be designated "common
shares."
B. Except as otherwise provided by law or in the by-laws of the
corporation, the entire voting power for the election of directors and for all
other purposes shall be vested exclusively in the holders of the outstanding
common shares.
ARTICLE VI - PREEMPTIVE RIGHTS
Every shareholder, upon the sale for cash of any new stock of this
corporation of the same kind, class or series as that which he already holds,
shall have the right to purchase his pro rata share thereof (as nearly as may be
done without issuance of fractional shares) at the price at which it is offered
to others.
ARTICLE VII - PRINCIPAL OFFICE
The initial principal office of the corporation shall be: 1920 Ledo Road,
Albany, GA 31706. The mailing address of the corporation shall be Post Office
Box 3629, Albany, GA 31706.
<PAGE> 2
ARTICLE VIII - REGISTERED OFFICE AND AGENT
The street address of the principal registered office of this corporation
is 255 South Orange Avenue, Suite 1600, Orlando, FL 32801 and the name of the
initial registered agent of this corporation at that address is Philip A.
Diamond.
ARTICLE IX - INITIAL BOARD OF DIRECTORS
This corporation shall have five (5) directors initially. The number of
directors may be either increased or diminished from time to time by the
by-laws, but shall never be less than one or more than fifteen. The names and
addresses of the initial directors of this corporation are:
E. C. Addison Glen Davis
1920 Ledo Road 1920 Ledo Road
Albany, GA 31706 Albany, GA 31706
Paul Macomber Sam Mahdavi
1920 Ledo Road 1920 Ledo Road
Albany, GA 31706 Albany, GA 31706
T. M. Phagans
1920 Ledo Road
Albany, GA 31706
ARTICLE X - INCORPORATOR
The name and address of the person signing these articles are:
E. C. Addison
1920 Ledo Road
Albany, GA 31706
ARTICLE XI - BY-LAWS
The power to adopt, alter, amend or repeal by-laws shall be vested in the
Board of Directors subject to the power of the shareholders to repeal, alter, or
amend any by-laws adopted by the Board of Directors. The shareholders reserve
the power to adopt by laws and to prescribe in any by-laws that such by-laws
shall not be altered, amended, or repealed by the Board of Directors.
ARTICLE XII - OFFICERS
The Board of Directors may provide for the election or appointment and
prescribe the duties of all officers and agents as the board may deem desirable
and proper, and may take such action not inconsistent with the Articles of
Incorporation and the by-laws of the corporation and the laws of the
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State of Florida as such board may deem advisable for the conduct and operation
of the business of the corporation.
ARTICLE XIII - MEETINGS
Meetings of shareholders and directors, including the time, place, and
manner of calling such meetings, shall be fixed by the by-laws of the
corporation.
ARTICLE XIV- AMENDMENT
This corporation reserves the right to amend or repeal any provisions
contained in these Articles of Incorporation, or any amendment hereto, and any
right conferred upon the shareholders is subject to this reservation.
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 10th day of May, 1995.
/s/ E. C. Addison
------------------------------------
Print Name E. C. Addison
Incorporator
ACCEPTANCE BY REGISTERED AGENT
Having been named as registered agent and to accept service of process for
the above stated corporation at the place designated in this certificate, I
hereby accept the appointment as registered agent and agree to act in this
capacity. I further agree to comply with the provisions of all statutes relating
to the proper and complete performance of my duties, and I am familiar with and
accept the obligations of my position as registered agent.
/s/ Philip A. Diamond
------------------------------------
Philip A. Diamond
Date: May 11, 1995
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Exhibit 3.5(b)
ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF
ADDISON STRUCTURAL SERVICES, INC.
Pursuant to the provisions of Section 607 1001 of the Florida Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendments to its Articles of Incorporation.
1. The name of the corporation is: Addison Structural Services, Inc.
2. The following amendments of the Articles of Incorporation were adopted
by the Board of Directors of the corporation on October 6, 1995 in the manner
prescribed by the Florida Business Corporation Act.
A. Article V(A) of the Articles is deleted in its entirety and
restated to read as follows:
A. This corporation is authorized to issue one hundred
thousand (100,000) shares of $5.00 par value common
stock, which shall be designated common shares".
B. No other amendments were adopted.
3. One (1) share of the corporation was outstanding at the time of the
adoption and the number of shares entitled to vote thereon was one (1). No other
group was entitled to vote on the amendment.
4. The number of shares voted in favor of such amendment was one (1) and
the number of shares voted against such amendment was zero (0). The number of
votes cast was sufficient for approval.
5. The manner in which any exchange, reclassification or cancellation of
issued shares provided for in the amendment shall be effected in as follows:
Each share of outstanding $1.00 par value stock shall be exchanged for one share
of $5.00 par value stock.
Date July 27, 1996
ADDISON STRUCTURAL SERVICES, INC.
By: /s/ E. C. Addison
------------------------------------
E. C. ADDISON, Chairman of the Board
of Directors and Sole Shareholder
<PAGE> 2
STATE OF GEORGIA
COUNTY OF DOUGHERTY
The foregoing instrument was acknowledged before me this 29th day of
July, 1996, by E. C. ADDISON as Chairman of Addison Structural Services,
Inc., a Florida corporation, on behalf of the corporation. He is personally
known to me or has produced (n/a) as identification.
/s/ Angela M. Couch
------------------------------------
Name: Angela M. Couch
Notary Public
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Exhibit 3.6
BY-LAWS OF
ADDISON STRUCTURAL SERVICES, INC.
ARTICLE I.
OFFICES
The principal offices of the Corporation shall be located in the City of
Albany, State of Georgia. The Corporation may have such other offices, either
within or without the State of Florida, as the Board of Directors may designate
or as the business of the Corporation may require from time to time.
The registered office of the Corporation, required by the Florida
Corporation laws to be maintained in the State of Florida may be, but need not
be, identical with the principal office in the State of Florida, and the address
of the registered office may be changed from time to time by the Board of
Directors.
ARTICLE II.
SHAREHOLDERS
Sec. 1. ANNUAL MEETINGS. The annual meeting of the shareholders shall be
held at the principal office of the Corporation on the 2nd Monday in July each
year at 9:00 a.m. The Secretary shall serve personally, or send through the mail
at least ten days before such meeting, a notice thereof addressed to each
shareholder of record at his last known post office address; but at any meeting
at which all shareholders not present have waived notice in writing, the giving
of notice as above required shall be dispensed with.
Sec. 2. QUORUM. At all meetings of shareholders it shall be necessary
that stockholders representing in person or by proxy a majority of the
outstanding capital stock shall be present to constitute a quorum.
Sec. 3. SPECIAL MEETINGS. Special meetings of shareholders may be
called at any time by the Chairman or by a majority of the directors upon ten
days notice to each shareholder of record, and to be served personally or
sent through the post office addressed to each of such shareholders of record
at his last known post office address; but at any meeting at which all
shareholders shall be present, or of which shareholders not present have
waived notice of the meeting in writing, the giving of notice as above
required shall be dispensed with.
The Board of Directors shall also, in like manner, call a special meeting
of shareholders whenever and wherever so required in writing by shareholders
representing not less than one-half of the capital stock of the company.
<PAGE> 2
Sec. 4. VOTING. At all meetings of shareholders all questions, the manner
of deciding which is not prescribed by statute, shall be determined by a
majority vote of the shareholders present in person or by proxy; provided,
however, that any qualified voter may demand a stock vote, in which case each
shareholder present in person or proxy shall be entitled to cast one vote for
each share of stock owned or represented by him. All voting shall be done by
voice except that a stock vote shall be by ballot. The casting of all votes at
meetings of the shareholders shall be governed by the provisions of the statutes
of Florida thereunto pertaining.
Sec. 5. ORDER OF BUSINESS. The order of business at all meetings of
the shareholders shall be as follows:
1. Roll Call
2. Proof of notice of meeting or waiver of notice
3. Reading of minutes of preceding meeting
4. Report of officers
5. Reports of committees
6. Election of inspectors of election
7. Unfinished business
8. New business
Sec. 6. INFORMAL ACTION BY SHAREHOLDERS. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
ARTICLE III.
DIRECTORS
Sec. l. NUMBER. The affairs and business of this Corporation shall be
managed by a Board of Directors consisting of 5 person(s) who need not be
shareholder(s).
Sec. 2. HOW ELECTED. At the annual meeting of shareholders, the
person(s) receiving a plurality of the votes cast shall be directors and
shall constitute the Board of Directors for the coming year.
Sec. 3. TERM OF OFFICE. The term of office of each of the directors
shall be one year, and thereafter until his successor has been elected and
has qualified.
Sec. 4. DUTIES OF DIRECTORS. The Board of Directors shall have the control
and general management of the affairs and business of the Corporation, and
exercise all the powers, rights, and privileges permitted to be exercised by
directors of Corporations for profit under the statutes of the State of Florida
thereunto pertaining. Such directors shall in all cases act as a board,
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regularly convened by a majority, and they may adopt such rules and regulations
for the conduct of their meetings and the management of the Corporation as they
may deem proper, not inconsistent with these By-laws and the laws of the State
of Florida.
Sec. 5. DIRECTORS' MEETINGS. An annual meeting of the Board of
Directors shall be held immediately following the annual meeting of the
shareholders. Special meetings of the Board of Directors may be called by
the Chairman at any time, and must be called by the President or Secretary
upon the written request of two directors. The directors shall meet at such
place and time as may be designated in the notice of such meeting.
Sec. 6. NOTICE OF MEETINGS. Notice of meetings other than the annual
meeting shall be given by service upon each director by mail or in person at
least two days before the date therein designated for such meeting, including
the day of mailing of written or printed notice thereof, specifying the time and
place of such meeting. At any meeting at which every member of the Board of
Directors shall be present, or to the holding of which an absent director has
consented in writing, although held without notice, any business may be
transacted which might have been transacted if the meeting had been duly called.
Sec. 7. QUORUM. At any meeting of the directors, majority of the board
shall constitute a quorum for the transaction of business, but in the event
of a quorum not being present, a lesser number may adjourn the meeting to
some future time, but not more than five days later.
Sec. 8. VOTING. At all meetings of the Board of Directors, each
director is to have one vote.
Sec. 9. VACANCIES. Whenever any vacancies shall occur in the Board of
Directors by death, resignation, removal or otherwise, the same shall be filled
without undue delay by a majority vote of the remaining members of the Board of
Directors. Such election shall be held within thirty days after the occurrence
of such vacancy. The person so chosen shall hold office until the next annual
meeting of the shareholders, or until his successor shall have been chosen at a
special meeting of the shareholders or by informal action of the shareholders.
Sec. 10. REMOVAL OF DIRECTORS. Any one or more of the directors may
be removed with or without cause at any time by a vote of the shareholders
holding a majority of the outstanding stock at any meeting of the
shareholders or by informal action of the shareholders pursuant to Article
II, Section 6 of these By-laws.
Sec. 11. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken by the Board of Directors at a meeting may be taken without a
meeting if a consent in writing setting forth the action so taken, shall be
signed by all of the directors.
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ARTICLE IV.
OFFICERS
Sec. 1. NUMBER. The officers of the Corporation shall be:
1. Chairman
2. President
3. Vice President
4. Secretary
5. Treasurer
Sec. 2. ELECTION. All officers of the Corporation shall be elected
annually by the Board of Directors at its meeting held immediately after the
annual meeting of shareholders and shall hold office for the term of one
year, or until their successors are duly elected and have qualified.
Sec. 3. DUTIES OF OFFICERS. The duties and powers of the officers of
the Corporation shall be as follows:
CHAIRMAN
The Chairman shall preside at all meetings of the Board of Directors and
of the shareholders. He shall cause to be called regular and special meetings of
the shareholders and directors in accordance with these By-laws.
He shall appoint and remove, employ and discharge, and fix the
compensation of all servants, agents, and employees of the Corporation, other
than the duly elected officers, subject to the approval of the Board of
Directors.
He shall sign and make all contracts and agreements in the name of the
Corporation and see that they are properly carried out.
He shall see that the books, reports, statements and certificates required
by the statutes of Florida are properly kept, made and filed according to law.
He shall exercise all the rights and privileges and perform all the duties
usually pertaining to the office of Chairman of a Corporation for profit.
PRESIDENT
During the absence or inability of the Chairman to render and perform his
duties or to exercise his powers, the same shall be performed and exercised by
the President; and when so acting, he shall have all the powers and be subject
to all the responsibilities hereby given to or imposed upon the Chairman.
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SECRETARY
The Secretary shall keep the minutes of the meetings of the Board of
Directors and shareholders in an appropriate book or books.
He shall serve all notices of the Corporation.
He shall be a custodian of the records and of the seal, and affix the
latter when required.
He shall keep the stock book so as to show at all times the amount of the
outstanding capital stock, the manner and the time the same was paid in, and the
names and post office addresses of the owners thereof.
He shall, with the Chairman, sign all certificates of stock.
He shall perform all the duties usually incident to the office of
Secretary.
TREASURER
The Treasurer shall have the care and custody and be responsible for all
the funds and securities of the Corporation, and deposit all such funds in the
name of the Corporation in such bank or banks, or otherwise as the Board of
Directors may designate.
He shall keep, or cause to be kept at the office of the Corporation,
correct books of account of all of its business and transactions.
He shall do and perform all the duties pertaining to the office of
Treasurer.
Sec. 4. ALL VACANCIES - HOW FILLED. All vacancies in any office shall
be filled by the Board of Directors.
Sec. 5. COMPENSATION OF OFFICERS. The Board of Directors shall
determine the salary or compensation to be received by the officers.
Sec. 6. REMOVAL OF OFFICERS. The Board of Directors may remove any
officer by a majority vote at any time with or without cause.
ARTICLE V.
SEAL
Sec. I. SEAL. The seal of the Corporation shall be as follows:
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ARTICLE VI.
CERTIFICATES OF STOCK
Sec. l. DESCRIPTION OF STOCK CERTIFICATES. The certificates of stock shall
be numbered and registered in the order in which they are issued. They shall be
bound in a book and shall be issued in consecutive order therefrom, and in the
margin thereof shall be entered the name of the person owning the shares therein
represented, with the number of shares and the date thereof. Such certificates
shall exhibit the holder's name and number of shares. They shall be signed by
the Chairman or President and countersigned by the Secretary and sealed with the
seal of the Corporation.
Sec. 2. TRANSFER OF STOCK. The stock of the Corporation shall be assigned
and transferable on the books of the Corporation only by the person in whose
name it appears on said books or his legal representatives. In case of transfer
by attorney, the power of attorney duly executed and acknowledged, shall be
deposited with the Secretary. In all cases of transfer, the former certificate
must be surrendered and called before a new certificate may be issued. No
transfer shall be made upon the books of the Corporation within ten days next
proceeding the next annual meeting of the shareholders. Any taxes in connection
with the transfer of any such shares shall be paid by the transferor or the
transferee of said stock before said assignment and transfer shall be made on
the books of the Corporation.
ARTICLE VII.
DIVIDENDS
Sec. 1. WHEN DECLARED. The Board of Directors may from time to time
declare and the Corporation may pay dividends on its outstanding shares in
the manner and upon the terms and conditions provided by law and the articles
of incorporation.
ARTICLE VIII.
BILLS, NOTES, ETC.
Sec. 1. HOW MADE. All bills payable, notes, checks or other negotiable
instruments of the Corporation shall be made in the name of the Corporation, and
shall be signed by such officer or officers as the Board of Directors shall from
time to time direct. No officer or agent of the Corporation, either singly or
jointly with others, shall have the power to make any bill payable, note, check,
draft or warrant or other negotiable instrument, or endorse the same in the name
of the Corporation or contract or cause to be contracted any debt or liability
in the name or on behalf of the Corporation, except as herein expressly
prescribed and provided.
6
<PAGE> 7
ARTICLE IX.
AMENDMENTS
Sec. 1. HOW AMENDED. These By-laws may be altered, amended, repealed
or added to by the affirmative vote of the stockholders representing a
majority of the outstanding capital stock at any meeting of the stockholders
called for such purposes or by informal motion of the shareholders pursuant
to Article 2, Section 6 of these By-laws.
ARTICLE X.
INDEMNIFICATION
Sec. 1. ACTIONS NOT BY OR IN THE RIGHT OF THE COMPANY. This
Corporation shall indemnify any person who was or is a party to any
proceeding (other than an action by, or in the Corporation's right), by
reason of the fact that he is or was a director, officer, employee, or agent
of the Corporation, or is or was serving at the request of the Corporation as
a director, officer, employee or agent of another Corporation, partnership,
joint venture, trust or other enterprise, against liability incurred in
connection with such proceeding, including any appeal thereof, if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Corporation, and with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
Sec. 2. ACTIONS BY OR IN THE RIGHT OF THE COMPANY. The Corporation shall
indemnify any person who was or is a party to any proceeding by, or in the
Corporation's right, to procure a judgment in its favor because such person is
or was a corporate, director, officer, employee or agent or was serving at the
Corporation's request as a director, officer, employee or agent of another
Corporation, partnership, joint venture, trust or other enterprise, against
expenses and amounts paid in settlement which, in the Board of Directors'
judgment, do not exceed the estimated expense of litigating the proceeding to
conclusion. Such indemnification shall not exceed the amounts actually and
reasonably incurred in connection with the defense of such proceeding and any
appeal thereof. Such indemnification shall be authorized if such person acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Corporation, except that no indemnification shall be
made under this Section 2 in respect of any claim, issue, or matter as to which
such person shall have been adjudged to be liable unless, and only to the extent
that, the court in which such proceeding was brought or any other court of
competent jurisdiction, shall determine upon application that despite the
adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
Sec. 3. INDEMNIFICATION WHERE OFFICER OR DIRECTOR SUCCESSFULLY DEFENDS
ACTIONS. To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in defense of any
proceeding referred to in Section 1 or Section 2, or in defense of any claim,
issue, or matter therein, he shall be indemnified against
7
<PAGE> 8
expenses (including, but not limited to, attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Sec. 4. STANDARDS REQUIRED PRIOR TO INDEMNIFICATION. Except as
provided in Section 3 hereof and except as may be ordered by a court, any
indemnification under Section 1 or Section 2, shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee, or agent is proper in the
circumstances because he has met the applicable standard of conduct as set
forth in Section 1 or Section 2. Such determination shall be made:
(a) By the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, even if obtainable, by
majority vote of a committee duly designated by the Board of
Directors (in which directors who are parties may participate)
consisting solely of two or more directors not at the time parties
to the proceeding;
(c) By independent legal counsel;
1. Selected by the Board of Directors prescribed in
paragraph (a) or the committee prescribed in paragraph (b); or
2. If a quorum of the directors cannot be obtained for
subparagraph (1) and the committee cannot be designated under
paragraph (b), selected by majority vote of the full Board of
Directors (in which directors who are parties may participate); or
(d) By the shareholders by a majority vote of a quorum consisting
of shareholders who were not parties to such proceeding or, if no
such quorum is obtainable by a majority vote of shareholders who
were not parties to such proceeding.
Sec. 5. EVALUATION OF EXPENSE REASONABLENESS AND INDEMNIFICATION
AUTHORIZATION. Evaluation of the reasonableness of expenses and
authorization of indemnification shall be made in the same manner as the
determination that indemnification is permissible. However, if the
determination of permissibility is made by independent legal counsel, persons
specified by Section (4)(c) shall evaluate the reasonableness of expenses and
may authorize indemnification.
Sec. 6. ADVANCE OF EXPENSES. Expenses incurred by an officer or director
in defending a civil or criminal proceeding may be paid by the Corporation in
advance of the final disposition of such proceeding upon receipt of an
undertaking by or on behalf of such director or
8
<PAGE> 9
officer to repay such amount if he is ultimately found not to be entitled to
indemnification by the Corporation pursuant to this article. Expenses incurred
by other employees and agents may be paid in advance upon such terms or
conditions that the Board of Directors deems appropriate.
Sec. 7. CONTINUATION OF INDEMNIFICATION. These indemnification
provisions shall continue in effect (unless otherwise provided when
authorized or ratified) for persons who have ceased to be a director,
officer, employee or agent and shall additionally apply for the benefit of
the heirs, executors and administrators of such persons (unless otherwise
provided when authorized or ratified).
Sec. 8. INSURANCE. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent
of the Corporation or is or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, or other enterprise against any liability asserted
against him and incurred by him in any such capacity or arising out of his
status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this section.
Sec. 9. NON-EXCLUSIVITY. The indemnification and advancement of expenses
provided pursuant to this article are not exclusive and the Corporation may make
any other or further indemnification or advancement of expenses of any of its
directors, officers, employees, or agents, under any bylaw, agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
Sec. 10. NOTICE TO SHAREHOLDERS. If any expenses or other amounts
are paid by way of indemnification otherwise than by court order or action by
the shareholders or by an insurance carrier pursuant to insurance maintained
by the Corporation, the Corporation shall, not later than the time of
delivery to shareholders of written notice of the next annual meeting of
shareholders, unless such meeting is held within three (3) months from the
date of such payment, and, in any event, within fifteen (15) months from the
date of such payment, deliver either personally or by mail to each
shareholder of record at the time entitled to vote for the election of
directors, a statement specifying the persons paid, the amounts paid, and the
nature and status at the time of such payment of the litigation or threatened
litigation.
Sec. 11. PRECLUSION OF INDEMNIFICATION OR EXPENSE ADVANCEMENT.
Notwithstanding any other provision of this Article, indemnification or
advancement of expenses shall not be made to or on behalf of any director,
officer, employee, or agent if a judgment or other final adjudication
establishes that his actions, or omissions to act, were material to the cause
of action so adjudicated and constitute:
a. A violation of the criminal law, unless the director, officer,
employee or agent had reasonable cause to believe his conduct was lawful
or had no reasonable cause to believe his conduct was unlawful;
9
<PAGE> 10
b. A transaction from which the director, officer, employee or
agent derived an improper personal benefit; or
c. Willful misconduct or a conscious disregard for the best
interests of the Corporation in a proceeding by or in the right of the
Corporation to procure a judgment in its favor or in a proceeding by or in
the right of a shareholder.
/s/ E. C. Addison
--------------------------------
E. C. Addison
/s/ Paul Macomber
--------------------------------
Paul Macomber
/s/ T. M. Phagans
--------------------------------
T. M. Phagans
/s/ Glen Davis
--------------------------------
Glen Davis
/s/ Sam Mahdavi
--------------------------------
Sam Mahdavi
10
<PAGE> 1
Exhibit 3.7(a)
ARTICLES OF INCORPORATION
We, the undersigned subscribers to these Articles to Incorporation, each a
natural person competent to contract do hereby associate ourselves together for
the purpose of becoming a body corporation under the laws of the State of
Florida and for that purpose do hereby make, execute and adopt the following
Articles of Incorporation:
I.
The name of this corporation shall be
MID-FLORIDA STEEL CORPORATION
II.
The general nature of the business of this corporation and the objects and
purposes proposed to be transacted, promoted and carried out are as follows:
(a) To buy and sell steel, steel products, fabricating materials and
fabricated steel products, to manufacture, erect and glaze steel and metal sash,
to fabricate and otherwise construct any and all steel products, and to do all
things necessary and incident to the steel and steel fabricating business.
(b) To manufacture, buy, sell, or otherwise deal or traffic in iron,
steel, manganese, nickle, copper, coke, coal, lumber or any and all other
metals, minerals or allied or related materials.
(c) To acquire, own, lease, occupy, use, develop or deal in any lands,
buildings or other structures incident or necessary to the carrying forward of
the steel business as hereinabove and hereinafter set forth.
(d) To construct or purchase or otherwise acquire buildings, machinery,
engines, apparatus, cranes, welding equipment, railroads, docks, ships, trucks,
fork lift trucks, fabricating
<PAGE> 2
machinery, locomotives, cars, railroad equipment, elevators, bridges, viaducts,
canals and any other means of transportation necessary to maintain or operate
the steel business as aforesaid. To manufacture, buy, sell or otherwise deal or
traffic in any explosives, maritime and merine equipment, substances,
appliances, engines, articles and/or contrivances of any kind or sort necessary
to the business as aforesaid.
(e) To apply for, obtain, register, purchase, lease or otherwise to
acquire and to hold, use, own, exercise, develop, operate and introduce and to
sell, assign, grant licenses in respect of, or otherwise dispose of, any
trade-marks, trade-names, patents or inventions, improvements or processes used
in connection with or secured under letters patent of the United States or
elsewhere, or otherwise, in relation to any of the other purposes herein stated
and to acquire, use, exercise or otherwise turn to gain licenses in respect of
any such trade-marks, patents, inventions, processes and the like or any other
property or rights related to or concerning the steel business as aforesaid.
(f) To engage in any manufacturing, construction, transportation or other
business connected with any of the purposes herein stated.
(g) To act as financial, commercial or general agent for other
corporations engaged in businesses similar or allied to that of this
corporation, or in any business in which any product of this corporation is
employed whether the same be fabricated steel products or any other type of
steel product or in the production of anything used in the business of this
corporation.
(h) To enter into any contracts or arrangements with any governmental or
authority, national, state, municipal, local or otherwise conducive to the other
purposes hereinabove or hereinafter stated, to contract with the said
municipalities or governments for the erection of any steel or steel products or
the fabrication of any steel or steel products, or for the sale of or
contracting
2
<PAGE> 3
of or for any project or job for any such government or municipality, and to
obtain from any such government or municipality any and all rights, privileges,
grants or concessions related to any of the objects herein stated; to carry out,
exercise, comply with the enforce any such contracts, rights, privileges and
concessions; to subscribe for, acquire, invest in, sell or dispose of any bonds,
securities or obligations of any nature issued by any such government or
municipality or guaranteed thereby.
(i) To acquire by purchase, subscription or otherwise, and to invest
in and hold or dispose of stocks, bonds, securities or other instruments
of any other corporation or corporations, domestic or foreign, formed for or
then or theretofore engaged in any one or more of the kinds of business,
purposes, objects or any kind herein mentioned, or of any corporation owning or
holding the stock, bonds, securities or other obligations to exercise all the
rights, powers and privileges of ownership, including the right to vote thereon
for any and all purposes; to aid in any manner any corporation whose stocks,
bonds or other obligations are owned or held by it, or in which or in the
stocks, bonds or other obligations are owned or held by it, or in which or in
the stocks, bonds, securities or other obligations of which, it is in any way
interested; and to do any other acts or things for the preservation, protection,
improvement or enhancement of the value of any such stocks, bonds, securities or
obligations.
(j) To borrow money; to issue bonds, debentures or obligations of the
corporation from time to time, for moneys borrowed or in payment for property
purchased or for any of the other objects or purposes of the corporation; to
secure the same by mortgage or mortgages or deed or deeds of trust upon or
pledge of any or all of the property, rights, privileges, or franchises of the
corporation, wheresoever situated, acquired or to be acquired; and to sell or
otherwise dispose of any
3
<PAGE> 4
or all such bonds, debentures and obligations; provided that no such mortgage or
pledge shall be made without the consent of the holders of two-thirds of the
capital stock of the corporation of each class having voting powers represented
and voted upon in person or by proxy at a time specially called for the purpose
of procuring such consent, or, if such purpose be specified in the notice
thereof, then at any annual meeting; but no approval of stockholders shall be
requisite in respect of the execution of any purchase-money mortgage or any
other purchase-money lien, or in respect of any pledge of assets in the ordinary
course and conduct of the business of the corporation.
(k) To conduct its business in any or all of its branches which may be
hereafter set up or established within the State of Florida and in furtherance
of the establishment of these branches, if any, to convey real or personal
property to maintain offices and agencies in the State of Florida.
(l) To borrow money and contract debts when necessary for the transaction
of its business or for the exercise of its corporate rights, privileges or
franchises or for any other lawful purpose of this corporation and to issue
promissory notes, bills of exchange, bonds, debentures and other obligations or
evidences of indebtedness, payable at a specific time or upon the happening of a
specific event or events whether secured by mortgage or otherwise, or secured by
money borrowed, or in payment for property purchased, or for any other lawful
objects.
(m) To do any and all things necessary, suitable and proper for the
accomplishment of any one or more of the objects herein enumerated, or which
shall at any time appear suitable or expedient for the protection or benefit of
the corporation and in general to carry on any lawful business necessary or
incidental to the attainment of the objects of this corporation, whether or not
said business is similar in nature to the objects set forth in these Articles of
Incorporation, or any
4
<PAGE> 5
amendment that may be made thereto with all powers which are now or may
hereafter be granted or conferred by the laws of the State of Florida.
III.
The capital stock of this corporation shall be TEN THOUSAND ($10,000.00)
DOLLARS which shall be divided into Two Thousand shares of common stock of the
par value of Five ($5.00) Dollars per share, all of which is to be fully paid
and non-assessable; said capital stock or any portion thereof may be paid for in
property, labor or service at a just valuation to be fixed by the Incorporators
or by the Directors at a meeting called for that purpose.
IV.
This corporation shall have perpetual existence unless dissolved according
to law.
V.
This corporation shall begin business with a paid-in capital of FIVE
HUNDRED ($500.00) DOLLARS.
VI.
The principal office and place of business of this corporation shall be
located at 508-11 Florida National Bank Bldg., Orlando, Orange County, Florida.
VII.
The business of this corporation shall be conducted by a Board of
Directors consisting of not less than three members and by the officers of the
corporation, namely, a President, Vice-President, Secretary and Treasurer. Any
office except that of President or Vice-President may be held by one and the
same person. The number of Directors may be increased or diminished from time to
time, by bylaws adopted by the stockholders but shall never be less than three.
5
<PAGE> 6
The Directors shall be elected at the annual meeting of the stockholders
which shall be held on the first Monday in June of each year. The officers of
the corporation shall be elected at the Directors' Meeting held on the same date
and immediately after the annual meting of the stockholders.
VIII.
The names and addresses of the officers and directors who shall hold
office for the first year of the corporation's existence or until their
resignation or removal and their successors have been elected and have
qualified, are as follows:
<TABLE>
<S> <C> <C>
E. C. Addison 2022 W. Amelia Avenue PRESIDENT
Orlando, Florida
L. C. Cameron 207 W. Lancaster Road VICE-PRESIDENT
Orlando, Florida
D. Arthur Yergey 508-11 Florida National SECRETARY-TREASURER
Bank Building
Orlando, Florida
</TABLE>
DIRECTORS
E. C. Addison 2022 W. Amelia Avenue, Orlando, Florida
L. C. Cameron 207 W. Lancaster Road, Orlando, Florida
D. Arthur Yergey 508-11 Florida National Bank Building, Orlando, Florida
IX.
The names and post offices address of the subscribers to these Articles
of Incorporation and the number of shares of stock each agrees to take is as
follows:
<TABLE>
<S> <C> <C>
E. C. Addison 2022 W. Amelia Avenue 40 shares
Orlando, Florida
L. C. Cameron 207 W. Lancaster Road 40 shares
Orlando, Florida
</TABLE>
6
<PAGE> 7
<TABLE>
<S> <C> <C>
D. Arthur Yergey 508-11 Florida National 20 shares
Bank Building
Orlando, Florida
</TABLE>
X.
This corporation reserved the right to alter, amend or repeal any
provision or provisions contained in these Articles of Incorporation in the
manner now or hereafter provided by the Statutes of the State of Florida and all
rights conferred on Stockholders herein are granted subject to this reservation.
Every such alteration, amendment or repeal of these provisions shall be approved
by the Board of Directors, proposed by them to the stockholders and approved at
the stockholders' meeting by at least a majority of the stockholders entitled to
vote thereon.
IN WITNESS WHEREOF we have hereunto set our hands and seals this 21st day
of April, 1960.
/s/ E. C. Addison (SEAL)
------------------------------------------
/s/ L. C. Cameron (SEAL)
------------------------------------------
/s/ D. Arthur Yergey (SEAL)
------------------------------------------
7
<PAGE> 8
STATE OF FLORIDA )
) ss
COUNTY OF ORANGE )
I HEREBY CERTIFY that on this 21st day of April, 1960, before me, the
undersigned authority, an officer duly authorized to administer oaths and take
acknowledgments, this day personally appeared E. C. ADDISON, L. C. CAMERON and
D. ARTHUR YERGEY, to me well known and known to me to be the individuals
described in and who executed the foregoing Articles of Incorporation, and they
severally acknowledged before me that they executed the above and foregoing
Articles of Incorporation for the uses and purposes therein expressed.
IN WITNESS WHEREOF I have hereunto set my hand and official seat at
Orlando, Florida, the day and year aforesaid.
_______________________________(SEAL)
Notary Public
8
<PAGE> 1
Exhibit 3.7(b)
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
MID-FLORIDA STEEL CORPORATION, A Florida Corporation under the hands of
its President, E. C. ADDISON and its Secretary, D. ARTHUR YERGEY, hereby
certifies that
I.
That the Board of Directors of said corporation, at a meeting called and
held May 19, 1960, adopted the following resolution amending Article III of the
Articles of Incorporation to read as follows:
The capital stock of this corporation shall be $20,000.00 which shall be
divided into 4,000 shares of common stock of the par value of $5.00 per
share all of which is to be fully paid and non-assessable. Said capital
stock or any portion thereof may be paid for in property, labor, or
services at a just valuation fixed by the incorporators or by the
directors at a meeting called for that purpose.
II.
A meeting of the stockholders of the corporation called by the Board of
Directors, was held May 19, 1960 and at said special meeting of stockholders
said amendment of the Certificate of Incorporation was duly adopted by the
unanimous vote of all of the stockholders.
IN WITNESS WHEREOF said corporation has caused this certificate to be
signed in its name by its President and its Secretary, this 26th day of May,
1960.
<PAGE> 2
MID-FLORIDA STEEL CORPORATION
By /s/ E. C. Addison
-----------------------------
E. C. Addison, President
Attest:
/s/ D. Arthur Yergey
- -----------------------------
D. Arthur Yergey, Secretary
Signed, Sealed and Delivered in
the presence of:
- -----------------------------
- -----------------------------
2
<PAGE> 3
STATE OF FLORIDA )
) ss
COUNTY OF ORANGE )
I HEREBY CERTIFY that on this day, before me, an officer duly authorized
in the State aforesaid and in the County aforesaid to take acknowledgments,
personally appeared E. C. ADDISON and D. ARTHUR YERGEY, to me known to be the
persons described in and who executed the foregoing Certificate of Amendment of
Articles of Incorporation, and they severally acknowledged before me that they
executed the above and foregoing instrument for the uses and purposes therein
expressed.
IN WITNESS WHEREOF I have hereunto set my hand and official seal at
Orlando, Florida, the day and year aforesaid.
-----------------------------
Notary Public
3
<PAGE> 1
Exhibit 3.7(c)
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
MID-FLORIDA STEEL CORPORATION, a Florida corporation, under it's
corporate seal and the hands of it's president, E. C. ADDISON, and secretary,
D. ARTHUR YERGEY, hereby certify that:
I
The Board of Directors of said corporation, at a meeting called and
held on September 18, 1961, adopted the following resolution amending Article
III of the Articles of Incorporation:
"Be it resolved that the Board of Directors of Mid-Florida Steel
Corporation, a Florida corporation, deems it advisable and hereby
declares it to be advisable that Article III of the Articles of
Incorporation of said corporation be amended and changed and altered
so as to read as follows: The capital stock of this corporation
shall be as follows:
a. Common stock - $20,000. which shall be divided into 4,000 shares
of common stock of a par value of $5. per share, all of which is to
be fully paid and non-assessable. Said common stock, or any portion
thereof, may be paid for in property, labor or services at a just
valuation fixed by the incorporators or the directors at a meeting
called for that purpose.
b. Preferred Stock - $20,000. which shall be divided into 2000
shares of preferred stock at a par value of $10. per share, bearing
interest payable annually at the rate of 7 1/2%. Said stock shall be
due and callable three (3) years from date of issuance. Said
preferred stock may be paid for only in cash and no discount upon
the purchase price thereof, if any, shall exceed 2 1/2% of the face
amount of the par value of said stock. Said preferred stock may be
issued only upon the
<PAGE> 2
unanimous vote of all of the stockholders and directors of said
corporation. The three year period of said stock can only be
extended upon a like unanimous vote of all of the stockholders and
directors of said corporation, at a meeting called for that purpose.
II
A meeting of the directors of the corporation, called by the Board
of Directors was held September 18, 1961 and at said special meeting of
stockholders, said amendment of the Certificate of Incorporation was duly
adopted by unanimous vote of all stockholders.
IN WITNESS WHEREOF, corporation has caused this certificate to be
signed by it's President and it's Secretary, this 22nd day of September, 1961.
MID-FLORIDA STEEL CORPORATION
By /s/ E. C. Addison
--------------------------------
E. C. Addison, President
ATTEST:
/s/ D. Arthur Yergey (CORPORATE SEAL)
- ----------------------------
D. Arthur Yergey, Secretary
Signed, sealed and delivered in the presence of:
- ----------------------------
- ----------------------------
STATE OF FLORIDA
COUNTY OF ORANGE
I HEREBY CERTIFY that on this day before me, an officer duly
authorized in the state aforesaid and in the county aforesaid, to take
acknowledgments, personally appeared
E. C. ADDISON and D. ARTHUR YERGEY
2
<PAGE> 3
to me known to be the persons described in and who executed the foregoing
Certificate of Amendment of Articles of Incorporation and they severally
acknowledged before me that they executed the above and foregoing instrument for
the uses and purpose therein expressed.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal at
Orlando, Orange County, Florida, the day and year first aforesaid.
----------------------------
Notary Public
3
<PAGE> 1
Exhibit 3.7 (d)
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
MID-FLORIDA STEEL CORPORATION, a Florida corporation, under
its corporate seal and the hands of its president, E. C. ADDISON, and
secretary, D. ARTHUR YERGEY, hereby certify that:
I
The Board of Directors of said corporation, at a meeting
called and held on November 19, 1962, adopted the following resolution amending
Article III of the Articles of Incorporation:
"Be it resolved that the Board of Directors of Mid-Florida
Steel Corporation, a Florida corporation, deems it advisable
and hereby declares it to be advisable that Article III of the
Articles of Incorporation of said corporation be amended and
changed and altered so as to read as follows: The capital
stock of this corporation shall be as follows:
a. Common stock - $40,000. which shall be divided into 8,000
shares of common stock of a par value of $5.00 per share, all
of which is to be fully paid and non-assessable. Said common
stock, or any portion thereof, may be paid for in property,
labor or services at a just valuation fixed by the
incorporators or the directors at a meeting called for that
purpose.
b. Preferred Stock - $20,000. which shall be divided into
2,000 shares of preferred stock at a par value of $10.00 per
share, bearing interest payable annually at the rate of 7
1/2%. Said stock shall be due and callable three (3) years
from date of issuance. Said preferred stock may be paid for
only in cash and no discount upon the purchase price thereof,
if any, shall exceed 2 1/2% of the face amount of the par
value of said stock. Said preferred stock may be issued only
upon the unanimous vote of all of the stockholders and
directors of said corporation. The three year period of said
stock can only be extended
<PAGE> 2
upon a like unanimous vote of all of the stockholders and
directors of said corporation, at a meeting called for that
purpose.
II
A meeting of the officers, directors and stockholders of the
said corporation was called by the President and was held on November 19th, 1962
and at said special meeting of officers, directors and stockholders, said
amendment of the Certificate of Incorporation was duly adopted by unanimous vote
of all the officers, directors and stockholders.
IN WITNESS WHEREOF, corporation has caused this certificate to
be signed by its President and attested by its Secretary, this 19th day of
November, 1962.
MID-FLORIDA STEEL CORPORATION
By
/s/ E.C. Addison
--------------------------
E. C. Addison, President
ATTEST:
/s/ D. Arthur Yergey (CORPORATE SEAL)
- -------------------------------
D. Arthur Yergey, Secretary
Signed, sealed and delivered
in the presence of:
- -------------------------
- -------------------------
<PAGE> 3
STATE OF FLORIDA )
) ss
COUNTY OF ORANGE )
I HEREBY CERTIFY that on this day before me, an officer duly
authorized in the state aforesaid and in the county aforesaid, to take
acknowledgments, personally appeared
E. C. ADDISON and D. ARTHUR YERGEY
to me known to be the persons described in and who executed the foregoing
Certificate of Amendment of Articles of Incorporation and they severally
acknowledged before me that they executed the above and foregoing instrument for
the uses and purpose therein expressed.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal at Orlando, Orange County, Florida, the day and year first above written.
------------------------------
Notary Public
3
<PAGE> 1
EXHIBIT 3.7(e)
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
MID-FLORIDA STEEL CORPORATION, A Florida Corporation under its
corporate seal and the hands of its President, E. C. ADDISON and its Secretary,
D. ARTHUR YERGEY, hereby certifies that
I.
That the Board of Directors of said corporation, at a meeting called
and held December 12, 1966, adopted the following resolution amending Article I
of the Articles of Incorporation:
"Be it resolved that the Board of Directors of Mid-Florida Steel
Corporation, a Florida corporation, deems it advisable and hereby
declares it to be advisable that the Articles of Incorporation of said
corporation be amended, changed and altered so as to provide as
follows:
The name of the corporation shall be ADDISON STEEL, INC."
II.
A meeting of the stockholders of said corporation was called by the
President and was held on December 12, 1966, and at said special meeting of
officers, directors and stockholders, said amendment of the Certificate of
Incorporation was duly adopted by a unanimous vote of all of the officers
directors and stockholders.
IN WITNESS WHEREOF the corporation has caused this certificate to be
signed by its President and attested by its Secretary this 20th day of December,
1966.
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MID-FLORIDA STEEL CORPORATION
By
/s/ E. C. Addison
-------------------------
E. C. Addison, President
Attest:
/s/ D. Arthur Yergey
- --------------------------- (SEAL)
D. Arthur Yergey, Secretary
Signed, sealed and delivered in the presence of:
STATE OF FLORIDA )
) ss
COUNTY OF ORANGE )
I hereby certify that on this day, before me, an officer duly
authorized in the state aforesaid and in the county aforesaid, to take
acknowledgments, personally appeared
E. C. ADDISON and D. ARTHUR YERGEY
to me known to be the persons described in and who executed the foregoing
Certificate of Amendment of Articles of Incorporation, and they severally
acknowledged before me that they executed the above and foregoing instrument for
the uses and purposes therein expressed.
IN WITNESS WHEREOF I have hereunto set my hand and official seal at
Orlando, Florida, the day and year first above written.
Notary Public
State of Florida at Large
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EXHIBIT 3.7(f)
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
ADDISON STEEL, INC. (formerly Mid-Florida Steel Corporation),
a Florida corporation, under its corporate seal and the hands of its president,
E. C. ADDISON, and Secretary, D. ARTHUR YERGEY, hereby certify that:
I
The Board of Directors of said corporation, at a meeting
called and held on September 1, 1968, adopted the following resolution amending
Article III of the Articles of Incorporation, as previously amended as follows:
"Be it resolved that the Board of Directors of Addison Steel,
Inc., a Florida Corporation, deems it advisable and hereby
declares it to be advisable that Article III of the Articles
of Incorporation of said corporation as previously amended be
further amended, changed and altered so as to read as follows:
The capital stock of this corporation shall be as follows:
a. Common stock - $50,000. which shall be divided into 10,000
shares of common stock of a par value of $5.00 per share, all
of which is to be fully paid and non-assessable. Said common
stock, or any portion thereof, may be paid for in property,
labor or services at a just valuation fixed by the
incorporators or the directors at a meeting called for that
purpose.
b. Preferred Stock - $20,000. which shall be divided into
2,000 shares of preferred stock at a par value of $10.00 per
share, bearing interest payable annually at the rate of 7
1/2%. Said stock shall be due and callable three (3) years
from date of issuance. Said preferred stock may be paid for
only in cash and no discount upon the purchase price thereof,
if any, shall exceed 2 1/2 of the face amount of the par value
of said stock. Said preferred stock may be issued only upon
the unanimous vote of all of the stockholders and directors of
said corporation. The three (3) year period of said stock can
only be
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extended upon a like unanimous vote of all of the stockholders
and directors of said corporation, at a meeting called for
that purpose."
II
The Board of Directors of said corporation at a meeting called
on September 1, 1968, adopted the following resolution amending Article VII as
follows:
"Be it resolved that the Board of Directors of Addison Steel,
Inc., a Florida Corporation, deems it advisable and hereby
declares it to be advisable that Article VII of the Articles
of Incorporation of said Corporation be amended and changed
and altered so as to read as follows:
The business of the corporation shall be conducted by a Board
of Directors consisting of not less than four (4) members and
by the officers of the corporation namely, a president,
executive vice-president, vice-president, and
secretary-treasurer. Any office except that of president,
executive vice-president, or vice-president may be held by one
and the same person. The number of directors may be increased
or diminished from time to time by by-law adopted by the
stockholders but shall never be less than four. The Directors
shall be elected at the annual meeting of the stockholders
which shall be held the first Monday in July of each year. The
officers of the corporation shall be elected at the directors
meeting held on the same date and immediately after the annual
meeting of the stockholders."
III
A meeting of the officers, directors and stockholders of the
said corporation was called by the president and was held on September 1, 1968,
and at said special meeting of officers, directors and stockholders, said
amendment of the Certificate of Amendment was duly adopted by unanimous vote of
all the officers, directors and stockholders.
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IN WITNESS WHEREOF, corporation has caused this certificate to
be signed by its president and attested by its secretary, this 11th day of
September, 1968.
ADDISON STEEL, INC.
By:
/s/ E. C. Addison
------------------------------
E. C. Addison, President
ATTEST:
/s/ D. Arthur Yergey (Corporate Seal)
- --------------------------------------
D. Arthur Yergey, Secretary
Signed, sealed and delivered in the presence of:
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STATE OF FLORIDA
COUNTY OF ORANGE
I HEREBY CERTIFY that on this day before me, an officer duly
authorized in the state aforesaid and in the county aforesaid, to take
acknowledgments, personally appeared
E. C. ADDISON and D. ARTHUR YERGEY
to me known to be the persons described in and who executed the foregoing
Certificate of Amendment of Articles of Incorporation and they severally
acknowledged before me that they executed the above and foregoing instrument for
the uses and purpose therein expressed.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal at Orlando, Orange County, Florida, the day and year first above written.
------------------------------
Notary Public
My Commission Expires: 8/10/69
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EXHIBIT 3.7(g)
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
ADDISON STEEL, INC., a Florida corporation, under its
corporate seal and the hands of its President, E. C. ADDISON, and Secretary, D.
ARTHUR YERGEY, hereby certify that:
I
The Board of Directors of said corporation, at a meeting
called and held on January 26, 1981 adopted the following resolution amending
Article III of the Articles of Incorporation as twice previously amended as
follows:
"Be it resolved that the Board of Directors of ADDISON STEEL,
INC., a Florida corporation, deems it advisable and hereby
declares it to be advisable that Article III of the Articles
of Incorporation of said corporation as previously twice
amended be further amended, changed and altered so as to read
as follows:
The capital stock of this corporation shall be as follows:
a. Common Stock - Class A - $500,000.00 which shall be divided
into one hundred thousand (100,000) shares of a par value of
$5.00 per share, all of which is to be fully paid and
non-assessable. Said common stock, or any portion thereof, may
be paid for in property, labor or services at a just valuation
fixed by the incorporators or the directors at a meeting
called for that purpose.
b. Common Stock - Class B - $500,000.00 which shall be divided
into one hundred (100,000) shares of common stock of a par
value of $5.00 per share, all of which is to be fully paid and
non-assessable, said stock, however, shall have no voting
rights. Said common stock or any portion thereof may be paid
for in property, labor or services, the just valuation to be
fixed by the incorporators or the directors at a meeting
called for that purpose.
<PAGE> 2
II
A meeting of the officers, directors and stockholders of said
corporation, called by the President, was held January 26, 1981. At said special
meeting of officers, directors and stockholders, the above amendment of the
Certificate of Incorporation was duly adopted by unanimous vote of all of the
directors and stockholders.
IN WITNESS WHEREOF, corporation has caused this Certificate to
be signed by its President and attested by its Secretary, this 28th day of
February, 1981.
ADDISON STEEL, INC.
By
/s/ E. C. Addison
------------------------------
E. C. Addison, President
ATTEST:
/s/ D. Arthur Yergey (Corporate Seal)
- ------------------------------------
D. Arthur Yergey, Secretary
Signed, sealed and delivered
in the presence of:
2
<PAGE> 3
STATE OF FLORIDA
COUNTY OF ORANGE
I HEREBY CERTIFY that on this day before me, an officer duly
authorized in the State aforesaid and in the County aforesaid, to take
acknowledgments, personally appeared D. ARTHUR YERGEY to me known to be the
person described in and who executed the foregoing Certificate of Amendment of
Articles of Incorporation and he acknowledged before me that he executed the
above and foregoing instrument for the uses and purposes therein expressed.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal at Orlando, Orange County, Florida, the day and year first above written.
Notary Public
My Commission Expires:
STATE OF GEORGIA
COUNTY OF DOUGHERTY
I HEREBY CERTIFY that on this day before me, an officer duly
authorized in the State aforesaid and in the County aforesaid, to take
acknowledgments, personally appeared E. C. ADDISON to me known to be the person
described in and who executed the foregoing Certificate of Amendment of Articles
of Incorporation and he acknowledged before me that he executed the above and
foregoing instrument for the uses and purposes therein expressed.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal at
Albany, Dougherty, Georgia, the day and year first above written.
Notary Public
My Commission Expires:
3
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EXHIBIT 3.8
BY-LAWS OF
ADDISON STEEL, INC.
ARTICLE I.
OFFICES
The principal offices of the Corporation shall be located in the City
of Albany, State of Georgia. The Corporation may have such other offices, either
within or without the State of Florida, as the Board of Directors may designate
or as the business of the Corporation may require from time to time.
The registered office of the Corporation, required by the Florida
Corporation laws to be maintained in the State of Florida may be, but need not
be, identical with the principal office in the State of Florida, and the address
of the registered office may be changed from time to time by Board of Directors.
ARTICLE II.
SHAREHOLDERS
Sec. 1. ANNUAL MEETINGS. The annual meeting of the shareholders shall
be held at the principal office of the Corporation on the 2nd Monday in July
each year at 9:00 a.m. The Secretary shall serve personally, or send through the
mail at least ten days before such meeting, a notice thereof addressed to each
shareholder of record at his last known post office address, but at any meeting
at which all shareholders not present have waived notice in writing, the giving
of notice as above required shall be dispensed with.
Sec. 2. QUORUM. At all meetings of shareholders it shall be necessary
that stockholders representing in person or by proxy a majority of the
outstanding capital stock shall be present to constitute a quorum.
Sec. 3. SPECIAL MEETINGS. Special meetings of shareholders may be
called at any time by the Chairman or by a majority of the directors upon ten
days notice to each shareholder of record, and to be served personally or sent
through the post office addressed to each of such shareholders of record at his
last known post office address; but at any meeting at which shall shareholders
shall be present, or of which shareholders not present have waived notice of the
meeting in writing, the giving of notice as above required shall be dispensed
with.
The Board of Directors shall also, in like manner, call a special
meeting of shareholders whenever or wherever so required in writing by
shareholders representing not less than one-half of the capital stock of the
company.
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Sec. 4. VOTING. At all meetings of shareholders all questions, the
manner of deciding which is not prescribed by statute, shall be determined by a
majority vote of the shareholders present in person or by proxy; provided,
however, that any qualified voter may demand a stock vote, in which case each
shareholder present in person or proxy shall be entitled to cast one vote for
each share of stock owned or represented by him. All voting shall be done by
voice except that a stock vote shall be by ballot. The casting of all votes at
meetings of the shareholders shall be governed by the provisions of the statutes
of Florida thereunto pertaining.
Sec. 5. ORDER OF BUSINESS. The order of business at all meetings of the
shareholders shall be as follows:
1. Roll Call
2. Proof of notice of meeting or waiver of notice
3. Reading of minutes of preceding meeting
4. Report of officers
5. Reports of committees
6. Election of inspectors of election
7. Unfinished business
8. New business
Sec. 6. INFORMAL ACTION BY SHAREHOLDERS. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
ARTICLE III.
DIRECTORS
Sec. 1. NUMBER. The affairs and business of this Corporation shall be
managed by a Board of Directors consisting of 5 person(s) who need not be
shareholder(s).
Sec. 2. HOW ELECTED. At the annual meeting of shareholders, the
person(s) receiving a plurality of the votes cast shall be directors and shall
constitute the Board of Directors for the coming year.
Sec. 3. TERM OF OFFICE. The term of office of each of the directors
shall be one year, and thereafter until his successor has been elected and has
qualified.
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Sec. 4. DUTIES OF DIRECTORS. The Board of Directors shall have the
control and general management of the affairs and business of the Corporation,
and exercise all the powers, rights, and privileges permitted to be exercised by
directors of Corporations for profit under the statutes of the State of Florida
thereunto pertaining. Such directors shall in all cases act as a board,
regularly convened by a majority, and they may adopt such rules and regulations
for the conduct of their meetings and the management of the Corporation as they
may deem proper, not inconsistent with these By-laws and the laws of the State
of Florida.
Sec. 5. DIRECTORS' MEETINGS. An annual meeting of the Board of
Directors shall be held immediately following the annual meeting of the
shareholders. Special meetings of the Board of Directors may be called by the
Chairman at any time, and must be called by the President or Secretary upon the
written request of two directors. The directors shall meet at such place and
time as may be designated in the notice of such meeting.
Sec. 6. NOTICE OF MEETINGS. Notice of meetings other than the annual
meeting shall be given by service upon each director by mail or in person at
least two days before the date therein designated for such meeting, including
the day of mailing of written or printed notice thereof, specifying the time and
place of such meeting. At any meeting at which every member of the Board of
Directors shall be present, or to the holding of which an absent director has
consented in writing, although held without notice, any business may be
transacted which might have been transacted if the meeting had been duly called.
Sec. 7. QUORUM. At any meeting of the directors, majority of the board
shall constitute a quorum for the transaction of business, but in the event of a
quorum not being present, a lesser number may adjourn the meeting to some future
time, but not more than five days later.
Sec. 8. VOTING. At all meetings of the Board of Directors, each
director is to have one vote.
Sec. 9. VACANCIES. Whenever any vacancies shall occur in the Board of
Directors by death, resignation, removal or otherwise, the same shall be filled
without undue delay by a majority vote of the remaining members of the Board of
Directors. Such election shall be held within thirty days after the occurrence
of such vacancy. The person so chosen shall hold office until the next annual
meeting of the shareholders, or until his successor shall have been chosen at a
special meeting of the shareholders or by informal action of the shareholders.
Sec. 10. REMOVAL OF DIRECTORS. Any one or more of the directors may be
removed with or without cause at any time by a vote of the shareholders holding
a majority of the outstanding stock at any meeting of the shareholders or by
informal action of the shareholders pursuant to Article II, Section 6 of these
By-laws.
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Sec. 11. ACTION WITHOUT A MEETING. Any action required or permitted to
be taken by the Board of Directors at a meeting may be taken without a meeting
if a consent in writing setting forth the action so taken, shall be signed by
all of the directors.
ARTICLE IV.
OFFICERS
Sec. 1. NUMBER. The officers of the Corporation shall be:
1. Chairman and Chief Executive Officer
2. President
3. Secretary
4. Treasurer
5. Assistant Secretary
6. Assistant Vice-President
Sec. 2. ELECTION. All officers of the Corporation shall be elected
annually by the Board of Directors at its meeting held immediately after the
annual meeting of shareholders and shall hold office for the term of one year,
or until their successors are duly elected and have qualified.
Sec. 3. DUTIES OF OFFICERS. The duties and powers of the officers of
the Corporation shall be as follows:
CHAIRMAN
The Chairman shall preside at all meetings of the Board of Directors
and of the shareholders. He shall cause to be called regular and special
meetings of the shareholders and directors in accordance with these By-laws.
He shall appoint and remove, employ and discharge, and fix the
compensation of all servants, agents, and employees of the Corporation, other
than the duly elected officers, subject to the approval of the Board of
Directors.
He shall sign and make all contracts and agreements in the name of the
Corporation and see that they are properly carried out.
He shall see that the books, reports, statements and certificates
required by the statutes of Florida are properly kept, made and filed according
to law.
He shall exercise all the rights and privileges and perform all the
duties usually pertaining to the office of Chairman of a Corporation for profit.
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PRESIDENT
During the absence or inability of the Chairman to render and perform
his duties or to exercise his powers, the same shall be performed and exercised
by the President; and when so acting, he shall have all the powers and be
subject to all the responsibilities hereby given to or imposed upon the
Chairman.
SECRETARY
The Secretary shall keep the minutes of the meetings of the Board of
Directors and shareholders in an appropriate book or books.
He shall serve all notices of the Corporation.
He shall be a custodian of the records and of the seal, and affix the
latter when required.
He shall keep the stock book so as to show at all times the amount of
the outstanding capital stock, the manner and the time the same was paid in, and
the names and post office addresses of the owners thereof.
He shall, with the Chairman, sign all certificates of stock.
He shall perform all the duties usually incident to the office of
Secretary.
TREASURER
The Treasurer shall have the care and custody and be responsible for
all the funds and securities of the Corporation, and deposit all such funds in
the name of the Corporation in such bank or banks, or otherwise as the Board of
Directors may designate.
He shall keep, or cause to be kept at the office of the Corporation,
correct books of account of all of its business and transactions.
He shall do and perform all the duties pertaining to the office of
Treasurer.
Sec. 4. ALL VACANCIES - HOW FILLED. All vacancies in any office shall
be filled by the Board of Directors.
Sec. 5. COMPENSATION OF OFFICERS. The Board of Directors shall
determine the salary or compensation to be received by the officers.
Sec. 6. REMOVAL OF OFFICERS. The Board of Directors may remove any
officer by a majority vote at any time with or without cause.
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ARTICLE V.
SEAL
Sec. 1. SEAL. The seal of the Corporation shall be as follows:
ARTICLE VI.
CERTIFICATES OF STOCK
Sec. 1. DESCRIPTION OF STOCK CERTIFICATES. The certificates of stock
shall be numbered and registered in the order in which they are issued. They
shall be bound in a book and shall be issued in consecutive order therefrom, and
in the margin thereof shall be entered the name of the person owning the shares
therein represented, with the number of shares and the date thereof. Such
certificates shall exhibit the holder's name and number of shares. They shall be
signed by the Chairman or President and countersigned by the Secretary and
sealed with the seal of the Corporation.
Sec. 2. TRANSFER OF STOCK. The stock of the Corporation shall be
assigned and transferable on the books of the Corporation only by the person in
whose name it appears on said books or his legal representatives. In case of
transfer by attorney, the power of attorney duly executed and acknowledged,
shall be deposited with the Secretary. In all cases of transfer, the former
certificate must be surrounded and called before a new certificate may be
issued. No transfer shall be made upon the books of the Corporation within ten
days next preceding the annual meeting of the shareholders. Any taxes in
connection with the transfer of any such stock shall be paid by the transferor
or the transferee of said stock before said assignment and transfer shall be
made on the books of the Corporation.
ARTICLE VII.
DIVIDENDS
Sec. 1. WHEN DECLARED. The Board of Directors may from time to time
declare and the Corporation may pay dividends on its outstanding shareholders in
the manner and upon the terms and conditions provided by law and the articles of
incorporation.
ARTICLE VIII.
BILLS, NOTES, ETC.
Sec. 1. HOW MADE. All bills payable, notes, checks or other negotiable
instruments of the Corporation shall be made in the name of the Corporation, and
shall be signed by such officer
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or officers as the Board of Directors shall from time to time direct. No officer
or agent of the Corporation, either singly or jointly with others, shall have
the power to make any bill payable, note, check, draft or warrant or other
negotiable instrument, or endorse the same in the name of the Corporation or
contract or cause to be contracted any debt or liability in the name or on
behalf of the Corporation, except as herein expressly prescribed and provided.
ARTICLE IX.
AMENDMENTS
Sec. 1. HOW AMENDED. These By-laws may be altered, amended, repealed,
or added to by the affirmative vote of the stockholders representing a majority
of the outstanding capital stock at any meeting of the stockholders called for
such purposes or by informal action of the shareholders pursuant to Article 2,
Section 6 of these By-laws.
ARTICLE X.
INDEMNIFICATION
Sec. 1. ACTIONS NOT BY OR IN THE RIGHT OF THE COMPANY. This Corporation
shall indemnify any person who was or is a party to any proceeding (other than
an action by, or in the Corporation's right), by reason of the fact that he is
or was a director, officer, employee, or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another Corporation, partnership, joint venture, trust or other
enterprise, against liability incurred in connection with such proceeding,
including any appeal thereof, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Sec. 2. ACTIONS BY OR IN THE RIGHT OF THE COMPANY. The Corporation
shall indemnify any person who was or is a party to any proceeding by, or in the
Corporation's right, to procure a judgment in its favor because such person is
or was a corporate, director, officer, employee or agent or was serving at the
Corporation's request as a director, officer, employee or agent of another
Corporation, partnership, joint venture, trust or other enterprise, against
expenses and amounts paid in settlement which, in the Board of Directors'
judgment, do not exceed the estimated expense of litigating the proceeding to
conclusion. Such indemnification shall not exceed the amounts actually and
reasonably incurred in connection with the defense of such proceeding and any
appeal thereof. Such indemnification shall be authorized if such person acted in
good faith and in a manner he reasonably believe to be in, or not opposed to,
the best interests of the Corporation, except that no indemnification shall be
made under this Section 2 in respect of any claim, issue, or matter as to which
such person shall have been adjudged to be liable unless, and only to the extent
that, the court in which such proceeding was brought or any other court of
competent jurisdiction, shall determine upon application that, despite the
adjudication of liability but in view of all circumstances of the case, such
person be fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
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Sec. 3. INDEMNIFICATION WHERE OFFICER OR DIRECTOR SUCCESSFULLY DEFENDS
ACTIONS. To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in defense of any
proceeding referred to in Section 1 or Section 2, or in defense of any claim,
issue, or matter therein, he shall be indemnified against expenses (including,
but not limited to, attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Sec. 4. STANDARDS REQUIRED PRIOR TO INDEMNIFICATION. Except as provided
in Section 3 hereof and except as may be ordered by a court, any indemnification
under Section 1 or Section 2, shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
has met the applicable standard of conduct as set forth in Section 1 or Section
2. Such determination shall be made:
(a) By the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, event if
obtainable, by a majority vote of a committee duly designated by the
Board of Directors (in which directors who are parties may participate)
consisting solely of two or more directors not at the time parties to
the proceeding;
(c) The independent legal counsel;
1. Selected by the Board of Directors prescribed in
paragraph (a) or the committee prescribed in paragraph (b); or
2. If a quorum of the directors cannot be obtained
for subparagraph (1) and the committee cannot be designated
under paragraph (b), selected by majority vote of the full
Board of Directors (in which directors who are parties may
participate); or
(d) By the shareholders by a majority vote of a quorum
consisting of shareholders who were not parties to such proceeding or,
if no such quorum is obtainable by a majority vote of shareholders who
were not parties to such proceeding.
Sec. 5. EVALUATION OF EXPENSE REASONABLENESS AND INDEMNIFICATION
AUTHORIZATION. Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of permissibility
is made by independent legal counsel, persons specified by Section (4)(c) shall
evaluate the reasonableness of expenses and may authorize indemnification.
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Sec. 6. ADVANCE OF EXPENSES. Expenses incurred by an officer or
director in defending a civil or criminal proceeding may be paid by the
Corporation in advance of the final disposition of such proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if he is ultimately found not to be entitled to indemnification by the
Corporation pursuant to this article. Expenses incurred by other employees and
agents may be paid in advance upon such terms and conditions that the Board of
Directors deems appropriate.
Sec. 7. CONTINUATION OF INDEMNIFICATION. These indemnification
provisions shall continue in effect (unless otherwise provided when authorized
or ratified for persons who have ceased to be a director, officer, employee or
agent and shall additionally apply for the benefit of the heirs, executors and
administrators of such persons (unless otherwise provided when authorized or
ratified).
Sec. 8. INSURANCE. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this section.
Sec. 9. NON-EXCLUSIVITY. The indemnification and advancement of
expenses provided pursuant to this article are not exclusive and the Corporation
may make any other or further indemnification or advancement of expenses of any
of its directors, officers, employees or agents, under any bylaw, agreement,
vote of shareholders or disinterested directors, or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office.
Sec. 10. NOTICE TO SHAREHOLDERS. If any expenses or other amounts are
paid by way of indemnification otherwise than by court order or action by the
shareholders or by an insurance carrier pursuant to insurance maintained by the
Corporation, the Corporation shall, not later than the time of delivery to
shareholders of written notice of the next annual meeting of shareholders,
unless such meeting is held within three (3) months from the date of such
payment, and, in any even, within fifteen (15) months from the date of such
payment, deliver either personally or by mail to each shareholder of record at
the time entitled to vote for the election of directors, a statement specifying
the persons paid, the amounts paid, and the nature and status at the time of
such payment of the litigation or threatened litigation.
Sec. 11. PRECLUSION OF INDEMNIFICATION OR EXPENSE ADVANCEMENT.
Notwithstanding any other provision of this Article, indemnification or
advancement of expenses shall not be made to or on behalf of any director,
officer, employee or agent if a judgment or other final adjudication establishes
that his actions, or omissions to act, were material to the cause of action so
adjudicated and constitute:
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(a) A violation of the criminal law, unless the director,
officer, employee or agent had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was
unlawful;
(b) A transaction from which the director, officer, employee
or agent derived an improper personal benefit; or
(c) Willful misconduct or a conscious disregard for the best
interests of the Corporation in a proceeding by or in the right of the
Corporation to procure a judgment in its favor or in a proceeding by or
in the right of a shareholder.
Addison Steel, Inc.
By: /s/ E. C. Addison
--------------------------
E. C. Addison, Chairman of
the Board
Attest: /s/ T. M. Phagans
------------------------
T. M. Phagans, Secretary
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<PAGE> 1
EXHIBIT 3.9(a)
ARTICLES OF INCORPORATION
OF
QUINCY JOIST COMPANY
ARTICLE I
The name of the corporation shall be:
QUINCY JOIST COMPANY
ARTICLE II
This corporation shall have perpetual existence unless dissolved
according to law. These articles shall be effective January 1, 1991 pursuant to
Florida Statute 607.0203.
ARTICLE III
PURPOSE. The general nature and purpose of the corporation and the
purposes proposed to be transacted, promoted and carried out are as follows:
1. (a) To manufacture, but, sell, deal in, and deal with steel or iron,
or both, and all like or kindred products; to mine, manufacture, prepare for
market, market, and sell the same, and any articles or product in the
manufacture or composition of which metal is a factor, including the acquisition
by purchase, mining, manufacture or otherwise of all materials, supplies, and
other articles necessary or convenient for use in connection with and in
carrying on the business herein mentioned, or any part thereof.
(b) To acquire by purchase, lease or otherwise, lands and interests in
lands, and to own, hold improve, develop and manage any real estate so acquired,
and to erect, or cause to be erected, on any lands, owned, held or accepted by
the corporation, buildings or other structures, public or
<PAGE> 2
private, with appurtenances, and to manage, operate, lease, rent, rebuild,
enlarge, alter, or improve any buildings or other structures, now or hereafter
erected on any lands so owned, held or occupied and to encumber or dispose of
any lands, or interests in lands, and any buildings or other structure, at any
time owned or held by the corporation. To buy, sell, mortgage, exchange, lease,
hold for investment or otherwise, use and operate, real estate of all kinds,
improved or unimproved, and any right or interest therein.
(c) To acquire by purchase, lease, manufacture, or otherwise, any
personal property deemed necessary or useful in the equipment, furnishing,
improvement, development or management of any property, real or personal, at any
time owned, held or occupied by the corporation, and to invest, trade, and deal
in any personal property deemed beneficial to the corporation, and to lease,
rent, encumber or dispose of any personal property at any time owned or held by
the corporation.
(d) To contract debts and borrow money, issue and sell or pledge bonds,
debentures, notes, and other evidences of indebtedness, and to execute such
mortgages, transfers of corporate property, or other instruments to secure the
payment of corporate indebtedness as required.
(e) To purchase the corporate assets of any other corporation and to
engage in the same or other character of business.
(f) To guarantee, endorse, purchase, hold, sell, transfer, mortgage,
pledge or otherwise acquire or dispose of the shares of the capital stock of, or
any bonds, securities or other evidences of indebtedness created by any other
corporation of the State of Florida or any other state or government, and while
owner of such stock to exercise all the rights, powers, and privileges of
ownership, including the right to vote such stock.
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<PAGE> 3
(g) To enter into, make, perform, and carry out contracts and
agreements of every kind, for any lawful purpose without limit as to amount,
with any person, firm, association or corporation; and to transact any further
and other business necessarily connected with the purposes of this corporation
or calculated to facilitate the same.
(h) To enter into, or become a partner in any arrangement for the
sharing or profits, union of interest, or corporation, joint venture or
otherwise with any person, firm, or corporation to carry on any business or to
make any investment which this corporation has the direct or incidental
authority to engage in.
(i) To enter into, for the benefit of its employees, one or more of the
following: (i) pension plan, (ii) a profit sharing plan, (iii) a stock bonus
plan, (iv) a thrift and savings plan, (v) a stock option plan, (vi) other
retirement, death benefit or incentive compensation plan or plans.
(j) To carry on any or all of its operations and business, and to
promote its objects within the State of Florida or elsewhere, without
restriction as to place or amount; and to have, use, exercise and enjoy all of
the general powers of like corporations.
(k) To do any and all of the things herein set forth to the same extent
as natural persons might or could do, and in any part of the world as
principals, agents, contractors, partners or otherwise, alone, or in company
with others, and to do and perform all such other things and acts as may be
necessary, profitable, or expedient in carrying on any of the business or acts
above named.
2. In general to carry on any business not forbidden by the laws of the
State of Florida and with all the powers conferred upon corporations by the laws
of the State of Florida. Nothing herein shall be construed as giving the
corporation hereby organized any rights, powers or privileges not permitted to
it by the laws of the State of Florida.
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3. The intention is that none of the objects and powers as hereinabove
set forth, except where otherwise specified in this Article, shall be in anywise
limited or restricted by reference to or inference from the terms of any other
objects, powers and clauses of this Article or any other Articles; but that the
objects and powers specified in each of the clauses in the Article shall be
regarded as independent objects and powers.
ARTICLE IV
CAPITAL STOCK. The corporation is authorized to issue 1,000 shares of
capital stock at a par value of $0.01 per share. The same is to be designated as
"Common Shares."
ARTICLE V
PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF SHARES OF CAPITAL STOCK.
Section 1. Dividends.
The Directors may declare and pay dividends upon common shares of stock
at any meeting duly called for said purpose.
Section 2. Rights upon Liquidation or Dissolution.
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of this corporation, the holders of record of the outstanding
shares of common stock shall be entitled to be paid ratably, as their interests
appear of record upon the date of such liquidation, dissolution and winding up
of this corporation.
Section 3. Voting Rights.
Except as otherwise provided by law, the entire voting power for the
election of directors and for all other purposes shall be vested exclusively in
the holders of the outstanding common shares.
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<PAGE> 5
ARTICLE VI
PREEMPTIVE RIGHTS.
Every shareholder, upon the sale for cash of any new stock of this
corporation of the same kind, class or series as that which he already holds,
shall have the right to purchase his prorata share thereof (as nearly as may be
cone without issuance of fractional shares) at the price at which it is offered
to others.
ARTICLE VII
INITIAL REGISTERED OFFICE, AGENT AND PRINCIPAL OFFICE.
The street address of the initial registered office of the corporation
is 211 North Magnolia Avenue, Orlando, Florida 32801. The name of the initial
registered agent of the Service of Process is David A. Yergey, Jr., at 211 North
Magnolia Avenue, Orlando, Florida 32801. The principal office of the corporation
shall be at 520 South Virginia Street, Quincy, Florida 32351. The mailing
address of the corporation shall be P.O. Box 3629, Albany, Georgia 31708.
ARTICLE VIII
INITIAL BOARD OF DIRECTORS.
The corporation shall have three (3) Directors initially. The number of
Directors may be either increased or diminished from time to time by the Bylaws
of the corporation, but shall never be less than one (1). The name and address
of the initial Directors of this corporation are:
E. C. Addison 7351 Overland Road
Chairman of the Board Orlando, Florida 32810
Glen S. Davis 7351 Overland Road
President Orlando, Florida 32810
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<PAGE> 6
T. Michael Phagans 1920 Ledo Road
Secretary/Treasurer Albany, Georgia 31708
ARTICLE IX
INCORPORATORS
The names of the person signing these Articles are:
E. C. Addison Chairman of the Board
ARTICLE X
BYLAWS
The power to adopt, alter, amend or repeal Bylaws shall be vested in
the Board of Directors and the shareholders.
ARTICLE XI
Shares of capital stock of this corporation shall be issued initially
to the following corporation and in the amount set opposite their names:
Addison Steel, Inc., a Florida Corporation 1000 shares
Stock shall be issued and paid for in cash or by the transfer of real
or personal property of the same value. The same shall be issued under Section
1244 of the Internal Revenue Code, and shall be subject to the terms of that
Section.
ARTICLE XIII
CUMULATIVE VOTING.
Cumulative voting shall not be permitted.
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<PAGE> 7
ARTICLE XIII
CALLING OF SPECIAL MEETINGS.
Special meetings of shareholders may be called by a simple majority of
the outstanding shares of the outstanding stock of the corporation. Treasury
stock shall not be included in any such computation.
ARTICLE XIV
SHAREHOLDER QUORUM AND VOTING.
Fifty-one percent (51%) of the shares entitled to vote, represented in
person or by proxy, shall constitute a quorum at a meeting of stockholders.
If a quorum is present, the affirmative vote of 51% of the share
represented at the meeting and entitled to vote on the subject matter shall be
the act of the shareholders.
ARTICLE XV
GREATER VOTING REQUIRED FOR SHAREHOLDERS WITH RESPECT TO
BORROWING MONEY IN THE NAME OF THE CORPORATION.
The affirmative vote of 100% of the shares of the corporation entitled
to vote thereon shall be required for the authorization of the corporation to
borrow any funds of any kind from any institution or person, and a shareholders'
meeting is required. Any action of the shareholders of this corporation must be
taken at a meeting of shareholders of this corporation duly called as provided
by the Bylaws of the corporation.
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<PAGE> 8
ARTICLE XVI
POWERS.
This corporation shall have all of the corporate powers enumerated in
the Florida General Corporation Act unless specifically limited herein.
ARTICLE XVII
RESIDENCE AND COMPENSATION.
Directors of this corporation are not required to be residents of the
State of Florida.
The shareholders of this corporation shall have the exclusive authority
to fix the compensation of directors of this corporation.
ARTICLE XVIII
REMOVAL OF DIRECTORS.
The shareholders of this corporation shall be entitled to remove any
directors from office during his term upon the vote of not less than 51% of the
outstanding stock, unless in accord with these Bylaws the directors are reduced
to one.
ARTICLE XIX
DIRECTORS' QUORUM AND VOTING.
Two directors shall constitute a quorum for a meeting of directors,
unless in accord with these Bylaws, the directors are reduced to one.
If a quorum is present, the affirmative vote of two of the directors is
required to transact any business, and upon such affirmative vote any such
action so taken and any meeting so called shall be the act of the Board of
Directors.
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<PAGE> 9
ARTICLE XX
MEETING BY CONFERENCE TELEPHONE.
Members of the Board of Directors may participate in special meetings
of the Board of Directors by means of conference telephone by Bylaws, but
regular meetings of the Board of Directors must be attended in fact, in person,
by each director.
ARTICLE XXI
ACTION BY DIRECTORS WITHOUT A MEETING.
The directors of this corporation may take action by written consent as
provided by law, except the following actions must be taken up at a meeting of
directors:
(a) To purchase by the corporation any equipment or item of person or
real property that exceeds the sum of $1,000.
(b) The sale of any personal property or thing which exceeds the sum of
$1,000.
ARTICLE XXII
DIVIDENDS.
Dividends may be paid to shareholders only out of unreserved and
unrestricted earned surplus of the corporation. Dividends payable in shares of
stock may be paid to the holders of the shares of other stock in accord with the
preemptive rights hereinabove set forth in these Articles.
The corporation shall be permitted to file under Sub-Chapter S of the
Internal Revenue Code to be taxed thereunder if compliance with the Code
requirements are met by the corporation after proper vote.
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<PAGE> 10
ARTICLE XXIII
INDEMNIFICATION.
Corporation shall indemnity any officer, director or any former
officer, director to the full extent permitted by law.
ARTICLE XXIV
AMENDMENT.
This corporation reserves the right to amend or repeal any provisions
contained in these Articles of Incorporation, or any amendment thereto, and any
right conferred upon the shareholders is subject to his reservation.
IN WITNESS WHEREOF, the undersigned subscribers have executed these
Articles of Incorporation this 27th day of September, 1990.
/s/ E. C Addison (Seal)
---------------------
E. C. Addison
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<PAGE> 11
STATE OF GEORGIA
COUNTY OF DOUGHERTY
I HEREBY CERTIFY that on this 27th day of September, 1990, before me,
the undersigned authority, an officer duly authorized to administer oaths and
take acknowledgments, this day personally appeared E. C. Addison to me well
known and known to me to be the individual described in and who executed the
foregoing Articles of Incorporation, and he acknowledged before me that he
executed the above and foregoing Articles of Incorporation for the uses and
purposes therein expressed.
IN WITNESS WHEREOF, I have hereunto set my hand and seal at Albany,
Dougherty County, Georgia, the day and year aforesaid.
Notary Public
My Commission Expires:
Having been named to accept service of process for the above stated
corporation at the place designated in this document, I hereby accept to act in
this capacity and agree to comply with the provision of said Act relative to
keeping open said office.
/s/ David A. Yergey, Jr.
-------------------------
David A. Yergey, Jr.
Registered Agent
11
<PAGE> 1
EXHIBIT 3.9(b)
ARTICLES OF AMENDMENT TO THE ARTICLES
OF INCORPORATION
OF
QUINCY JOIST COMPANY
Pursuant to the provisions of Section 607.1001 of the Florida Business
Corporation Act the undersigned corporation adopts the following Articles of
Amendments to its Articles of Incorporation:
1. The name of the corporation is: Quincy Joist Company
2. The following amendments of the Articles of Incorporation were
adopted by the Board of Directors of the corporation on October 5, 1995, in the
manner prescribed by the Florida Business Corporation Act:
1.
RESOLVED, Article IV of the Articles of Incorporation is hereby amended
to read as follows:
CAPITAL STOCK. The corporation is authorized to issue 1,110
shares of capital stock at a par value of $0.01 per share. The same is
to be designated as "Common Shares".
2.
Articles XV of the Articles of Incorporation is hereby amended by
deleting Article XV in its entirety.
3.
Article XXI of the Articles of Incorporation is hereby amended by
deleting Article XXI in its entirety and replacing Article XXI with the
following:
The directors of this corporation may take action by written
consent as provided by law.
3. No other amendments were adopted.
4. One Thousand (1,000) shares of the corporation was outstanding at
the time of the adoption, and the number of shares entitled to vote thereon was
one thousand (1,000). No other group was entitled to vote on the amendment.
<PAGE> 2
5. The number of shares voted in favor of such amendment was one
thousand (1,000), and the number of shares voted against such amendment was zero
(0). The number of votes cast was sufficient for approval.
6. There shall be an additional 110 shares authorized and held as
treasury shares until issued by the corporation for any lawful purpose.
Date: October 6, 1995
QUINCY JOIST COMPANY
By: /s/ E. C. Addison
-------------------------------------
E. C. Addison, Chairman
By: /s/ T. Michael Phagans
-------------------------------------
T. Michael Phagans, Secretary
Sole Shareholder: ADDISON STEEL, INC.
By: /s/ E.C. Addison
-------------------------------------
E. C. Addison, Chairman
By: /s/ T. Michael Phagans
-------------------------------------
T. Michael Phagans, Secretary
(Corporate Seal)
STATE OF GEORGIA
COUNTY OF DOUGHERTY
The foregoing instrument was acknowledged before me this 6th day of
October, 1995, by E. C. ADDISON as Chairman of Quincy Joist Company, a Florida
corporation, on behalf of the corporation. He was personally known to me.
/s/ Kelly Dunn
---------------
Name: Kelly Dunn
----------
Notary Public
2
<PAGE> 1
Exhibit 3.10
BYLAWS
OF
QUINCY JOIST COMPANY
The original corporate records have been misplaced. The
following Bylaws are Adopted as of the date of incorporation to replace
the lost Bylaws.
ARTICLE I - OFFICES
The office of the corporation shall be located in the City, County and
State designated in the Certificate of Incorporation. The corporation may also
maintain offices at such other places within or without the United States as the
Board of Directors may, from time to time, determine.
ARTICLE II - MEETING OF SHAREHOLDERS
Section 1 - Annual Meetings:
The annual meeting of the shareholders of the corporation shall be held
within five (5) months after the close of the fiscal year of the corporation for
the purpose of electing directors and transacting such other business as may
properly come before the meeting.
Section 2 - Special Meetings:
Special meetings of the shareholders may be called at any time by the
Board of Directors or by the President, and shall be called by the President or
the Secretary at the written request of the holders of twenty-five percent (25%)
of the shares then outstanding and entitled to vote thereat, or as otherwise
required by law.
Section 3 - Place of Meetings:
All meetings of shareholders shall be held at the principal office of
the corporation or at such other places as shall be designated in the notices or
waivers of notice of such meetings.
Section 4 - Notice of Meetings:
(a) Except as otherwise provided by statute, written notice of each
meeting of shareholders, whether annual or special, stating the time when and
place where it is to be held, shall be served either personally or by mail, not
less than ten (10) or more than fifty (50) days before the meeting, upon each
shareholder of record entitled to vote at such meeting, and to any other
<PAGE> 2
shareholder to whom the giving of notice may be required by law. Notice of a
special meeting shall also state the purpose or purposes for which the meeting
is called, and shall indicate that it is being issued by, or at the direction
of, the person or persons calling the meeting. If, at any meeting, action is
proposed to be taken that would, if taken, entitle shareholders to receive
payment for their shares pursuant to statute, the notice of such meeting shall
include a statement of that purpose and to that effect. If mailed, such notice
shall be directed to each such shareholder at his address, as it appears on the
records of the shareholders of the corporation, unless he shall have previously
filed with the Secretary of the corporation a written request that notices
intended for him to be mailed to some other address, in which case, it shall be
mailed to the address designated in such request.
(b) Notice of any meeting need not be given to any person who may
become a shareholder of record after the mailing of such notice and prior to the
meeting, or to any shareholder who attends such meeting, in person or by proxy,
or to any shareholder who, in person or by proxy, submits a signed waiver of
notice either before or after such meeting. Notice of any adjourned meeting of
shareholders need not be given, unless otherwise required by statute.
Section 5 - Quorum:
(a) Except as otherwise provided herein, or by statute, or in the
Certificate of Incorporation (such Certificate and any Amendments thereof being
hereinafter collectively referred to as the "Certificate of Incorporation"), at
all meetings of shareholders of the corporation, the presence at the
commencement of such meetings in person or by proxy of shareholders holding of
record a majority of the total number of shares of the corporation then issued
and outstanding and entitled to vote, shall be necessary and sufficient to
constitute a quorum for the transaction of any business. The withdrawal of any
shareholder after the commencement of a meeting shall have no effect on the
existence of a quorum, after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares entitled to vote thereon, may adjourn the meeting. At any such
adjourned meeting at which a quorum is present, any business may be transacted
at the meeting as originally called if a quorum had been present.
Section 6 - Voting:
(a) Except as otherwise provided by statute or by the Certificate of
Incorporation, any corporate action, other than the election of directors, to be
taken by vote of the shareholders, shall be authorized by a majority of votes
cast at a meeting of shareholders by the holders of shares entitled to vote
thereon.
(b) Except as otherwise provided by statute or by the Certificate of
Incorporation, at each meeting of shareholders, each holder of record of stock
of the corporation entitled to vote thereat, shall be entitled to one (1) vote
for each share of stock registered in his name on the books of the corporation.
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<PAGE> 3
(c) Each shareholder entitled to vote or to express consent or dissent
without a meeting, may do so by proxy; provided, however, that the instrument
authorizing such proxy to act shall have been executed in writing by the
shareholder himself, or by his attorney in fact thereunto duly authorized in
writing. No proxy shall be valid after the expiration of eleven (11) months from
the date of its execution, unless the person executing it shall have specified
therein the length of time it is to continue in force. Such instrument shall be
exhibited to the Secretary at the meeting and shall be filed with the records of
the corporation.
(d) Any resolution in writing, signed by all of the shareholders
entitled to vote thereon, shall be and constitute action by such shareholders to
the effect therein expressed, with the same force and effect as if the same had
been duly passed by unanimous vote at a duly called meeting of shareholders and
such resolution so signed shall be inserted in the minute book of the
corporation under its proper date.
ARTICLE III - BOARD OF DIRECTORS
Section 1 - Number, Election and Term of Office:
(a) The number of directors of the corporation shall be not less than
three (3), unless all of the outstanding shares are owned beneficially and of
record by less than three (3) shareholders, in which event the number of
directors shall not be less than the number of shareholders permitted by
statute.
(b) Except as may otherwise be provided herein or in the Certificates
of Incorporation, the members of the Board of Directors of the corporation who
need not be shareholders shall be elected by majority of the votes cast at a
meeting of shareholders, by the holders of shares, present in person or by
proxy, entitled to vote in the election.
(c) Each director shall hold office until the annual meeting of the
shareholders next succeeding his election, and until his successor is elected
and qualified, or until his prior death, resignation or removal.
Section 2 - Duties and Powers:
(a) A regular annual meeting of the Board of Directors shall be held
immediately following the annual meeting of the shareholders, at the place of
such annual meeting of shareholders.
(b) The Board of Directors, from time to time, may provide by
resolution for the holding of other regular meetings of the Board of Directors,
and may fix the time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall not
be required to be given and, if given, need not specify the purpose of the
meeting; provided, however, that in case the
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Board of Directors shall fix or change the time or place of any regular meeting,
notice of such action shall be given to each director who shall not have been
present at the meeting at which such action was taken within the time limit, and
in the manner set forth in paragraph (b) of Section 4 of this Article III, with
respect to special meetings, unless such notice shall be waived in the manner
set forth in paragraph (c) of such Section 4.
Section 3 - Special Meetings; Notice:
(a) Special meetings of the Board of Directors shall be held whenever
called by the President or by one of the Directors, at such time and place as
may be specified in the respective notices or waivers of notice thereof.
(b) Except as otherwise required by statute, notice of special meetings
shall be mailed directly to each director, addressed to him at his residence or
usual place of business, at least two (2) days before the day on which the
meeting is to be held, or shall be sent to him at such place by telegram, radio
or cable, or shall be delivered to him personally or given to him orally, not
later than the day before the day on which the meeting is to be held. A notice,
or waiver of notice, except as required by Section 8 of this Article III, need
not specify the purpose of the meeting.
(c) Notice of any special meeting shall not be required to be given to
any director who shall attend such meeting without protesting prior thereto or
at its commencement, the lack of notice to him, or who submits a signed waiver
of notice, whether before or after the meeting. Notice of any adjourned meeting
shall not be required to be given.
Section 4- Chairman:
At all meetings of the Board of Directors, the Chairman of the Board,
if any and if present, shall preside. If there shall be no Chairman, or he shall
be absent, then the President shall preside, and in his absence, a Chairman
chosen by the directors shall preside.
Section 5 - Quorum and Adjournments:
(a) At all meetings of the Board of Directors, the presence of a
majority of the entire Board shall be necessary and sufficient to constitute a
quorum for the transaction of business, except as otherwise provided by law, by
the Certificate of Incorporation, or by these Bylaws.
(b) A majority of the directors present at the time and place of any
regular or special meeting, although less than a quorum, may adjourn the same
from time to time without notice, until a quorum shall be present.
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Section 6 - Manner of Acting:
(a) At all meetings of the Board of Directors, each director present
shall have one (1) vote, irrespective of the number of shares of stock, if any,
which he may hold.
(b) Except as otherwise provided by statute, by the Certificate of
Incorporation, or by these Bylaws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors. Any action authorized, in writing, by all of the directors
entitled to vote thereon and filed with the minutes of the corporation shall be
the act of the Board of Directors with the same force and effect as if the same
had been passed by unanimous vote at a duly called meeting of the Board.
Section 7 - Vacancies:
Any vacancy in the Board of Directors occurring by reason of an
increase in the number of directors, or by reason of the death, resignation,
disqualification, removal (unless a vacancy created by the removal of a director
by the shareholders shall be filled by the shareholders at the meeting at which
the removal was effected) or inability to act of any director, or otherwise,
shall be filled for the unexpired portion of the term by a majority vote of the
remaining directors, though less than a quorum, at any regular meeting or
special meeting of the Board of Directors called for that purpose.
Section 8 - Resignation:
Any director may resign at any time by giving written notice to the
Board of Directors, the President or the Secretary of the corporation. Unless
otherwise specified in such written notice, such resignation shall take effect
upon receipt thereof, by the Board of Directors or such officer, and the
acceptance of such resignation shall not be necessary to make it effective.
Section 9 - Removal:
Any director may be removed with or without cause at any time by the
affirmative vote of shareholders holding of record in the aggregate at least a
majority of the outstanding shares of the corporation at a special meeting of
the shareholders called for that purpose, and may be removed for cause by action
of the Board.
Section 10 - Salary:
No stated salary shall be paid to directors as such for their services,
but by resolution of the Board of Directors, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board; provided, however, that nothing herein contained shall be
construed to preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
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Section 11 - Contracts:
(a) No contract or other transaction between this corporation and any
other corporation shall be impaired, affected or invalidated, nor shall any
director be liable in any way by reason of the fact that any one or more of the
directors of this corporation is or are interested in, or is a director or
officer, or are directors or officers of such other corporation, provided that
such facts are disclosed or made known to the Board of Directors.
(b) Any director, personally and individually, may be a party to or may
be interested in any contract or transaction of this corporation, and no
director shall be liable in any way by reason of such interest, provided that
the fact of such interest be disclosed or made known to the Board of Directors,
and provided that the Board of Directors shall authorize, approve or ratify such
contract or transaction by the vote (not counting the vote of any such director)
of a majority of a quorum, notwithstanding the presence of any such director at
the meeting at which such action is taken. Such director or directors may be
counted in determining the presence of a quorum at such meeting. This section
shall not be construed to impair or invalidate or in any way affect any contract
or other transaction which would otherwise be valid under the law (common,
statutory or otherwise) applicable thereto.
Section 12 - Committees:
The Board of Directors, by resolution adopted by a majority of the
entire Board, may from time to time designate from among its members an
executive committee and such other committees, and alternate members thereof, as
they may deem desirable, each consisting of three (3) or more members, with such
powers and authority (to the extent permitted by law) as may be provided in such
resolution. Each such committee shall serve at the pleasure of the Board.
ARTICLE IV - OFFICERS
Section 1 - Number Qualifications, Election and Term of Office:
(a) The officers of the corporation shall consist of a President, a
Secretary, a Treasurer, and such other officers including a Chairman of the
Board of Directors, and one (1) or more Vice-Presidents, as the Board of
Directors may from time to time, deem advisable. Any officer other than the
Chairman of the Board of Directors may be, but is not required to be, a director
of the corporation. Any two (2) or more offices may be held by the same person.
(b) The officers of the corporation shall be elected by the Board of
Directors at the regular annual meeting of the Board following the annual
meeting of shareholders.
(c) Each officer shall hold office until the annual meeting of the
Board of Directors next succeeding his election, and until his successor shall
have been elected and qualified, or until his death, resignation or removal.
6
<PAGE> 7
Section 2 - Resignation:
Any officer may resign at any time by giving written notice of such
resignation to the Board of Directors, or to the President or the Secretary of
the corporation. Unless otherwise specified in such written notice, such
resignation shall take effect upon receipt thereof by the Board of Directors or
by such officer, and the acceptance of such resignation shall not be necessary
to make it effective.
Section 3 - Removal:
Any officer may be removed, either with or without cause, and a
successor elected by a majority vote of the Board of Directors at any time.
Section 4 - Vacancies:
A vacancy in any office by reason of death, resignation, inability to
act, disqualification, or any other cause, may at any time be filled for the
unexpired portion of the tem by a majority vote of the Board of Directors.
Section 5 - Duties of Officers:
Officers of the corporation shall, unless otherwise provided by the
Board of Directors, each have such powers and duties as generally pertain to
their respective offices as well as such powers and duties as may be set forth
in these Bylaws, or may from time to time be specifically conferred or imposed
by the Board of Directors. The President shall be the chief executive officer of
the corporation.
Section 6 - Sureties and Bonds:
In case the Board of Directors shall so require, any officer, employee
or agent of the corporation shall execute to the corporation a bond in such sum,
and with such surety or sureties as the Board of Directors may direct,
conditioned upon the faithful performance of his duties to the corporation,
including responsibility for negligence and for the accounting for all property,
funds or securities of the corporation which may come into his hands.
Section 7 - Shares of Other Corporations:
Whenever the corporation is the holder of shares of any other
corporation, any right or power of the corporation as such shareholder
(including the attendance, acting and voting at shareholders' meetings and
execution of waivers, consents, proxies or other instruments) may be exercised
on behalf of the corporation by the President, any Vice-President, or such other
person as the Board of Directors may authorize.
7
<PAGE> 8
ARTICLE V - SHARES OF STOCK
Section 1 - Certificate of Stock:
(a) The certificates representing shares of the corporation shall be in
such form as shall be adopted by the Board of Directors, and shall be numbered
and registered in the order issued. They shall bear the holder's name and the
number of shares, and shall be signed by (i) the Chairman of the Board or the
President or the Vice-President, and (ii) the Secretary or Treasurer, or any
Assistant Secretary or Assistant Treasurer, and shall bear the corporate seal.
(b) No certificate representing shares shall be issued until the full
amount of consideration therefor has been paid, except as otherwise permitted by
law.
(c) To the extent permitted by law, the Board of Directors may
authorize the issuance of certificates for fractions of a share which shall
entitle the holder to exercise voting rights, receive dividends and participate
in liquidating distributions, in proportion to the fractional holdings; or it
may authorize the payment in cash of the fair value of fractions of a share as
of the time when those entitled to receive such fraction are determined; or ir
may authorize the issuance, subject to such conditions as may be permitted by
law, of scrip in registered or bearer form over the signature of an officer or
agent of the corporation, exchangeable as therein provided for full shares, but
such scrip shall not entitle the holder to any rights of a shareholder, except
as therein provided.
Section 2 - Lost or Destroyed Certificates:
The holder of any certificate representing shares of the corporation
shall immediately notify the corporation of any loss or destruction of the
certificate representing the same. The corporation may issue a new certificate
in the place of any certificate theretofore issued by it, alleged to have been
lost or destroyed. On production of such evidence of loss or destruction as the
Board of Directors in its discretion may require, the Board of Directors may, in
its discretion, require the owner of the lost or destroyed certificate, or his
legal representatives, to give the corporation a bond in such sum as the Board
may direct, and with such surety or sureties as may be satisfactory to the
Board, to indemnify the corporation against any claims, loss, liability or
damage it may suffer on account of the issuance of the new certificate. A new
certificate may be issued without requiring any such evidence or bond, when in
the judgment of the Board of Directors it is proper so to do.
Section 3 - Transfers of Shares:
(a) Transfers of shares of the corporation shall be made on the share
records of the corporation only by the holder of record thereof, in person or by
his duly authorized attorney, upon surrender for cancellation of the certificate
or certificates representing such shares, with an assignment or power of
transfer endorsed thereon or delivered therewith, duly executed, with such proof
of the authenticity or the signature and of authority to transfer and of payment
of transfer taxes as the corporation or its agents may require.
8
<PAGE> 9
(b) The corporation shall be entitled to treat the holder of record of
any share or shares as the absolute owner thereof for all purposes and,
accordingly, shall not be bound to recognize any legal, equitable or other claim
to, or interest in, such share or shares on the part of any other person,
whether or nor it shall have express or other notice thereof, except as
otherwise expressly provided by law.
Section 4 - Record Date:
In lieu of closing the share records of the corporation, the Board of
Directors may fix, in advance, a date not exceeding fifty (50) days, nor less
than ten (10) days, as the record date for the determination of shareholders
entitled to receive notice of, or to vote at, any meeting of shareholders, or to
consent to any proposal without a meeting, or for the purpose of determining
shareholders entitled to receive payment of any dividends, or allotment of any
rights, or for the purpose of any other action. If no record date is fixed, the
record date for the determination of shareholders entitled to notice of or to
vote at a meeting of shareholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if no notice is given, the
day on which the meeting is held; the record date for determining shareholders
for any other purpose shall be at the close of business on the day on which the
resolution of the directors relating thereto is adopted. When a determination of
shareholders of record entitled to notice or to vote at any meeting of
shareholders has been made as provided for herein, such determination shall
apply to any adjournment thereof, unless the directors fix a new record date for
the adjourned meeting.
ARTICLE VI - DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of
any funds available therefor, as often, in such amounts, and at such time or
times as the Board of Directors may determine.
ARTICLE VII - FISCAL YEAR
The fiscal year of the corporation shall be fixed by the Board of
Directors from time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be approved
from time to time by the Board of Directors.
9
<PAGE> 10
ARTICLE IX - AMENDMENTS
Section 1 - By Shareholders:
All bylaws of the corporation shall be subject to alteration or repeal,
and new bylaws may be made, by the affirmative vote of shareholders holding of
record in the aggregate at least a majority of the outstanding shares entitled
to vote in the election of directors at any annual or special meeting of
shareholders, provided that the notice or waiver of notice of such meeting,
shall have summarized or set forth in full therein, the proposed amendment.
Section 2 - By Directors:
The Board of Directors shall have power to make, adopt, alter, amend
and repeal, from time to time, the bylaws of the corporation; provided, however,
that the shareholders entitled to vote with respect thereto as in this Article
IX above provided may alter, amend or repeal bylaws made by the Board of
Directors, except that the Board of Directors shall have no power to change the
quorum for meetings of shareholders or of the Board of Directors, or to change
any provisions of the bylaws with respect to the removal of directors or the
filling of vacancies in the Board resulting from the removal by the
Shareholders. If any bylaw regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall be set forth
in the notice of the next meeting of shareholders for the election of directors,
the bylaw so adopted, amended or repealed, together with a concise statement of
the changes made.
ARTICLE X - INDEMNITY
(a) Any person made a party to an action, suit or proceeding, by reason
of the fact that he, his testator or intestate representative is or was a
director, officer or employee of the corporation, or of any corporation in which
he served as such at the request of the corporation, shall be indemnified by the
corporation against the reasonable expenses, including attorney's fees, actually
and necessarily incurred by him in connection with the defense of such action,
suit or proceedings, or in connection with any appeal therein, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding, or in connection with any appeal therein that such officer, director
or employee is liable for negligence or misconduct in the performance of his
duties.
(b) The foregoing right of indemnification shall not be deemed
exclusive of any other rights to which any officer or director or employee may
be entitled apart from the provisions of this section.
(c) The amount of indemnity to which any officer or any director may be
entitled shall be fixed by the Board of Directors, except that in any case where
there is no disinterested majority of the Board available, the amount shall be
fixed by arbitration pursuant to the then existing rules of the American
Arbitration Association.
10
<PAGE> 11
ARTICLE XI - CERTIFICATE OF CORPORATION AND SHAREHOLDERS AGREEMENT
Notwithstanding anything to the contrary, the provisions of the
Certificate of Incorporation and a Shareholders Agreement shall supersede any
conflicting provisions of these Bylaws and are hereby incorporated by reference
as part of these Bylaws.
ARTICLE XII - REIMBURSEMENT OF DISALLOWED EXPENSES
Any payments made to an Officer or Director of the Corporation such as
salary, commission, bonus, fees, interest, rent or entertainment expense
incurred by him, which shall be disallowed in whole or in part as a deductible
expense by the Internal Revenue Service, shall be reimbursed by such Officer of
the Corporation to the full extent of such disallowance. lt shall be the duty of
the Directors, as a Board, to enforce payment of each amount disallowed. In lieu
of payment by the Officer, subject to the determination of the Directors,
proportionate amounts may be withheld from his future compensation payments
until the amount owed to the Corporation has been recovered.
IN WITNESS WHEREOF, the President of the corporation hereby executes
these Bylaws and certifies that these Bylaws are adopted by the corporation, as
of the 27th day of September, 1990 to replace the original Bylaws which have
been misplaced.
QUINCY JOIST COMPANY
By: /s/ E. C. Addison
--------------------------
E. C. ADDISON, Chairman
11
<PAGE> 1
Exhibit 5.1
June 26, 1998
Schuff Steel Company
420 South 19th Avenue
Phoenix, Arizona 85069
B & K Steel Fabrications, Inc.
420 South 19th Avenue
Phoenix, Arizona 85069
Addison Structural Services, Inc.
1920 Lado Road
Albany, Georgia 31706
Addison Steel, Inc.
7351 Overland Road
Lockhart, Florida 32810
Quincy Joist Company
520 South Virginia Street
Quincy, Florida 32353-0520
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4, including
amendments and exhibits thereto (the "Registration Statement"), for the proposed
offer to exchange (the "Exchange Offer") by Schuff Steel Company (the "Company")
and B & K Steel Fabrications, Inc., Addison Structural Services, Inc., Addison
Steel, Inc., and Quincy Joist Company (collectively, the "Guarantors"), of up to
an aggregate of $100 million in principal amount of its 10 1/2% Senior Notes due
2008 ("Exchange Notes") for an equal principal amount of its outstanding 10 1/2%
Senior Notes due 2008 ("Outstanding Notes") and the guarantees by the Guarantors
of the Exchange Notes. The Outstanding Notes were issued, and the Exchange Notes
are issuable, pursuant to an Indenture, dated June 4, 1998, by and among the
Company, the Guarantors and Harris Trust Company of California, as Trustee (the
"Indenture").
Based on the foregoing, we are of the opinion that:
1. The Exchange Notes, when executed by the Company and
authenticated by the Trustee in accordance with the provisions of the Indenture,
and when issued in exchange for Outstanding Notes as contemplated in the
Registration Statement, will constitute valid and binding obligations of the
Company and will be entitled to the benefits of the Indenture.
<PAGE> 2
June 26, 1998
Page 2
2. The guarantees by the Guarantors of the Exchange Notes,
when executed by the Guarantors in accordance with the provisions of the
Indenture and when issued as contemplated in the Registration Statement, will
constitute valid and binding obligations of the Guarantors, respectively, and
will be entitled to the benefits of the Indenture.
In rendering this opinion, we have reviewed and relied upon the
Indenture, the Outstanding Notes, the form of Exchange Notes and such documents,
records, and other instruments of the Company and the Guarantors as we have
deemed necessary and have assumed the following:
(i) the opinions expressed herein are subject to and may be
limited by (a) applicable bankruptcy, insolvency, liquidation, fraudulent
transfer, moratorium, reorganization, or other similar laws affecting creditors'
rights generally; (b) rights of acceleration and general equitable principles
and rules of law governing specific performance, estoppel, waiver, injunctive
relief, and other equitable remedies (regardless of whether enforcement is
sought in a proceeding at law or in equity), and the discretion of any court
before which a proceeding may be brought; (c) duties and standards of good
faith, reasonableness and fair dealing imposed on creditors and parties to
contracts; (d) the limitation in certain circumstances of provisions imposing
penalties, forfeitures, late payment charges or an increase in interest rate
upon delinquency in payment or the occurrence of a default; and (e) a court
determination that any fees payable pursuant to a provision requiring the
payment of attorneys' fees is reasonable;
(ii) the genuineness of the signatures and the authenticity of
documents submitted to us as originals, and the conformity to originals of all
documents submitted to us as certified or photostatic copies;
(iii) the accuracy, completeness, and genuineness of all
representations and certifications, with respect to factual matters, made to or
obtained by us, by officers of the Company, the Guarantors and public officials;
and
(iv) the accuracy and completeness of records of the Company
and the Guarantors.
The opinions expressed herein are limited solely to the laws
of the State of Arizona, the General Corporation Law of the State of Delaware
and the laws of the United States of America. We express no opinion on the law
of any other jurisdiction or principles of conflicts of law and can assume no
responsibility for the applicability or effect of any such laws or principles.
<PAGE> 3
June 26, 1998
Page 3
The opinions expressed herein are limited to the matters
stated herein and no opinion is implied or may be inferred beyond the matters
expressly stated. Without limiting the foregoing, the opinions expressed in this
letter are based upon the law and facts as we understand them in effect on the
date hereof, and we assume no obligation to revise or supplement this opinion
should such law be changed by legislative action, judicial decision, or
otherwise, or should any facts or other matters upon which we have relied be
changed.
We hereby consent to the filing or the opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement.
Very truly yours,
/s/ Snell & Wilmer L.L.P.
<PAGE> 1
EXHIBIT 21.1
SCHUFF STEEL COMPANY
LIST OF SUBSIDIARIES
NAME OF ENTITY JURISDICTION OR ORGANIZATION
1. B&K Fabrications, Inc. Arizona
2. Addison Structural Services, Inc. Florida
3. Addison Steel, Inc. Florida
4. Quincy Joist Company Florida
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 20, 1998, except for Note 16 as to which the
date is March 18, 1998 in the Registration Statement (Form S-4) and related
Prospectus of Schuff Steel Company for the registration of $100,000,000 of
10-1/2% Senior Notes due 2008.
/s/ ERNST & YOUNG LLP
Phoenix Arizona
June 30, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF MAULDIN & JENKINS, LLC, INDEPENDENT AUDITORS
We hereby consent to the use in this Registration Statement on Form S-4 of our
report dated August 5, 1997, except for Note 10 as to which the date is March
18, 1998, relating to the consolidated financial statements of Addison
Structural Services, Inc. and Subsidiaries as of June 30, 1997 and for each of
the years in the three year period ended June 30, 1997. We also consent to the
reference of our Firm under the caption "Experts" in the Prospectus.
/s/ MAULDIN & JENKINS, LLC
Albany, Georgia
June 29, 1998
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10 1/2% SENIOR NOTES DUE 2008
OF
SCHUFF STEEL COMPANY
PURSUANT TO
PROSPECTUS DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1998, UNLESS EXTENDED. TENDERS OF 10 1/2% SENIOR NOTES DUE 2008
MAY ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND
HEREIN.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
By Hand before 4:30 P.M.: By Facsimile:
</TABLE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING NOTES TENDERED
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL PRINCIPAL
AMOUNT OF
TOTAL PRINCIPAL OUTSTANDING
AMOUNT REPRESENTED NOTES TENDERED
NAME(S) AND ADDRESS(ES) OF HOLDER(S) BY CERTIFICATE(S) (MUST BE IN INTEGRAL
(PLEASE FILL IN, IF BLANK, EXACTLY AS (IF ENCLOSING MULTIPLES OF
NAME(S) APPEAR(S) ON OUTSTANDING NOTES) CERTIFICATE NUMBER(S) CERTIFICATES) $1,000)(A)
- ---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total
- ---------------------------------------------------------------------------------------------------------------------------------
(a) Unless indicated in the column labeled "Total Principal Amount of Outstanding Notes Tendered," any tendering Holder of
Outstanding Notes will be deemed to have tendered the entire aggregate principal amount represented by the column labeled
"Total Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and principal amounts on a separate signed schedule
and affix the list to this Letter of Transmittal.
The minimum permitted is $1,000 in principal amount of Outstanding Notes. All other tenders must be integral multiples of
$1,000.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE PROSPECTUS, DATED
1998 (THE "PROSPECTUS"), OF SCHUFF STEEL COMPANY, A DELAWARE CORPORATION (THE
"COMPANY"), RELATING TO THE OFFER (THE "EXCHANGE OFFER") OF THE COMPANY, UPON
THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THE PROSPECTUS AND HEREIN
AND THE INSTRUCTIONS HERETO, TO EXCHANGE $1,000 PRINCIPAL AMOUNT OF ITS 10 1/2%
SENIOR NOTES DUE 2008 (THE "EXCHANGE NOTES") FOR EACH $1,000 PRINCIPAL AMOUNT OF
ITS OUTSTANDING 10 1/2% SENIOR NOTES DUE 2008 (THE "OUTSTANDING NOTES"), OF
WHICH $100 MILLION AGGREGATE PRINCIPAL AMOUNT IS OUTSTANDING. THE MINIMUM
PERMITTED TENDER IS $1,000 PRINCIPAL AMOUNT OF OUTSTANDING NOTES, AND ALL OTHER
TENDERS MUST BE IN INTEGRAL MULTIPLES OF $1,000.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION BY
FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998 (the "Expiration Date"), unless extended.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES PURSUANT TO THE
EXCHANGE OFFER MUST VALIDLY TENDER THEIR OUTSTANDING NOTES TO THE EXCHANGE AGENT
PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.
This Letter of Transmittal should be used only to exchange the Outstanding
Notes, pursuant to the Exchange Offer as set forth in the Prospectus.
This Letter of Transmittal is to be used (a) if Outstanding Notes are to be
physically delivered to the Exchange Agent or (b) if delivery of Outstanding
Notes is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company ("DTC" or the "Book-Entry
Transfer Facility") pursuant to the procedures set forth in the Prospectus under
the caption "The Exchange Offer -- Procedures for Tendering." Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
Holders whose Outstanding Notes are not available or who cannot deliver
their Outstanding Notes and all other documents required hereby to the Exchange
Agent by 5:00 p.m. on the Expiration Date nevertheless may tender their
Outstanding Notes in accordance with the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures." See Instruction 1.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF
OUTSTANDING NOTES FOR EXCHANGE BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY
JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT
BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
All capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Prospectus.
HOLDERS WHO WISH TO EXCHANGE THEIR OUTSTANDING NOTES MUST COMPLETE ALL THE
COLUMNS IN THE BOX ENTITLED "DESCRIPTION OF OUTSTANDING NOTES TENDERED" ON THE
PRIOR PAGE, COMPLETE THE BOX BELOW ENTITLED "METHOD OF DELIVERY" AND SIGN WHERE
INDICATED BELOW.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OUTSTANDING
NOTES TENDERED" AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE
TENDERED THE OUTSTANDING NOTES AND MADE CERTAIN REPRESENTATIONS DESCRIBED IN THE
PROSPECTUS AND HEREIN.
2
<PAGE> 3
METHOD OF DELIVERY
[ ] CHECK HERE IF CERTIFICATES FOR TENDERED OUTSTANDING NOTES ARE ENCLOSED
HEREWITH.
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: __________________________________________
Account Number: ________________ Transaction Code Number: _____________
______________________________________________________________________________
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING (SEE INSTRUCTIONS 1 AND 4):
Name(s) of Registered Holder(s):
_____________________________________________________________
Window Ticket Number (if any):
_____________________________________________________________
Date of Execution of Notice of Guaranteed Delivery:
___________________________________________________
Name of Eligible Institution which Guaranteed Delivery:
_______________________________________________________
IF DELIVERED BY THE BOOK-ENTRY TRANSFER FACILITY, PROVIDE THE FOLLOWING
INFORMATION:
[ ] The Depository Trust Company
Account Number: _______________ Transaction Code Number: ______________
______________________________________________________________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE TEN ADDITIONAL
COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _________________________________________________________________________
Address: ______________________________________________________________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
3
<PAGE> 4
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Outstanding
Notes indicated in the box entitled "Description of Outstanding Notes Tendered."
Subject to, and effective upon, the acceptance for exchange of the Outstanding
Notes tendered hereby, the undersigned hereby irrevocably sells, assigns and
transfers to or upon the order of the Company all right, title and interest in
and to such Outstanding Notes, and hereby irrevocably constitutes and appoints
the Exchange Agent the true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that said Exchange Agent also acts as the agent
of the Company and as Trustee under the indenture governing the Outstanding
Notes and the Exchange Notes) with respect to such Outstanding Notes, with full
power of substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest) to (a) deliver certificates representing such
Outstanding Notes, and to deliver all accompanying evidences of transfer and
authenticity to or upon the order of the Company upon receipt by the Exchange
Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon the acceptance by the Company of such Outstanding
Notes for exchange pursuant to the Exchange Offer, (b) receive all benefits and
otherwise to exercise all rights of beneficial ownership of such Outstanding
Notes, all in accordance with the terms of the Exchange Offer, and (c) present
such Outstanding Notes for transfer on the register for such Outstanding Notes.
The undersigned acknowledges that prior to this Exchange Offer, there has
been no public market for the Outstanding Notes or the Exchange Notes. If a
market for the Exchange Notes should develop, the Exchange Notes could trade at
a discount from their principal amount. The undersigned is aware that the
Company does not intend to list the Exchange Notes on a national securities
exchange and that there can be no assurance that an active market for the
Exchange Notes will develop.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes, it represents that the Outstanding Notes to be exchanged for Exchange
Notes were acquired as a result of market-making activities or other trading
activities and it acknowledges that it will deliver a prospectus in connection
with any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM
OR ON BEHALF OF, HOLDERS OF THE OUTSTANDING NOTES IN ANY JURISDICTION IN WHICH
THE MAKING OF THE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE LAWS OF SUCH JURISDICTION OR WOULD OTHERWISE NOT BE IN COMPLIANCE WITH ANY
PROVISION OF ANY APPLICABLE SECURITY LAW.
The undersigned represents that (a) it is not an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company or any of the Guarantors
(as defined in the Prospectus), (b) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Exchange Notes, and (c) it is acquiring
the Exchange Notes in the ordinary course of business.
The undersigned understands and acknowledges that the Company reserves the
right, in its sole discretion, to purchase or make offers for any Outstanding
Notes that remain outstanding subsequent to the Expiration Date or to terminate
the Exchange Offer and, to the extent permitted by applicable law, purchase
Outstanding Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers will differ from the terms
of the Exchange Offer.
The undersigned hereby represents and warrants that (a) the undersigned
accepts the terms and conditions of the Exchange Offer, (b) the undersigned has
a net long position within the meaning of Rule 14e-4 under the Exchange Act
("Rule 14e-4") equal to or greater than the principal amount of Outstanding
Notes tendered hereby, (c) the tender of such Outstanding Notes complies with
Rule 14e-4 (to the extent that Rule 14e-4 is applicable to such exchange), (d)
the undersigned has full power and authority to tender, exchange, assign and
transfer the Outstanding Notes tendered hereby, and (e) when the same are
accepted for exchange by the Company, the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim or right. The undersigned
will, upon request, execute and deliver any additional documents deemed by the
Exchange Agent
4
<PAGE> 5
or the Company to be necessary or desirable to complete the sale, assignment and
transfer of the Outstanding Notes tendered hereby.
The undersigned agrees that all authority conferred or agreed to be
conferred by this Letter of Transmittal and every obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. The undersigned also agrees that, except as
stated in the Prospectus, the Outstanding Notes tendered hereby cannot be
withdrawn.
The undersigned understands that tenders of the Outstanding Notes pursuant
to any one of the procedures described in the Prospectus under the caption "The
Exchange Offer -- Procedures for Tendering" and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company in
accordance with the terms and subject to the conditions of the Exchange Offer.
The undersigned understands that by tendering Outstanding Notes pursuant to
one of the procedures described in the Prospectus and the instructions thereto,
the tendering holder will be deemed to have waived the right to receive any
payment in respect of interest on the Outstanding Notes accrued up to the date
of issuance of the Exchange Notes.
The undersigned recognizes that, under certain circumstances set forth in
the Prospectus, the Company may not be required to accept for exchange any of
the Outstanding Notes tendered. Outstanding Notes not accepted for exchange or
withdrawn will be returned to the undersigned at the address set forth below
unless otherwise indicated under "Special Delivery Instructions" below.
Unless otherwise indicated herein under the box entitled "Special Issuance
Instructions" below, Exchange Notes, and Outstanding Notes not validly tendered
or accepted for exchange, will be issued in the name of the undersigned.
Similarly, unless otherwise indicated under the box entitled "Special Delivery
Instructions" below, Exchange Notes, and Outstanding Notes not validly tendered
or accepted for exchange, will be delivered to the undersigned at the address
shown below the signature of the undersigned. The undersigned recognizes that
the Company has no obligation pursuant to the "Special Issuance Instructions' to
transfer any Outstanding Notes from the name of the registered holder thereof if
the Company does not accept for exchange any of the principal amount of such
Outstanding Notes so tendered.
All questions as to the validity, form, eligibility (including time of
receipt), and withdrawal of the tendered Outstanding Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all
Outstanding Notes not properly tendered or any Outstanding Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any irregularities or
conditions of tender as to particular Outstanding Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in this Letter of Transmittal) will be final and binding. Unless
waived, any defects or irregularities in connection with tenders of Outstanding
Notes must be cured within such time as the Company shall determine. Neither the
Company, the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Outstanding
Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Outstanding Notes will not be deemed to have been made
until such irregularities have been cured or waived. Any Outstanding Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
without cost to such holder by the Exchange Agent to the tendering holders of
Outstanding Notes, unless otherwise provided in this Letter of Transmittal, as
soon as practicable following the Expiration Date.
5
<PAGE> 6
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
<TABLE>
<S> <C>
X _____________________________________________________ _________________________________________________, 1998
X _____________________________________________________ _________________________________________________, 1998
SIGNATURE(S) OF OWNER DATE
</TABLE>
Area code and Telephone Number ________________________________________________
If a Holder is tendering any Outstanding Notes, this Letter must be signed
by the registered Holder(s) as the name(s) appear(s) on the certificate(s) for
the Outstanding Notes or by any person(s) authorized to become registered
Holder(s) by endorsements and documents transmitted herewith. If signature is by
a trustee, executor, administrator, guardian, officer or other person acting in
a fiduciary or representative capacity, please set forth full title. See
Instruction 3.
Name(s):_______________________________________________________________________
_______________________________________________________________________________
(PLEASE TYPE OR PRINT)
Capacity: _____________________________________________________________________
_______________________________________________________________________________
Address: ______________________________________________________________________
_______________________________________________________________________________
(INCLUDING ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by an Eligible Institution: ___________________________
(AUTHORIZED SIGNATURE)
_______________________________________________________________________________
(TITLE)
_______________________________________________________________________________
(NAME AND FIRM)
Dated: ___________________________ , 1998
6
<PAGE> 7
____________________________________________________________
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4 AND 6)
To be completed ONLY if certificates for Outstanding Notes in a
principal amount not exchanged and/or certificates for Exchange Notes are
to be issued in the name of someone other than the undersigned, or if
Outstanding Notes are to be returned by credit to an account maintained by
the Book_Entry Transfer Facility.
Issue (check appropriate box)
[ ] Exchange Notes to:
[ ] Outstanding Notes to:
Name: ___________________________________________________
(PLEASE PRINT)
Address: ________________________________________________
________________________________________________
ZIP CODE
________________________________________________
TAXPAYER IDENTIFICATION NUMBER
(YOU MUST ALSO COMPLETE
SUBSTITUTE FORM W_9 BELOW.)
Credit unaccepted Outstanding Notes tendered by book_entry transfer to:
[ ] The Depository Trust Company account set forth below
____________________________________________________________
(DTC ACCOUNT NUMBER)
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4 AND 6)
To be completed ONLY if certificates for Outstanding Notes in a
principal amount not exchanged and/or certificates for Exchange Notes are
to be sent to someone other than undersigned at an address other than that
shown above.
Deliver (check appropriate box)
[ ] Exchange Notes to:
[ ] Outstanding Notes to:
Name: ____________________________________________________
(PLEASE PRINT)
Address: _________________________________________________
_________________________________________________
ZIP CODE
_________________________________________________
TAXPAYER IDENTIFICATION NUMBER
(YOU MUST ALSO COMPLETE
SUBSTITUTE FORM W_9 BELOW.)
_________________________________________________
INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS
OF THE OFFER AND THE SOLICITATION
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. To be effectively tendered pursuant to the Exchange Offer,
the Outstanding Notes, together with a properly completed Letter of Transmittal
(or facsimile thereof), duly executed by the registered holder thereof, and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at one of its addresses set forth on the first page of this
Letter of Transmittal. If the beneficial owner of any Outstanding Notes is not
the registered holder, then such person may validly tender his or her
Outstanding Notes only by obtaining and submitting to the Exchange Agent a
properly completed Letter of Transmittal from the registered holder. OUTSTANDING
NOTES SHOULD BE DELIVERED ONLY TO THE EXCHANGE AGENT AND NOT TO THE COMPANY OR
TO ANY OTHER PERSON.
7
<PAGE> 8
THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND ALL OTHER REQUIRED
DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER.
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE
AGENT BY 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
If a holder desires to tender Outstanding Notes and such holder's
Outstanding Notes are not immediately available or time will not permit such
holder's Letter of Transmittal, Outstanding Notes or other required documents to
reach the Exchange Agent on or before the Expiration Date, such holder's tender
may be effected if:
(a) the tender is made through an Eligible Institution (as defined
herein);
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Outstanding Notes,
the certificate number or numbers of such Outstanding Notes and the
principal amount of Outstanding Notes tendered, stating that the tender is
being made thereby, and guaranteeing that, within three business days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Outstanding Notes to be
tendered in proper form for transfer or a Book-Entry Confirmation, as the
case may be, and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof) together with the certificate(s) representing all
tendered Outstanding Notes in proper form for transfer and all other
documents required by the Letter of Transmittal are received by the
Exchange Agent within three business days after the Expiration Date.
2. WITHDRAWAL OF TENDERS. Tendered Outstanding Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date, unless
previously accepted for exchange.
To be effective, a written or facsimile transmission notice of withdrawal
must (a) be received by the Exchange Agent at one of its addresses set forth on
the first page of this Letter of Transmittal prior to 5:00 p.m., New York City
time, on the Expiration Date, unless previously accepted for exchange, (b)
specify the name of the person who tendered the Outstanding Notes, (c) contain
the description of the Outstanding Notes to be withdrawn, the certificate
numbers shown on the particular certificates evidencing such Outstanding Notes
and the aggregate principal amount represented by such Outstanding Notes and (d)
be signed by the holder of such Outstanding Notes in the same manner as the
original signature appears on this Letter of Transmittal (including any required
signature guarantees) or be accompanied by evidence sufficient to have the
Trustee with respect to the Outstanding Notes register the transfer of such
Outstanding Notes into the name of the holder withdrawing the tender. The
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution unless such Outstanding Notes have been tendered (a) by a registered
holder of Outstanding Notes who has not completed either the box entitled
"Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (b) for the account of an
Eligible Institution. All questions as to the validity, form and eligibility
(including time of receipt) of such withdrawal notices shall be determined by
the Company, whose determination shall be final and binding on all parties. If
the Outstanding Notes to be withdrawn have been delivered or otherwise
identified to the Exchange Agent, a signed notice of withdrawal is effective
immediately upon receipt by the Exchange Agent of a written or facsimile
transmission notice of withdrawal even if physical release is not yet effected.
In addition, such notice must specify, in the case of Outstanding Notes tendered
by delivery of certificates for such Outstanding Notes, the name of the
registered holder (if different from that of the tendering holder) to be
credited with the withdrawn Outstanding Notes. Withdrawals may not be rescinded,
and any Outstanding Notes withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer. However, properly withdrawn
Outstanding Notes may be retendered by following one of the procedures described
under "The Exchange Offer -- Procedures for Tendering" in the Prospectus at any
time on or prior to the applicable Expiration Date.
3. SIGNATURES ON THIS LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Outstanding Notes tendered hereby, the signature
must correspond exactly with the name(s) as written on the face of the
certificates without any change whatsoever.
8
<PAGE> 9
If any Outstanding Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any Outstanding Notes tendered hereby are registered in different names
on several certificates, it will be necessary to complete, sign and submit as
many separate copies of this Letter of Transmittal as there are different
registrations of certificates.
When this Letter of Transmittal is signed by the registered holder or
holders specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required unless Exchange Notes are to be issued, or
certificates for any untendered principal amount of Outstanding Notes are to be
reissued, to a person other than the registered holder.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any certificate(s) specified herein, such
certificates(s) must be endorsed or accompanied by appropriate bond powers, in
either case signed exactly as the name(s) of the registered holder(s) appear(s)
on the certificate(s).
If this Letter of Transmittal or a Notice of Guaranteed Delivery or any
certificates or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, evidence satisfactory to the Company
of their authority so to act must be submitted with this Letter of Transmittal.
Except as described below, signatures on this Letter of Transmittal or a
notice of withdrawal, as the case may be, must be guaranteed by an Eligible
Institution. Signatures on this Letter of Transmittal or a notice of withdrawal,
as the case may be, need not be guaranteed if the Outstanding Notes tendered
pursuant hereto are tendered (a) by a registered holder of Outstanding Notes who
has not completed either the box entitled "Special Issuance Instructions" or the
box entitled "Special Delivery Instructions" on this Letter of Transmittal or
(b) for the account of an Eligible Institution. In the event that signatures on
this Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a firm which is a member of
a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (each as "Eligible
Institutions").
Endorsements on certificates for Outstanding Notes or signatures on bond
powers required by this Instruction 3 must be guaranteed by an Eligible
Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate in the applicable box the name and address to which certificates for
Exchange Notes and/or substitute certificates evidencing Outstanding Notes for
the principal amounts not exchanged are to be issued or sent, if different from
the name and address of the person signing this Letter of Transmittal. In the
case of issuance in a different name, the employer identification or social
security number of the person named must also be indicated. If no such
instructions are given, any Outstanding Notes not exchanged will be returned to
the name and address of the person signing this Letter of Transmittal.
5. TAX IDENTIFICATION NUMBER WITHHOLDING. Federal income tax law of the
United States requires that a holder of Outstanding Notes whose Outstanding
Notes are accepted for exchange provide the Company with the holder's correct
taxpayer identification number, which, in the case of a holder who is an
individual, is his or her social security number, or otherwise establish an
exemption from backup withholding. If the Company is not provided with the
correct taxpayer identification number, the exchanging holder of Outstanding
Notes may be subject to a $50 penalty imposed by the Internal Revenue Service
(the "IRS"). In addition, interest on the Exchange Notes acquired pursuant to
the Exchange Offer may be subject to backup withholding in an amount equal to
31% of any interest payment. If withholding occurs and results in an overpayment
of taxes, a refund may be obtained.
To prevent backup withholding, an exchanging holder of Outstanding Notes
must provide his correct taxpayer identification number by completing the
Substitute Form W-9 provided in this Letter of Transmittal, certifying that the
taxpayer identification number provided is correct (or that the exchanging
holder of Outstanding Notes is awaiting a taxpayer identification number) and
that either (a) the exchanging holder has not yet been notified by the IRS that
such holder is subject to backup withholding as a result of failure to report
all interest or dividends or (b) the IRS has notified the exchanging holder that
such holder is no longer subject to backup withholding.
9
<PAGE> 10
Certain exchanging holders of Outstanding Notes (including, among others,
all corporations and certain foreign individuals) are not subject to these
backup withholding requirements. A foreign individual and other exempt holders
other than foreign individuals (e.g., corporations) should certify, in
accordance with the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9," to such exempt status on the
Substitute Form W-9 provided in this Letter of Transmittal. Foreign individuals
should complete and provide Form W-8 to indicate their foreign status.
6. TRANSFER TAXES. Holders tendering pursuant to the Exchange Offer will
not be obligated to pay brokerage commissions or fees or to pay transfer taxes
with respect to their exchange under the Exchange Offer unless the box entitled
"Special Issuance Instructions" in this Letter of Transmittal has been
completed, or unless the Exchange Notes are to be issued to any person other
than the holder of the Outstanding Notes tendered for exchange. The Company will
pay all other charges or expenses in connection with the Exchange Offer. If
holders tender Outstanding Notes for exchange and the Exchange Offer is not
consummated, certificates representing the Outstanding Notes will be returned to
the holders at the Company's expense.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificate(s) specified in this Letter
of Transmittal.
7. INADEQUATE SPACE. If the space provided herein is inadequate, the
aggregate principal amount of the Outstanding Notes being tendered and the
certificate numbers (if available) should be listed on a separate schedule
attached hereto and separately signed by all parties required to sign this
Letter of Transmittal.
8. PARTIAL TENDERS. Tenders of Outstanding Notes will be accepted only in
integral multiples of $1,000. If tenders are to be made with respect to less
than the entire principal amount of any Outstanding Notes, fill in the total
principal amount of Outstanding Notes which are tendered in the appropriate box
on the cover entitled "Description of Outstanding Notes Tendered." In the case
of partial tenders, new certificates representing the Outstanding Notes in fully
registered form for the remainder of the principal amount of the Outstanding
Notes will be sent to the person(s) signing this Letter of Transmittal, unless
otherwise indicated in the appropriate place on this Letter of Transmittal, as
promptly as practicable after the expiration or termination of the Exchange
Offer.
9. MUTILATED, LOST, STOLEN OR DESTROYED OUTSTANDING NOTES. Any holder
whose Outstanding Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.
10. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
or additional copies of the Prospectus or this Letter of Transmittal may be
obtained from the Exchange Agent at its telephone number set forth on the first
page of this Letter of Transmittal.
10
<PAGE> 11
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PAYER'S NAME:
=================================================================================================================================
SUBSTITUTE Part 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND
FORM W-9 CERTIFY BY SIGNING AND DATING BELOW. ------------------------------
DEPARTMENT OF THE TREASURY Social Security Number
INTERNAL REVENUE SERVICE
or
------------------------------
Employer Identification
Number
---------------------------------------------------------------------------------------------
Part 2 -- Certification -- Under penalties of perjury, I
certify that:
(1) The number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number to
be issued to me) and
(2) I am not subject to backup withholding because (a) I
am exempt from backup withholding or (b) I have not
been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup as a result of
failure to report all interest or dividends or (c) the
IRS has notified me that I am no longer subject to
backup withholding.
---------------------------------------------------------------------------------------------
PAYER'S REQUEST FOR Certification Instructions -- You must cross out item (2) in Part 2 above if you have been
TAXPAYER IDENTIFICATION notified by the IRS that you are subject to backup withholding because of under reporting
NUMBER (TIN) interest or dividends on your tax returns. However, if after being notified by the IRS that
you were subject to backup withholding you received another notification from the IRS stating
that you are no longer subject to backup withholding, do not cross out such item (2). If you
are exempt from backup withholding, check the box in Part 4 above.
---------------------------------------------------------------------------------------------
Signature ----------------------------------------- Date------------------------- , 1998
-------------------------------------------------------------------------------------------
Name (Please Print)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Part 3 -- Awaiting TIN [ ]
--------------------------
Part 4 -- Exempt [ ]
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER AND THE
SOLICITATION PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE
BOX IN PART II OF THE SUBSTITUTE FORM W-9.
11
<PAGE> 12
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalty of perjury that a taxpayer identification number has not
been issued to me, and either (a) I have mailed or delivered an application to
receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within 60 days, 31% of all reportable
payments made to me thereafter will be withheld until I provide a number.
- ------------------------------------------
Signature Date
Date -------------------------, 1998
- ------------------------------------------
Name (Please Print)
12
<PAGE> 13
NOTICE OF GUARANTEED DELIVERY
TO TENDER FOR EXCHANGE
10 1/2% SENIOR NOTES DUE 2008
OF
SCHUFF STEEL COMPANY
PURSUANT TO
PROSPECTUS DATED , 1998
This Notice of Guaranteed Delivery or a form substantially equivalent
hereto must be used to accept the offer (the "Exchange Offer") of Schuff Steel
Company, a Delaware corporation (the "Company"), to exchange $1,000 principal
amount of its 10 1/2% Senior Notes due 2008 (the "Exchange Notes")for each
$1,000 principal amount of its outstanding 10 1/2% Senior Notes due 2008
(the "Outstanding Notes") if (a) certificates representing the Outstanding
Notes are not immediately available or (b) time will not permit the
Outstanding Notes and all other required documents to reach the Exchange
Agent on or prior to the Expiration Date. This form may be delivered by
an Eligible Institution (as defined) by mail or hand delivery, or
transmitted via facsimile, telegram or telex, to the Exchange Agent as set
forth below. All capitalized terms used herein but not defined herein shall
have the meanings ascribed to them in the Prospectus dated , 1998 (the
"Prospectus").
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF
OUTSTANDING NOTES BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF OUTSTANDING NOTES
IN ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER
WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1998, UNLESS EXTENDED. TENDERS OF 10 1/2% SENIOR NOTES DUE 2008
MAY ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND
THE LETTER OF TRANSMITTAL.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
By Hand before 4:30 P.M.: By Facsimile:
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION VIA FACSIMILE, TELEGRAM OR TELEX, OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
13
<PAGE> 14
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus, receipt of which is hereby
acknowledged, the principal amount of Outstanding Notes set forth below,
pursuant to the guaranteed delivery procedures set forth in the Prospectus under
the caption "The Exchange Offer -- Guaranteed Delivery Procedures."
Subject to and effective upon acceptance for exchange of the Outstanding
Notes tendered herewith, the undersigned hereby sells, assigns and transfers to
or upon the order of the Company all right, title and interest in and to, and
any and all claims in respect of or arising or having arisen as a result of the
undersigned's status as a holder of, all Outstanding Notes tendered hereby. In
the event of a termination of the Exchange Offer, the Outstanding Notes tendered
pursuant thereto will be returned promptly to the tendering Outstanding Note
holder.
The undersigned hereby represents and warrants that the undersigned accepts
the terms and conditions of the Prospectus and the Letter of Transmittal, has
full power and authority to tender, sell, assign and transfer the Outstanding
Notes tendered hereby and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The undersigned will, upon
request, execute and deliver any additional documents deemed by the Exchange
Agent or the Company to be necessary or desirable to complete the sale,
assignment and transfer of the Outstanding Notes tendered.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
14
<PAGE> 15
PLEASE SIGN AND COMPLETE
<TABLE>
<S> <C>
Signature(s) of Registered Holder(s) or
Authorized Signatory: Address(es): -----------------------------
- ------------------------------------------ ------------------------------------------
- ------------------------------------------ ------------------------------------------
Name(s) of Registered Holder(s): Area Code and Telephone No.:
- ------------------------------------------ ------------------------------------------
- ------------------------------------------
Principal Amount of Outstanding Notes If Outstanding Notes will be delivered by
Tendered: a book-entry transfer, provide the
following information
- ------------------------------------------
Certificate No(s) of Outstanding Notes Transaction Code No.: --------------------
(if available)
- ------------------------------------------ Depository Account No.: ------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the registered holder(s) of
Outstanding Notes exactly as their name(s) appear(s) on the Outstanding Notes or
by person(s) authorized to become registered holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, guardian, attorney-in-fact, officer of a corporation, executor,
administrator, agent or other representative, such person must provide the
following information:
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): ----------------------------------------------------------------------
Capacity: ---------------------------------------------------------------------
- -------------------------------------------------------------------------------
Address(es): ------------------------------------------------------------------
- -------------------------------------------------------------------------------
15
<PAGE> 16
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office or correspondent in the United States
(each, an "Eligible Institution"), hereby guarantees that, within three business
days from the date of this Notice of Guaranteed Delivery, a properly completed
and validly executed Letter of Transmittal (or a facsimile thereof), together
with Outstanding Notes tendered hereby in proper form for transfer (or
confirmation of the book-entry transfer of such Outstanding Notes into the
Exchange Agent's account at a Book-Entry Transfer Facility) and all other
required documents will be deposited by the undersigned with the Exchange Agent
at one of its addresses set forth above.
<TABLE>
<S> <C>
Name of Firm: ------------------------------------
-----------------------------------------------------
Authorized Signature
Address: ----------------------------------------- Name: ----------------------------------------------
Title: ---------------------------------------------
Area Code and Telephone No.: ------------------ Date: ----------------------------------------------
</TABLE>
DO NOT SEND OUTSTANDING NOTES WITH THIS FORM. ACTUAL SURRENDER OF OUTSTANDING
NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND
VALIDLY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
16
<PAGE> 17
SCHUFF STEEL COMPANY
OFFER TO EXCHANGE
10 1/2% SENIOR NOTES DUE 2008
FOR ANY AND ALL OUTSTANDING
10 1/2% SENIOR NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1998, UNLESS EXTENDED. TENDERS OF 10 1/2% SENIOR NOTES DUE 2008
MAY ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND
THE LETTER OF TRANSMITTAL.
, 1998
To Our Clients:
Enclosed for your consideration is the Prospectus dated ,
1998 (the "Prospectus") and the related Letter of Transmittal and instructions
thereto (the "Letter of Transmittal") in connection with the offer (the
"Exchange Offer") of Schuff Steel Company, a Delaware corporation ("the
Company"), to exchange $1,000 principal amount of its 10 1/2% Senior Notes due
2008 (the "Exchange Notes") for each $1,000 principal amount of its outstanding
10 1/2% Senior Notes due 2008 (the "Outstanding Notes").
Consummation of the Exchange Offer is subject to certain conditions
described in the Prospectus. Capitalized terms used herein but not defined shall
have the meanings ascribed to them in the Prospectus.
WE ARE THE REGISTERED HOLDER OF OUTSTANDING NOTES HELD BY US FOR YOUR
ACCOUNT. A TENDER OF ANY SUCH OUTSTANDING NOTES CAN BE MADE ONLY BY US AS THE
REGISTERED HOLDER AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL
IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO
TENDER OUTSTANDING NOTES HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish us to tender
any or all such Outstanding Notes held by us for your account pursuant to the
terms and conditions set forth in the Prospectus and the Letter of Transmittal.
We urge you to read carefully the Prospectus and the Letter of Transmittal
before instructing us to tender your Outstanding Notes.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender Outstanding Notes on your behalf in accordance with
the provisions of the Exchange Offer. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME ON , 1998 (THE "EXPIRATION DATE"),
UNLESS EXTENDED. Outstanding Notes tendered pursuant to the Exchange Offer may
only be withdrawn under the circumstances described in the Prospectus and the
Letter of Transmittal.
Your attention is directed to the following:
1. The Exchange Offer is for the entire aggregate principal amount of
Outstanding Notes.
2. Consummation of the Exchange Offer is conditioned upon the
conditions set forth in the Prospectus under the caption "The Exchange
Offer --Conditions."
3. Tendering holders may withdraw their tender at any time until the
Expiration Date.
4. Any transfer taxes incident to the transfer of Outstanding Notes
from the tendering holder to the Company will be paid by the Company,
except as provided in the Prospectus and the instructions to the Letter of
Transmittal.
5. The Exchange Offer is not being made to (nor will the surrender of
Outstanding Notes for exchange be accepted from or on behalf of) holders of
Outstanding Notes in any jurisdiction in which the making or acceptance of
the Exchange Offer would not be in compliance with the laws of such
jurisdiction.
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<PAGE> 18
6. The acceptance for exchange of Outstanding Notes validly tendered
and not validly withdrawn and the issuance of Exchange Notes will be made
as promptly as practicable after the Expiration Date. However, subject to
rules promulgated pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Company expressly reserves the right to
delay acceptance of any of the Outstanding Notes or to terminate the
Exchange Offer and not accept for purchase any Outstanding Notes not
theretofore accepted if any of the conditions set forth in the Prospectus
under the caption "The Exchange Offer -- Conditions" shall not have been
satisfied or waived by the Company.
7. The Company expressly reserves the right, in its sole discretion,
(i) to delay accepting any Outstanding Notes, (ii) to extend the Exchange
Offer, (iii) to amend the terms of the Exchange Offer or (iv) to terminate
the Exchange Offer. Any delay, extension, amendment or termination will be
followed as promptly as practicable by oral or written notice to the
Exchange Agent and the Company will mail to the registered holders an
announcement thereof, each prior to 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Except as
otherwise provided in the Prospectus, withdrawal rights with respect to
Outstanding Notes tendered pursuant to the Exchange Offer will not be
extended or reinstated as a result of an extension or amendment of the
Exchange Offer.
8. Consummation of the Exchange Offer may have adverse consequences
to non-tendering Outstanding Note holders, including that the reduced
amount of Outstanding Notes as a result of the Exchange Offer may adversely
affect the trading market, liquidity and market price of the Outstanding
Notes.
If you wish to have us tender any or all of the Outstanding Notes held by
us for your account, please so instruct us by completing, executing and
returning to us the instruction form that follows.
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<PAGE> 19
SCHUFF STEEL COMPANY
INSTRUCTIONS REGARDING THE EXCHANGE OFFER
WITH RESPECT TO THE
10 1/2% SENIOR NOTES DUE 2008
THE UNDERSIGNED ACKNOWLEDGE(S) RECEIPT OF YOUR LETTER AND THE ENCLOSED
DOCUMENTS REFERRED TO THEREIN RELATING TO THE EXCHANGE OFFER OF THE COMPANY.
THIS WILL INSTRUCT YOU WHETHER TO TENDER THE PRINCIPAL AMOUNT OF
OUTSTANDING NOTES INDICATED BELOW HELD BY YOU FOR THE ACCOUNT OF THE UNDERSIGNED
PURSUANT TO THE TERMS OF AND CONDITIONS SET FORTH IN THE PROSPECTUS AND THE
LETTER OF TRANSMITTAL.
Box 1 [ ] Please tender the Outstanding Notes held by you for my account, as
indicated below.
Box 2 [ ] Please do not tender any Outstanding Notes held by you for my
account.
Date: , 1998
Principal Amount of Outstanding Notes to be Tendered:
$ *
- ------------------------------------------------------
(must be in the principal amount of $1,000 or an integral multiple thereof)
- ------------------------------------------------------
- ------------------------------------------------------
Signature(s)
- ------------------------------------------------------
- ------------------------------------------------------
Please print name(s) here
- ------------------------------------------------------
Please type or print address
- ------------------------------------------------------
Area Code and Telephone Number
- ------------------------------------------------------
Taxpayer Identification or Social Security Number
- ------------------------------------------------------
My Account Number with You
- ---------------
* UNLESS OTHERWISE INDICATED, SIGNATURE(S) HEREON BY BENEFICIAL OWNER(S) SHALL
CONSTITUTE AN INSTRUCTION TO THE NOMINEE TO TENDER ALL OUTSTANDING NOTES OF
SUCH BENEFICIAL OWNER(S).
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<PAGE> 20
[ ]
SCHUFF STEEL COMPANY
OFFER TO EXCHANGE
10 1/2% SENIOR NOTES DUE 2008
FOR ANY AND ALL OUTSTANDING
10 1/2% SENIOR NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1998, UNLESS EXTENDED. TENDERS OF 10 1/2% SENIOR NOTES
DUE 2008 MAY ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN THE
PROSPECTUS AND THE LETTER OF TRANSMITTAL.
To Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees:
We have been appointed by American Architectural Products Corporation, a
Delaware corporation (the "Company"), to act as the Exchange Agent in connection
with the offer (the "Exchange Offer") of the Company to exchange $1,000
principal amount of its 10 1/2% Senior Notes due 2008 (the "Exchange Notes") for
each $1,000 principal amount of its 10 1/2% Senior Notes due 2008 (the
"Outstanding Notes"), upon the terms and subject to the conditions set forth in
the Prospectus dated , 1998 (the "Prospectus") and in the related
Letter of Transmittal and the instructions thereto (the "Letter of
Transmittal").
Enclosed herewith are copies of the following documents:
1. The Prospectus;
2. The Letter of Transmittal for your use and for the information of
your clients, together with guidelines of the Internal Revenue Service for
Certification of Taxpayer Identification Number on Substitute Form W-9
providing information relating to backup federal income tax withholding;
3. Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if the Notes and all other required documents cannot be delivered to
the Exchange Agent on or prior to the Expiration Date (as defined);
4. A form of letter which may be sent to your clients for whose
account you hold the Notes in your name or in the name of a nominee, with
space provided for obtaining such clients' instructions with regard to the
Exchange Offer; and
5. A return envelope addressed to the Exchange Agent.
PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME ON , 1998 (THE "EXPIRATION DATE"), UNLESS EXTENDED. WE URGE
YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
The Company will not pay any fees or commission to any broker or dealer or
other person (other than to the Exchange Agent) for soliciting tenders of the
Notes pursuant to the Exchange Offer. You will be reimbursed for customary
mailing and handling expenses incurred by you in forwarding the enclosed
materials to your clients.
<PAGE> 21
Additional copies of the enclosed materials may be obtained by contacting
the Exchange Agent as provided in the enclosed Letter of Transmittal.
Very truly yours,
[ ]
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON THE AGENT OF THE COMPANY OR THE EXCHANGE AGENT OR AUTHORIZE YOU
OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF
OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER NOT CONTAINED IN THE
PROSPECTUS OR THE LETTER OF TRANSMITTAL.
