<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 8, 1997
REGISTRATION STATEMENT NO. 333-37679
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
AMERISTEEL CORPORATION
(Exact name of Registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
FLORIDA 3312 59-0792436
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
---------------------
5100 W. LEMON STREET
TAMPA, FLORIDA 33609
(813) 286-8383
(Address, including zip code, and telephone number including area code, of
Registrant's principal executive offices)
---------------------
PHILLIP E. CASEY, CHIEF EXECUTIVE OFFICER
AMERISTEEL CORPORATION
5100 W. LEMON STREET
TAMPA, FLORIDA 33609
(813) 286-8383
(Name, address, including zip code, and telephone number including area code, of
agent for service)
Copies of communications to:
<TABLE>
<C> <C>
ALBERT C. O'NEILL, JR., ESQUIRE JOHN EVANGELAKOS, ESQUIRE
TRENAM, KEMKER, SCHARF, BARKIN, SULLIVAN & CROMWELL
FRYE, O'NEILL & MULLIS 125 BROAD STREET
P.O. BOX 1102 NEW YORK, NEW YORK 10004-2400
TAMPA, FLORIDA 33601-1102 (212) 558-4000
(813) 223-7474
</TABLE>
---------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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(c)
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. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
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 DECEMBER 8, 1997
<TABLE>
<S> <C> <C>
[AmeriSteel LOGO] 3,950,000 SHARES
AMERISTEEL CORPORATION
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
</TABLE>
----------------------
Of the 3,950,000 shares of Class A Common Stock offered, 3,160,000 shares
are being offered hereby in the United States and 790,000 shares are being
offered in a concurrent international offering outside the United States. The
initial public offering price and the aggregate underwriting discount per share
will be identical for both Offerings. See "Underwriting".
All of the 3,950,000 shares of Class A Common Stock offered hereby are
being sold by the Company. Prior to the Offerings, there has been no public
market for the Class A Common Stock of the Company. It is currently estimated
that the initial public offering price per share will be between $20.00 and
$23.00. For factors considered in determining the initial public offering price,
see "Underwriting".
The Company has two classes of Common Stock. Shares of Class A Common Stock
and Class B Common Stock generally carry the same rights, powers, preferences,
privileges and limitations, except that Class A Common Stock has one vote per
share while Class B Common Stock has two votes per share. See "Description of
Capital Stock". After giving effect to the Offerings (assuming the Underwriters'
over-allotment options are not exercised), the issued and outstanding shares of
Class B Common Stock will have approximately 84% of the combined voting power of
all outstanding shares of capital stock of the Company. After the Offerings,
approximately 89% of the Class B Common Stock will be held by Kyoei Steel, Ltd.
See "Principal Stockholders".
SEE "RISK FACTORS" ON PAGE 8 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE CLASS A COMMON STOCK.
The Class A Common Stock has been approved for listing, subject to notice
of issuance, on the New York Stock Exchange under the symbol "AST".
----------------------
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.
----------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT (1) COMPANY (2)
-------------- ------------ -----------
<S> <C> <C> <C>
Per Share.............................. $ $ $
Total (3).............................. $ $ $
</TABLE>
- ---------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $800,000 payable by the Company.
(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 474,000 shares at the initial public offering
price per share, less the underwriting discount, solely to cover
over-allotments. Additionally, the Company has granted the International
Underwriters a similar option with respect to an additional 118,500 shares
as part of the concurrent international offering. If such options are
exercised in full, the total initial public offering price, underwriting
discount and proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting".
----------------------
The shares offered hereby are offered severally by the U.S. Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York, on
or about , 1997, against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO. MORGAN STANLEY DEAN WITTER
----------------------
The date of this Prospectus is , 1997.
<PAGE> 3
[PICTURE OF ANGLE, FLAT, REBAR AND CHANNEL STEEL PRODUCTS
AND REPRESENTATIVE APPLICATIONS OF SUCH PRODUCTS]
---------------------
In this Prospectus, references to "dollars", "U.S.$" and "$" are to United
States dollars.
---------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERINGS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Financial Statements and Notes thereto appearing elsewhere in
this Prospectus. Unless otherwise indicated, all information presented in this
Prospectus assumes that the Underwriters' over-allotment options will not be
exercised. All references in this Prospectus to the "Company" shall be deemed to
refer to AmeriSteel Corporation and all references to fiscal years are to the
Company's fiscal years ended on March 31.
THE COMPANY
The Company operates four non-union minimills located in the southeastern
U.S. that produce steel concrete reinforcing bars ("rebar"), light structural
shapes such as rounds, squares, flats, angles and channels ("merchant bars")
and, to a lesser extent, wire rod ("rods") and billets (which are semi-finished
steel products). The Company also operates 13 rebar fabricating plants
strategically located in close proximity to its mills. The Company estimates
that it currently has annual steel melting capacity of 2.0 million tons per year
and finished product rolling capacity of 1.7 million tons per year. The Company
believes that it is the second largest producer and the largest fabricator of
rebar in the U.S.
The Company's minimills use electric arc furnaces to melt recycled scrap
steel. The molten steel is then cast into long strands called billets in a
continuous casting process. Billets are then reheated and rolled into rebar,
merchant bars and rods. The Company's fabricating plants further process
approximately 40% of the Company's mill rebar production to meet specific
contractor specifications. Rebar is used primarily for strengthening concrete in
highway and building construction and other construction applications. Merchant
bars are used in a wide variety of applications including floor and roof joists,
transmission towers, and farm equipment. Rods are used in a variety of
applications, including the manufacture of welded wire fabric and nails.
In late 1992, the Company was purchased by Kyoei Steel Ltd. ("Kyoei"), a
private Japanese minimill company engaged in the manufacture of commodity grade
steel products, primarily rebar and merchant bar products. Kyoei, founded in
1947, operates five minimills in Japan and a rolling mill in Vietnam with a
total annual rebar and merchant bar rolling capacity of 2.5 million tons. The
Company has benefitted from access to Kyoei's operating, engineering and
technical expertise.
THE INDUSTRY
According to industry sources, United States market demand for rebar was
approximately 6.3 million tons in calendar 1996. The Company believes that it is
the second largest producer of rebar in the U.S. and estimates it has
approximately a 13% share of the U.S. rebar market and approximately a 20% share
in the eastern two-thirds of the U.S. According to industry sources, the U.S.
market for merchant and other light structural shape bars was estimated to be
approximately 8.6 million tons in calendar 1996. The Company estimates that it
has approximately a 6% share of this market. For the six months ended September
30, 1997, approximately 24% of the Company's net sales were derived from
fabricated rebar, 28% from stock rebar (rebar produced by the mills and sold to
third parties), 31% from merchant bars, 5% from rods and 12% from semi-finished
billets.
The minimill industry is composed of two types of competitors: multi-mill
operators and stand-alone minimills. The Company believes that recent growth in
the industry (through acquisitions as well as capital expenditures) has been
driven by multi-mill operations because stand-alone minimills have not generally
been able to achieve the economies of scale or had access to the financial
resources to make the investments that larger operators have. The Company
believes that further industry consolidation will continue given the significant
advantages available to multi-mill operators. Accordingly, the Company is
actively investigating potential acquisition opportunities.
3
<PAGE> 5
COMPETITIVE STRENGTHS
The primary focus of the Company's business strategy is to continue to be a
low cost producer of rebar and merchant bar products in the U.S. and to further
grow its business including through acquisitions of steel producing and related
assets. The Company believes that the following competitive strengths are key
elements of this strategy:
DEMONSTRATED COST CONTROL. Since 1994, the Company has reduced its
costs of converting scrap steel to finished steel products ("conversion
costs") from $146 per ton to $128 per ton for the six months ended
September 30, 1997. The Company has achieved these cost reductions through
its mill modernization program, high mill utilization, access to
competitively priced electric power at its Tennessee and North Carolina
mills, and labor incentive programs designed to maximize productivity. In
addition, since 1994, the Company has closed unprofitable operations and
divested non-core activities. The Company currently has initiatives in
place that it believes will further reduce its conversion costs.
MODERNIZED PRODUCTION EQUIPMENT IN ATTRACTIVE LOCATIONS. Since 1992,
the Company has invested approximately $115 million in mill modernization,
including major projects at its Jackson, Tennessee, Jacksonville, Florida
and Charlotte, North Carolina mills. The Company believes its recent mill
modernization program will lower conversion costs and increase capacity
utilization, enhance merchant bar quality and broaden its merchant bar
product range. The southeastern U.S. (where all the Company's mills are
located) accounts generally for more than one-fourth of U.S. rebar
consumption and, due to mild wintertime weather conditions, demonstrates
less seasonal demand fluctuations than more northern regions of the U.S.
Because of the high cost of freight relative to the value of the Company's
products, competition from non-regional producers is limited.
MOTIVATED, NON-UNION LABOR FORCE. The Company employs a non-union
workforce of approximately 1,860 employees. The Company's compensation
programs are designed to allow employees to earn significant incentive
bonuses (approximately one-fifth of their total compensation) based on
production volumes, sales volumes, cost targets or return on capital
employed. These programs have been successfully implemented by the current
management team and have resulted in lower costs, higher productivity and
increased profitability. Further incentive is provided through equity
ownership plans. Approximately 57% of current employees have purchased
stock in the Company, including Phillip E. Casey, Chairman and Chief
Executive Officer, who beneficially owns approximately 10% of the
outstanding shares of the Company's capital stock (approximately 6% after
the Offerings).
STRONG MARKET POSITIONS. The Company believes that it is the second
largest producer of rebar in the U.S. and estimates it has approximately a
13% share in the U.S. rebar market and approximately a 20% share in the
eastern two-thirds of the U.S. In addition, the Company believes that it is
the largest fabricator of rebar products in the U.S., with fiscal 1997
revenues of $161.2 million, or approximately 26% of the Company's sales.
The Company believes its strong market position in both stock rebar
shipments and fabricated rebar shipments provides it with competitive
market intelligence and other advantages from vertical integration relative
to its smaller competitors. The Company estimates it has approximately a 6%
share of the U.S. market for merchant and other light structural shape
bars. The Company believes it has opportunities to increase its market
share in this market, which is generally less cyclical and more profitable
than the rebar market. A recent independent survey has ranked the Company
first in customer service and on-time delivery in the Company's principal
product markets. As evidence of a high degree of customer satisfaction, the
Company has had, on average, a relationship of at least 10 years with its
top 25 customers.
The Company's headquarters are located at 5100 W. Lemon Street, Suite 312,
Tampa, Florida 33609, and its telephone number is (813) 286-8383.
4
<PAGE> 6
THE OFFERINGS(1)
<TABLE>
<S> <C> <C>
Class A Common Stock offered by the
Company:
United States Offering................ 3,160,000 shares
International Offering................ 790,000 shares
Total......................... 3,950,000 shares
Common Stock outstanding after the
Offerings:
Class A Common Stock.................. 3,950,000 shares
Class B Common Stock.................. 10,114,385 shares(2)
Total......................... 14,064,385 shares
Use of Proceeds......................... To repay approximately $66.3 million in long term
debt, to fund working capital and for general
corporate purposes. See "Use of Proceeds".
Proposed New York Stock Exchange
symbol................................ AST
</TABLE>
- ------------------------
(1) The offerings of Class A Common Stock by the U.S. Underwriters and the
International Underwriters are referred to herein as the "Offerings".
(2) Excludes 329,762 shares of Class B Common Stock issuable at an average
exercise price of $12.71 on the exercise of stock options granted under the
Company's option plans and outstanding as of September 30, 1997. See
"Management -- Incentive and Benefit Plans" and "Description of Capital
Stock".
CONCURRENT NOTES OFFERING
Concurrent with the Offerings, the Company is planning to offer $100
million aggregate principal amount of its senior unsecured Notes due 2007 (the
"Notes", and the offering of such Notes, the "Notes Offering") by a separate
offering memorandum. Because the Notes Offering is subject to a variety of
market, economic and other factors, there can be no assurance that the Notes
Offering will be consummated. The closing of the Notes Offering is conditioned
upon the closing of the Offerings, but not vice versa. It is expected that the
Notes Offering would be closed shortly after the closing of the Offerings. See
"Use of Proceeds" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources".
5
<PAGE> 7
SUMMARY FINANCIAL AND OPERATING DATA
The summary statement of operations and balance sheet data for the years
ended March 31, 1994, 1995, 1996 and 1997 are derived from the audited financial
statements of the Company. The same data for the year ended March 31, 1993 have
been compiled from the Company's financial statements, combining the periods for
the nine months ended December 31, 1992 which was unaudited, and the three
months ended March 31, 1993 which was audited. The data for the six month
periods ended September 30, 1996 and 1997 have been derived from the unaudited
financial statements for those periods. The results of the six months ended
September 30, 1997 are not necessarily indicative of the results to be expected
for the fiscal year ending March 31, 1998. The unaudited financial data include,
in the opinion of management, all adjustments consisting only of normal
recurring accruals necessary to present fairly the data for such periods.
Certain reclassifications have been made to the March 31, 1994 financial data to
conform with the financial data of the other periods presented. The following
financial data for the years ended March 31, 1995, 1996 and 1997, and for the
six month period ended September 30, 1996 and 1997 are qualified in their
entirety by reference to the more detailed Financial Statements and Notes
thereto, included elsewhere in this Prospectus, and should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
-------------------------------------------------------------- -----------------------------
1993 1994 1995 1996 1997 1996 1997
---------- ---------- ---------- ---------- ---------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AND AVERAGE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales........................ $ 479,971 $ 547,118 $ 639,908 $ 628,404 $ 617,289 $327,908 $343,805
Operating expenses:
Cost of sales.................. 431,288 498,692 545,725 533,965 531,190 285,173 277,251
Selling and administrative..... 25,285 27,293 29,959 29,605 29,068 14,261 12,834
Depreciation................... 15,496 15,369 14,046 14,619 16,654 8,091 9,643
Amortization of goodwill....... 3,017 4,061 4,130 4,130 4,130 2,065 2,065
Other operating expenses(1).... 9,000 10,920 -- 16,013 -- -- --
---------- ---------- ---------- ---------- ---------- -------- --------
$ 484,086 $ 556,335 $ 593,860 $ 598,332 $ 581,042 $309,590 $301,793
Income (loss) from operations.... (4,115) (9,217) 46,048 30,072 36,247 18,318 42,012
Other expense:
Interest....................... 37,534 21,027 23,330 22,000 19,473 9,898 10,115
Amortization of deferred
financing costs.............. 1,548 2,552 2,863 1,956 934 467 353
---------- ---------- ---------- ---------- ---------- -------- --------
$ 39,082 $ 23,579 $ 26,193 $ 23,956 $ 20,407 $ 10,365 $ 10,468
Income (loss) before income taxes
(benefit) & extraordinary
item........................... (43,197) (32,796) 19,855 6,116 15,840 7,953 31,544
Income taxes (benefit)........... (13,711) (10,833) 9,354 3,996 7,788 3,907 13,108
---------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) before
extraordinary item............. $ (29,486) $ (21,963) $ 10,501 $ 2,120 $ 8,052 $ 4,046 $ 18,436
Extraordinary item, net of income
tax benefit(2)................. (4,185) (748) -- -- -- -- --
---------- ---------- ---------- ---------- ---------- -------- --------
Net income (loss)................ $ (33,671) $ (22,711) $ 10,501 $ 2,120 $ 8,052 $ 4,046 $ 18,436
========== ========== ========== ========== ========== ======== ========
Earnings (loss) per share(3)..... $ (2.27) $ 1.05 $ 0.21 $ 0.80 $ 0.40 $ 1.83
========== ========== ========== ========== ======== ========
BALANCE SHEET DATA
(end of period):
Working capital.................. $ 88,805 $ 111,666 $ 121,364 $ 114,521 $ 108,727 $ 99,816 $111,852
Total assets..................... 495,884 523,706 561,748 554,896 535,685 534,961 543,400
Current liabilities.............. 59,530 76,006 102,080 85,588 73,792 75,208 80,841
Long-term debt (less current
portion)....................... 212,002 247,128 243,030 252,525 237,474 239,245 216,835
Stockholders' equity............. 147,711 124,999 137,750 141,747 150,564 146,192 169,410
SELECTED OPERATING DATA:
Shipped Tons
Stock rebar.................... 434 466 536 508 472 242 291
Merchant bar................... 427 468 549 544 512 253 283
Rod............................ 144 121 129 133 105 62 48
---------- ---------- ---------- ---------- ---------- -------- --------
Subtotal mill finished goods... 1,005 1,055 1,214 1,185 1,089 557 622
Fabricated rebar............... 317 330 347 315 326 170 174
Billets........................ 232 263 141 175 281 188 106
---------- ---------- ---------- ---------- ---------- -------- --------
Total shipped tons............. 1,554 1,648 1,702 1,675 1,696 915 902
========== ========== ========== ========== ========== ======== ========
Average mill finished goods
prices (per ton)............... $ 284 $ 310 $ 342 $ 337 $ 333 $ 332 $ 349
Average scrap cost (per ton)..... 94 119 130 131 130 133 131
Average metal spread (per
ton)(4)........................ 190 191 212 206 203 199 218
Average mill conversion costs
(per ton)...................... 140 146 135 135 138 140 128
</TABLE>
6
<PAGE> 8
- ---------------
(1) In September 1992, the Company recorded a $9.0 million charge for a
settlement related to a Florida Department of Transportation epoxy coated
rebar claim. In the fiscal year ended March 31, 1994, the Company recorded a
$10.3 million charge related to the closing of the Tampa melt shop and a
$0.6 million charge related to closing the Fort Myers, Florida and
Woodbridge, Virginia fabrication shop facilities. In the fiscal year ended
March 31, 1996, the Company recorded a $15.0 million charge related to the
closing of the Tampa rolling mill and a $1.0 million charge for the closure
of other facilities.
(2) In December 1992, the Company repaid $239.6 million of existing debt which
had a carrying value of $233.0 million resulting in a loss of $4.2 million
net of income tax benefit. In the fiscal year ended March 31, 1994, the
Company incurred a charge of $748,000, net of income tax benefits, as a
result of redeeming $20 million of the 14.5% subordinated debentures at a
premium of 6% or $1.2 million.
(3) Earnings (loss) per share for the year ended March 31, 1993 is not presented
because ownership of the Company changed in late calendar 1992. For
comparative purposes, loss per share for the entire period would have been
$(3.37) assuming 10,000,000 shares of stock outstanding throughout the
entire year.
(4) Average metal spread equals Average mill finished goods prices minus Average
scrap costs.
7
<PAGE> 9
RISK FACTORS
An investment in the shares of Class A Common Stock offered hereby involves
a high degree of risk. Prospective investors should carefully consider the
following risk factors, as well as the other information in this Prospectus,
before investing in shares of the Class A Common Stock offered hereby. This
Prospectus contains certain forward-looking statements that involve risks and
uncertainties. Future events and the Company's actual results could differ
materially from the results reflected in these forward-looking statements.
HIGHLY CYCLICAL INDUSTRY
The domestic steel industry and the Company's business are highly cyclical
in nature. The Company is particularly sensitive to the presence or absence of
sustained economic growth and accompanying construction activity since rebar is
used to reinforce concrete in the construction of high rise commercial
buildings, highways, bridges and dams, and other public and private construction
projects. Demand for the Company's merchant bar products is tied less to
construction activity and more to general economic activity. Future economic
downturns or a slowdown in construction activity could adversely affect the
Company's results of operations and financial condition.
AVAILABILITY AND COST OF RAW MATERIALS
The Company's principal raw material is ferrous scrap metal derived from,
among other sources, junked automobiles, railroad cars, appliances and
demolition scrap. Scrap comprised approximately 42% of the Company's cost of
sales in fiscal 1997. The purchase price for scrap is subject to market forces
beyond the control of the Company, including demand by domestic and foreign
steel producers, freight costs, speculation by scrap brokers and other
conditions. As minimills have steadily increased their share of supplying U.S.
steel demand, demand for scrap has also increased.
The ability to pass on increases in raw material prices to the Company's
customers is, to a large extent, dependent on market conditions. There may be
periods of time in which increases in raw material prices are not recoverable by
the Company due to an inability to increase the selling prices of its products
because of weakness in the demand for, or an oversupply of, such products.
Increases in raw material prices, during such periods, may have a material
adverse effect on the Company's results of operations and financial condition.
See "Business -- Raw Materials".
The Company buys substantially all of the scrap it requires through one
broker, The David J. Joseph Company, which also operates shredders for the
Company at the Jacksonville and Jackson mills. The Company believes that it
could readily obtain adequate supplies of scrap, if warranted, from a number of
other sources at competitive prices.
HIGHLY COMPETITIVE INDUSTRY; EXCESS PRODUCTION CAPACITY
The domestic and foreign steel industries are characterized by intense
competition. The Company competes primarily with domestic minimill producers of
commodity grade steel bar products, although foreign competition can also be a
factor depending on the level of domestic prices, foreign government subsidies
and exchange rates. The Company competes primarily on the basis of price,
product quality, and reliability of service and delivery. The Company believes
that its competitive production costs, the proximity of its mills to major
markets and customers, and its long-standing reputation for quality products and
service will ensure its competitive position in the industry, although there can
be no assurance that competition will not have an adverse effect in the future.
Overall consumption of steel products in the U.S. has not grown with the
economy as a whole during the past decade. Although the operations of domestic
steel producers have been scaled back as a result of corporate reorganizations
and bankruptcies, there still exists, taking into account current levels of
imports and announced capacity additions, significant excess production capacity
in the domestic steel
8
<PAGE> 10
industry as a whole. There can be no assurance that such excess production
capacity will not have a material adverse effect on the Company's results of
operation and financial condition.
SEASONALITY; VARIABILITY OF QUARTERLY RESULTS
The Company has historically experienced and expects to continue to
experience seasonal fluctuations in its revenues and net income. Revenues can
fluctuate significantly between quarters due to factors such as the seasonal
slowdown in the construction industry, which is an important market for the
Company's finished steel products. In the past, the Company has generally
experienced its lowest sales during the third and fourth quarters of its fiscal
year.
DEPENDENCE ON SOUTHEASTERN MARKET
Sales to customers in the southeastern U.S. in recent years have accounted
for approximately one-third of the Company's total sales. Due to the relatively
high transport costs associated with the delivery of the Company's products
beyond this region, the Company does not believe that it can expand sales
significantly outside of the region without the acquisition of additional
facilities. Accordingly, the Company believes the economic condition of this
regional market will continue to have a material effect on sales and
profitability of the Company.
POTENTIAL COSTS OF ENVIRONMENTAL COMPLIANCE
The Company is subject to federal, state and local laws and regulations
governing the remediation of environmental contamination associated with past
releases of hazardous substances and to extensive federal, state, and local laws
and regulations governing discharges to the air and water as well as the
handling and disposal of solid and hazardous wastes and employee health and
safety (collectively, "Environmental Laws"). Governmental authorities have the
power to enforce compliance with these requirements, and violators may be
subject to civil or criminal penalties, injunctions or both. Third parties also
may have the right to sue for damages to enforce compliance.
The electric arc furnaces at each of the Company's four mills are
classified as generators of hazardous waste because the melting operation
produces dust containing heavy metals (principally zinc, lead, chromium and
cadmium). The Company also owns or has owned properties, and conducts or has
conducted operations at properties, which have been assessed as contaminated
with hazardous or other regulated substances, or as otherwise requiring remedial
action under Environmental Laws. Moreover, environmental legislation has been
enacted, and may in the future be enacted, to create liability for past actions
that were lawful at the time taken but that have been found to affect the
environment and to create public rights of action for environmental conditions
and activities. Under some of these Environmental Laws a company that has sent
waste to a third party waste disposal site could be held liable for the entire
cost of remediating such site regardless of fault or the lawfulness of the
original disposal activity.
Over the past three years, the Company has spent in excess of $30 million
for remediation under Environmental Laws for certain on-site and off-site
locations. The Company has estimated its potential costs for further remediation
under Environmental Laws at on-site and off-site locations to be approximately
$14.9 million and has included this amount in the Company's recorded liabilities
as of September 30, 1997. Although the Company has established reserves for
environmental remediation, there is no assurance regarding the cost of remedial
action authorities might eventually require, or that additional environmental
hazards, requiring further remedial expenditures, might not be assessed by these
authorities or private parties. Accordingly the costs of remedial measures may
exceed the amounts reserved. In addition, the Company may be subject to legal
proceedings brought by private parties or governmental agencies with respect to
environmental matters.
Although it is the Company's policy to comply with all Environmental Laws
and the Company believes that it is currently in material compliance with all
Environmental Laws, there can be no assurance that material environmental
liabilities will not be incurred by the Company in the future or that future
9
<PAGE> 11
compliance with Environmental Laws (whether those currently in effect or enacted
in the future) will not require additional expenditures by the Company or
require changes to the Company's current operations, any of which could have a
material adverse effect on the Company's results of operations and financial
condition. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Compliance with Environmental Laws and Regulations" and
"Note E to the September 30, 1997 unaudited condensed financial
statements -- Environmental".
VOTING CONTROL BY PRINCIPAL STOCKHOLDER
Upon completion of the Offerings, Kyoei, through its wholly owned
subsidiary, FLS Holdings Inc. ("FLS"), will be the beneficial owner of 9,000,000
shares of the Class B Common Stock, which Class B Common Stock is entitled to
two votes per share and will represent approximately 74.4% of the combined
voting power of all classes of voting stock (72.7% if the Underwriters'
over-allotment options are exercised in full). As a result, Kyoei has, and will
continue to have, sufficient voting power to elect the entire Board of Directors
of the Company and, in general, to determine (without the consent of the
Company's other stockholders) the outcome of any corporate transaction or other
matters submitted to the stockholders for approval. In addition, pursuant to
terms of the Company's Articles of Incorporation, additional shares of Class B
Common Stock may be issued to Kyoei or its wholly-owned subsidiaries. See
"Management", "Principal Stockholders" and "Description of Capital Stock".
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS
Although the Company's business strategy includes growing its business
through acquisitions, there can be no assurance that the Company will be able to
identify attractive or willing acquisition candidates, or that the Company will
be able to complete acquisitions if such candidates are identified. Future
acquisitions by the Company may result in potentially dilutive issuances of
equity securities, and the incurrence of additional debt and amortization
expenses related to goodwill and other intangible assets, each of which could
materially adversely affect the Company's business and results of operations. In
addition, acquisitions involve numerous risks, including difficulties in
assimilating the operations, products and personnel of the acquired company, the
diversion of management's attention from other business concerns, risks of
entering markets in which the Company has no direct prior experience and the
potential loss of key employees of both the acquired company and the Company.
The Company has no present agreements or commitments with respect to any
material acquisitions of other businesses, products or assets or present
intention to apply any portion of the proceeds of the Offerings to any such
acquisition.
NO PRIOR MARKET FOR CLASS A COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offerings, there has been no public market for the Class A
Common Stock, and there can be no assurance that an active market will develop
or be sustained after the completion of the Offerings. Consequently, the initial
public offering price of the Class A Common Stock will be determined by
negotiations among the Company and the Underwriters. See "Underwriting" for a
description of the factors to be considered in determining the initial public
offering price.
The market price of the Class A Common Stock may be significantly affected
by, and could be subject to significant fluctuations in response to, such
factors as the Company's operating results, changes in any earnings estimates
publicly announced by the Company or by securities analysts, announcements of
significant business developments by the Company or its competitors, other
developments affecting the Company, its clients or its competitors, and various
factors affecting the Company's business, the financial markets or the economy
in general, some of which may be unrelated to the Company's performance. In
addition, the stock market has experienced a high level of price and volume
volatility, and market prices for the stock of many companies, especially
companies that have recently completed initial public offerings, have
experienced wide price fluctuations not necessarily related to the operating
performance of such companies. Because the number of shares of Class A Common
Stock
10
<PAGE> 12
being offered hereby is small relative to the average number of shares traded of
many other publicly held companies, the market price of Class A Common Stock may
be more susceptible to fluctuation.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of a substantial number of shares of the Class A Common Stock
in the public market could adversely affect the market price of the Class A
Common Stock and could impair the Company's ability to raise capital through the
sale of equity or equity-related securities. Upon completion of the Offerings,
the Company will have 3,950,000 shares of Class A Common Stock outstanding and
10,114,385 shares of Class B Common Stock outstanding. All shares of Class B
Common Stock are convertible into shares of Class A Common Stock on a one-for-
one basis. Of such shares, 72,508 shares of Class B Common Stock, representing
less than 1.0% of the issued and outstanding shares of Common Stock, will be
freely tradeable without restriction or further registration under the
Securities Act, unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act ("Rule 144"). The remaining
10,041,877 shares of Class B Common Stock, representing approximately 71.4% of
the issued and outstanding shares of Common Stock (approximately 68.5% if the
Underwriters' over-allotment options are exercised in full), are beneficially
owned by affiliates of the Company and are therefore "restricted securities" as
that term is defined in Rule 144 and as such are subject to certain holding
period, volume limitation and other restrictions prescribed by Rule 144. The
Company, certain of its executive officers and Kyoei have agreed that, during
the period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of this Prospectus, they will not
offer, sell, contract to sell, pledge, hypothecate, grant any option, right or
warrant to purchase, or otherwise dispose of, directly or indirectly, (which
shall be deemed to include, without limitation, the entering into of a
cash-settled or Common Stock settled derivative instrument) any shares of Common
Stock, any securities of the Company that are substantially similar to the Class
A Common Stock or any securities that are convertible into or exchangeable for,
or that represent the right to receive, Common Stock, or any such substantially
similar securities, (other than pursuant to employee stock option plans existing
on, or upon the conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Prospectus), without the prior written
consent of the representatives, except for the shares of Class A Common Stock
offered in connection with the Offerings. Upon expiration of such 180 day
period, an aggregate of 10,041,877 shares will be eligible for sale subject to
the timing, volume and manner of sale restrictions of Rule 144. See "Shares
Eligible for Future Sale" and "Underwriting".
IMMEDIATE AND SUBSTANTIAL DILUTION
Investors in the Offerings will experience immediate and substantial
dilution in net tangible book value per share of Common Stock of $10.00 per
share. In addition, any future issuance of shares of Common Stock or the grant
of options to purchase Common Stock could cause further dilution. See
"Dilution".
11
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the Offerings (based on an assumed
offering price of $21.50 per share and after deducting assumed underwriting
discounts and estimated offering expenses) are estimated to be approximately
$78.2 million ($90.0 million if the Underwriters' over-allotment options are
exercised in full). The Company intends to use $50.0 million of the net proceeds
of the Offerings to repay all of the Company's Subordinated Intercompany Note.
The balance of the estimated net proceeds of the Offerings will be used first to
repay the outstanding balance under the Company's Revolving Credit Agreement
(currently estimated to be $16.3 million) and then to fund working capital and
for general corporate purposes.
The $50.0 million principal amount of the Company's Subordinated
Intercompany Note outstanding as of September 30, 1997 bears interest calculated
using a pass-through provision based on notes held by FLS at a weighted average
rate of LIBOR plus 138 basis points, or 7.4% per annum as of such date, and
matures in December 2002. Indebtedness under the Revolving Credit Agreement
bears interest at a per annum rate equal to one of several rate options (LIBOR,
Fed Funds or Cost of Funds), depending on the debt facility selected by the
Company, plus an applicable margin determined by tests of performance from time
to time. The indebtedness outstanding as of September 30, 1997 under the
Revolving Credit Agreement bears interest at a rate of 7.3% per annum as of such
date. The Revolving Credit Agreement expires in June 1999. The unpaid balance
under the Revolving Credit Agreement was $31.0 million as of September 30, 1997.
Concurrent with the Offerings, the Company is planning to offer $100
million aggregate principal amount of the Notes by a separate offering
memorandum. Because the Notes Offering is subject to a variety of market,
economic and other factors, there can be no assurance that the Notes Offering
will be closed. The closing of the Notes Offering is conditioned upon the
closing of the Offerings, but not vice versa. It is expected that the Notes
Offering would be closed shortly after the closing of the Offerings. The net
proceeds to the Company from the Notes Offering (after deduction of assumed
underwriting discounts and the Company's estimated offering expenses), if
closed, are estimated to be $97.6 million. and will be used together with
approximately $4.3 million of additional cash drawn from the Revolving Credit
Agreement to redeem the Company's 11 1/2% First Mortgage Notes due December 15,
2000 (the "First Mortgage Notes") at a redemption price of 101.916% of their
principal amount. Although there can be no assurance of the actual interest rate
of the Notes (the establishment of which is subject to a variety of market,
economic and other factors), the Company currently anticipates that the Notes
will bear interest at a lower rate than the First Mortgage Notes. Deferred
financing costs related to the First Mortgage Notes are expected to be written
off at the time the First Mortgage Notes are redeemed. The Company also expects
that the Notes will be outstanding for up to 50 days before redemption of the
First Mortgage Notes is completed. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources".
DIVIDEND POLICY
Prior to the completion of the Offerings, the Company intends to declare
and pay a special dividend of approximately $6.1 million to its then current
stockholders. The Company has not recently paid regular cash dividends on its
Common Stock, but intends to establish a policy to declare and pay regular cash
dividends each fiscal quarter. The Company currently anticipates that the first
regular cash dividend will be declared within six months following the
completion of the Offerings in the amount of $.025 per share of Common Stock.
However, any determination to pay dividends will be at the discretion of the
Company's Board of Directors and necessarily will be dependent upon the
Company's results of operations, financial condition, contractual restrictions,
restrictions imposed by applicable law and other factors deemed relevant by the
Board of Directors, and the Company may change its dividend policy or cease
paying dividends at any time.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997 and as adjusted as of such date to reflect (i) the
recapitalization of the Company to create shares of Class A Common Stock and
Class B Common Stock of which 100,000,000 and 22,000,000 will be authorized,
respectively, (ii) the payment prior to the completion of the Offerings of a
dividend of approximately $6.1 million, (iii) the application of the estimated
net proceeds from the issuance and sale by the Company of the 3,950,000 shares
of Class A Common Stock in the Offerings (at an assumed offering price of $21.50
per share) as described in "Use of Proceeds" and (iv) the issuance and sale of
the Notes pursuant to the Notes Offering and the application of the net proceeds
therefrom as described in "Use of Proceeds". The table should be read in
conjunction with the Financial Statements and Notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
------------------------------------------------------
AS ADJUSTED FOR
-------------------------------------
RECAPITALIZATION,
RECAPITALIZATION, DIVIDEND,
DIVIDEND OFFERINGS AND
ACTUAL AND OFFERINGS NOTES OFFERING
-------------- ----------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt (including current portion of long-term
debt)................................................... $ 5,687 $ 5,687 $ 5,687
======== ======== ========
Long-term debt (less current portion)
First Mortgage Notes.................................... $100,000 $100,000 $ --
Notes................................................... -- -- 100,000
Revolving Credit Agreement.............................. 30,960 20,729 25,045
Industrial Revenue Bonds................................ 35,875 35,875 35,875
Subordinated Intercompany Note.......................... 50,000 -- --
-------- -------- --------
Total long-term debt............................ $216,835 $156,604 $160,920
Stockholders' equity(1):
Class A Common Stock, $0.01 par value, 100,000,000
shares authorized; no shares issued and outstanding;
3,950,000 shares as adjusted......................... -- 40 40
Class B Common Stock, $0.01 par value, 22,000,000 shares
authorized; 10,114,603 shares issued and
outstanding.......................................... 101 101 101
Capital in excess of par................................ 157,297 235,437 235,437
Retained earnings....................................... 14,108 8,039 5,806
Deferred compensation................................... (2,096) (2,096) (2,096)
-------- -------- --------
Total stockholders' equity...................... $169,410 $241,521 $239,288
-------- -------- --------
Total capitalization...................................... $386,245 $398,125 $400,208
======== ======== ========
</TABLE>
- ---------------
(1) Excludes 329,762 shares of Class B Common Stock issuable at an average
exercise price of $12.71 on the exercise of stock options granted under the
Company's option plans and outstanding as of September 30, 1997. See
"Management -- Incentive and Benefit Plans" and "Description of Capital
Stock".
13
<PAGE> 15
DILUTION
The Company's net tangible book value as of September 30, 1997 was $83.5
million, or $8.25 per share, based on 10,114,603 shares of Common Stock
outstanding. Net tangible book value per share represents the amount of the
Company's total tangible assets less its total liabilities, divided by the total
number of shares of Common Stock outstanding. After giving effect to the sale of
the 3,950,000 shares of Class A Common Stock in the Offerings and the
application of the estimated net proceeds therefrom, the pro forma net tangible
book value of the Company as of September 30, 1997 would have been $161.7
million or $11.50 per share of Common Stock. This represents an immediate
increase in net tangible book value of $3.25 per share to existing stockholders
and an immediate dilution of $10.00 per share to new investors purchasing shares
of Class A Common Stock in the Offerings. The following illustrates the per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 21.50
Net tangible book value per share before the Offerings.... $ 8.25
Increase per share attributable to new investors.......... 3.25
-------
Pro forma net tangible book value per share after the
Offerings................................................. $ 11.50
-------
Dilution of net tangible book value per share to new
investors(1).............................................. $ 10.00
=======
</TABLE>
- ---------------
(1) Dilution is determined by subtracting pro forma net tangible book value per
share after the Offerings from the assumed initial public offering price per
share. The foregoing excludes 329,762 shares of Class B Common Stock
issuable at an average exercise price of $12.71 on the exercise of stock
options granted under the Company's option plans and outstanding as of
September 30, 1997. See "Management -- Incentive and Benefit Plans" and
"Description of Capital Stock". To the extent such options are exercised
upon vesting, there will be further dilution to new investors purchasing
shares of Class A Common Stock in the Offerings.
14
<PAGE> 16
SELECTED FINANCIAL DATA
The selected statement of operations and balance sheet data for the years
ended March 31, 1994, 1995, 1996 and 1997 are derived from the audited financial
statements of the Company. The same data for the year ended March 31, 1993 have
been compiled from the Company's financial statements, combining the periods for
the nine months ended December 31, 1992 which was unaudited, and the three
months ended March 31, 1993 which was audited. The data for the six month
periods ended September 30, 1996 and 1997 have been derived from the unaudited
financial statements for those periods. The results of the six months ended
September 30, 1997 are not necessarily indicative of the results to be expected
for the fiscal year ending March 31, 1998. The unaudited financial data include,
in the opinion of management, all adjustments consisting only of normal
recurring accruals necessary to present fairly the data for such periods.
Certain reclassifications have been made to the March 31, 1994 financial data to
conform with the financial data of the other periods presented. The following
financial data for the years ended March 31, 1995, 1996 and 1997 and for the six
month period ended September 30, 1996 and 1997 are qualified in their entirety
by reference to the more detailed Financial Statements and Notes thereto,
included elsewhere in this Prospectus, and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
-------------------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1996 1997
---------- ---------- ---------- ---------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND AVERAGE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales.................................. $ 479,971 $ 547,118 $ 639,908 $ 628,404 $ 617,289 $327,908 $343,805
Operating expenses:
Cost of sales............................ 431,288 498,692 545,725 533,965 531,190 285,173 277,251
Selling and administrative............... 25,285 27,293 29,959 29,605 29,068 14,261 12,834
Depreciation............................. 15,496 15,369 14,046 14,619 16,654 8,091 9,643
Amortization of goodwill................. 3,017 4,061 4,130 4,130 4,130 2,065 2,065
Other operating expenses(1).............. 9,000 10,920 -- 16,013 -- -- --
---------- ---------- ---------- ---------- ---------- -------- --------
$ 484,086 $ 556,335 $ 593,860 $ 598,332 $ 581,042 $309,590 $301,793
Income (loss) from operations.............. (4,115) (9,217) 46,048 30,072 36,247 18,318 42,012
Other expense:
Interest................................. 37,534 21,027 23,330 22,000 19,473 9,898 10,115
Amortization of deferred financing
costs.................................. 1,548 2,552 2,863 1,956 934 467 353
---------- ---------- ---------- ---------- ---------- -------- --------
$ 39,082 $ 23,579 $ 26,193 $ 23,956 $ 20,407 $ 10,365 $ 10,468
Income (loss) before income taxes (benefit)
& extraordinary item..................... (43,197) (32,796) 19,855 6,116 15,840 7,953 31,544
Income taxes (benefit)..................... (13,711) (10,833) 9,354 3,996 7,788 3,907 13,108
---------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) before extraordinary item.... $ (29,486) $ (21,963) $ 10,501 $ 2,120 $ 8,052 $ 4,046 $ 18,436
Extraordinary item, net of income tax
benefit(2)............................... (4,185) (748) -- -- -- -- --
---------- ---------- ---------- ---------- ---------- -------- --------
Net income (loss).......................... $ (33,671) $ (22,711) $ 10,501 $ 2,120 $ 8,052 $ 4,046 $ 18,436
========== ========== ========== ========== ========== ======== ========
Earnings (loss) per share(3)............... $ (2.27) $ 1.05 $ 0.21 $ 0.80 $ 0.40 $ 1.83
========== ========== ========== ========== ======== ========
BALANCE SHEET DATA
(end of period):
Working capital............................ $ 88,805 $ 111,666 $ 121,364 $ 114,521 $ 108,727 $ 99,816 $111,852
Total assets............................... 495,884 523,706 561,748 554,896 535,685 534,961 543,400
Current liabilities........................ 59,530 76,006 102,080 85,588 73,792 75,208 80,841
Long-term debt (less current portion)...... 212,002 247,128 243,030 252,525 237,474 239,245 216,835
Stockholders' equity....................... 147,711 124,999 137,750 141,747 150,564 146,192 169,410
SELECTED OPERATING DATA:
Shipped Tons
Stock rebar.............................. 434 466 536 508 472 242 291
Merchant bar............................. 427 468 549 544 512 253 283
Rod...................................... 144 121 129 133 105 62 48
---------- ---------- ---------- ---------- ---------- -------- --------
Subtotal mill finished goods............. 1,005 1,055 1,214 1,185 1,089 557 622
</TABLE>
15
<PAGE> 17
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
-------------------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1996 1997
---------- ---------- ---------- ---------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND AVERAGE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Fabricated rebar......................... 317 330 347 315 326 170 174
Billets.................................. 232 263 141 175 281 188 106
---------- ---------- ---------- ---------- ---------- -------- --------
Total shipped tons....................... 1,554 1,648 1,702 1,675 1,696 915 902
========== ========== ========== ========== ========== ======== ========
Average mill finished goods prices (per
ton)..................................... $ 284 $ 310 $ 342 $ 337 $ 333 $ 332 $ 349
Average scrap cost (per ton)............... 94 119 130 131 130 133 131
Average metal spread (per ton)(4).......... 190 191 212 206 203 199 218
Average mill conversion costs (per ton).... 140 146 135 135 138 140 128
</TABLE>
- ---------------
(1) In September 1992, the Company recorded a $9.0 million charge for a
settlement related to a Florida Department of Transportation epoxy coated
rebar claim. In the fiscal year ended March 31, 1994, the Company recorded a
$10.3 million charge related to the closing of the Tampa melt shop and a
$0.6 million charge related to closing the Fort Myers, Florida and
Woodbridge, Virginia fabrication shop facilities. In the fiscal year ended
March 31, 1996, the Company recorded a $15.0 million charge related to the
closing of the Tampa rolling mill and a $1.0 million charge for the closure
of other facilities.
(2) In December 1992, the Company repaid $239.6 million of existing debt which
had a carrying value of $233.0 million resulting in a loss of $4.2 million
net of income tax benefit. In the fiscal year ended March 31, 1994, the
Company incurred a charge of $748,000, net of income tax benefits, as a
result of redeeming $20 million of the 14.5% subordinated debentures at a
premium of 6% or $1.2 million.
(3) Earnings (loss) per share for the year ended March 31, 1993 is not presented
because ownership of the Company changed in late calendar 1992. For
comparative purposes, loss per share for the entire period would have been
$(3.37) assuming 10,000,000 shares of stock outstanding throughout the
entire year.
(4) Average metal spread equals Average mill finished goods prices minus Average
scrap cost.
16
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains certain forward-looking statements that are based
on the beliefs of the Company's management, as well as assumptions made by, and
information currently available to, the Company's management. Such statements
include, among others, (i) the highly cyclical nature and seasonality of the
steel industry, (ii) the fluctuations in the cost and availability of raw
materials, (iii) the possibility of excess production capacity, (iv) the
potential costs of environmental compliance, (v) the risks associated with
potential acquisitions, (vi) further opportunities for industry consolidation,
(vii) the impact of inflation and (viii) the fluctuations in the cost of
electricity. Because such statements involve risks and uncertainties, actual
actions and strategies and the timing and expected results thereof may differ
materially from those expressed or implied by such forward-looking statements,
and the Company's future results, performance or achievements could differ
materially from those expressed in, or implied by, any such forward-looking
statements. Factors that could cause or contribute to such material differences
include, but are not limited to, those discussed under "Risk Factors". The
following presentation of management's discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the Company's Financial Statements and the Notes thereto, and other financial
information, included elsewhere in this Prospectus.
GENERAL
The results of operations of the Company are largely dependent on the level
of construction and general economic activity in the U.S. The Company's sales
are seasonal with sales in the Company's fiscal first and second quarters
generally stronger than the rest of the year. The Company's cost of sales
includes the cost of its primary raw material, steel scrap, the cost of
converting the scrap to finished steel products, the cost of warehousing and
handling finished steel products and freight costs. The following table sets
forth information regarding the historical results of operations:
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
------------------------------ -------------------
1995 1996 1997 1996 1997
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C>
Net sales........................................ $639,908 $628,404 $617,289 $327,908 $343,805
Cost of sales.................................... 545,725 533,965 531,190 285,173 277,251
Cost of sales as a percent of net sales.......... 85.3% 85.0% 86.1% 87.0% 80.6%
Selling and administrative....................... 29,959 29,605 29,068 14,261 12,834
Depreciation..................................... 14,046 14,619 16,654 8,091 9,643
Amortization of goodwill......................... 4,130 4,130 4,130 2,065 2,065
Other operating expenses......................... -- 16,013 -- -- --
-------- -------- -------- -------- --------
Income from operations................. $ 46,048 $ 30,072 $ 36,247 $ 18,318 $ 42,012
Interest expense................................. 23,330 22,000 19,473 9,898 10,115
Amortization of deferred financing costs......... 2,863 1,956 934 467 353
Income taxes..................................... 9,354 3,996 7,788 3,907 13,108
-------- -------- -------- -------- --------
Net income............................. $ 10,501 $ 2,120 $ 8,052 $ 4,046 $ 18,436
======== ======== ======== ======== ========
</TABLE>
17
<PAGE> 19
SIX MONTHS ENDED SEPTEMBER 30, 1997 VERSUS SIX MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
TONS SHIPPED (THOUSANDS) AVERAGE SELLING PRICES (PER TON)
------------------------- ---------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- ---------------------------------
1996 1997 1996 1997
----- ----- -------- --------
<S> <C> <C> <C> <C>
Mill Finished Goods:
Stock Rebar............................ 242 291 $313 $334
Merchant Bar........................... 253 283 354 367
Rods................................... 62 48 322 344
--- --- ---- ----
557 622 332 349
Fabricated Rebar......................... 170 174 453 457
Billets.................................. 188 106 225 232
--- ---
Total.......................... 915 902
=== ===
</TABLE>
NET SALES. Net sales in the six months ended September 30, 1997 increased
approximately 5% from the same period last year as both prices and volumes of
mill finished goods increased. Average mill finished goods prices increased over
5%. Overall shipped tonnage was down over 1% due to a decline in semi-finished
billet tons shipped, however shipments of higher margin mill finished goods
increased over 11%. The volume shift towards higher margin finished goods and
away from semi-finished billets is a direct result of higher rolling mill
production levels from completion of mill modernization projects at the
Charlotte and Jackson mills.
COST OF SALES. Increased production levels, lower average unit costs and
the shift towards higher margin finished steel products resulted in higher
margins. Cost of sales declined from 87% to 81% of net sales in the six months
ended September 30, 1997.
SELLING AND ADMINISTRATIVE. Selling and administrative expenses for the
six months ended September 30, 1997 include a $3.3 million charge for the
disposition of environmental waste, offset by $6.8 million received in
connection with an insurance settlement related to cleanup of the 1995 melting
of radioactive scrap at the Jackson mill. The Company also incurred $1.4 million
in startup expenses associated with its facility at the Jackson mill that is
designed to utilize a technology developed by a third party to recycle the
Company's electric arc furnace/emission control dust ("EC dust") that is
currently regulated as a hazardous waste. See "Business -- Environmental
Regulation".
DEPRECIATION. Depreciation expense of $9.6 million for the six months
ended September 30, 1997 increased 19% over the same period last year due to
capital improvement spending of $19.3 million since September 30, 1996.
FISCAL 1997 VERSUS FISCAL 1996
<TABLE>
<CAPTION>
TONS SHIPPED (THOUSANDS) AVERAGE SELLING PRICES (PER TON)
------------------------- ---------------------------------
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
------------------------- ---------------------------------
1996 1997 1996 1997
----- ----- -------- --------
<S> <C> <C> <C> <C>
Mill Finished Goods:
Stock Rebar......................... 508 472 $310 $316
Merchant Bar........................ 544 512 362 352
Rods................................ 133 105 336 322
----- ----- ---- ----
1,185 1,089 337 333
Fabricated Rebar...................... 315 326 460 451
Billets............................... 175 281 233 227
----- -----
Total....................... 1,675 1,696
===== =====
</TABLE>
NET SALES. Net sales in fiscal 1997 declined 1.8% from fiscal 1996 as both
prices and sales volumes of finished goods declined. Mill finished product
prices declined $4 per ton, while fabricated rebar prices declined $9 per ton.
Mill finished steel production and shipment volumes were limited by the
18
<PAGE> 20
start-up of major capital improvement projects at the Charlotte and Jackson
rolling mills. As a result, shipments were more heavily weighted in favor of
lower-priced semi-finished billet products during the equipment installation and
start-up period. Fabricating revenues improved modestly as volume increases
offset the decline in price.
COST OF SALES. Cost of sales were 86.1% of net sales in fiscal 1997 versus
85.0% of net sales in fiscal 1996 due to the higher costs associated with the
decline in production tonnage at the Charlotte and Jackson mills during the
startup of capital projects for the rolling mills. Average scrap costs were down
$1 per ton for the year due to a fourth quarter decline in scrap prices.
SELLING AND ADMINISTRATIVE. Selling and administrative expenses remained
constant at 4.7% of sales in fiscal 1997 as compared to fiscal 1996.
DEPRECIATION. Depreciation increased to $16.7 million in fiscal 1997 from
$14.6 million in fiscal 1996 due to increased capital expenditures at all four
mills during the last two years.
OTHER OPERATING EXPENSES. The Company decided in June 1995 to close the
Tampa rolling mill effective September 1995. The Tampa mill was the Company's
oldest facility and represented the Company's highest operating cost minimill.
In fiscal 1996, the Company incurred non-cash charges of $12 million
representing the write-down of property, plant and equipment to its estimated
fair market value, and incurred cash charges of $3 million for severance
payments and benefits costs for the termination of substantially all 116 Tampa
rolling mill employees. All severance payroll and benefit costs were paid and
charged against the liability during fiscal 1996, resulting in no liability for
severance payroll and benefit costs at March 31, 1996. Approximately $1.8
million in net book value of property, plant and equipment related to the Tampa
site, primarily land and buildings, was retained and is currently being used by
the Company. The Company currently incurs minimal ongoing costs related to the
Tampa mill land and building, primarily for ongoing warehousing and shipping
operations, and the caretaking of environmental cleanup (see "Note E to
September 30, 1997 unaudited condensed financial statements -- Environmental
Matters"), totaling approximately $300,000 annually. These costs are offset by
short-term rental income attributable to this property of approximately $225,000
annually. Approximately $3.5 million remains in Assets Held for Sale, which
represents appraised values of machinery and equipment and land being marketed
for sale. Since the closure, the Tampa market has been served by the Company's
Jacksonville mill, minimizing lost sales. The Company intends to sell the Tampa
minimill property.
The Company incurred an additional $.8 million charge in fiscal 1996 for
the write-off of all future lease obligations (through November 1998) related to
the closure of its fabricating plant in Woodbridge, Virginia.
INTEREST EXPENSE. Interest expense declined from $22.0 million in fiscal
1996 to $19.5 million in fiscal 1997 as cash generated from operations was used
to lower debt by $29.6 million and average annual interest rates declined from
9.3% to 8.7%. Capitalized interest for fiscal 1997 was $2.0 million compared to
$2.1 million in fiscal 1996.
AMORTIZATION OF DEFERRED FINANCING COSTS. Amortization of deferred
financing costs declined from $2.0 million in fiscal 1996 to $.9 million in
fiscal 1997 due to the refinancing of the Company's Revolving Credit Agreement
in June 1995. See "-- Liquidity and Capital Resources".
INCOME TAXES. The Company's effective federal and state income tax rate
for fiscal 1997 and 1996 was 39% excluding the effect of goodwill amortization,
which is not deductible for income tax purposes.
19
<PAGE> 21
FISCAL 1996 VERSUS FISCAL 1995
<TABLE>
<CAPTION>
TONS SHIPPED (THOUSANDS) AVERAGE SELLING PRICES (PER TON)
-------------------------- ---------------------------------
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
-------------------------- ---------------------------------
1995 1996 1995 1996
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Mill Finished Goods:
Stock Rebar.............................. 536 508 $326 $310
Merchant Bar............................. 549 544 359 362
Rods..................................... 129 133 338 336
----- ----- ---- ----
1,214 1,185 342 337
Fabricated Rebar........................... 347 315 421 460
Billets.................................... 141 175 228 233
----- -----
Total............................ 1,702 1,675
===== =====
</TABLE>
NET SALES. Net sales for fiscal 1996 were 1.8% lower than fiscal 1995 due
to lower volume and lower mill average selling prices. Although semi-finished
billet shipments were 24.1% higher than in fiscal 1995, finished product
shipments were down 4.1%. Average mill selling prices declined $5 per ton.
Although fabricated rebar prices increased $39 per ton, fabricated rebar
shipments were down 9.2%.
COST OF SALES. Cost of sales were 85.0% of net sales in fiscal 1996 versus
85.3% of net sales in the previous year. Mill conversion costs were the same
while scrap steel costs were $1 per ton higher than in fiscal 1995.
SELLING AND ADMINISTRATIVE. Selling and administrative expenses remained
constant at 4.7% of sales in fiscal 1996 compared to fiscal 1995.
DEPRECIATION. Depreciation increased to $14.6 million in fiscal 1996 from
$14.0 million in fiscal 1995 due to increased capital expenditures that were
placed in service at all four mills.
OTHER OPERATING EXPENSES. The Company decided in June 1995 to close the
Tampa rolling mill effective September 1995. The Tampa mill was the Company's
oldest facility and represented the Company's highest operating cost minimill.
In 1996, the Company incurred non-cash charges of $12 million representing the
write-down of property, plant and equipment to its estimated fair market value,
and incurred cash charges of $3 million for severance payments and benefits
costs for the termination of substantially all 116 Tampa rolling mill employees.
All severance payroll and benefit costs were paid and charged against the
liability during fiscal 1996, resulting in no liability for severance payroll
and benefit costs at March 31, 1996. The Company believed that the closing of
the Tampa minimill would improve future operating results, liquidity and cash
flows. Approximately $1.8 million in net book value of property, plant and
equipment related to the Tampa site, primarily land and buildings, was retained
and is currently being used by the Company. The Company currently incurs minimal
ongoing costs related to the Tampa mill land and buildings, primarily for
ongoing warehousing and shipping operations, and the caretaking of environmental
cleanup (see "Note E to September 30, 1997 unaudited condensed financial
statements -- Environmental Matters"), totaling approximately $300,000 annually.
These costs are offset by short-term rental income attributable to this property
of approximately $225,000 annually. Approximately $3.5 million remains in Assets
Held for Sale, which represents appraised values of machinery and equipment and
land being marketed for sale. Since the closure, the Tampa market has been
served by the Company's Jacksonville mill, minimizing lost sales. The Company
intends to sell the Tampa minimill property.
The Company incurred an additional $.8 million charge in fiscal 1996 for
the write-off of all future lease obligations (through November 1998) related to
the closure of its fabricating plant in Woodbridge, Virginia.
INTEREST EXPENSE. Interest expense declined from $23.3 million in fiscal
1995 to $22.0 million in fiscal 1996 primarily because of lower average interest
rates and higher capitalized interest. Average annual interest rates declined
from 9.8% in fiscal 1995 to 9.3% in fiscal 1996. Average borrowings were
20
<PAGE> 22
higher in fiscal 1996 than in fiscal 1995. Capitalized interest for fiscal 1996
was $2.1 million versus $654 thousand in fiscal 1995.
AMORTIZATION OF DEFERRED FINANCING COSTS. Amortization of deferred
financing costs declined in fiscal 1996 as compared to fiscal 1995 due to
refinancing of the Company's Revolving Credit Agreement. See "-- Liquidity and
Capital Resources".
INCOME TAXES. The effective federal and state income tax rate for fiscal
1996 was 39% compared to 38.8% for fiscal 1995 excluding the effect of goodwill
amortization, which is not deductible for income tax purposes.
QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1996 1996 1997 1997 1997
------------- ------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT AVERAGE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales............................ $158,086 $139,948 $149,433 $168,359 $175,446
Operating expenses:
Cost of sales...................... 136,261 119,602 126,415 135,037 142,214
Selling and administrative......... 7,328 7,184 7,623 7,572 5,262
Depreciation....................... 4,096 4,193 4,370 4,827 4,816
Amortization of goodwill........... 1,032 1,032 1,033 1,033 1,032
-------- -------- -------- -------- --------
$148,717 $132,011 $139,441 $148,469 $153,324
Income from operations............. 9,369 7,937 9,992 19,890 22,122
Other expense:
Interest........................... 5,043 4,786 4,789 5,188 4,927
Amortization of deferred financing
costs............................ 233 233 234 234 119
-------- -------- -------- -------- --------
$ 5,276 $ 5,019 $ 5,023 $ 5,422 $ 5,046
Income before income taxes........... 4,093 2,918 4,969 14,468 17,076
Income taxes......................... 1,999 1,541 2,340 6,045 7,063
-------- -------- -------- -------- --------
Net income.................. $ 2,094 $ 1,377 $ 2,629 $ 8,423 $ 10,013
======== ======== ======== ======== ========
SELECTED OPERATING DATA:
Shipped Tons
Stock rebar........................ 108 104 125 140 151
Merchant bar....................... 133 123 135 136 147
Rod................................ 26 19 25 29 19
-------- -------- -------- -------- --------
Subtotal mill finished goods....... 267 246 285 305 317
Fabricated rebar................... 86 82 74 85 89
Billets............................ 79 47 47 56 50
-------- -------- -------- -------- --------
Total shipped tons................. 432 375 406 446 456
======== ======== ======== ======== ========
Average mill finished goods prices
(per ton).......................... $ 334 $ 334 $ 334 $ 346 $ 352
Average scrap cost (per ton)......... 134 129 125 129 134
Average metal spread (per ton)....... 200 205 209 217 218
Average mill conversion costs (per
ton)............................... 134 137 134 125 130
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's three largest financial obligations currently outstanding are
the $100 million aggregate principal amount of First Mortgage Notes, a $140
million aggregate revolving credit facility (the "Revolving Credit Agreement"),
and a $50 million aggregate principal amount Subordinated Intercompany Note due
December 21, 2002 and owed to FLS.
21
<PAGE> 23
The First Mortgage Notes are secured by the real property, equipment and
certain other assets at the Company's minimills. The First Mortgage Notes are
redeemable, at the option of the Company, in whole or in part from time to time,
at the redemption prices set forth below (expressed as percentages of the
outstanding principal amount) if redeemed during the twelve-month period
commencing on December 15 of each year referenced below, plus, in each case,
accrued interest thereon to the date of the redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
1996........................................................ 103.833%
1997........................................................ 101.916
1998 and thereafter......................................... 100.000
</TABLE>
The Revolving Credit Agreement is secured by the Company's inventory and
receivables and matures on June 9, 1999. The Revolving Credit Agreement provides
for a substantial portion of the Company's liquidity by making available up to
$140 million in borrowings, subject to a "borrowing base". As of September 30,
1997, the Revolving Credit Agreement had a borrowing base of approximately
$121.9 million, of which approximately $51.0 million was available to the
Company for further borrowings, $31.0 million was outstanding and $39.9 million
was allocated to letters of credit (most of which are being provided as credit
backing for the Company's outstanding Industrial Revenue Bonds). These
Industrial Revenue Bonds were issued to construct facilities in Jackson,
Tennessee, Charlotte, North Carolina, Jacksonville, Florida, and Plant City,
Florida. The interest rates on these bonds range from 50% to 75% of the prime
rate. The Company increased its outstanding Industrial Revenue Bonds by $20.0
million in fiscal 1996 and $5.0 million in fiscal 1998 for a solid waste
recycling facility in Jackson, Tennessee. The Industrial Revenue Bonds mature in
fiscal 2004 except for the 1996 and 1998 Industrial Revenue Bonds which mature
in fiscal 2018 and 2014, respectively.
The First Mortgage Notes and the Revolving Credit Agreement contain certain
restrictions regarding the incurrence of additional indebtedness by the Company,
restrictions on the Company's ability to pay dividends and other restrictive
covenants relating to the Company's business. The Company continues to comply
with all of the covenants of its loan agreements. See "Note D to Financial
Statements -- Borrowings". In addition, the Notes being offered in the Notes
Offering will also contain restrictions on the Company's ability to pay
dividends and certain restrictive covenants relating to the Company's business.
Net cash provided by operating activities for the six months ended
September 30, 1997 was $27.0 million compared with $29.4 million for the same
period last year. Cash flow from net income increased by $14.4 million but was
offset principally because finished product inventories were restored from the
period ended September 30, 1996 when inventories were drawn down during
production disruptions caused by mill modernization projects at the Charlotte
and Jackson mills. The Company used $20.4 million in cash to repay debt and
$11.3 million to invest in capital projects, mostly for mill modernization. In
September 1997, the Company incurred additional indebtedness of $5.0 million
through an Industrial Revenue Bond issue for construction of a facility at the
Jackson mill to recycle EC dust. Net cash provided by operating activities in
fiscal 1997 was $43.9 million compared to $44.1 million in fiscal 1996.
Over the years, the Company has expanded capacity by means of modernizing
and upgrading facilities. Capital expenditures were $34.4 million for the year
ended March 31, 1997, $36.9 million for the year ended March 31, 1996 and $25.8
million for the year ended March 31, 1995. The Company anticipates spending
approximately $28.0 million for capital expenditures in fiscal 1998, of which
approximately $9.1 million were made in the six months ended September 30, 1997.
Prior to the completion of the Offerings, the Company intends to declare
and pay a special dividend of approximately $6.1 million to its then current
stockholders. The dividend will be paid from current fiscal year earnings. The
Company plans to use available cash provided from operating activities, and if
necessary, additional borrowings under its Revolving Credit Agreement (under
which there was $51.0 million available for further borrowings as of September
30, 1997) to fund the payment of this $6.1 million cash dividend.
22
<PAGE> 24
The Company believes that the amounts available from operating cash flows
and funds available through its Revolving Credit Agreement will be sufficient to
meet its expected operational cash needs and planned capital expenditures for
the foreseeable future.
The Company is aware of the Year 2000 issue and the effects it may have on
its business systems. In response, the Company has developed a detailed plan to
address the issue. This plan includes a two year campaign, which began in April
1997 and includes approved spending of approximately $2.6 million for upgrading
hardware and software, including training, prior to 2000. The Company believes
that it will be Year 2000 compliant without a material impact on its operations
or financial results.
The estimated net proceeds from the Offerings (after deduction of
underwriting discounts and the Company's estimated offering expenses) are
intended to be used first to repay all of the Company's Subordinated
Intercompany Note and then to repay the outstanding balance under the Company's
Revolving Credit Agreement (currently estimated to be $16.3 million) and then to
fund working capital and general corporate purposes.
Concurrent with the Offerings, the Company is planning to offer $100
million aggregate principal amount of the Notes by a separate offering
memorandum. The closing of the Notes Offering is conditioned upon the closing of
the Offerings. It is expected that the Notes Offering would be closed shortly
after the closing of the Offerings. The net proceeds to the Company from the
Notes Offering (after deduction of assumed underwriting discounts and the
Company's estimated offering expenses), if consummated, are estimated to be
$97.6 million. The Company will use such proceeds to redeem the Company's First
Mortgage Notes.
Because the Notes Offering is subject to a variety of market, economic and
other factors, there can be no assurance that the Notes Offering will be closed.
COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS
The Company is subject to federal, state and local laws and regulations
governing the remediation of environmental contamination associated with
releases of hazardous substances which can impose joint and several liability
for contamination regardless of fault or the lawfulness of past activities
(collectively, "Environmental Cleanup Laws") and to extensive federal, state,
and local laws and regulations governing discharges to the air and water as well
as the handling and disposal of solid and hazardous wastes and employee health
and (collectively, "Environmental Regulatory Laws"). Governmental authorities
have the power to enforce compliance with these requirements, and violators may
be subject to civil or criminal penalties, injunctions or both. Third parties
also may have the right to sue to enforce compliance and for damages.
The Company has estimated its potential costs for further remediation under
Environmental Cleanup Laws at on-site and off-site locations to be approximately
$14.9 million and has included this amount in the Company's recorded liabilities
as of September 30, 1997. Based on past use of certain technologies and
remediation methods by third parties, evaluation of those technologies and
methods by the Company's consultants, and quotations and third-party estimates
of costs of remediation-related services provided to the Company, or of which
the Company and its consultants are aware, the Company and its consultants
believe that the Company's cost estimates are reasonable. In light of the
uncertainties inherent in determining the costs associated with the clean-up of
such contamination, including the time periods over which such costs must be
paid, the extent of contribution by parties which are jointly and severally
liable, and the nature and timing of payments to be made under cost sharing
arrangements, there can be no assurance that the ultimate costs of remediation
may not be more or less than the estimated remediation costs that the Company
has recorded.
The Company also incurs significant ongoing costs to comply with current
standards promulgated by Environmental Regulatory Laws which costs are being
expensed and paid from current operations. Although it is the Company's policy
to comply with all Environmental Regulatory Laws and the Company believes that
it is currently in material compliance with all Environmental Regulatory Laws,
Environmental
23
<PAGE> 25
Regulatory Laws may become more significant in the future and, there can be no
assurance that material environmental liabilities will not be incurred by the
Company or that compliance with Environmental Regulatory Laws (whether those
currently in effect or those that may be enacted in the future) will not require
additional expenditures by the Company or require changes to the Company's
current operations, any of which could have a material adverse effect on the
Company's results of operations and financial condition.
See "Note E to September 30, 1997 unaudited condensed financial
statements -- Environmental Matters" for further information regarding
environmental matters.
IMPACT OF INFLATION
The Company's primary costs include ferrous scrap, energy and labor, which
can be affected by inflationary conditions. The Company has generally been able
to pass on cost increases through price adjustments. However, the ability to
pass on these increases depends on market conditions driven primarily by the
level of construction activity. Another factor that may limit the Company's
ability to pass on cost increases in materials is over-capacity in the steel
industry.
24
<PAGE> 26
BUSINESS
GENERAL
The Company operates four non-union minimills located in the southeastern
U.S. that produce steel concrete reinforcing bars ("rebar"), light structural
shapes such as rounds, squares, flats, angles and channels ("merchant bars")
and, to a lesser extent, wire rod ("rods") and billets (which are semi-finished
steel products). The Company also operates 13 rebar fabricating plants
strategically located in close proximity to its mills; rail spike manufacturing
facilities in Paragould, Arkansas and Lancaster, South Carolina; and a wire mesh
and collated nail manufacturing facility in New Orleans, Louisiana. Rebar is
used primarily for strengthening concrete in highway and building construction
and other construction applications. Merchant bars are used in a wide variety of
applications including floor and roof joists, transmission towers, and farm
equipment. Rods are used in a variety of applications, including the manufacture
of welded wire fabric and nails.
Approximately 60% of the Company's mill rebar production is sold directly
to distributors and independent fabricating companies in stock lengths and
sizes. The remaining 40% of the rebar produced by the mills is transferred to
the Company's 13 fabricating plants where value is added by cutting and bending
the rebar to meet strict engineering, architectural and other end-product
specifications. Merchant bars and rods generally are sold by the mills to steel
service centers, original equipment manufacturers and fabricators in stock
lengths and sizes.
The Company's four minimills are located in Jacksonville, Florida,
Charlotte, North Carolina, and Jackson and Knoxville, Tennessee. Minimills are
steel mills that use electric arc furnaces to melt steel scrap and cast the
resulting molten steel into long strands called billets in a continuous casting
process. The billets are typically transferred to a rolling mill where they are
reheated, passed through roughing mills for size reduction and then rolled into
rebar, merchant bars or rods. These products emerge from the rolling mill and
are uniformly cooled on a cooling bed. Most merchant products then pass through
automated straightening and stacking equipment. Rebar and merchant products are
neatly bundled prior to shipment to customers by rail or truck.
The predecessor of the Company was formed in 1937 as a rebar fabricator. In
1956, it merged with five steel fabricators in Florida to form Florida Steel
Corporation, which then commenced construction of its first minimill in Tampa,
Florida. In 1996, the Company changed its name to AmeriSteel Corporation.
The Company was a public company from 1956 until 1988 when it was taken
private in a management led leveraged buyout. In late 1992, the Company was
purchased by Kyoei Steel, Ltd. ("Kyoei"), a private Japanese minimill company
engaged in the manufacture of commodity grade steel products, primarily rebar
and merchant bar products. Kyoei, founded in 1947, operates five minimills in
Japan and a rolling mill in Vietnam with a total annual finished steel capacity
of 2.5 million tons. The Company has benefitted from access to Kyoei's
operating, engineering and technical expertise.
INDUSTRY
According to industry sources, United States market demand for rebar was
approximately 6.3 million tons in calendar 1996. The Company believes that it is
the second largest producer of rebar in the U.S. and estimates it has
approximately a 13% share of the U.S. rebar market and approximately a 20% share
in the eastern two-thirds of the U.S. According to industry sources, the U.S.
market for merchant and other light structural shape bars was estimated to be
approximately 8.6 million tons in calendar 1996. The Company estimates that it
has approximately a 6% share of this market. For the six months ended September
30, 1997, approximately 24% of the Company's net sales were derived from
fabricated rebar, 28% from stock rebar, 31% from merchant bars, 5% from rods and
12% from semi-finished billets.
The minimill industry is composed of two types of competitors: multi-mill
operators and stand-alone minimills. The Company believes that recent growth in
the industry (through acquisitions as well as capital expenditures) has been
driven by multi-mill operations because stand-alone minimills have not
25
<PAGE> 27
generally been able to achieve the economies of scale or had access to the
financial resources to make the investments that larger operators have. The
Company believes that further industry consolidation will continue given the
significant advantages available to multi-mill operators. Accordingly, the
Company is actively investigating potential acquisition opportunities.
COMPETITIVE STRENGTHS
The primary focus of the Company's business strategy is to continue to be a
low cost producer of rebar and merchant bar products in the U.S. and further
grow its business including through acquisitions of steel producing and related
assets. The Company believes that the following competitive strengths are key
elements of this strategy:
DEMONSTRATED COST CONTROL. Since 1994, the Company has reduced its costs
of converting scrap steel to finished steel products ("conversion costs") from
$146 per ton to $128 per ton for the six months ended September 30, 1997. The
Company has achieved these cost reductions through its mill modernization
program, high mill utilization, access to competitively priced electric power at
its Tennessee and North Carolina mills, and labor incentive programs designed to
maximize productivity. In addition, since 1994, the Company has closed
unprofitable operations and divested non-core activities. The Company currently
has initiatives in place that it believes will further reduce its conversion
costs.
MODERNIZED PRODUCTION EQUIPMENT IN ATTRACTIVE LOCATIONS. Since 1992, the
Company has invested approximately $115 million in mill modernization, including
major projects at its Jackson, Tennessee, Jacksonville, Florida and Charlotte,
North Carolina mills. The Company believes its recent mill modernization program
will lower conversion costs and increase capacity utilization, enhance merchant
bar quality and broaden its merchant bar product range. The southeastern U.S.
(where all the Company's mills are located) accounts generally for more than
one-fourth of U.S. rebar consumption and, due to mild wintertime weather
conditions, demonstrates less seasonal demand fluctuations than more northern
regions of the U.S. Because of the high cost of freight relative to the value of
the Company's products, competition from non-regional producers is limited.
MOTIVATED, NON-UNION LABOR FORCE. The Company employs a non-union
workforce of approximately 1,860 employees. The Company's compensation programs
are designed to allow employees to earn significant incentive bonuses
(approximately one-fifth of their total compensation) based on production
volumes, sales volumes, cost targets or return on capital employed. These
programs have been successfully implemented by the current management team and
have resulted in lower costs, higher productivity and increased profitability.
Further incentive is provided through equity ownership plans. Approximately 57%
of current employees have purchased stock in the Company, including Phillip E.
Casey, Chairman and Chief Executive Officer, who beneficially owns approximately
10% of the outstanding shares of the Company's capital stock (approximately 6%
after the Offerings).
STRONG MARKET POSITIONS. The Company believes that it is the second
largest producer of rebar in the U.S. and estimates it has approximately a 13%
share in the U.S. rebar market and approximately a 20% share in the eastern
two-thirds of the U.S. In addition, the Company believes that it is the largest
fabricator of rebar products in the U.S., with fiscal 1997 revenues of $161.2
million, or approximately 26% of the Company's sales. The Company believes its
strong market position in both stock rebar shipments and fabricated rebar
shipments provides it with competitive market intelligence and other advantages
from vertical integration relative to its smaller competitors. The Company
estimates it has approximately a 6% share of the U.S. market for merchant and
other light structural shape bars. The Company believes it has opportunities to
increase its market share in this market, which is generally less cyclical and
more profitable than the rebar market. A recent independent survey has ranked
the Company first in customer service and on-time delivery in the Company's
principal product markets. As evidence of a high degree of customer
satisfaction, the Company has had, on average, a relationship of at least 10
years with its top 25 customers.
26
<PAGE> 28
PRODUCTS
The following table shows the percentage of the Company's net sales derived
from each product category in the relevant time period:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
------------------ SIX MONTHS ENDED
1995 1996 1997 SEPTEMBER 30, 1997
---- ---- ---- ------------------
<S> <C> <C> <C> <C>
Fabricated Rebar............................................ 23% 24% 24% 24%
Stock Rebar................................................. 27 25 24 28
Merchant Bars............................................... 31 32 30 31
Rods........................................................ 7 7 5 5
Billets and other........................................... 12 12 17 12
--- --- --- -----
100% 100% 100% 100%
=== === === =====
</TABLE>
REBAR PRODUCTS (STOCK AND FABRICATED)
The Company produces rebar products at its minimills in Knoxville,
Jacksonville and Charlotte, and to a lesser degree in Jackson. The Company's
rebar either is sold directly to distributors and independent fabricating
companies in stock lengths and sizes or is transferred to the Company's 13
fabricating plants where it is cut and bent to meet engineering, architectural
and other end-product specifications. Rebar is used primarily for strengthening
concrete in highway and building construction and other construction
applications. The Company's rebar products are used primarily in two sectors of
the construction industry: non-residential building projects, such as
institutional buildings, retail sites, commercial offices, apartments and hotels
and manufacturing facilities, and infrastructure projects such as highways,
bridges, utilities, water and waste treatment facilities and sports stadiums.
The Company's rebar products are also used in multi-family residential
construction such as apartments, condominiums and multi-family homes. Usage of
the Company's rebar products is roughly split evenly between private and public
projects.
MERCHANT BARS
The Company produces merchant bars at its minimills in Jackson and
Charlotte and to a lesser degree in Knoxville. Merchant bars consist of rounds,
squares, flats, angles and channels. Merchant bars are generally sold to
fabricators, steel service centers, and manufacturers who fabricate the steel to
meet engineering or end-product specifications. Merchant bars are used to
manufacture a wide variety of products, including gratings, transmission towers,
floor and roof joists, safety walkways, ornamental furniture, stair railings and
farm equipment.
Merchant bar products typically require more specialized processing and
handling than rebar, including straightening, stacking and specialized bundling.
Because of the greater variety of shapes and sizes, merchant bars typically are
produced in shorter production runs, necessitating more frequent changeovers in
rolling mill equipment. Merchant products generally command higher prices and
produce higher profit margins than rebar.
RODS
The Company produces steel rod at its Jacksonville minimill. Most of this
rod is sold directly to third-party customers, while the remainder, depending on
market conditions, is shipped to the Company's New Orleans, Louisiana facility,
where the rod is drawn down to wire for use in the manufacture of wire mesh,
collated nails and bulk nails.
BILLETS
The Company produces semi-finished billets for conversion to rebar,
merchant bar and rods. When the market for finished product is down, or when
rolling production is limited -- as was the case in fiscal
27
<PAGE> 29
1997 with downtime associated with capital improvements in the Charlotte and
Jackson mills -- the Company sells the excess billet production to steel mills
that have less steel melting capacity than rolling mill capacity.
MARKETING AND CUSTOMERS
The Concrete Reinforcing Steel Institute ("CRSI") annual statistical report
for apparent rebar consumption during 1995 in the U.S. for the nine regions is
depicted on the map below.
[U.S. MAP OF REBAR CONSUMPTION]
CRSI has reported that the apparent rebar consumption for 1996 is
approximately 6.3 million tons, an increase of 14.5% over reported apparent
rebar usage in 1995 of 5.5 million tons. The latest industry data of apparent
rebar consumption by region is from CRSI's 1995 data as shown below.
<TABLE>
<CAPTION>
U.S. APPARENT REBAR USAGE AMERISTEEL SHIPMENTS % OF
REGION (THOUSANDS OF TONS) (THOUSANDS OF TONS) MARKET
------ ------------------------- -------------------- ------
<S> <C> <C> <C>
5................................................. 1,074 504 47
6................................................. 314 150 48
3................................................. 833 71 9
4................................................. 428 34 8
7................................................. 837 30 4
2................................................. 530 23 4
1................................................. 158 22 14
8................................................. 300 0 0
9................................................. 1,037 1 0
------- ----- ----
Total................................... 5,511 835 15%
======= ===== ====
</TABLE>
The Company believes that it is the second largest producer of rebar in the
U.S. The Company markets its rebar primarily in the Southeast, generally within
a 350 mile radius of its mills due to freight economics. The boundary of the
current market area for the Company's rebar products is roughly defined by a
line running through New Orleans, Louisiana, Little Rock, Arkansas, Kansas City,
Kansas, St. Louis, Missouri, Indianapolis, Indiana, Columbus, Ohio, and
Baltimore, Maryland.
The Company is one of the larger producers of merchant bar products and
generally markets its products in the eastern two-thirds of the U.S. The Company
estimates that it has approximately 6% market share of the U.S. market for
merchant and other light structural shape merchant bars. The Company believes it
has opportunities to increase its market share in the merchant bar market, which
is generally less cyclical and more profitable than the rebar market.
28
<PAGE> 30
The Company conducts its marketing operation through both its own inside
and outside sales personnel. The outside sales personnel for mill rebar and
merchant bar are located in close proximity to the Company's major markets and
customers. The Company's salespeople handle both rebar and merchant bar sales in
a geographic area. This structure has several advantages in that it eliminates
duplicate sales calls on customers, enables salespeople to cover smaller
geographic areas, improves customer relationships and facilitates flow of
reliable market information to the Company. Metallurgical service
representatives, located at each of the Company's mills, provide technical
support to the sales force.
The Company's inside sales force is centralized at the Company's Tampa,
Florida headquarters, where all order taking, mill production scheduling,
inventory management and shipping arrangements are coordinated. This inside
sales force has an average of 18 years of experience with the Company. The
Company's inside sales force can provide customers with updated order and
shipment status, rolling schedules, inventory levels and mill test reports. The
Company also provides customers with a dial-up information service, called
AmeriSteel E-Z-Link(TM), which allows 24-hour electronic assess to information
on open orders, purchasing history, shipments, rolling schedules and current
inventories.
The Company has recently developed in-house a system ("Vendor Managed
Inventory" or "VMI") for certain (currently four) of its larger merchant bar
customers. This system provides real-time updates to the Company and customers
of order and production status. The Company assumes the responsibility for
maintaining the customers' desired inventory levels and shipment status. Because
of the nature of the programs, VMI is targeted for the Company's larger and more
well established customers. The Company believes VMI provides it with a
competitive marketing advantage with respect to these customers.
Fabricated rebar sales personnel are located at the Company's 13
fabricating facilities where engineering service representatives provide
technical and sales support.
Principal customers of the Company include steel distributors, steel
service centers, rebar fabricators, other metal fabricators and manufacturers,
railroads, building material dealers and contractors. Its fabricated rebar
products are sold to contractors performing work for residential and
nonresidential building, road, bridge, public works, utility and other
miscellaneous construction.
The Company's business is not dependent upon any single customer. The
Company's customer base is fairly stable from year to year, and during fiscal
1997 no one customer accounted for more than 2.9% of net sales and the five
largest customers accounted for approximately 9.4% of net sales. The Company's
business is seasonal, with orders in the Company's first and second fiscal
quarters tending to be strongest.
Fabricated rebar is generally produced in response to specific customer
orders. The amount of sales order backlog pertaining to fabrication contracts
was approximately 205 thousand tons at September 30, 1997. The Company expects
almost all of the backlog at September 30, 1997 to be filled through the first
fiscal quarter of 1999. Due to the advanced order booking and the order backlog,
fabricated rebar business tends to be less cyclical than the Company's other
product lines.
The Company's payment terms to customers are generally determined based on
market conditions. The Company, however, generally does not offer extended
payment terms to customers.
Despite the commodity characteristics of the stock rebar and merchant bar
markets, the Company believes that it is able to distinguish itself from its
competitors to some extent due to its product quality, its consistent delivery
record, its capacity to service large orders, and its ability to fill most
orders quickly from inventory. Moreover, although construction and
infrastructure projects are generally nonrecurring in nature, the steel
fabricators, distributors and service centers which supply many of these
projects tend to be long-time customers of the Company. The Company believes
that its reputation for quality products and service is among the highest in the
industry.
29
<PAGE> 31
PRODUCTION AND FACILITIES
Steel can be produced at significantly lower costs by minimills than by
integrated steel operators. Integrated steel mills, which typically process iron
ore and other raw materials in blast furnaces to produce steel, generally use
costlier raw materials, consume more energy, operate older facilities that are
more labor intensive and employ a more highly paid labor force. In general,
minimills serve localized markets and produce a limited line of steel products.
The domestic minimill steel industry currently has excess production
capacity. This excess capacity has resulted in competitive product pricing and
cyclical pressures on industry profit margins. The high fixed costs of operating
a minimill encourage mill operators to maintain high levels of output even
during periods of reduced demand which exacerbates the pressures on profit
margins. In this environment, efficient production and cost controls are
important to domestic minimill steel producers.
The Company's minimills operate their melting facilities continuously and
have an annual aggregate melting capacity of approximately 2.0 million tons. The
Jackson, Charlotte and Jacksonville mills operate their rolling facilities
continuously. The Knoxville mill operates its rolling facility five days per
week.
[MAP OF THE UNITED STATES SHOWING THE COMPANY'S MINIMILL
LOCATIONS AND MELTING AND ROLLING CAPACITIES ]
30
<PAGE> 32
The following table sets forth certain information regarding the Company's
four minimills, including the current estimated annual production capacity and
actual production of the minimills in thousands of tons. Billets produced in the
melting process in excess of rolling needs are sold to third parties.
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
MARCH 31, MARCH 31,
ANNUAL 1997 CAPACITY 1997 CAPACITY
START-UP MELTING MELTING UTILIZATION ROLLING ROLLING UTILIZATION
LOCATION DATE CAPACITY PRODUCTION PERCENTAGE CAPACITY PRODUCTION PERCENTAGE
- -------- -------- -------- ---------- ----------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Charlotte, NC...................... 1961 450 415 92% 400 220 55%
Jackson, TN........................ 1981 600 523 87 480 364 76
Jacksonville, FL................... 1976 600 465 78 500 443 89
Knoxville, TN...................... 1987(1) 330 297 90 360 340 94
----- ----- -- ----- ----- --
Total..................... 1,980 1,700 86% 1,740 1,367 79%
===== ===== == ===== ===== ==
</TABLE>
- ---------------
(1) Purchase Date
The Company's four minimills, together with certain other assets, serve as
collateral for the Company's First Mortgage Notes. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources".
CHARLOTTE MINIMILL
The Charlotte minimill produces rebar and merchant bars. Rebar produced in
Charlotte is marketed in the states from South Carolina to Pennsylvania.
Merchant bar produced in Charlotte is marketed along the eastern seaboard states
from Florida to Pennsylvania.
Charlotte's melting equipment includes a 75 ton electric arc furnace
utilizing the Consteel process, a continuous scrap feeding and preheating
system, and a ladle refining station. The melting facilities also include a
3-strand continuous caster and material handling equipment. Charlotte's rolling
mill includes a reheat furnace, 15 in-line mill stands, a 200 foot cooling bed,
a cut-to-length shear and an automated material bundling unit. The rolling mill
includes recently installed upgraded finishing end equipment, including a
product straightener for merchant shapes and a French manufactured Empilam
stacker. During fiscal 1997, capacity utilization of the rolling mill was
limited due to down time associated with a major capital improvement project.
The Company believes that the upgrade will improve merchant bar quality,
increase production and lower conversion costs.
JACKSON MINIMILL
The Jackson minimill produces mostly merchant bars and some larger size
rebar. This minimill is the Company's largest single producer of merchant bars.
The merchant bars are marketed primarily in the southeastern U.S., as well as
into southern Illinois, Indiana and Ohio.
The Jackson mill is the newest of the Company's minimills. Melting
equipment includes a 135 ton electric arc furnace, a 4-strand continuous billet
caster and material handling equipment. The rolling mill consists of a 120 tons
per hour reheat furnace, 16 new in-line quick-change mill stands, a cooling bed,
an in-line straightener, a cut-to-length product shear, an automatic stacker,
and associated shipping and material handling facilities. Installation of the
new quick-change mill stands, a combination of Danieli vertical and horizontal,
began in April 1996 and is scheduled to be completed in December 1997.
Installation of those stands had a disruptive effect on the rolling mill
operations as evidenced by the reduced capacity utilization of 76% in fiscal
1997. The Company believes this investment will provide significant return on
investment in the form of decreased change time and therefore increasing
production and lowering conversion costs. The Company expects that the new mill
stands will increase rolling mill production capacity by approximately 60,000
tons per year and decrease mill conversion costs by approximately $5 per ton if
the benefits of the project are fully realized.
31
<PAGE> 33
JACKSONVILLE MINIMILL
The Jacksonville minimill produces rebar and rods. The rebar is marketed
primarily in Florida, the nearby Gulf Coast states and Puerto Rico, with coiled
rebar being shipped throughout the Company's marketing area. The rod products
are sold throughout the southeastern U.S.
Jacksonville's melting equipment consists of a 90 ton capacity electric arc
furnace and a 4-strand continuous caster. The rolling mill includes a 100 tons
per hour reheat furnace, a 16-stand horizontal Danieli in-line mill, a 10-stand
Danieli rod block, a cooling bed for straight bars and a controlled cooling line
for coiled products, a cut-to-length product shear, and automatic bundling and
tying equipment for straight bars and coils.
KNOXVILLE MINIMILL
The Knoxville minimill produces almost exclusively rebar. The rebar is
marketed throughout the Ohio Valley, including all areas of Ohio and Kentucky
and parts of Illinois, Indiana, Virginia, West Virginia, Tennessee, and in
portions of North and South Carolina, Georgia and Alabama.
Knoxville's melting equipment includes two 35 ton electric arc furnaces, a
3-strand continuous caster and material handling equipment. The rolling mill
consists of a reheat furnace, 16 in-line mill stands utilizing the Thermex
in-line heat treating process, a cooling bed, a cut-to-length shear line, and
associated shipping and material handling facilities.
32
<PAGE> 34
FABRICATION
The Company believes that it operates the largest rebar fabricating group
in the U.S., consisting of a network of 13 strategically located reinforcing
steel fabricating plants throughout the southeastern U.S. with an annual
capacity of approximately 334,000 tons. The facilities are interconnected via
satellite for the immediate transfer of customer engineering and production
information utilized in its computer assisted design (CAD) detailing programs.
The fabricating plants are a downstream operation of the Company, purchasing all
rebar from the Company's minimills, primarily Knoxville, Jacksonville and
Charlotte.
[MAP OF THE UNITED STATES SHOWING THE COMPANY'S FABRICATING PLANT LOCATIONS]
33
<PAGE> 35
Fabricated rebar is produced by cutting and bending stock rebar to meet
engineering, architectural and other end-product specifications. The fabrication
division employs about 540 employees. The following table shows the fabricating
plant locations and approximate annual tonnage on a two-shift per day, five days
per week operating basis.
<TABLE>
<CAPTION>
CAPACITY
FABRICATING PLANT (IN TONS)
- ----------------- ---------
<S> <C>
Ft. Lauderdale, FL.......................................... 30,000
Jacksonville, FL............................................ 30,000
Orlando, FL................................................. 20,000
Plant City, FL (Tampa)...................................... 40,000
Duluth, GA (Atlanta)........................................ 30,000
Louisville, KY.............................................. 20,000
Charlotte, NC............................................... 30,000
Raleigh, NC................................................. 18,000
Aiken, SC................................................... 16,000
Collierville, TN (Memphis).................................. 20,000
Knoxville, TN............................................... 40,000
Nashville, TN............................................... 20,000
St. Albans, WV.............................................. 20,000
-------
Total............................................. 334,000
=======
</TABLE>
OTHER OPERATIONS
The Company's railroad spike operations, located in Lancaster, South
Carolina and Paragould, Arkansas, forge steel square bars produced at the
Charlotte mill into railroad spikes that are sold on an annual contract basis to
various railroad companies. The Company's facility in New Orleans, Louisiana
produces wire from steel rod. The wire is then either manufactured into wire
mesh for concrete pavement, converted into collated nails for use in high-speed
nail machines, or converted to bulk nails for general construction uses.
RAW MATERIALS
Steel scrap is the Company's primary raw material and comprised
approximately 42% of the Company's costs of sales in fiscal 1997. The relatively
simple metallurgical requirements of the Company's products enable the Company
to use low quality, and thus lower cost, steel scrap. Due to the geographic
extent of the Company's requirements, the Company utilizes a scrap broker, The
David J. Joseph Company ("DJJ"), in the purchase of substantially all of its
requirements. DJJ receives a fixed per ton commission fee for all tons supplied.
To reduce costs at its Jacksonville and Jackson minimills, the Company employs
DJJ under contract to operate shredding and processing operations on its mill
property for preparation and delivery of scrap from its local markets. The
operator is paid a per ton fee for these services. At Knoxville, a DJJ
representative is employed to source local prepared scrap, which the Company
buys at day-to-day market prices at the mill. The Company believes that these
processing and local buying operations at its mills consistently result in the
purchase of significant quantities of the Company's requirements at a $5-$10/ton
savings versus open market brokerage purchases. The Company anticipates that it
could readily obtain adequate supplies of scrap steel at market prices from
sources other than DJJ if warranted.
Various domestic and foreign firms supply other important raw materials or
operating supplies required for the Company's business, including refractories,
ferroalloys and carbon electrodes. The Company has historically obtained
adequate quantities of such raw materials and supplies to permit efficient mill
operations.
34
<PAGE> 36
ENERGY SUPPLY
Electricity and natural gas represent approximately 14% and 5%,
respectively, of the Company's conversion costs. Access to attractively priced
electric power and natural gas can be an important competitive cost advantage to
a minimill.
The Company purchases its electricity from the Tennessee Valley Authority
("TVA"), Knoxville Utility Board, a TVA affiliate ("KUB"), Duke Power Company
("Duke") and Florida Power & Light Company ("FP&L") and incurred the following
costs for electricity for fiscal 1997:
<TABLE>
<CAPTION>
APPROXIMATE
MILL SUPPLIER CENTS/KWH ANNUAL COST
- ---- -------- --------- -----------
(IN
MILLIONS)
<S> <C> <C> <C>
Jackson..................................................... TVA 2.3 $7.2
Knoxville................................................... TVA/KUB 2.5 4.9
Charlotte................................................... Duke 2.9 6.2
Jacksonville................................................ FP&L 4.4 11.4
</TABLE>
The Company receives electric service under competitively priced power
supply contracts with Duke and TVA. Given the importance of competitively priced
power to minimill steel production, the Company plans to continue to exhaust
every available avenue in pursuit of more cost effective rates at the
Jacksonville Mill. The Company expects that, longer term, deregulation of the
electric power industry will allow electricity to be purchased on more favorable
terms in Florida.
The Company purchases its power from its utilities under interruptible
service contracts. Under such contracts, the utilities provide service at less
than firm tariff rates in return for the right to curtail power deliveries
during peak demand periods. Such interruptions are infrequent and occur with
sufficient notice to allow the Company to curtail production in an orderly
manner.
Since deregulation of the natural gas industry, natural gas requirements
have generally been provided through purchase of well-head gas delivered via the
interstate pipeline system and local distribution companies. Open access to
competitively priced supply of natural gas enables the Company to secure
adequate supplies at competitive prices.
ENVIRONMENTAL REGULATION
See "Management's Discussion and Analysis of Results of Operations and
Financial Condition -- Compliance with Environmental Laws and Regulations" and
"Note E to September 30, 1997 unaudited condensed financial
statements -- Environmental Matters", for a discussion of the Company's cleanup
liabilities with state and federal regulators regarding the investigation and/or
cleanup of certain sites.
The Company, through a third-party contractor and operator, has been
constructing a facility at the Company's Jackson mill that is designed to
utilize a technology developed by a third party to recycle the Company's EC dust
which is currently regulated as a hazardous waste due to the presence of heavy
metals. The facility has a design capacity to recycle up to 30 thousand tons of
EC dust per year. The Company currently generates approximately 24 thousand tons
of EC dust per year. The facility is designed to recycle EC dust in two stages.
In the first stage the dust is fed into a rotary hearth furnace where the zinc
in the dust is vaporized and collected in a baghouse as crude zinc oxide. The
residual of the dust exits the rotary hearth in the form of a reduced iron unit
that can be fed into the Jackson minimill's electric arc furnace as a steel
scrap substitute. In the second stage of the process, the crude zinc oxide is
fed into a wet chemical process to extract the lead and cadmium and produce a
high quality, saleable zinc oxide.
The contractor and third-party operator of the facility has recently
defaulted under its agreements with the Company. This third-party default will
result in the Company incurring additional costs and may delay the completion of
the facility. The facility is currently in the early startup phase. Startup is
expected to progress slowly given that new technology is involved, and the
challenge will be to demonstrate that it can be applied at a commercially
acceptable scale of production. If the technology and the facility can be
35
<PAGE> 37
successfully developed, the Company foresees that all of the Company's EC dust
will eventually be recycled at the facility and that the revenues from sale of
the zinc oxide and other by-products may cover the operating cost of the
facility. Additionally, the Company will save the alternative cost of disposing
of its EC dust with third parties. There can be no assurance, however, that the
technology or the facility will be successfully developed, or that, if
successfully developed, can be operated in a cost-efficient basis.
COMPETITION
The Company experiences substantial competition in the sale of each of its
products from a large number of companies in its geographic markets.
Rebar and merchant bars are commodity steel products, making price the
primary competitive factor. Due to the high cost of freight relative to the
value of the Company's steel products, competition from non-regional producers
is limited. Rebar deliveries are generally concentrated within a 350 mile radius
of a minimill, while merchant bar deliveries are generally concentrated within a
500 mile radius of a minimill. Except in unusual circumstances, the customer's
delivery expense is limited to freight charges from the nearest competitive
minimill and any incremental freight charges must be absorbed by the supplier.
The Company has experienced some competition from foreign sources, with the
level and degree of foreign competition varying from time to time depending upon
factors including foreign government subsidies and currency exchange rates.
The Company's competitive environment varies by product.
STOCK REBAR
The boundary of the current market area for the Company's rebar products is
roughly defined by a line running through New Orleans, Louisiana, Little Rock,
Arkansas, Kansas City, Kansas, St. Louis, Missouri, Indianapolis, Indiana,
Columbus, Ohio, and Baltimore, Maryland. The Company has found shipping outside
of this market area to be only marginally profitable because of freight cost
considerations.
MERCHANT BAR
The Company's primary marketing area for merchant bars encompasses the
southeastern and midwestern U.S. The Company did not enter the merchant bar
market in a significant way until 1982 and does not have the same market
position it has in the rebar market. The Company's merchant bar sales now
represent approximately 31% of the Company's total sales.
The market for merchant bars is very competitive, with price being the
primary competitive factor. In the last two years, the Company has upgraded its
rolling mill facilities at Charlotte to increase the Company's ability to shift
production from rebar to merchant bar as market conditions allow and at Jackson
to increase production and improve merchant product mix.
RODS
The Company produces rods at its Jacksonville minimill. The Company's
primary marketing area for rods includes Florida, South Carolina, Georgia,
Alabama and Louisiana. The Company does not intend to geographically expand its
marketing beyond these states due to the relatively low margins and prohibitive
freight cost inherent to rod products. Although the market for rods can be
heavily influenced by foreign imports, rod sales by foreign competitors have not
had a material effect on the Company's rod sales in the last three years.
FABRICATED REBAR
With 13 fabricating plants located throughout the southeastern U.S., all
within good support distance from one of the Company's four minimills, the
Company is a major factor in all the markets it serves. In the
36
<PAGE> 38
sale of fabricated rebar, the Company competes with other steel fabricators in
its marketing area, some of whom purchase their stock rebar from the Company.
EMPLOYEES
As of September 30, 1997, the Company had 1,858 employees, none of whom is
covered by a collective bargaining agreement. The Company believes that its
relations with its employees are good. The following table sets forth the
approximate number of employees of the Company as of September 30, 1997:
<TABLE>
<CAPTION>
NUMBER OF
GROUP EMPLOYEES
- ----- ----------
<S> <C>
Mills
Jackson................................................... 294
Knoxville................................................. 212
Jacksonville.............................................. 272
Charlotte................................................. 271
-----
Total Mills....................................... 1,049
Mill Sales.................................................. 21
Fabricating................................................. 534
Rail/Atlas.................................................. 184
Corporate................................................... 70
-----
Total Company..................................... 1,858
=====
</TABLE>
The Company has been, and continues to be, proactive in establishing and
maintaining a climate of good employee relations with its employees. Ongoing
initiatives include organizational development skills training, team building
programs, opportunities for participation in employee involvement teams, and
adoption of an "open book" system of management. The Company believes high
employee involvement is a key factor in the success of the Company's operations.
A compensation program designed to make the Company's employees' financial
interests congruous with those of the Company's shareholders has been
implemented. For the Company's mill operating employees, the incentive is
directly connected to melting and rolling mill volumes. The sales team has their
own incentive calculated on the Company's sales volumes. The fabrication group's
operating employee incentives are tied to operating costs and other incentive
targets. Some 50 employees, comprising senior management, participate in a
Strategic Value Added incentive plan based upon return on capital employed.
LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than routine
litigation incidental to the Company's business, to which the Company is a party
or in which any of its property is the subject, and no such proceedings are
known to be contemplated by governmental authorities. However, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Compliance with Environmental Laws and Regulations" and "Note E to
September 30, 1997 unaudited condensed financial statements -- Environmental
Matters" for a discussion of the Company's liabilities with respect to the
investigation and/or remediation at certain sites.
37
<PAGE> 39
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Board of Directors consists of eight members. The Company
intends within approximately six months after the completion of the Offerings to
elect two independent outside directors. Directors generally serve for one-year
terms and until their successors are duly elected and qualified.
The following table sets forth certain information regarding the Company's
existing directors and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
Phillip E. Casey..................... 54 Chairman of the Board, Chief Executive Officer and Director
J. Donald Haney...................... 61 Group Vice President, Fabricated Reinforcing Steel, and
Director
Shuzo Hikita......................... 54 Vice President, Engineering and Technology, and Director
Tom J. Landa......................... 46 Vice President, Chief Financial Officer, Secretary and
Director
Koichi Takashima..................... 74 Director
Akihiko Takashima.................... 60 Director
Hideichiro Takashima................. 39 Director
Ryutaro Yoshioka..................... 58 Director
Dennie Andrew........................ 57 Vice President, Steel Mill Operations
J. Neal McCullohs.................... 41 Vice President, Mill Product Sales
Robert P. Muhlhan.................... 47 Vice President, Material Procurement
James S. Rogers, II.................. 49 Vice President, Human Resources
Hiroyoshi Tsuchiya................... 59 Vice President, Strategic Planning
</TABLE>
Phillip E. Casey has been Chairman of the Board, Chief Executive Officer
and a director since June 1994. Prior to joining the Company, Mr. Casey held
various positions with Birmingham Steel Corporation, including Chief Financial
Officer, Executive Vice President and Vice Chairman of the Board from 1985 until
1994.
J. Donald Haney has been Group Vice President, Fabricated Reinforcing Steel
since 1979 and a director of the Company since 1988. Mr. Haney joined the
Company in 1958 and has held various management and sales positions with the
Company. Mr. Haney was promoted to the position of Vice President in 1974. Mr.
Haney is principally responsible for the Company's reinforcing steel fabricating
group.
Shuzo Hikita has been Vice President, Engineering and Technology and a
director of the Company since September 1996. Prior to September 1996, Mr.
Hikita held several management positions with Kyoei including Division Manager
of Kyoei's Hirakata and Osaka mills from 1994 to 1996. From 1992 to 1993, Mr.
Hikita was a Vice President with Auburn Steel.
Tom J. Landa has been Chief Financial Officer, Vice President and Secretary
of the Company since April 1995. Mr. Landa was elected a director of the Company
in March 1997. Before joining the Company, Mr. Landa spent over 19 years in
various financial management positions with Exxon Corporation and its affiliates
worldwide.
Koichi Takashima has been a director of the Company since 1992 and Chairman
of Kyoei for many years.
Akihiko Takashima has been a director of the Company since 1992 and a
Director of Kyoei for 26 years.
38
<PAGE> 40
Hideichiro Takashima has been a director of the Company since 1995. Since
June 1995 Mr. Takashima has been President and Chief Operating Officer of Kyoei.
From June 1992 until June 1995, Mr. Takashima held other senior management
positions with Kyoei.
Ryutaro Yoshioka has been a director of the Company since 1995. Mr.
Yoshioka has been Managing Director of Kyoei since July 1, 1994. Prior to such
time, Mr. Yoshioka was an executive of Bank of Tokyo for over 7 years.
Dennie Andrew has been Vice President, Steel Mill Operations, since October
1997. From September 1996 until September 1997, Mr. Andrew was Vice President,
Jacksonville Steel Mill Division. From 1986 until 1996, Mr. Andrew was President
of North American operations for Simac International.
J. Neal McCullohs has been Vice President, Mill Product Sales, since August
1995. Mr. McCullohs joined the Company in 1978 and has held various sales
management positions with the Company, including division manager of the St.
Albans Reinforcing Division and Atlanta Reinforcing Division.
Robert P. Muhlhan has been Vice President, Material Procurement, since
February 1995. From 1993 until 1995, Mr. Muhlhan was Regional Vice President of
National Material Trading. Prior to 1993, Mr. Muhlhan spent 24 years with LTV
Steel Company, most recently as Manager -- Production Materials.
James S. Rogers, II, has been Vice President, Human Resources, since June
1997. From 1992 until 1996, Mr. Rogers was Vice President, Human Resources, at
Birmingham Steel Corporation. From 1975 until 1992, Mr. Rogers was employed by
the Company in various positions, including Manager of Corporate Personnel
Practices and Director of Human Resources.
Hiroyoshi Tsuchiya has been Vice President, Strategic Planning, since May
1994. Prior to his employment with the Company, Mr. Tsuchiya held various
management positions with Mitsubishi Corporation in Japan and Canada from 1975
to 1994.
Koichi Takashima and Akihiko Takashima are brothers. Hideichiro Takashima
is the son of Koichi Takashima. None of the other directors or executive
officers is related to one another.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a standing Executive Compensation Committee and
Audit Committee.
The principal responsibility of the Executive Compensation Committee is to
provide recommendations to the Board of Directors regarding compensation for
executive officers of the Company.
The Audit Committee's principal responsibilities are to review the annual
audit of the Company's financial statements and to meet with the independent
auditors of the Company from time to time in order to review the Company's
general policies and procedures with respect to audits and accounting and
financial controls.
DIRECTORS COMPENSATION
No director receives separate compensation for services rendered as a
director. Expenses incurred by directors who are employees of the Company to
attend meetings of the Board of Directors or committees thereof are reimbursed
by the Company. The Company does not reimburse expenses incurred by non-employee
directors to attend Board of Directors or committee meetings. These policies are
expected to change following the election of two outside, independent directors
within six months following completion of the Offerings.
39
<PAGE> 41
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation awarded to, earned by, or
paid for services rendered to the Company in all capacities during the Company's
three most recently completed fiscal years for each of the named executive
officers of the Company as defined under applicable Securities and Exchange
Commission Rules (the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------- -------------------------
SECURITIES
RESTRICTED UNDERLYING
STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARD(S)(1) (#)(1) COMPENSATION(2)
- --------------------------- ---- -------- ---------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Phillip E. Casey........... 1997 $255,000 $ 65,637 $ 0 0 $ 3,278
Chairman of the Board 1996 255,000 80,453 0 0 4,617
and Chief Executive 1995 249,167 2,692,170 4,500,000 250,000 0
Officer(3)
J. Donald Haney............ 1997 210,954 53,893 0 3,500 3,032
Group Vice President, 1996 196,974 64,445 0 1,368 2,620
Fabricated Reinforcing 1995 216,594 140,995 0 0 4,137
Steel
Tom J. Landa............... 1997 170,217 43,886 0 0 3,647
Vice President and 1996 160,389 153,019 150,000 12,960 0
Chief Financial
Officer(4)
James C. Hogue............. 1997 166,662 42,570 0 3,000 2,921
Vice President, Human 1996 155,712 50,944 0 1,080 2,735
Resources(5) 1995 171,210 105,872 0 0 3,422
James F. Oliver............ 1997 121,978 83,009 0 3,000 2,332
Vice President, 1996 104,734 62,942 0 738 2,096
Knoxville Steel Mill 1995 119,856 55,317 0 0 1,936
Division
Thomas G. Creed............ 1997 156,408 39,935 0 2,500 593,569
President and 1996 256,308 82,671 0 0 2,481
Chief Operating 1995 282,204 221,779 0 0 4,748
Officer(5)
</TABLE>
- ------------------------
(1) All references are to Class B Common Stock. The shares of restricted stock
shown are subject to a substantial risk of forfeiture which for Mr. Casey
lapses at the rate of 20% per year beginning as of June 1, 1995 and for Mr.
Landa lapses at a rate of 33 1/3% per year beginning as of April 1, 1997. At
the end of fiscal 1997, the aggregate restricted stock holdings and value of
such holdings were for Mr. Casey 450,000 shares and $6,075,000,
respectively, and for Mr. Landa 12,000 shares and $162,000, respectively.
Dividends, if declared and paid on the Common Stock generally, are payable
on such restricted shares at the same rate as paid to all stockholders. In
fiscal 1998, Messrs. Haney, Landa and Oliver were granted 2,500 shares of
restricted stock each subject to a substantial risk of forfeiture which
lapses at the rate of 33 1/3% per year beginning as of October 1, 1999.
(2) These amounts consist of Company matching contributions made pursuant to the
Company's Savings Plan, except for Mr. Creed, which amount includes a
one-time payment of $591,600 from the Supplemental Benefits Plan in
connection with his retirement in November 1996.
(3) For fiscal 1995, Mr. Casey's salary covers ten months of employment
beginning June 1, 1994, and his bonus includes a one-time signing bonus of
$500,000 and a $1,946,000 tax bonus. See "-- Executive Employment Agreement"
for more information.
(4) Includes a $100,000 signing bonus pursuant to Mr. Landa's employment offer
in March 1995.
(5) Messrs. Creed and Hogue retired from the Company in November 1996 and May
1997, respectively.
40
<PAGE> 42
OPTION GRANTS TABLE
The following table shows information concerning options to purchase shares
of Class B Common Stock granted during fiscal 1997 for the Named Executive
Officers:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED
------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ------------ -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Phillip E. Casey............................ 0 -- -- -- -- --
J. Donald Haney............................. 3,500 4.41% 12.50 5/14/06 27,514 69,726
Tom J. Landa................................ 0 -- -- -- -- --
James C. Hogue(1)........................... 3,000 3.78% 12.50 5/14/06 23,584 59,765
James F. Oliver............................. 3,000 3.78% 12.50 5/14/06 23,584 59,765
Thomas G. Creed(1).......................... 2,500 3.15% 12.50 5/14/06 19,653 49,804
</TABLE>
- ---------------
(1) Messrs. Creed and Hogue forfeited their options upon retirement in November
1996 and May 1997, respectively.
OPTION EXERCISES AND YEAR-END VALUE TABLE
No stock options were exercised by any of the Company's executive officers
during fiscal 1997. The following table shows information concerning values as
of the end of fiscal 1997 of options to purchase shares of Class B Common Stock
held by each Named Executive Officer:
<TABLE>
<CAPTION>
VALUE OF OPTIONS
NUMBER OF OPTIONS EXERCISABLE/UNEXERCISABLE
NAME EXERCISABLE/UNEXERCISABLE $(1)
- ---- ------------------------- -------------------------
<S> <C> <C>
Phillip E. Casey........................................ 0/0 0/0
Tom J. Landa............................................ 0/12,960 0/12,960
J. Donald Haney......................................... 0/4,868 0/4,868
James C. Hogue(2)....................................... 0/4,080 0/4,080
James F. Oliver......................................... 0/3,738 0/3,738
Thomas G. Creed(2)...................................... 0/0 0/0
</TABLE>
- ---------------
(1) This represents the amount by which the latest appraisal exceeds the
exercise price of the options held by the Named Executive Officer.
(2) Messrs. Creed and Hogue forfeited their options upon retirement in November
1996 and May 1997, respectively.
PENSION BENEFITS
The table below sets forth the estimated annual benefits, payable as a
single life annuity beginning at retirement at age 65, at various remuneration
levels and for representative years of service at normal retirement date, under
the Company's tax qualified noncontributory defined benefit pension plan (the
"Retirement Plan").
ESTIMATED ANNUAL RETIREMENT BENEFIT
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
FINAL AVERAGE COMPENSATION 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- -------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000............................................ $27,070 $33,837 $40,604 $47,372 $ 52,372
150,000............................................ 42,070 52,587 63,104 73,622 81,122
200,000............................................ 57,070 71,337 85,604 99,872 109,872
</TABLE>
41
<PAGE> 43
Under the Retirement Plan, the compensation taken into account generally
includes all salary, bonuses and other taxable compensation, subject to a
$150,000 per year limitation. The final average compensation for the Named
Executive Officers for purposes of the Retirement Plan for fiscal 1997 is
$150,000. The years of credited service for the named Executive Officers for the
Retirement Plan are three years for Phillip E. Casey, 39 years for J. Donald
Haney, two years for Tom J. Landa, seven years for James F. Oliver, and 23 years
for Thomas G. Creed. The benefits under the Retirement Plan are not subject to
any deduction for Social Security or other offset amounts.
SUPPLEMENTAL BENEFITS PLAN
The Company maintains a nonqualified, unfunded Supplemental Benefits Plan
(the "SERP"), which provides certain officers defined pension benefits in
addition to those provided under the Company's other plans. The SERP provides an
annual retirement benefit equal to the greater of (i) 50% of final average
compensation without regard to the $150,000 limit, and (ii) 2.4% of final
average compensation multiplied by years of service (up to 25), plus 1% of final
average compensation multiplied by years of service in excess of 25 (up to 10),
less (in either case) amounts to which the participant is entitled under other
retirement plans of the Company and prior employers and under Social Security.
Upon retirement at November 1, 1996, Thomas G. Creed received a one-time payment
of $591,600 as his SERP benefit. As of March 31, 1997, the Company had accrued
approximately $138,500 in supplemental retirement benefits for the then two
remaining active employees (James C. Hogue and J. Donald Haney) covered by the
SERP. No other Named Executive Officer is, or is anticipated to be, covered by
the SERP.
In connection with the acquisition of FLS by Kyoei the officers covered by
the SERP waived certain rights under the SERP, provided that if such officers
are terminated without cause, resign for good reason, die, retire or become
disabled, then such officers will be entitled to receive the amounts they would
have received had such officers not waived such rights.
EXECUTIVE EMPLOYMENT AGREEMENT
Effective June 1, 1994, the Company entered into an employment agreement
with Phillip E. Casey to serve as the Company's Chairman of the Board of
Directors and Chief Executive Officer. The agreement provides for a one time
signing bonus of $500,000, annual base salary of $300,000, a grant of 750,000
shares of Class B Common Stock (then valued at $4.5 million) to vest ratably
over five years, a tax bonus in the amount of $1,946,000 with respect to such
shares, and other benefits commensurate with his position. Mr. Casey has placed
15% of his annual salary at risk as part of the Company's annual incentive
program. Pursuant to the agreement, the Company also granted to Mr. Casey an
option to purchase an additional 250,000 shares of Class B Common Stock for $1.5
million, which Mr. Casey exercised. The agreement provides for certain
termination benefits and places restrictions on the disposition of the Company's
Class B Common Stock. Effective upon the completion of the Offerings, the
restrictions on the disposition of such shares will lapse.
INCENTIVE AND BENEFIT PLANS
EQUITY OWNERSHIP PLAN
The Board of Directors administers the Equity Ownership Plan and makes the
determination as to the grant of awards, options and/or rights under the plan.
An aggregate of 243,002 shares of Class A Common Stock are reserved for issuance
under the plan. An aggregate of 143,750 shares of Class B Common Stock are
reserved for issuance in connection with stock options previously granted under
the plan and currently unexercised. Under the plan, restricted stock, incentive
stock options, nonqualified stock options and stock appreciation rights or any
combination thereof may be granted to Company employees. In general, the
exercise price of the options granted under the plan will be determined at the
discretion of the Board of Directors, which price generally may not be less than
the market price of the Common Stock on the date the option is granted. Options
normally vest 33 1/3% each year beginning approximately two years after the date
of grant and expire after 10 years. The Board of Directors may
42
<PAGE> 44
condition awards of restricted stock and stock appreciation rights upon
satisfaction of performance criteria or other conditions.
SHARES IN SUCCESS
In 1995, the Company adopted a stock purchase/stock option plan that
provided employees with a one-time right in July 1995 to purchase Class B Common
Stock at a price equal to 85% of then appraised fair market value. For each
share of Class B Common Stock purchased under the plan, each employee received
options to purchase six additional shares at the then appraised fair market
value. Options vest 33 1/3% each year beginning approximately two years after
the date of grant and expire in 2005. No additional options may be granted under
the plan, and no additional shares may be purchased under the plan except upon
the exercise of outstanding options. As of September 30, 1997, an aggregate of
30,987 shares of Class B Common Stock purchased by employees under the plan
remain outstanding, and an aggregate of 186,012 shares of Class B Common Stock
are reserved for issuance under the plan in connection with stock options that
were granted under the plan and are currently unexercised.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Executive Compensation Committee are Koichi
Takashima, Hideichiro Takashima and Ryutaro Yoshioka. Akihiko Takashima, a
current director of the Company, and Takeshi Fujimura, a former director, were
members of the committee during fiscal 1997. Mr. Fujimura remains a special
advisor to the Chairman of the Board of the Company. No other member of the
Executive Compensation Committee has at any time been an officer or employee of
the Company.
Mr. Fujimura was an advisor to the President of Kyoei until his retirement
in June 1997; the current members of the Executive Compensation Committee and
Akihiko Takashima continue to be executive officers and/or directors of Kyoei.
CERTAIN TRANSACTIONS
The Company has entered into technical assistance arrangements with Kyoei,
which owns FLS. See "Risk Factors -- Voting Control by Principal Stockholder"
and "Principal Stockholders". Under these arrangements the Company reimburses
Kyoei for the personnel costs of its consulting engineers and certain travel and
other expenses. Payments made by the Company under these arrangements have been
approximately $230,000, $408,000 and $2,000 in fiscal 1995, 1996 and 1997,
respectively.
Kyoei has informed the Company that it currently holds $2 million of the
First Mortgage Notes. Kyoei has indicated to the Company that it intends to
purchase $2 million of the Notes in the Notes Offering. The Company understands
that Kyoei will purchase Notes in the Notes Offering on the same terms and
conditions as unrelated third parties.
43
<PAGE> 45
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Class B Common Stock as of the date of the
Prospectus and as adjusted to reflect the sale of the shares of Class A Common
Stock offered hereby, assuming no exercise of the Underwriters' over-allotment
option, by (i) each person known by the Company to own beneficially more than
5.0% of the outstanding Class B Common Stock, (ii) each director of the Company
who owns shares of Class B Common Stock, (iii) each of the Named Executive
Officers and (iv) all executive officers and directors as a group.
BENEFICIAL OWNERSHIP(1)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
COMMON STOCK VOTING POWER
------------------------ -------------
BEFORE THE AFTER THE AFTER THE
NUMBER OFFERINGS OFFERINGS OFFERINGS
--------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Kyoei Steel, Ltd.................................... 9,000,000(2) 89.0 64.0 74.4
Phillip E. Casey(3)................................. 1,005,792 9.9 6.2 7.2
J. Donald Haney..................................... 6,676 * * *
Tom J. Landa........................................ 14,660 * * *
James F. Oliver..................................... 4,172 * * *
Koichi Takashima.................................... 500 * * *
Akihiko Takashima................................... 0 -- -- --
Shuzo Hikita........................................ 0 -- -- --
Hideichiro Takashima................................ 300 * * *
Ryutaro Yoshioka.................................... 0 -- -- --
Thomas G. Creed(4).................................. 0 -- -- --
James C. Hogue(4)................................... 0 -- -- --
All Directors and Executive Officers as a Group (13
persons).......................................... 1,041,877 10.3 6.5 7.5
</TABLE>
- ---------------
* Less than one percent.
(1) Beneficial ownership of shares, as determined in accordance with applicable
Securities Exchange Commission rules, includes shares as to which a person
has or shares voting power and/or investment power. Except as otherwise
indicated, all shares are held of record with sole voting and investment
power. For purposes of the table, a person or group of persons is deemed to
have "beneficial ownership" of any shares as of a given date which such
person has the right to acquire within 60 days after such date.
(2) All shares shown are owned directly by FLS, a wholly owned subsidiary of
Kyoei. Kyoei's address is 18F Aqua Dojima, West Building, 1-4-16 Dojimahama,
Kita-Ku, Osaka 530, Japan.
(3) Includes 129,408 shares of Class B Common Stock that have been gifted by Mr.
Casey pursuant to Transfer and Proxy Agreements between Mr. Casey and
certain donees. The gifted shares are subject to certain restrictions set
forth in the agreements. Under the agreements, Mr. Casey is appointed as
attorney-in-fact with full power to vote the shares in accordance with the
decision of the holders of a majority of the shares held by the donee
stockholders and Mr. Casey. As a result, Mr. Casey had the right to vote all
129,408 shares. The restrictions (including those relating to voting) expire
upon the effectiveness of the registration statement of which this
Prospectus is a part. Mr. Casey's address is 5100 W. Lemon Street, Suite
312, Tampa, Florida 33609.
(4) Messrs. Creed and Hogue retired from the Company in November 1996 and May
1997, respectively.
44
<PAGE> 46
DESCRIPTION OF CAPITAL STOCK
References in this Prospectus to the Company's Articles of Incorporation or
Bylaws are references to such documents as they will be amended and restated in
connection with the Offerings. The following description is a summary and is
subject to and qualified in its entirety by reference to the provisions of the
Company's Articles of Incorporation, the form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
COMMON STOCK
The Company has authority under its Articles of Incorporation to issue up
to 100,000,000 shares of Class A Common Stock, par value $.01 per share, and up
to 22,000,000 shares of Class B Common Stock, par value $.01 per share (together
referred to as "Common Stock"). Shares of Class A Common Stock and shares of
Class B Common Stock generally carry the same rights, powers, preferences,
privileges and limitations, except that Class A Common Stock has one vote per
share while Class B Common Stock has two votes per share. As of the date of this
Prospectus, there are no shares of Class A Common Stock outstanding and there
are 10,114,385 shares of Class B Common Stock outstanding held of record by
approximately 1,065 stockholders. Of such shares, 9,000,000 shares are held of
record by FLS, which shares will represent approximately 74.4% of the combined
voting power of all Common Stock upon completion of the Offerings. See
"Principal Stockholders".
Holders of Common Stock do not have any preemptive rights or rights to
subscribe for additional securities of the Company.
VOTING RIGHTS
The holders of Class A Common Stock are entitled to one vote per share.
Holders of Class B Common Stock are entitled to two votes per share. Except as
otherwise required by law or the Company's Articles of Incorporation, the
holders of all classes of Common Stock entitled to vote will vote together as a
single class on all matters presented to the stockholders for their vote or
approval. Because of the disproportionate voting rights of the Class B Common
Stock, holders of Class B Common Stock may be able to control the outcome of
matters submitted to a vote of the Company's stockholders, including the
election of directors, when the number of outstanding shares of Class B Common
Stock is less than a majority of the number of shares of all classes of Common
Stock then outstanding. See "Risk Factors -- Voting Control by Principal
Stockholder".
DIVIDENDS
Holders of Class A Common Stock and Class B Common Stock are entitled to
receive dividends at the same rate on a per share basis if, as and when such
dividends are declared by the Board of Directors of the Company out of assets or
funds legally available therefor. In the case of a dividend or other
distribution payable in shares of a class of Common Stock, including
distributions pursuant to stock splits or divisions of Common Stock, only shares
of Class A Common Stock may be distributed with respect to Class A Common Stock
and only shares of Class B Common Stock may be distributed with respect to Class
B Common Stock. The number of shares of each class of Common Stock so
distributed shall be equal in number on a per share basis.
CONVERSION
Class A Common Stock has no conversion rights. Shares of Class B Common
Stock are convertible into Class A Common Stock, in whole or in part, at any
time and from time to time at the option of the holder, on the basis of one
share of Class A Common Stock for each share of Class B Common Stock converted.
Each share of Class B Common Stock shall automatically convert into one share of
Class A Common Stock on the date on which the number of shares of Class B Common
Stock then owned of record by Kyoei, its wholly owned subsidiaries and Phillip
E. Casey would be entitled to cast fewer than 50% of the aggregate number of
votes that would be entitled to be cast by all holders of shares of
45
<PAGE> 47
Common Stock then outstanding at a meeting of such holders. The Company
covenants that (i) it will at all times reserve and keep available, out of its
authorized but unissued shares of Class A Common Stock, such number of shares of
Class A Common Stock issuable upon the conversion of all outstanding shares of
Class B Common Stock, (ii) it will cause any share of Class A Common Stock
issuable upon conversion of a share of Class B Common Stock that requires
registration with or approval of any governmental authority under federal or
state law before such shares may be issued upon conversion to be so registered
or approved and (iii) it will use its best efforts to list the shares of Class A
Common Stock required to be delivered upon conversion prior to such delivery
upon such national securities exchange upon which the outstanding Class A Common
Stock is listed at the time of such delivery.
RESTRICTIONS ON ADDITIONAL ISSUANCES AND TRANSFER
Other than pursuant to options or other rights to purchase already
outstanding, or pursuant to a stock split, stock dividend or similar transaction
effected in accordance with the Company's Articles of Incorporation, the Company
may not issue or sell any shares of Class B Common Stock or any securities
(including, without limitation, any rights, options, warrants or other
securities) convertible into, or exchangeable or exercisable for, shares of
Class B Common Stock to any person who is not then a record holder of Class B
Common Stock, Kyoei or a wholly owned subsidiary of Kyoei. Additionally, shares
of Class B Common Stock may not be transferred, whether by sale, assignment,
gift, bequest, appointment or otherwise, to a person other than another record
holder of Class B Common Stock, Kyoei or a wholly owned subsidiary of Kyoei.
Notwithstanding the foregoing (i) any holder of Class B Common Stock may pledge
his, her or its shares of Class B Common Stock to a financial institution
pursuant to a bona fide pledge of such shares as collateral security for
indebtedness due to the pledgee provided that such shares remain subject to the
transfer restrictions and that, in the event of foreclosure or other similar
action by the pledgee, such pledged shares of Class B Common Stock may only be
transferred to as provided above or converted into shares of Class A Common
Stock, as the pledgee may elect, and (ii) the foregoing transfer restrictions
shall not apply in the case of a merger, consolidation or business combination
of the Company with or into another corporation in which all of the outstanding
shares of Common Stock of the Company regardless of class are purchased by the
acquiror.
RECLASSIFICATION AND MERGER
In the event the Company enters into any consolidation, merger, combination
or other transaction in which shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then,
and in such event, the shares of each class of Common Stock will be exchanged
for or changed into either (i) the same amount of stock, securities, cash and/or
any other property, as the case may be, into which or for which each share of
any other class of Common Stock is exchanged or changed; provided, however, that
if shares of Common Stock are exchanged for or changed into shares of capital
stock, such shares so exchanged for or changed into may differ to the extent and
only to the extent that the Class A Common Stock and Class B Common Stock differ
as provided in the Company's Articles of Incorporation or (ii) if holders of
each class of Common Stock are to receive different distributions of stock,
securities, cash and/or any other property, an amount of stock, securities, cash
and/or property per share having a value, as determined by an independent
investment banking firm of national reputation selected by the Board of
Directors, equal to the value per share into which or for which each share of
any other class of Common Stock is exchanged or changed.
OTHER PROVISIONS
In the event of any dissolution, liquidation or winding up of the affairs
of the Company, after payment of the debts and other liabilities of the Company,
the remaining assets of the Company will be distributable ratably among the
holders of the Class A Common Stock and Class B Common Stock treated as a single
class. The holders of the Class A Common Stock and Class B Common Stock are not
entitled to preemptive rights. None of the Class A Common Stock or Class B
Common Stock may be
46
<PAGE> 48
reclassified, subdivided or combined in any manner unless the other class is
simultaneously reclassified, subdivided or combined in the same proportion.
FLORIDA BUSINESS CORPORATION ACT
The Company will be subject to several anti-takeover provisions under
Florida law that apply to a public corporation organized under Florida law
unless the corporation has elected to opt out of such provisions in its Articles
of Incorporation or (depending on the provision in question) its Bylaws. The
Company has not elected to opt out of these provisions. The Florida Business
Corporation Act (the "Florida Act") contains a provision that prohibits the
voting of shares in a publicly-held Florida corporation which are acquired in a
"control share acquisition" unless the holders of a majority of the
corporation's voting shares (exclusive of shares held by officers of the
corporation, inside directors or the acquiring party) approve the granting of
voting rights as to the shares acquired in the control share acquisition. A
"control share acquisition" means an acquisition that immediately thereafter
entitles the acquiring party to vote in the election of directors within any of
the following ranges of voting power: (i) one-fifth or more but less than one
third of such voting power, (ii) one third or more but less than a majority of
such voting power and (iii) more than a majority of such voting power.
The Florida Act also contains an "affiliated transaction" provision that
prohibits a publicly-held Florida corporation from engaging in a broad range of
business combinations or other extraordinary corporate transactions with an
"interested stockholder" unless (i) the transaction is approved by a majority of
disinterested directors before the person becomes an interested stockholder,
(ii) the interested stockholder has owned at least 80% of the corporation's
outstanding voting shares for at least five years, or (iii) the interested
stockholder is the beneficial owner of at least 90% of the corporation's
outstanding voting shares, exclusive of those shares acquired by the interested
stockholder directly from the corporation in a transaction approved by a
majority of the disinterested directors, or (iv) the affirmative vote of
two-thirds of the voting shares other than the shares beneficially owned by the
interested stockholders. An interested stockholder is defined as a person who
together with affiliates and associates beneficially owns more than 10% of the
corporation's outstanding voting shares.
INDEMNIFICATION AND LIMITATION OF LIABILITY FOR DIRECTORS AND OFFICERS
The Company's Bylaws provide that the Company shall indemnify directors and
officers to the fullest extent permitted by the laws of the State of Florida.
The Company intends to enter into indemnification agreements with all of its
executive officers and directors creating certain indemnification obligations on
the Company's part in favor of the directors and executive officers. These
indemnification agreements clarify and expand the circumstances under which a
director or executive officer will be indemnified.
The indemnification rights conferred by the Bylaws and indemnification
agreements are not exclusive of any other right, under the Florida Act or
otherwise, to which a person seeking indemnification may otherwise be entitled.
The Company also intends to provide liability insurance for the directors and
officers for certain losses arising from claims or charges made against them
while acting in their capacities as directors or officers.
The effect of such indemnification arrangements may be to exempt or limit
the liability of such executive officers and directors to the Company or its
stockholders for monetary damages for breach of fiduciary duty to the Company,
except to the extent such exemption or limitation is not permitted under the
Florida Act as the same exists or may hereafter be amended.
TRANSFER AGENT
The transfer agent and registrar of the Common Stock is ChaseMellon
Shareholder Services.
47
<PAGE> 49
LISTING
The Class A Common Stock has been approved for listing, subject to notice
of issuance, on the New York Stock Exchange ("NYSE") under the trading symbol
"AST".
SHARES ELIGIBLE FOR FUTURE SALE
A substantial number of shares of Class B Common Stock already outstanding,
or issuable on exercise of outstanding options, upon conversion into shares of
Class A Common Stock, will be eligible for future sale in the public market at
prescribed times pursuant to exemptions from registration under the Securities
Act of 1933, as amended (the "Securities Act").
Future sales of a substantial number of shares of the Class A Common Stock
in the public market could adversely affect the market price of the Class A
Common Stock and could impair the Company's ability to raise capital through the
sale of equity or equity-related securities. Upon completion of the Offerings,
the Company will have 3,950,000 shares of Class A Common Stock outstanding and
10,114,385 shares of Class B Common Stock outstanding. All shares of Class B
Common Stock are convertible into shares of Class A Common Stock on a one-for-
one basis. Of such shares, 72,508 shares of Class B Common Stock, representing
less than 1.0% of the issued and outstanding shares of Common Stock will be
freely tradeable without restriction or further registration under the
Securities Act, unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act ("Rule 144"). The remaining
10,041,877 shares of Class B Common Stock representing approximately 71.4% of
the issued and outstanding shares of Common Stock (approximately 68.5% if the
Underwriters' over-allotment options are exercised in full) are beneficially
owned by affiliates of the Company and are therefore "restricted securities" as
that term is defined in Rule 144 and as such are subject to certain holding
period, volume limitations and other restrictions prescribed by Rule 144. The
Company, certain of its executive officers and Kyoei have agreed that, during
the period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of this Prospectus, they will not
offer, sell, contract to sell, pledge, hypothecate, grant any option, right or
warrant to purchase, or otherwise dispose of, directly or indirectly, (which
shall be deemed to include, without limitation, the entering into of a
cash-settled or Common Stock settled derivative instrument) any shares of Common
Stock, any securities of the Company that are substantially similar to the Class
A Common Stock or any securities that are convertible into or exchangeable for,
or that represent the right to receive, Common Stock, or any such substantially
similar securities, (other than pursuant to employee stock option plans existing
on, or upon the conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Prospectus), without the prior written
consent of the representatives, except for the shares of Class A Common Stock
offered in connection with the Offerings. Upon expiration of such 180 day
period, an aggregate of 10,041,877 shares will be eligible for sale subject to
the timing, volume and manner of sale restrictions of Rule 144. See
"Underwriting".
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned his or her shares of Common Stock for at least one year
(including the prior holding period of any prior owner other than an affiliate
of the Company) is entitled to sell within any three-month period that number of
shares which does not exceed the greater of 1% of the outstanding shares of
Common Stock and the average weekly trading volume during the four calendar
weeks preceding each such sale. Sales under Rule 144 also are subject to certain
manner of sale provisions, notice requirements and the availability of current
public information about the Company. A person (or persons whose shares are
aggregated) who is not or has not been deemed an affiliate of the Company for at
least three months and who has beneficially owned shares for at least two years
(including the holding period of any prior owner other than an affiliate) would
be entitled to sell such shares under Rule 144 without regard to the limitations
discussed above.
Sales of such shares in the public market, or the perception that such
sales may occur, could adversely affect the market price of the Common Stock or
impair the Company's ability to raise additional capital in the future through
the sale of equity securities.
48
<PAGE> 50
VALIDITY OF CLASS A COMMON STOCK
The validity of the shares of Class A Common Stock offered hereby will be
passed upon for the Company by Trenam, Kemker, Scharf, Barkin, Frye, O'Neill &
Mullis, Professional Association, Tampa, Florida. The validity of the shares of
Class A Common Stock offered hereby will be passed upon for the Underwriters by
Sullivan & Cromwell, New York, New York, which will be relying upon the opinion
of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill, & Mullis, Professional
Association, as to matters of Florida law.
EXPERTS
The Financial Statements and Notes thereto included in this Prospectus, to
the extent and for the periods indicated in their report, have been audited by
Arthur Andersen LLP, independent certified public accountants, as indicated in
their report with respect thereto, and is included herein, in reliance upon the
authority of said firm, as experts in accounting and auditing in giving said
report.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (herein, together with all
amendments and exhibits, referred to as the "Registration Statement") under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each such instance reference is
made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Company is subject to the informational requirements of the
Exchange Act of 1934, as amended ("Exchange Act"), and in accordance therewith
will file reports, proxy statements and other information with the Commission.
The Registration Statement, as well as all periodic reports and other
information filed by the Company pursuant to the Exchange Act, may be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street NW, Washington, D.C. 20549, and at the regional offices of the
Commission located at 7 World Trade Center, 7th Floor, New York, New York 10048
and Citicorp Center, 500 Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained from the World Wide Web site that the
Commission maintains at http://www.sec.gov and from the Public Reference Section
of the Commission, 450 Fifth Street, NW, Washington, D.C. 20549, at prescribed
rates.
49
<PAGE> 51
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Statements of Financial Position as of March 31, and
September 30, 1997 (unaudited)............................ F-2
Statements of Income (unaudited) for the Six Month Periods
Ended September 30, 1996 and 1997......................... F-3
Statements of Cash Flows (unaudited) for the Six Month
Periods Ended September 30, 1996 and 1997................. F-4
Notes to Unaudited Financial Statements..................... F-5
Report of Independent Certified Public Accountants.......... F-9
Statements of Financial Position as of March 31, 1996 and
1997...................................................... F-10
Statements of Income for the Years Ended March 31, 1995,
1996 and 1997............................................. F-11
Statements of Shareholders' Equity for the Years Ended March
31, 1995, 1996 and 1997................................... F-12
Statements of Cash Flows for the Years Ended March 31, 1995,
1996 and 1997............................................. F-13
Notes to Financial Statements for the Years Ended March 31,
1995, 1996 and 1997....................................... F-14
</TABLE>
F-1
<PAGE> 52
AMERISTEEL CORPORATION
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
MARCH 31, -------------------------
1997 HISTORICAL PRO FORMA
--------- ----------- -----------
(UNAUDITED) (UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................. $ 1,645 $ 1,848 $ 1,848
Accounts receivable....................................... 68,563 77,573 77,573
Inventories............................................... 106,173 106,830 106,830
Deferred tax assets....................................... 5,000 5,000 5,000
Other current assets...................................... 1,138 1,442 1,442
-------- -------- --------
TOTAL CURRENT ASSETS............................ 182,519 192,693 192,693
ASSETS HELD FOR SALE...................................... 14,838 14,967 14,967
PROPERTY, PLANT AND EQUIPMENT............................. 308,159 317,496 317,496
Less accumulated depreciation............................. 58,138 67,679 67,679
-------- -------- --------
250,021 249,817 249,817
GOODWILL.................................................. 85,773 83,708 83,708
DEFERRED FINANCING COSTS.................................. 2,523 2,208 2,208
OTHER ASSETS.............................................. 11 7 7
-------- -------- --------
TOTAL ASSETS.................................... $535,685 $543,400 $543,400
======== ======== ========
CURRENT LIABILITIES
Trade accounts payable.................................... $ 44,666 $ 39,779 $ 39,779
Salaries, wages and employee benefits..................... 14,598 14,926 14,926
Environmental remediation................................. 5,079 5,875 5,875
Other current liabilities................................. 4,355 9,594 9,594
Interest payable.......................................... 4,659 4,980 4,980
Current maturities of long-term borrowings................ 435 5,687 5,687
-------- -------- --------
TOTAL CURRENT LIABILITIES....................... 73,792 80,841 80,841
LONG-TERM BORROWINGS, LESS CURRENT PORTION................ 237,474 216,835 222,904
OTHER LIABILITIES......................................... 21,555 24,014 24,014
DEFERRED TAX LIABILITIES.................................. 52,300 52,300 52,300
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; 30,000,000 shares
authorized at March 31, and September 30, 1997,
10,079,028 and 10,114,603 shares outstanding at March
31, and September 30, 1997, respectively............. 101 101 101
Capital in excess of par................................ 156,816 157,297 157,297
(Accumulated deficit) retained earnings................. (4,328) 14,108 8,039
Deferred compensation................................... (2,025) (2,096) (2,096)
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY...................... 150,564 169,410 163,341
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $535,685 $543,400 $543,400
======== ======== ========
</TABLE>
See notes to financial statements
F-2
<PAGE> 53
AMERISTEEL CORPORATION
STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1997
------------- -------------
($ IN THOUSANDS EXCEPT PER
COMMON SHARE)
<S> <C> <C>
NET SALES................................................... $327,908 $343,805
Operating Expenses:
Cost of sales............................................. 285,173 277,251
Selling and administrative................................ 14,261 12,834
Depreciation.............................................. 8,091 9,643
Amortization of goodwill.................................. 2,065 2,065
-------- --------
309,590 301,793
-------- --------
INCOME FROM OPERATIONS...................................... 18,318 42,012
Other Expenses:
Interest.................................................. 9,898 10,115
Amortization of deferred financing costs.................. 467 353
-------- --------
10,365 10,468
-------- --------
INCOME BEFORE INCOME TAXES.................................. 7,953 31,544
Income taxes................................................ 3,907 13,108
-------- --------
NET INCOME.................................................. $ 4,046 $ 18,436
======== ========
Weighted average common shares outstanding (in thousands)... 10,093 10,096
EARNINGS PER COMMON SHARE................................... $ .40 $ 1.83
</TABLE>
See notes to financial statements
F-3
<PAGE> 54
AMERISTEEL CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1997
------------- -------------
($ IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 4,046 $ 18,436
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.......................... 10,623 12,061
Deferred income taxes.................................. 1,300 --
Other (loss on asset disposals and deferred
compensation)........................................ 492 2,313
Changes in operating assets and liabilities:
Accounts receivable.................................... 761 (9,010)
Inventories............................................ 16,758 (657)
Other assets........................................... 270 (429)
Accounts payable, income taxes and other liabilities... (4,898) 4,256
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES................. 29,352 26,970
INVESTING ACTIVITIES
Additions to property, plant and equipment (24,211) (9,121)
Proceeds from sales of property, plant and equipment... 519 90
Restricted IRB funds................................... 8,109 (2,252)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES..................... (15,583) (11,283)
FINANCING ACTIVITIES
Payments to short-term and long-term borrowings, net... (19,782) (20,387)
Proceeds from IRB (Bonds).............................. -- 5,000
Addition to deferred financing costs................... -- (38)
Purchase of common stock............................... (107) (59)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES..................... (19,889) (15,484)
-------- --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS............ (6,120) 203
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 6,193 1,645
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 73 $ 1,848
======== ========
</TABLE>
See notes to financial statements
F-4
<PAGE> 55
AMERISTEEL CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE A -- BASIS OF PRESENTATION
The condensed financial statements include the accounts of AmeriSteel
Corporation, a Florida corporation (the "Company"). As of April 1, 1996, the
Company changed its name from Florida Steel Corporation (which it had used since
1956) to AmeriSteel Corporation. The predecessor of the Company was formed in
1937.
The accompanying unaudited condensed financial statements do not include
all the information or footnotes necessary for a complete presentation of
financial condition, results of operations and cash flows in conformity with
generally accepted accounting principles. However all adjustments which, in the
opinion of management, are necessary for a fair presentation have been included.
Such adjustments consist only of normally recurring items.
It is suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto included
elsewhere in this Prospectus. The results of the six months ended September 30,
1997 are not necessarily indicative of the results to be expected for the fiscal
year ending March 31, 1998.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Pronouncements: In February 1997, the Financial
Accounting Standards Board issued Statement No. 128, "Earnings per Share" which
establishes standards for computing and presenting earnings per share. The
statement replaces the presentation of primary earnings per share with a
presentation of basic earnings per share. It also requires dual presentation of
basic and diluted earnings per share on the income statement and provides for
certain disclosures. The Company will adopt Statement No. 128 in the third
quarter of fiscal 1998 and does not believe the effect of adoption will be
material.
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information" which
establishes standards for reporting information about operating segments of a
business. The statement, which is based on the management approach to segment
reporting, includes requirements to report selected segment information and
entity-wide disclosures about products and services, major customers, and the
countries in which the Company holds assets and reports revenues. This statement
becomes effective for the Company for reporting beginning in fiscal 1999.
Management has not yet evaluated the effects of this change on the Company's
financial statements.
Reclassifications: Certain amounts in the prior period financial
statements have been reclassified to conform to the current fiscal financial
statement presentation.
NOTE C -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1997
--------- -------------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
Finished goods.............................................. $ 59,299 $ 64,056
Work in-process............................................. 14,175 10,022
Raw materials and operating supplies........................ 32,699 32,752
-------- --------
$106,173 $106,830
======== ========
</TABLE>
F-5
<PAGE> 56
AMERISTEEL CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- BORROWINGS
Long-term borrowings consist of the following:
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1997 1997
--------- -------------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
Revolving Credit Agreement.................................. $ 51,340 $ 30,960
First Mortgage Notes........................................ 100,000 100,000
Subordinated Intercompany Note.............................. 50,000 50,000
Industrial Revenue Bonds.................................... 30,875 35,875
Trade Loan Agreement........................................ 5,259 5,259
Note to Parent.............................................. 435 428
-------- --------
237,909 222,522
Less Current Maturities..................................... 435 5,687
-------- --------
$237,474 $216,835
======== ========
</TABLE>
NOTE E -- ENVIRONMENTAL MATTERS
The Company is involved in the manufacture of steel, in connection with
which it produces and uses certain substances that may pose environmental
hazards. The principal hazardous waste generated by current and past operations
is electric arc furnace/emission control dust ("EC dust"), a residual from the
production of steel in electric arc furnaces. Environmental legislation and
regulation at both the federal and state level over EC dust is subject to
change, which may change the cost of compliance. While EC dust is generated in
current production processes, such EC dust is being collected, handled and
disposed of in a manner which management believes meets all current federal and
state environmental regulations. The costs of such collection and disposal are
being expensed and paid currently from operations. In addition, the Company has
handled and disposed of EC dust in other manners in previous years, and is
responsible for the remediation of certain sites where such EC dust was
generated and/or disposed. In general, the Company's estimate of the remediation
costs is based on its review of each site and the nature of the anticipated
remediation activities to be undertaken. The Company's process for estimating
such remediation costs includes determining for each site the expected
remediation methods, and the estimated cost for each step of the remediation. In
all such determinations, the Company employs outside consultants, and providers
of such remedial services where necessary, to assist in making such
determinations. Although the ultimate costs associated with the remediation are
not presently known, the Company has estimated the total cost to be
approximately $14.9 million and has recorded these costs as accrued liabilities
as of September 30, 1997. The majority of this amount is associated with four
sites.
The Tampa mill site contains slag and soil that is contaminated with EC
dust generated by past operations. The volume and mass estimates of the
contamination was based on analytical data from approximately 600 soil borings,
700 soil samples and 91 groundwater-monitoring wells. The remediation approach
selected by the Company, excavation and on-site treatment and disposal, was
approved, and a permit issued, by the U.S. Environmental Protection Agency
during fiscal 1996 and by the Florida Department of Environmental Protection
during fiscal 1998. The Company is currently awaiting a signed Consent Order to
begin the remediation process. The remediation cost estimates are based on the
Company's previous experience with comparable projects as well as estimates
provided by outside environmental consultants. The Company is responsible for
the total remediation costs and currently
F-6
<PAGE> 57
AMERISTEEL CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
estimates those costs to be approximately $8 million for this site. The Company
expects cleanup at this site to be substantially completed during 2001.
At the Jackson Tennessee mill site, EC dust contaminated with Cesium 137, a
man-made, radioactive material (incident-related material) has been stored in
containers awaiting remediation. The remediation volumes and masses are based on
actual measurements made by the outside contractor during the now complete
cleanup, consolidation and containerization phase of the remediation. The
approach for the remaining treatment, transport and disposal phase is based on
the final Nuclear Regulatory Commission "Technical Position," dated March 20,
1997. The remediation cost estimate is based on a signed contract for the
treatment and transportation and on a written price quotation for the disposal.
The detailed workplan has been submitted to the regulatory agencies and approval
is expected within 90 days. The Company is responsible for the total remediation
cost and currently estimates those costs to be approximately $3 million for this
site. The Company expects cleanup at this site to be substantially completed
during fiscal 1998.
The Sogreen site, a third party site, contains EC dust from the Company
that was improperly stored at this recycling location. The estimate includes the
cost of soil remediation and groundwater remediation based on an approach
approved by the Georgia Environmental Protection Division. The Company has been
named as a potentially responsible party ("PRP") for this site, and thus its
estimated share of the remediation costs is approximately 43% (based on
analytical data from soil borings and samples) of the total estimated
remediation cost of $4.3 million; therefore, the Company currently estimates its
obligation to be approximately $2 million. The Company's management believes
that the impact of additional future costs on the Company's results of
operations, financial condition and liquidity from the Sogreen site, based on
the other PRPs not fulfilling their obligations, would not be significant. The
Company expects cleanup at this site to be substantially completed during fiscal
1998.
The Stoller site, a third party site, contains EC dust from the Company
that was improperly stored at this recycling location. The Company has been
named as a PRP for this site. The estimate includes soil remediation and
groundwater remediation. Outside contractors have measured the remediation
volumes and masses during the now complete cleanup and consolidation phase of
the remediation. The remainder of the remediation approach selected by the
Company, on-site treatment and disposal, has been approved, and contract
negotiations for construction of the on-site vault are underway. The Company's
cost estimates are based on its previous experience with comparable projects as
well as estimates confirmed by the State of South Carolina. An Allocation
Agreement was issued by the State of South Carolina during fiscal 1997 that
essentially shifted some of the payment burden from the Company to other PRPs,
leaving the Company with an approximately 2% share of the remaining estimated $8
million remediation cost; therefore, the Company currently estimates its
obligation to be approximately $.2 million. The non-participating PRPs have
intervened in the proceedings for approval by the federal court in order to
contest the agreement. The Company's management believes that the agreement will
be finalized between February and May 1998. If the Allocation Agreement is not
finalized under its present terms, the Company's management believes that the
Company's overall obligation for this site would not exceed approximately 50% of
the total estimated remediation cost. The Company expects cleanup at this site
to be substantially completed during fiscal 1998.
The Company paid approximately $5.2 million in remediation costs in fiscal
1997, and $.7 million during the first six months of fiscal 1998. Of the $14.9
million accrued at September 30, 1997, the Company expects to pay approximately
$3.7 million during the remainder of fiscal 1998. The timing of the remaining
future payments for each future year is uncertain due to the various remediation
alternatives being considered. However, the Company's management has estimated
that all significant remediation
F-7
<PAGE> 58
AMERISTEEL CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
should be completed by 2002. The Company expensed approximately $3.3 million
during the six months ended September 30, 1997 and approximately $2 million in
each of the past two fiscal years for environmental remediation costs.
Based on past use of certain technologies and remediation methods by third
parties, evaluation of those technologies and methods by the Company's
consultants and quotations and third-party estimates of costs of
remediation-related services provided to the Company or which the Company and is
consultants are aware, the Company and its consultants believe that the
Company's cost estimates are reasonable. In light of the uncertainties inherent
in determining the costs associated with the clean-up of such contamination,
including the time periods over which such costs must be paid, the extent of
contribution by parties which are jointly and severally liable, and the nature
and timing of payments to be made under cost sharing arrangements, there can be
no assurance the ultimate costs of remediation may not be greater or less than
the estimated remediation costs.
NOTE F -- SUBSEQUENT EVENTS
The Company proposes to sell shares of common stock to the public pursuant
to a Registration Statement filed with the Securities and Exchange Commission
(the "Offering"). In connection with the Offering, the Board of Directors
approved on October 16, 1997 subject to stockholder approval, amendments to the
Company's Articles of Incorporation. The Company expects the amendments to the
Articles of Incorporation to become effective on or about December 7, 1997. The
amendment authorizes 100,000,000 shares of $.01 par value Class A common stock
and 22,000,000 shares of $.01 par value Class B common stock. The rights of the
holders of both Class A and Class B common stock will be substantially the same
except that the holders of Class A common stock and Class B common stock will be
entitled to one vote per share and two votes per share, respectively. Only
shares of Class A common stock will be sold in the Offerings.
NOTE G -- PRO FORMA INFORMATION
Prior to the completion of the Offering, the Company intends to declare and
pay a special dividend of $.60 per share to its then current stockholders.
The accompanying unaudited pro forma statement of financial position as of
September 30, 1997, is based on the Company's historical statement of financial
position as of September 30, 1997, as adjusted to reflect the payment of the
special dividend which is assumed to be funded from available borrowings under
the Revolving Credit Agreement. This transaction is presented in the unaudited
pro forma statement of financial position as if it was consummated on September
30, 1997.
F-8
<PAGE> 59
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To AmeriSteel Corporation:
We have audited the accompanying statements of financial position of
AmeriSteel Corporation (a Florida corporation) as of March 31, 1996 and 1997,
and the related statements of income, shareholders' equity and cash flows for
each of the three years in the period ended March 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 financial position of AmeriSteel Corporation as of
March 31, 1996 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended March 31, 1997, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tampa, Florida,
April 25, 1997 (except with
respect to the matter discussed
in Note L, as to which the
date is October 16, 1997)
F-9
<PAGE> 60
AMERISTEEL CORPORATION
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1997
--------- ---------
($ IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................... $ 6,193 $ 1,645
Accounts receivable, less allowance of $1,000 at March 31,
1996 and 1997 for doubtful accounts....................... 72,910 68,563
Inventories................................................. 112,753 106,173
Deferred tax assets......................................... 7,200 5,000
Other current assets........................................ 1,053 1,138
-------- --------
TOTAL CURRENT ASSETS.............................. 200,109 182,519
ASSETS HELD FOR SALE........................................ 14,411 14,838
PROPERTY, PLANT AND EQUIPMENT
Land and improvements....................................... 13,393 14,942
Building and improvements................................... 31,906 35,116
Machinery and equipment..................................... 199,350 250,299
Construction in progress.................................... 45,039 7,802
-------- --------
289,688 308,159
Less accumulated depreciation............................... 42,679 58,138
-------- --------
247,009 250,021
GOODWILL.................................................... 89,903 85,773
DEFERRED FINANCING COSTS.................................... 3,457 2,523
OTHER ASSETS................................................ 7 11
-------- --------
TOTAL ASSETS...................................... $554,896 $535,685
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable...................................... $ 40,234 $ 44,666
Salaries, wages and employee benefits....................... 14,336 14,598
Environmental remediation................................... 6,079 5,079
Other current liabilities................................... 5,057 4,355
Interest payable............................................ 4,940 4,659
Current maturities of long-term borrowings (including note
payable to parent of $444 and $435 at March 31, 1996 and
1997, respectively)....................................... 14,942 435
-------- --------
TOTAL CURRENT LIABILITIES......................... 85,588 73,792
LONG-TERM BORROWINGS, LESS CURRENT PORTION.................. 252,525 237,474
OTHER LIABILITIES........................................... 20,336 21,555
DEFERRED TAX LIABILITIES.................................... 54,700 52,300
SHAREHOLDERS' EQUITY........................................
Common stock, $.01 par value; 30,000,000 authorized,
10,095,741 and 10,079,028 shares outstanding, at March 31,
1996 and 1997, respectively............................... 101 101
Capital in excess of par.................................... 157,026 156,816
Accumulated deficit......................................... (12,380) (4,328)
Deferred compensation....................................... (3,000) (2,025)
-------- --------
TOTAL SHAREHOLDERS' EQUITY........................ 141,747 150,564
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $554,896 $535,685
======== ========
</TABLE>
See notes to financial statements
F-10
<PAGE> 61
AMERISTEEL CORPORATION
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
1995 1996 1997
---------- ---------- ----------
($ IN THOUSANDS EXCEPT EARNINGS PER
COMMON SHARE)
<S> <C> <C> <C>
NET SALES................................................... $639,908 $628,404 $617,289
Operating expenses:
Cost of sales............................................. 545,725 533,965 531,190
Selling and administrative................................ 29,959 29,605 29,068
Depreciation.............................................. 14,046 14,619 16,654
Amortization of goodwill.................................. 4,130 4,130 4,130
Other operating expenses.................................. -- 16,013 --
-------- -------- --------
593,860 598,332 581,042
-------- -------- --------
INCOME FROM OPERATIONS...................................... 46,048 30,072 36,247
Other expenses:
Interest.................................................. 23,330 22,000 19,473
Amortization of deferred financing costs.................. 2,863 1,956 934
-------- -------- --------
26,193 23,956 20,407
-------- -------- --------
INCOME BEFORE INCOME TAXES.................................. 19,855 6,116 15,840
Income taxes................................................ 9,354 3,996 7,788
-------- -------- --------
NET INCOME.................................................. $ 10,501 $ 2,120 $ 8,052
======== ======== ========
Weighted average common shares outstanding (in thousands)... 10,000 10,062 10,087
EARNINGS PER COMMON SHARE................................... $ 1.05 $ 0.21 $ 0.80
</TABLE>
See notes to financial statements
F-11
<PAGE> 62
AMERISTEEL CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL
------------------- IN EXCESS ACCUMULATED DEFERRED
SHARES AMOUNT OF PAR DEFICIT COMPENSATION TOTAL
---------- ------ --------- ----------- ------------ --------
($ IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT MARCH 31, 1994....... 200 $ -- $150,000 $(25,001) $ -- $124,999
Repurchase of common stock....... (20) -- -- -- -- --
Common stock issuance............ 15 -- 4,500 -- (4,500) --
Exercise of stock options........ 5 -- 1,500 -- -- 1,500
Net income....................... -- -- -- 10,501 -- 10,501
Reduction in deferred
compensation................... -- -- -- -- 750 750
49,999 for 1 stock dividend...... 9,999,800 100 (100) -- -- --
---------- ---- -------- -------- ------- --------
BALANCES AT MARCH 31, 1995....... 10,000,000 100 155,900 (14,500) (3,750) 137,750
Common stock issuance............ 95,741 1 1,126 -- (150) 977
Net income....................... -- -- -- 2,120 -- 2,120
Reduction in deferred
compensation................... -- -- -- -- 900 900
---------- ---- -------- -------- ------- --------
BALANCES AT MARCH 31, 1996....... 10,095,741 101 157,026 (12,380) (3,000) 141,747
Common stock issuance............ 100 -- 1 -- -- 1
Repurchase of common stock....... (16,813) -- (211) -- -- (211)
Net income....................... -- -- -- 8,052 -- 8,052
Reduction in deferred
compensation................... -- -- -- -- 975 975
---------- ---- -------- -------- ------- --------
BALANCES AT MARCH 31, 1997....... 10,079,028 $101 $156,816 $ (4,328) $(2,025) $150,564
========== ==== ======== ======== ======= ========
</TABLE>
See notes to financial statements
F-12
<PAGE> 63
AMERISTEEL CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1995 1996 1997
---------- ---------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 10,501 $ 2,120 $ 8,052
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.............................................. 14,046 14,619 16,654
Amortization.............................................. 6,993 6,086 5,064
Deferred income taxes..................................... 1,849 (1,200) (200)
Loss on disposition of property, plant and equipment...... 600 14,312 317
Deferred compensation..................................... 750 900 975
Changes in operating assets and liabilities:
Accounts receivable....................................... (11,142) 7,450 4,347
Recoverable income taxes.................................. 300 -- --
Inventories............................................... (12,470) 14,927 6,580
Other current assets...................................... 420 (303) (85)
Other assets.............................................. 15 21 (4)
Trade accounts payable.................................... 3,315 (9,130) 4,432
Salaries, wages and employee benefits..................... (868) (2,184) 262
Other current liabilities................................. 290 769 (828)
Environmental remediation................................. (7,995) (5,421) (1,400)
Interest payable.......................................... 526 (318) (281)
Income taxes payable...................................... 1,561 514 126
Other liabilities......................................... 2,666 929 (81)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES.......... 11,357 44,091 43,930
INVESTING ACTIVITIES
Additions to property, plant and equipment.................. (25,781) (36,894) (34,382)
Proceeds from sale of property, plant and equipment......... 1,857 788 876
Proceeds from sale of assets held for sale.................. -- 794 1,550
Purchase of assets held for sale............................ -- -- (454)
Restricted IRB Funds........................................ -- (13,700) 13,700
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES.............. $(23,924) $(49,012) $(18,710)
FINANCING ACTIVITIES
Proceeds from (payments to) short and long-term borrowings,
net....................................................... $ 12,147 $ 21,227 $(29,558)
Additions to deferred financing costs....................... -- (909) --
Repurchase of subordinated debentures....................... -- (13,035) --
Proceeds from exercise of stock options..................... 1,500 -- --
Proceeds from sale of common stock.......................... -- 977 --
Redemption of common stock.................................. -- -- (210)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES......... 13,647 8,260 (29,768)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 1,080 3,339 (4,548)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 1,774 2,854 6,193
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 2,854 $ 6,193 $ 1,645
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest (net of amount capitalized).......... $ 22,150 $ 22,318 $ 19,754
======== ======== ========
Cash paid for income taxes.................................. $ 5,645 $ 4,682 $ 7,862
======== ======== ========
</TABLE>
See notes to financial statements
F-13
<PAGE> 64
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995, 1996 AND 1997
NOTE A -- BASIS OF PRESENTATION
The financial statements include the accounts of AmeriSteel, a Florida
corporation (the "Company"). As of April 1, 1996, the Company changed its name
from Florida Steel Corporation (which it had used since 1956) to AmeriSteel
Corporation. The predecessor of the Company was formed in 1937. All significant
intercompany accounts and transactions have been eliminated.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Credit Risk: The Company extends credit, primarily on a basis of 30-day
terms, to various customers in the steel distribution, fabrication and
construction industries, primarily located in the southeastern United States.
The Company performs periodic credit evaluations of its customers and generally
does not require collateral. Credit (recoveries)losses for the fiscal years
1995, 1996, and 1997 have been $(559,000), $184,000 and $106,000, respectively.
Business Segment: The Company is engaged in steel production and the
manufacture, fabrication and marketing of steel products, primarily for use in
construction and industrial markets. In the years ended March 31, 1996 and 1997,
export sales were less than 1% of total sales.
Cash Equivalents: The Company considers all highly liquid investments,
with a maturity of three months or less when purchased, to be cash equivalents.
Inventories: Inventories are stated at the lower of cost (first-in,
first-out method) or market.
Assets Held for Sale: The majority of the account consists of real estate
and machinery and equipment held for sale which are carried at the lower of cost
or estimated fair value. For the year ended March 31, 1996, the Company
transferred $5.0 million from property, plant and equipment to assets held for
sale.
Property, Plant and Equipment: Property, plant and equipment are stated at
cost. Major renewals and betterments are capitalized and depreciated over their
estimated useful lives. Maintenance and repairs are charged against operations
as incurred. Upon retirement or other disposition of property, plant and
equipment, the cost and related allowances for depreciation are removed from the
accounts and any resulting gain or loss is reflected in income.
Restricted IRB Funds: The Company accounts for restricted funds received
from the proceeds of Industrial Revenue Bonds (IRBs) as Construction in Progress
within Property, Plant and Equipment until such funds have been spent. As of
March 31, 1996 and 1997, the Company had $13.7 million and $0 million,
respectively, of such restricted IRB funds on its balance sheet.
Interest costs for property, plant and equipment construction expenditures
of approximately $2.1 million and $2.0 million were capitalized for the years
ended March 31, 1996 and 1997, respectively. For financial reporting purposes,
the Company provides for depreciation of property, plant and equipment using the
straight-line method over the estimated useful lives of 20 to 30 years for
buildings and improvements and 4 to 15 years for all other property, plant and
equipment.
Goodwill: Goodwill consists of the excess of purchase price over the fair
value of acquired assets and liabilities. Goodwill is stated at cost less
accumulated amortization of $13.3 million and $17.5 million at March 31, 1996
and 1997, respectively. Goodwill is being amortized over a 25-year period.
Deferred Financing Costs: The deferred financing costs as of March 31,
1996 and 1997, are net of accumulated amortization of $8.0 million and $9.0
million, respectively. These amounts will be amortized over the term of the
respective debt instruments, which range from 3 to 8 years.
F-14
<PAGE> 65
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Earnings per Common Share: Earnings per common share are computed using
the weighted average number of outstanding common shares. On May 22, 1995, the
Company's Board of Directors authorized a 49,999 for 1 stock dividend.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles 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 date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments: The carrying amount of long-term
borrowings approximates fair value due to market rates of interest and related
maturities.
Delivery Expenses: The Company's policy is to include all delivery
expenses in cost of sales.
Self Insurance: As part of its risk management strategies, the Company is
self-insured, up to certain amounts, for risks such as workers' compensation,
employee health benefits, and long-term disability. Risk retention is determined
based on savings from insurance premium reductions, and, in the opinion of
management, does not result in unusual loss exposure relative to other companies
in the industry.
Recent Accounting Pronouncements: In October 1996, the American Institute
of Certified Public Accountants issued Statement of Position No. 96-1,
"Environmental Remediation Liabilities" (SOP 96-1). SOP 96-1 provides
authoritative guidance on the specific accounting issues for the recognition,
measurement, display, and disclosure of environmental remediation liabilities.
Specifically, SOP 96-1 requires (1) the recognition of an environmental
remediation liability when the criteria of Statement of Financial Accounting
Standards No. 5, "Accounting for Contingencies" are met, (2) the measurement of
the liability to include incremental direct costs of the remediation effort and
costs of compensation and benefits for those employees who are expected to
devote a significant amount of time directly to the remediation effort, (3) the
measurement of the liability to include the entity's allocable share of the
liability for a specific site and the entity's share of amounts related to the
site that will not be paid by other potentially responsible parties, (4) the
measurement of the liability be based on enacted laws, regulations and
technology, and (5) appropriate display of the liabilities in the financial
statements and disclosures in the footnotes to the financial statements. SOP
96-1 is effective for fiscal years beginning after December 15, 1996. Management
has determined that the adoption of SOP 96-1 will not have a material effect on
the accompanying financial statements.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share" which establishes standards for computing and
presenting earnings per share. The statement replaces the presentation of
primary earnings per share with a presentation of basic earnings per share. It
also requires dual presentation of basic and diluted earnings per share on the
income statement and provides for certain disclosures. The Company will adopt
Statement No. 128 in the third quarter of fiscal 1998 and does not believe the
effect of adoption will be material.
Reclassifications: Certain amounts in the fiscal 1995 and 1996 financial
statements have been reclassified to conform to the fiscal 1997 financial
statement presentation.
F-15
<PAGE> 66
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE C -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1997
--------- ---------
($ IN THOUSANDS)
<S> <C> <C>
Finished goods.............................................. $ 73,196 $ 59,299
Work in-process............................................. 16,291 14,175
Raw materials and operating supplies........................ 23,266 32,699
-------- --------
$112,753 $106,173
======== ========
</TABLE>
NOTE D -- BORROWINGS
Long-term borrowings consist of the following:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1997
--------- ---------
($ IN THOUSANDS)
<S> <C> <C>
Revolving Credit Agreement.................................. $ 71,650 $ 51,340
First Mortgage Notes........................................ 100,000 100,000
Subordinated Intercompany Note.............................. 50,000 50,000
Industrial Revenue Bonds.................................... 30,875 30,875
Note to Parent.............................................. 444 435
Trade Loan Agreements....................................... 4,498 5,259
Bank of Tokyo Loan.......................................... 10,000 --
-------- --------
267,467 237,909
Less current maturities..................................... 14,942 435
-------- --------
$252,525 $237,474
======== ========
</TABLE>
On June 9, 1995, the Company entered into a revolving bank agreement (the
"Revolving Credit Agreement"), which provides up to $140 million borrowings
subject to a "borrowing base" amount. The borrowing base amount will not exceed
the sum of 85% of eligible accounts receivable plus 65% of eligible inventory.
Letters of credit are subject to an aggregate sublimit of $50 million. The
Revolving Credit Agreement expires on June 9, 1999.
The Revolving Credit Agreement contains certain covenants including, among
other restrictions, financial ratios and limitations on indebtedness, liens,
investments and disposition of assets and dividends. It is collateralized by
first priority security interests in substantially all accounts receivable and
inventory of the Company. The Company was in compliance with these covenants
throughout fiscal 1997.
Loans under the Revolving Credit Agreement bear interest at a per annum
rate equal to one of several rate options (LIBOR, Fed Funds, or Cost of Funds)
based on the facility chosen at the time of borrowing plus an applicable margin
determined by tests of performance from time to time. The effective interest
rate at March 31, 1997 was 7.4%.
The First Mortgage Notes are collateralized senior obligations of the
Company limited in aggregate principal amount to $100 million and mature on
December 15, 2000. Interest on the First Mortgage Notes accrues at the rate of
11.5% per annum and is payable semiannually on each June 15 and December 15. The
Company has assigned and pledged a security interest in substantially all the
real and personal property of the four mills.
F-16
<PAGE> 67
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The First Mortgage Notes will be redeemable, at the option of the Company,
in whole or in part from time to time, on or after December 15, 1996 at
redemption prices (expressed as percentages of the outstanding principal amount)
if redeemed during the twelve-month period commencing on December 15 of the year
set forth below, plus, in each case, accrued interest thereon to the date of
redemption (none were redeemed in fiscal 1997):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
1996........................................................ 103.833%
1997........................................................ 101.916%
1998 and thereafter......................................... 100.000%
</TABLE>
The First Mortgage Notes rank pari passu with respect to the payment in
full of the principal and interest on all existing and future senior
indebtedness of the Company and rank senior to all subordinated indebtedness of
the Company.
The First Mortgage Notes contain covenants that include, without
limitation, maintenance of sufficient consolidated net worth and limitations on
additional indebtedness, transactions with affiliates, dispositions of assets,
liens, dividends and distributions. The Company was in compliance with these
covenants throughout fiscal 1997.
The Company has issued to a related party a $50 million note (the
"Subordinated Intercompany Note") which matures December 21, 2002. The
Subordinated Intercompany Note bears interest at variable rates. The weighted
average interest rate at March 31, 1997 was 7.01%.
The Company also has outstanding borrowings obtained through industrial
revenue bonds ("IRBs") issued to construct facilities in Jackson, Tennessee;
Charlotte, North Carolina; Jacksonville, Florida; and Plant City, Florida. The
interest rates on these bonds range from 50% to 75% of the prime rate. The
Company increased its outstanding IRBs by $20 million in fiscal 1996 for a solid
waste recycling facility in Jackson, Tennessee. The IRBs mature in fiscal 2004
except for the new IRBs which mature in fiscal 2018. The IRBs are backed by
irrevocable letters of credit issued pursuant to the Revolving Credit Agreement.
As of March 31, 1997, the Company had approximately $37 million of outstanding
letters of credit, primarily for IRBs, insurance-related matters and surety
bonds.
The Note to Parent is an unsecured non-interest bearing note which is due
on demand. Accordingly, amounts due are classified as current in the
accompanying statements of financial position.
The Company has borrowed $5.3 million as of March 31, 1997, under the Trade
Loan Agreements. The loan bears interest at 7.3% and matures on June 30, 1998.
Proceeds were used for the purchase of steel mill equipment.
The maturities of long-term borrowings for the fiscal years subsequent to
March 31, 1997 are as follows:
<TABLE>
<CAPTION>
FISCAL AMOUNT
- ------ ----------------
($ IN THOUSANDS)
<S> <C>
1998....................................................... $ 435
1999....................................................... 58,079
2000....................................................... --
2001....................................................... 100,000
2002....................................................... --
Thereafter................................................. 79,395
--------
$237,909
========
</TABLE>
F-17
<PAGE> 68
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE E -- INCOME TAXES
The provision for income taxes is comprised of the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1995 1996 1997
---------- ---------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C>
Currently payable:
Federal........................................ $3,572 $ 4,592 $7,391
State.......................................... -- 604 597
------ ------- ------
3,572 5,196 7,988
------ ------- ------
Deferred provision (benefit):
Federal........................................ 4,785 (1,301) (594)
State.......................................... 997 101 394
------ ------- ------
5,782 (1,200) (200)
------ ------- ------
$9,354 $ 3,996 $7,788
====== ======= ======
</TABLE>
A reconciliation of the difference between the effective income tax rate
for each year and the statutory federal income tax rate follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1995 1996 1997
---------- ---------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C>
Tax provision at statutory rates................... $6,949 $2,141 $5,544
State income taxes, net of federal income tax
effect........................................... 997 244 722
Goodwill amortization.............................. 1,611 1,611 1,446
Other items, net................................... (203) -- 76
------ ------ ------
$9,354 $3,996 $7,788
====== ====== ======
</TABLE>
F-18
<PAGE> 69
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The components of the deferred tax assets and liabilities consisted of the
following at March 31:
<TABLE>
<CAPTION>
1996 1997
-------- --------
($ IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX ASSET
Allowance for doubtful accounts........................... $ 390 $ 390
Worker's compensation accrual............................. 1,648 1,413
Employee benefits and related accruals.................... 2,229 2,351
Environmental remediation accrual......................... 4,611 3,414
Federal loss carryforward................................. 2,055 1,654
State loss carryforward................................... 596 40
Alternative minimum tax credit carryforward............... 468 --
Pension accrual........................................... 1,739 2,334
Post retirement benefits accrual.......................... 3,228 3,306
Other..................................................... 1,136 856
-------- --------
18,100 15,758
-------- --------
DEFERRED TAX LIABILITY
Inventories............................................... (2,988) (1,992)
Property, plant and equipment............................. (58,260) (57,903)
Assets held for sale...................................... (3,240) (2,432)
Deferred compensation..................................... (1,112) (731)
-------- --------
(65,600) (63,058)
-------- --------
NET DEFERRED TAX LIABILITY.................................. $(47,500) $(47,300)
======== ========
</TABLE>
The Company has a Federal net operating loss carryforward of approximately
$4.7 million and a state net operating loss of approximately $1.0 million, both
expiring in 2009. As a result of a change in tax fiscal year, recognition of
Federal net operating loss carryforwards are limited to approximately $1.6
million each year.
NOTE F -- BENEFIT PLANS
The Company maintains a defined benefit pension plan covering substantially
all employees. The benefits are based on years of service and compensation
during the period of employment. Annual contributions are made in conformity
with minimum funding requirements and maximum deductible limitations.
F-19
<PAGE> 70
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The plan's funded status and the amounts recognized in the accompanying
statements of financial position are as follows:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1997
--------- ---------
($ IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation including vested benefits
of $65,617 and $66,249, at March 31, 1996 and 1997,
respectively........................................... $ 69,221 $ 71,157
======== ========
Projected benefit obligation for service rendered to date... $(84,950) $(84,646)
Plan assets at fair value................................... 82,808 85,828
-------- --------
Projected benefit obligation (in excess of) less than plan
assets.................................................... (2,142) 1,182
Unrecognized net gain....................................... (1,310) (6,549)
Unrecognized prior service cost............................. (426) (390)
-------- --------
Net accrued pension cost included in accrued salaries, wages
and employee benefits..................................... $ (3,878) $ (5,757)
======== ========
</TABLE>
The weighted average discount rates used in determining the actuarial
present value of the accumulated benefit obligation were 7.5% and 7.75%, for the
years ended March 31, 1996 and 1997, respectively. The rate of increase in
future compensation levels was 4.5% for both years. The expected rate of return
on plan assets was 9.5% for the years ended March 31, 1996 and 1997.
Pension cost included in the accompanying statements of income is comprised
of the following:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
1995 1996 1997
---------- ---------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C>
Service cost................................... $ 2,574 $ 2,695 $ 2,802
Interest cost.................................. 5,357 5,756 6,223
Actual income from plan assets................. (6,783) (14,561) (7,395)
Net amortization and deferral.................. 982 8,025 249
------- -------- -------
Net pension cost............................... $ 2,130 $ 1,915 $ 1,879
======= ======== =======
</TABLE>
The Company also has a voluntary savings plan available to substantially
all of its employees. Under this plan, the Company contributes amounts based
upon a percentage of the savings paid into the plan by employees. The Company
matches 50% of the employees' contributions up to 4% of employees' salaries.
Costs under this plan were $1.2 million, $1.1 million, and $1.1 million for the
years ended March 31, 1995, 1996 and 1997, respectively.
The Company has an unfunded Supplemental Benefits Plan, which is a
nonqualified plan that provides certain officers defined pension benefits in
excess of limits imposed by federal tax laws. The charges to income under the
Supplemental Benefits Plan for the years ended March 31, 1995, 1996 and 1997
were $159 thousand, $0 and $282 thousand, respectively.
Post Retirement Benefits
The Company currently provides specified health care benefits to retired
employees. Employees who retire after a certain age with specified years of
service become eligible for benefits under this unfunded plan. The Company has
the right to modify or terminate these benefits. The following table summarizes
F-20
<PAGE> 71
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
the accumulated post retirement benefit obligations included in the Company's
statements of financial position:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1997
--------- ---------
($ IN THOUSANDS)
<S> <C> <C>
Retirees.................................................... $4,176 $4,496
Fully eligible active participants.......................... 238 232
Other active plan participants.............................. 3,178 3,015
------ ------
Total............................................. 7,592 7,743
Plan assets at fair value................................... -- --
Unrecognized net gain....................................... 1,303 1,319
------ ------
Accrued post retirement benefit obligation.................. $8,895 $9,062
====== ======
</TABLE>
The following table summarizes the net post retirement benefit costs:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1997
--------- ---------
($ IN THOUSANDS)
<S> <C> <C>
Service cost................................................ $ 203 $ 216
Interest cost............................................... 543 558
Gain........................................................ (60) (23)
------ ------
Net post retirement benefit cost............................ $ 686 $ 751
====== ======
</TABLE>
The weighted average discount rate used in determining the accrued post
retirement benefit obligation was 7.50% for fiscal 1996 and 7.75% for fiscal
1997. The gross medical trend rate was assumed to be 10.31% in 1996 and dropping
.346% per year to 6.0% in 2008 and beyond for pre-65 retirees that retired
before January 1, 1994 and 9.0% decreasing by .5% per year to 5.5% in 2003 and
beyond for post-65 retirees that retired before January 1, 1994. For retirees on
or after January 1, 1994, the trend rate is the same until the Company's
expected costs are double the 1992 costs. At that point, future increases in the
medical trend will be paid by the retirees. The health care cost trend rate
assumption has a significant effect on the amount of the obligation reported.
The incremental effect of a 1% increase in the medical trend rate would
result in an increase of approximately $230,448 and $16,699 to the accrued post
retirement benefit obligation and net post retirement benefit cost,
respectively, as of and for the year ended March 31, 1997.
NOTE G -- COMMON STOCK
In fiscal 1996, the Board of Directors approved a one time Stock
Purchase/Option Plan (the "Purchase Plan") available to essentially all
employees. Employees who purchased stock were awarded stock options equal to six
times the number of shares purchased. A total of 37,689 shares were sold under
the Purchase Plan at a purchase price of $10.63 per share, with 32,448 shares
outstanding as of March 31, 1997. The options were granted at fair value at the
date of the grants, determined based on an independent appraisal as of the end
of the previous fiscal year-end. The options have a four-year vesting period. A
total of 226,134 options were granted under the Purchase Plan. No options remain
available for future grant. The issued options and shares become one-third
vested two years from the grant date, another one-third vested three years from
the grant date and the remaining balance vested four years from the grant date.
Options may be exercised for 10 years from the grant date.
F-21
<PAGE> 72
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
During fiscal 1996, the Board of Directors also approved the AmeriSteel
Corporation Equity Ownership Plan (the "Equity Ownership Plan") which provides
for grants of common stock, options to purchase common stock and stock
appreciation rights up to 438,852 shares. The Company has granted 91,350
incentive stock options and 12,100 shares of common stock under the Equity
Ownership Plan through March 31, 1997. As of March 31, 1997, there remain
348,452 shares available for future grants. The issued options and shares become
one-third vested two years from the grant date, another one-third vested three
years from the grant date and the remaining balance vested four years from the
grant date. All grants were at the fair market value of the common stock on the
grant date, determined based on an independent appraisal as of the end of the
previous fiscal year-end. Options may be exercised for 10 years from the grant
date.
The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25 (APB 25), under which no compensation
expense has been recognized for the instruments issued under the Purchase Plan
or the options issued under the Equity Ownership Plan. In October 1995, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123),
which was effective for fiscal years beginning after December 15, 1995. SFAS No.
123 allows companies to continue following the accounting guidance of APB 25,
but requires pro forma disclosure of net income and earnings per share for the
effects on compensation expense had the accounting guidance of SFAS No. 123 been
adopted. The pro forma disclosures are required only for stock-based awards
granted subsequent to April 1, 1995.
The Company adopted SFAS No. 123 for disclosure purposes in fiscal 1997.
For SFAS No. 123 purposes, the fair value of each option grant under the
Purchase Plan and the Equity Ownership Plan has been estimated as of the date of
the grant using a minimum value calculation with the following weighted average
assumptions: risk-free interest rate of 6.5% and 6.3% for the Equity Ownership
Plan and Purchase Plan, respectively; expected life of 7 years for both the
Equity Ownership Plan and Purchase Plan; and dividend rate of 0% for both the
Equity Ownership Plan and Purchase Plan. Using these assumptions, the fair value
of the stock options granted in fiscal 1996 and 1997 is $1,009,501 and $347,159,
respectively, which would be amortized as compensation expense over the vesting
period of the options.
The fair value of the stock issued under the Purchase Plan has been
estimated at the date of the grant using a minimum value calculation with the
following weighted average assumptions: risk-free interest rate of 5.3%,
expected life of 7 years and dividend rate of zero percent. Using these
assumptions, the fair value of the issued stock in fiscal 1996 and fiscal 1997
is $75,755 and $0, respectively. The fiscal 1996 fair value would be
compensation expense for fiscal 1996. Had compensation cost been determined
consistent with SFAS No. 123, utilizing the assumptions detailed above, the
Company's net income and earnings per share ("EPS") would have been changed to
the following pro forma amounts:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Net Income:
As Reported............................................... $2,120 $8,052
Pro Forma................................................. 2,003 7,858
EPS:
As Reported............................................... $ .21 $ .80
Pro Forma................................................. .20 .78
</TABLE>
F-22
<PAGE> 73
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Because the SFAS No. 123 method of accounting has not been applied to
stock-based compensation granted prior to April 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in future
years.
The following table summarizes stock option activity for the years ended
March 31, 1996 and 1997:
<TABLE>
<CAPTION>
EQUITY OWNERSHIP PLAN PURCHASE PLAN
--------------------------------------------- ---------------------------------------------
1996 1997 1996 1997
--------------------- --------------------- --------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of
year............... -- $ -- 12,000 $ 12.50 -- $ -- 221,094 $12.50
Granted............ 12,000 12.50 79,350 12.50 226,134 12.50 -- --
Exercised.......... -- -- -- -- -- -- -- --
Forfeited.......... -- -- (13,050) (12.50) (5,040) 12.50 (26,316) 12.50
Outstanding, end of
year............... 12,000 12.50 78,300 12.50 221,094 12.50 194,778 12.50
====== ======= ======= =======
Options vested at
year-end........... -- -- -- -- -- -- -- --
Weighted-average fair
value of options
granted during the
year............... -- $ 4.46 -- $ 4.38 -- $ 4.45 -- $ --
</TABLE>
No stock option activity occurred during fiscal 1995. The weighted-average
remaining contractual life of the options under the Purchase Plan and the Equity
Ownership Plan as of March 31, 1997 is 8.50 years and 9.15 years, respectively.
The weighted-average fair value of the shares sold under the Purchase Plan
during fiscal 1996 was $12.50.
Subsequent to year end, the Board of Directors granted options for an
additional 63,550 shares with an exercise price of $13.50 per share.
NOTE H -- INCENTIVE COMPENSATION PLAN
During 1989, the Board of Directors approved a short-term incentive plan to
reward key employees who are significant to the Company's long-term success. The
awards are based on the Company's actual operating results, as compared to
targeted results. The plan provides for annual distributions to participants
based on that relationship. The plan is amended annually by the Board of
Directors to reflect changes in expected operating results, and to adjust target
results accordingly. The fiscal 1996 and 1997 plans were based on actual return
on capital employed as compared to target return on capital employed. The prior
fiscal years plans were based on actual operating results as compared to target
operating results. The award was $1.9 million for fiscal 1995, $1.2 million for
fiscal 1996, and $1.4 million for fiscal 1997, which amounts were included in
salaries, wages and employee benefits.
NOTE I -- ENVIRONMENTAL MATTERS
Environmental legislation and regulation at both the federal and state
level is subject to change, which may change the cost of compliance. Various
possible methods of remediation are presently being studied for approval;
however, it is expected that the investigation and remediation process will take
a number of years. Although the ultimate costs associated with the remediation
are not presently known, the Company has estimated the cost to be approximately
$12.3 million with these costs recorded in accrued liabilities as of March 31,
1997. The Company paid approximately $5.2 million in remediation
F-23
<PAGE> 74
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
costs in fiscal 1997. Of the amount accrued at March 31, 1997, the Company
expects to pay approximately $5.1 million in fiscal 1998. The timing of future
payments are uncertain due to the various remediation alternatives being
considered. The Company's estimate of the remediation costs is based on its
review of each site and the nature of such problems. The Company then determines
for each site the expected remediation methods, and the estimated cost for each
step of remediation. In all such determinations, the Company employs outside
consultants, and providers of such remedial services where necessary, to assist
in making such determinations.
The Company expensed approximately $6 million in fiscal 1995 and $2 million
in each of the past two fiscal years for environmental remediation costs.
Based on past use of certain technologies and remediation methods by third
parties, evaluation of those technologies and methods by the Company's
consultants and quotations and third-party estimates of costs of
remediation-related services provided to the Company or of which the Company and
its consultants are aware, the Company and its consultants believe that the
Company's cost estimates are reasonable. In light of the uncertainties inherent
in determining the costs associated with the clean-up of such contamination,
including the time periods over which such costs must be paid, the extent of
contribution by parties which are joint and severally liable, and the nature and
timing of payments to be made under cost sharing arrangements; there can be no
assurance the ultimate costs of remediation may not be greater or less than the
estimated remediation costs.
NOTE J -- COMMITMENTS
Operating Leases
The Company leases certain equipment and real property under noncancelable
operating leases. Aggregate future minimum payments under these leases are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31, AMOUNT
- --------------------- ----------------
($ IN THOUSANDS)
<S> <C>
1998..................................................... $1,644
1999..................................................... 1,210
2000..................................................... 1,134
2001..................................................... 863
2002..................................................... 735
Thereafter............................................... 1,345
--------
$6,931
========
</TABLE>
Total rent expense was approximately $5.0 million, $4.2 million, and $4.1
million, for the years ended March 31, 1995, 1996 and 1997, respectively.
On April 1, 1995, the Company entered into two noncancelable operating
lease agreements with an initial lease term of five years to lease land and land
improvements to a third party. Aggregate future minimum gross rentals under
these leases is $100,000 per year. Cost of the land and land improvements was
$1.6 million.
Service Commitments
The Company entered into two noncancelable agreements to purchase
transportation services. The rates charged are based on a fixed dollar amount
and number of miles. These rates are subject to change each year based on
inflation. The term for each agreement is 5 years, beginning April 1, 1995,
renewable for successive one-year periods.
F-24
<PAGE> 75
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Employment Agreement
On June 1, 1994, the Company entered into a five-year employment agreement
(the "Employment Agreement") with a senior member of management. The Employment
Agreement provides for, among other benefits, a one-time bonus of $2,446,000,
base annual salary of $300,000 (subsequently revised to $255,000 plus incentives
based on performance), and equity interest of 7.5% of the outstanding common
stock of the Company to vest ratably over the next five years. Deferred
compensation of $4,500,000 was recorded related to the common stock granted, and
is being amortized on a straight-line basis over the term of the Employment
Agreement. The Employment Agreement also provides for certain additional
benefits in the event of termination.
Interest Rate Swap
The Company maintained an interest rate swap (the "Swap") agreement as a
hedge against fluctuations in interest rates on certain debt. The Swap had a
notional amount of $20 million and expired on February 24, 1997. Under the terms
of the Swap, the Company agreed to pay fixed interest at 9% and receive variable
interest at the LIBOR Rate plus 3.0%, computed on the notional amount. The
Company amortized the premium paid to acquire the Swap over its term as an
adjustment to interest expense.
Litigation
The Company is defending various claims and legal actions which are common
to its operations. While it is not feasible to predict or determine the ultimate
outcome of these matters, none of them, in the opinion of management, will have
a material effect on the Company's financial position or results of operations.
NOTE K -- OTHER OPERATING EXPENSES
The Company decided in June 1995 to close the Tampa rolling mill effective
September 1995. The Tampa mill was the Company's oldest facility and represented
the Company's highest operating cost minimill. In fiscal 1996, the Company
incurred non-cash charges of $12 million representing the write-down of
property, plant and equipment to its estimated fair market value, and incurred
cash charges of $3 million for severance payments and benefits costs for the
termination of substantially all 116 Tampa rolling mill employees. All severance
payroll and benefit costs were paid and charged against the liability during
fiscal 1996, resulting in no liability for severance payroll and benefit costs
at March 31, 1996. Approximately $1.8 million in net book value of property,
plant and equipment related to the Tampa site, primarily land and buildings, was
retained and is currently being used by the Company. The Company currently
incurs minimal ongoing costs related to the Tampa mill land and building,
primarily for ongoing warehousing and shipping operations, and the caretaking of
environmental cleanup (see "Note E to September 30, 1997 unaudited condensed
financial statements -- Environmental Matters"), totaling approximately $300,000
annually. These costs are offset by short-term rental income attributable to
this property of approximately $225,000 annually. Approximately $3.5 million
remains in Assets Held for Sale, which represents appraised values of machinery
and equipment and land being marketed for sale. Since the closure, the Tampa
market has been served by the Company's Jacksonville mill, minimizing lost
sales. The Company intends to sell the Tampa minimill property.
The Company incurred an additional $.8 million charge in fiscal 1996 for
the write-off of all future lease obligations (through November 1998) related to
the closure of its fabricating plant in Woodbridge, Virginia.
F-25
<PAGE> 76
AMERISTEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE L -- SUBSEQUENT EVENTS
The Company proposes to sell shares of common stock to the public pursuant
to a Registration Statement filed with the Securities and Exchange Commission
(the "Offering"). In connection with the Offering, the Board of Directors
approved on October 16, 1997, subject to stockholder approval, amendments to the
Company's Articles of Incorporation. The Company expects the amendments to the
Articles of Incorporation to become effective on or about December 8, 1997. The
amendment authorizes 100,000,000 shares of $.01 par value Class A common stock
and 22,000,000 shares of $.01 par value Class B common stock. The rights of the
holders of both Class A and Class B common stock will be substantially the same
except that the holders of Class A common stock and Class B common stock will be
entitled to one vote per share and two votes per share, respectively. Only
shares of Class A common stock will be sold in the Offering.
During September 1997, the Board of Directors granted 9,200 common stock
options with an exercise price of $13.50 per share and 40,000 restricted shares
of common stock with a price of $13.50 per share. These options and shares will
relate to Class B common stock upon the Offering.
In September 1997, the Company incurred additional indebtedness of
$5,000,000 through an industrial revenue bond for the construction of steel mill
equipment. The loan bears interest at 50% to 75% of the prime rate and matures
in September 2014.
F-26
<PAGE> 77
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co. and Morgan Stanley
& Co. Incorporated are acting as representatives, has severally agreed to
purchase from the Company, the respective number of shares of Class A Common
Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
CLASS A
UNDERWRITER COMMON STOCK
----------- ------------
<S> <C>
Goldman, Sachs & Co.........................................
Morgan Stanley & Co. Incorporated...........................
---------
Total..................................................... 3,160,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Class A Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain securities dealers at
such a price less a concession of $ per share. The U.S. Underwriters may
allow, and such dealers may reallow, a concession not in excess of $ per
share to certain brokers and dealers. After the shares of Class A Common Stock
are released for sale to the public, the offering price and other selling terms
may from time to time be varied by the representatives.
The Company has entered into an underwriting agreement (the "International
Underwriting Agreement") with the underwriters of the international offering
(the "International Underwriters") providing for the concurrent offer and sale
of 790,000 shares of Class A Common Stock in an international offering outside
the United States. The offering price and aggregate underwriting discounts and
commissions per share for the two offerings are identical. The closing of the
offering made hereby is a condition to the closing of the international
offering, and vice versa. The representatives of the International Underwriters
are Goldman Sachs International and Morgan Stanley & Co. International Limited.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the Offerings, each of the U.S.
Underwriters named herein has agreed that, as a part of the distribution of the
shares offered hereby and subject to certain exceptions, it will offer, sell or
deliver the shares of Class A Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States or
(b) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters has agreed pursuant to the Agreement Between that, as
a part of the distribution of the shares offered as a part of the international
offering, and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Class A Common Stock (a) in the
United States or to any U.S. persons or (b) to any person who it believes
intends to reoffer, resell or deliver the shares in the United States or to any
U.S. persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.
U-1
<PAGE> 78
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Class A Common Stock as may be mutually agreed. The price of any shares so sold
shall be the initial public offering price, less an amount not greater than the
selling concession.
In connection with the Offerings, the Underwriters may purchase and sell
the Class A Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the Offerings. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Class A Common Stock; and
syndicate short positions involve the sale by the Underwriters of a greater
number of shares of Class A Common Stock than they are required to purchase from
the Company in the Offerings. The Underwriters also may impose a penalty bid,
whereby selling concessions allowed to syndicate members or other broker-dealers
in respect of the securities sold in the Offerings for their account may be
reclaimed by the syndicate if such shares of Class A Common Stock are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Class A Common Stock, which may be higher than the price that might otherwise
prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be effected on the New York
Stock Exchange, in the over-the-counter market or otherwise.
The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of 474,000
additional shares of Class A Common Stock solely to cover over-allotments, if
any. If the U.S. Underwriters exercise their over-allotment option, the U.S.
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to the
3,160,000 shares of Class A Common Stock offered. The Company has granted the
International Underwriters a similar option to purchase up to an aggregate of
118,500 additional shares of Class A Common Stock.
The Company, certain executive officers of the Company and Kyoei have
agreed that, during the period beginning from the date of this Prospectus and
continuing to and including the date 180 days after the date of this Prospectus,
they will not offer, sell, contract to sell, pledge, hypothecate, grant any
option, right or warrant to purchase, or otherwise dispose of, directly or
indirectly, (which shall be deemed to include, without limitation, the entering
into of a cash-settled or Common Stock settled derivative instrument) any shares
of Common Stock, any securities of the Company which are substantially similar
to the shares of Class A Common Stock or any securities that are convertible
into or exchangeable for, or that represent the right to receive, Common Stock,
or any such substantially similar securities, (other than pursuant to employee
stock option plans existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of this
Prospectus), without the prior written consent of the representatives, except
for the shares of Class A Common Stock offered in connection with the Offerings.
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Class A Common Stock offered by them.
Prior to the Offerings, there has been no public market for the shares of
Class A Common Stock. The initial public offering price will be negotiated among
the Company and the representatives of the U.S. Underwriters and International
Underwriters. Among the factors considered in determining the initial public
offering price of the Class A Common Stock, in addition to prevailing market
conditions, were the Company's historical performance, estimates of the business
potential and earnings prospects of the Company, an assessment of the Company's
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.
The Class A Common Stock has been approved for listing, subject to notice
of issuance, on the New York Stock Exchange under the symbol "AST". In order to
meet one of the requirements for listing the
U-2
<PAGE> 79
Class A Common Stock on the New York Stock Exchange, the Underwriters have
undertaken to sell lots of 100 or more shares to a minimum of 2,000 beneficial
holders.
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Class A Common Stock, including shares initially sold in
the international offering, to persons located in the United States.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
U-3
<PAGE> 80
[ILLUSTRATED FLOW CHART OF THE STEEL-MAKING PROCESS]
<PAGE> 81
==========================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH SOLICITATION IS UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 8
Use of Proceeds.......................... 12
Dividend Policy.......................... 12
Capitalization........................... 13
Dilution................................. 14
Selected Financial Data.................. 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 17
Business................................. 25
Management............................... 38
Principal Stockholders................... 44
Description of Capital Stock............. 45
Shares Eligible for Future Sale.......... 48
Validity of Class A Common Stock......... 49
Experts.................................. 49
Additional Information................... 49
Index to Financial Statements............ F-1
Underwriting............................. U-1
</TABLE>
----------------------
THROUGH AND INCLUDING , 1997 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
==========================================================
==========================================================
3,950,000 SHARES
AMERISTEEL CORPORATION
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------
[AMERISTEEL LOGO]
------------------
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
REPRESENTATIVES OF THE UNDERWRITERS
==========================================================
<PAGE> 82
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 31,660
NASD filing fee............................................. 10,275
NYSE listing fees........................................... 118,331*
Printing and engraving expenses............................. 250,000*
Accounting fees and expenses................................ 100,000*
Legal fees and expenses..................................... 150,000*
Blue Sky fees and expenses.................................. 18,000*
Transfer Agent's fees and expenses.......................... 50,000*
Miscellaneous............................................... 71,734
--------
Total............................................. $800,000*
========
</TABLE>
- ---------------
* Estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Florida Business Corporation Act, as amended (the "Florida Act"),
provides that, in general, a business corporation may indemnify any person who
is or was a party to any proceeding (other than an action by, or in the right
of, the corporation) by reason of the fact that he or she is or was a director
or officer of the corporation, against liability incurred in connection with
such proceeding, including any appeal thereof, provided certain standards are
met, including that such officer or director acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, and provided further that, with respect to any criminal action
or proceeding, the officer or director had no reasonable cause to believe his or
her conduct was unlawful. In the case of proceedings by or in the right of the
corporation, the Florida Act provides that, in general, a corporation may
indemnify any person who was or is a party to any such proceeding by reason of
the fact that he or she is or was a director or officer of the corporation
against expenses and amounts paid in settlement actually and reasonably incurred
in connection with the defense or settlement of such proceeding, including any
appeal thereof, provided that such person acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, except that no indemnification shall be made in respect of any
claim as to which such person is adjudged liable unless a court of competent
jurisdiction determines upon application that such person is fairly and
reasonably entitled to indemnity. To the extent that any officers or directors
are successful on the merits or otherwise in the defense of any of the
proceedings described above, the Florida Act provides that the corporation is
required to indemnify such officers or directors against expenses actually and
reasonably incurred in connection therewith. However, the Florida Act further
provides that, in general, indemnification or advancement of expenses shall not
be made to or on behalf of any officer or director if a judgment or other final
adjudication establishes that his or her actions, or omissions to act, were
material to the cause of action so adjudicated and constitute: (i) a violation
of the criminal law, unless the director or officer had reasonable cause to
believe his or her conduct was lawful or had no reasonable cause to believe it
was unlawful; (ii) a transaction from which the director or officer derived an
improper personal benefit; (iii) in the case of a director, a circumstance under
which the director has voted for or assented to a distribution made in violation
of the Florida Act or the corporation's articles of incorporation; or (iv)
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.
Under the terms of the Company's Articles of Incorporation and Bylaws, the
Company may indemnify any director, officer or employee or any former director,
officer or employee to the fullest extent permitted by law.
II-1
<PAGE> 83
The Company intends to enter into indemnity agreements with each of its
directors and certain officers which provide that the Company will indemnify
such persons against any costs and expenses, judgments, settlements and fines
incurred in connection with any claim involving such person by reason of his or
her position as director or officer, provided that such person meets certain
standards of conduct.
The underwriters also will agree to indemnify the directors and officers of
the Company against certain liabilities pursuant to the Underwriting Agreement
(see Exhibit 1).
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Company sold 250,000 sales of Class B Common Stock to Mr. Casey for an
aggregate of $1.5 million in 1994, and 750,000 shares were granted as
compensation, pursuant to his employment agreement as described in the
Prospectus included in this Registration Statement. The Company sold 48,836
shares of Class B Common Stock to members of the Company's management for an
aggregate of $610,450 in 1996 in connection with the Company's bonus
compensation system. The Company believes that all such transactions were exempt
from registration pursuant to Section 4(2) and/or Rule 701 under the Securities
Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
1 -- Underwriting Agreement
3.1 -- Articles of Incorporation, as amended to date (incorporated
by reference to Exhibit 3(I) to the Company's Annual Report
on Form 10-K for the year ended March 31, 1996)
3.2* -- Form of Article of Amendment to the Articles of
Incorporation to be filed immediately prior to completion of
the Offerings to which this Registration Statement relates
3.3* -- Amended and Restated Bylaws
4* -- Form of Class A Common Stock Certificate
5* -- Opinion of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill &
Mullis, as to the legality of the Class A Common Stock being
Registered
10.1 -- AmeriSteel Equity Ownership Plan (incorporated by reference
to Exhibit 10 to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1996)
10.2 -- AmeriSteel Strategic Value Added Executive Short-Term
Incentive Plan (incorporated by reference to Exhibit 10 to
the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1996)
10.3 -- $140,000,000 Credit Agreement dated as of June 9, 1995 among
the Company, certain financial institutions, The Bank of
Tokyo, Ltd. and NationsBank of Florida, N.A., and The Bank
of Tokyo, Ltd. as agent, as amended
10.4 -- Indenture dated as of December 15, 1992 by and between the
Company and The Connecticut National Bank for $100,000,000
11 1/2% First Mortgage Notes due 2000, as amended
11 -- Statement re computation of per share earnings (incorporated
by reference to Exhibit 11 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997)
23.1* -- Consent of Counsel to the Company (included in Exhibit 5)
23.2 -- Consent of Arthur Andersen LLP
24* -- Powers of Attorney by persons whose names are signed to this
Registration Statement pursuant to such Powers of Attorney
</TABLE>
- ---------------
* Previously filed
II-2
<PAGE> 84
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14), or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant 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 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
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes to provide to the underwriter,
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt deliver to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
II-3
<PAGE> 85
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tampa, State of Florida,
on the 8th day of December, 1997.
AMERISTEEL CORPORATION
By: /s/ PHILLIP E. CASEY
------------------------------------
Phillip E. Casey
Chief Executive Officer
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>
SIGNATURE TITLE DATE
<C> <S> <C>
/s/ PHILLIP E. CASEY Chief Executive Officer December 8, 1997
- ----------------------------------------------------- and Director (Principal
Phillip E. Casey Executive Officer)
/s/ TOM J. LANDA Chief Financial Officer, December 8, 1997
- ----------------------------------------------------- Vice President and
Tom J. Landa Director (Principal
Financial Officer and
Principal Accounting
Officer)
* Group Vice President, December 8, 1997
- ----------------------------------------------------- Fabricated Reinforcing
J. Donald Haney Steel, and Director
* Vice President of December 8, 1997
- ----------------------------------------------------- Engineering and
Shuzo Hikita Technology, and Director
* Director December 8, 1997
- -----------------------------------------------------
Koichi Takashima
* Director December 8, 1997
- -----------------------------------------------------
Akihiko Takishima
* Director December 8, 1997
- -----------------------------------------------------
Hideichiro Takashima
* Director December 8, 1997
- -----------------------------------------------------
Ryutaro Yoshioka
</TABLE>
*By: /s/ TOM J. LANDA
-------------------------------
Tom J. Landa
Attorney-in-fact
II-4
<PAGE> 1
EXHIBIT 1
AMERISTEEL CORPORATION
COMMON STOCK $.01 PAR VALUE
---------------------------------------
UNDERWRITING AGREEMENT
(U.S. VERSION)
----------------------
December , 1997
Goldman, Sachs & Co.,
Morgan Stanley & Co. Incorporated
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
AmeriSteel Corporation, a Florida corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of 3,160,000 shares (the "Firm Shares") and, at the election of the
Underwriters, up to 474,000 additional shares (the "Optional Shares") of Class
A Common Stock, par value $.01 per share ("Stock"), of the Company. The Firm
Shares and the Optional Shares that the Underwriters elect to purchase pursuant
to Section 2 hereof are herein collectively called the "Shares".
It is understood and agreed to by all parties that the Company is
concurrently entering into an agreement (the "International Underwriting
Agreement") providing for the sale by the Company of up to a total of 908,500
shares of Stock (the "International Shares"), including the overallotment
option thereunder, through arrangements with certain underwriters outside the
United States (the "International Underwriters"), for whom Goldman Sachs
International and Morgan Stanley & Co., International Limited are acting as
lead managers. Anything herein or therein to the contrary notwithstanding, the
respective closings under this Agreement and the International Underwriting
Agreement are hereby expressly made conditional on one another. The
Underwriters hereunder and the International Underwriters are simultaneously
entering into an Agreement between U.S. and International Underwriting
Syndicates (the "Agreement between Syndicates") which provides, among other
things, for the transfer of shares of Stock between the two syndicates. Two
<PAGE> 2
forms of prospectus are to be used in connection with the offering and sale of
shares of Stock contemplated by the foregoing, one relating to the Shares
hereunder and the other relating to the International Shares. The latter form
of prospectus will be identical to the former except for certain substitute
pages. Except as used in Sections 2, 3, 4, 9 and 11 herein, and except as the
context may otherwise require, references hereinafter to the Shares shall
include all the shares of Stock which may be sold pursuant to either this
Agreement or the International Underwriting Agreement, and references herein to
any prospectus whether in preliminary or final form, and whether as amended or
supplemented, shall include both the U.S. and the international versions
thereof.
1. (a) The Company represents and warrants to, and agrees with,
each of the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-37679)
(the "Initial Registration Statement") in respect of the Shares has
been filed with the Securities and Exchange Commission (the
"Commission"); the Initial Registration Statement and any
post-effective amendment thereto, each in the form heretofore
delivered to you, and, excluding exhibits thereto, to you for each of
the other Underwriters, have been declared effective by the Commission
in such form; other than a registration statement, if any, increasing
the size of the offering (a "Rule 462(b) Registration Statement"),
filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended (the "Act"), which became effective upon filing, no other
document with respect to the Initial Registration Statement has
heretofore been filed with the Commission; and no stop order
suspending the effectiveness of the Initial Registration Statement,
any post-effective amendment thereto or the Rule 462(b) Registration
Statement, if any, has been issued and no proceeding for that purpose
has been initiated or threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed
with the Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Act, is hereinafter called a
"Preliminary Prospectus"); the various parts of the Initial
Registration Statement and the Rule 462(b) Registration Statement, if
any, including all exhibits thereto and including the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section 5(a)
hereof and deemed by virtue of Rule 430A under the Act to be part of
the Initial Registration Statement at the time it was declared
effective or such part of the Rule 462(b) Registration Statement, if
any, became or hereafter becomes effective, each as amended at the
time such part of the registration statement became effective, are
hereinafter collectively called the "Registration Statement"; and such
final prospectus, in the form first filed pursuant to Rule 424(b)
under the Act, is hereinafter called the "Prospectus";
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in
all material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that
-2-
<PAGE> 3
this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter through Goldman,
Sachs & Co. expressly for use therein;
(iii) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration
Statement or the Prospectus will conform, in all material respects to
the requirements of the Act and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(iv) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs,
management, financial position, shareholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set
forth or contemplated in the Prospectus;
(v) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title
to all personal property owned by them, in each case free and clear of
all liens, encumbrances and defects except such as are described in
the Prospectus or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be
made of such property by the Company and its subsidiaries; and any
real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries;
(vi) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the state
of Florida, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other
-3-
<PAGE> 4
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so
qualified in any such jurisdiction; and each subsidiary of the Company
has been duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of incorporation;
(vii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of Stock and
Class B Common Stock, par value $.01 per share ("Class B Stock"), of
the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and conform to the description of the
Stock and Class B Stock, respectively, contained in the Prospectus;
and all of the issued shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and (except for directors' qualifying
shares) are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims;
(viii) The Shares to be issued and sold by the Company to the
Underwriters hereunder and under the International Underwriting
Agreement have been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein, will be duly
and validly issued and fully paid and non-assessable and will conform
to the description of the Stock contained in the Prospectus;
(ix) The issue and sale of the Shares to be sold by the
Company hereunder and under the International Underwriting Agreement
and the compliance by the Company with all of the provisions of this
Agreement and the International Underwriting Agreement and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company, any of its subsidiaries or affiliates
is a party or by which the Company, any of its subsidiaries or
affiliates is bound or to which any of the property or assets of the
Company, any of its subsidiaries or affiliates is subject, nor will
such action result in any violation of the provisions of the Articles
of Incorporation or By-laws of the Company or any statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company, any of its subsidiaries or
affiliates or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the issue
and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement and the International
Underwriting Agreement, except the registration under the Act of the
Shares and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Shares by
the Underwriters and the International Underwriters;
(x) Neither the Company nor any of its subsidiaries or
affiliates is in violation of its Articles of Incorporation or By-laws
or in default in the performance or
-4-
<PAGE> 5
observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound;
(xi) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock and Class B Stock, and
under the caption "Underwriting", insofar as they purport to describe
the provisions of the documents referred to therein, are accurate,
complete and fair;
(xii) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company, any of
its subsidiaries or affiliates is a party or of which any property of
the Company, any of its subsidiaries or affiliates is the subject
which, if determined adversely to the Company, any of its subsidiaries
or affiliates, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial
position, shareholders' equity or results of operations of the Company
and its subsidiaries; and, to the best of the Company's knowledge, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(xiii) Other than as set forth in the Prospectus, neither the
Company nor any of its subsidiaries or affiliates is in violation of,
or subject to any liability or claims relating to any statute, rule,
regulation, common law or any order or directive of any governmental
agency or court, relating to the protection of the environment or
human health and safety or the use, disposal, release of, or exposure
to, any substance or waste regulated under such laws, including any
hazardous or toxic substances (collectively, "Environmental Laws");
has owned or operated any real property contaminated with any
substance that might require remediation under any Environmental Law;
is liable for any off-site disposal or contamination in connection
with any Environmental Law; or is subject to any other condition,
circumstance, event, notice or investigation which might lead to any
claims, liabilities, compliance expenditures, costs, damages or losses
relating to any Environmental Law except in each case as would not,
individually or in the aggregate, have a material adverse effect on
the financial condition, shareholders' equity or result of operations
of the Company, any of its subsidiaries or affiliates;
(xiv) The Company is the only subsidiary of FLS Holdings,
Inc. and FLS Holdings, Inc. owns no assets other than, and conducts no
business other than the ownership of, 9,000,000 shares of Class B
Stock (representing 89.0% of the outstanding shares of Class B Stock);
(xv) The New York choice of law provision contained in
Section 15 of this Agreement is valid and will be recognized and given
effect by the courts of the State of Florida;
(xvi) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company"
or an entity "controlled" by an
-5-
<PAGE> 6
"investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment
Company Act"); and
(xvii) Arthur Andersen LLP, who have certified certain
financial statements of the Company and its subsidiaries, are
independent public accountants as required by the Act and the
rules and regulations of the Commission thereunder.
2. Subject to the terms and conditions herein set forth, (a) the
Company agrees to sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company at
a purchase price per share of $......................, the number of Firm
Shares (to be adjusted by you so as to eliminate fractional shares) determined
by multiplying the aggregate number of Firm Shares to be sold by the Company by
a fraction, the numerator of which is the aggregate number of Firm Shares to be
purchased by such Underwriter as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the aggregate
number of Firm Shares to be purchased by all of the Underwriters from the
Company hereunder and (b) in the event and to the extent that the Underwriters
shall exercise the election to purchase Optional Shares as provided below, the
Company agrees to sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company,
at the purchase price per share set forth in clause (a) of this Section 2, that
portion of the number of Optional Shares as to which such election shall have
been exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Optional Shares by a fraction the
numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 474,000 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the
Company, given within a period of 30 calendar days after the date of this
Agreement and setting forth the aggregate number of Optional Shares to be
purchased and the date on which such Optional Shares are to be delivered, as
determined by you but in no event earlier than the First Time of Delivery (as
defined in Section 4 hereof) or, unless you and the Company otherwise agree in
writing, earlier than two or later than ten business days after the date of
such notice.
3. Upon the authorization by you of the release of the Firm
Shares, the several Underwriters propose to offer the Firm Shares for sale upon
the terms and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder,
in definitive form, and in such authorized denominations and registered
in such names as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior notice to the Company shall be delivered by or
on behalf of the Company to Goldman, Sachs & Co., for the account of
such Underwriter, against payment by or on behalf of such Underwriter
of the purchase price therefor by certified or official bank check or
checks, payable to the order of the Company in New York Clearing House
(next day) funds. The Company will cause the certificates representing
the Shares to be made available for checking and packaging at
-6-
<PAGE> 7
least twenty-four hours prior to the Time of Delivery (as defined
below) with respect thereto at the office of Goldman, Sachs & Co., 85
Broad Street, New York, New York 10004 (the "Designated Office"). The
time and date of such delivery and payment shall be, with respect to
the Firm Shares, 9:30 a.m., New York City time, on December , 1997 or
such other time and date as Goldman, Sachs & Co. and the Company may
agree upon in writing, and, with respect to the Optional Shares, 9:30
a.m., New York City time, on the date specified by Goldman, Sachs & Co.
in the written notice given by Goldman, Sachs & Co. of the
Underwriters' election to purchase such Optional Shares, or such other
time and date as Goldman, Sachs & Co. and the Company may agree upon in
writing. Such time and date for delivery of the Shares is herein called
the "First Time of Delivery", such time and date for delivery of the
Optional Shares, if not the First Time of Delivery, is herein called
the "Second Time of Delivery", and each such time and date for delivery
is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or
on behalf of the parties hereto pursuant to Section 7 hereof, including
the cross-receipt for the Shares and any additional documents requested
by the Underwriters pursuant to Section 7(k) hereof, will be delivered
at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New
York 10004 (the "Closing Location"), and the Shares will be delivered
at the Designated Office, all at each Time of Delivery. A meeting will
be held at the Closing Location at 3:00 p.m., New York City time, on
the New York Business Day next preceding each Time of Delivery, at
which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the
parties hereto. For the purposes of this Section 4, "New York Business
Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and
to file such Prospectus pursuant to Rule 424(b) under the Act not
later than the Commission's close of business on the second business
day following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly
after it receives notice thereof, of the time when any amendment to
the Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
and to furnish you copies thereof; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the
withdrawal of such order;
-7-
<PAGE> 8
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under
the securities laws of such jurisdictions as you may request and to
comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Shares, provided that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process
in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the Prospectus in
New York City in such quantities as you may reasonably request, and,
if the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Shares and if at such time
any events shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary during
such period to amend or supplement the Prospectus in order to comply
with the Act, to notify you and upon your request to prepare and
furnish without charge to each Underwriter and to any dealer in
securities as many copies as you may from time to time reasonably
request of an amended Prospectus or a supplement to the Prospectus
which will correct such statement or omission or effect such
compliance, and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Shares at any time
nine months or more after the time of issue of the Prospectus, upon
your request but at the expense of such Underwriter, to prepare and
deliver to such Underwriter as many copies as you may request of an
amended or supplemented Prospectus complying with Section 10(a)(3) of
the Act;
(d) To make generally available to its securityholders as
soon as practicable, but in any event not later than eighteen months
after the effective date of the Registration Statement (as defined in
Rule 158(c) under the Act), an earnings statement of the Company and
its subsidiaries (which need not be audited) complying with Section
11(a) of the Act and the rules and regulations of the Commission
thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, not to offer, sell, contract to sell, pledge, hypothecate,
grant any option, right or warrant to purchase, or otherwise dispose
of, directly or indirectly, (which shall be deemed to include, without
limitation, the entering into of a cash-settled or Stock or Class B
Stock settled derivative instruments) any shares of Stock or Class B
Stock, except as provided hereunder and under the International
Underwriting Agreement, any securities of the Company that are
substantially similar to the Shares or any securities that are
convertible into or exchangeable for, or that represent the right to
receive, Stock or Class B Stock, or any such substantially similar
securities, (other than pursuant to employee stock option plans
existing on, or upon the
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<PAGE> 9
conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement), without your prior
written consent;
(f) To furnish to its shareholders as soon as practicable
after the end of each fiscal year an annual report (including a
balance sheet and statements of income, shareholders' equity and cash
flows of the Company and its consolidated subsidiaries certified by
independent public accountants) and, as soon as practicable after the
end of each of the first three quarters of each fiscal year (beginning
with the fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial information of
the Company and its subsidiaries for such quarter in reasonable
detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to shareholders,
and to deliver to you (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of
securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the
Company as you may from time to time reasonably request (such
financial statements to be on a consolidated basis to the extent the
accounts of the Company and its subsidiaries are consolidated in
reports furnished to its shareholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement and the International Underwriting
Agreement in the manner specified in the Prospectus under the caption
"Use of Proceeds";
(i) To use its best efforts to list, subject to notice of
issuance, the Shares on the New York Stock Exchange (the "Exchange");
and
(j) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on
the date of this Agreement, and the Company shall at the time of filing
either pay to the Commission the filing fee for the Rule 462(b)
Registration Statement or give irrevocable instructions for the payment
of such fee pursuant to Rule 111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that (a)
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the International Underwriting
Agreement, the Agreement between Syndicates, the Selling Agreements, the Blue
Sky Memorandum, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
5(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in
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<PAGE> 10
connection with the Blue Sky surveys; (iv) all fees and expenses in connection
with listing the Shares on the Exchange; (v) the filing fees incident to, and
the fees and disbursements of counsel for the Underwriters in connection with,
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of the sale of the Shares; (vi) the cost of preparing stock
certificates; (vii) the cost and charges of any transfer agent or registrar;
and (viii) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section. It is understood, however, that except as provided in this Section,
and Sections 8 and 11 hereof, the Underwriters will pay all of their own costs
and expenses, including the fees of their counsel, stock transfer taxes on
resale of any of the Shares by them, and any advertising expenses connected
with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion,
to the condition that all representations and warranties and other statements
of the Company herein are, at and as of such Time of Delivery, true and
correct, the condition that the Company shall have performed all of its and
their obligations hereunder theretofore to be performed, and the following
additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; if the Company has elected to
rely upon Rule 462(b), the Rule 462(b) Registration Statement shall
have become effective by 10:00 P.M., Washington, D.C. time, on the
date of this Agreement; no stop order suspending the effectiveness of
the Registration Statement or any part thereof shall have been issued
and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional
information on the part of the Commission shall have been complied
with to your reasonable satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such opinion or opinions (a draft of each such
opinion is attached as Annex II(a) hereto), dated such Time of
Delivery, with respect to the incorporation of the Company, the
validity of the Shares being delivered at such Time of Delivery, the
Registration Statement and such other related matters as you may
reasonably request, and such counsel shall have received such papers
and information as they may reasonably request to enable them to pass
upon such matters; Sullivan & Cromwell may rely upon the opinion of
Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis referenced in
subsection (c) below as to all matters of Florida law in connection
with the matters covered by paragraphs (i), (ii) and (vi) of
subsection (c) below;
(c) Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis,
counsel for the Company, shall have furnished to you their written
opinion (a draft of each such opinion is attached as Annex II(b)
hereto), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the state of
Florida, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus;
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(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital stock
of the Company (including the Shares being delivered at such Time of
Delivery) have been duly and validly authorized and issued and are
fully paid and non-assessable; and the Shares conform to the
description of the Stock contained in the Prospectus;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of failure to be so qualified in any such jurisdiction (such
counsel being entitled to rely in respect of the opinion in this
clause upon opinions of local counsel and in respect of matters of
fact upon certificates of officers of the Company, provided that such
counsel shall state that they believe that both you and they are
justified in relying upon such opinions and certificates);
(iv) Each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation; and all of the
issued shares of capital stock of each such subsidiary have been duly
and validly authorized and issued, are fully paid and non-assessable,
and (except for directors' qualifying shares) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims (such counsel being entitled to rely in respect of
the opinion in this clause upon opinions of local counsel and in
respect of matters of fact upon certificates of officers of the
Company or its subsidiaries, provided that such counsel shall state
that they believe that both you and they are justified in relying upon
such opinions and certificates);
(v) To the best of such counsel's knowledge and other
than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any
of its subsidiaries is the subject which, if determined adversely to
the Company or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the current or future
consolidated financial position, shareholders' equity or results of
operations of the Company and its subsidiaries; and, to the best of
such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(vi) This Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by the
Company;
(vii) The issue and sale of the Shares being delivered at
such Time of Delivery to be sold by the Company and the compliance by
the Company with all of the provisions of this Agreement and the
International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject, nor will such action result in
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<PAGE> 12
any violation of the provisions of the Articles of Incorporation or
By-laws of the Company or any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any
of their properties;
(viii) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the
Shares or the consummation by the Company of the transactions
contemplated by this Agreement and the International Underwriting
Agreement, except the registration under the Act of the Shares, and
such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Shares by
the Underwriters and the International Underwriters;
(ix) Neither the Company nor any of its subsidiaries is
in violation of its Articles of Incorporation or By-laws;
(x) To the best of such counsel's knowledge, neither the
Company nor any of its subsidiaries is in default in the performance
or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound;
(xi) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock and the Class B Stock,
and under the caption "Underwriting", insofar as they purport to
describe the provisions of the documents referred to therein, are
accurate, complete and fair;
(xii) The Company is not an "investment company" or an
entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act; and
(xiii) The Registration Statement and the Prospectus and
any further amendments and supplements thereto made by the Company
prior to such Time of Delivery (other than the financial statements
and related schedules therein, as to which such counsel need express
no opinion) comply as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder;
although they do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those referred to
in the opinion in subsection (xi) of this Section 7(c), they have no
reason to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company prior
to such Time of Delivery (other than the financial statements and
related schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that, as of its date,
the Prospectus or any further amendment or supplement thereto made by
the Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel
need express no opinion) contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading or that, as of such Time of Delivery, either
the Registration Statement or the Prospectus or any further amendment
or supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) contains an
untrue statement of a material fact or omits to state a material fact
necessary to make the statements
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<PAGE> 13
therein, in the light of the circumstances under which they
were made, not misleading; and they do not know of any
amendment to the Registration Statement required to be filed
or of any contracts or other documents of a character
required to be filed as an exhibit to the Registration
Statement or required to be described in the Registration
Statement or the Prospectus which are not filed or described
as required.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States and, in
connection with the matters covered by paragraph (vi) of this subsection (c),
such counsel may rely upon the opinion of Sullivan & Cromwell as referenced in
subsection (b) above as to matters of New York law;
(d) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the effective
date of any post-effective amendment to the Registration Statement filed
subsequent to the date of this Agreement and also at each Time of Delivery,
Arthur Andersen LLP shall have furnished to you a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to
you, to the effect set forth in Annex I hereto (the executed copy of the letter
delivered prior to the execution of this Agreement is attached as Annex I(a)
hereto and a draft of the form of letter to be delivered on the effective date
of any post-effective amendment to the Registration Statement and as of each
Time of Delivery is attached as Annex I(b) hereto);
(e) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus, and (ii) since
the respective dates as of which information is given in the Prospectus there
shall not have been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any change, or any development involving
a prospective change, in or affecting the general affairs, management,
financial position, shareholders' equity or results of operations of the
Company and its subsidiaries, otherwise than as set forth or contemplated in
the Prospectus, the effect of which, in any such case described in clause (i)
or (ii), is in the judgment of the Representatives so material and adverse as
to make it impracticable or inadvisable to proceed with the public offering or
the delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
(f) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act, and
(ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of any
of the Company's debt securities;
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<PAGE> 14
(g) On or after the date hereof there shall not have occurred any
of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension or
material limitation in trading in the Company's securities on the New York
Stock Exchange; (iii) a general moratorium on commercial banking activities
declared by either Federal or New York State authorities; or (iv) the outbreak
or escalation of hostilities involving the United States or the declaration by
the United States of a national emergency or war, if the effect of any such
event specified in this clause (iv) in the judgment of the Representatives
makes it impracticable or inadvisable to proceed with the public offering or
the delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
(h) The Shares to be sold by the Company at such Time of Delivery
shall have been duly listed, subject to notice of issuance, on the New York
Stock Exchange;
(i) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from the parties listed on Schedule II hereto
to the effect set forth in Section 5(e) hereof in form and substance
satisfactory to you;
(j) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on the New
York Business Day next succeeding the date of this Agreement; and
(k) The Company shall have furnished or caused to be furnished to
you at such Time of Delivery certificates of officers of the Company
satisfactory to you as to the accuracy of the representations and warranties of
the Company herein at and as of such Time of Delivery, as to the performance by
the Company if all its obligations hereunder to be performed at or prior to
such Time of Delivery, and as to such other matters as you may reasonably
request, and the Company shall have furnished or caused to be furnished
certificates as to the matters set forth in subsections (a) and (e) of this
Section, and as to such other matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse
each Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through Goldman, Sachs & Co.
expressly for use therein.
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<PAGE> 15
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter through Goldman, Sachs & Co. expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (which shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation
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<PAGE> 16
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering of the
Shares purchased under this Agreement (before deducting expenses) received by
the Company bear to the total underwriting discounts and commissions received
by the Underwriters with respect to the Shares purchased under this Agreement,
in each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this subsection
(d) were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above
in this subsection (d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be
in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Act; and the obligations of
the Underwriters under this Section 8 shall be in addition to any liability
which the respective Underwriters may otherwise have and shall extend, upon the
same terms and conditions, to each officer and director of the Company
(including any person who, with his or her consent, is named in the
Registration Statement as about to become a director of the Company) and to
each person, if any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
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thirty-six hours after such default by any Underwriter you do not arrange for
the purchase of such Shares, then the Company shall be entitled to a further
period of thirty-six hours within which to procure another party or other
parties satisfactory to you to purchase such Shares on such terms. In the event
that, within the respective prescribed periods, you notify the Company that you
have so arranged for the purchase of such Shares, or the Company notifies you
that they have so arranged for the purchase of such Shares, you or the Company
shall have the right to postpone such Time of Delivery for a period of not more
than seven days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your
opinion may thereby be made necessary. The term "Underwriter" as used in this
Agreement shall include any person substituted under this Section with like
effect as if such person had originally been a party to this Agreement with
respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the aggregate
number of all of the Shares to be purchased at such Time of Delivery, then the
Company shall have the right to require each non-defaulting Underwriter to
purchase the number of Shares which such Underwriter agreed to purchase
hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have
not been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-eleventh of the aggregate number
of all of the Shares to be purchased at such Time of Delivery, or if the
Company shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Shares of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the
Second Time of Delivery, the obligations of the Underwriters to purchase and of
the Company to sell the Optional Shares) shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter or the Company, except
for the expenses to be borne by the Company and the Underwriters as provided in
Section 6 hereof and the indemnity and contribution agreements in Section 8
hereof; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless
of any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, or the
Company, or any officer or director or controlling person of the Company, and
shall survive delivery of and payment for the Shares.
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<PAGE> 18
11. If this Agreement shall be terminated pursuant to Section 9
hereof, the Company shall not then be under any liability to any Underwriter
except as provided in Sections 6 and 8 hereof; but, if for any other reason any
Shares are not delivered by or on behalf of the Company as provided herein, the
Company will reimburse the Underwriters through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Shares not so delivered, but the Company
shall then be under no further liability to any Underwriter in respect of the
Shares not so delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of
the Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Underwriter made
or given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex
or facsimile transmission to you as the representatives in care of Goldman,
Sachs & Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any
notice to an Underwriter pursuant to Section 8 (c) hereof shall be delivered or
sent by mail, telex or facsimile transmission to such Underwriter at its
address set forth in its Underwriters' Questionnaire or telex constituting such
Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters and the Company, and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used
herein, the term "business day" shall mean any day when the Commission's office
in Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
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If the foregoing is in accordance with your understanding, please sign
and return to us one for the Company and for each of the Representatives plus
one for each counsel, counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement among each of the Underwriters and
the Company. It is understood that your acceptance of this letter on behalf of
each of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters (U.S. Version), the form of which shall be
submitted to the Company for examination upon request, but without warranty on
your part as to the authority of the signers thereof.
Very truly yours,
AmeriSteel Corporation
By:
---------------------------------
Name:
Title:
Accepted as of the date hereof at
85 Broad Street,
New York, New York, 10004
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
By:
--------------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
-19-
<PAGE> 20
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
<S> <C> <C>
Goldman, Sachs & Co...........................
Morgan Stanley & Co. Incorporated.............
--------------- ------------------
Total................................... 3,160,000 474,000
=============== ==================
</TABLE>
-20-
<PAGE> 21
SCHEDULE II
Kyoei Steel, Ltd.
FLS Holdings, Inc.
Phillip E. Casey
J. Donald Haney
Tom J. Landa
-21-
<PAGE> 22
ANNEX I
Pursuant to Section 7(d) of the Underwriting Agreement, the
accountants shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined
by them and included in the Prospectus or the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations thereunder; and, if applicable, they have made a review in
accordance with standards established by the American Institute of
Certified Public Accountants of the unaudited consolidated interim
financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the
periods specified in such letter, as indicated in their reports
thereon, copies of which have been separately furnished to the
representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus as indicated in their reports thereon
copies of which have been separately furnished to the Representatives;
and on the basis of specified procedures including inquiries of
officials of the Company who have responsibility for financial and
accounting matters regarding whether the unaudited condensed
consolidated financial statements referred to in paragraph (vi)(A)(i)
below comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations, nothing came to their attention that caused them to
believe that the unaudited condensed consolidated financial statements
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with
respect to the consolidated results of operations and financial
position of the Company for the five most recent fiscal years included
in the Prospectus agrees with the corresponding amounts (after
restatements where applicable) in the audited consolidated financial
statements for such five fiscal years which were included or
incorporated by reference in the Company's Annual Reports on Form 10-K
for such fiscal years;
(v) They have compared the information in the Prospectus
under selected captions with the disclosure requirements of Regulation
S-K and on the basis of limited procedures specified in such letter
nothing came to their attention as a result of the foregoing
procedures that caused them to believe that this information does not
conform in all
-1-
<PAGE> 23
material respects with the disclosure requirements of Items 301, 302,
402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and
other information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included in
the Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of
income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus do not
comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance
sheets and consolidated statements of cash flows included in
the Prospectus for them to be in conformity with generally
accepted accounting principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not agree
with the corresponding items in the unaudited consolidated
financial statements from which such data and items were
derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis
for the corresponding amounts in the audited consolidated
financial statements included in the Prospectus;
(C) the unaudited financial statements which were
not included in the Prospectus but from which were derived
any unaudited condensed financial statements referred to in
Clause (A) and any unaudited income statement data and
balance sheet items included in the Prospectus and referred
to in Clause (B) were not determined on a basis substantially
consistent with the basis for the audited consolidated
financial statements included in the Prospectus;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Prospectus do not comply
as to form in all material respects with the applicable
accounting requirements of the Act and the published rules
and regulations thereunder or the pro forma adjustments have
not been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days
prior to the date of such letter, there have been any changes
in the consolidated capital stock (other than issuances of
capital stock upon exercise of options and stock appreciation
rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which
were outstanding on the date of the latest financial
statements included in the Prospectus) or any increase in the
consolidated long-term debt of the Company and its
subsidiaries, or any decreases in
-2-
<PAGE> 24
consolidated net current assets or stockholders' equity or
other items specified by the Representatives, or any
increases in any items specified by the Representatives, in
each case as compared with amounts shown in the latest
balance sheet included in the Prospectus, except in each case
for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described
in such letter; and
(F) for the period from the date of the latest
financial statements included in the Prospectus to the
specified date referred to in Clause (E) there were any
decreases in consolidated net revenues or operating profit or
the total or per share amounts of consolidated net income or
other items specified by the Representatives, or any
increases in any items specified by the Representatives, in
each case as compared with the comparable period of the
preceding year and with any other period of corresponding
length specified by the Representatives, except in each case
for decreases or increases which the Prospectus discloses
have occurred or may occur or which are described in such
letter; and
(vii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and (vi)
above, they have carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards, with
respect to certain amounts, percentages and financial information specified by
the Representatives, which are derived from the general accounting records of
the Company and its subsidiaries, which appear in the Prospectus, or in Part II
of, or in exhibits and schedules to, the Registration Statement specified by
the Representatives, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
-3-
<PAGE> 1
Exhibit 10.3
$140,000,000
CREDIT AGREEMENT
dated as of June 9, 1995
among
FLORIDA STEEL CORPORATION,
as Borrower,
CERTAIN FINANCIAL INSTITUTIONS,
as Lenders,
THE BANK OF TOKYO, LTD.,
New York Agency
and
NATIONSBANK OF FLORIDA, N.A.,
as Issuing Banks
and Co-Administrative Agents
and
THE BANK OF TOKYO, LTD.,
New York Agency,
as Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 General Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 34
1.3 Accounting Terms and Determinations . . . . . . . . . . . . . . . 35
ARTICLE 2. The Credit Facility . . . . . . . . . . . . . . . . . . . . . . . 35
2.1 Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.2 Swingline Loans . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.3 Facility Letters of Credit . . . . . . . . . . . . . . . . . . . 36
2.4 Borrowing Mechanics (Revolving Loans) . . . . . . . . . . . . . . 37
2.4.1 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . . 37
2.4.2 Funding of Revolving Loans . . . . . . . . . . . . . . . . . . . 38
2.5 Borrowing Mechanics and Certain Other
Provisions Regarding Swingline Loans . . . . . . . . . . . . . 39
2.6 Certain Provisions Regarding Fixed
Rate Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.6.1 Notice of Continuation and Notice of
Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.6.2 Suspension of Fixed Rate Option . . . . . . . . . . . . . . . . . 43
2.6.3 Breakage Costs . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.7 Issuance Mechanics and Other Provisions
Regarding Facility Letters of Credit . . . . . . . . . . . . . 45
2.7.1 Requests for Issuance . . . . . . . . . . . . . . . . . . . . . . 45
2.7.2 Participation by Lenders . . . . . . . . . . . . . . . . . . . . 46
2.7.3 LOC Drawings and Reimbursements . . . . . . . . . . . . . . . . . 46
2.7.4 Obligations of Lenders Absolute . . . . . . . . . . . . . . . . . 49
2.7.5 Obligations of Borrower Absolute . . . . . . . . . . . . . . . . 50
2.7.6 Letter of Credit Reports . . . . . . . . . . . . . . . . . . . . 52
2.7.7 Third Party Letters of Credit . . . . . . . . . . . . . . . . . 52
2.7.8 LOC Cash Collateral Account . . . . . . . . . . . . . . . . . . 53
2.8 Interest on Loans and Other Obligations . . . . . . . . . . . . . 54
2.8.1 Interest on Fixed Rate Loans . . . . . . . . . . . . . . . . . . 54
2.8.2 Interest on Floating Rate Loans . . . . . . . . . . . . . . . . . 54
2.8.3 Interest on Overdue Amounts . . . . . . . . . . . . . . . . . . . 54
2.8.4 Changes in Applicable Margin . . . . . . . . . . . . . . . . . . 55
2.9 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . 55
2.9.1 Commitment Fees . . . . . . . . . . . . . . . . . . . . . . . . . 55
2.9.2 Participation Fees . . . . . . . . . . . . . . . . . . . . . . . 55
2.9.3 Letter of Credit Fees and Expenses . . . . . . . . . . . . . . . 55
2.9.4 Agent's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 56
2.9.5 Audit Charges . . . . . . . . . . . . . . . . . . . . . . . . . . 56
2.9.6 Fees Fully Earned . . . . . . . . . . . . . . . . . . . . . . . . 56
2.10 Repayment of Outstanding Credit . . . . . . . . . . . . . . . . . 57
2.10.1 Mandatory Repayments . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
2.10.2 Optional Prepayment . . . . . . . . . . . . . . . . . . . . . . 57
2.11 Expiration Date; Reduction of
Credit Facility . . . . . . . . . . . . . . . . . . . . . . . 58
2.11.1 Expiration Date . . . . . . . . . . . . . . . . . . . . . . . . 58
2.11.2 Mandatory Reduction of Credit Facility . . . . . . . . . . . . . 59
2.11.3 Optional Reduction of Credit Facility . . . . . . . . . . . . . 59
2.12 Evidence of Indebtedness . . . . . . . . . . . . . . . . . . . . 59
2.12.1 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
2.12.2 Loan Account . . . . . . . . . . . . . . . . . . . . . . . . . . 59
2.12.3 Statement of Account . . . . . . . . . . . . . . . . . . . . . . 60
2.12.4 Agent's Register . . . . . . . . . . . . . . . . . . . . . . . 60
2.13 Place and Manner of Payments by Borrower . . . . . . . . . . . . 60
2.13.1 Time for Payment . . . . . . . . . . . . . . . . . . . . . . . . 60
2.13.2 Computation . . . . . . . . . . . . . . . . . . . . . . . . . . 61
2.13.3 Distribution of Payments . . . . . . . . . . . . . . . . . . . . 61
2.14 Increased Costs, Etc.; Taxes . . . . . . . . . . . . . . . . . . 62
2.14.1 Increased Cost . . . . . . . . . . . . . . . . . . . . . . . . . 62
2.14.2 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
2.15 Additional Provisions Regarding Credit
Facility and Loans . . . . . . . . . . . . . . . . . . . . . . 67
2.15.1 Lockbox Arrangement; Flow of Funds
Account . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
2.15.2 Determination of Borrowing Base . . . . . . . . . . . . . . . . 69
2.15.3 Several Obligations . . . . . . . . . . . . . . . . . . . . . . 69
2.15.4 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . 69
2.15.5 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . 70
2.15.6 Defaulting Lenders . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE 3. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . 71
3.1 Conditions to Initial Loans . . . . . . . . . . . . . . . . . . 71
(a) Effective Date . . . . . . . . . . . . . . . . . . . . . 71
(b) No Material Adverse Change . . . . . . . . . . . . . . . . 71
(c) Corporate and Legal Proceedings . . . . . . . . . . . . . 71
(d) Availability . . . . . . . . . . . . . . . . . . . . . . 71
(e) BTCC Credit Facilities . . . . . . . . . . . . . . . . . . 71
(f) Consents and Approvals . . . . . . . . . . . . . . . . . . 72
(g) Due Diligence . . . . . . . . . . . . . . . . . . . . . . 72
(h) Fees and Expenses . . . . . . . . . . . . . . . . . . . . 72
(i) Termination of BTCC Lock Box
Arrangements . . . . . . . . . . . . . . . . . . . . . 72
(j) Closing Documents . . . . . . . . . . . . . . . . . . . . 72
(k) Additional Documents . . . . . . . . . . . . . . . . . . . 76
3.2 Conditions to Issuance of Letters
of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 76
3.3 Condition to Swingline Loans . . . . . . . . . . . . . . . . . . 77
3.4 Conditions to Each Credit Event . . . . . . . . . . . . . . . . 77
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 4. Representations and Warranties . . . . . . . . . . . . . . . . . 78
4.1 Organization and Qualification;
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 79
4.2 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
4.3 Liens; Inventory . . . . . . . . . . . . . . . . . . . . . . . . 80
4.4 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
4.5 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . 81
4.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 81
4.7 Locations of Offices, Records and
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 81
4.8 Names of Borrower or Predecessors . . . . . . . . . . . . . . . . 82
4.9 No Judgments or Litigation . . . . . . . . . . . . . . . . . . . 82
4.10 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
4.11 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 83
4.12 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . 83
4.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
4.14 Compliance with Environmental Laws . . . . . . . . . . . . . . . 84
4.15 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . 85
4.16 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . 85
4.17 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . 86
4.18 Investment Company . . . . . . . . . . . . . . . . . . . . . . . 86
4.19 No Event of Default . . . . . . . . . . . . . . . . . . . . . . . 86
4.20 Taxes and Tax Returns . . . . . . . . . . . . . . . . . . . . . . 86
4.21 Recording and Stamp Taxes . . . . . . . . . . . . . . . . . . . . 87
4.22 No Other Indebtedness, Status as
Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . 87
4.23 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . 88
4.24 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . 88
4.25 Accuracy and Completeness of Information . . . . . . . . . . . . 88
4.26 No Material Adverse Change . . . . . . . . . . . . . . . . . . . 88
ARTICLE 5. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . 89
5.1 Financial Information . . . . . . . . . . . . . . . . . . . . . . 89
5.2 Corporate Existence and Franchise . . . . . . . . . . . . . . . . 92
5.3 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . 92
5.4 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
5.5 Notice of Legal Proceedings or
Adverse Changes Notice of Borrowing . . . . . . . . . . . . . . 94
5.6 Environmental and Other Matters . . . . . . . . . . . . . . . . 94
5.7 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . 95
5.8 Changes in Location of Offices . . . . . . . . . . . . . . . . . 96
5.9 Location of Inventory . . . . . . . . . . . . . . . . . . . . . . 96
5.10 Name Change; Trade Name . . . . . . . . . . . . . . . . . . . . . 96
5.11 Adverse Change in Collateral . . . . . . . . . . . . . . . . . . 97
5.12 Collateral Records . . . . . . . . . . . . . . . . . . . . . . . 97
5.13 Security Interests . . . . . . . . . . . . . . . . . . . . . . . 97
5.14 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . 98
5.15 Casualty Loss; Condemnation . . . . . . . . . . . . . . . . . . 98
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
5.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
5.17 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . 99
5.18 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 99
5.19 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
5.20 Notification of Certain Events . . . . . . . . . . . . . . . . . . 99
5.21 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . 100
5.22 Maintenance of Property . . . . . . . . . . . . . . . . . . . . . 100
5.23 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 100
5.24 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 101
ARTICLE 6. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . 101
6.1 Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . 101
6.2 Interest Coverage . . . . . . . . . . . . . . . . . . . . . . . . 101
6.3 Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . 101
6.4 Restricted Expenditures . . . . . . . . . . . . . . . . . . . . . 101
6.5 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 103
6.6 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
6.7 No Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . 105
6.8 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 106
6.9 No Corporate Changes . . . . . . . . . . . . . . . . . . . . . . 107
6.10 Sale/Leaseback Transactions . . . . . . . . . . . . . . . . . . . 107
6.11 No Restricted Payments . . . . . . . . . . . . . . . . . . . . . . 108
6.12 No Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 109
6.13 No Affiliate Transactions . . . . . . . . . . . . . . . . . . . . 111
6.14 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
6.15 Additional Bank Accounts . . . . . . . . . . . . . . . . . . . . 112
6.16 No Excess Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 112
6.17 Material Amendments of Material
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
6.18 Additional Negative Pledges . . . . . . . . . . . . . . . . . . . 113
6.19 No Additional Subsidiaries . . . . . . . . . . . . . . . . . . . . 113
ARTICLE 7. Events of Default and Remedies . . . . . . . . . . . . . . . . . . 114
7.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . 114
7.2 Acceleration and Cash Collateralization . . . . . . . . . . . . . 118
7.3 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
ARTICLE 8. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
8.1 Appointment of Agent . . . . . . . . . . . . . . . . . . . . . . . 121
8.2 Nature of Duties of Agent . . . . . . . . . . . . . . . . . . . . 121
8.3 Lack of Reliance on Agent . . . . . . . . . . . . . . . . . . . . 121
8.4 Certain Rights of the Agent . . . . . . . . . . . . . . . . . . . 122
8.5 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . 123
8.6 Indemnification of Agent . . . . . . . . . . . . . . . . . . . . . 123
8.7 The Agent in its Individual Capacity . . . . . . . . . . . . . . . 123
8.8 Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . 124
8.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . 124
8.10 Collateral Matters . . . . . . . . . . . . . . . . . . . . . . . . 125
</TABLE>
(iv)
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
8.11 Actions with Respect to Defaults . . . . . . . . . . . . . . . . . 127
8.12 Delivery of Information . . . . . . . . . . . . . . . . . . . . . . 127
ARTICLE 9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
9.1 SUBMISSION TO JURISDICTION; WAIVERS . . . . . . . . . . . . . . . . 127
9.2 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . 128
9.3 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
9.4 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
9.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
9.6 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
9.7 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 133
9.8 Indemnification; Expenses . . . . . . . . . . . . . . . . . . . . . 134
9.9 Entire Agreement: Successors and Assigns . . . . . . . . . . . . . 135
9.10 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 135
9.11 Nonliability of Agent and Lenders . . . . . . . . . . . . . . . . . 136
9.12 The Co-Administrative Agent . . . . . . . . . . . . . . . . . . . . 136
9.13 Independent Nature of Lenders' Rights . . . . . . . . . . . . . . . 137
9.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
9.15 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
9.16 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
9.17 Maximum Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
9.18 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . 138
ANNEX I - Lenders, Lending Offices and Commitment Amounts
SCHEDULES
Schedule 4.1 Jurisdictions Where Qualified to Do Business
Schedule 4.3 Warehouse Locations
Schedule 4.7 Asset, Equipment and Inventory Locations
Schedule 4.8 Fictitious Business Names
Schedule 4.9 Judgments or Litigation
Schedule 4.10 Conduct of Business and Defaults
Schedule 4.12 Compliance With Law
Schedule 4.13(a) Employee Benefit Plans
Schedule 4.14 Compliance With Environmental Law
Schedule 4.17 Title to Property
Schedule 4.20(a) Late Filing of Tax Returns and Requests for
Extensions for Filing Tax Returns
Schedule 4.20(b) Established Reserves for Payment of Taxes,
Assessments, Fees and Other Governmental Charges
Schedule 4.20(c) Tax Deficiencies and Liens and Granted Extensions
</TABLE>
(v)
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Schedule 4.20(d) Tax Sharing Agreements
Schedule 4.23 Material Contracts
Schedule 4.24 Affiliate Transactions
Schedule 6.5 Indebtedness
Schedule 6.6 Liens
Schedule 6.7 Guarantees
Schedule 6.12 Investments
Schedule 6.15 Additional Bank Accounts
EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Notice of Continuation
Exhibit D Form of Notice of Conversion
Exhibit E Form of Extension Agreement
Exhibit F Form of Security Agreement
Exhibit G-1 Form of Acknowledgement Agreement (lessor)
Exhibit G-2 Form of Acknowledgement Agreement (Warehouseman)
Exhibit H Form of Lockbox Agreement
Exhibit I Form of Tripartite Agreement
Exhibit J Form of Officer's Certificate
Exhibit K Form of Compliance Certificate
Exhibit L Form of Solvency Certificate
Exhibit M-1 Form of Opinion of Borrower's Counsel
Exhibit M-2 Form of Opinion of Borrower's New York Counsel
Exhibit N Form of Borrowing Base Certificate
Exhibit O Form of Assignment and Assumption Agreement
</TABLE>
(vi)
<PAGE> 8
CREDIT AGREEMENT is dated as of June 9, 1995, among FLORIDA STEEL
CORPORATION, a Florida corporation (the "Borrower"), each of the financial
institutions identified as Lenders on Annex I (together with each of their
successors and assigns, each a "Lender" and collectively the "Lenders"), THE
BANK OF TOKYO, LTD., New York Agency, and NATIONSBANK OF FLORIDA, N.A., as
issuers of letters of credit hereunder (in such capacity the "Issuing Banks")
and as Co-Administrative Agents (in such capacity the "Co-Administrative
Agents"), and THE BANK OF TOKYO, LTD., New York Agency, acting in the manner and
to the extent described in Article 8 hereof, as Agent (in such capacity,
together with certain of its Affiliates as specified in Section 1.1 below, the
"Agent").
W I T N E S S E T H:
WHEREAS, the Borrower wishes to obtain a revolving credit facility (i) to
refinance and replace the BTCC - Credit Facilities (as defined below), (ii) to
provide financing for the Borrower's reimbursement obligations under Facility
Letters of Credit (as defined below) and (iii) for the Borrower's ongoing
working capital requirements and general corporate purposes;
WHEREAS, the Borrower wishes to obtain a letter of credit facility (i) to
refinance, replace or support the Existing Letters of Credit (as defined below)
and (ii) for the Borrower's ongoing letter of credit requirements; and
WHEREAS, upon the terms and subject to the conditions set forth herein, the
Lenders are willing to (i) make loans and advances to the Borrower and (ii)
purchase participations in letters of credit issued by the Issuing Banks for the
account of the Borrower, and each Issuing Bank is willing to issue letters of
credit for the account of the Borrower;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE 1. Definitions.
1.1 General Definitions. As used herein, the following terms shall have
the meanings herein specified (to be equally applicable to both the singular and
plural forms of the terms defined):
<PAGE> 9
"Acceptance Date" shall have the meaning specified in Section 9.6(c).
"Accounts" shall mean all of the Borrower's accounts (as such term is
defined in the UCC), whether now existing or hereafter arising, including,
without limitation, all (i) accounts receivable (whether or not specifically
listed on schedules furnished to the Agent), including, without limitation, all
accounts created by or arising from the Borrower's sales of goods or rendition
of services made under any of the Borrower's trade names or styles; (ii) unpaid
seller's rights (including rescission, replevin, reclamation and stopping in
transit) relating to the foregoing or arising therefrom; (iii) rights to any
goods represented by any of the foregoing, including returned or repossessed
goods; (iv) reserves and credit balances held by the Borrower with respect to
any such accounts receivable or the account debtors thereon; and (v) guarantees
or collateral for any of the foregoing.
"Acknowledgement Agreements" shall mean any acknowledgement agreements, in
the form of Exhibit G-1, of lessors of real property on which Inventory is
located and the acknowledgment agreements, in the form of Exhibit G-2, of any
warehouseman or processor in possession of Inventory, in each case
acknowledging the Liens and security interests of the Agent on behalf of the
Lenders and the Issuing Banks and agreeing to provide the Agent access to such
Inventory for purposes of liquidation thereof or otherwise enforcing the Agent's
Lien thereon.
"Adjusted COF Rate" shall mean, for any COF Rate Loans for any Interest
Period, the rate per annum (rounded, if necessary, to the nearest 1/100 of 1%)
determined by the Agent to be the sum of (i) the COF Rate for such Interest
Period divided by one (1) minus the Reserve Requirements for such Loans for such
Interest Period plus (ii) the Assessment Rate for such Interest Period.
"Adjusted Consolidated Net Income" shall mean Consolidated Net Income
excluding gains and losses attributable to any asset disposition (other than
sales of Inventory in the ordinary course of business).
"Adjusted Credit Facility" shall mean, on any date, the lesser on such
date of (i) the Credit Facility or (ii) the Borrowing Base.
"Adjusted Eurodollar Rate" shall mean, with respect to each Interest Period
for any Eurodollar Rate Loan, the rate per annum (rounded upward, if necessary,
to
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<PAGE> 10
the nearest 1/100 of one percent) obtained by dividing (i) the Eurodollar
Rate for such Interest Period by (ii) a percentage equal to 1 minus the Reserve
Requirements for such Loans for such Interest Period.
"Adjustment Date" shall mean, with respect to any Rolling Period, in
connection with the adjustment of the Applicable Margin or Applicable Fee Rate,
the first day of the month that commences at least five (5) days after the
delivery to the Agent of the Financial Statements and compliance certificate for
such Rolling Period or for the fiscal quarter constituting the last quarter of
such Rolling Period.
"Adjustment Period" shall mean a period commencing on any Adjustment Date
and ending on the immediately following Adjustment Date.
"Agent" shall mean BOT or any successor thereto as Agent hereunder and, for
purposes of Sections 8.6 and 9.8 or any action required to be taken by the Agent
hereunder, shall include each of its Affiliates performing services on behalf of
the Agent hereunder.
"Affiliate" shall mean (i) any entity which directly or indirectly
controls, is controlled by, or is under common control with, the Borrower or
any Subsidiary (ii) and any Person who is a director or officer of the Borrower
or any Subsidiary. For purposes of this definition, "control" shall mean the
possession, directly or indirectly, of the power to (x) vote ten percent (10%)
or more of the securities having ordinary voting power for the election of
directors of such Person, (y) elect a majority of the board of directors of such
Person or (z) direct or cause the direction of management and policies of a
business, whether through the ownership of voting securities, by contract or
otherwise.
"Agent Account" shall mean an account of the Agent at its Payment Office,
identified by it to the Lenders and the Borrower, at which funds are to be made
available by the Lenders to the Agent for disbursement hereunder and, except as
provided herein, funds are made available by the Borrower for payment of its
obligation hereunder.
"Applicable Fee Rate" shall mean (a) for purposes of calculating the
Commitment Fee, one-half of one percent (0.5%), (b) for purposes of calculating
the LOC Utilization Fee, one and three-quarters percent (1.75%) and (c) for
purposes of calculating the LOC Fronting Fee, three-tenths of one percent
(0.3%); provided, however, that (i) if the
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<PAGE> 11
Debt/EBITDA Ratio for any Rolling Period is less than 5.30 to 1.00, then
the Applicable Fee Rate during the Adjustment Period immediately following such
Rolling Period shall mean (x) for purposes of calculating the Commitment Fee,
three-eighths of one percent (0.375%), (y) for purposes of calculating the LOC
Utilization Fee, one and one-half percent (1.5%) and (z) for purposes of
calculating the LOC Fronting Fee, one-quarter percent (0.25%) and (ii) if the
Debt/EBITDA Ratio for any Rolling Period is less than 3.30 to 1.00, then the
Applicable Fee Rate during the Adjustment Period immediately following such
Rolling Period shall mean (x) for purposes of calculating the Commitment Fee,
one-quarter of one percent (0.25%), (y) for purposes of calculating the LOC
Utilization Fee, one and one-quarter percent (1.25%) and (z) for purposes of
calculating the LOC Fronting Fee, two-tenths of one percent (0.2%); provided
further, however, that upon the occurrence of an Event of Default, and so long
as such Event of Default is continuing and is not waived by the Lenders, the
Applicable Fee Rate for purposes of calculating the LOC Utilization Fee shall
mean three and one-half percent (3.5%) and the Applicable Fee Rate for purposes
of calculating the LOC Fronting Fee shall mean one-half of one percent (0.5%).
"Applicable Lending Office" shall mean, with respect to each Lender, such
Lender's Eurodollar Lending Office in the case of Eurodollar Loans of such
Lender, and such Lender's Domestic Lending Office in the case of Base Rate
Loans, COF Rate Loans, FFR Loans and Overnight FFR Loans of such Lender.
"Applicable Margin" means (i) with respect to Base Rate Loans, zero percent
(0%), and (ii) with respect to Fixed Rate Loans one and three-quarters percent
(1.75%); provided, however, that if the Debt/EBITDA Ratio for any Rolling Period
is less than that set forth below, then the "Applicable Margin" during the
Adjustment Period immediately following such Rolling Period, for each Type of
Floating Rate Loan outstanding during such Adjustment Period and for each Type
of Fixed Rate Loan during each Interest Period applicable thereto commencing
during such Adjustment Period, shall be as set forth below for such Type of Loan
opposite such ratio:
<TABLE>
<CAPTION>
Applicable Applicable
Margin for Margin for
Debt/ Base Rate Fixed Rate
EBITDA Ratio Loans Loans and Overnight FFR Loans
- ------------ ---------------- -----------------------------
<S> <C> <C>
5.30 to 1.00 zero percent (0%) one and one-half percent (1.5%)
3.30 to 1.00 zero percent (0%) one and one-quarter percent (1.25%)
</TABLE>
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<PAGE> 12
provided, however, that if there shall occur and be continuing an Event of
Default which is not remedied within two (2) Business Days or waived by the
Lenders, then the "Applicable Margin" for each Type of Loan shall be equal to
two percent (2%) plus the Applicable Margin otherwise applicable to such Loan
immediately before the occurrence of such Event of Default, such increased
Applicable Margin to become effective as of the date such Event of Default first
occurs; provided further, that any amount of principal of and (to the extent
permitted by law) interest on any Loan that is not paid when due shall bear
interest at the rate set forth in Section 2.8.3.
"Assessment Rate" shall mean, for any Interest Period for any COF Rate
Loans, the average rate (rounded upwards, if necessary, to the nearest 1/100 of
1%) charged by the Federal Deposit Insurance Corporation (the "FDIC"), or any
successor thereto, for deposit insurance for time deposits at offices in the
United States of commercial banks on the first day of such Interest Period, as
reasonably determined by the Agent.
"Assignment and Assumption Agreement" shall mean an assignment and
assumption agreement, in the form of Exhibit O, entered into by an assigning
Lender and an assignee Lender, and accepted by the Agent, in accordance with
Section 9.6.
"Auditors" shall mean Arthur Andersen & Co., or another
nationally-recognized firm of independent public accountants selected by the
Borrower and reasonably satisfactory to the Agent.
"Availability" shall mean, on any date, the Adjusted Credit Facility on
such date minus the sum on such date of (i) the aggregate outstanding principal
amount of all Loans, plus (ii) the aggregate amount of outstanding Facility LOC
Obligations, plus (iii) the aggregate amount of outstanding Third Party LOC
Obligations.
"Bankruptcy Code" shall mean Title 11 of the United States Code, as in
effect from time to time, or any successor statute thereto.
"Base Rate" shall mean on any day the higher of (i) the rate which the
Agent announces from time to time as its prime rate, as in effect on such day,
or (ii) one-half of one percent (0.5%) plus the Overnight Federal Funds Rate for
such day. The prime rate is a reference rate and does not necessarily represent
the lowest or best rate actually charged to any customer. BOT may make
commercial loans or
-5-
<PAGE> 13
other loans at rates of interest at, above or below the prime rate.
"Base Rate Borrowing" shall mean a Borrowing of Base Rate Loans.
"Base Rate Loan" shall mean a Loan that bears interest calculated on the
basis of the Base Rate.
"Benefit Plan" shall mean a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan), and which is subject to Title
IV of ERISA, for which the Borrower, any Subsidiary or any ERISA Affiliate is,
or within the immediately preceding six (6) years was, an employer as defined in
Section 3(5) of ERISA.
"Borrower's Corporate Account" shall mean (i) Account No. 320-003-612
established by the Borrower with BOT Trust Company and (ii) any similar account
established by the Borrower with the approval of the Agent.
"Borrowing" shall mean each borrowing hereunder from the Lenders and refers
to the amount of the Loans made by all the Lenders on the Borrowing Date for
such borrowing.
"Borrowing Base" shall mean the sum of (i) Eighty-five percent (85%) (the
"Receivables Advance Rate") of all Eligible Accounts Receivable, plus (ii)
sixty-five percent (65%) (the "Inventory Advance Rate") of all Eligible
Inventory; provided, however, that the Agent may at any time adjust the amount
of the Borrowing Base as provided in Section 2.15.2.
"Borrowing Base Certificate" shall have the meaning given to such term in
Section 5.1(f).
"Borrowing Date" shall mean each date on which a Borrowing occurs.
"BOT" shall mean The Bank of Tokyo, Ltd., New York Agency, and any
successor thereto by merger or consolidation.
"BOT Trust Company" shall mean The Bank of Tokyo Trust Company, a New York
state-chartered Bank.
"BTCC" shall mean BT Commercial Corporation.
"BTCC Credit Agreement" shall mean the Credit Agreement dated as of
December 21, 1992, among the
-6-
<PAGE> 14
Borrower, the lenders named therein, BTCC, as agent, and Bankers Trust Company,
as issuing bank.
"BTCC Credit Facilities" shall mean the loans made to the Borrower pursuant
to the BTCC Credit Agreement.
"Budget" shall mean, for any fiscal year, a projection of the expected
financial condition and results of operations of the Consolidated Entity for
such fiscal year (including, but not limited to, a projected consolidated
balance sheet, statement of operations, statement of cash flows and statement of
changes in stockholders equity, and including a detailed projection of proposed
Capital Expenditures) made as of the beginning of such fiscal year.
"Business Day" shall mean any day other than (i) a Saturday, Sunday or any
other day on which commercial banks in New York City or North Carolina are
authorized or required by law to close or (ii) when used with respect to
Eurodollar Loans or the Eurodollar Rate, any day on which commercial banks are
not open for dealing in U.S. Dollar deposits in the London, England interbank
market.
"Capital Expenditures" shall mean, for any period, the sum of all
expenditures of the Borrower and its Subsidiaries capitalized for financial
statement purposes in accordance with GAAP.
"Capitalized Lease Obligations" shall mean the aggregate rental obligations
under leases which, under GAAP, are required to be capitalized on the books of
the Borrower or a Subsidiary thereof, in each case taken at the amount thereof
accounted for as indebtedness (net of imputed interest expense) in accordance
with such principles; and "Capital Lease" means any lease under which there
arise Capitalized Lease Obligations.
"Cash Equivalents" shall mean (i) securities issued, guaranteed or insured
by the United States or any of its agencies with maturities of not more than
ninety (90) days from the date acquired; (ii) certificates of deposit with
maturities of not more than ninety (90) days from the date acquired issued by a
U.S. federal or state chartered commercial bank of recognized standing, which
has capital and unimpaired surplus in excess of $200,000,000 (or by a Federal or
state licensed U.S. branch or agency of a non-U.S. commercial bank of recognized
standing which has a shareholders' equity of not less than the equivalent of
$1,000,000,000) and which bank or its holding company (or branch or agency) has
a short-term commercial paper rating of at least A-2 or the equivalent by
Standard & Poor's Corporation or at least P-2 or the equivalent by Moody's
-7-
<PAGE> 15
Investors Services, Inc.; (iii) reverse repurchase agreements with terms of
not more than seven days, for securities of the type described in (i) above and
entered into only with commercial banks (or U.S. branches or agencies thereof)
having the qualifications described in (ii) above; (iv) commercial paper or
finance company paper issued by any Person incorporated under the laws of the
United States or any state thereof and rated at least A-2 or the equivalent
thereof by Standard & Poor's Corporation or at least P-2 or the equivalent
thereof by Moody's Investors Service, Inc., in each case with maturities of not
more than ninety (90) days from the date acquired, and (v) investments in money
market funds registered under the Investment Company Act of 1940, which have net
assets of at least $200,000,000 and at least eighty-five percent (85%) of whose
assets consist of securities and other obligations of the type described in
clauses (i) through (iv) above.
"Casualty Loss" shall have the meaning specified in Section 5.15.
"Closing" shall mean the making of the initial Loans by the Lenders
hereunder to the Borrower under this Credit Agreement.
"Closing Date" shall mean the date on which the Closing occurs.
"COF Rate" shall mean, for any Interest Period for COF Rate Loans, the
Agent's cost of funds (expressed as a rate per annum) on the first day of such
Interest Period, as determined by the Agent (and rounded upwards, if necessary,
to the nearest 1/100 of 1%), for funding the COF Rate Loans of the Agent (in its
capacity as Lender) to which such Interest Period relates.
"COF Rate Loan" shall mean a Loan that bears interest calculated on the
basis of the Adjusted COF Rate.
"Collateral" shall mean all of the Accounts and Inventory of the Borrower
as defined herein or in the Security Agreement and all proceeds thereof.
"Collateral Documents" shall mean the Security Agreement and the
Acknowledgement Agreements.
"Commitment" of any Lender shall mean with respect to each Initial Lender,
the amount set forth opposite such Lender's name on Annex I, as such annex may
be amended from time to time, under the heading "Commitment," or, in the case of
any Lender which is a party, as assignee or assignor, to one or more Assignment
and Assumption
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<PAGE> 16
Agreements, the amount set forth as such Lender's Commitment in the Register
maintained by the Agent pursuant to Section 9.6, as any such amount may be
reduced from time to time pursuant to the terms of this Credit Agreement.
"Commitment Letter" shall mean the letter agreement dated May 10, 1995
between BOT and the Borrower relating to the credit facility established hereby.
"Commitment Period" shall mean the period commencing on the Effective Date
and ending on the earlier of the Expiration Date or the termination of the
Credit Facility.
"Consolidated Entity" shall mean, collectively, the Borrower and its
Subsidiaries; provided that so long as the Borrower has no Subsidiaries,
"Consolidated Entity" shall mean the Borrower.
"Consolidated Net Income" shall mean the consolidated net income of the
Consolidated Entity reflected on the Financial Statements of the Consolidated
Entity for the specific period.
"Consolidated Net Worth" shall mean, as of any date, the Consolidated
Entity's shareholders' equity on such date, as reflected on the Financial
Statements of the Consolidated Entity as of such date.
"Continuation" shall have the meaning specified in Section 2.6.1.
"Convert," "Conversion" and "Converted" each shall refer to a conversion of
Loans of one Type into Loans of another Type pursuant to Section 2.6.1.
"Covered Taxes" shall have the meaning specified in Section 2.14.2(a).
"Credit Agreement" or "this Agreement" shall mean this Agreement, as the
same may be modified, amended, restated, or supplemented from time to time.
"Credit Date" shall mean any Borrowing Date or LOC Issue Date.
"Credit Documents" shall mean, collectively, this Credit Agreement, the
Notes, the Facility Letters of Credit, all Letter of Credit Applications, if
any, the Collateral Documents and all other documents, agreements, instruments,
opinions and certificates executed and delivered in connection herewith or
therewith, as the same
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<PAGE> 17
may be modified, amended, extended, restated or supplemented from time to time.
"Credit Event" shall mean each Borrowing or issuance of a Facility Letter
of Credit.
"Credit Facility" shall mean the credit facility established by the Lenders
for the Borrower hereunder for Loans and Facility Letters of Credit pursuant to
and in accordance with the terms of this Credit Agreement, in an amount up to
$150,000,000 (consisting of the aggregate amount of the Lenders' Commitments),
as such credit facility may be reduced from time to time in accordance with
Section 2.11.
"Credit Parties" shall mean, collectively, the Borrower and any other
parties (other than the Lenders, the Issuing Banks, the Agent or the
Co-Administrative Agents) to the Credit Documents (other than the
Acknowledgment Agreements).
"Current Assets" shall mean all assets of the Consolidated Entity
designated as current on a consolidated balance sheet of the Consolidated Entity
prepared in accordance with GAAP.
"Current Liabilities" shall mean all liabilities of the Consolidated Entity
designated as "current" on a consolidated balance sheet of the Consolidated
Entity prepared in accordance with GAAP and, for purposes of this Agreement,
shall not include the outstanding amount of the Loans.
"Debt/EBITDA Ratio" shall mean, with respect to any Rolling Period, the
ratio of (i) the average aggregate Indebtedness outstanding on the last day of
each month during such Rolling Period to (ii) EBITDA for such Rolling Period, as
reflected in the Financial Statements and Certificates delivered pursuant to
Section 5.1.
"Default" shall mean (i) an Event of Default and/or (ii) an event,
condition or default which with the giving of notice, the passage of time or
both would be an Event of Default.
"Defaulting Lender" shall mean any Lender who fails to fund any Loan
required to be made by it hereunder or any participation required to be
purchased or funded by it hereunder.
"Disbursement Account" shall mean (i) an account maintained by the Borrower
with BOT Trust Company for the
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<PAGE> 18
purpose of paying trade payables and other operating expenses and making other
disbursements and (ii) any other account established by the Borrower, with the
approval of the Agent, for such purpose.
"DOL" shall mean the United States Department of Labor and any successor
department or agency.
"Dollars" and the sign "$" shall mean United States dollars constituting
the lawful currency of the United States.
"Domestic Lending Office" shall mean, with respect to any Lender, the
office of such Lender specified as its Domestic Lending Offices below its name
on Annex I, as such annex may be amended from time to time.
"EBITDA" shall mean, in any fiscal period, the Adjusted Consolidated Net
Income of the Consolidated Entity (other than extraordinary items of the
Consolidated Entity for such period), plus (i) to the extent deducted in
calculating Adjusted Consolidated Net Income for such period, the amount of all
Interest Expense, income tax expense, depreciation and amortization, including
amortization of any goodwill or other intangibles, of the Consolidated Entity
for such period, plus or minus (as the case may be) (ii) to the extent included
in determining Adjusted Consolidated Net Income for such period, any other
non-cash charges which have been subtracted or added, as the case may be, in
calculating Adjusted Consolidated Net Income for such period, all determined in
accordance with GAAP.
"EBITDA/Interest Expense Ratio" shall mean, for any Rolling Period, the
ratio of (i) the EBITDA of the Consolidated Entity for such Rolling Period to
(ii) the Interest Expense of the Consolidated Entity for such Rolling Period.
"Effective Date" shall have the meaning specified in Section 9.15.
"Eligible Accounts Receivable" shall mean the aggregate face amount of the
Borrower's Accounts that conform to the warranties and standards for eligibility
contained herein and in the Security Agreement, less the aggregate amount of all
returns, discounts, claims, credits, charges and allowances of any nature
(whether issued, owing, granted or outstanding), and less the aggregate amount
of all reserves, limits and deductions set forth below or as otherwise provided
in this Credit Agreement. Unless otherwise approved in writing by the
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<PAGE> 19
Required Lenders, no Account shall be deemed to be an Eligible Account
Receivable if:
(a) it arises out of a sale made by the Borrower to an Affiliate;
or
(b) the Account (other than Fabricating Accounts) is unpaid more
than 60 days after the original payment due date, with respect to
Accounts the invoice for which provides that payment is due in 30 days
or less from the date of such invoice; or
(c) the Account (other than Fabricating Accounts) is unpaid more
than 30 days after the original payment due date, with respect to
Accounts the invoice for which provides that payment is due more than
30 days from the date of such invoice; provided, that in no event
shall such Accounts constitute an Eligible Accounts Receivable if
unpaid more than 120 days from the original invoice date; provided
further, that the aggregate amount of all such invoices providing for
payment more than 30 days from the date of the invoice that may
constitute Eligible Accounts Receivable shall not exceed $5,000,000 at
any one time; or
(d) it is a Fabricating Account (i) that is unpaid more than 120
days from the original invoice date related thereto or (ii) the
invoice for which provides for payment more than 60 days from the date
of such invoice; or
(e) Fifty percent (50%) or more, in face amount, of all Accounts
from the account debtor on such Account (or any affiliate thereof) are
ineligible pursuant to (b), (c) or (d) above; or
(f) the Account, when aggregated with all other Accounts having
the same account debtor as the account debtor on such Account (or an
affiliate of such account debtor), exceeds fifty percent (50%) in face
value of all Accounts of the Borrower then outstanding, but such
Account shall be excluded pursuant to this clause (f) only to the
extent of such excess; provided, however, that Accounts supported or
secured by letters of credit shall be excluded for purposes of the
calculation under this clause (f); or
(g) (i) the account debtor on such Account is also a creditor of
the Borrower, but such Account shall be excluded pursuant to this
clause (g) only to the extent of the amount owed by the Borrower to
such
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account debtor; provided that such Account shall not be excluded
pursuant to this clause (g) if the aggregate amount owed by the
Borrower to all such account debtors is less than $500,000 or such
account debtor has executed a no-offset letter in form and substance
acceptable to the Agent, (ii) the account debtor has disputed its
liability on, or the account debtor has made any claim with respect
to, such Account or any other Account due from such account debtor to
the Borrower, which has not been resolved, but such Account shall be
excluded pursuant to this clause (g)(ii) only to the extent of the
amount of such dispute or claim, or (iii) the Account otherwise is or
may become subject to any right of setoff by the account debtor, but
such Account shall be excluded pursuant to this clause (g)(iii) to
the extent of the amount of such setoff; or
(h) a voluntary or involuntary case under the Bankruptcy Code
has been commenced by or against the account debtor on such account,
or an order for relief has been entered with respect to such account
debtor under the Bankruptcy Code, or such account debtor has made an
assignment for the benefit of creditors, or any other similar petition
or other application for relief under any other state, federal or
foreign laws has been filed by or against the account debtor, or if
the account debtor has filed a certificate of dissolution under
applicable state law or has been liquidated, dissolved or wound-up, or
has authorized or commenced any action or proceeding for dissolution,
winding-up or liquidation, or if the account debtor has failed,
suspended business, declared itself to be insolvent, or a receiver,
trustee, liquidator or custodian has been appointed for it or for all
or a significant portion of its assets or affairs, unless (A) the
payment of Accounts from such account debtor is secured in a manner
satisfactory to the Agent or (B) if the Account from such account
debtor arises subsequent to the commencement of a case with respect to
such account debtor under the Bankruptcy Code, the Agent shall have
determined that the timely payment and collection of such Account will
not be impaired; or
(i) the Account arises from sales to account debtors outside the
continental United States, to the extent that the aggregate amount of
outstanding invoices for such sales exceeds $5,000,000 at any one
time, except for sales (A) on guaranty or acceptance terms, in each
case determined by the Agent in its sole discretion to be acceptable,
(B) supported by a
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letter of credit acceptable to the Agent issued by a commercial bank
located in the United States or a U.S. branch or agency of a foreign
bank, in each case acceptable to the Agent or (C) otherwise approved
by and acceptable to the Agent; or
(j) the sale to the account debtor on such Account is on a
bill-and-hold, guaranteed sale, sale-and-return, sale on approval or
consignment basis or made pursuant to any other written agreement
providing for repurchase or return; or
(k) the Agent determines in its commercially reasonable judgment
that collection of such Account is uncertain or that such Account may
not be paid by reason of the account debtor's financial inability to
pay; or
(l) the account debtor is the United States of America or any
department, agency or instrumentality thereof, unless the Borrower
duly assigns its rights to payment of such Account to the Agent
pursuant to the Assignment of Claims Act of 1940, as amended; or
(m) the goods giving rise to such Account have not been shipped
and delivered to and accepted by the account debtor or the services
giving rise to such Account have not been performed by the Borrower
and accepted by the account debtor or the Account otherwise does not
represent a final sale; or
(n) the Account does not comply with all applicable legal
requirements, including, where applicable, the Federal Consumer Credit
Protection Act, the Federal Truth in Lending Act and Regulation Z of
the Board of Governors of the Federal Reserve System, as then in
effect; or
(o) the Account (or the account debtor's indebtedness
thereunder) is evidenced by a promissory note or other negotiable
instrument or is secured by a letter of credit (unless such promissory
note, negotiable instrument or letter of credit is pledged and
delivered to the Agent); or
(p) the Agent, on behalf of itself, the Lenders and the Issuing
Banks, does not have a valid and perfected first priority security
interest in such Account.
"Eligible Inventory" shall mean:
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(a) the gross amount of the Borrower's Inventory, valued at the lower of
cost (on a FIFO basis) or market, which:
(i) is owned solely by the Borrower and with respect to which the
Borrower has good, valid and marketable title;
(ii) is stored on property that is either (A) owned or leased by
the Borrower or (B) owned or leased by a warehouseman that has
contracted with the Borrower to store Inventory on such warehouseman's
property (provided that, with respect to Inventory stored on property
leased by the Borrower or owned or leased by a warehouseman, the
Borrower shall have delivered in favor of the Agent an Acknowledgment
Agreement executed by the lessor of such property or such
warehouseman, as the case may be),
(iii) is subject to a valid, enforceable and perfected first
priority Lien in favor of Agent on behalf of itself the Lenders and
the Issuing Banks except, with respect to Eligible Inventory stored at
sites described in clause (ii)(B) above, for Liens for normal and
customary warehouseman charges;
(iv) is located in the United States; and
(v) is not obsolete or slow moving, and otherwise conforms to the
warranties and standards for eligibility contained herein;
minus (b) the aggregate amount of:
(i) any goods returned or rejected by the Borrower's customers
that are determined by the Borrower or by the Agent to be unsalable in
the ordinary course of business;
(ii) goods in transit to third parties (other than to the
Borrower's agents or warehousemen that comply with clause (a)(ii)(3)
above);
(iii) manufacturing supplies and spare parts Inventory;
(iv) any reserves required by the Agent pursuant to Section
2.15.2; and
(v) the amount of any Inventory that the Agent determines to be
ineligible pursuant to Section 2.15.2.
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In addition to the foregoing, Eligible Inventory shall include such items of
Inventory as the Required Lenders, at the request of the Borrower, may (but
shall not be required to) in their sole discretion approve in advance in
writing.
"Environmental Law" shall mean any Federal, state, local or foreign
statute, law, rule, regulation, ordinance, order, writ, judgment, injunction,
decree, determination or award, permit, concession, franchise license, agreement
or governmental restriction relating to the environment or to the release of any
substances or materials into the environment, including, without limitation, the
Clean Air Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, the Hazardous Materials
Transportation Act, as amended, the Resource Conservation and Recovery Act, as
amended, the Toxic Substances Control Act, the Federal Water Pollution Control
Act, as amended, the Safe Drinking Water Act, and the Oil Pollution Act.
"Environmental Letter" shall mean the letter dated April 28, 1995, together
with the Attachments thereto, from Ardman & Associates, Inc. to Arthur Andersen
& Co.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute thereto and all final or
temporary regulations promulgated thereunder and published, generally applicable
rulings entitled to precedential effect.
"ERISA Affiliate" shall mean any entity required at any relevant time to be
aggregated with the Borrower or any Subsidiary under Sections 414(b), (c), (m)
or (o) of the IRC.
"Eurodollar Lending Office" shall mean, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" below its
name on Annex I, as such annex may be amended from time to time (or, if no such
office is specified, its Domestic Lending Office), or such other office or
affiliate of such Lender as such Lender may from time to time specify to the
Borrower and the Agent.
"Eurodollar Loan" shall mean a Loan that bears interest calculated on the
basis of the Adjusted Eurodollar Rate.
"Eurodollar Rate" shall mean, with respect to each Interest Period for
each Eurodollar Loan comprising the same Tranche, the interest rate per annum
which appears
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on the Reuters Screen LIBO Page as the rate at which The Bank of Tokyo, Ltd.
(London Office), or any successor thereto, will offer Dollar deposits of
immediately available funds to first-class banks in the London interbank market
(in amounts comparable to the Eurodollar Loan of BOT in such Tranche and for a
period equal to such Interest Period) at 11:00 a.m. London time on the day
which is two Business Days preceding the first day of such Interest Period;
provided, however, that if the Eurodollar Rate, as defined herein, cannot be
determined by referring to the Reuters Screen LIBO Page, then "Eurodollar Rate"
shall mean the rate of interest per annum determined by the Agent to be the
average (rounded upward to the nearest 1/10 of one percent) of quotations which
leading banks in the City of New York selected by the Agent are quoting in the
New York interbank market on the day which is two Business Days preceding the
first day of such Interest Period for Dollar deposits of immediately available
funds in amounts comparable to the principal amount of the Eurodollar Loan of
BOT in such Tranche, for a period equal to the term such Interest Period.
"Event(s) of Default" shall have the meaning provided for such term in
Article 7 of this Credit Agreement. An Event of Default shall be "continuing"
until such Event of Default has been waived in accordance with Section 9.10.
"Existing Debenture Indenture" shall mean the Indenture for the Borrower's
Existing Subordinated Debentures, dated as of November 15, 1988, from the
Borrower to Southeast Bank, N.A., as Trustee.
"Existing Letters of Credit" shall mean the outstanding letters of credit
issued under the BTCC Credit Agreement in support of certain obligations of the
Borrower.
"Existing Subordinated Debentures" shall mean the Subordinated Debentures
due 2000 issued by the Borrower pursuant to the Existing Debenture Indenture.
"Expenses" shall mean all present and future expenses incurred by or on
behalf of the Agent or the Lockbox Bank in connection with this Credit Agreement
or otherwise, whether incurred heretofore or hereafter, which expenses shall
include, without being limited to, the cost of record searches, reasonable
counsel fees (including the allocated cost of internal counsel), all costs and
expenses incurred by the Agent and the Lockbox Bank in opening bank accounts,
depositing checks, receiving and transferring funds, and any charges imposed on
the Agent or the Lockbox
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Bank due to insufficient funds of deposited checks and the Lockbox Bank's
standard fee relating thereto, Collateral examination fees and expenses, fees
and expenses of accountants, appraisers or other experts or advisors retained by
the Agent or the Lockbox Bank, fees and expenses incurred by the Agent in
connection with the assignments of or sales of participations in the Loans and
Commitments, fees and taxes relative to the filing of UCC financing statements
and all expenses, costs and fees set forth in Article 2 of this Credit Agreement
and all other fees and expenses required to be paid pursuant to the Fee Letter
or the Commitment Letter.
"Expiration Date" shall have the meaning specified in Section 2.11.1.
"Fabricating Accounts" shall mean Accounts owing to the Borrower and
arising from the activity of the Borrower's "Reinforcing Steel Fabricating
Group."
"Facility Letter of Credit" shall mean each letter of credit issued
pursuant to Section 2.7 by an Issuing Bank for the account of the Borrower and
all amendments, renewals, extensions or replacements thereof.
"Facility LOC Obligations" shall mean, at any time, the sum of (i) the
maximum aggregate undrawn amount of all Letters of Credit outstanding at such
time, plus (ii) the aggregate amount of all Unpaid LOC Reimbursement
Obligations, plus (iii) without duplication, the aggregate amount of all
payments made by each Lender to the Issuing Bank with respect to such Lender's
participation in Facility Letters of Credit issued by each Issuing Bank, as
provided in Section 2.7.3(d), for which the Borrower has not at such time
reimbursed the Lenders, whether with the proceeds of a Borrowing hereunder or
otherwise.
"Fee Letter" shall mean the letter agreement dated May 10, 1995 between the
Borrower and BOT.
"Fees" shall mean, collectively, the Participation Fees, the Commitment
Fees, the LOC Utilization Fees, the LOC Fronting Fee and the other fees provided
for herein or in the Fee Letter.
"Financial Statements" shall mean the balance sheets, statements of
operations, statements of cash flows and statements of changes in shareholder's
equity of the Consolidated Entity for the period specified, prepared in
accordance with GAAP. If the Borrower shall have any subsidiaries, such
financial statements shall be prepared
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on a consolidated and, if so requested by the Agent, consolidating basis.
"First Mortgage Indenture" shall mean the Indenture with respect to the
First Mortgage Notes, dated as of December 15, 1992, between the Borrower and
Shawmut Bank Connecticut, National Association (formerly called The Connecticut
National Bank), as trustee, as amended, supplemented or otherwise modified from
time to time in accordance with Section 6.17.
"First Mortgage Notes" shall mean the Borrower's 11 1/2% First Mortgage
Notes due 2000, issued pursuant to the First Mortgage Notes Indenture, as
amended, supplemented or otherwise modified from time to time in accordance with
Section 6.17.
"Fixed Rate Base" shall mean (i) in the case of Eurodollar Loans, the
Adjusted Eurodollar Rate, (ii) in the case of COF Rate Loans, the Adjusted COF
Rate and (iii) in the case of FFR Loans, the Term Federal Funds Rate.
"Fixed Rate Borrowing" shall mean a Borrowing of Fixed Rate Loans,
"Fixed Rate Loan" shall mean a Eurodollar Loan, a COF Rate Loan or an FFR
Loan; and "Fixed Rate Loans" means Eurodollar Loans, COF Rate Loans and FFR
Loans.
"FFR Loan" shall mean a Loan that bears interest calculated on the basis of
the Term Federal Funds Rate.
"Floating Rate Borrowing" shall mean a borrowing of Floating Rate Loan.
"Floating Rate Loan" shall mean a Base Rate Loan or an Overnight FFR Loan.
"FLS" shall mean FLS Holdings Inc., a Delaware corporation.
"FLS Intercompany Note" shall mean the demand unsecured note from the
Borrower to FLS in the original principal amount of $17,641,567.92.
"Forecast" shall mean a projection of the expected financial condition and
results of operations of the Consolidated Entity (including, but not limited to,
a projected consolidated balance sheet, statement of operations, statement of
cash flows and statement of changes in stockholders, equity, including a
projection of proposed Capital Expenditures) made as of the beginning of the
third fiscal
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quarter of the Borrower for the succeeding twelve month period.
"Foreign Lender" shall mean any Lender organized under the laws of a
jurisdiction outside of the United States.
"Form 10-K" and "Form 10-Q" shall mean, respectively, a report on
Form 10-K or Form 10-Q filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended, and the regulations
thereunder.
"Funded Debt" shall mean Indebtedness maturing more than twelve months
after the issuance or incurrence thereof, but shall not include the Loans or
other Obligations hereunder.
"GAAP" shall mean generally accepted accounting principles in the United
States as in effect from time to time.
"Hazardous Substances" shall mean (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that
contained dielectric fluid containing levels of poly-chlorinated biphenyls, and
radon gas; (b) any chemicals, materials or substances defined as or included in
the definition of "hazardous substances," "hazardous waste," "hazardous
materials," "extremely hazardous waste," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority.
"Highest Lawful Rate" shall mean, at any given time during which any
Obligations shall be outstanding hereunder, the maximum interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the Obligations owing under this Credit Agreement, under
the laws of the State of New York (or the law of any other jurisdiction whose
laws may be mandatorily applicable notwithstanding other provisions of this
Credit Agreement and the other Credit Documents), or under applicable federal
laws which may presently or hereafter be in effect and which allow a higher
maximum interest rate than under New York (or such other jurisdiction's) law, in
any case after taking into account, to the extent permitted by applicable law,
any and
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all relevant payments or charges under this Credit Agreement and any other
Credit Documents executed in connection herewith, and any available exemptions,
exceptions and exclusions.
"Indebtedness" shall mean any indebtedness of the Borrower or any
Subsidiary, whether or not contingent, in respect of (i) borrowed money or
evidenced by bonds, notes (including, but not limited to, the Notes), debentures
or similar instruments, (ii) without duplication, letters of credit (or
reimbursement agreements in respect thereof) including Facility Letters of
Credit and Third Party Letters of Credit, (iii) the deferred and unpaid balance
of the purchase price of any property, (iv) Capital Leases, if and to the extent
any such indebtedness would appear as a liability upon a consolidated balance
sheet, (v) obligations of the Borrower or any Subsidiary under Interest Rate
Agreements and (vi) any of the foregoing obligations of any Person secured by a
Lien on assets of the Borrower or any Subsidiary. Such terms shall also
include, to the extent not otherwise included, the guaranty by the Borrower or
any Subsidiary of any items specified in clause (i) through (vi) above, but
shall not include any trade payables incurred in the ordinary course of
business.
"Industrial Development Bonds" shall mean the industrial development or
pollution control revenue refunding bonds in the aggregate principal amount of
$10,875,000 issued by certain political subdivisions pursuant to four separate
Trust Indentures, dated November 1, 1988 and December 1, 1988.
"Initial Lender" shall mean each Lender named on the signature pages of
this Credit Agreement as in effect on the Effective Date.
"Interest Expense" shall mean the aggregate consolidated interest expense
of the Consolidated Entity in respect of Indebtedness determined on a
consolidated basis in accordance with GAAP, including, without limitation, (i)
amortization of original issue discount on any Indebtedness and of all fees
payable in connection with the incurrence of such Indebtedness (to the extent
included in interest expense in accordance with GAAP), (ii) the interest portion
of any deferred payment obligation, (iii) the interest component of any Capital
Lease Obligations and (iv) any payments made by the Borrower or any Subsidiary
pursuant to any Interest Rate Agreement (or minus any payment received by the
Borrower or any Subsidiary under an Interest Rate Agreement).
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"Interest Period" shall mean (i) in the case of each Eurodollar Loan, each
period commencing on the day such Eurodollar Loan is made or on which a Floating
Rate Loan, COF Rate Loan or an FFR Loan is converted into such Eurodollar Loan
or the last day of the immediately preceding Interest Period for such Eurodollar
Loan and ending on the corresponding day one, two, three or six months
thereafter (or such other period as shall be agreed to by the Lenders, (ii) in
the case of each COF Rate Loan, each period commencing on the day such COF Rate
Loan is made or on which a Floating Rate Loan, a Eurodollar Loan or an FFR Loan
is converted into such COF Rate Loan or the last day of the immediately
preceding interest period for such COF Rate Loan and ending on the day 30, 60,
or 90 days thereafter and (iii) in the case of each FFR Loan, each period
commencing on the day such FFR Loan is made, or on which a Floating Rate Loan, a
Eurodollar Loan or a COF Rate Loan is converted into such FFR Loan, and ending
one, two, three or four weeks thereafter or one, two or three months thereafter,
in each case as specified in the notice given pursuant to Section 2.4.1 (in the
case of the initial Interest Period for a Fixed Rate Loan) or as specified in a
Notice of Continuation or Notice of Conversion given before the commencement of
each subsequent Interest period for such Fixed Rate Loan. If the Borrower fails
to specify the duration of an Interest Period as aforesaid, the Borrower shall
be deemed to have selected an Interest Period of one month (in the case of a
Eurodollar Loan) or 30 days (in the case of a COF Rate Loan) or one week (in the
case of an FFR Loan). In selecting Interest Periods for Fixed Rate Loans, the
Borrower shall insure that Fixed Rate Loans of the same Type aggregating
$3,500,000 or less shall have common Interest Periods. Notwithstanding the
foregoing:
(1) each Interest Period which would otherwise end on a day which
is not a Business Day shall end on the next succeeding Business Day
(or, in the case of an Interest Period for Eurodollar Loans, if such
next succeeding Business Day falls in the next succeeding calendar
month, on the immediately preceding Business Day for a Eurodollar
Loan);
(2) if any Interest Period for a Eurodollar Loan commences on the
last Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the appropriate subsequent
calendar month), such Interest Period shall end on the last Business
Day of the appropriate subsequent calendar month;
(3) no more than ten (10) Interest Periods shall be in effect at
the same time for all Types of Loans,
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and all Loans of the same Type made on the same Borrowing Date and
having the same Interest Period shall be treated as a single
Borrowing; and
(4) no Interest Period shall extend beyond the Expiration Date.
Interest on each Fixed Rate Loan shall accrue during each Interest Period
applicable thereto from (and including) the first day of such Interest Period
to (but excluding) the last day of such Interest Period.
"Interest Rate Agreement" shall mean any interest rate protection
agreement, interest rate future, interest rate option, interest rate swap,
interest rate cap or other interest rate hedge or arrangement under which the
Borrower is a party or beneficiary.
"Internal Revenue Code" or "IRC" shall mean the Internal Revenue Code of
1986, as amended from time to time, and any successor statute thereto and all
final or temporary rules and regulations promulgated thereunder and published,
generally applicable rulings entitled to precedential effect to the extent such
rules, regulations or rulings are effective and applicable hereto.
"Internal Revenue Service" or "IRS" shall mean the United States Internal
Revenue Service and any successor agency.
"Inventory" shall mean all of the Borrower's inventory, including, without
limitation: (i) all raw materials, work-in process, parts, components,
assemblies, supplies and materials used or consumed in the Borrower's business;
(ii) all goods, wares and merchandise, finished or unfinished, held for sale or
lease; and (iii) all goods returned or repossessed by the Borrower.
"Inventory Advance Rate" shall have the meaning specified for such term in
the definition of the term "Borrowing Base."
"Investment" shall mean, with respect to any specified Person, (a) the
purchase or acquisition by such specified Person of any share of capital stock,
evidence of indebtedness or other security issued by any other Person; (b) any
acquisition by such specified Person of another Person by a merger with such
other Person (other than a merger by a wholly-owned Subsidiary with another
wholly-owned Subsidiary or with the Borrower), (c) any loan, advance, or
extension of credit by such specified Person to, or contribution by such
specified Person to the capital
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of, any other Person, (d) any purchase by such specified Person of all or any
integral part of the business of any other Person or assets comprising such
business or part thereof, (e) any other investment by such specified Person and
(f) any binding obligation or option by such specified Person to do any of the
foregoing if, in the case of an option, the consideration paid or payable for
such option exceeds $100,000; provided, however, that the term "Investment"
shall not include (i) current trade and customer accounts receivable for
services rendered in the ordinary course of business and payable in accordance
with customary trade terms, (ii) advances to employees for travel expenses,
drawing accounts and similar expenditures, (iii) Capital Expenditures or (iv)
stock or other securities acquired by such specified Person in connection with
the satisfaction or enforcement of debts or claims due or owing to such
specified Person or as security for any such debts or claims, provided that
such debts or claims arose in the ordinary course of business and were not
created for the purpose or with a view to the acquisition of such stock or
other securities.
"Issuing Bank" shall mean BOT or NationsBank, in its capacity as issuer of
Facility Letters of Credit hereunder.
"Issuing Office" shall mean, with respect to each Issuing Bank, the branch
or office from which a Facility Letter of Credit of such Issuing Bank has been
or is being issued.
"Kyoei" shall mean Kyoei Steel Ltd., a corporation organized under the laws
of Japan and the sole stockholder of FLS.
"Lender" shall mean each financial institution listed on Annex I hereto,
and each Person that becomes a Lender pursuant to an Assignment and Assumption
Agreement accepted by the Agent. The term "Lender" shall include the Swingline
Lender and each Issuing Bank.
"Letter of Credit Application" shall have the meaning specified in Section
2.7.1.
"Lien" shall mean, with respect to any Person, (i) any lien, mortgage,
pledge, encumbrance, charge, or conditional sale or other title retention
agreement (including, without limitation, the rights of a lessor under a Capital
Lease to the property leased thereunder) or other security interest of any kind
upon any property or assets of any character of such Person, whether now owned
or hereafter acquired by such Person, or upon the income or
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profits therefrom, (ii) any arrangement or agreement that would prohibit such
Person from creating any liens, mortgages, pledges, encumbrances, charges or
other security interests in favor of the Lenders, (iii) any indebtedness of
such Person outstanding for more than 30 days which if unpaid would by law or
upon bankruptcy or insolvency, or otherwise, be given any priority over general
creditors of such Person and (iv) any sale, assignment, pledge or other
transfer by such Person of its accounts receivable, contract rights, general
intangibles or chattel paper, with or without recourse.
"Loan" shall mean a loan of any Type made by any Lender to or for the
account of the Borrower hereunder and refers to a Swingline Loan, a Revolving
Loan or a Refunding Loan.
"Loan Account" shall have the meaning given to such term in Section 2.12.2.
"LOC Availability" shall mean the lesser of (a) the LOC Facility minus the
outstanding Facility LOC Obligations or (b) the Availability.
"LOC Cash Collateral Account" shall have the meaning specified in Section
2.7.8.
"LOC Facility" shall have the meaning specified in Section 2.3(a).
"LOC Fronting Fee" shall have the meaning specified in Section 2.9.3(b).
"LOC Issue Date" shall mean any date on which a Facility Letter of Credit
is issued.
"LOC Participation" shall mean with respect to each Lender, the amount of
its participation in outstanding Facility LOC Obligations.
"LOC Reimbursement Obligation" shall have the meaning specified in Section
2.7.3.
"LOC Request" shall have the meaning specified in Section 2.7.1.
"LOC Utilization Fee" shall have the meaning specified in Section 2.9.3(a).
"Lockbox Account" shall have the meaning given to such term in Section
2.15.1.
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"Lockbox Agreements" shall have the meaning given to such term in Section
2.15.1.
"Lockbox Bank" shall mean NationsBank, N.A. (Carolinas) and any other bank
selected by the Borrower and approved by the Agent.
"Lockboxes" shall have the meaning given to such term in Section 2.15.1.
"Majority Lenders" shall mean (a) at any time when no Loans or Facility LOC
Obligations are outstanding, banks whose Commitments constitute in the aggregate
at least fifty-one percent (51%) of the Credit Facility and (b) at any time when
any Loans or Facility LOC Obligations are outstanding, Lenders owed or holding,
directly or by means of a participation acquired pursuant hereto, in the
aggregate at least fifty-one percent (51%) of the sum of (i) the aggregate
outstanding principal amount of all Loans and (ii) the aggregate amount of all
outstanding Facility LOC Obligations.
"Material Adverse Effect" shall mean a material adverse effect on (i) the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of the Borrower or of the Borrower and its
Subsidiaries taken as a whole, (ii) the value of Collateral or the amount which
the Agent and the Lenders would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the liquidation
of the Collateral, (iii) the Borrower's or any Subsidiary's ability to perform
its obligations under the Credit Documents to which it is a party, or (iv) the
rights and remedies of the Agent, the Issuing Banks or the Lenders hereunder or
under any other Credit Document.
"Material Contract" shall mean any contract or other arrangement (other
than any of the Credit Documents), whether written or oral, to which the
Borrower or any Subsidiary is a party and under which the maximum amount which
may be required to be paid by or to the Borrower or such Subsidiary exceeds
$1,000,000.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA and (i) to which the Borrower, any Subsidiary or any
ERISA Affiliate is, or within the immediately preceding six (6) years was,
contributing or (ii) with respect to which the Borrower or any Subsidiary may
incur any liability.
"NationsBank" shall mean NationsBank of Florida.
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"Note" shall mean a promissory note of the Borrower payable to the order
of any Lender, in the form of Exhibit A, evidencing the aggregate indebtedness
of the Borrower to such Lender resulting from the Loans made by such Lender or
acquired by such Lender from another Lender pursuant to Section 9.6.
"Notice of Borrowing" shall have the meaning given to such term in Section
2.4.1.
"Notice of Continuation" shall have the meaning given to such term in
Section 2.6.1.
"Notice of Conversion" shall have the meaning given to such term in Section
2.6.1.
"Obligations" shall mean the unpaid principal of and interest on (including
interest accruing on or after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Borrower or any Subsidiary, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) the Loans, any
reimbursement obligation or indemnity of the Borrower on account of Facility
Letters of Credit or any accommodation extended with respect to applications for
Facility Letters of Credit, including all Unpaid LOC Reimbursement Obligations,
and all other obligations and liabilities of the Borrower or any Subsidiary to
the Agent, the Issuing Banks or the Lenders, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with this Credit
Agreement, the Notes, the Facility Letters of Credit, any other Credit Document
and any other document made, delivered or given in connection herewith or
therewith, and each other obligation and liability, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, whether on account of principal, interest, fees, indemnities, costs
or expenses (including, without limitation, all fees and disbursements of
counsel to the Agent, the Issuing Bank or the Lenders), of the Borrower or any
Subsidiary to the Lenders, the Agent or the Issuing Banks pursuant to the terms
of this Credit Agreement or any of the other Credit Documents.
"Other Taxes" shall have the meaning given to such term in Section
2.14.2(b).
"Outstanding Credit" shall mean at any time (i) the aggregate principal
amount of all Loans then outstanding plus (ii) the aggregate amount of all then
outstanding
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Facility LOC Obligations minus (iii) the amount on deposit in the LOC Cash
Collateral Account.
"Overnight Federal Funds Rate" shall mean, for any day, a fluctuating
interest rate per annum equal to the weighted average of the rates on overnight
Federal Funds transactions with members of the Federal Reserve System arranged
by Federal Funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such transactions
received by the Agent from three Federal Funds brokers of recognized standing
selected by it.
"Overnight FFR Loans" shall mean Loans that bear interest calculated on
the basis of the Overnight Federal Funds Rate.
"Payment Office" shall mean the office of the Agent located at 1251 Avenue
of the Americas, New York, New York 10116-3138 or such other office of the Agent
as it may specify from time to time by a notice in writing to the Lenders and
the Borrower.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.
"Permitted Discretion" shall mean the Agent's judgment exercised in good
faith based upon its consideration of any factor which the Agent believes in
good faith could affect the value of any Inventory or Accounts or the amount
which the Agent and the Lenders would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the liquidation
of such Inventory and Accounts. In exercising such judgment, the Agent may
consider such factors which are already included in or relevant to the
definition of Eligible Accounts Receivable or Eligible Inventory, as well as any
of the following: (i) the financial and business climate of the Borrower's (and
any Subsidiary's, as applicable) industries and general macroeconomic
conditions, (ii) changes in collection history and dilution with respect to the
Accounts, (iii) changes in demand for, and pricing of, Inventory, (iv) changes
in any concentration of risk with respect to Accounts and Inventory, and (v) any
other factors that change the credit risk of lending to the Borrower on the
security of the Accounts and Inventory.
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"Permitted Liens" shall mean liens specified in clause (a) through (n) of
Section 6.6.
"Person" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (including any division, agency or
department thereof), and, as applicable, the successors, heirs and assigns of
each.
"Plan" shall mean any employee benefit plan, program or arrangement,
whether oral or written, maintained or contributed to by the Borrower or any
Subsidiary, or with respect to which the Borrower or any Subsidiary may incur
liability, including, but not limited to, any Benefit Plan.
"Proportionate Share" shall mean, with respect to any Lender on any day, a
fraction (expressed as a percentage), the numerator of which shall be the amount
of such Lender's Commitment on such day and the denominator of which shall be
the total Commitments of all the Lenders.
"Receivables Advance Rate" shall have the meaning specified for such term
in the definition of the term "Borrowing Base."
"Reduced Rate" shall have the meaning specified in Section 2.14.2(e).
"Refinancing" shall mean the refinancing and replacement pursuant to this
Credit Agreement of the BTCC Credit Facilities, including the refinancing or
replacement or support of the Existing Letters of Credit.
"Refunding Loan" shall mean a Revolving Loan the proceeds of which are used
solely to repay outstanding Swingline Loans or Unpaid LOC Reimbursement
Obligations and accrued interest thereon. Refunding Loans shall be remitted by
each Lender directly to the Agent for the account of the Swingline Bank or the
relevant Issuing Bank, as the case may be, and the Borrower shall have no right
to direct the application of proceeds of Refunding Loans for any other purpose.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (12 CFR, Part 204), as from time to time in effect and
any successor thereto.
"Reportable Event" shall mean any of the events described in Section 4043
of ERISA and the regulations thereunder, other than such events with respect to
which
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the 30-day notice requirement has been expressly waived under such
regulations.
"Required Lenders" shall mean (a) at any time when no Loans or Facility LOC
Obligations are outstanding, Lenders whose Commitments constitute in the
aggregate at least fifty-one percent (51%) of the Credit Facility and (b) at any
time while Loans or Facility LOC Obligations are outstanding, Lenders owed or
holding, directly or by means of participation acquired pursuant thereto, in the
aggregate of at least fifty-one percent (51%) of the sum of (i) the aggregate
outstanding principal amount of all Loans and (ii) the aggregate amount of all
outstanding Facility LOC Obligations; provided that Required Lenders must
include both BOT and NationsBank.
"Reserve Requirements" shall mean with respect to any Eurodollar Loans or
COF Rate Loans for any Interest Period therefor, the stated maximum rate (stated
as a decimal) at which reserves (including any marginal, supplemental or
emergency reserves) are required to be maintained on the first day of such
Interest Period under Regulation D (a) in the case of Eurodollar Loans, by
member banks of the Federal Reserve system in New York City with deposits in
excess of five billion dollars against "eurocurrency liabilities" (as such term
is defined in Regulation D) or (b) in the case of COF Rate Loans, by member
banks of the Federal Reserve System against non-personal time deposits in an
amount of $100,000 or more having maturities corresponding to such Interest
Period. Without limiting the foregoing, Reserve Requirement with respect to any
such Loan shall include any other reserves required to be maintained by such
member banks against (i) any category of liabilities which includes deposits by
reference to which the Eurodollar Rate or the COF Rate (as the case may be) for
such Loan is to be determined as provided in the definition thereof or (ii) any
category of extensions of credit or other assets which include Eurodollar Loans
or COF Rate Loans (as the case may be).
"Restricted Expenditures", "Restricted Expenditures Allowance" and
"Restricted Expenditures Basket" shall have the meanings specified in Section
6.4.
"Retiree Health Plan" shall mean an "employee welfare benefit plan" within
the meaning of Section 3(i) of ERISA that provides benefits to persons after
termination of employment, other than as required by Section 601 of ERISA.
"Rolling Period" shall mean any period of four consecutive fiscal quarters
of the Consolidated Entity.
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"Sale/Leaseback Transaction" shall mean any arrangement or series of
arrangements providing for the leasing by the Borrower or any subsidiary from
any Person for a period (including any renewal periods) of more than one year of
real or personal property (i) which has been or is to be sold or transferred by
the Borrower or any Subsidiary to such Person or any Affiliate thereof or with
respect to which funds have been or are to be advanced by another Person on the
security of such property or rental obligations of the Borrower or any
Subsidiary, or (ii) which has been or is to be acquired from another Person by
such Person, or on which one or more buildings have been or are to be
constructed by such Person, for the purpose of leasing such property to the
Borrower or any Subsidiary.
"Security Agreement" shall mean the Security Agreement, of even date
herewith, between the Agent and the Borrower, in the form attached as Exhibit F.
"Standby Letter of Credit" shall mean any Facility Letter of Credit other
than a Trade Letter of Credit.
"Subordinated BOT Note" shall mean the Subordinated Note due March 28, 1996
in the original principal amount of $10,000,000 issued by the Borrower to BOT.
"Subordinated Intercompany Note" shall mean the Junior Subordinated Note
due December 21, 2002 in the original principal amount of $50,000,000 issued by
the Borrower to FLS.
"Subordinated Notes" shall mean the FLS Intercompany Note, the Subordinated
Intercompany Note and the Subordinated BOT Note.
"Subsidiary" shall mean as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise specified, all references herein or in any
other Credit Document to a "Subsidiary" or to "Subsidiaries" shall refer to a
Subsidiary or Subsidiaries of the Borrower.
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"Swingline Availability" shall mean, as of any date, the least on such date
of (i) the Unused Swingline Commitment, (ii) the Unused Commitment of the
Swingline Lender or (iii) the Availability.
"Swingline Commitment" shall have the meaning specified in Section 2.2. The
Swingline Commitment shall be a subcommitment of the Commitment of BOT.
"Swingline Lender" shall mean BOT, with respect to Swingline Loans made or
to be made by it pursuant to Section 2.5.
"Swingline Loan" shall mean a Loan made by the Swingline Lender pursuant to
Section 2.5.
"Swingline Loan Amount" shall have the meaning specified in Section 2.5(d).
"Swingline Participation" shall have the meaning specified in Section
2.5(e).
"Swingline Settlement Date" shall have the meaning specified in Section
2.5(d).
"Swingline Settlement Notice" shall have the meaning specified in Section
2.5(e).
"Tax Transferee" shall have the meaning given to such term in Section
2.14.2(a).
"Taxes" shall have the meaning given to such term in Section 2.14.2(a).
"Technical Assistance Agreements" shall mean technical assistance
agreements, whether oral or written, that may exist from time to time between
the Borrower and Kyoei.
"Term Federal Funds Rate" shall mean, for any Interest Period for FFR
Loans, the average of the rates per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined by the Agent to be the average of the bid rates
quoted to the Agent at approximately 10:00 a.m. (or as soon thereafter as
practicable) on the first day of such Interest Period by at least two federal
funds dealers of recognized national standing selected by the Agent for the sale
to the Agent of federal funds having a term comparable to such Interest Period
and in an amount comparable to the principal amount of the FFR Loans of the
Agent (in the capacity as Lender) to which such Interest Period relates.
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"Termination Event" shall mean: (a) a Reportable Event with respect to
any Benefit Plan or Multiemployer Plan; (b) the withdrawal of the Borrower, any
Subsidiary or any ERISA Affiliate from a Benefit Plan during a plan year in
which such entity was a "substantial employer" as defined in Section 4001(a) (2)
of ERISA; (c) the providing of notice of intent to terminate a Benefit Plan in a
distress termination described in Section 4041(c) of ERISA; (d) the institution
by the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan;
(e) any event or condition that is reasonably likely to (i) constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Benefit Plan or Multiemployer Plan, or (ii) result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (f)
the partial or complete withdrawal within the meaning of Sections 4203 and 4205
of ERISA, of the Borrower, any Subsidiary or any ERISA Affiliate from a
Multiemployer Plan.
"Third Party Letter of Credit" shall have the meaning specified in Section
2.7.7.
"Third Party LOC Obligations" shall mean, at any time, the sum of (i) the
maximum aggregate amount of all Third Party Letters of Credit then outstanding
plus (ii) the aggregate amount of all unreimbursed drawings under Third Party
Letters of Credit.
"Trade Letter Of Credit" shall mean any Facility Letter of Credit in
support of obligations incurred by the Borrower or any of its Subsidiaries in
the ordinary course of business for the purchase of goods or services.
"Tranche" shall mean Loans of the same Type and having a common Interest
Period.
"Tripartite Agreement" shall have the meaning specified in Section
2.15.1(c).
"Type" shall mean, with respect to any Loan, the character of such Loan as
a Eurodollar Rate Loan, a Base Rate Loan, COF Rate Loan or an FFR Loan.
"UCC" or "Uniform Commercial Code" shall mean the Uniform Commercial Code.
Unless otherwise specified, all references herein or in any other Credit
Document to the UCC shall be to the Uniform Commercial Code as in effect in the
State of New York.
"Unfunded Current Liabilities" of any Benefit Plan shall mean the amount,
if any, by which the present
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value of the accrued benefits under such Benefit Plan as of the close of its
most recent plan year exceeds the fair market value of the assets allocable
thereto, determined in accordance with Section 412 of the IRC.
"Unpaid LOC Reimbursement Obligations" shall mean the amount of drawings
under Facility Letters of Credit for which the Issuing Bank thereof has not been
reimbursed, whether with the proceeds of a Borrowing hereunder or otherwise.
"Unused Commitment" shall mean as to each Lender on any date of
determination thereof, such Lender's Commitment in effect on such date minus the
sum of (i) the aggregate principal amount of such Lender's Loans outstanding on
such date and (ii) the amount of such Lender's Proportionate Share of Facility
LOC Obligations outstanding on such date.
"Unused Credit Facility" shall mean, on any date, the amount of the Credit
Facility on such date minus the sum of (i) the aggregate outstanding principal
amount of all Loans and (ii) the outstanding Facility LOC Obligations.
"Unused Swingline Commitment" shall mean the Swingline Commitment minus
the aggregate outstanding principal amount of all Swingline Loans.
Section 1.2 Construction. (a) As used herein, words of the neuter gender
mean and include correlative words of the masculine and feminine gender. Unless
otherwise specified herein, all references to time of day contained in this
Credit Agreement are to New York City time. References herein to "written" or
"in writing" shall include communications or notices by means of facsimile
transmission, telex or cable. Terms not otherwise defined herein which are
defined in the UCC shall have the meanings given them in the UCC.
(b) All references in this Credit Agreement to Articles, Sections, Annexes,
Schedules and Exhibits are to Articles, Sections, Schedules and Exhibits in or
to this Credit Agreement unless otherwise specified. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Credit
Agreement shall refer to this Credit Agreement as a whole and not to any
particular provision of this Agreement. All Annexes, Schedules and Exhibits
hereto shall be deemed to be a part of this Credit Agreement.
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(c) The descriptive headings of the several Articles, Sections and
paragraphs of this Credit Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Credit Agreement.
1.3 Accounting Terms and Determinations. Unless otherwise defined or
specified herein, all accounting terms shall be construed in accordance with
GAAP applied on a basis consistent in all material respects with the GAAP used
in the preparation of the Financial Statements referred to in Section 4.6. All
accounting calculations to determine the Debt/EBITDA Ratio or compliance with
Sections 6.1, 6.2, 6.3 and Section 6.4 shall be made in accordance with GAAP
applied on a basis consistent in all material respects with the GAAP used in the
preparation of the Financial Statements referred to in Section 4.6. The
Financial Statements required to be delivered hereunder from and after the
Closing Date and all financial records at the Borrower shall be maintained in
accordance with GAAP applied on a basis consistent with the GAAP used in the
preparation of the Financial Statements referred to in Section 4.6 (the
"Historical GAAP"), except for any changes concurred in by the Auditors;
provided that if GAAP shall change from the Historical GAAP, the certificates
required to be delivered pursuant to Section 5.1 shall include calculations
setting forth the adjustments necessary to calculate the Debt/EBITDA Ratio in
accordance with Historical GAAP and to demonstrate whether the Borrower is in
compliance with the financial covenants based upon the Historical GAAP.
ARTICLE 2. The Credit Facility.
2.1 Revolving Loans. Upon the terms and subject to the conditions
hereinafter set forth, each Lender severally agrees to make loans (each a
"Revolving Loan") to or for the account of the Borrower from time to time on any
Business Day during the Commitment Period, in an aggregate principal amount not
exceeding, at any one time outstanding, such Lender's Commitment; provided that
no Lender shall be required to make a Revolving Loan (i) in excess of its
Proportionate Share of all Revolving Loans being made on the same day or (ii) if
after giving effect thereto and to any Facility Letters of Credit issued
concurrently therewith, the aggregate outstanding principal amount of all
Revolving Loans made by such Lender plus its outstanding LOC Participation would
exceed such Lender's Commitment or (iii) if after giving effect thereto, to all
other Loans being made concurrently therewith and all Letters of Credit being
issued concurrently therewith, the sum of (x) the
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aggregate outstanding principal amount of all Loans plus (y) the outstanding
amount of all Facility LOC Obligations plus (z) the outstanding amount of all
Third Party LOC Obligations would exceed the Adjusted Credit Facility. Within
the limits of the Credit Facility and each Lender's Commitment, and subject to
the limits referred to above, the Borrower may borrow under this Section 2.1,
prepay pursuant to Section 2.13 and reborrow under this Section 2.1. All
Revolving Loans shall be denominated in Dollars.
2.2 Swingline Loans. Subject to the terms and conditions of this Credit
Agreement, the Swingline Lender agrees to make loans (each a "Swingline Loan")
to or for the account of the Borrower from time to time on any Business Day
during the Commitment Period in an aggregate principal amount not exceeding, at
any one time outstanding, $10,000,000 (the "Swingline Commitment"); provided,
however, that the Swingline Lender shall not be required to make a Swingline
Loan if, after giving effect thereto, (i) the aggregate outstanding principal
amount of all Loans (Revolving Loans and Swingline Loans) of the Swingline
Lender plus the amount of its LOC Participation would exceed the Commitment of
the Swingline Lender or (ii) the sum of (x) the aggregate outstanding principal
amount of the Loans of all Lenders (including the Swingline Lender) plus (y) the
outstanding Facility LOC Obligations plus (z) the outstanding Third Party LOC
Obligations would exceed the Adjusted Credit Facility. Within the limit of the
Swingline Lender's Swingline Commitment, and subject to the limits referred to
above, the Borrower may borrow under this Section 2.2, prepay pursuant to
Sections 2.5(c) and 2.13 and reborrow under this Section 2.2. All Swingline
Loans shall be Floating Rate Loans and shall be denominated in Dollars. The
Swingline Commitment shall be a subcommitment of the Commitment of the Swingline
Lender.
2.3 Facility Letters of Credit. (a) Subject to the terms and conditions
of this Credit Agreement, each Issuing Bank severally agrees to issue letters of
credit ("Facility Letters of Credit") in Dollars for the account of the Borrower
from time to time on any Business Day from the Closing Date until the earlier of
(i) 15 days before the Expiration Date or (ii) the termination of the Credit
Facility in an aggregate amount not exceeding, for both Issuing Banks,
$50,000,000 (the "LOC Facility") at any one time outstanding; provided, however,
that no Facility Letter of Credit shall be issued if (x) the amount of such
proposed Letter of Credit, when added to the amount of all other Facility
Letters of Credit to be issued concurrently therewith, exceeds the amount of the
Availability or (y) the amount of such proposed Facility Letter of Credit, when
added to the amount of all other Facility Letters of Credit
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to be issued on such Date and the Facility LOC Obligations then outstanding,
exceeds the lesser of the LOC Facility or the amount of the Adjusted Credit
Facility then in effect. Each Lender shall acquire a participation in each
Facility Letter of Credit as provided in Section 2.7.2.
(b) Facility Letters of Credit shall be in a form customarily used by the
Issuing Bank thereof or in such other form as has been approved by such Issuing
Bank. No Facility Letter of Credit shall have an expiration date (including all
rights of renewal) later than the earlier of (i) thirteen (13) months (or, in
the case of Trade Letters of Credit, 120 days) from the issuance thereof or (ii)
five (5) days before the Expiration Date.
(c) Within the limits of the LOC Facility, and subject to the limits
referred to above, the Borrower may request the issuance of Facility Letters of
Credit under this Section 2.3, repay any LOC Reimbursement Obligations resulting
from drawings thereunder pursuant to Section 2.7.3 and request the issuance of
additional Facility Letters of Credit under this Section 2.3.
2.4 Borrowing Mechanics (Revolving Loans).
2.4.1 Notice of Borrowing. (a) Each Revolving Borrowing (other than a
Refunding Borrowing) shall be made on notice, given by the Borrower to the Agent
not later than (i) 11:00 a.m. on the date of any proposed Base Rate Borrowing
and (ii) not later than 2:00 p.m. three Business Days prior to the proposed
Borrowing, in the case of a Fixed Rate Borrowing. The Agent shall give to each
Lender prompt notice, by telex, telecopier or cable, of each requested Borrowing
of Revolving Loans. Except in the case of Refunding Loans, each Base Rate
Borrowing shall be in the amount of $2,000,000 or any integral multiple of
$500,000 in excess thereof and each Tranche of Loans in a Fixed Rate Borrowing
shall be in the amount of $2,000,000 or an integral multiple of $500,000 in
excess thereof.
(b) Each notice of a Borrowing shall be made by telephone and promptly
confirmed in writing by telecopier, telex or cable, in substantially the form of
Exhibit B hereto (a "Notice of Borrowing"), specifying therein (i) the proposed
date of such Borrowing (which shall be a Business Day), (ii) amount of such
Borrowing (which shall not be in excess of the Availability on the proposed
Borrowing Date), (iii) the Type(s) of Loans to be made on such Borrowing Date
and the aggregate amount of each Tranche of Loans comprising such Borrowing and
(iv) in the case of a Fixed Rate Borrowing the initial Interest Period to be
applicable to each such Type of Loans comprising such
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Borrowing. If the Borrower fails to specify the Types of Loans requested, it
shall be deemed to request Base Rate Loans, and if it fails to specify an
Interest Period for any type of requested Fixed Rate Loans it shall be deemed
to request the shortest available Interest Period for such Type of Fixed Rate
Loans. Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. The Borrower shall indemnify each Lender against any loss, cost or
expense incurred by such Lender as a result of (i) any failure by the Borrower
to borrow the requested Loans on the Borrowing Date specified in the Notice of
Borrowing therefor or (ii) any failure to fulfill, on or before the date
specified in such Notice of Borrowing, the applicable conditions set forth in
Article 3 including, without limitation, any loss (excluding loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
redemption of deposits or other funds acquired by such Lender to fund its
ratable portion of such Borrowing when such Borrowing, as a result of such
failure, is not made on such date.
(c) The Borrower shall notify the Agent in writing of the names of its
officers and employees authorized to request Loans on behalf of the Borrower and
shall provide the Agent with a specimen signature of each such officer or
employee. The Agent shall be entitled to rely conclusively on such officer's or
employee's authority to request Loans on behalf of the Borrower until the Agent
receives written notice to the contrary.
(d) Notwithstanding the obligation of the Borrower to send written
confirmation of a Notice of Borrowing made by telephone if and when requested by
the Agent, in the event that the Agent agrees to accept a notice made by
telephone, such telephonic notice of Borrowing shall be binding on the Borrower
whether or not written confirmation is sent by the Borrower or requested by the
Agent. The Agent may act prior to the receipt of any requested written
confirmation, without any liability whatsoever, based upon telephonic notice
believed by the Agent, in good faith, to be from the Borrower or its agents. The
Agent's records of the terms of any telephonic Notices of Borrowing shall be
conclusive on the Borrower and the Lenders in the absence of gross negligence or
willful misconduct on the part of the Agent in connection therewith.
2.4.2 Funding of Revolving Loans. (a) Each Lender shall, before 3:00 p.m.
on the Borrowing Date of each Borrowing, make available to the Agent at the
Agent Account, in immediately available funds, for the account of such Lender's
applicable Lending Office, such Lender's
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Proportionate Share of such Borrowing. After the Agent's receipt of such funds
and the Agent's good faith determination that the conditions set forth in
Article III with respect to such Borrowing have been fulfilled, the Agent will
make such funds available to the Borrower on the Borrowing Date by crediting
the amount thereof, in immediately available funds, to the Borrower's Corporate
Account or as otherwise directed by the Borrower.
(b) Unless the Agent shall have received notice from a Lender prior to the
date of any Borrowing that such Lender will not make available to the Agent such
Lender's Proportionate Share of such Borrowing, the Agent may assume that such
Lender has made such Proportionate Share available to the Agent on the Borrowing
Date of such Borrowing in accordance with this Section 2.4.2, and the Agent may,
in reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have made
such Proportionate Share available to the Agent, such Lender and the Borrower
severally agree to pay or repay to the Agent, forthwith on demand, such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is paid
or repaid to the Agent, at (i) in the case of the Borrower, the interest rate
applicable at the time to Loans comprising such Borrowing and (ii) in the case
of such Lender, an interest rate per annum equal to the sum of one percent (1%)
plus the Overnight Federal Funds Rate. If such Lender shall pay to the Agent
such corresponding amount, such amount so paid shall constitute such Lender's
Loan as part of such Borrowing for purposes of this Agreement.
2.5 Borrowing Mechanics and Certain Other Provisions Regarding Swingline
Loans. (a) Whenever the Borrower wishes to borrow under the Swingline
Commitment it shall give the Swingline Lender (with a copy to the Agent), no
later than 3:00 p.m. of the proposed Borrowing Date, notice thereof (a
"Swingline Borrowing Notice"), specifying (i) the proposed Borrowing Date (which
shall be a Business Day), (ii) the amount thereof (which shall be at least
$100,000 or a multiple of $10,000 in excess thereof but in no event more than
the Swingline Availability on the proposed Borrowing Date), and (iii) the Type
of such Swingline Loan. If the Swingline Lender determines that the conditions
specified in Sections 3.3 and 3.4 have been satisfied, the Swingline Lender
shall make the requested Swingline Loan no later than 5:00 p.m. of the Borrowing
Date specified in the Swingline Borrowing Notice by depositing the proceeds
thereof in the Disbursement Account maintained by the Borrower at BOT Trust
Company unless
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otherwise directed by the Borrower in the Swingline Borrowing Notice. In
connection with any Swingline Loan made by it, the Swingline Lender may rely on
the authority of the officers and employees of the Borrower referred to in
Section 2.4.1(c) and on telephonic notices received by the Swingline Lender to
the same extent as the Agent may rely thereon pursuant to paragraphs (c) and
(d) of Section 2.4.1.
(b) The Swingline Lender shall cease making (and shall be relieved of its
obligations to make) Swingline Loans if it receives notice in writing from a
Lender at least one Business Day prior to the proposed Borrowing Date for a
Swingline Loan that a Default exists hereunder; provided that the Swingline
Lender may resume making Swingline Loans if receive notice in writing from the
Agent that such Default has been waived by the Lenders or cured in accordance
herewith.
(c) The Borrower may prepay Swingline Loans on any Business Day, upon
notice to the Swingline Lender (with a copy to the Agent) given no later than
3:00 p.m. on the proposed prepayment date. Each partial prepayment of Swingline
Loans shall be in the aggregate amount of $100,000 or any integral multiples of
$10,000 in excess thereof. All payment of Swingline Loans shall be made to the
Swingline Lender through the Agent as provided in Section 2.13.
(d) Upon demand by the Swingline Lender, but in any event upon the
occurrence of any Event of Default, the Borrower shall repay the principal
amount of all Swingline Loans then outstanding and accrued and unpaid interest
thereon. (Each day on which Swingline Loans are required to be repaid is herein
called a "Swingline Settlement Date.") The Borrower may make such repayment with
the proceeds of Loans from the Lenders. If the Borrower shall fail to request
Revolving Loans for any Swingline Settlement Date in an aggregate amount at
least equal to all Swingline Loans outstanding on such date and all interest
accrued and unpaid thereon to such date (the "Swingline Loan Amount") or if the
conditions for making such Revolving Loans on such date are not satisfied, then
the Borrower shall be irrevocably deemed to have requested a Refunding Loan from
each Lender on such Swingline Settlement Date in an amount equal to such
Lender's Proportionate Share of the Swingline Loan Amount outstanding on such
date.
(e) If for any reason the Borrower fails to repay in full on any Swingline
Settlement Date the Swingline Loan Amount outstanding on such Swingline
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Settlement Date, then each Lender shall, upon notice thereof (the "Swingline
Settlement Notice") from the Swingline Lender (through the Agent), specifying
the principal amount of Swingline Loan Amount outstanding on such Swingline
Settlement Date, deposit in the Agent Account, for the account of the Swingline
Lender, no later than 4:00 p.m. of the day on which the Swingline Settlement
Notice is delivered (or the following Business Day if such notice is delivered
after 3:00 p.m.), immediately available funds in an amount equal to (i) such
Lender's Proportionate Share on such Swingline Settlement Date multiplied by
(ii) the Swingline Loan Amount on such Swingline Settlement Date, and the Agent
shall thereupon promptly remit such funds to the Swingline Lender. Such
deposit by a Lender shall constitute a Loan by such Lender to the Borrower in
an amount of such deposit; provided, however, that if such Lender is then
prohibited by applicable law from making, or if the Borrower is then prohibited
from incurring, such Loan, then such deposit by such Lender shall constitute
the purchase by such Lender, without recourse to or any representation or
warranty by, the Swingline Bank, for a purchase price equal to the amount of
such deposit, of a participation and undivided interest (a "Swingline
Participation") equal to such Lender's Proportionate Share on such Swingline
Settlement Date in the Swingline Loans Amount then outstanding. The obligation
of each Lender to make funds available to the Swingline Lender, as aforesaid, on
each Swingline Settlement Date in respect of the Swingline Loan Amount
outstanding on such date shall not be subject to the conditions or requirements
set forth in Article III and shall be unconditional and irrevocable under any
and all circumstances including, without limitation, (i) the existence of an
Event of Default hereunder (including an Event of Default specified in clause
(g) of Section 7.1) or (ii) the termination of the Credit Facility.
Any Lender acquiring a participation in a Swingline Loan as aforesaid shall
have, for all purposes hereof, all rights of a direct holder of such Loan to
the extent of such participation.
(f) If a Lender fails to make the payment required to be made by it
pursuant to Section 2.5(d) with respect to any Swingline Loans on the due date
of such payment, it shall pay to the Swingline Lender interest, for each day
that such default continues, on the unpaid amount at a rate per annum equal to
(i) the sum of one percent (1%) plus the Overnight Federal Funds Rate, for each
of the first three days following such default and (ii) the Base Rate
thereafter.
(g) All interest accruing on Swingline Loans prior to refunding thereof
with a Refunding Loan or the
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funding of a participation therein as required by Section 2.5(d) shall be for
the account of the Swingline Lender.
2.6 Certain Provisions Regarding Fixed Rate Loans.
2.6.1 Notice of Continuation and Notice of Conversion. (a) Subject to the
provisions of Section 2.6.2, if the Borrower wishes any Tranche of Fixed Rate
Loans of a particular Type to continue to be maintained hereunder as such
Tranche following the expiration of the then current Interest Period therefor,
the Borrower shall, not later than 2:00 p.m. of the third Business Day
immediately preceding the expiration of the such Interest Period, select, and
notify the Agent of, the new Interest Period for such Tranche, which new
Interest Period shall commence on the last day of the preceding Interest Period.
Each such selection of a new Interest Period is herein called a "Continuation"
and the notice to the Agent of a Continuation is herein called a "Notice of
Continuation"). Each Notice of Continuation shall be by telephone or telecopy
(confirmed immediately in writing if by telephone) in substantially the form of
Exhibit C, specifying (i) the applicable Fixed Rate Loans, and (ii) the duration
of the selected Interest Period and the date on which such Interest Period is to
commence, all of which shall be specified in such manner as is necessary to
comply with all conditions and limitations set forth in the definition of the
term "Interest Period". If the Borrower shall fail to select a new Interest
Period for any Tranche of Fixed Rate Loans in accordance with this Section
2.6.1(a), then on the last day of the then current Interest Period therefor all
Fixed Rate Loans in such Tranche will automatically Convert into Base Rate
Loans. Each Continuation with respect to a Tranche shall apply to all Fixed Rate
Loans in such Tranche other than those being converted into Loans of another
Type pursuant to Section 2.6.1(b).
(b) The Borrower may on any Business Day, upon notice (each such notice, a
"Notice of Conversion") given to the Agent, and subject to the provisions of
Section 2.6.2, Convert the entire amount or a portion of all Loans of one Type
comprising the same Tranche into Loans of another Type; provided, however, that
any Conversion of any Fixed Rate Loans of any Type into Loans of another Type
shall be made on, and only on, the last day of an Interest Period therefor. Each
such Notice of Conversion shall be given not later than 2:00 p.m. on the
Business Day prior to the date of any proposed Conversion of Fixed Rate Loans
into Base Rate Loans and on the third Business Day prior to the date of any
proposed Conversion of Loans of any Type into Fixed Rate Loans of another type.
Subject to the
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restrictions specified above, each Notice of Conversion shall be substantially
the form of Exhibit D and shall be given by telephone or telecopy (confirmed
immediately in writing if by telephone) and shall specify (i) the requested
date of such Conversion, (ii) the Type of Loans to be Converted, (iii) the
portion of such Type of Loan to be Converted, (iv) the Type of Loans into which
such Loans are to be Converted into and (v) if such Conversion is into Fixed
Rate Loans, the duration of the Interest Period therefor. Each Tranche
resulting from a Conversion shall be in an amount of not less than $2,000,000
or an integral multiple of $500,000 in excess thereof. Conversion of Base Rate
Loans into Loans of another type shall be made ratably with respect to the
outstanding Base Rate Loans of each Lender and Conversion of Fixed Rate Loans
of a particular Tranche shall be made ratably with respect to the outstanding
Loans of each Lender comprising such Tranche.
(c) Each Notice of Continuation and Notice of Conversion shall be
irrevocable and binding on the Borrower. In the case of any Borrowing,
Continuation or Conversion that the related Notice of Borrowing, Notice of
Continuation or Notice of Conversion specifies is to be comprised of Fixed Rate
Loans, the Borrower shall indemnify each Lender against any loss, cost or
expense incurred by such Lender as a result of any failure to fulfill, on or
before the date for such Borrowing, Continuation or Conversion specified in such
Notice of Borrowing, Notice of continuation or Notice of Conversion, the
applicable conditions set forth in Article III, including, without limitation,
any loss (excluding loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund the Fixed Rate Loans to be made or maintained by such Lender
as part of such Borrowing, Continuation or Conversion.
2.6.2 Suspension of Fixed Rate Option. Notwithstanding anything contained
in Section 2.6.1 above to the contrary:
(a) No Notice of Continuation or Notice of Conversion may be
given at any time when a Default exists hereunder, and the Borrower's
right to borrow or maintain Loans as Fixed Rate Loans shall be
suspended while such Default exists and is not waived.
(b) If the Agent is unable to determine the Fixed Rate Base for
a particular Type of a Fixed Rate Loan comprising any requested
Borrowing, Continuation or Conversion, the right of the Borrower to
select or maintain Fixed Rate Loans of such Type for such Bor-
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rowing or any subsequent Borrowing shall be suspended until the Agent shall
notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exists, and each Loan comprising such Borrowing shall be a
Loan of a Type that is unaffected by such circumstances, as selected by the
Borrower pursuant to this Credit Agreement.
(c) If the Majority Lenders shall, at least one Business Day before the
date of any requested Borrowing of Fixed Rate Loans or a requested Continuation
of or Conversion into Fixed Rate Loans, notify the Agent that Fixed Rate Base
for such Fixed Rate Loans will not adequately reflect the cost to such Lenders
of making or funding such Fixed Rate Loans, the right of the Borrower to select
such Fixed Rate Loans for such, or any subsequent, Borrowing, Conversion or
Continuation shall be suspended until the Agent shall notify the Borrower and
the Lenders that the circumstances causing such suspension no longer exist, and
each Loan comprising such Borrowing, Conversion or Continuation shall be a Loan
of a Type that is unaffected by such circumstances, as selected by the Borrower
pursuant to this Credit Agreement.
(d) If any Lender shall determine that the introduction of or any change
in or in the interpretation of any law or regulation shall make it unlawful, or
any central bank or other governmental authority shall assert that it is
unlawful, for any Lender or its Eurodollar Lending Office to perform its
obligations hereunder to make Eurodollar Loans or to continue to fund or
maintain Eurodollar Loans hereunder, then, on notice thereof and demand
therefor by such Lender to the Borrower through the Agent, (i) each such
Eurodollar Loan will automatically, upon such demand, Convert into a Base Rate
Loan and (ii) the obligation of the Lenders to make, or to convert Loans into,
Eurodollar Loans shall be suspended until the Agent shall notify the Borrower
that such Lender has determined that the circumstances causing such suspension
no longer exist. Before giving any such notice and demand to the Agent pursuant
to this Section 2.6.2, such Lender shall designate a different Eurodollar
Lending Office if such designation would avoid the need for giving such notice
and demand and would not, in the judgment of such Lender, be otherwise
disadvantageous to such Lender.
2.6.3 Breakage Costs. If any payment of principal of, or Conversion or
Continuation of, any Fixed Rate Loan is made other than on the last day of the
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Interest Period for such Loan as a result of a payment, prepayment (whether
mandatory or optional) or Conversion of such Loan or upon the acceleration of
the maturity of any of the Obligations pursuant to Article 7 or for any other
reason, the Borrower shall, upon demand by any Lender (with a copy of such
demand to the Agent), pay to the Agent for the account of such Lender any
amounts required to compensate such Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such payment, including,
without limitation, any loss (excluding loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by any Lender to fund or maintain such Loan.
2.7 Inssuance Mechanics and Other Provisions Regarding Facility Letters of
Credit.
2.7.1 Requests for Issuance. Each Facility Letter of Credit shall be
issued or amended upon notice given at least three (3) Business Days' prior to
the proposed issuance date (or such shorter period as may be agreed to by the
proposed Issuing Bank) in accordance herewith and with the terms of any
separate agreement, instrument or other document, if any, between the Borrower
and the proposed Issuing Bank thereof providing for the issuance or amendment
of such Facility Letter of Credit pursuant to this Agreement and containing
terms and conditions not inconsistent with this Agreement (a "Letter of Credit
Application"), provided that if any such terms and conditions are inconsistent
with this Agreement, this Agreement shall control. Each such request for the
issuance of a Facility Letter of Credit (an "LOC Request") shall be given in
writing, specifying (i) the requested date of such issuance (which shall be a
Business Day), (ii) the amount of such Facility Letter of Credit (which shall
not be less than $5,000 but not more than the LOC Availability), (iii) the
expiration date of such Facility Letter of Credit, (iv) the name and address of
the beneficiary of such Facility Letter of Credit, (v) the terms of such
Facility Letter of Credit (including a precise description of the documents and
the text of any certificate to be delivered by the beneficiary of such Facility
Letter of Credit in connection with a drawing thereunder and (vi) such other
information as shall be required pursuant to the relevant Letter of Credit
Application. Concurrently with its delivery of an LOC Request to an Issuing
Bank, the Borrower shall deliver a copy thereof, by facsimile transmission,
telex or cable, to the Agent who shall thereupon notify each Lender of such LOC
Request and the terms thereof. Subject to the terms of this Agreement, if the
requested terms and conditions of such Facility Letter of Credit are reasonably
acceptable to
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the proposed Issuing Bank, such Issuing Bank will, upon fulfillment of the
applicable conditions set forth in Section 3.2, make such Facility Letter of
Credit available to the Borrower at the Issuing Office of such Issuing Bank or
as otherwise agreed with the Borrower in connection with such issuance;
provided that such Issuing Bank shall not issue, and shall be relieved of its
obligation to issue, the requested Facility Letter of Credit if it receives, at
least one Business Day prior to the proposed issuance date, a notice in writing
from any Lender (with a copy to the Agent) stating that the circumstances
specified in Section 3.2(a) exist with respect to such Lender.
2.7.2 Participation by Lenders. Immediately upon the issuance of each
Facility Letter of Credit, the Issuing Bank thereof shall be deemed to have
sold and transferred to each Lender, and each Lender shall be deemed to have
purchased and received from the such Issuing Bank, in each case irrevocably and
unconditionally, without any further action by any party and without recourse
to or any representation or warranty by such Issuing Bank, an undivided
interest and participation equal to such Lender's Proportionate Share on such
LOC Issue Date in any such Facility Letter of Credit, each drawing thereunder
and the obligations of the Borrower under this Credit Agreement in respect
thereof (including all LOC Reimbursement Obligations in respect thereof but
excluding (i) all LOC Fronting Fees payable to such Issuing Bank with respect
to such Facility Letter of Credit and (ii) all amounts paid to such Issuing
Bank pursuant to Section 2.9.3(d)) and all security therefor and guaranties
thereof; provided, however, if a Lender notifies the Issuing Bank and the Agent
in writing, at least one Business Day prior to the issuance of a Facility
Letter of Credit, of the existence of any circumstance described in Section
3.2(a) with respect to such Lender, then such Lender shall not be obligated to
purchase any participating interest in such Facility Letter of Credit.
2.7.3 LOC Drawings and Reimbursements. (a) The Borrower shall be obligated
to reimburse each Issuing Bank for each amount that such Issuing Bank pays in
respect of any drawing under any Facility Letter of Credit (each such
obligation of the Borrower to reimburse an Issuing Bank in respect of a drawing
under a Facility Letter of Credit herein called an "LOC Reimbursement
Obligation"). Each LOC Reimbursement Obligation owing with respect to any
payment by an Issuing Bank under any Facility Letter of Credit which is not
paid on the date such payment is made by the Issuing Bank (an "Unpaid LOC
Reimbursement Obligation") shall bear interest, from the date such payment is
made and until such Unpaid LOC Reimbursement Obligation is paid
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in full (either with the proceeds of a Borrowing hereunder or otherwise), at an
interest rate per annum equal to the Base Rate plus the Applicable Margin for
Base Rate Loans. All payments to an Issuing Bank of LOC Reimbursement
Obligations shall be accompanied by interest accrued thereon.
(b) In the event of any drawing under any Facility Letter of Credit, the
Issuing Bank shall notify the Agent, which shall notify the Borrower of such
drawing, prior to the time on which the Issuing Bank intends to honor such
drawing. The Borrower shall give notice to the Agent and the Issuing Bank on
such Business Day if it intends to reimburse the Issuing Bank for the amount of
such drawing with funds other than the proceeds of Loans. Such notice from the
Borrower shall be irrevocable and, if given, the Borrower shall reimburse the
Issuing Bank not later than the close of business (New York City time) on the
day on which such drawing is honored in an amount in same day funds equal to
the amount of such drawing. If the Agent shall not have timely received such
notice, (i) the Borrower shall be deemed to have given a Notice of Borrowing to
the Agent requesting a Base Rate Refunding Borrowing on the date on which such
drawing is to be honored in an amount equal to the amount of such drawing, and
the Lenders shall, on the date of such drawing (or the next Business day if the
notice is not given on a timely basis for Loans to be made on the date of the
drawing), make Base Rate Refunding Loans in the amount of such drawing (plus
accrued interest thereon if such Refunding Loan is made on a date following the
date such drawing is honored by the Issuing Bank), the proceeds of which shall
be applied directly by the Agent to reimburse the Issuing Bank for the amount
of such drawing or payment plus all interest accrued on an Unpaid LOC
Reimbursement Obligations with respect thereto. If for any reason, proceeds of
Loans are not received by the Issuing Bank on such date in an amount equal to
the amount of such drawing, the Borrower shall be obligated to and shall
reimburse the Issuing Bank, on the business day (under the laws of the
jurisdiction of the Issuing Office) immediately following the date of such
drawing, in an amount in immediately available funds equal to the excess of the
amount of such drawing over the amount of such Loans, if any, which are so
received, plus accrued interest on such amount at the rate set forth in Section
2.7.3(a). All interest accrued on an Unpaid LOC Reimbursement Obligation in
respect of a drawing under a Facility Letter of Credit prior to the
reimbursement of such drawing or the funding of a Lender's participation
therein shall be for the account of the Issuing Bank thereof.
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(c) In the event that the Borrower does not reimburse an Issuing Bank for
the amount of any drawing pursuant to Section 2.7.3(b), such Issuing Bank shall
notify the Agent, who shall thereupon promptly notify each Lender of the
unreimbursed amount of such drawing and of such Lender's respective
participating therein. Each Lender shall then make a Base Rate Refunding Loan
equal to such Lender's Proportionate Share of the amount of such unreimbursed
drawing and shall make the proceeds thereof available to such Issuing Bank, in
immediately available funds, at the office of the Issuing Bank specified in
such notice, not later than 1:00 P.M. on the business day (under the laws of
the jurisdiction in which Issuing Bank's Issuing Office is located) following
the date notified by the Agent.
(d) If any Lender is prohibited from making, or the Borrower is prohibited
from incurring, Refunding Loans specified above with respect to a drawing under
a facility letter of Credit, the funds required to be made available by such
Lender to the Issuing Bank with respect to such unreimbursed drawing shall
constitute the funding of such Lender's participation therein.
(e) In the event that any Lender fails to make available to an Issuing
Bank the amount of such Lender's required Refunding Loan with respect to, or
participation in, any Unpaid LOC Reimbursement Obligations as provided in this
Section 2.7.3, such Issuing Bank shall be entitled to recover such amount on
demand from such Lender, together with interest at a rate per annum equal to,
for the first three days during which such failure continues, one percent (1%)
plus the Overnight Federal Funds Rate and thereafter at the Base Rate.
(f) Promptly after an Issuing Bank receives a payment from the Borrower on
account of an Unpaid LOC Reimbursement Obligation as to which the Issuing Bank
has received the proceeds of any Loans (or purchases of participations) made by
the Lenders pursuant to this Section 2.7.3, such Issuing Bank shall promptly
pay to the Agent, and the Agent shall promptly pay to each Lender that made a
Loan (or funded its participation) in respect of such unpaid LOC Reimbursement
Obligation, an amount equal to such Lender's Proportionate Share of the amount
of such payment received by such Issuing Bank from the Borrower.
(g) In determining whether to pay any draft drawn under any Facility
Letter of Credit, the Issuing Bank thereof shall have no obligation to the
Lenders other than to confirm that any documents required to be delivered under
such Facility Letter of Credit appear to have been
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delivered and that they appear to comply on their face with the requirements of
such Facility Letter of Credit. No action taken or omitted to be taken by an
Issuing Bank under or in connection with any Facility Letter of Credit, if
taken or omitted to be taken in the absence of willful misconduct or gross
negligence, shall result in any liability of the Issuing Bank to any Lender.
(h) If any payment received by an Issuing Bank on account of any LOC
Reimbursement Obligation with respect to a Facility Letter of Credit and
distributed to a Lender as a participant therein under Section 2.7.3(f) or
Section 2.13(e) is thereafter set aside, avoided or recovered from such Issuing
Bank in connection with any receivership, liquidation, reorganization or
bankruptcy proceeding relating to the Borrower or otherwise, each Lender that
received such distribution shall, upon demand by such Issuing Bank (through the
Agent), pay to such Issuing Bank such Lender's Proportionate Share of the
amount so set aside, avoided or recovered plus such Lender's Proportionate
Share of all interest required to be paid by the Issuing Bank with respect to
such recovered amount.
2.7.4 Obligations of Lenders Absolute. The obligations of each Lender to
make a Loan with respect to an unreimbursed drawing under a Facility Letter of
Credit or to fund its participation therein, as provided in Section 2.7.2 and
2.7.3, shall be irrevocable and not subject to any qualification or condition
whatsoever and shall be made in accordance with the terms and conditions of
this Credit Agreement under all circumstances, including, without limitation,
any of the following circumstances:
(a) failure of the Borrower to satisfy any otherwise applicable
condition to such Lender's obligation to make a Loan set forth in Article
III;
(b) the existence of an Event of Default (including an Event of
Default specified in clause (g) of Section 7.1) or the termination of the
Credit Facility;
(c) any lack of validity or enforceability of this Credit Agreement
or any of the other Credit Documents;
(d) the existence of any claim, set-off, defense or other right which
the Borrower may have at any time against a beneficiary named in a Facility
Letter of Credit or any transferee of any Facility Letter of Credit (or any
Person for whom any such transferee may
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be acting), the Agent, the Issuing Bank, any Lender or any other Person,
whether in connection with this Credit Agreement, any Facility Letter of
Credit, the transactions contemplated herein or any unrelated transactions;
(e) any draft, certificate or any other document presented under the
Facility Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(f) the surrender or impairment of any security for the performance
or observance of any of the terms of any Credit Documents; or
(g) any set-off, counterclaim, recoupment, defense or other right
which such Lender may have against any Issuing Bank, the Borrower or any
other Person for any reason whatsoever; the occurrence or continuance of a
Default; any adverse change in the condition (financial or otherwise) of
the Borrower; any breach of this Credit Agreement by the Borrower or any
other Lender; or any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
2.7.5 Obligations of Borrower Absolute. (a) The obligations of the
Borrower under this Credit Agreement, any Letter of Credit Agreement and any
other agreement or instrument relating to any Facility Letter of Credit shall
be unconditional and irrevocable and shall be paid strictly in accordance with
the terms of this Credit Agreement, such Letter of Credit Agreement and such
other agreement or instrument under all circumstances. As between the Borrower
and each Issuing Bank, the Borrower assumes all risks of the acts and omissions
of, or misuse of any Facility Letters of Credit by, the beneficiaries of the
Facility Letters of Credit. In furtherance and not in limitation of the
foregoing, neither any Issuing Bank, any Lender nor any of their officers or
directors shall be responsible for:
(i) any lack of validity or enforceability of this Credit Agreement,
any Letter of Credit Agreement, any Letter of Credit Agreement, any other
Credit Document, any Facility Letter of Credit or any other agreement or
instrument relating thereto (collectively, the "LOC Related Documents");
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Borrower in respect of
the Facility
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Letters of Credit or any other amendment or waiver of or any consent to
departure from all or any of the LOC Related Documents;
(iii) the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Facility Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason;
(iv) the existence of any claim, set-off, defense or other right that
the Borrower may have at any time against any beneficiary or any transferee
of a Facility Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), any Issuing Bank, any
Lender or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the LOC Related Documents or any
unrelated transaction;
(v) the use that may be made of any Facility Letter of Credit or acts
or omissions of any beneficiary or transferee in connection therewith,
including, without limitation, the misapplication by the beneficiary of a
Facility Letter of Credit of the proceeds of any drawing under such
Facility Letter of Credit;
(vi) any certificate or any other document presented under a Facility
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
(vii) payment by the Issuing bank under a Facility Letter of Credit
against presentation of documents that do not comply with the terms of the
Facility Letter of Credit, including, without limitation, failure of such
documents to bear any reference or adequate reference to the Facility
Letter of Credit; or
(viii) the failure of the beneficiary of any Facility Letter of Credit
to comply fully with conditions required in order to draw upon such
Facility Letter of Credit;
(ix) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex, telecopy or
otherwise, whether or not they be in cipher;
(x) errors in interpretation of technical terms;
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(xi) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Facility Letter of
Credit, or of the proceeds thereof; and
(xii) any other circumstances whatsoever in making or failing to make
payment under any Facility Letter of Credit.
(b) In furtherance and not in limitation of the foregoing, each
Issuing Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary. None of the above shall affect, impair, or
prevent the vesting of any of any Issuing Bank's rights or powers hereunder.
(c) Notwithstanding the foregoing, no Issuing Bank shall be relieved
of any liability it may otherwise have as a result of any direct, but not any
consequential, damages resulting from its gross negligence or willful
misconduct in paying non-conforming drawings under a Facility Letter of Credit.
2.7.6. Letter of Credit Reports. Each Issuing Bank shall furnish to
the Agent and each Lender, on the third Business Day of each month, a written
report setting forth (i) the issuance and expiration dates of Facility Letters
of Credit issued by such Issuing Bank during the preceding month, (ii) all
drawings during such preceding month under all such Facility Letters of Credit,
(iii) the aggregate undrawn amount of all Facility Letters of Credit issued by
such Issuing Bank and outstanding as of the last day of such preceding month,
(iv) the aggregate amount of the Unpaid LOC Reimbursement Obligations owing to
such Issuing Bank outstanding as of the last day of such preceding month and
(v) the amount of such Lender's participation in all such outstanding Facility
Letters of Credit of Credit and Unpaid LOC Reimbursement Obligations.
2.7.7 Third Party Letters of Credit. In addition to procuring Facility
Letters of Credit, the Borrower may procure letters of credit (any such letter
of credit hereing called a "Third Party Letter of Credit") from issuers not
party to this Credit Agreement, provided that:
(a) at least five (5) Business Days prior to the issuance of such
letter of credit, the Borrower notifies the Agent of the amount and
expiration date of such letter of credit and the issuer and beneficiary
thereof;
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(b) any security interest in the Collateral granted by the Borrower
or its Subsidiaries to such issuer to secure the Borrower's reimbursement
obligations with respect to such letter of credit shall be expressly
subordinated to the Lenders' security interest therein; and
(c) the aggregate amount of Third Party Letters of Credit outstanding
at any one time shall not exceed $15,000,000.
2.7.8 LOC Cash Collateral Account. If at any time the amount of all
outstanding Facility LOC Obligations, when aggregated with the total
outstanding principal amount of all Loans and all third Party LOC Obligations,
exceeds the Adjusted Credit Facility and if such excess continues to exist
after the repayment of the Loans, the Borrower shall deposit in a special
account to be held by the Agent (the "LOC Cash Collateral Account") an amount
equal to such excess. The Borrower shall also make deposits to the Cash
Collateral Account as otherwise specified herein. The Agent shall have sole
dominion and control over the Cash Collateral Account and is hereby granted a
lien and security interest therein and in all amounts and investments held
therein, which lien and security interest shall secure all Obligations of the
Borrower hereunder and shall be held by the Agent as agent for, and for the
benefit of, itself, the Lenders and the Issuing Banks. If at any time when
amounts are held in the LOC Cash Collateral Account (i) there exists no Default
hereunder and (ii) the amount of the Adjusted Credit Facility exceeds the sum
of (x) the aggregate outstanding principal amount of all Loans plus (y) the
aggregate amount of all outstanding Facility LOC Obligations plus (z) the
aggregate amount of all outstanding Third Party LOC Obligations, the Agent
shall release to the Borrower, from the Cash Collateral Account amounts held
therein to the extent of such excess. Upon the occurrence of an Event of
Default, the Agent may apply amounts held in the LOC Cash Collateral Account to
reimburse Issuing Banks for payments made by them under Facility Letters of
Credit and/or to pay other outstanding Obligations of the Borrower. Any amount
remaining in the LOC Cash Collateral Account after the expiration of all
outstanding Facility Letters of Credit, the payment of all Obligations
(including all outstanding Facility LOC Obligations) in full and the
termination of the Credit Agreement shall be remitted to the Borrower.
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2.8 Interest on Loans and Other Obligations.
2.8.1 Interest on Fixed Rate Loans. Subject to the provisions of Section
2.8.3, each Fixed Rate Loan shall bear interest during each Interest Period
applicable thereto on the principal amount thereof outstanding from time to time
at a rate per annum equal to the sum of (i) the Fixed Rate Base applicable to
such Type of Fixed Rate Loan for such Interest Period plus (ii) the Applicable
Margin for such Type of Fixed Rate Loan. Interest on each Fixed Rate Loan shall
accrue from and including, the first day of each Interest Period applicable
thereto to, but excluding the last day of such Interest Period and shall be
payable on the last day of each such Interest Period, on the date of Conversion
of such Fixed Rate Loan (or a portion thereof) to a Loan of another Type and at
the maturity of such Fixed Rate Loan; provided that interest on each Fixed Rate
Loan having an Interest Period longer than three months shall also be payable on
the last day of each 90-day interval during the term of such Interest Period.
Upon determining the Fixed Rate for any Fixed Rate Loan for any Interest Period
therefor, the Agent shall promptly notify the Borrower and the Lenders by
telephone (confirmed promptly in writing) or in writing thereof, but failure by
the Agent to so notify the Borrower or the Lenders shall not affect the
Borrower's obligation to pay interest on each Fixed Rate Loan in accordance
with the terms of this Credit Agreement. Each determination by the Agent of an
interest rate hereunder shall be conclusive and binding for all purposes,
absent manifest error.
2.8.2 Interest on Floating Rate Loans. Subject to the provisions of Section
2.8.3, each Floating Rate Loan shall bear interest on the principal amount
thereof outstanding on any day at a rate per annum equal to the sum of (i) the
Floating Rate Base applicable to such Type of Floating Rate Loan on such day
plus (ii) the Applicable Margin for such Type of Floating Rate Loan on such
day. Interest accrued on Floating Rate Loans in any calendar quarter (or
portion thereof) of each year shall be payable on the third Business Day
following such quarter. Interest accrued on Floating Rate Loans shall also be
payable upon the maturity of such Loans.
2.8.3 Interest on Overdue Amounts. Any amount of principal and (to the
extent permitted by law) interest, and any other Obligations, which is not paid
when due shall bear interest, from the due date thereof and until paid, at a
rate per annum equal to the Base Rate plus two percent (2%), which rate shall
change as and when the Base Rate changes; provided, however, that if any Fixed
Rate Loan become due prior to the last day of any Interest Period
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applicable thereto, such Loan shall bear interest until the last day of such
Interest Period at the applicable Fixed Rate Base plus the Applicable Margin
specified for such Fixed Rate Loan in the final proviso to the definition of
the term "Applicable Margin".
2.8.4 Changes in Applicable Margin. Any change in Applicable Margin
resulting from a change in the Debt/EBITDA Ratio for any Rolling Period shall
become effective as follows: (a) in the case of a Floating Rate Loan, on the
Adjustment Date immediately following such Rolling Period and (b) in the case
of a Fixed Rate Loan, during each Interest Period for such Loan commencing on
or after the Adjustment Date immediately following such Rolling Period.
2.9 Fees and Expenses.
2.9.1 Commitment Fees. The Borrower shall pay to the Agent, for the
ratable account of the Lenders, a fee (the "Commitment Fee") at a rate per
annum equal to the Applicable Fee Rate on the average daily amount of the
Unused Credit Facility. The Commitment Fee shall accrue from the Effective Date
and until the termination of the Credit Facility. Commitment fees accrued in
any calendar quarter (or portion thereof) of each year shall be payable on the
third Business Day following such quarter. Accrued Commitment Fees shall also
be payable upon each reduction of the Credit Facility and at the Expiration
Date or, if earlier, the termination of the Credit Facility. The Lenders shall
share the Commitment Fee accrued on any day in proportion to their respective
Unused Commitment on such day.
2.9.2 Participation Fees. The Borrower shall pay to the Agent, for the
account of each Initial Lender (including the Agent in its capacity as an
Initial Lender), on the Closing Date, a fee (the "Participation Fee") in the
amount of one-eighth of one percent (1/8 of 1%) of the Commitment of such
Initial Lender.
2.9.3 Letter of Credit Fees and Expenses. (a) The Borrower shall pay to
the Agent, for the ratable account of the Lenders, a fee (the "LOC Utilization
Fee") at a rate per annum equal to (i) the Applicable Fee Rate on the average
daily undrawn amount of all outstanding Facility Letters of Credit minus (ii)
the LOC Fronting Fees paid or payable in respect of such Facility Letters of
Credit for the same period. Each Lender's share of the LOC Utilization Fee
accruing on any day shall be equal to its Proportionate Share on such day.
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(b) The Borrower shall pay to the Agent, for the account of each Issuing
Bank a fee (the "LOC Fronting Fee") at a rate per annum equal to the Applicable
Fee Rate on the average daily undrawn amount of the outstanding Facility
Letters of Credit issued by such Issuing Bank.
(c) The LOC Utilization Fee and LOC Fronting Fee in respect of each
Facility Letter of Credit shall accrue from the date such Facility Letter of
Credit is issued and until it expires or, if earlier, the date on which the
entire amount thereof is drawn and paid thereunder. The LOC Utilization Fee and
LOC Fronting Fee accrued during any calendar quarter (or portion thereof) shall
be payable on the third Business Day following the end of such quarter. Upon
the occurrence of an Event of Default, all accrued LOC Utilization Fees and LOC
Fronting Fees shall be payable on demand.
(d) The Borrower shall also pay to each Issuing Bank, for its own account,
such Issuing Bank's customary issuance, opening and transfer fees and other
fees and charges in connection with the issuance and administration of each
Facility Letter of Credit.
2.9.4 Agent's Fees. (a) The Borrower shall pay to the Agent, for its own
account, a fee (the "Agent Fee") in the amount and on each date specified in a
separate letter agreement between the Borrower and the Agent.
(b) The Borrower shall also promptly reimburse the Agent for all Expenses
of the Agent as the same are incurred by the Agent, upon receipt of invoices
therefor and, if requested by the Borrower, such reasonable backup materials
and information as the Borrower shall reasonably request.
2.9.5 Audit Charges. The Borrower shall compensate the Agent for the
reasonable costs and expenses incurred by the Agent in connection with the
Agent's audit and field examination during the term of this Agreement of the
Collateral and the Borrower's operations, as notified by the Agent to the
Borrower. So long as no Event of Default shall have occurred and be continuing
hereunder, audits for which such compensation is sought shall not be conducted
more frequently than two (2) times in any twelve month period.
2.9.6 Fees Fully Earned. All Fees shall be fully earned on the date such
Fees become payable pursuant hereto and, when paid, shall be non-refundable.
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2.10 Repayment of Outstanding Credit.
2.10.1 Mandatory Repayments. (a) The Outstanding Credit shall be repaid in
full on the earlier of (i) the Expiration Date or (ii) the termination of the
Credit Facility.
(b) If at any time the sum of the Outstanding Credit plus all outstanding
Third Party LOC Obligations exceeds the lesser of (i) the Borrowing Base or
(ii) the Credit Facility, the Borrower shall repay the Outstanding Credit by
the amount of such excess within three (3) Business Days after notice from the
Agent requesting such repayment.
(c) If at any time the Availability is less than $10,000,000, the Borrower
shall, if so requested by the Agent, apply all amounts then held in or
thereafter deposited in the Lockbox Account to the repayment of the Outstanding
Credit until the Availability is $10,000,000 or more.
(d) Repayment of the Outstanding Credit shall be effected by, first,
repaying outstanding Loans. If the amount of any mandatory repayment of the
Outstanding Credit exceeds the aggregate outstanding principal amount of the
Loans, the Borrower shall deposit in cash in the LOC Cash Collateral Account an
amount equal to such excess.
2.10.2 Optional Prepayment. (a) The Borrower may, upon at least one
Business Day's notice to the Agent (in the case of Floating Rate Loans) or
three Business Days' prior notice to the Agent (in the case of Fixed Rate
Loans) stating in each case the proposed date and aggregate principal amount
of the prepayment and the Type of Loans to be prepaid, and if such notice is
given the Borrower shall on such proposed date, prepay the outstanding
Revolving Loans, in whole or in part, in the aggregate amount stated in such
notice, without penalty or premium, together with interest accrued to the date
of such prepayment on the principal amount prepaid; provided that optional
prepayment of Fixed Rate Loans may only be made on the last day of an Interest
Period applicable thereto; and provided further, that optional prepayments of
Swingline Loans shall be made in accordance with Section 2.5(c). Each optional
partial prepayment of Revolving Loans shall be in an aggregate principal amount
not less than $1,000,000 or in integral multiples of $100,000 in excess thereof.
(b) Unless otherwise specified by the Borrower, each partial repayment of
the Loans shall be applied first to the outstanding principal balance of
Swingline Loans and
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next to outstanding Revolving Loans. Each partial prepayment of the Revolving
Loans shall be applied first to outstanding Base Rate Loans, next to
outstanding Overnight FFR Loans and then to each Tranche of Fixed Rate Loans
having the shortest remaining Interest Period. Partial repayment of Loans in
each Tranche shall be applied ratably to each Lender's Loans in such Tranche.
2.11 Expiration Date; Reduction of Credit Facility.
2.11.1 Expiration Date. (a) The "Expiration Date" shall be June 9, 1997;
provided, however, that the Expiration Date may be extended for further
successive periods of one year each in accordance with the terms of this
Section 2.11.1. If the Borrower wishes to have the Expiration Date so extended,
it shall give written notice to that effect to the Agent not more than 16
months or less than 15 months before the then current Expiration Date (the
"Scheduled Expiration Date"), whereupon the Agent shall notify each Lender of
such notice. Each Lender shall promptly notify the Borrower and the Agent in
writing not less than 13 months prior to the then Scheduled Expiration Date
whether or not such Lender consents to such extension of the Expiration Date.
If any Lender fails to give such notice within such time period, it shall be
conclusively deemed to have refused to extend the Scheduled Expiration Date.
The Expiration Date shall not be extended unless the Borrower and each Lender
executes and deliver to the Agent at least 13 months prior to the Scheduled
Expiration Date counterparts of an extension agreements, substantially in the
form of Exhibit E hereto (an "Extension Agreement"), providing for such
extension. If the Extension Agreement is executed by the Borrower and all the
Lenders, the Expiration Date shall be extended to the first anniversary of the
then Scheduled Expiration Date and references herein to "Expiration Date" shall
be to the Expiration Date as so extended. No Lender shall be under any
obligation whatsoever to sign an Extension Agreement and may refuse to extend
the Expiration Date in its sole and absolute discretion. Each extension of the
Expiration Date pursuant to an Extension Agreement shall become effective on
the date when the Extension Agreement (or counterparts thereof) signed by the
Borrower and all Lenders are delivered to the Agent and accepted by it.
(b) In connection with any request by the Borrower to extend the
Expiration Date, the Agent or the Required Lenders may require the Borrower to
deliver to the Agent (i) updated opinions of counsel regarding the matters
covered by the opinions of counsel referred to in clauses (xxi) and (xxii) of
Section 3.1(j) and/or (ii) UCC, tax and
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judgment lien search reports with respect to the Borrower for each jurisdiction
in which Collateral is located.
2.11.2 Mandatory Reduction of Credit Facility. The entire Credit Facility
and each Lender's Commitment shall be reduced to zero and terminated on the
Expiration Date.
2.11.3 Optional Reduction of Credit Facility. The Borrower shall have the
right, upon at least three (3) Business Days' notice to the Agent (which shall
provide prompt notice thereof to each Lender), to terminate in whole or reduce
in part the Unused Credit Facility; provided that each partial reduction shall
be in the amount of $5,000,000 or an integral multiple of $500,000 in excess
thereof; and provided further, that if after giving effect to such reduction,
the Credit Facility would be less than $30,000,000, the entire Credit Facility
shall be terminated. Each reduction of the Credit Facility shall be applied
ratably to the Commitment of each Lender.
2.12 Evidence of Indebtedness.
2.12.1 Notes. Each Lender's Loans shall be evidenced by promissory notes,
substantially in the form of Exhibit A hereto (each a "Note" and collectively
the "Notes"), executed and delivered by the Borrower, each such Note delivered
to a Lender to be payable to the order of such Lender and to be dated the
Closing Date and to be in the amount of such Lender's Commitment.
2.12.2 Loan Account. The Agent shall maintain an account (the "Loan
Account") on its books in the name of the Borrower in which the Borrower will
be charged with all Loans made by the Lenders and all Unpaid LOC Reimbursement
Obligations and with any other Obligations, including any and all costs,
expenses and attorneys' fees which the Agent may incur in connection with the
exercise by or for the Lenders of any of the rights or powers herein conferred
upon the Agent (other than in connection with any assignments or participations
by any Lender) or in the prosecution or defense of any action or proceeding by
or against the Borrower or the Lenders concerning any matter arising out of,
connected with, or relating to this Credit Agreement, any other Credit
Documents or the Collateral, or any Obligations owing to the Lenders by the
Borrower. The Borrower will be credited with all amounts received by the Agent
or the Lenders from the Borrower or from others for the Borrower's account,
including, all proceeds of the Collateral received by the Agent.
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2.12.3 Statement of Account. After the end of each month the Agent shall
send the Borrower a statement showing all charges, debits and credits to the
Loan Account and setting forth, as of the last day of such month, the
outstanding principal of all Loans, all accrued and unpaid interest thereon,
all accrued and unpaid Fees, the undrawn amount of all outstanding Facility
Letters of Credit, all Unpaid LOC Reimbursement Obligations and all other
transactions occurring among and between the Agent or the Lenders and the
Borrower during that month. The monthly statements shall be deemed correct and
binding upon the Borrower and shall constitute an account stated among the
Borrower, the Agent and the Lenders unless the Agent receives a written
statement of the Borrower's exceptions within thirty (30) days after said
statement is received by the Borrower.
2.12.4 Agent's Register. The Register maintained by the Agent pursuant to
Section 9.6(e) shall include a control account, in which account shall be
recorded (i) the date and amount of each Borrowing made and Facility Letter of
Credit issued hereunder, (ii) each Assignment and Acceptance delivered to and
accepted by the Agent, (iii) the amount of any outstanding principal or accrued
and unpaid hereunder interest due and payable or to become due and payable from
the Borrower to each Lender hereunder and (iv) the amount of any sum received by
the Agent from the Borrower hereunder for the account of any Lender. The entries
made in the Register shall be conclusive and binding for all purposes, absent
demonstrable error.
2.13 Place and Manner of Payments by Borrower.
2.13.1 Time for Payment. (a) Except as otherwise expressly provided
herein, the Borrower shall make each payment due hereunder not later than 2:00
p.m. on the day when due, in Dollars, to the Agent at the Agent Account, in
immediately available funds, for the account of the party entitled thereto. Any
funds received after such time shall be deemed to have been received on the
following Business Day. The Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal or interest,
Commitment Fees, LOC Utilization Fees, Participation Fees or Expenses ratably
(other than amounts payable pursuant to Section 2.14, amounts payable to the
Swingline Bank in respect of the Swingline Loans, amounts payable to the Issuing
Banks in respect of Facility Letters of Credit and amounts payable to the Agent
or an Issuing Bank to reimburse it for fees and expenses payable solely to it)
to the Lenders for the account of their Applicable Lending Offices (or any
other account specified
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in writing by any Lender from time to time) and like funds relating to the
payment of any other amount payable to any Lender or Issuing Bank to such Lender
for the account of its Applicable Lending Office (or any other office specified
in writing by any Lender from time to time) or to such Issuing Bank, in each
case to be applied in accordance with the terms of this Agreement. The
Borrower's obligations to the Lenders with respect to such payments shall be
discharged by making such payments to the Agent pursuant to this Section 2.13.1.
(b) Whenever any payment hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and any such extension of time shall in such case be included in
the computation of payment of interest.
(c) Upon its acceptance of an Assignment and Acceptance and recording of
the information contained therein in the Register pursuant to Section 9.6,
from and after the effective date of such Assignment and Acceptance, the Agent
shall make all payments hereunder in respect of the interest assigned thereby
to the assignee Lender thereunder, and the parties to such Assignment and
Acceptance shall make all appropriate adjustments in such payments for periods
prior to such effective date directly between themselves.
2.13.2 Computation. All computations of interest, Fees and Letter of
Credit Fees shall be made by the Agent on the basis of a year of 360 days, in
each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest, fees or Letter
of Credit Fees are payable. Each determination by the Agent of an interest
rate, Fee or commission hereunder shall be conclusive and binding for all
purposes, absent demonstrable error.
2.13.3 Distribution of Payments. Unless the Agent shall have received
notice from the Borrower prior to the date on which any payment is due to any
Lender hereunder that the Borrower will not make such payment in full, the
Agent may assume that the Borrower has made such payment in full to the Agent
on such date and the Agent may, in reliance upon such assumption, cause to be
distributed to each such Lender or Issuing Bank, as the case may be, on such
due date an amount equal to the amount then due such Lender or Issuing Bank. If
and to the extent the Borrower shall not have so made such payment in full to
the Agent, each such Lender or Issuing Bank shall repay to the Agent forthwith
on demand such amount distributed to such Lender or Issuing Bank together with
interest thereon,
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for each day from the date such amount is distributed to such Lender or Issuing
Bank and until the date such Lender or Issuing Bank repays such amount to the
Agent, at the interest rate per annum equal to the Overnight Federal Funds Rate.
2.14 Increased Costs, Etc.; Taxes.
2.14.1 Increased Cost. (a) If either (i) any change in or in the
interpretation of any law or regulation or (ii) the compliance by any Lender or
its Applicable Lending Office or by any Issuing Bank with any guideline or
request from any central bank or other governmental authority, in any case
introduced, changed, interpreted or requested after the date hereof (whether or
not having the force of law), shall either (x) impose, modify or deem
applicable any reserve, special deposit or similar requirement against assets
held by, or letters of credit or guarantees issued by, or deposits in or for
the account of, any Lender or any Issuing Bank or (y) impose on any Lender or
any Issuing Bank any other condition relating to this Credit Agreement or such
Lender or the Loans made by it or any Facility Letter of Credit issued by it or
any Lender's participation therein, and the result of any event referred to in
clause (x) or (y) shall be to increase the cost to any Lender of agreeing to
make or making, funding or maintaining its Commitment or Loans, or to any
Issuing Bank of issuing or maintaining and Facility Letter of Credit or to any
Lender of purchasing any participation therein, then the Borrower shall from
time to time, upon demand by such Lender or such Issuing Bank (with a copy of
such demand to the Agent), pay to the Agent, for the account of such Lender or
such Issuing Bank, as the case may be, additional amounts sufficient to
compensate such Lender, such Issuing Bank or such corporation for such
increased cost. A certificate as to the amount of such increased cost,
submitted to the Borrower by such Lender or Issuing Bank (through the Agent)
shall be conclusive and binding for all purposes, absent manifest error.
(b) If any Lender or any Issuing Bank determines that the adoption or
effectiveness of any treaty, law, rule or regulation in regard to capital
adequacy, or any change therein or in the application thereof, or any change in
the interpretation or administration thereof by any central bank or other
governmental or monetary authority charged with the interpretation or
administration thereof, or compliance by such Lender or any of its Applicable
Lending Offices or such Issuing Bank, or any corporation controlling such
Lender or such Issuing Bank, with any interpretation, directive, request, order
or decree in regard to capital adequacy (whether or not having the force
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of law) by any such central bank or other governmental or monetary authority,
including, without limitation, any guideline contemplated by the report dated
July, 1988 entitled "International Convergence of Capital Management and
Capital Standards" issued by the Bank Committee on Banking Regulations and
Supervisory Practices, has or would have the effect of increasing the amount of
capital required or expected to be maintained by such Lender, the Issuing Bank
or any corporation controlling such Lender or the Issuing Bank or otherwise, as
a consequence of such Lender's Loans or Commitment hereunder (including,
without limitation, its obligation to make to fund its participation in
Facility Letters of Credit) or the issuance of Facility Letters of Credit by
such Issuing Bank, and thereby reducing the rate of return on the capital of
such Lender, such Issuing Bank or any corporation controlling such Lender or
such Issuing Bank to a level below that which such Lender, the Issuing Bank or
any corporation controlling such Lender or the Issuing Bank could have achieved
but for such adoption, effectiveness, change or compliance (taking into account
such Lender's, the Issuing Bank's or such corporation's policies with respect
to capital adequacy), then the Borrower shall, from time to time, pay to such
Lender or Issuing Bank, upon demand by such Lender or the Issuing Bank (with a
copy of such demand to the Agent) such additional amounts as may be specified
by such Lender or such Issuing Bank as being sufficient to compensate such
Lender or such Issuing Bank or such corporation for such reduction in return,
to the extent that such Lender or the Issuing Bank determines such reduction to
be attributable to the existence, issuance or maintenance of any Commitments,
Loans or Facility Letters of Credit. A certificate as to such additional
amounts submitted to the Borrower (through the Agent) by such Lender or Issuing
Bank shall be conclusive and binding for all purposes, absent manifest error.
2.14.2 Taxes. (a) Any and all payment by the Borrower hereunder, under the
Notes or in respect of the Facility Letters of Credit to or for the benefit of
any Lender, any Issuing Bank or the Agent shall be made free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings and penalties, interests and all other
liabilities with respect thereto ("Taxes"), excluding, (i) in the case of each
such Lender, any Issuing Bank or the Agent, taxes imposed on its net income
(including, without limitation, any taxes imposed on branch profits) and
franchise taxes imposed on it by the jurisdiction under the laws of which such
Lender, Issuing Bank or the Agent (as the case may be) is organized or any
political subdivision thereof, (ii) in the case of each Lender or Issuing Bank,
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taxes imposed on its net income (including, without limitation, any taxes
imposed on branch profits), and franchise taxes imposed on it, by the
jurisdiction of such Lender's Applicable Lending Office or any political
subdivision thereof, (iii) in the case of each such Lender, each Issuing Bank
and the Agent, any Taxes that are in effect and that would apply to a payment
to such Lender, Issuing Bank or the Agent, as applicable, as of the Closing
Date, and (iv) if any Person acquires any interest in this Credit Agreement, any
Note or Letter of Credit pursuant to the provisions hereof, or a Foreign
Lender or the Agent changes the Applicable Lending Office for such Loan (any
such person, or such Foreign Lender or the Agent in that event, being referred
to as a "Tax Transferee"), any Taxes to the extent that they are in effect and
would apply to a payment to such Tax Transferee as of the date of the
acquisition of such interest or change in office, as the case may be (all such
Taxes not excluded pursuant to clauses (i) through (iv) above being
hereinafter referred to as "Covered Taxes"). If the Borrower shall be required
by law to deduct any Covered Taxes from or in respect of any sum payable
hereunder, under any Note or in respect of any Facility Letter of Credit to or
for the benefit of any Lender, any Issuing Bank or the Agent or any Tax
Transferee, (A) the sum payable shall be increased as may be necessary so that
after making all required deductions of Covered Taxes (including deductions of
Covered Taxes applicable to additional sums payable under this Section 2.14.2)
such Lender, Issuing Bank, the Agent or such Tax Transferee, as the case may
be, receives an amount equal to the sum it would have received had no such
deductions been made, (B) the Borrower shall make such deductions and (C) the
Borrower shall pay the full amount so deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or future stamp,
documentary, excise, privilege, intangible or similar levies (hereinafter
referred to as "Other Taxes") that arise at any time or from time to time (i)
from any payment made under any and all Credit Documents, (ii) from the
transfer of the rights of the Lender under any Credit Documents to any
transferee, or (iii) from the execution or delivery by the Borrower of, or from
the filing or recording or maintenance of, or otherwise with respect to the
exercise by the Agent or the Lenders of their rights under, any and all Credit
Documents.
(c) The Borrower will indemnify each Lender, each Issuing Bank, the Agent,
and any Tax Transferee for the full amount of (i) Covered Taxes imposed on or
with
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respect to amounts payable hereunder, (ii) Other Taxes, and (iii) any Taxes
(including Covered Taxes imposed by any jurisdiction on amounts payable under
this Section 2.14.2) paid by such Lender, Issuing Bank or the Agent or such Tax
Transferee, as the case may be, and any liability (including penalties,
interest and reasonable expenses) arising therefrom or with respect thereto.
Payment of this indemnification shall be made within 30 days after the date
such Lender, Issuing Bank or the Agent or Tax Transferee delivers to the
Borrower (with a copy to the Agent) a certificate specifying the amount thereof
and setting forth in reasonable detail the calculation thereof. Any such
certificate submitted by a Lender, Issuing Bank, the Agent or a Tax Transferee
in good faith to the Borrower shall, absent manifest error, be final,
conclusive and binding on all parties.
(d) Within 30 days after payment of Covered Taxes or Other Taxes, the
Borrower will furnish to the Agent the original or a certified copy of a
receipt evidencing such payment.
(e) On or before the Closing Date, each Foreign Lender shall deliver to
the Agent and the Borrower (i) two valid, duly completed copies of IRS Form
1001 or 4224 or successor applicable form, as the case may be, and any other
required form, certifying in each case that such Foreign Lender is entitled to
receive payments under this Credit Agreement or the Revolving Notes payable to
it without deduction or withholding of any United States federal income taxes
or with such withholding imposed at a reduced rate (the "Reduced Rate"), and
(ii) a valid, duly completed IRS Form W-8 or W-9 or successor applicable form,
as the case may be, to establish an exemption from United States backup
withholding tax. Each such Foreign Lender shall also deliver to the Agent and
the Borrower two further copies of said Form 1001 or 4224 and W-8 or W-9, or
successor applicable forms, or other manner of required certification, as the
case may be, on or before the date that any such form expires or becomes
obsolete or otherwise is required to be resubmitted as a condition to obtaining
an exemption from a required withholding of United States federal income tax or
entitlement to having such withholding imposed at the Reduced Rate or after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to the Borrower and the Agent, and such extensions or renewals
thereof as may reasonably be requested by the Borrower or the Agent, certifying
(i) in the case of a Form 1001 or 4224 that such Foreign Lender is entitled to
receive payments under this Credit Agreement or the Notes payable to it without
deduction or withholding or any United States federal
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income taxes (unless in any such case any change in a tax treaty to which the
United States is a party, or any change in law or regulation of the United
States or official interpretation thereof, has occurred after the date of this
Credit Agreement and prior to the date on which any such delivery would
otherwise be required that renders all such forms inapplicable to such Foreign
Lender or that would prevent such Foreign Lender from duly completing and
delivering any such form with respect to it, and such Foreign Lender advises
the Borrower and the Agent that it is not capable of receiving payments without
any deduction or withholding or at the Reduced Rate), or (ii) in the case of a
Form W-8 or W-9 that such Foreign Lender is exempt from United States backup
withholding tax.
(f) If a Tax Transferee that is organized under the laws of a jurisdiction
outside of the United States acquires an interest in this Credit Agreement or
any Note or a Foreign Lender changes its Applicable Lender Office, the
transferor, or the applicable Foreign Lender (in the case of a change of
Applicable Lending Office), shall cause such Tax Transferee to agree that on or
prior to the effective date of such acquisition or change, as the case may be,
it will deliver to the Borrower and the Agent (i) two valid, duly completed
copies of IRS Form 1001 or 4224 or successor applicable form, as the case may
be, and any other required form, certifying in each case that such Tax
Transferee is entitled to receive payments under this Credit Agreement and the
Notes payable to it without deduction or withholding of United States federal
income tax or with such withholding imposed at a Reduced Rate; and (ii) a
valid, duly completed IRS Form W-8 or W-9 or successor applicable form, as the
case may be, to establish an exemption from United States backup withholding
tax. Each Tax Transferee that delivers to the Borrower and the Agent a Form
1001 or 4224, and Form W-8 or W-9 and any other required form pursuant to the
next preceding sentence further undertakes to deliver two further copies of
such Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms, or
other manner of required certification, as the case may be, on or before the
date that any such form expires or becomes obsolete or otherwise is required to
be resubmitted as a condition to obtaining an exemption from a required
withholding of United States federal income tax or entitlement to having such
withholding imposed at the Reduced Rate or after the occurrence of any event
requiring a change in the most recent form previously delivered by it to the
Borrower and the Agent, and such extensions or renewals thereof as may
reasonably be requested by the Borrower or the Agent, certifying (i) in the
case of a Form 1001 or 4224 that such Tax Transferee is entitled to receive
payments under this Credit Agreement without deduction or
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withholding of any United States federal income taxes or with such withholding
imposed at the Reduced Rate (unless any change in treaty, law or regulation or
official interpretation thereof has occurred after the effective date of such
acquisition or change by such Tax Transferee and prior to the date on which any
such delivery would otherwise be required that renders all such forms
inapplicable to such Tax Transferee or that would prevent such Tax Transferee
from duly completing and delivering any such form with respect to it, and such
Tax Transferee advises the Borrower and the Agent that it is not capable of
receiving payments (x) without any deduction or withholding of United States
federal income tax or (y) with such withholding at the Reduced Rate, as the
case may be) and (ii) in the case of a Form W-8 or W-9, that such Tax
Transferee is exempt from United States backup withholding tax.
(g) If any Taxes for which the Borrower is required to make payment under
this Section 2.14.2 are imposed on any Lender, Issuing Bank or the Agent, the
affected party shall use its reasonable efforts to avoid or reduce such Taxes
by taking any appropriate action (including, without limitation, assigning its
rights hereunder to a related entity or a different office) which would not in
the sole opinion of such party impose any cost on such affected party for which
it is not reimbursed by the Borrower or be otherwise disadvantageous to such
affected party.
(h) The agreements and obligations of the Borrower contained in this
Section 2.14.2 shall survive the payment in full of the Obligations and the
termination of this Credit Agreement.
2.15 Additional Provisions Regarding Credit Facility and Loans.
2.15.1 Lockbox Arrangements; Flow of Funds Account. (a) The Borrower shall
establish and maintain with the Lockbox Bank lockbox arrangements (the
"Lockboxes") satisfactory to the Agent and the Lockbox Bank and shall instruct
all account debtors on the Accounts of the Borrower arising after the date
hereof to remit all payments to the Lockboxes. All amounts received by the
Borrower from any account debtor with respect to Accounts shall upon receipt be
deposited into a special account maintained by the Borrower with the Lockbox
Bank (the "Lockbox Account"). The Borrower, the Agent and the Lockbox Bank
shall enter into an agreement, substantially in the form of Exhibit H, with
respect to such lockbox arrangement (the "Lockbox Agreement"). Neither the
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Borrower nor any Subsidiary shall establish any lockbox arrangement with any
Person other than the Lockbox Bank.
(b) Upon the terms and subject to the conditions set forth herein and in
the Lockbox Agreement, all available amounts held in the Lockbox Accounts shall
be remitted by the Lockbox Bank in accordance with the Borrower's instructions;
provided, however, that if the Agent determines, or is advised by the Borrower
or any Lender, that a Default has occurred, the Agent may, so long as such
Default is continuing and has not been remedied or waived, instruct the Lockbox
Bank to wire directly to the Agent Account all funds then held or thereafter
deposited in the Lockbox Account.
(c) The Borrower may use amounts in the Borrower's Corporate Account and
the Disbursement Account for its general corporate purposes; provided that if
the Agent determines or is advised by any Lender that a Default has occurred,
the Agent (on behalf of itself, the Lender and the Issuing Banks), upon notice
to BOT Trust Company, shall have sole dominion and control over the Borrower's
Corporate Account and Disbursement Account so long as such Default is
continuing and has not been remedied or waived, and may direct BOT Trust
Company to transfer all funds then or thereafter held therein to the Agent
Account (and the Borrower shall thereupon cease to have any authority with
respect to the Borrower's Corporate Account or the Disbursement Account or any
amounts on deposit therein). The Agent, the Borrower and BOT Trust Company (and
any other bank at which a Disbursement Account or a Corporate Account is
hereafter maintained by the Borrower) shall enter into an agreement,
substantially in the form of Exhibit I (the "Tripartite Agreement") to reflect
and give effect to the foregoing.
(d) Unless the Borrower shall specify a different order of applications to
the Obligations, the Agent shall apply all funds received each day in the Agent
Account to pay, first, the principal balance of Swingline Loans, next, the
principal balance of the Revolving Loans, next, all accrued interest on the
Swingline Loans, next accrued interest on the Revolving Loans and, next, to the
extent of any Outstanding Credit, for deposit in the LOC Cash Collateral
Account; provided that after the occurrence and during the continuance of a
Default all such funds shall be applied to pay all Fees and Expenses, accrued
but unpaid interest, principal or for deposit in the Cash Collateral Account in
any order determined by the Agent in its sole discretion.
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2.15.2 Determination of Borrowing Base. The Agent may, but shall not be
required to, rely on the most current Borrowing Base Certificate and any other
schedule or reports delivered to the Agent in connection herewith in
determining the amount of the Borrowing Base and the qualification of Accounts
and Inventory as Eligible Accounts Receivable and Eligible Inventory. However,
the Agent may, in its Permitted Discretion (i) establish or increase reserves
against Eligible Accounts Receivable and Eligible Inventory, (ii) reduce the
Receivable Advance Rate and/or the Inventory Advance Rate and (iii) increase
the standards of eligibility hereunder for Eligible Accounts Receivable and/or
Eligible Inventory, but the Agent will give the Borrower ten (10) days' prior
written notice thereof.
2.15.3 Several Obligations. The failure of any Lender to make the Loan to
be made by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Loan on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Loan to be made by such other Lender on the date of any Borrowing.
2.15.4 Sharing of Payments, Etc. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of Revolving Loans owing to it or its Swingline
Participation or LOC Participation (other than pursuant to Section 2.6.3 or
2.14), in excess of its Proportionate Share of payments on account of Revolving
Loans, LOC Participations and Swingline Participations obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in the Revolving Loans, LOC Participation and Swingline
Participation owing to them as shall be necessary to cause such purchasing
Lender to share the excess payment ratably with each of them; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from such purchasing Lender, such purchase from each Lender shall be
rescinded and such Lender shall repay to the purchasing Lender the purchase
price to the extent of such recovery together with an amount equal to such
Lender's ratable share (according to the proportion of (i) the amount of such
Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. Each Lender
holding such participation in another Lender's Loans, LOC Participation or
Swingline Participation shall be deemed the holder of such Loans for all
purposes hereof. The Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section 2.15.4 may, to the
fullest
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extent permitted by law, exercise all its rights of payment (including the
right of set-off) with respect to such participation as fully as if such
Lender were the direct creditor of the Borrower in the amount of such
participation.
2.15.5 Pro Rata Treatment. Except to the extent otherwise provided herein,
(i) each Borrowing of Revolving Loans shall be requested from the Lenders, pro
rata, according to their respective Proportionate Shares, (ii) each termination
or reduction of the Credit Facility shall be applied to the respective
Commitments of the Lenders pro rata according to their respective Proportionate
Shares and (iii) each payment or prepayment by the Borrower of principal or
interest of any Revolving Loan shall be made for the account of the Lenders,
pro rata, according to their respective Proportionate Shares.
2.15.6 Defaulting Lenders. Notwithstanding anything contained herein to the
contrary, so long as any Lender shall be in default in its obligation to fund
its Proportionate Share of any Borrowing or participation in any Swingline
Loans or Unpaid LOC Reimbursement Obligation or shall have rejected its
Commitment, such Defaulting Lender shall not be entitled to receive any
payments of principal of or interest on its Loans (including the sharing of
any payment pursuant to Section 2.15.4 or its share of any fees payable
hereunder, and for purposes of voting or consenting to matters with respect to
the Credit Documents, such Defaulting Lender shall be deemed not to be a
"Lender" hereunder and such Lender's Commitment shall be deemed to be zero (0),
unless and until (x) the Loans and all interest thereon have been paid in full,
(y) such Defaulting Lender's failure to fulfill its obligation to fund is cured
and such Defaulting Lender shall have paid, as and to the extent provided in
this Credit Agreement, to the applicable party, if any, interest on the amount
of funds that such Lender failed to timely fund or (z) the Obligations under
this Agreement shall have been declared or shall have become immediately due
and payable. No Commitment or any Lender shall be increased or otherwise
affected by any such failure or rejection by any Defaulting Lender. Any payments
of principal, interest or fees which would, but for this paragraph, be paid to
any Defaulting Lender, shall be paid to the first, to the Agent, to the extent
of any amounts owing by such Defaulting Lender to the Agent hereunder, next to
the Swingline Lender to the extent of amounts owing by such Defaulting Lender
to the Swingline Lender hereunder, next to each Issuing Bank to the extent of
amounts owing by such Defaulting Lender to such Issuing Bank hereunder and next
to all other Lenders who shall not be in default under their respective
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Commitments, for application to the Loans or to provide cash collateral in such
manner and order as shall be determined by the Agent.
ARTICLE 3. Conditions Precedent.
3.1 Conditions to Initial Loans. The obligation of each Lender to make its
initial Loan hereunder is subject to the satisfaction of the following
conditions precedent;
(a) Effective Date. The Effective Date shall have occurred.
(b) No Material Adverse Change. (i) Since March 31, 1995, no change,
occurrence, event or development or event involving a prospective change,
which in each case is reasonably likely to have a Material Adverse Effect
shall have occurred and be continuing, in each case as determined by the
Agent and each Lender in its sole discretion, and (ii) on or prior to the
Closing Date, there shall not have occurred a substantial impairment of
the financial markets generally which, in the opinion of the Agent and the
Lenders, has materially and adversely affected the transactions
contemplated hereby.
(c) Corporate and Legal Proceedings. All corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by this Credit Agreement and the other Credit
Documents shall be reasonably satisfactory in form and substance to the
Agent, and the Agent shall have received all information and copies of all
certificates, documents and papers, and any other records of corporate
proceedings and governmental approvals, if any, which the Agent reasonably
may have requested in connection therewith, such documents and papers,
where appropriate, to be certified by proper corporate or governmental
authorities.
(d) Availability. After giving effect to all Loans to be made, and
all Facility Letters of Credit to be issued, on the Closing Date, the
Availability on the Closing Date shall be at least $25,000,000.
(e) BTCC Credit Facilities. All of the Borrower's obligations under
the BTCC Credit Agreement shall have been fully satisfied (or shall be so
satisfied with the proceed of the initial Loans hereunder, and terminations
and releases (including UCC termina-
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tion statements) of all Liens and security interests granted in connection
therewith, satisfactory in form and substance to the Agent, shall have been
delivered to the Agent.
(f) Consents and Approvals. Except for (i) the filing of UCC
financing statements and termination statements, (ii) consents or
authorizations which have been obtained or filings which have been made,
and which in either case are in full force and effect or (iii) consents,
authorizations and filings the failure to obtain or make which could not
reasonably be expected to have a Material Adverse Effect, no consent or
authorization of, filing with or other act by or in respect of, any
Governmental Authority or any other Person shall be required in connection
with the Borrowings or issuance of Letters of Credit hereunder, the grant
of the Liens pursuant to the Credit Documents, the consummation of the
Refinancing or the execution, delivery, performance, validity or
enforceability of this Credit Agreement, the Notes or the other Credit
Documents.
(g) Due Diligence. The Agent and the Lenders shall have completed
their due diligence inspection, testing and review of the assets and
liabilities of the Borrower and shall be satisfied with the results thereof
in all respects.
(h) Fees and Expenses. The Agent, the Lockbox Bank and the Lenders
shall have received payment in full of the Fees, the Expenses and all other
fees and expenses (or an irrevocable authorization to pay such fees out of
the proceeds of the Loans) referred to in the Commitment Letter or the Fee
Letter and in Section 2.9 which are payable to them on or before the
Closing Date.
(i) Termination of BTCC Lockbox Arrangements. The Agent shall have
received evidence satisfactory to it that all lockbox arrangement
established pursuant to the BTCC Credit Agreement have been terminated,
that the Lockbox Bank has access to the lockboxes established pursuant
thereto and that all funds held in lockbox accounts established pursuant
to the BTCC Credit Agreement have been or will be transferred to the
Lockbox Account.
(j) Closing Documents. The Agent shall have received each of the
following items, in form and substance satisfactory to the Agent or in the
form specified below:
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(i) Notes. Notes duly executed by the Borrower, payable to the order of
each Lender in the amount of such Lender's Commitment.
(ii) Security Agreement. The Security Agreement duly executed by the
Borrower.
(iii) UCC Financing Statements. UCC financing statement duly executed by
the Borrower with respect to the Collateral and in proper form for filing in
each jurisdiction specified by the Agent and that all taxes and other amounts
payable with respect to such filings have been paid.
(iv) UCC Termination Statements. UCC termination statements with respect
to (x) all UCC financing statements filed with respect to the liens granted
under the BTCC Credit Agreement and (ii) any other UCC financing statements
filed against the Borrower (other than UCC financing statements relating to
Permitted Liens and which do not cover to any item of Collateral).
(v) UCC Search. Certified copies of Requests for Information (Form
UCC-11), or equivalent reports, each of a recent date, listing all effective
financing statements that name the Borrower as debtor and that are filed in the
jurisdictions specified in clause (iii) above, together with copies of such
financing statements (none of which shall cover the Collateral except those
with respect to which appropriate termination statements executed by the
secured lender thereunder have been delivered to the Agent).
(vi) Tax and Judgment Lien Search. Tax lien and judgment lien search
reports as of a recent date showing that no tax liens or judgment lien, have
been filed against the Borrower in any jurisdiction specified by the Agent.
(vii) Acknowledgement Agreements. Acknowledgement Agreements signed by
each lessor or warehouseman listed in Schedule 4.3 (other than those shown on
said Schedule as not delivering an Acknowledgment Agreement on the Closing
Date).
(viii) BTCC Payoff Letter. A letter or certificate signed by BTCC as to
the amount required
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to pay in full all outstanding BTCC Credit Facilities.
(ix) Notice of Authorized Persons. The notice specified in Section
2.4.1(c) setting forth the names and specimen signatures of each officer
and employee as the Borrower authorized to request Loans hereunder on
behalf of the Borrower.
(x) Notice of Borrowing. A Notice of Borrowing duly completed and
signed by the Borrower.
(xi) Borrowing Base Certificate. A Borrowing Base Certificate, duly
certified by the chief executive officer or chief financial officer of the
Borrower, as of May 31, 1995.
(xii) Lockbox Agreement. The Lockbox Agreement duly executed by the
Borrower and the Lockbox Bank.
(xiii) Tripartite Agreement. The Tripartite Agreement duly executed
by the Borrower and BOT Trust Company.
(xiv) Charter. A copy of the Borrower's Articles of Incorporation as
in effect on the Closing Date, certified by the Borrower's Secretary.
(xv) By-laws. A copy of the By-laws of the Borrower as in effect on
the Closing Date, certified by the Borrower's Secretary.
(xvi) Good Standing Certificates. Certificates of the Secretary of
State of Florida as to the Borrower's due incorporation and good standing
in said state, and Certificates of the Secretary of State of each
jurisdiction in which the Borrower is qualified to do business as to the
Borrower's due qualification and good standing as a foreign corporation in
each such jurisdiction, such certificates to be dated as of a date close to
the Closing Date.
(xvii) Officer's Certificate; Resolutions. A certificate substantially
in the form of Exhibit J, signed by the Secretary or an Assistant Secretary
of the Borrower, together with copies of resolutions of the Borrower's
board of
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directors referred to therein approving the execution, delivery and performance
by the Borrower of this Credit Agreement and the other Credit Documents, the
Refinancing and the other transactions contemplated hereby.
(xviii) Compliance Certificate. A certificate signed by the chief
executive officer or chief financial officer of the Borrower, substantially in
the form of Exhibit K hereto.
(xix) Solvency Certificate. A certificate signed by the chief executive
officer or the chief financial officer of the Borrower, substantially in form
of Exhibit L hereto.
(xx) Environmental Letter. A copy of the Environmental Report.
(xxi) Opinions of Borrower's Counsel. An opinion of Trenam, Kemker,
Scharf, Barkin, Frye, O'Neill & Mullis, P.A., Florida counsel to the Borrower,
substantially in the form of Exhibit M-1, and an opinion of Chadbourne & Parke,
special New York counsel to the Borrower, substantially in the form of Exhibit
M-2, which opinions shall also cover such other matters as the Agent shall
reasonably specify.
(xxii) Opinions of Local Counsel. Opinions of local counsel for the Agent
in Florida, Louisiana, North Carolina and Tennessee, in form and substance
satisfactory to the Agent, as to such matters as the Agent shall reasonably
specify.
(xxiii) Budget. A Budget for the fiscal year beginning April 1, 1995.
(xxiv) Insurance Certificates. Certificates as to the insurance policies
maintained by the Borrower.
(xxv) First Mortgage Indenture. A copy of the First Mortgage Indenture as
in effect on the Closing Date, certified by the Secretary of the Borrower.
(xxvi) Existing Debenture Indenture. A copy of the Existing Debenture
Indenture as in effect on the Closing Date, certified by the Secretary of the
Borrower.
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(xxvii) Subordinated Notes. Copies of the Subordinated Notes as
in effect on the Closing Date, certified by the Secretary of the
Borrower, together with a confirmation from BOT, as holder of the
Subordinated BOT Note, that the Obligations of the Borrower hereunder
constitute "Senior Debt" for purposes of the Subordinated BOT Note.
(xxviii) IRB Indentures. A copy of each Indenture, as in effect
on the Closing Date, for each issue of the Industrial Revenue Bonds
with respect to which a Facility Letter of Credit is to be issued,
certified by the Secretary of the Borrower.
(xxix) Auditor Notification. A letter from the Borrower to the
Auditor authorizing the Auditor to communicate with the Agent as
provided in Section 5.7.
(k) Additional Documents. The Borrower shall have executed and
delivered to the Agent and the Lenders all documents which the Agent or
any Lender reasonably request with respect to this Credit Agreement, the
Refinancing and the lending arrangements contemplated hereby.
3.2 Conditions to Issuance of Letters of Credit. No Issuing Bank shall be
obligated to issue any Facility Letter of Credit if the Closing has not occurred
or if at the time of such requested issuance the Issuing Bank determines or is
advised by any Lender or the Agent that:
(a) Any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain such Issuing
Bank from issuing such Facility Letter of Credit or any Lender from
acquiring a participation therein or any requirement of law applicable to
such Issuing Bank or any Lender or any request or directive (whether or not
having the force of law) from any governmental authority with jurisdiction
over such Issuing Bank or any Lender shall prohibit, or direct such Issuing
Bank to refrain from, or otherwise prevent the issuance of letters of
credit generally or such Facility Letter of Credit in particular or any
Lender from acquiring a participation therein or shall impose upon such
Issuing Bank or such Lender with respect to that Facility Letter of Credit
or such Lender's participation therein any restriction or unreimbursed
reserve
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requirement not in effect on the Closing Date or any unreimbursed cost or
expense which was not applicable on or as of the Closing Date and which
such Issuing Bank or such Lender in good faith deems materially adverse to
it; or
(b) any Lender is a Defaulting Lender hereunder unless the Agent and
the Issuing Banks have entered into satisfactory arrangements with the
Borrower to eliminate the Issuing Banks' risk with respect to such
Defaulting Lender, including cash collateralization of such Lender's
Proportionate Share of such Facility Letter of Credit.
3.3 Condition to Swingline Loans. The Swingline Lender shall not be
obligated to make any Swingline Loan if any Lender is a Defaulting Lender
hereunder unless the Agent and the Borrower have entered into satisfactory
arrangements with the Borrower to eliminate the Swingline Lender's risk with
respect to such Defaulting Lender.
3.4 Conditions to Each Credit Event. (a) In addition to the conditions set
forth in Sections 3.1 with respect to the initial Loans hereunder and the
conditions set forth in Sections 3.2 and 3.3 above with respect to any Credit
Event, the obligation of each Lender to make a Loan hereunder (other than a
Refunding Loan) and the obligation of any Issuing Bank to issue a Facility
Letter of Credit hereunder shall be subject to the condition that on the Credit
Date for such Credit Event, both before and after giving effect thereto and to
the application of the proceeds thereof, the following statements shall be true
to the satisfaction of the Agent (and if so requested by the Agent, the Borrower
shall deliver to the Agent a certificate of the chief executive office or chief
financial officer of the Borrower that such statements are true):
(i) the representations and warranties contained in this Credit
Agreement and any other Credit Document are true and correct in all
material respects on and as of the date of such Loan or issuance of such
Facility Letter of Credit as though made on and as of such date, except to
the extent that such representations and warranties expressly relate solely
to an earlier date (in which case such representations and warranties shall
have been true and accurate on and as of such earlier date);
(ii) no event has occurred and is continuing, or would result from
such Loan or the issuance of such Facility Letter of Credit or the
application of the
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proceeds thereof, which would constitute a Default under this Credit
Agreement;
(iii) no circumstance, development or event has occurred and is
continuing as of the Credit Date for such Loan or Letter of Credit which
has had or could reasonably be expected to have a Material Adverse effect;
(iv) there is not pending or threatened by or against the Borrower or
any Subsidiary any litigation, contested claim, investigation, arbitration
or governmental proceeding which, if adversely determined, could reasonably
be expected to have a Material Adverse Effect;
(v) there has occurred no material adverse change in the financial
condition or results of operations of the Consolidated Entity from that
reflected in the Financial Statements of the Borrower referred to in
Section 4.6; and
(vi) with respect to the Issuance of any Facility Letter of Credit,
none of the events set forth in Section 3.2 has occurred and is continuing
or would result from the issuance of such Facility Letter of Credit.
(b) Each request for Loans (other than a Refunding Loan) or for the
issuance of a Facility Letter of Credit, and the acceptance by the Borrower of
the proceeds of such Loan or the issuance of such Facility Letter of Credit,
shall constitute a representation and warranty by the Borrower that on the date
of such Loan or issuance of such Letter of Credit, before and after giving
effect thereto and to the application of the proceeds therefrom, the statements
set forth in clauses (i) through (vi) in Section 3.4(a) above are true unless
the Borrower specifies otherwise in its request for such Loan or Facility
Letter of Credit.
ARTICLE 4. Representations and Warranties.
In order to induce the Lenders and the Issuing Banks to enter into this
Credit Agreement and to make available the credit facilities contemplated
hereby, the Borrower hereby represents and warrants to the Lenders, the Issuing
Banks, and the Agent as follows (which representations and warranties shall
survive, the execution and delivery of this Credit Agreement and the other
Credit Documents
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and the making of the Loans and the issuance of Facility Letters of Credit):
4.1 Organization and Qualification; Subsidiaries.
(a) The Borrower (i) is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation, (ii) has the
power and authority to own its properties and assets and to transact the
businesses in which it is presently, or proposes to be, engaged and (iii) is
duly qualified and is authorized to do business and is in good standing in every
jurisdiction in which the failure to be so qualified could reasonably be
expected to have a Material Adverse Effect. Schedule 4.1 contains a correct and
complete list of all jurisdictions in which the Borrower is qualified to do
business as a foreign corporation on the Closing Date.
(b) On the date hereof the Borrower has no Subsidiaries. If at any time
hereafter the Borrower shall, to the extent permitted by Section 6.19, acquire
or establish any Subsidiary such Subsidiary will be a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, (ii) have the power and authority to own its properties and
assets and to transact the businesses in which it is engaged and (iii) be duly
qualified and be authorized to do business and in good standing in every
jurisdiction in which the failure to be so qualified could reasonably be
expected to have a Material Adverse Effect.
4.2 Solvency. On and as of the Closing Date on a pro forma basis after
giving effect to the Refinancing and all Indebtedness incurred and to be
incurred, and Liens created and to be created, by the Borrower in connection
with this Credit Agreement, (x) the sum of the assets, at a fair valuation, of
the Borrower taken as a whole will exceed its debts, (y) the Borrower will not
have incurred nor intended to, or believe that it will, incur debts beyond its
ability to pay such debts as such debts mature and (z) the Borrower does not
have unreasonably small capital with which to conduct its businesses. For
purposes of this Section 4.2, "debt" means any reasonably expected liability on
a claim, and "claim" means (i) right to payment whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (ii)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed,
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contingent, matured, unmatured, disputed, undisputed, secured or unsecured.
4.3 Liens; Inventory. After giving effect to the Refinancing, there are no
Liens in favor of third parties with respect to any of the Collateral,
including, without limitation, with respect to the Inventory, wherever located,
except Permitted Liens. Except as disclosed in Schedule 4.3, no lessor or
warehousemen of the Borrower or any Subsidiary has been granted any Lien with
respect to the Inventory maintained by the Borrower or any Subsidiary at the
property of any such lessor or warehousemen. Upon the proper filing of UCC
financing statements with the appropriate filing or recordation offices in each
of the jurisdictions listed in Schedule 4.3, the security interests granted
pursuant to the Credit Documents shall constitute the valid and enforceable
first, prior and perfected Liens on the Collateral. The Borrower is the
absolute owner of the Collateral with full right to pledge, sell, assign,
consign, transfer and create a Lien therein, free and clear of any and all
Liens in favor of third parties, except Permitted Liens. Prior to the
Expiration Date, the Borrower will at its expense warrant and, at the Agent's
request, defend the Collateral from any and all Liens of any third party.
4.4 No Conflict. The execution and delivery by the Borrower of this Credit
Agreement and the other Credit Documents and the performance by the Borrower of
the Obligations hereunder and thereunder and the consummation by the Borrower of
the transactions contemplated hereby; (i) are within the corporate power of the
Borrower; (ii) are duly authorized by the Board of Directors of the Borrower
and, if necessary, its stockholders; (iii) are not in contravention of the terms
of the Articles or Certificate of Incorporation or By-Laws of the Borrower or
any Subsidiary, or of any indenture, contract, lease, agreement, instrument or
other commitment to which the Borrower or any Subsidiary are a party or by which
the Borrower or any Subsidiary or any of their respective properties are bound,
except where such contravention would not have a Material Adverse Effect; (iv)
do not require the consent, registration or approval of any governmental entity
or any other Person (except such as have been duly obtained, made or given, and
are in full force and effect); (v) do not contravene any statute, law,
ordinance, regulation, rule, order or other governmental restriction, or any
writ, order, injunction or decree of any court, applicable to or binding upon
the Borrower or any Subsidiary; and (vi) will not, except as contemplated
herein, result in the imposition of any Liens upon any property of the Borrower
or any Subsidiary under any
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indenture, mortgage, deed of trust, loan or credit agreement or other material
agreement or instrument to which either of the Borrower or any Subsidiary is a
party or by which they or any of their property may be bound or affected.
4.5 Enforceability. The Credit Agreement and all of the other Credit
Documents have been duly executed and delivered by the Borrower and constitute
the legal, valid and binding obligations of the Borrower, and the Credit
Documents, if any, executed and delivered by any Subsidiary constitute legal,
valid and binding obligations at such Subsidiary, and are enforceable against
the Borrower and such Subsidiaries, as the case may be, in accordance with
their respective terms except as such enforceability may be limited by (i) the
effect of any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and (ii) general principles
of equity.
4.6 Financial Statements. The Borrower has furnished to the Lenders the
following financial statements of the Borrower: (i) balance sheet as of, and
statements of operations, shareholder's equity and cash flows for the fiscal
year ended, March 31, 1994 audited by Deloitte & Touche and (ii) an unaudited
balance sheet as of, and unaudited statements of operations, shareholder's
equity and cash flows for the period ending, December 31, 1994. Said financial
statements were prepared in accordance with GAAP consistently applied throughout
the periods involved and fairly present the financial condition of the Borrower
as at said dates and the results of the operations of the Borrower for the
periods ended on such dates. Since the date of said financial statements there
have been no changes in the condition, financial or otherwise, of the Borrower
as shown on the balance sheets of the Borrower described above, except for
changes in the ordinary course of business (none of which individually or in
the aggregate has been materially adverse).
4.7 Locations of Offices, Records and Inventory. On the date hereof, the
Borrower's principal place of business and chief executive office are both
located at 5100 West Lemon Street, Tampa, Florida 33609, and the books and
records of the Borrower and all chattel paper and all records of Accounts are
located at the principal place of business and chief executive office of the
Borrower or at the locations listed on Schedule 4.7. On the date hereof, there
is no location in which the Borrower or any of its Subsidiaries have any
Inventory (except for Inventory in transit) other than those locations listed
on Schedule 4.7. Schedule 4.7 also contains a true, correct and complete
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list, as of the date hereof of (i) the legal names and addresses of each
warehouseman and lessor at whose warehouse or premises Inventory is stored,
(ii) the address of the chief executive offices and principal place of business
of the Borrower and (iii) the address of all offices where records and books of
account of the Borrower are kept. None of the receipts received by the Borrower
from any warehouseman states that the goods covered thereby are to be delivered
to bearer or to the order of a named person or to a named person and such named
person's assigns.
4.8 Names of Borrower or Predecessors. Except as set forth in Schedule 4.8
or as otherwise notified to the Agent in writing pursuant to Section 5.10,
during the five (5) years preceding the date hereof (i) neither the Borrower
nor any of the Subsidiaries has used any corporate, fictitious or assumed name
or tradename other than the corporate name shown on the Borrower's or such
Subsidiary's Articles or Certificate of Incorporation and (ii) the Borrower did
not merge or consolidate with any corporation other than Atlas Steel & Wire
Corporation and Stafford Rail Products, Inc.
4.9 No Judgments or Litigation. Except with respect to environmental
matters, which are covered in Section 4.14 or as set forth on Schedule 4.9 or
as otherwise disclosed by the Borrower to Agent in writing, no judgments,
orders, writs, decrees or arbitration awards are outstanding against the
Borrower or any Subsidiaries nor is there now pending or, to the best of the
Borrower's knowledge after diligent inquiry, threatened in writing any
litigation, contested claim, investigation, arbitration, or governmental
proceeding by or against the Borrower or any of the Subsidiaries except
judgments and pending or threatened litigation, contested claims and
governmental proceedings which, if adversely determined, would not reasonably
be expected to have a Material Adverse Effect.
4.10 No Defaults. After giving effect to the transactions contemplated
herein, except as set forth on Schedule 4.10, neither the Borrower nor any of
the Subsidiaries is in default under any term of any indenture, contract,
lease, agreement, instrument or other commitment to which any of them is a
party or by which any of them is bound which default could reasonably be
expected to have a Material Adverse Effect. The Borrower knows of no dispute
regarding any indenture, contract, lease, agreement, instrument or other
commitment which would individually, or when aggregated with other such
disputes, be reasonably likely to have a Material Adverse Effect.
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4.11 Labor Matters. (a) There are no controversies pending or, to the best
of the Borrower's knowledge after diligent inquiry, threatened between the
Borrower or any of the Subsidiaries and any of their respective employees,
other than employee grievances arising in the ordinary course of business which
would not, in the aggregate, be reasonably likely to have a Material Adverse
Effect.
(b) Neither the Borrower nor any Subsidiary is engaged in any unfair labor
practice. There is (i) no material unfair labor practice complaint pending
against the Borrower or any Subsidiary or, to the best knowledge of the
Borrower, threatened against any of them, before the National Labor Relations
Board, and no material grievance or significant-arbitration proceeding arising
out of or under collective bargaining agreements is pending against the
Borrower or any Subsidiary or, to the best knowledge of the Borrower,
threatened against any of them, (ii) no strike, labor dispute, slowdown or
stoppage pending against the Borrower or any Subsidiary or, to the best
knowledge of the Borrower, threatened against any of them and (iii) no union
representation question with respect to the employees of the Borrower or any
Subsidiary and no union organizing activities.
4.12 Compliance with Law. Except with respect to environmental matters,
which are covered in Section 4.14 hereof, and except as set forth on Schedule
4.12, neither the Borrower nor any Subsidiary has violated or failed to comply
with any statute, law, ordinance, regulation, rule or order of any foreign,
federal, state or local government or any other governmental department or
agency, or any judgment, decree or order of any court, applicable to its
business or operations except where the aggregate of all such violations or
failures to comply would not reasonably be likely to have a Material Adverse
Effect. The conduct of the business of the Borrower and each Subsidiary is in
conformity with all applicable securities, commodities, energy, public utility,
zoning, building code, and all other applicable foreign, federal, state and
local governmental and regulatory requirements, except where the aggregate of
all such non-conformities would not reasonably be likely to have a Material
Adverse Effect. Neither the Borrower nor any Subsidiary has received any notice
to the effect that it is not in compliance with, and neither the Borrower nor
any Subsidiary has any reason to anticipate that any presently existing
circumstances are likely to result in the violation of, any such statute, law,
ordinance, regulation, rule, judgment, decree or order, which failure or
violation would have a Material Adverse Effect.
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4.13 ERISA. (a) None of the Borrower, any Subsidiary and any ERISA
Affiliate maintains or contributes to any Plan other than those listed on
Schedule 4.13 or those disclosed to the Agent in writing after the date hereof.
Each Plan has been and is being maintained and funded in accordance with its
terms and in compliance with all provisions of ERISA and the IRC applicable
thereto except to the extent that failure to do any of the foregoing would not
result in a Material Adverse Effect or a liability or potential liability by
the Borrower exceeding in the aggregate $1,000,000. The Borrower does not
contribute to, or have any liability with respect to, a Multiemployer Plan. The
Borrower, each Subsidiary and each ERISA Affiliate (i) have fulfilled all
obligations related to the minimum funding standards of ERISA and the IRC for
each Plan, (ii) except where noncompliance would not have a Material Adverse
Effect or result in a liability or potential liability by the Borrower
exceeding $1,000,000 are in compliance in all material respects with the
currently applicable provisions of ERISA and of the IRC and have not incurred
any liability (other than routine liability for premiums) under Title IV of
ERISA. No Termination Event has occurred nor has any other event occurred that
is reasonably likely to result in a Termination Event. No event or events have
occurred in connection with which the Borrower, any Subsidiary, any ERISA
Affiliate, any fiduciary of a Plan or any Plan, directly or indirectly, is
reasonably likely to be subject to any material liability, individually or in
the aggregate, under ERISA, the IRC or any other law, regulation or
governmental order or under any agreement, instrument, statute, rule of law or
regulation pursuant to or under which any such entity has agreed to indemnify or
is required to indemnify any person against liability incurred under, or for a
violation or failure to satisfy the requirements of, any such statute,
regulation or order. The aggregate amount of the Unfunded Current Liabilities
of all Benefit Plans does not exceed $1,000,000.
(b) True, correct and complete copies of the following documents have been
delivered by the Borrower to the Agent: (i) the most recent determination
letter issued by the Internal Revenue Service with respect to each Plan; (ii)
for the most recent plan year, the Annual Report on Form 5500 Series required
to be filed with any governmental agency for each Plan. The aggregate amount of
the most recent annual payments made to former employees of the Borrower or any
ERISA Affiliate under any Retiree Health Plan prior to the date hereof is
$455,614.
4.14 Compliance with Environmental Laws. Except as disclosed in Schedule
4.14 hereto, or except as would
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not, in the aggregate, reasonably be expected to have a Material Adverse
Effect: (i) the operations of the Borrower and each Subsidiary comply with all
applicable Environmental Laws; (ii) the Borrower has not received written
notice that any of the operations of the Borrower or any Subsidiary is the
subject of any judicial or administrative proceeding alleging the violation of
any Environmental Laws; (iii) none of the operations of the Borrower or any
Subsidiary is the subject of any federal or state investigation, of which the
Borrower has knowledge or reasonably should have knowledge, evaluating whether
the Borrower or any Subsidiary disposed of any Hazardous Substances at any site
that may require remedial action to respond to a release of any Hazardous
Substances into the environment; (iv) neither the Borrower nor any Subsidiary
has filed any notice under any federal or state law indicating past or present
treatment, storage or disposal of a hazardous waste or reporting a spill or
release of a Hazardous Substance into the environment; (v) neither the
Borrower nor any Subsidiary has any contingent liability of which the Borrower
has knowledge or reasonably should have knowledge in connection with any
release of any Hazardous Substance into the environment, nor has the Borrower
or any Subsidiary received any written notice alleging potential liability
arising from the disposal of any Hazardous Substance into the environment; and
(vi) neither the nature of the Borrower's businesses and operations nor the
use, operation or condition of its properties have changed in any material
respect from that in effect as of the date of the Environmental Report.
4.15 Intellectual Property. The Borrower possesses adequate licenses,
patents, patent applications, copyrights, service marks, trademarks and trade
names to continue to conduct its business as theretofore conducted by it.
4.16 Licenses and Permits. Except as previously disclosed in writing to the
Lenders or except as would not reasonably be expected to have a Material Adverse
Effect, the Borrower and each of its Subsidiaries have obtained and hold all
material franchises, licenses, leases, permits, certificates, authorizations,
qualifications, easements, rights of way and other rights and approvals which
are necessary for the operation of their businesses as presently conducted and
as proposed to be conducted, all of which are in full force and effect. Neither
of the Borrower nor any of the Subsidiaries is in violation of the terms of any
such franchise, license, lease, permit, certificate, authorization,
qualification, easement, right of way, right or approval in any such case which
would reasonably be expected to have a Material Adverse Effect.
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4.17 Title to Property. Except as set forth on Schedule 4.17, each of the
Borrower and its Subsidiaries has (i) good and marketable fee simple title to
or valid leasehold interests in all of its real property and (ii) good and
marketable title to all of its other property (including, without limitation,
all real and other property in each case as reflected in the Financial
Statements referred to in Section 4.6 or delivered to the Agent pursuant to
Section 5.1), other than properties disposed of in the ordinary course of
business or in any manner otherwise permitted under this Credit Agreement since
the date of the most recent audited balance sheet of the Consolidated Entity, as
the case may be, and in each case subject to no Liens other than those
Permitted Liens.
4.18 Investment Company. Neither the Borrower nor any Subsidiary is (i)
an investment company or a company controlled by an investment company within
the meaning of the Investment Company Act of 1940, as amended, (ii) a holding
company or a Subsidiary company of a holding company, or an affiliate of a
holding company or of a Subsidiary company of a holding company, within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii)
subject to any other law which purports to regulate or restrict its ability to
borrow money or to consummate the transactions contemplated by this Credit
Agreement or the other Credit Documents or to perform its obligations hereunder
or thereunder.
4.19 No Event of Default. No Default has occurred and is continuing.
4.20 Taxes and Tax Returns. (a) Except as set forth on Schedule 4.20 or as
otherwise disclosed in writing to the Agent, the Borrower and the Subsidiaries
or any affiliated group of which the Borrower or any of the Subsidiaries are
now or have been members) has timely filed (inclusive of any permitted
extensions) with the appropriate taxing authorities all returns (including
without limitation, information returns and other material information) in
respect of taxes required to be filed through the date hereof and will timely
file (inclusive of any permitted extensions) any such returns required to be
filed on and after the date hereof. The information filed is complete and
accurate in all material respects. Except as specified in Schedule 4.20 or as
otherwise disclosed in writing to the Agent, neither the Borrower nor any
Subsidiary, nor any group of which the Borrower or any Subsidiary is now or was
a member, has requested any extension of time within which to file returns
(including without limitation information returns) in respect of any taxes.
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(b) All taxes, assessments, fees and other governmental charges payable by
the Borrower or any Subsidiary in respect of periods beginning prior to the
date hereof, have been timely paid, or will be timely paid, or an adequate
reserve has been established therefor, and neither the Borrower nor any of the
Subsidiaries has any material liability for taxes in excess of the amounts so
paid or reserves so established.
(c) Except as set forth in Schedule 4.20, no deficiencies for taxes have
been claimed, proposed or assessed by any taxing or other governmental
authority against the Borrower or any Subsidiary involving more than $2,000,000
in aggregate amount and no tax liens have been filed. Except as set forth in
Schedule 4.20, there are no pending or, to the best of the Borrower's
knowledge, threatened audits, investigations or claims for or relating to any
material liability in respect of taxes, and there are no matters under
discussion with any governmental authorities with respect to taxes which are
likely to result in a material additional liability for taxes. Either the
federal income tax returns of the Borrower have been audited by the Internal
Revenue Service and such audits have been closed, or the period during which
any assessments may be made by the Internal Revenue Service has expired without
waiver or extension, for all years up to and including the fiscal year ended
September 30, 1987. Except as set forth in Schedule 4.20, no extension of a
statute of limitations relating to taxes, assessments, fees or other
governmental charges is in effect with respect to the Borrower or any of its
Subsidiaries.
(d) Neither the Borrower nor any of its Subsidiaries has any obligation
under any written tax sharing agreement or agreement regarding payments in lieu
of taxes.
4.21 Recording and Stamp Taxes. All taxes (including, but not limited to,
stamp or recording taxes and recording fees) payable in connection with the
filing and recording of the Credit Documents or any instruments with respect
thereto have either been paid in full by the Borrower or arrangements for the
payment of such amounts satisfactory to the Agent have been made.
4.22 No Other Indebtedness, Status as Senior Indebtedness. After giving
effect to the Refinancing, the Consolidated Entity has no Indebtedness other
than Indebtedness permitted by Section 6.5. The Obligations of the Borrower
hereunder are permitted by, and constitute "Senior Indebtedness" as defined in,
the Existing Debenture Indenture and the Subordinated Intercompany Note, and are
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permitted by, and constitute "Senior Debt" as defined in, the Subordinated BOT
Note.
4.23 Material Contracts. Schedule 4.23 contains a true, correct and
complete list of all the Material Contracts (other than Fabricating Contracts)
in effect on the date hereof. None of the Material Contracts contains any
burdensome restrictions on the Borrower or any of its Subsidiaries or any of
their respective properties which have or could reasonably be expected to have
a Material Adverse Effect. All of the Material Contracts are in full force and
effect, and no material defaults currently exist thereunder.
4.24 Affiliate Transactions. Except as set forth on Schedule 4.24, neither
the Borrower nor any Subsidiary is a party to or bound by any agreement or
arrangement (whether oral or written) to which any Affiliate of the Borrower or
any Subsidiary is a party except (i) in the ordinary course of and pursuant to
the reasonable requirements of the Borrower's or such Subsidiary's business,
(ii) upon fair and reasonable terms no less favorable to the Borrower and such
Subsidiary than it could obtain in a comparable arm's-length transaction with
an unaffiliated Person and (iii) the Technical Assistance Agreements.
4.25 Accuracy and Completeness of Information. All factual information
heretofore, contemporaneously or hereafter furnished by or on behalf of the
Borrower or any of the Subsidiaries in writing to the Agent, any Lender, or the
Auditors for purposes of or in connection with this Credit Agreement or any
Credit Documents, or any transaction contemplated hereby or thereby is or will
be true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information not misleading at such time.
There are no facts now known to any officer of the Borrower which individually
or in the aggregate would reasonably be expected to have a Material Adverse
Effect and which have not been set forth herein, in the Financial Statements,
or in any certificate, opinion or other written statement made or furnished by
the Borrower to the Agent.
4.26 No Material Adverse Change. After March 31, 1995, there has been no
development or event nor any prospective development or event, which has had or
could reasonably be expected to have a Material Adverse Effect.
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ARTICLE 5. Affirmative Covenants.
Until termination of this Credit Agreement and payment and satisfaction of
all Obligations due hereunder and under the other Credit Documents, the
Borrower agrees that:
5.1 Financial Information. The Borrower will furnish to the Lenders the
following information within the following time periods:
(a) as soon as available and in any even within ninety (90) days after
the end of each fiscal year of the Consolidated Entity, (i) audited
Financial Statements as of the close of the fiscal year and for the fiscal
year prepared in accordance with GAAP, together with a comparison to the
Financial Statements for the prior fiscal year, in each case accompanied by
(A) an unqualified opinion of the Auditors, (B) such Auditors' "Management
Letter" to the Borrower and (C) a written statement signed by the Auditors
stating that in the course of the regular audit of the business of the
Consolidated Entity, which audit was conducted by the Auditors in
accordance with generally accepted auditing standards, the Auditors have
not obtained any knowledge of the existence of any Default under any
provision of this Credit Agreement, or, if such Auditors shall have
obtained from such examination any such knowledge, they shall disclose in
such written statement the existence of the Default and the nature thereof,
it being understood that such Auditors shall have no liability, directly or
indirectly, to anyone for failure to obtain knowledge of any such Default
or Event of Default, (ii) a narrative discussion of the consolidated
financial condition and results of operations and the consolidated
liquidity and capital resources of the Consolidated Entity for such fiscal
year prepared by the chief executive officer or chief financial officer of
the Borrower and (iii) a compliance certificate signed by the chief
executive officer or chief financial officer of the Borrower in the form of
Exhibit K along with a schedule in form satisfactory to the Agent of the
calculations used in determining, as of the end of such fiscal year, (x)
the Debt/EBITDA Ratio for such fiscal year and (y) whether the Borrower was
in compliance with the covenants set forth in Articles 5 and 6 of this
Credit Agreement for such year. To the extent that the Borrower's annual
report on Form 10-K contains any of the foregoing items, the Lenders will
accept the Borrower's Form 10-K in lieu of such items;
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(b) as soon as available and in any event within forty-five (45) days
after the end of each fiscal quarter of the Consolidated Entity (except the
last fiscal quarter of any fiscal year) (i) Financial Statements as at the
end of such period and for the fiscal year to date, together with a
comparison to the Financial Statements for the same periods in the prior
year, all in reasonable detail and duly certified (subject to normal
year-end audit adjustments) by the chief executive officer or chief
financial officer of the Borrower as having been prepared in accordance
with GAAP, (ii) a narrative discussion of the consolidated financial
condition and results of operations and the consolidated liquidity and
capital resources of the Consolidated Entity for such period and for the
fiscal year to date prepared by the chief executive officer or chief
financial officer of the Borrower, (iii) a compliance certificate in the
form of Exhibit K signed by the chief executive officer or chief financial
officer of the Borrower, along with a schedule in form satisfactory to the
Agent of the calculations used in determining, as of the end of such fiscal
quarter, (x) the Debt/EBITDA Ratio for the Rolling Period ending on the
last day of such quarter and (y) whether the Consolidated Entity was in
compliance with the covenants set forth in Articles 5 and 6 of this Credit
Agreement for such quarter. To the extent that the Borrower's quarterly
report on Form 10-Q contains any of the foregoing terms, the Lenders will
accept the Borrower's Form 10-Q in lieu of such items;
(c) as soon as available and in any event, within thirty (30) days
after the end of each of the first two months of each fiscal quarter,
within forty-five (45) days after the end of the third month of each of
the first three fiscal quarters of the fiscal year and within ninety (90)
days after the end of the last month of the fiscal year, a consolidated
balance sheet for the Consolidated Entity as at the end of such month and
for the fiscal year to date and statements of operations for such month
and for the fiscal year to date, together with a comparison to the
statements of operations for the same periods in the prior year, all in
reasonable detail and duly certified (subject to normal year-end audit
adjustments) by the chief executive officer of the Borrower as having been
prepared in accordance with GAAP;
(d) not later than ninety (90) days after the end of each fiscal year
commencing with the fiscal year ending March 31, 1996, the Budget for the
follow-
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ing fiscal year and not later than forty-five (45) days after the end of the
third fiscal quarter of each fiscal year the Forecast for the immediately
following twelve months;
(e) a copy of the state and federal income tax returns of the Borrower and
each of its Subsidiaries within thirty (30) days after they are filed with the
appropriate taxing authorities, if and when requested by any Lender;
(f) upon request by the Agent at any time and in any event within ten (10)
Business Days after the last Business Day of each month, a borrowing base
certificate (the "Borrowing Base Certificate") in substantially the form of
Exhibit N, duly completed, detailing the Eligible Accounts Receivable and
Eligible Inventory as of the last day of such month (or such other date as the
Agent may specify in such request), certified by the Borrower's chief executive
officer or chief financial officer and subject only to adjustment upon
completion of the normal year end audit of physical inventory; provided, that
if the Agent requests a Borrowing Base Certificate at any time other than the
end of any month, (i) such interim Borrowing Base Certificate will be provided
by the Borrower within five (5) Business Days after such request, (ii) such
interim Borrowing Base Certificate may only be requested as of the end of any
week and (iii) such interim Borrowing Base Certificate need not be certified by
the Borrower's chief executive officer or chief financial officer. In addition,
each Borrowing Base Certificate provided hereunder shall have attached to it
such additional schedules and/or other information as the Agent may reasonably
request;
(g) promptly and in any event within two (2) Business Days after becoming
aware of the occurrence of a Default, a certificate of the chief executive
officer or chief financial officer of the Borrower specifying the nature
thereof and the Borrower's proposed response thereto, each in reasonable detail;
(h) promptly upon the earlier of the mailing or filing thereof, copies of
all Forms 10-K, 10-Q, 8-K, proxy statements, annual reports, quarterly
reports, registration statements and any other filings or other communications
made by the Borrower to holders of its publicly traded securities or the
Securities Exchange Commission from time to time pursuant to the Securities
Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended;
and
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(i) from time to time, such further information regarding the
Collateral, business affairs and financial condition of the Borrower and/or
each of its Subsidiaries as the Agent or any Lender (through the Agent) may
reasonably request.
5.2 Corporate Existence and Franchises. The Borrower will, and will cause
each Subsidiary to, (i) maintain its corporate existence (except that
Subsidiaries may merge with each other and, provided the Borrower is the
survivor thereof, with the Borrower) and (ii) maintain in full force and effect
all material licenses, bonds, franchise, leases, trademarks and qualifications
to do business, and all patents, contracts and other rights necessary or
desirable to the profitable conduct of its businesses, except when
noncompliance would not, in the aggregate, have a Material Adverse Effect.
5.3 Conduct of Business. The Borrower will continue in, and limit its
operations to, the same general lines of business as those presently conducted
by the Borrower and will cause each Subsidiary so to do.
5.4 ERISA. (a) The Borrower will deliver to the Agent and the Lenders, at
the Borrower's expense, the following information at the times specified below:
(i) within ten (10) Business Days after the Borrower, any Subsidiary
or any ERISA Affiliate knows or has reason to know that a Termination Event
has occurred, a written statement of the chief financial officer of the
Borrower describing such Termination Event and the action, if any, which
the Borrower or other such entities have taken, are taking or propose to
take with respect thereto, and within ten days after known, any action
taken or threatened by the IRS, DOL or PBGC with respect thereto;
(ii) within ten (10) Business Days after the Borrower, any Subsidiary
or any ERISA Affiliate knows or has reason to know that a non-exempt
prohibited transaction (as defined in Sections 406 of ERISA and 4975 of
the Internal Revenue Code) has occurred which has or may reasonably be
expected to have a Material Adverse Effect, a statement of the chief
financial officer of the Borrower describing such transaction and the
action which the Borrower or other such entities have taken, are taking or
propose to take with respect thereto;
(iii) within thirty (30) Business Days after the filing thereof with
the DOL, the Internal Revenue
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Service or the PBGC, copies of each annual report (form 5500 series),
including Schedule B thereto, filed with respect to each Benefit Plan;
(iv) within three (3) Business Days after the filing thereof with the
Internal Revenue Service, a copy of each funding waiver request filed with
respect to any Benefit Plan and all communications received by the
Borrower, any Subsidiary or any ERISA Affiliate with respect to such
request;
(v) within three (3) Business Days after receipt by the Borrower, any
Subsidiary or any ERISA Affiliate of notice of the PBGC's intention to
terminate a Benefit Plan or to have a trustee appointed to administer a
Benefit Plan, copies of each such notice;
(vi) within ten (10) Business Days after receipt by the Borrower, any
Subsidiary or any ERISA Affiliate of any favorable or unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Internal Revenue
Code, copies of each such letter;
(vii) within ten (10) Business Days after receipt by the Borrower,
any Subsidiary or any ERISA Affiliate of a notice regarding the imposition
of withdrawal liability, copies of each such notice;
(viii) within ten (10) Business Days after the Borrower, any
Subsidiary or any ERISA Affiliate fails to make a required installment or
any other required payment under Section 412 of the Internal Revenue Code
exceeding in the aggregate $750,000 on or before the due date for such
installment or payment, a notification of such failure;
(ix) no later than 90 days after the end of each plan year, a
calculation of the Unfunded Current Liabilities, if any, of each Benefit
Plan.
For purposes of this paragraph (a), the Borrower, any Subsidiary and any ERISA
Affiliate shall be deemed to know all facts known by the administrator of any
Plan of which such entity is the plan sponsor.
(b) The Borrower will establish, maintain and operate all Plans to
comply in all material respects with the provisions of ERISA, the Internal
Revenue Code, and all other applicable laws, and the regulations and
interpretations thereunder except to the extent that the Borrower is in good
faith contesting by appropriate proceedings the
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validity or implication of any such provision, law, rule, regulation or
interpretation or except where noncompliance would not (i) have a Material
Adverse Effect on (ii) result in a liability or potential liability exceeding
$1,000,000.
5.5 Notice of Legal Proceedings or Adverse Changes. The Borrower
will, as soon as possible, and in any event within five (5) Business Days after
the Borrower learns of the following, give written notice thereof to the Agent
and the Lenders: (i) any material proceeding(s) being instituted or threatened
to be instituted in writing by or against the Borrower or any of the
Subsidiaries in any federal, state, local or foreign court, arbitral, tribunal
or before any commission or other regulatory body (federal, state, local or
foreign), and (ii) any change, or development or event involving a prospective
change, which has had or could reasonably be expected to have a Material
Adverse Effect; provided that the Borrower shall not be required to notify the
Agent and the Lenders of industry wide or general economic changes for which
information is publicly available.
5.6 Environmental and Other Matters. (a) The Borrower and its
Subsidiaries will conduct their businesses so as to comply in all material
respects with all applicable Environmental Laws in all jurisdictions in which
any of them is doing business, except to the extent that the Borrower of any of
the Subsidiaries are contesting, in good faith by appropriate legal
proceedings, any such Environmental Law or the interpretation of application
thereof, provided that the Borrower and each of the Subsidiaries shall comply
with the applicable order of any court or other governmental agency relating to
any such contested Environmental Law unless the Borrower or the Subsidiaries
shall currently be prosecuting an appeal or proceedings for review and shall
have secured a stay of enforcement or execution or other arrangement postponing
enforcement or execution pending such appeal or proceedings for review.
(b) If the Borrower or any of the Subsidiaries shall (i) receive
written notice that any material violation of any Environmental Law may have
been committed or is about to be committed by the Borrower or any of the
Subsidiaries, (ii) receive written notice that any administrative or judicial
complaint or order has been filed or is about to be filed against the Borrower
or any Subsidiary alleging material violations of any Environmental Law or
requiring the Borrower or any Subsidiary to take any action in connection with
the release of Hazardous Substances into the environment or (iii) receive any
written notice from a federal, state, or local government agency or private
party alleging that the Borrower or any Subsidiary may be
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liable or responsible for material costs associated with a response to or
cleanup any Hazardous Substance or any damages caused thereby, the Borrower
will provide the Agent and the Lenders with a copy of such notice within
fifteen (15) days after the receipt thereof by the Borrower or any Subsidiary.
Within fifteen (15) days after the Borrower learns of the enactment or
promulgation of any Environmental Law which could reasonably be expected to
have a Material Adverse Effect, the Borrower will provide the Agent and the
Lenders with notice thereof.
(c) The Borrower will promptly take all reasonable actions necessary
to prevent the imposition of any Liens on any of its properties arising out of
or related to any Environmental Law.
(d) At the written request of the Agent, which request shall include
a reasonably specific statement of the basis thereof, but in any event not more
frequently than once in any twelve month period (unless the Agent determines
that a violation of Environmental Laws may have occurred on premises or
facilities owned or leased by the Borrower or any Subsidiary), and at the sole
cost and expense of the Borrower, the Borrower will retain an environmental
consulting firm, satisfactory to the Agent in its commercially reasonable
judgment, to conduct an environmental review, audit or investigation of the
specific items as requested by the Agent relating to the properties of the
Borrower and the Subsidiaries located in the United States and provide to the
Agent and each Lender a copy of any reports delivered in connection therewith.
At the request of the Agent, the Borrower shall provide the Agent with any
additional information relating to environmental matters and any potential
related liability resulting therefrom as the Agent may reasonably request.
5.7 Books and Records. The Borrower will maintain, and will cause
each Subsidiary to maintain, books and records pertaining to the Collateral and
to the business, assets and operations of the Borrower and its Subsidiaries, in
such detail, form and scope as is consistent with good business practice, and
will reflect in such books and records the Lenders' interest in the Accounts.
The Borrower agrees that the Agent or its agents may (a) enter upon the
premises of the Borrower or any of the Subsidiaries at any time and from time
to time during normal business hours and upon reasonable notice under the
circumstances (and at any time during all hours on and after the occurrence of
an Event of Default which has not been waived pursuant to Section 9.10), for
the purpose of (i) inspecting the Collateral and (ii) inspecting and/or copying
(at Borrower's expense) any and all records
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pertaining thereto, and (iii) verifying Eligible Accounts Receivable and/or
Eligible Inventory and (b) discuss the affairs, finances and business of the
Borrower with any officers, employees and directors of the Borrower or with the
Auditors and (c) verify Accounts with the account debtors thereon.
5.8 Changes in Location of Offices. The Borrower will give the
Agent 30 days' prior written notice of any proposed change in the location of
the Borrower's or any of its Subsidiaries' chief executive office, principal
place of business or the office at which the Borrower or such Subsidiary keeps
its records concerning its Account from that specified in Section 4.7 (or from
that to which any such location was previously changed pursuant to this Section
5.8), and prior to implementing any such proposed change the Borrower will
furnish to the Agent all UCC financing statements and other documents and
instruments specified by the Administrative to continue the Lien of the Agent
and the Lenders on the Collateral as a first and perfected senior Lien. The
Borrower shall in any event not (i) implement such proposed change if it would
cause the Agent's or the Lenders' Lien on any Collateral to cease being a first
and perfected senior Lien, or (ii) relocate its chief executive office to a
location outside the United States.
5.9 Location of Inventory. The Borrower shall keep all Inventory of
the Borrower and its Subsidiaries (other than any Inventory in transit) at the
locations specified in Schedule 4.7; provided that the Borrower and its
Subsidiaries may keep Inventory at other locations in the United States if (i)
the Borrower gives the Agent 30 days' prior written notice of its intention to
keep Inventory at any such other location and (ii) prior to implementing such
proposal the Borrower furnishes to the Agent all UCC financing statements and
other documents specified by the Agent to continue the Lien of the Agent and
the Lenders on the Inventory as a first and perfected senior Lien. The
Borrower and its Subsidiary shall not in any event keep Inventory (other than
any Inventory in transit) at any location other than the locations specified in
Schedule 4.7 if to do so would cause the Agent's or the Lenders' Lien on such
Inventory to cease being a first and perfected senior Lien.
5.10 Name Change; Trade Name. The Borrower will give the Agent 30
days' prior written notice of any proposed change in the Borrower's or any
Subsidiary's name or of any proposal by the Borrower or any Subsidiary to
conduct any business under an assumed name or trade name not theretofore
disclosed to the Agent. Prior to imple-
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menting such proposal the Borrower will deliver to the Agent all UCC financing
statements and other instruments requested by the Agent to continue the Lien of
the Agent on the Collateral as a first perfected Senior Lien.
5.11 Adverse Change in Collateral. The Borrower will advise the Agent
promptly, in sufficient detail, of any substantial change relating to the type,
quantity or quality of the Collateral, or any event which could have a Material
Adverse Effect on the value of the Collateral or on the security interests
granted to the Lenders therein.
5.12 Collateral Records. The Borrower will execute and deliver to the
Agent from time to time, solely for the Agent's convenience in maintaining a
record of the Collateral, such written statements and schedules as the Agent may
reasonably require designating, identifying or describing the Collateral. The
Borrower's or any failure, however, to promptly give the Agent such statements
or schedules shall not affect, diminish, modify or otherwise limit the Agent's
or Lenders' security interest in the Collateral.
5.13 Security Interests. The Borrower will defend the Collateral
against all claims and demands of all Persons at any time claiming the same or
any interest therein. The Borrower will comply with the requirements of all
state and federal laws in order to grant to the Agent and the Lenders valid and
perfected first security interests in the Collateral. The Agent is hereby
authorized by the Borrower to file any financing statements covering the
Collateral whether or not the Borrower's signatures appear thereon. The
Borrower agrees to do whatever the Agent may reasonably request, from time to
time, by way of: filing notices of liens, financing statements, and amendments,
renewals and continuations thereof; cooperating with the Agent's agents and
representatives; keeping stock records; paying claims which might, if unpaid,
become a Lien on the Collateral; and performing such further acts as the Agent
may reasonably require in order to effect the purposes of this Credit Agreement
and the other Credit Documents. Any and all fees, costs and expenses, of
whatever kind and nature (including any taxes, attorneys' fees or costs for
insurance of any kind), which the Agent may incur with respect to the Collateral
or the Obligations: in filing public notices; in preparing or filing documents;
in protecting, maintaining, or preserving the Collateral or its interest
therein; in enforcing or foreclosing the Liens hereunder, whether through
judicial procedures or otherwise; or in defending or prosecuting any actions or
proceedings arising out of or relating to its transactions
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with the Borrower or any of the Subsidiaries under this Credit Agreement or any
other Credit Document, shall be borne and paid by the Borrower. If same are not
promptly paid by the Borrower, the Agent may pay same on the Borrower's behalf,
and the amount thereof shall be an Obligation secured hereby and due to the
Agent on demand.
5.14 Maintenance of Insurance. The Borrower will, and will cause each
Subsidiary to, (i) maintain insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is usually
carried by companies engaged in similar business of similar size and owning
similar properties in the same general areas in which the Borrower or such
subsidiary operations and (ii) furnish to the Agent and the Lenders, upon
written request, full information as to the insurance maintained by the Borrower
and its Subsidiaries.
5.15 Casualty Loss; Condemnation. The Borrower will provide written
notice to the Agent and the Lenders of the occurrence of any of the following
events within five (5) Business Days after the occurrence of such event: any
asset or property owned or used by the Borrower or any of the Subsidiaries is
(i) damaged or destroyed, or suffers any other loss, or (ii) condemned,
confiscated or otherwise taken, in whole or in part, or the use thereof is
otherwise diminished so as to render impracticable or unreasonable the use of
such asset or property for the purposes to which such asset or property was used
immediately prior to such condemnation, confiscation or taking, by exercise of
the powers of condemnation or eminent domain or otherwise, and as a result of
the circumstances specified in clause (i) or (ii) above the Borrower or its
Subsidiaries suffer losses (whether or not compensable by insurance or award)
exceeding in the aggregate $1,000,000 (collectively, a "Casualty Loss"). The
Borrower will diligently file and prosecute its claim or claims for any award or
payment in connection with a Casualty Loss.
5.16 Taxes. The Borrower will pay, when due, and will cause each
Subsidiary to pay when due, all taxes lawfully levied or assessed against the
Borrower, such Subsidiary or any of the Collateral before any penalty or
interest accrues thereon; provided, however, that, unless such taxes have become
a federal tax or ERISA Lien on any of the assets of the Borrower or any
Subsidiary, no such tax need to be paid if the same is being contested, in good
faith, by appropriate proceedings promptly instituted and diligently conducted
and if an adequate reserve or other appropriate provision shall have been made
therefor as required in order to be conformity with GAAP.
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5.17 Compliance With Laws. Except where failure to comply would not
have a Material Adverse Effect, the Borrower will comply, and will cause each
Subsidiary to comply, with all laws, rules, regulations, orders and ordinances
of any legislative, administrative or judicial body or official applicable to
the Collateral or any part thereof or to its assets or the operation of its
business; provided that the Borrower and any Subsidiary may contest any acts,
rules, regulations, orders and ordinances of such bodies or officials in any
reasonable manner that would not reasonable be expected to have a Material
Adverse Effect.
5.18 Use of Proceeds. The initial Loans made to the Borrower hereunder
shall be used first (i) to pay the costs and expenses of the transactions
contemplated by this Credit Agreement which are due and payable on the Closing
Date, including, without limitation, the Fees and Expenses due on the Closing
Date pursuant to Sections 2.9 and 3.1 hereof and (ii) for the Refinancing; and
the proceeds of any subsequent Loans made hereunder shall be used by the
Borrower for general corporate purposes, including working capital requirements,
of the Borrower and the Subsidiaries after the Refinancing. The Borrower will
not use any portion of the proceeds of any Loans hereunder for the purpose of
purchasing or carrying any "margin stock" (as defined in Regulation G of the
Board of Governors of the Federal Reserve System) in any manner which violates
the provisions of Regulation G, U or X or said Board of Governors or for any
other purpose in violation of any applicable statute or regulation or of the
terms and conditions of this Credit Agreement.
5.19 Fiscal Year. The Borrower will not change its fiscal year from a
year ending March 31 unless (i) required by law or (ii) Kyoei shall have
requested such change to facilitate its Japanese financial reporting
requirements, and in either case the Borrower shall give the Agent and the
Lenders at least thirty (30) days prior written notice thereof.
5.20 Notification of Certain Events. The Borrower will promptly notify
the Agent and the Lenders of the occurrence of any of the following events:
(a) except for any contract which gives rise to a Fabricating
Account, any Material Contract of the Borrower or any of the Subsidiaries
is terminated or amended in any material respect or any new Material
Contract is entered into (in which event the Borrower shall provide the
Agent and the Lenders with a copy of such Material Contract); or
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(b) any of the material terms upon which suppliers to the
Borrower or any of the Subsidiaries do business with the Borrower or any
Subsidiary are changed or amended and such change or amendment could
reasonably be expected to have a Material Adverse Effect on the Borrower
and its Subsidiaries taken as a whole; or
(c) any order, judgment or decree in excess of $1,000,000 shall
have been entered against the Borrower or any of the Subsidiaries or any
of their respective properties or assets; or
(d) any notification of violation of any law or regulation or
any inquiry shall have been received by the Borrower or any of the
Subsidiaries from any local, state, federal or foreign governmental
authority or agency, which reasonably could be expected to have a
Material Adverse Effect.
5.21 Intellectual Property. The Borrower will do and cause to
be done all things necessary to preserve and keep in full force and effect all
registrations of patents, trademarks, service marks and other marks, trade names
or other trade rights.
5.22 Maintenance of Property. The Borrower will keep, and cause
each Subsidiary to keep, all property useful and necessary to its respective
business in good working order and condition (ordinary wear and tear excepted)
in accordance with its past operating practices and not commit or suffer any
waste with respect to any of its properties, except for properties which either
individually or in the aggregate are not material. In furtherance of the
maintenance required under this Section 5.22 the Borrower may temporarily
shutdown a property or facility for the upgrade or extended maintenance of such
property or facility.
5.23 Payment of Taxes. The Borrower will, and will cause each
Subsidiary to, pay and discharge all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits, or upon any properties
belonging to it, in each case on a timely basis, and all lawful claims which, if
unpaid, might become a lien upon any properties of the Borrower or Subsidiary,
provided that neither the Borrower nor any Subsidiary shall be required to pay
any such tax, assessment, charge, levy or claim which is being contested in good
faith and by proper proceedings if it maintains adequate reserves with respect
thereto in accordance with GAAP.
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5.24 Further Assurances. The Borrower will take, and will cause each
Subsidiary to take, all such further actions and execute all such further
documents and instruments as the Agent may at any time reasonably determine in
its sole discretion to be necessary or advisable to further carry out and
consummate the transactions contemplated by this Credit Document, to cause the
execution, delivery and performance of this Credit Document to be duly
authorized and to perfect or protect the Liens (and the priority status
thereof) of the Agent and the Lenders on the Collateral.
ARTICLE 6. Negative Covenants.
Until termination of this Credit Agreement and payment and
satisfaction of all Obligations due hereunder and under the other Credit
Documents, the Borrower agrees that:
6.1 Consolidated Net Worth. The Consolidated Entity will at all times
maintain a Consolidated Net Worth of not less than the sum of (i) $100,000,000
plus (ii) 50% of the net proceeds received by the Borrower after the date
hereof from sales of its stock (whether in a public offering or a private
placement) other than the sales to (x) the Borrower's Stock Purchase/Stock
Option Plan, or (y) employees or officers of the Borrower pursuant to incentive
plans or programs.
6.2 Interest Coverage. The Consolidated Entity will have an
EBITDA/Interest Expense Ratio of not less than 1.30 to 1.00 for each Rolling
Period.
6.3 Current Ratio. The Consolidated Entity will at all times maintain
a ratio of Current Assets to Current Liabilities of not less than 1.25 to 1.00.
6.4 Restricted Expenditures. The Borrower and its Subsidiaries will
not make Restricted Expenditure in any fiscal quarter commencing on or after
July 1, 1995 in an aggregate amount in excess of the sum of the Restricted
Expenditures Allowance plus the Restricted Expenditures Basket for such fiscal
quarter; provided that no Restricted Expenditures shall be made at any time if
after giving effect thereto the Availability would be less than $10,000,000 or
if such Restricted Expenditure is prohibited by Section 6.11(b). As used herein:
"Restricted Expenditures" shall mean, for any fiscal quarter,
the sum of (a) the Capital Expenditures of the Borrower and its
Subsidiaries in
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such fiscal quarter plus (b) the amount applied by the Borrower and its
Subsidiaries in such fiscal quarter to the optional repayment,
redemption or repurchase of Funded Debt, provided that there shall be
excluded from Restricted Expenditures any expenditures with respect to
any Casualty Loss to the extent of any insurance proceeds received with
respect to such Casualty Loss.
"Restricted Expenditures Allowance" shall mean for any fiscal
quarter (a) the operating cash flow of the Borrower and its
Subsidiaries in such fiscal quarter (as set forth in the Borrower's
Financial Statements for such quarter) plus (b) the net proceeds
received by the Borrower and its Subsidiaries in such fiscal quarter
from the issuance or incurrence of Funded Debt plus (c) the net cash
proceeds received by the Borrower and its Subsidiaries in such fiscal
quarter from the sale of their fixed assets minus (d) all mandatory
payments of principal of Funded Debt made by the Borrower and its
Subsidiaries in such fiscal quarter; provided that if the Restricted
Expenditures Allowance for any fiscal quarter exceeds the Restricted
Expenditures of the Borrower in such fiscal quarter, then the
Restricted Expenditures Allowance in the subsequent fiscal quarter
shall be increased by the amount of such excess which is not applied to
increase the Restricted Expenditures Basket pursuant to clause (c) of
the definition of that term; provided, further, that in calculating the
amount of Funded Debt proceeds received by the Borrower or any
Subsidiary in any fiscal quarter, for purposes of determining the
Restricted Expenditures Allowance in such fiscal quarter, there shall
be excluded proceeds of Funded Debt covered by Facility Letters of
Credit or Third Party Letters of Credit. If the Operating Cash Flow in
any fiscal quarter is negative, then the amount specified in clause (a)
above shall be negative. The Restricted Expenditures Allowance shall in
any event not be a number less than zero.
"Restricted Expenditures Basket" shall mean, for any fiscal
quarter (the "Relevant Fiscal Quarter") an amount equal to (a)
$30,000,000 minus (b) the aggregate amount of the Restricted
Expenditures made by the Borrower in each quarter commencing after the
date hereof and ending prior to the Relevant Fiscal Quarter in excess
of the Restricted Expenditures Allowance in each such fiscal quarter
plus (c) the lesser of (i) the amount specified in clause (b) above or
(ii) the aggregate amount of the Unused Restricted Expenditures
Allowance for each fiscal quarter
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commencing after the date hereof and ending prior to the Relevant Fiscal
Quarter to the extent such amount is not applied to increase the Restricted
Expenditure Allowance pursuant to the first proviso of the definition of
that term.
"Unused Restricted Expenditure Allowance" shall mean, for any fiscal
quarter, the excess, if any, of the Restricted Expenditures Allowance for
such fiscal quarter over the Restricted Expenditures made in such fiscal
quarter.
6.5 Indebtedness. The Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, incur, create, assume or suffer to exist
any Indebtedness other than:
(a) Indebtedness arising under this Credit Agreement and the other
Credit Documents;
(b) Indebtedness under the First Mortgage Notes and the First Mortgage
Notes Indenture;
(c) Indebtedness under the Existing Subordinated Debentures and the
Existing Debenture Indenture;
(d) Indebtedness under the FLS Intercompany Note;
(e) Indebtedness under Interest Rate Agreements entered into in the
ordinary course of business;
(f) Indebtedness in respect of Third Party Letters of Credit permitted
by Section 2.7.7;
(g) Indebtedness described on Schedule 6.5 and any refinancing of such
Indebtedness, provided that the aggregate principal amount of such
refinancing Indebtedness is not increased and such refinancing is on terms
and conditions no more restrictive than the terms and conditions of the
Indebtedness being refinanced (and for purposes hereof a "refinancing"
Indebtedness shall include Indebtedness incurred within 90 days after the
refinanced Indebtedness is repaid);
(h) Indebtedness, in addition to the Indebtedness permitted in clauses
(a) through (g) above, not exceeding $50,000,000 in principal amount at any
one time outstanding (including all outstanding
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Sale/Leaseback Transactions permitted by Section 6.10);
(i) Indebtedness, in addition to that permitted by clauses (a) through
(h) above, provided that (i) the Required Lenders consent thereto and (ii)
the EBITDA/Interest Expense Ratio, for the most recent Rolling Period
preceding the date such additional Indebtedness is to be incurred for which
Financial Statements have been furnished by the Borrower pursuant to Section
5.1, is equal to or greater than 2.25 to 1.00.
6.6 Liens. The Borrower will not, and will not permit any Subsidiary
to, directly or indirectly, mortgage, assign, pledge, transfer, create incur,
assume, suffer to exist or otherwise permit any Lien (whether as a result of a
purchase money or title retention transaction, Sale/Leaseback Transaction,
Capital Lease or other security arrangement, or otherwise) to exist on any of
its property, assets, revenues or goods, whether real, personal or mixed,
whether now owned or hereafter acquired, except for:
(a) Liens granted to the Lenders or the Agent pursuant to any Credit
Document;
(b) Liens securing the First Mortgage Notes;
(c) Liens listed on Schedule 6.6;
(d) Liens to the extent they secure Indebtedness permitted by clause
(h) of Section 6.5 provided such Liens do not cover or extend to the
Collateral;
(e) Liens of warehousemen, mechanics, materialmen, workers, repairmen,
common carriers, landlords and other similar Liens arising by operation of
law or otherwise, not waived in connection herewith, for amounts that are
not yet due and payable or which are being diligently contested in good
faith by the Borrower by appropriate proceedings;
(f) attachment or judgment Liens individually or in the aggregate not
in excess of $1,000,000 (exclusive of (i) any amounts that are duly bonded
to the reasonable satisfaction of the Agent or (ii) any amount adequately
covered by insurance as to which the insurance company has not disclaimed or
disputed in writing its obligations for coverage);
(g) Liens for taxes, assessments or other governmental charges not yet
due and payable or which are
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being diligently contested in good faith by the Borrower by appropriate
proceedings, provided that in any such case an adequate reserve is being
maintained by the Borrower in accordance with GAAP for the payment of same;
(h) deposits or pledges to secure obligations under workmen's
compensation, social security or similar laws, or under unemployment
insurance;
(i) deposits or pledges to secure bids, tenders, contracts (other than
contracts for the payment of money), leases, statutory obligations, surety
and appeal bonds and other obligations of like nature arising in the
ordinary course of business;
(j) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not materially detract
from the value of the property subject thereto or materially interfere with
the ordinary conduct of the business of the Borrower or any Subsidiary;
(k) Liens previously existing on property acquired hereafter (other
than Collateral) and assumed by the Borrower or any of its Subsidiaries in
connection with such acquisition and not created in contemplation of such
acquisition;
(l) Liens securing the reimbursement obligations of the Borrower in
respect of Third Party Letters of Credit permitted by Section 2.7.7,
provided that (i) such Liens, insofar as they relate to any item of
Collateral, are expressly stated to be subordinate in all respects to the
Liens securing the Obligations hereunder and (ii) the instruments pursuant
to which such Liens with respect to Third Party Letters of Credit are
created are approved by the Agent in the exercise of its commercially
reasonable judgment;
(m) Liens arising under Sale/Leaseback Transactions permitted by
Section 6.10;
(n) Liens securing refinancings, extensions or renewals of Indebtedness
or obligation secured by Liens permitted in clauses (a) through (m) above;
provided that (x) the amount of any such extended, renewed or refinancing
Indebtedness or obligation is not increased, (y) such extended, renewed or
refinancing Indebtedness or obligation is on terms and conditions no more
restrictive than the terms and conditions of
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the Indebtedness or obligation being extended or renewed and (z) such
Liens cover only property or assets theretofore subject thereto (and
for purpose of this clause (n) "refinancing" Indebtedness shall have
the meaning provided in clause (g) of Section 6.5.
6.7 No Guarantees. (a) The Borrower will not,
and will not permit any Subsidiary to, directly or indirectly, assume,
guarantee, endorse, or otherwise become liable upon the obligations of any
other Person, including, without limitation, any Subsidiary or Affiliate of the
Borrower, except (i) by the endorsement of negotiable instruments for deposit
or collection or similar transactions indemnities in connection with the sale
of Inventory or other asset dispositions permitted hereunder, (iii) in
connection with the incurrence of Indebtedness permitted to be incurred
pursuant to Section 6.5 hereof, (iv) guarantees of Indebtedness not exceeding
$500,000 at any one time outstanding, and (v) guarantees listed on Schedule 6.7
hereto.
(b) As used in this Section 6.7, the term "guarantee" shall
include all obligations incurred by the Borrower or any Subsidiary through an
agreement, contingent or otherwise, by the Borrower or any Subsidiary (i) to
purchase Indebtedness of any Person or any property or assets constituting
security for such Indebtedness; (ii) to advance or supply funds (A) for the
purchase or payment of Indebtedness of any Person, or (B) to maintain working
capital or equity capital of any Person at a specified level so long as
specified Indebtedness of such Person is outstanding; (iii) to purchase
property, securities, goods or services of any Person for the purpose of
assuring the owner of Indebtedness of such Person of the ability of such Person
to make payment of such Indebtedness; or (iv) otherwise to assure the owner of
any Indebtedness against loss in respect thereof.
6.8 Sale of Assets. The Borrower will not, and will not
permit any Subsidiary to, directly or indirectly, sell, lease, assign, transfer
or otherwise dispose of any assets other than:
(a) Inventory in the ordinary course of business;
(b) obsolete or worn out property disposed of in the
ordinary course of business;
(c) approximately 432 acres of undeveloped land, the
corporate office buildings and the Tampa Mill melt
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shop assets, all located in Tampa, Florida, provided that such assets
are sold for fair market value;
(d) other dispositions in any one fiscal year at fair market
value of assets having a book or market value (whichever is higher) not
exceeding $1,000,000; and
(e) other dispositions of assets that do not constitute
Collateral, provided that (i) such other dispositions are for fair
market value, (ii) at least seventy five percent (75%) of the aggregate
consideration for such other dispositions is in the form of cash, (iii)
such consideration is either (1) reinvested in the business of the
Borrower or its Subsidiaries, (2) used to repay the Loans or (3) used
to repay other Indebtedness as otherwise permitted hereunder, provided
that the book or market value (whichever is higher) of assets disposed
of by the Borrower and its Subsidiaries during any fiscal year pursuant
to this clause (e) may not exceed $50,000,000 without the written
consent of the Required Lenders.
6.9 No Corporate Changes. The Borrower will not, and will
not permit any Subsidiary to, directly or indirectly, (a) merge or consolidate
with any other Person or (b) alter or modify its Articles or Certificate of
Incorporation, structure, status or corporate existence (except for (i) changes
to increase the Borrower's authorized capital stock and (ii) changes upon 30
days prior notice to the Agent and the Lenders which individually and in the
aggregate would not reasonably be expected to have a Material Adverse Effect),
or (c) enter into or engage in any operation or activity materially different
from that presently being conducted by the Borrower or (d) liquidate or
dissolve, except that (i) any Subsidiary may be merged or consolidated with or
into another Subsidiary or the Borrower (provided that the Borrower shall be
the continuing or surviving corporation of any merger with a Subsidiary) and
(ii) the Borrower or any Subsidiary may merge with another Person provided that
(x) such transaction constitutes an Investment permitted by Section 6.12 and
(y) the Borrower or such Subsidiary is the surviving corporation in such merger.
6.10 Sale/Leaseback Transactions. The Borrower will not, and
will not permit any Subsidiary to, enter into any Sale/Leaseback Transaction
after the date hereof if, after giving effect thereto, the aggregate outstanding
amount of all Sale/Leaseback Transactions then in effect would exceed (i)
$50,000,000 minus (ii) outstanding Indebtedness of the Borrower or its
Subsidiaries (other than
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Sale/Leaseback Transactions) permitted by clause (h) of Section 6.5. For
purposes of this Section 6.10 and clause (h) of Section 6.5 the amount of each
Sale/Leaseback transaction shall be equal to (i) the amount thereof required to
be shown as a debt on the balance sheet of the Consolidated Entity pursuant to
GAAP or (ii) if the amount of such Sale/Leaseback Transaction is not required
to be so shown pursuant to GAAP, the discounted present value of all lease
payments required to be made by the Borrower or any Subsidiary under such
Sale/Lease Transaction. Each Sale/Leaseback Transaction shall also comply with
the requirements of clause (e) of Section 6.8.
6.11 No Restricted Payments. The Borrower will not, and will
not permit any Subsidiary to, directly or indirectly:
(a) declare or pay any dividend (other than dividends payable
solely in common stock of the Borrower) on, or make any payment on
account of, or set apart assets for a sinking or other analogous fund
for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of capital stock of the
Borrower or any warrants, options or rights to purchase any such
capital stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether
in cash or property or in obligations of the Borrower or any of its
Subsidiaries, except that (i) the Borrower and its Subsidiaries, except
that (i) the Borrower and its Subsidiaries may make tax payments
on behalf of FLS and may reimburse each other with respect to tax
payments, (ii) the Borrower may make payments under the Technical
Assistance Agreements in an aggregate amount not to exceed $2,000,000
in any twelve month period, (iii) the Borrower may make payments to FLS
for holding company expenses in an aggregate amount not to exceed
$500,000 in any fiscal year, (iv) the Borrower may reimburse Kyoei or
its Affiliate for expenses incurred on behalf of the Borrower and in
an aggregate amount not to exceed $500,000 in any one fiscal year, (v)
any Subsidiary may declare and pay dividends to the Borrower or any
other Subsidiary, (vi) in addition to the payments permitted by clauses
(i) through (v) above, so long as no Default has occurred and is
continuing or would result therefrom and so long as after giving effect
to the payment of any proposed dividend the amount of the Availability
shall be at least $10,000,000, the Borrower may pay dividends on its
common stock in an amount not to exceed, in any fiscal year, the lesser
of (A) $15,000,000 or (B) seventy-five percent (75%) of the aggregate
amount of
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Adjusted Consolidated Net Income for the immediately preceding fiscal year,
provided that any dividend permitted by this clause (vi) to be paid during any
fiscal year may be declared as of the last day of the immediately preceding
fiscal year, (vii) in addition to the payments permitted by clauses (i) through
(vi) above, the Borrower may pay dividends to FLS equal to the net cash proceeds
received by the Borrower after the date hereof from the sale of its stock and
(viii) the Borrower may repurchase shares of its stock issued to its officers
and employees, provided that (A) no Default exists at the time of such
repurchase, (B) such repurchase is made at a price equal to the appraised or
fair market value of such shares, (C) such repurchase is made pursuant to bona
fide contractual arrangements or incentive programs in effect at the time the
shares were issued to such officers and employees and (D) the total number of
shares which may be repurchased pursuant to this clause (viii) during the term
of this Agreement may not exceed 15% of the total outstanding capital stock of
the Borrower and (E) after giving effect to any such repurchase, the
Availability would be $10,000,000 or more;
(b) make any optional payment or repayment on or redemption (including,
without limitation, by making payments to a sinking or analogous fund) or
repurchase of any Indebtedness (other than Loans, LOC Reimbursement Obligations
or other Obligations owing under any Credit Document) including, without
limitation, the First Mortgage Notes, any Subordinated Note or the Existing
Subordinated Debentures; provided that (i) the Borrower may make mandatory
redemptions of the First Mortgage Notes with the net proceeds of certain Asset
Sales (as defined in the First Mortgage Note Indenture), (ii) the Borrower may
on or after July 1, 1995 subject to the limitation on Restricted Expenditures
set forth in Section 6.4, (A) purchase or prepay the Existing Subordinated
Debentures, (B) to the extent permitted by the provisions thereof, prepay up to
$945,000 of the principal amount of the FLS Intercompany Note, and/or (C) prepay
in any one fiscal year up to $1,000,000 in aggregate principal amount of any
other Indebtedness (other than the First Mortgage Notes and the Subordinated
Intercompany Note), in each case to the extent that after giving effect to such
purchase or payments the aggregate amount of the Availability is at least
$10,000,000; or
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(c) make any payment on the FLS Intercompany Note if a Default under
this Credit Agreement has occurred or is continuing.
6.12 No Investments. The Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, make any investment in any Person,
whether in cash, securities, or other property of any kind including, without
limitation, any Subsidiary or Affiliate of the Borrower, other than:
(a) advances or loans made in the ordinary course of business not to
exceed $2,000,000 in the aggregate outstanding at any one time;
(b) Investments existing on the date hereof not exceeding $500,000 in
aggregate amount and Investments listed in Schedule 6.12;
(c) Cash Equivalents;
(d) interest-bearing demand or time deposits (including certificates
of deposit) which are insured by the Federal Deposit Insurance Corporation
("FDIC"), provided, that the Borrower and its Subsidiaries may, in the
ordinary course of their business, maintain in their Disbursement Accounts
and/or the Borrower's Corporate Account from time to time amounts in excess
of then applicable FDIC insurance limits;
(e) loans to management employees of the Borrower or any Subsidiary
(in addition to those disclosed in Schedule 6.12) not exceeding in aggregate
principal amount $500,000 at any time outstanding;
(f) any exception to restricted payments set forth in Section 6.11
that may otherwise constitute an Investment; and
(g) such other Investments as the Required Banks may approve in their
sole discretion;
provided that the Borrower may make Investments (in addition to those permitted
by clauses (a) through (g) above) if after giving effect thereto the
EBITA/Interest Expense Ratio for the then most recent Rolling Period for which
Financial Statements have been furnished by the Borrower pursuant to Section 5.1
are both equal to or greater than 2.25 to 1.00; provided, further, that any
Investment resulting in the acquisition by the Borrower of a Subsidiary must
comply with the provisions of Section 6.19. As used herein, "Pro
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Forma EBITDA/Interest Expense Ratio" shall mean for any Rolling Period with
respect to any proposed Investment, the EBITDA/Interest Expense Ratio for such
Rolling Period calculated as if such Investment had been made on the first day
of such Rolling Period and retained for the entire duration thereof, all
Indebtedness incurred to finance such Investment had been incurred on the first
day of such Rolling Period and had been outstanding for the entire term of such
Rolling Period and the revenues and expenses attributable to such Investment
were reflected in EBITDA for such Rolling Period.
6.13 No Affiliate Transactions. Except for (i) the Technical
Assistance Agreements, if any, (ii) the FLS Intercompany Notes and the
Subordinated Intercompany Note, and (iii) payments otherwise permitted pursuant
to Section 6.11 or 6.12 hereof, the Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, enter into any transaction (including,
without limitation, the purchase, sale or exchange of property or the rendering
of any service) with any Subsidiary or Affiliate of the Borrower except in the
ordinary course of and pursuant to the reasonable requirements of the Borrower's
or such Subsidiary's business, as the case may be, and upon fair and reasonable
terms no less favorable to the Borrower or such Subsidiary than could be
obtained in a comparable arm's length transaction with an unaffiliated Person;
provided, that (a) the aggregate amount of all Affiliate transactions (excluding
payments under the Technical Assistance Agreement or payments permitted under
Section 6.11 or 6.12) may not exceed $3,000,000 in any twelve month period
unless the Board of Directors of the Borrower or such Subsidiary, as the case
may be, pursuant to a board resolution, reasonably and in good faith determines
that such transaction is fair to the Borrower or such Subsidiary, as the case
may be, and is on terms no less favorable to the Borrower or such Subsidiary
than could be obtained in a comparable arm's length transaction with an
unaffiliated Person and (b) the aggregate amount of all payments made under the
Technical Assistance Agreements may not exceed $2,000,000 in any twelve month
period.
6.14 ERISA. The Borrower will not, and shall not permit any
Subsidiary to, directly or indirectly:
(a) Engage, or permit any ERISA Affiliate to engage, in any
prohibited transaction which is reasonably likely to result in a
civil penalty or excise tax described in Sections 406 of ERISA or
4975 of the Internal Revenue Code exceeding in the aggregate
$1,000,000 for which a statutory or class exception is
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not available or a private exemption has not been previously obtained
from the DOL;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and
412 of the Internal Revenue Code), whether or not waived;
(c) fail, or permit any ERISA Affiliate to fail, to pay
timely required contributions or annual installments due with
respect to any waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any ERISA Affiliate to
terminate, any Benefit Plan where such event would result in
any liability of the Borrower exceeding $1,000,000, any
Subsidiary or any ERISA Affiliate under Title IV of ERISA;
(e) fail, or permit any ERISA Affiliate to fail, to
pay any required installment or any other payment exceeding
$750,000 in aggregate amount required under Section 412 of
the Internal Revenue Code on or before the due date for such
installment or other payment;
(f) amend, or permit any ERISA Affiliate to amend, a
Plan resulting in an increase in current liability for the plan
year such that either of the Borrower, any Subsidiary or any
ERISA Affiliate is required to provide security to such Plan
under Section 401(a)(29) of the Internal Revenue Code; or
(g) contribute to or otherwise incur any liability
with respect to a Multiemployer Plan.
6.15 Additional Bank Accounts. The Borrower will not, and
will not permit any Subsidiary to, directly or indirectly, open, maintain or
otherwise have any checking, savings or other accounts at any bank or other
financial institution, or any other account where money is or may be deposited
or maintained with any Person, other than the Borrower's Corporate Account, the
Disbursement Accounts, the Lockbox Accounts or accounts maintained by the Agent
or the Lockbox Bank and the accounts set forth on Schedule 6.15; provided that
upon 10 days prior written notice to the Agent the Borrower or its Subsidiary
may establish other deposit accounts (but no lockbox accounts) identified in
such notice at a bank in the United States or a U.S. branch of a non-U.S. bank.
6.16 No Excess Cash. The Borrower will not, and will not
permit any Subsidiary to, directly or indirectly
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maintain in the aggregate in all of the checking, savings or other accounts
(other than Lockbox Accounts or any payroll accounts) of the Borrower and its
Subsidiaries, total cash balances and investments in Cash Equivalents permitted
by Section 6.12 hereof in excess of $10,000,000 in the aggregate for the
Borrower and its Subsidiaries at any time during which any Loans are
outstanding hereunder.
6.17 Material Amendments of Material Contracts. The Borrower will
not, and will not permit any Subsidiary to, directly or indirectly, without the
prior written consent of the Required Lenders, amend, modify, cancel or
terminate or permit the amendment, modification, cancellation or termination of,
any of the Material Contracts, except in the event that such amendments or
modifications would not have a Material Adverse Effect. Without limiting the
generality of the foregoing, the Borrower shall not amend, modify or change, or
consent or agree to any amendment, modification or change, to any of the terms
of the First Mortgage Notes Indenture, the First Mortgage Notes, the
Subordinated Notes, the Existing Debenture Indenture and the Existing
Subordinated Debentures (a) if the effect of such amendment, modification or
change is to (directly or indirectly) (i) increase the amount of any payment of
principal thereof, (ii) increase the interest rate or premium payable thereon,
(iii) increase the amount of fees or any other amounts payable with respect
thereto, (iv) shorten the scheduled amortization or average weighted life
thereof, (v) shorten the date for payment of interest or principal thereon, (vi)
shorten the final maturity thereof, (vii) change any subordination provision
thereof to the detriment of any holder of the Notes or the Obligation of the
Borrower hereunder, or (viii) change any covenant or any event of default or
condition to an event of default thereunder, or (b) if such amendment,
modification or change would, together with all other amendments, modifications
or changes made, increase materially the obligations of the Borrower or confer
additional material rights on the holder of the First Mortgage Notes, the
Subordinated Intercompany Note or the Existing Subordinated Debentures.
Notwithstanding the foregoing, the Borrower may amend, modify, cancel or
terminate the Existing Debenture Indenture and/or the Existing Subordinated
Debentures in connection with any redemption of the Existing Subordinated
Debentures.
6.18 Additional Negative Pledges. The Borrower will not, and will
not permit any Subsidiary to, directly or indirectly, other than pursuant to
the First Mortgage Notes Indenture as in effect on the Closing Date, create or
otherwise cause or suffer to exist or become effective, directly or indirectly,
(i) any prohibition or restriction
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(including any agreement to provide equal and ratable security to any other
Person in the event a Lien is granted to or for the benefit of the Agent and
the Lenders) on the Borrower or any Subsidiary or (ii) any contractual
obligation which may restrict or inhibit the Agent's rights or ability to sell
or otherwise dispose of the Collateral or any part thereof after the occurrence
of an Event of Default.
6.19 No Additional Subsidiaries. The Borrower will not, directly or
indirectly, form or acquire any new Subsidiaries unless the Required Lenders,
in their sole discretion, shall consent thereto. References herein to
Subsidiaries of the Borrower shall not constitute the Lenders' consent to the
establishment of such Subsidiaries.
ARTICLE 7. Event of Default and Remedies.
7.1 Events of Default. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to pay in full any principal of any
Loan when due, whether at stated maturity, required prepayment, by
acceleration or otherwise or to deposit, when required to do so
hereunder, any amount required to be deposited in the LOC Cash
Collateral Account; or
(b) the Borrower shall fail to pay any interest, Fees,
Expenses or other Obligations (other than principal) when due,
or if the amount in the Borrower's Disbursement Accounts and the
Borrower's Borrowing Base is insufficient to permit such payment
when due, then within three (3) Business Days of the due date
thereof, in each case whether at stated maturity, by acceleration,
or otherwise; or
(c) the Borrower shall fail to perform, comply with or observe
any term, covenant or agreement applicable to it contained in (i)
Section 5.1 (other than paragraphs (f) and (g) thereof), 5.12, 5.13,
5.14 (ii), 5.21, 5.22 or 5.24, which failure continues for a period
of thirty (30) days after notice thereof to the Borrower from the
Agent or any Lender (through the Agent); (ii) Section 5.1(f), which
failure continues for a period of two (2) days; or (iii) any other
provision of Article 5 or Article 6; or
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(d) the Borrower or any other Credit Party shall fail to comply with
any covenant, contained in this Credit Agreement (other than under a
provision covered by Section 7.1(c) above), the other Credit Documents or
any other agreement among the Borrower, the Agent and the Lenders or
executed by the Borrower in favor of the Agent or the Lenders, which
breach or failure to comply is not cured within fifteen (15) Business Days
after notice thereof to the Borrower from the Agent or any Lender (through
the Agent); or
(e) any representation or warranty made by the Borrower or any other
Credit Party hereunder or in any other Credit Document or any certificate
delivered hereunder or in connection herewith shall prove to be incorrect
in any material respect when made or deemed to have been made; or
(f) the dissolution, liquidation, winding up or cessation of the
Borrower's businesses, or the failure of the Borrower or any Subsidiary to
pay its debts generally as they become due or its admission in writing of
its inability to pay its debts generally as they become due, or the
calling of one or more meetings of the Borrower's or any Subsidiary 's
major creditors for purposes of obtaining a moratorium on payment or a
compromise of the Borrower's debts; or
(g) the Borrower or any Subsidiary shall commence a voluntary case
concerning itself under the Bankruptcy Code, or any involuntary case under
the Bankruptcy Code shall be commenced against the Borrower or any
Subsidiary and the same shall be controverted but not dismissed within 60
days after the commencement of the case; or a custodian (as defined in the
Bankruptcy Code) shall be appointed for, or shall take charge of, all or
substantially of the property of the Borrower or any Subsidiary; or the
Borrower or any Subsidiary shall commence any other proceeding for itself
under any bankruptcy reorganization, arrangement, adjust of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction (domestic or foreign), whether now or hereafter in effect; or
there shall be commenced against the Borrower or any Subsidiary any such
proceeding which remains undismissed for a period of 60 days; or the
Borrower or any Subsidiary shall be adjudicated insolvent or bankrupt; or
any order of relief under the Bankruptcy Code or any other order approving
any such case or proceeding is entered; or the Borrower or any Subsidiary
shall suffer any appointment of any
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custodian or similar official for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days or
shall consent thereto; or the Borrower or any Subsidiary shall make a
general assignment for the benefit of creditors; or any corporate action
shall be taken by the Borrower or any Subsidiary for the purpose of
effecting any of the foregoing; or
(h) any judgment(s) or order(s) for the payment of money in excess of
$1,000,000 in aggregate amount shall be rendered against the Borrower
and/or any of its Subsidiaries and there shall be any period of ten (10)
consecutive days during which a stay of enforcement of such judgment(s) or
orders, by reason of a pending appeal or otherwise, shall not be in effect
unless such judgment(s) or order(s) shall have been vacated, satisfied or
dismissed or bonded pending appeal or, in the case of a judgment or order
the entire amount of which is covered by insurance, is the subject of a
binding agreement with the plaintiff and the insurer providing for the
payment therefor; or any non-monetary judgment or order shall be rendered
against the Borrower or any of its Subsidiaries that is reasonably likely
to have a Material Adverse Effect and there shall be any period of 30
consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect
unless such judgment or order shall have been vacated, satisfied,
discharged or bonded pending appeal; or
(i) there shall occur a default or event of a default (in each case
which shall continue beyond the expiration of any applicable grace
periods) which results in, or permits, the acceleration of the maturity
of, any note, agreement or instrument evidencing any Indebtedness of the
Borrower or any of the Subsidiaries (other than the Obligations), or which
requires the Borrower or any Subsidiary to redeem or repurchase, or
permits the holder of such Indebtedness to require the Borrower or any
Subsidiary to redeem or repurchase, such note or instrument, and the
aggregate principal amount of all such Indebtedness with respect to which
a default or an event of default has occurred, or the maturity of which
has been, or is permitted to be, accelerated, or which the Borrower is or
may be required to redeem or repurchase, exceeds $1,000,000; or
(j) there shall occur a default or event of default (in each case
which shall continue beyond the
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expiration of any applicable grace periods) which results in the
acceleration of the maturity of the Subordinated Notes due 2002 issued by
FLS; or
(k) any material covenant, agreement or obligation of any party
contained in or evidenced by any of the Credit Documents shall cease to be
enforceable in accordance with its terms or other than as a result of
actions taken or not taken by the Agent or the Lenders, or any party
(other than the Agent or the Lenders) to any Credit Document shall deny or
disaffirm its obligations under any of the Credit Documents, or any Credit
Document shall be cancelled, terminated, revoked or rescinded without the
express prior written consent of the Agent (other than as a result of
actions taken or not taken by the Agent or the Lenders), or any action or
proceeding shall have been commenced by any Person (other than the Agent
or any Lender) seeking to cancel, revoke, rescind or disaffirm the
obligations of any party to any Credit Document, or any court or other
governmental authority shall issue a judgment, order, decree or ruling to
the effect that any of the obligations of any party to any Credit Document
are illegal, invalid or unenforceable; or
(l) any Plan shall fail to satisfy the minimum funding standard
required for any plan year or part thereof or a waiver of such standard or
extension of any amortization period is sought or granted under Section
412 of the IRC, any Plan shall have had or is likely to have a trustee
appointed to administer such Plan, any Plan is, shall have been or is
likely to be terminated or to be the subject of termination proceedings
under ERISA, any Plan shall have an Unfunded Current Liability, or a
contribution required to be made to a Plan shall not be timely made, or
the Borrower or any ERISA Affiliate has incurred or is likely to incur a
liability to or an account of a Plan under Section 409, 502 (i), 502 (I),
515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section
401(a)(29), 4971, 4975 or 4980 of the Code, or the Borrower has incurred
or is likely to incur liabilities pursuant to one or more employee welfare
benefit plans (as defined in Section 3(1) of ERISA) that provide benefits
to retired employees or other former employees (other than as required by
Section 601 of ERISA) or employee pension benefit plans (as defined in
Section 3(2) of ERISA) and the foregoing, individually or in the
aggregate, (i) in the reasonable opinion of the Required Lenders, could be
expected to
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have a Material Adverse Effect or (ii) constitutes a breach of Section
6.14; or
(m) Kyoei shall fail to perform, comply with or observe any material
obligation, term or agreement applicable to it under any Technical
Assistance Agreement that may be in effect from time to time; or
(n) Kyoei shall cease, directly or indirectly, to (i) own at least
51% of all outstanding shares of each class of the voting stock of the
Borrower or (ii) possess the right to elect a majority of the Board of
Directors of the Borrower; or a Person or group of Persons (other than
Kyoei and its Affiliates) shall (A) become the direct or indirect
beneficial owner (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended from time to time) of capital stock of the
Borrower representing in the aggregate more than 49% of the combined voting
power of the outstanding voting capital stock for the election of directors
of the Borrower or (B) have the right to elect a majority of the board of
directors of the Borrower.
7.2 Acceleration and Cash Collateralization.
(a) Upon the occurrence and during the continuance of an Event of
Default which has not been waived by the Required Lenders, the Agent may,
and if so instructed by the Required Lenders shall, by written notice to
that effect to the Borrower, take any or all of the following actions
(without prejudice to the rights of the Agent, any Lender or the holder of
any Note to enforce its claims against the Borrower and without prejudice
or to any other rights or remedies any of them may have): (i) declare all
Obligations to be, and the same shall thereupon become, immediately due and
payable (provided that upon the occurrence of an Event of Default specified
in clause (g) of Section 7.1 all Obligations shall automatically become
immediately due and payable and the Credit Facility shall automatically
terminate without the necessity of any notice or other demand) without
presentment, demand, protest or any other action by the Agent or any
Lender; and/or (ii) immediately terminate the Credit Facility and the
Commitments hereunder; and/or (iii) demand that the Borrower deposit in the
LOC Cash Collateral Account, for the benefit of the Lenders and the Issuing
Banks, cash in an amount equal to the aggregate amount of all Facility
Letters of Credit then outstanding, and the Borrower shall thereupon be
obligated to make such deposit.
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(b) If at any time after acceleration of the maturity of the Loans,
the Borrower shall pay all arrears of interest and all payments on account of
principal of the Loans which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Credit Agreement) and all
Events of Default and Defaults (other than nonpayment of principal of and
accrued interest on the Loans and other Obligations due and payable solely by
virtue of acceleration) shall be waived or remedied, then by written notice to
the Borrower, the Required Lenders may elect, in the sole discretion of such
Required Lenders, to rescind and annul the acceleration and its consequences and
return any cash collateral; but such action shall not affect any subsequent
Default or impair any right or remedy consequent thereon. The provisions of the
preceding sentence are intended merely to bind the Lenders to a decision which
may be made at the election of the Required Lenders; they are not intended to
benefit the Borrower and do not give the Borrower the right to require the
Lenders to rescind or annul any acceleration hereunder or to return any cash
collateral, even if the conditions set forth herein are met.
7.3. Remedies. (a) Upon the occurrence and during the continuance of
any Event of Default which has not been waived by the Agent at the direction of
the Required Lenders, the Agent may exercise all right of a secured party with
respect to the Collateral. Without limiting the generality of the foregoing the
Agent may: (i) remove from any premises where same may be located any and all
documents, instruments, files and records (including the copying of any computer
records), and any receptacles or cabinets containing same, relating to the
Accounts, or the Agent may use (at the expense of the Borrower) such of the
supplies or space of the Borrower at the Borrower's place of business or
otherwise, as may be necessary to properly administer and control the Accounts
or the handling of collections and realizations thereon; (ii) bring suit, in
the name of the Borrower, the Agent or the Lenders, to enforce the Accounts and
generally exercise all other rights of an owner of the Accounts, including,
without limitation, the right to: accelerate or extend the time of payment,
settle, compromise, release in whole or in part any amounts owing on any
Accounts and issue credits in the name of the Borrower or the Lenders; (iii)
sell, assign and deliver the Accounts any returned, reclaimed or repossessed
merchandise, with or without advertisement, at public or private sale, for cash,
on credit or otherwise, at the Agent's sole option and discretion, and any
lender may bid or become a purchaser at any such sale, free from any right of
redemption, which right is hereby expressly
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waived by the Borrower; (iv) foreclose the security interests in the Accounts
created pursuant to the Credit Documents by any available judicial procedure;
(v) take possession of any or all of the Inventory without judicial process and
enter any premises where any Inventory may be located for the purpose of taking
possession of or removing the same; (vi) without notice of advertisement, sell,
lease, or otherwise dispose of all or any part of the Inventory, whether in its
then condition or after further preparation or processing, in the name of the
Borrower or the Lenders, or in the name of such other party as the Agent may
designate, either at public or private sale or at any broker's board, in lots or
in bulk, for cash or for credit, with or without warranties or representations,
and upon such other terms and conditions as the Agent in its sole discretion may
deem advisable, and the Agent or any other Lender shall have the right to
purchase at any such sale.
(b) If any Inventory shall require rebuilding, repairing, maintenance
or preparation, the Agent shall have the right, at its option, to do such of the
aforesaid as is necessary, for the purpose of putting the Inventory in such
saleable form as the Agent shall deem appropriate. The Borrower agrees, at the
request of the Agent, to assemble the inventory and to make it available to the
Agent at places which the Agent shall select, whether at the premises of the
Borrower or elsewhere, and to make available to the Agent the premises and
facilities of the Borrower for the purpose of the Agent's taking possession of,
removing or putting the Inventory in saleable form.
(c) If notice of intended disposition of any Collateral is required
by law, the Borrower agrees that five (5) Business Days notice shall constitute
reasonable notification. Unless expressly prohibited by the licensor thereof,
if any, the Agent is hereby granted a license to use all computer software
programs, data bases, processes and materials used by the Borrower in connection
with its businesses or in connection with the Collateral.
(d) The net cash proceeds resulting from the Agent's exercise of any
of the foregoing rights (after deducting all charges, costs and expenses,
including reasonable attorneys' fees) shall be applied by the Agent to the
payment of the Borrower's Obligations to the Agent and the Lenders, whether due
or to become due, in such order as the Agent may elect. The Borrower shall
remain liable to the Agent and the Lenders for any deficiency, and the Agent and
the Lenders in turn agree to remit to the Borrower or its successors or assigns
any surplus resulting therefrom.
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(e) The enumeration of the foregoing rights is not intended to be
exhaustive and the exercise of any right shall not preclude the exercise of any
other rights, all of which shall be cumulative.
(f) In no event shall prior recourse to any Accounts or other
Collateral be a prerequisite to the Agent's or any Lender's right to demand
payment of any Obligation upon its maturity or upon the occurrence of an Event
of Default.
ARTICLE 8. The Agent.
8.1 Appointment of Agent. (a) Each Lender hereby designates BOT as
Agent to act as herein specified. Each Lender hereby irrevocably authorizes,
and each holder of any Note or participation in any Facility Letter of Credit by
the acceptance of such Note or participation shall be deemed irrevocably to
authorize, the Agent to take such action on such Lender's behalf under the
provisions of this Credit Agreement and the Notes and any other instruments and
agreements referred to herein and to exercise such powers and to perform such
duties hereunder and thereunder as are specifically delegated to or required of
the Agent by the terms hereof and thereof and such other powers as are
reasonably incidental thereto. The Agent shall hold all Collateral and all
payments of principal, interest, Fees, charges and Expenses received pursuant to
this Credit Agreement or any other Credit Document for the benefit of the
Lenders to be distributed promptly as provided herein. The Agent may perform
any of its duties hereunder by or through its agents or employees.
(b) The provisions of this Article 8 are solely for the benefit of
the Agent and the Lenders, and none of the Credit Parties shall have any rights
as a third party beneficiary of any of the provisions hereof (other than Section
8.9). In performing its functions and duties under this Agreement, the Agent
shall act solely as agent of the Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for any Credit Party.
8.2 Nature of Duties of Agent. The Agent shall have no duties or
responsibilities except those expressly set forth in this Credit Agreement and
the other Credit Documents. Neither the Agent nor any of its officers,
directors, employees or agents shall be liable for any action taken or omitted
by it as such hereunder or in connection herewith, unless caused by its or their
gross negligence or willful misconduct. The duties of the Agent
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shall be mechanical and administrative in nature; the Agent shall not have, by
reason of this Credit Agreement or the other Credit Documents, fiduciary
relationship in respect of any Lender; and nothing in this Credit Agreement or
the other Credit Documents, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of this Credit
Agreement or the other Credit Documents except as expressly set forth herein or
therein.
8.3 Lack of Reliance on Agent. (a) Independently and without
reliance upon the Agent, each Lender, to the extent it deems appropriate, has
made and shall continue to make (i) its own independent investigation of the
financial or other condition and affairs of each Credit Party in connection with
its becoming a party hereto, making Loans hereunder or the taking or not taking
of any other action in connection herewith and (ii) its own appraisal of the
creditworthiness of each Credit Party, and, except as expressly provided in this
Credit Agreement, the Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information with respect thereto, whether coming into its possession
before the making of the Loans or at any time or times thereafter.
(b) The Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or warranties herein or in
any document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility, priority or sufficiency of this Credit Agreement, or the Notes
or the financial or other condition of any Credit Party. The Agent shall not be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Credit Agreement or the
Notes, or the financial condition of any Credit Party, or the existence or
possible existence of any Default, unless specifically requested to do so in
writing by any Lender. The Agent shall not be charged with knowledge of the
existence of any Default unless it is advised of such Default by the Borrower or
a Lender. Upon receipt by the Agent of written notice of such a Default from
the Borrower or any Lender, the Agent shall promptly give notice thereof to each
Lender.
8.4 Certain Rights of the Agent. The Agent shall have the right to
request instructions from the Lenders at any time. If the Agent shall request
instructions from the Lenders with respect to any act or action (including the
failure to act) in connection with this
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Credit Agreement, the Agent shall be entitled to refrain from such act or taking
such action unless and until the Agent shall have received instructions from the
Required Lenders or (if so provided in this Credit Agreement) the Majority
Lenders and the Agent shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the instructions of the
Required Lenders or (when so provided herein) the Majority Lenders.
8.5 Reliance by Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram, order
or other documentary, facsimile transmission or telephone message reasonably
believed by it to be genuine and correct and to have been signed, sent or made
by the proper person. The Agent may consult with legal counsel (including
counsel for the Borrower with respect to matters concerning the Borrower),
independent public accountants and other experts selected by it and (in the
absence of its gross negligence or willful misconduct in such selection) shall
not be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
8.6 Indemnification of Agent. To the extent the Agent is not
reimbursed and indemnified by the Borrower, each Lender will reimburse and
indemnify the Agent, in proportion to its respective Commitment, for and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (including reasonable counsel
fees and disbursements) of any kind or nature whatsoever (including all
Expenses) which may be imposed on, incurred by or asserted against the Agent in
performing its duties hereunder, in any way relating to or arising out of this
Credit Agreement or any other Credit document, provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful misconduct. The agreements
contained in this Section 8.6 shall survive any termination of this Credit
Agreement and the other Credit Documents and the payment in full of the
Obligations. To the extent indemnification payments made by the Lenders
pursuant to this Section 8.6 are subsequently recovered by the Agent from the
Borrower on the Collateral, the Agent will promptly refund such previously paid
indemnification payments to the Lender.
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8.7 The Agent in its Individual Capacity. With respect to its obligation
to lend under this Credit Agreement, the Loans made by it and the Notes issued
to it, and Facility Letters of Credit issued by it or in which it has a
participation hereunder, the Agent shall have the same rights and powers
hereunder as any other Lender, holder of a Note or participation interests or
Issuing Bank and may exercise the same as though it was not performing the
duties specified herein; and the terms "Lenders," "Required Lenders," "Majority
Lenders," "holders of Notes," "Issuing Bank," "Swingline Bank" or any similar
terms shall, unless the context clearly otherwise indicates, include the Agent
in its individual capacity. The Agent may accept deposits from, lend money to,
acquire equity interests in, and generally engage in any kind of banking, trust,
financial advisory or other business with the Borrower or any affiliate of the
Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from the Borrower for services in connection
with this Credit Agreement and otherwise.
8.8 Holders of Notes. The Agent and its affiliates may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and until
a written notice of the assignment or transfer thereof shall have been filed
with the Agent. Any request, authority or consent of any Person who, at the time
of making such request or giving such authority or consent, is the holder of any
Note, shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
8.9 Successor Agent. (a) The Agent may, upon (ten) 10 Business Days,
notice to the Lenders and the Borrower, resign at any time (effective upon the
appointment of a successor Agent pursuant to the provisions of this Section 8.9)
by giving written notice thereof to the Lenders and the Borrower. Upon such
resignation by the Agent, it shall cease to have any obligation hereunder as an
Issuing Bank, including any obligation, as Issuing Bank, to issue Facility
Letters of Credit. Upon any such resignation, the Majority Lenders shall have
the right, upon five (5) days' notice and approval by the Borrower (which
approval shall not be unreasonably withheld), to appoint a successor Agent. If
no successor Agent shall have been so appointed by the Majority Lenders, and
shall have accepted such appointment, within thirty (30) days after the retiring
Agent's giving of notice of resignation, then, upon five (5) days, notice, the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be a bank or a trust company or other financial institution which
maintains an office in the United States, or a com-
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mercial bank organized under the laws of the United States of America or of any
State thereof, or any Affiliate of such bank or trust company or other financial
institution which is engaged in the commercial finance business, having a
combined capital and surplus of at least $100,000,000.
(b) Upon any merger or consolidation of the Agent with any other Person,
the resulting entity shall automatically succeed to the Agent as Agent hereunder
and the other Credit Documents, and all references herein to "Agent" shall
include such resulting entity; provided, however, that the parties hereto, if so
requested by such and instruments reasonably requested by such resulting entity
to confirm its succession as Agent hereunder and under the Credit Documents.
(c) Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Credit Agreement (except for liabilities accrued prior to its resignation).
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article 8 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Credit Agreement.
(d) In the event of a material breach by the Agent of its duties
hereunder, the Agent may be removed by the Required Lenders (other than the
Agent and without giving effect to any Loans or Commitments made by the Agent)
for cause and the provisions of this Section 8.9 shall apply to the appointment
of a successor Agent.
8.10 Collateral Matters. (a) Each Lender authorizes and directs the
Agent to enter into the Collateral Documents for the benefit of the Lenders.
Each Lender hereby agrees, and each holder of any Note by the acceptance thereof
will be deemed to agree, that, except as otherwise set forth herein, any action
taken by the Majority Lenders or the Required Lenders, as applicable, in
accordance with the provisions of this Credit Agreement or the Collateral
Documents, and the exercise by the Majority Lenders or the Required Lenders, as
applicable, of the powers set forth herein or therein, together with such other
powers as are reasonably incidental thereto, shall be authorized and binding
upon all of the Lenders. The Agent is hereby authorized on behalf of all of the
Lenders, without the necessity of any notice to or further consent from any
Lender, from time to time prior to an Event of Default,
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to take any action with respect to any Collateral or Collateral Documents which
may be necessary to perfect and maintain perfected the security interest in and
liens upon the Collateral granted pursuant to the Collateral Documents.
(b) The Lenders hereby authorize the Agent, at its option and in its
discretion, to release any Lien granted to or held by the Agent upon any
Collateral (i) upon termination of the Commitments and payment and satisfaction
of all of the Obligations at any time arising under or in respect of this Credit
Agreement or the Credit Documents or the transactions contemplated hereby or
thereby, (ii) constituting property being sold or disposed of upon receipt of
the proceeds of such sale by the Agent and application of such proceeds in
accordance with Section 2.13, if the Borrower certifies to the Agent that the
sale or disposition is made in compliance with Section 6.8 (and the Agent may
rely conclusively on any such certificate, without further inquiry) or (iii) if
approved, authorized or ratified in writing by the Required Lenders, unless such
release is required to be approved by all of the Lenders pursuant to Section
9.10. Upon request by the Agent at any time, the Lenders will confirm in
writing the Agent's authority to release particular types or items of Collateral
pursuant to this Section 8.10.
(c) Upon any sale and transfer of Collateral which is expressly permitted
pursuant to the terms of this Credit Agreement, or consented to in writing by
the Required Lenders or all of the Lenders, as applicable, and upon at least
five (5) Business Days' prior written request by the Borrower, the Agent shall
(and is hereby irrevocably authorized by the Lenders to) execute such documents
as may be necessary to evidence the release of the Liens granted to the Agent
for the benefit of the Lenders herein or pursuant hereto upon the Collateral
that was sold or transferred; provided that (i) the Agent shall not be required
to execute any such document on terms which, in the Agent's opinion, would
expose the Agent to liability or create any of such Liens without recourse or
warranty and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any Liens upon (or obligations of the Borrower or any
Subsidiary in respect of) all interests retained by the Borrower or any
Subsidiary, including (without limitation) the proceeds of the sale, all of
which shall continue to constitute part of the Collateral, or any foreclosure
with respect to any of the Collateral, the Agent shall be authorized to deduct
all of the Expenses
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reasonably incurred by the Agent from the proceeds of any such sale, transfer
or foreclosure.
(d) The Agent shall have no obligation whatsoever to the Lenders or to any
other Person (i) to assure that the Collateral exists or is owned by the
Borrower or any Subsidiary or is cared for, protected or insured or that the
Liens granted to the Agent herein or pursuant hereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or (ii) to exercise or to continue
exercising at all or in any manner or under any duty of care, disclosure or
fidelity any of the rights, authorities and powers granted or available to the
Agent in this Credit Agreement or in any of the Collateral Documents, it being
understood and agreed that in respect of the Collateral, or any act, omission
or event related thereto, the Agent shall have no duty or liability whatsoever
to the Lenders, except for its gross negligence or willful misconduct.
8.11 Actions with Respect to Defaults. In addition to the Agent's right to
take actions on its own accord as permitted under this Credit Agreement, the
Agent shall take such action with respect to a Default as shall be directed by
the Lenders pursuant to Article 7; provided that until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
as it shall deem to be advisable and in the best interests of the Lenders.
8.12 Delivery of Information. The Agent shall not be required to deliver
to any Lender originals or copies of any documents, instruments, notices,
communications or other information received by the Agent from the Borrower,
any Subsidiary, the Majority Lenders, the Required Lenders, any Lender or any
other Person under or in connection with this Credit Agreement or any other
Credit Document except (i) as specifically provided in this Credit Agreement or
any other Credit Document and (ii) as specifically requested from time to time
in writing by any Lender with respect to a specific document, instrument,
notice or other written communication received by and in the possession of the
Agent pursuant hereto at the time of receipt of such request and then only in
accordance with such specific request.
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ARTICLE 9. Miscellaneous.
9.1 SUBMISSION TO JURISDICTION; WAIVERS. THE BORROWER HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS TO
WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN
RESPECT THEREOF, TO THE NONEXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK AND APPELLATE COURTS FROM ANY THEREOF;
(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH
ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO
PLEAD OR CLAIM THE SAME;
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL
(OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE
BORROWER AT ITS ADDRESS SET FORTH IN SUBSECTION 9.5 OR AT SUCH OTHER
ADDRESS OF WHICH THE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;
(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT TO SUE IN ANY OTHER JURISDICTION;
(e) WAIVES THE RIGHT TO ASSERT ANY SETOFF, COUNTERCLAIM OR CROSS-CLAIM
IN RESPECT OF, AND ALL STATUTES OF LIMITATIONS WHICH MAY BE RELEVANT TO,
SUCH ACTION OR PROCEEDING; AND
(f) WAIVES DUE DILIGENCE, DEMAND, PRESENTMENT AM PROTEST AND ANY
NOTICES THEREOF AS WELL AS NOTICE OF NONPAYMENT.
9.2 WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT, THE ISSUING BANKS
AND THE LENDERS EACH HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, THE CREDIT
DOCUMENTS OR ANY OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO OR THERETO.
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9.3 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS CREDIT AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
9.4 Waivers. No delay or omission of the Agent, any Issuing Bank or
the Lenders to exercise any right or remedy hereunder, whether before or after
the happening of any Event of Default, shall impair any such right or shall
operate as a waiver thereof or as a waiver of any such Event of Default. No
single or partial exercise by the Agent, any Issuing Bank or the Lenders of any
right or remedy shall preclude any other or further exercise thereof, or
preclude any other right or remedy.
9.5 Notices. Except as otherwise provided herein, all notices and
correspondences hereunder to any party here at shall be in writing and sent to
such party by certified or registered mail, return receipt requested, or by
overnight delivery service, with all charges prepaid, or by facsimile
transmission, promptly confirmed in writing sent by first class mail, addressed
as follows:
If to the Bank Agent:
The Bank of Tokyo
1251 Avenue of the Americas
New York, New York 10116-3138
Attention: Mr. Akihiko Hagura
Fax No.: 212-782-6437
If to the Borrower:
Florida Steel Corporation
5100 West Lemon Street
Tampa, Florida 33609
Attention: Mr. Tom J. Landa
Fax No.: 813-207-2328
if to any Lender, to its address for notices set forth next to its name on
Annex I hereto or, as to any party, to such other address as such party shall
specify by a notice in writing to the other parties. All such notices and
correspondence shall be deemed given (i) if sent by certified or registered
mail, three (3) Business Days after being postmarked, (ii) if sent by overnight
delivery service, when received at the above stated addresses or when delivery
is refused and (iii) if sent by facsimile transmission, when evidence of
successful transmission is received; provided, however, that no notices or
other communications to the Agent shall be effective until actually received by
it.
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9.6 Assignments. (a) The Borrower shall not have the right to
assign this Credit Agreement or any interest therein except with the prior
written consent of the Agent and all the Lenders.
(b) Any Lender may make, carry or transfer Loans at, to or for the
account of, any of its branch offices or the office of an affiliate of such
Lender except to the extent such transfer would result in increased costs to
the Borrower.
(c) Each Lender may, with the consent of the Agent, the Borrower and
the Issuing Banks (such consents not to be unreasonably withheld), but without
consent
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of any other Lender, assign to one or more banks or other financial
institutions all or a portion of its rights and obligations under this Credit
Agreement and the Revolving Notes; provided that (i) for each such assignment,
the parties thereto shall execute and deliver to the Agent, for its acceptance
and recording in the Register (as defined below), an Assignment and Assumption
Agreement, together with any Note or Notes subject to such assignment and a
processing and recordation fee of $3,000, (ii) no such assignment shall be for
less than $5,000,000 of such Lender's Commitment, unless such assignment is to
a then current holder of a Note or unless the Agent and the Borrower shall
otherwise consent, and (iii) the Commitment of each Initial Lender, after
giving effect to all such assignments by it, shall not be less than $15,000,000.
Upon such execution and delivery of the Assignment and Assumption Agreement to
the Agent, from and after the date specified as the effective date in the
Assignment and Assumption Agreement (the "Acceptance Date"), (x) the assignee
thereunder shall be a party hereto, and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Assumption Agreement, such assignee shall have the rights and obligations of a
"Lender" hereunder and (y) the assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Assumption Agreement, relinquish its rights (other than any
rights it may have pursuant to Section 2.14 and 9.8 which will survive) and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Assumption Agreement covering all or the remaining portion of an
assigning Lender's rights and obligations under this Credit Agreement, such
Lender shall cease to be a party hereto).
(d) By executing and delivering as Assignment and Assumption
Agreement, the assignee thereunder confirms and agrees as follows: (i) other
than as provided in such Assignment and Assumption Agreement, neither the
assigning Lender nor the Agent makes any representation or warranty or assumes
any responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Credit Agreement, the Notes or any other instrument or document furnished
pursuant hereto or the value or existence of the Collateral or the validity,
perfection or priority of the Liens granted to the Lenders in the Collateral,
(ii) neither such assigning Lender nor the Agent makes any representation or
warranty or assumes any responsibility with respect to the financial condition
of the Borrower or any other Credit Party or the performance
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or observance by the Borrower or any other Credit Party of any of its
obligations under this Credit Agreement or any other instrument or document
furnished pursuant hereto, (iii) such assignee confirms that it has received a
copy of this Credit Agreement, together with copies of the financial statements
referred to in Section 4.6 and 5.1 and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Assumption Agreement, (iv) such assignee will,
independently and without reliance upon the Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Credit Agreement, (v) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Credit Agreement as are delegated to the Agent by the
therms hereof, together with such powers as are reasonably incidental thereto
and (vi) such assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Credit Agreement are
required to be performed by it as a Lender.
(e) The Agent shall maintain at its Payment Office a copy of each
Assignment and Assumption Agreement delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Commitments of, and principal amount of the Loans owing to, each Lender from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower, the Agent
and the Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register and copies
of each Assignment and Assumption Agreement shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(f) Upon its receipt of an Assignment and Assumption Agreement
executed by an assigning Lender, together with the Note or Notes subject to such
assignment, the Agent shall, if such Assignment and Assumption Agreement has
been completed and is in substantially the form of Exhibit O, (i) accept such
Assignment and Assumption Agreement, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Borrower.
Within fifteen (15) Business Days after its receipt of such notice, the Borrower
shall execute and deliver to the Agent in exchange for the surrendered Note or
Notes a corresponding new Note or Notes to the order of the assignee in an
amount equal to the
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Commitment or Commitments assumed by it pursuant to such Assignment and
Assumption Agreement and, if the assigning Lender has retained a Commitment or
Commitments hereunder, a new corresponding Note or Notes to the order of the
assigning Lender in an amount equal to the Commitment or Commitments retained
by it hereunder. Such new Note or Notes shall re-evidence the indebtedness
outstanding under the old Note or Notes and shall be in an aggregate principal
amount equal to the aggregate principal amount of such surrendered Note or
Notes, shall be dated the Closing Date and shall otherwise be in substantially
the form of the Note or Notes subject to such assignments.
(g) Each Lender may (with the consent of the Agent and the Borrower,
which consent shall not be unreasonably withheld) sell participations to one or
more parties in or to all or a portion of its rights and obligations under this
Credit Agreement (including, without limitation, all or a portion of its
Commitments, the Loans owing to it and the Note or Notes held by it); provided
that (i) such Lender's obligations under this Credit Agreement (including,
without limitation, its Commitments to the Borrower hereunder) shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) such Lender shall
remain the holder of any such Note for all purposes of this Credit Agreement,
(iv) the Borrower, the Agent, and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights
and obligations under this Credit Agreement, (v) the selling Lender shall pay
to the Administrative Agent a processing fee of $3,000 with respect to each
such sale of a participation and (vi) such Lender shall not transfer, grant,
assign or sell any participation under which the participant shall have rights
to approve any amendment or waiver of this Credit Agreement except to the
extent such amendment or waiver would (A) extend the final maturity date or the
date for the payments of any installment of fees or principal or interest of
any Loans or Letter of Credit reimbursement obligations in which such
participant is participating, (B) reduce the amount of any principal of the
Loans or LOC Reimbursement Obligations in which such participant is
participating, (C) except as otherwise expressly provided in this Credit
Agreement, reduce the interest rate applicable to the Loans or Unpaid LOC
Reimbursement Obligations in which such participant is participating, or (D)
except as otherwise expressly provided in this Credit Agreement, reduce any
Fees payable hereunder. Any such participant shall be entitled to the benefits
of Section 2.14 with respect to its participation.
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(h) Each Lender agrees that, without the prior written consent of the
Borrower and the Agent, it will not make any assignment hereunder in any manner
or under any circumstances that would require registration or qualification of,
or filings in respect of, any Loan, Note or other Obligation under the
securities laws of the United States of America or of any jurisdiction.
(i) In connection with the efforts of any Lender to assign its
rights or obligations or to participate interests, such Lender may disclose any
information in its possession regarding the Borrower.
(j) The parties to an assignment or participation (namely the
assignor and assignees) shall be jointly and severally liable to the Agent for
all costs and expenses incurred by the Agent in connection with such assignment
or participation and shall pay all stamp, documentary, excise, privilege,
intangible or similar levies or taxes imposed with respect to such assignment
or participation.
9.7 Confidentiality. (a) Subject to the provisions of paragraph (b)
of this Section 9.7, the Agent and each Lender agrees that it will use its
reasonable efforts not to disclose without the prior consent of the Borrower
(other than to its employees, auditors, advisors or counsel) any information
with respect to the Borrower or any of its Subsidiaries which is furnished
pursuant to this Agreement or any other Credit Document and which is designated
by the Borrower to the Lenders or the Agent in writing as confidential;
provided that the Agent and any Lender may disclose any such information (i) to
each other (ii) as has become generally available to the public, (iii) as may
be required or appropriate in any report, statement or testimony submitted to
any municipal, state or Federal regulatory body having or claiming to have
jurisdiction over the Agent or such Lender or to the Board of Governors of the
Federal Reserve System or the Federal Deposit Insurance Corporation or similar
organizations (whether in the United States or elsewhere) or their successors,
(iv) as may be required or appropriate in respect to any summons or subpoena or
in connection with any litigation, (v) in order to comply with any law, order,
regulation or ruling applicable to such Lender, (vi) to any prospective or
actual transferee or participant in connection with any contemplated transfer
or participation of any of the Notes or Commitments or any interest therein by
such Lender, provided that such prospective transferee or participant agrees
with such Lender to be bound by the provisions of this Section 9.7(a) and (vii)
in connection with the enforcement of the Borrower's obligation hereunder.
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(b) The Borrower hereby acknowledges and agrees that each Lender and
the Agent may share with any of its Affiliates any information related to the
Borrower or any of its Subsidiaries (including, without limitation, any
nonpublic customer information regarding the creditworthiness of the Borrower
or any of its Subsidiaries, provided such Affiliates shall be subject to the
provisions of this Section 9.7 to the same extent as such Lender).
9.8 Indemnification; Expense.
(a) The Borrower shall and hereby agrees to indemnify, defend and
hold harmless the Agent, each issuing Bank and each Lender and their respective
directors, officers, agents, employees and counsel (each herein called an
"Indemnitee") from and against (i) any and all losses, claims, damages,
liabilities, deficiencies, judgments or expenses (collectively, "Losses")
incurred by such Indemnitee (except to the extent that any such Loss is finally
judicially determined to have resulted from such Indemnitee's own gross
negligence or willful misconduct) arising out of or by reason of any
litigations, investigations, claims or proceedings which arise out of or are in
any way related to (A) this Credit Agreement or the transactions contemplated
thereby, (B) the issuance of any Facility Letters of Credit, (C) the failure of
any Issuing Bank to honor a drawing under any Facility Letter of Credit as a
result of any act or omission, whether rightful or wrongful, of any present or
future de jure or de facto government or governmental authority, (D) any actual
or proposed use by the Borrower of the proceeds of the Loans or (E) the Agent or
the Lenders entering into this Credit Agreement, the other Credit Documents or
any other agreements and documents relating hereto, including, without
limitation, amounts paid in settlement, court costs and the reasonable fees and
disbursements of counsel incurred in connection with any such litigation,
investigation, claim or proceeding or any advice rendered in connection with any
of the foregoing and (ii) any Losses, claims, damages, liabilities or
deficiencies incurred in connection with any remedial or other action taken by
the Borrower, any of the Subsidiaries or any of the Lenders in connection with
any failure by the Borrower or any of the Subsidiaries, or any of their
respective properties, to comply with any Environmental Laws. If and to the
extent that the obligations of the Borrower hereunder are unenforceable for any
reason, the Borrower hereby agrees to make the maximum contribution to the
payment and satisfaction of such obligations which is permissible under
applicable law. The Borrower's obligations hereunder shall survive any
termination of this Credit Agreement and the other Credit Documents and the
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payment in full of the Obligations, and are in addition to, and not in
substitution of, any of its other obligations under this Credit Agreement.
(b) The Borrower shall also, upon demand, (i) subject to the terms of the
Fee Letter, pay to the Agent all costs or expenses (including reasonable fees
and disbursements of counsel) incurred by the Agent or any Co-Administrative
Agent in connection with the preparation of this Credit Agreement and the other
Credit Documents and (ii) pay to the Agent and each Lender all costs and
expenses (including the reasonable fees and disbursements of counsel and other
professionals) paid or incurred by the Agent or such Lender in (A) enforcing or
defending its rights under or in respect of this Credit Agreement, the other
Credit Documents or any other document or instrument now or hereafter executed
and delivered in connection herewith, (B) in collecting the Loans, (C) in
foreclosing its Lien on, or otherwise realizing upon, the Collateral or any part
thereof and (D) obtaining any legal, accounting or other advice in connection
with any of the foregoing.
9.9 Entire Agreement: Successors and Assigns. This Credit Agreement, the
other Credit Documents and the Fee Letter constitute the entire agreement among
the Borrower, the Agent and the Lenders, supersede any prior agreements among
them, and shall bind and benefit the Borrower and the Lenders and their
respective successors and permitted assigns.
9.10 Amendments, Etc. No amendment or waiver of any provision of this
Credit Agreement or any other Credit Document, nor any consent to any departure
by any Credit Party therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Required Lenders, and each such amendment,
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided that no amendment, waiver or consent
shall, unless in writing and signed by all the Lenders, do any of the following:
(i) increase the Commitments of the Lenders or subject the Lenders to any
additional obligations, (ii) except as otherwise expressly provided in this
Agreement, reduce the principal of, or interest on, the Loans or any Unpaid LOC
Reimbursement Obligations or any fees hereunder, (iii) postpone any date fixed
for any payment in respect of principal of, or interest on, the Loans or any LOC
Reimbursement Obligations or any fees hereunder, (iv) change the percentage of
the Commitments, or any minimum requirement, necessary for the Lenders, the
Required Lenders or the Majority Lenders to take any action hereunder, (v)
except as otherwise expressly provided in
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this Credit Agreement, and other than in connection with the sale or other
disposition of any asset of the Borrower permitted under this Credit Agreement,
release any Liens in favor of the Lenders on all or a substantial portion of the
Collateral or (vi) amend or waive this Section 9.10, or change the definition of
"Majority Lenders" or "Required Lenders"; and provided, further, that no such
amendment, modification, waiver or consent (collectively a "Change") shall in
any event be effective unless in writing and signed by (A) the Agent, if such
Change affects Article 8 or any rights, duties, obligations, indemnities or
exculpations of the Agent (in its capacity as such) under any Credit Document,
(B), the Swingline Lender, if such Change affects Sections 2.2 or 2.5, any
Swingline Loan or the Swingline Commitment or any rights, duties or obligations
of the Swingline Lender (in its capacity as such) under any Credit Document, (C)
each Issuing Bank, if such Change affects Section 2.3 or 2.7 or any Facility
Letter of Credit issued by such Issuing Bank, the LOC Reimbursement Obligations
or LOC Fronting Fees owing or payable to such Issuing Bank or any Letter of
Credit Application of such Issuing Bank or any rights, duties, obligations or
indemnities of such Issuing Bank (in its capacity as such) under the Credit
Document or (b) each Co-Administrative Agent, if such Change affects Section
9.12 or any rights, duties, obligations, indemnities or exculpation of such
Co-Agent (in it capacity as such). Notwithstanding any of the foregoing to the
contrary, the consent of the Borrower shall not be required for any amendment,
modification or waiver of the provisions of Article 8 unless such amendment
imposes additional obligations or liabilities on the Borrower. In addition,
the Borrower and the Lenders hereby authorize the Agent to modify this Credit
Agreement by unilaterally amending or supplementing Annex I form time to time
in the manner requested by the Borrower, the Agent or any Lender in order to
reflect any assignments or transfers of the Loans and Commitments as provided
for in Section 9.6. The Agent shall promptly deliver a copy of any such
modification of Annex I to the Borrower and each Lender.
9.11 Nonliability of Agent and Lenders. The relationship between the
Borrower, on the one hand, and the Lenders, on the other, shall be solely that
of borrower and lender. Neither the Agent nor any Lender shall have any
fiduciary responsibilities to the Borrower. Neither the Agent nor any Lender
undertakes any responsibility to the Borrower to review or inform the Borrower
of any matter in connection with any phase of the Borrower's business or
operations.
9.12 The Co-Administrative Agents. The Co-Administrative Agents (in
their capacity as such) shall
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have no duty, liability or obligation hereunder or under any other Credit
Document to any party hereto or thereto.
9.13 Independent Nature of Lenders' Rights. The amounts payable at any
time hereunder to each Lender under such Lender's Note or Notes shall be a
separate and independent debt of the Borrower.
9.14 Counterparts. This Credit Agreement may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
9.15 Effectiveness. This Credit Agreement shall become effective on the
date (the "Effective Date") on which all of the parties hereto shall have signed
a copy hereof (whether the same or different copies) and shall have delivered
the same to the Agent or, in the case of any Lender, shall have given to the
Agent written, telecopied or telex notice (actually received by it) that a
counterpart of this Credit Agreement has been signed by such Lender and mailed
by it to the Agent.
9.16 Severability. In case any provision in or obligation under this
Credit Agreement or the Notes or the other Credit Documents shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
9.17 Maximum Rate. Notwithstanding anything to the contrary contained
elsewhere in this Credit Agreement or in any other Credit Document, the
Borrower, the Agent and the Lenders hereby agree that all agreements among them
under this Credit Agreement and the other Credit Documents, whether now existing
or hereafter arising and whether written or oral, are expressly limited so that
in no contingency or event whatsoever shall the amount paid, or agreed to be
paid, to the Agent or any Lender for the use, forbearance, or detention of the
money loaned to the Borrower and evidenced hereby or thereby or for the
performance or payment of any covenant or obligation contained herein or
therein, exceed the Highest Lawful Rate. If due to any circumstances
whatsoever, fulfillment of any provisions of this Credit Agreement or any of the
other Credit Documents at the time performance of such provision shall be due
shall exceed the Highest Lawful Rate, then, automatically, the obligation to be
fulfilled shall be modified or reduced
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to the extent necessary to limit such interest to the Highest Lawful Rate, and
if from any such circumstance and Lender should ever receive anything of value
deemed interest by applicable law which would exceed the Highest Lawful Rate,
such excessive interest shall be applied to the reduction of the principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to the Borrower. All
sums paid or agreed to be paid to the Agent or any Lender for the use,
forbearance, or detention of the obligations and other indebtedness of the
Borrower to the Agent or any Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of such indebtedness until payment in full so that the actual rate of
interest on account of all such indebtedness does not exceed the Highest Lawful
Rate throughout the entire term of such indebtedness. The terms and provisions
of this Section shall control every other provision of this Credit Agreement and
all agreements among the Borrower, the Agent and the Lenders.
9.18 Right of Setoff. In addition to and not in limitation of all
rights of offset that any Lender or Issuing Bank may have under applicable law,
each Lender and Issuing Bank shall, upon the occurrence of any Event of Default
and whether or not such Lender, Issuing Bank or such holder has made any demand
or the Obligations of the Borrower are matured, have the right to appropriate
and apply to the payment of the Obligations of the Borrower all deposits
(general or special, time or demand, provisional or final) then or thereafter
held by and other indebtedness or property then or thereafter owing by such
Lender, Issuing Bank or other holder, including without limitation, any and all
amounts in any Lockbox Account, the Borrower's Corporate Account or the
Disbursement Accounts. Each Lender or Issuing Bank exercising such right shall
promptly notify the Agent thereof. Any amount received as a result of the
exercise of such rights shall be reallocated among the Lenders as set forth in
Section 2.15.4 hereof.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be executed and delivered by their proper and duly authorized
officers as of the date set forth above.
BORROWER:
FLORIDA STEEL CORPORATION
By: /s/ Tom J. Landa
-----------------------------
Name: Tom J. Landa
Title: Vice President & Chief
Financial Officer
AGENT:
THE BANK OF TOKYO, LTD.,
New York Agency,
as Agent
By: /s/ Akihiko Hagura
------------------------------
Name: Akihiko Hagura
Title: Attorney-in-fact
ISSUING BANKS AND
CO-ADMINISTRATIVE AGENTS:
THE BANK OF TOKYO, LTD.,
New York Agency, as an
Issuing Bank and
Co-Administrative Agent
By: /s/ Akihiko Hagura
------------------------------
Name: Akihiko Hagura
Title: Attorney-in-fact
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NATIONSBANK OF FLORIDA, N.A.,
as an Issuing Bank and
Co-Administrative Agent
By: /s/ Beth A. Tiffin
----------------------------
Name: Beth A. Tiffin
Title: Vice President
LENDERS:
THE BANK OF TOKYO, LTD.,
New York Agency
By: /s/ Akihiko Hagura
----------------------------
Name: Akihiko Hagura
Title: Attorney-in-fact
NATIONSBANK OF FLORIDA, N.A.
By: /s/ Beth A. Tiffin
----------------------------
Name: Beth A. Tiffin
Title: Vice President
THE DAIWA BANK, LTD.,
New York Branch
By: /s/ Wayne P. Gray
---------------------------
Name: Wayne P. Gray
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, Atlanta Agency
By: /s/ Shusai Nagai
---------------------------
Name: Shusai Nagai
Title: General Manager
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THE SUMITOMO BANK, LIMITED,
Atlanta Agency
By: /s/ Hiroyuki Veda
------------------------------
Name: Hiroyuki Veda
Title: Joint General Manager
THE SUMITOMO TRUST & BANKING
CO., LTD., New York Branch
By: /s/ Hidehiko Asai
------------------------------
Name: Hidehiko Asai
Title: Deputy General Manager
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FIRST AMENDMENT
TO
CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT is made and entered into this
16th day of April, 1996, but effective for all purposes as of March 31, 1996,
by and among AMERISTEEL CORPORATION (formerly known as FLORIDA STEEL
CORPORATION), a Florida corporation (the "Borrower"), and each of the
financial institutions signing this First Amendment (collectively, the
"Required Lenders").
WHEREAS, the Borrower, the Required Lenders and others entered into a
Credit Agreement dated as of June 9, 1995 in the maximum amount of $140,000,000
(the "Credit Agreement"); and
WHEREAS, Section 9.10 of the Credit Agreement provides that it may be
amended with the approval of the Required Lenders; and
WHEREAS, the parties desire to amend one of the definitions contained in
the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements of the parties contained herein, the parties agree that the
Credit Agreement shall, and it is, hereby amended as follows:
Section 1. Amendment. The definition of "Availability" in Section 1.1
of the Credit Agreement is hereby amended by adding the following sentence at
the end thereof.
For these purposes, the aggregate amount of outstanding Facility
LOC Obligations on any date shall not include that portion of the
Irrevocable Letter of Credit issued by NationsBank, dated October
25, 1995 in the maximum amount of $20,230,137, or any extension
thereof or replacement therefor, equal to the amount held on the
date of determination in the Construction Fund created under that
certain Indenture of Trust, dated as of October 1, 1995, between
The Industrial Development Board of the City of Jackson and
Norwest Bank Minnesota, N.A., as Trustee; provided, that during
any period of time Availability is increased solely as a result
of the applicability of this sentence, the Company will not
consent to any amendment of the Indenture relating to the
Construction Fund without first obtaining the consent of the
Required Lenders.
Section 2. Conditions of Effectiveness. This First Amendment shall
become effective as of the date which this First Amendment is dated when, and
only when, this First Amendment shall have been executed and delivered on behalf
of the Borrower and each of the Required Lenders.
Section 3. Representations and Warranties of the Borrower. Borrower
represents and warrants to the Lenders as follows:
<PAGE> 151
(a) Borrower has full corporate power and authority to enter into
this First Amendment; and to carry out the provisions of this First Amendment
and the Credit Agreement, as amended hereby.
(b) This First Amendment has been duly authorized by all necessary
corporate proceedings, has been duly and validly executed and delivered by the
Borrower, and, assuming due authorization, execution and delivery by Borrower,
is a valid and legally binding agreement of the Borrower.
(c) No consent, approval, authorization, order, registration or
qualification of or with any court or regulatory authority or other
governmental body having jurisdiction over the Borrower is required for, and
the absence of which would adversely affect, the legal, valid and binding
execution and delivery of this First Amendment.
(d) The execution and delivery of this First Amendment (i) will not
violate or result in the violation of any existing provision of any law,
regulation or court order by which the Borrower or its property is bound, or of
the Articles of Incorporation or By-Laws of Borrower, (ii) will not conflict
with or result in a breach of or default under any of the terms or provisions
of any contract or agreement under which Borrower is an obligor or by which its
property is bound, and (iii) will not, except as contemplated herein, require
on the part of Borrower the filing with, notification to, or the consent or
approval of any governmental body, agency or authority or any other person.
Section 4. Reference to and Effect on the Credit Agreement.
(a) Upon the effectiveness of Section 1, each "hereunder", "hereof",
"herein" or words of like import, shall mean and be a reference to the Credit
Agreement as amended hereby.
(b) Except as specifically amended above, the Credit Agreement shall
remain in full force and effect and is ratified and confirmed.
(c) The execution, delivery and effectiveness of the First Amendment
shall not, except as expressly provided herein, operate as waiver of any right,
power of remedy of the Lenders under the Credit Agreement, nor constitute a
waiver of any provision of the Credit Agreement.
Section 5. Execution in Counterparts. The First Amendment may be executed
in one or more counterparts and by the parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.
Section 6. Governing Law. The First Amendment shall be governed by the
laws of the State of New York.
2.
<PAGE> 152
Section 7. Headings. Section headings in this First Amendment are
included herein for convenience of reference only and shall not constitute a
part of this First Amendment for any other purposes.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
executed and delivered by their proper and duly authorized officers.
AMERISTEEL CORPORATION
- ----------------------
By: /s/
--------------------------------------------
Name:
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.,
NEW YORK BRANCH, as Agent, Co-Administrative
Agent, Issuing Bank, and Lender
By:/s/ Akihiko Hagura
-------------------------------------------
Name: Akihiko Hagura
Title: Vice President
NATIONSBANK OF FLORIDA, N.A.
as Co-Administrative Agent, Issuing Bank,
and Lender
By:/s/ Miles C. Dearden III
-------------------------------------------
Name: Miles C. Dearden III
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN, LTD.
Atlanta Agency
By:/s/ Shusai Nagai
-------------------------------------------
Name: Shusai Nagai
Title: General Manager
3.
<PAGE> 153
THE SUMITOMO BANK, LIMITED
Atlanta Agency
By:/s/ Masayuki Fukushima
------------------------------------
Name: Masayuki Fukushima
Title: Joint General Manager
THE SUMITOMO BANK, LIMITED
New York Branch
By:
------------------------------------
Name:
Title:
THE SUMITOMO TRUST & BANKING CO., LTD.
New York Branch
By:/s/ Hidehiko Asai
------------------------------------
Name: Hidehiko Asai
Title: Deputy General Manager
4.
<PAGE> 154
SECOND AMENDMENT
Dated as of December 30, 1996
to
CREDIT AGREEMENT
dated as of June 9, 1995
(AmeriSteel Corporation)
WHEREAS, AmeriSteel Corporation (formerly called Florida Steel
Corporation), a Florida Corporation (the "Borrower"), the Lenders (as defined in
the Credit Agreement referred to below), the Bank of Tokyo-Mitsubishi, Ltd.
(successor by merger to The Bank of Tokyo, Ltd.) and Nationsbank of Florida,
N.A., as Issuing Banks and Co-Administrative Agents, and The Bank of
Tokyo-Mitsubishi, Ltd., New York Branch, as Agent (in such capacity, the
"Agent"), are parties to a Credit Agreement dated as of June 9, 1995, as amended
by a First Amendment dated as of April 16, 1996 (as so amended, the "Credit
Agreement"), pursuant to which the Lenders established a credit facility for the
Borrower, and made loans to the Borrower, on the terms and conditions set forth
in the Credit Agreement;
WHEREAS, the Borrower wishes to establish and operate a wholly-owned
subsidiary to accomplish certain business purposes of the Borrower, as more
fully set forth below;
WHEREAS, the Borrower has requested the Lenders, and the Lenders are
willing on the terms and conditions set forth below, to consent to (i) the
establishment of such subsidiary and to the transactions between the Borrower
and such
<PAGE> 155
subsidiary set forth below and (ii) amend the Credit Agreement in the manner and
on the terms and conditions set forth below to reflect the establishment and
operation of such subsidiary as described herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Defined Terms. Except as otherwise expressly provided herein,
capitalized terms used herein which are defined in the Credit Agreement shall
have the meanings given to such terms in the Credit Agreement
2. Consent to Transaction. The Required Lenders hereby consents to the
following transaction (the "AmeriSteel Finance Transaction") and waive any
provisions of the Credit Agreement, as in effect on the date hereof, that would
not permit such transaction, but only to the extent that the AmeriSteel Finance
Transaction would violate such provisions:
Prior to January 1, 1997, the Borrower will establish and initially
capitalize (up to $10,000) a Delaware corporation under the name of
AmeriSteel Finance, Inc. ("AmeriSteel Finance") which will be a
wholly-owned subsidiary of the Borrower. AmeriSteel Finance will have a
bank account in its name established in Delaware. It will also lease space
and hire not more than 4 employees to conduct business in that state.
Prior to January 1, 1997, the Borrower will contribute to the capital
of AmeriSteel Finance all or a substantial portion of the Borrower's
accounts receivable. Said accounts receivable will be transferred by the
Borrower and accepted by AmeriSteel Finance, subject to the security
interest therein in favor of the Lenders and the Agent created by the
Security Agreement. Pursuant to the First Mortgage Indenture, the Borrower
and AmeriSteel Finance will enter into a Third Supplemental Indenture under
which AmeriSteel Finance will guarantee the First Mortgage Notes. During
the time that the accounts receivable transferred to it by the
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Borrower are owned by AmeriSteel Finance, the Borrower, for a reasonable
fee, will provide a limited number of ministerial services with respect to
such accounts receivables.
It is presently anticipated that, after January 1, 1997, AmeriSteel
Finance will declare a dividend, payable to the Borrower as its sole
stockholder, in the form of any uncollected receivables and available cash.
It is presently anticipated that the transactions described above will be
repeated each year so long, but only so long as AmeriSteel Finance is a
wholly-owned Subsidiary of the Borrower and there exists no Default under
the Credit Agreement.
Prior to the initial transfer of the Accounts of the Borrower to
AmeriSteel Finance, AmeriSteel Finance shall execute and deliver to the
Agent (i) a Security Agreement (the "AmeriSteel Finance Security
Agreement") granting to the Agent and the Lenders a security interest in
all accounts receivable and inventory owned by AmeriSteel Finance,
including all Accounts transferred to it by the Borrower, and (ii) a
Guaranty (the "AmeriSteel Finance Guaranty") pursuant to which AmeriSteel
Finance shall guarantee all obligations of the Borrower under the Credit
Agreement, the Notes and the other Credit Documents.
3. Amendments to Credit Agreement. The Credit Agreement is hereby amended as
follows:
(a) Section 1.1 of the Credit Agreement is amended by adding the following
definitions thereto in appropriate alphabetical sequence:
"AmeriSteel Finance" shall mean AmeriSteel Finance, Inc., a Delaware
corporation.
"AmeriSteel Finance Security Agreement" shall mean the Security
Agreement dated as of December 30, 1996 executed and delivered by
AmeriSteel Finance to the Agent, granting to the Agent, for the benefit of
the Agent and the Lenders, a security interest in all accounts receivable
and inventory owned by AmeriSteel Finance.
"AmeriSteel Finance Guaranty" means the Guaranty dated as of December
30, 1996 executed and delivered by AmeriSteel Finance to the Agent pursuant
to which the AmeriSteel Finance has guaranteed all obligations
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of the Borrower under the Credit Agreement, the Notes and all other
Credit Documents."
(b) The definition of the term "Accounts" in Section 1.1 of the Credit
Agreement is amended by adding the following sentence at the end of such
definition:
"The term "Accounts" shall also include Accounts of the Borrower
transferred to and owned by AmeriSteel Finance."
(c) The definition of the term "Eligible Accounts Receivable" in Section
1.1 of the Credit Agreement is amended by (i) adding the word "and of AmeriSteel
Finance's" immediately following the word "Borrower" in line 2 of said
definition; (ii) adding the words "and AmeriSteel Finance" immediately after the
word "Borrower" in line 5 of paragraph (f) and line 7 of paragraph (g) of said
definition and (iii) adding the words "or AmeriSteel Finance" immediately after
the word "Borrower" in lines 2 and 4 of paragraph (g) of said definition.
(d) The definition of the term "Collateral" in Section 1.1 of the Credit
Agreement is amended by adding the following sentence at the end thereof:
"The term 'Collateral' shall include all Accounts of the Borrower
transferred to AmeriSteel Finance and all proceeds thereof."
(e) The definition of the term "Collateral Documents" in Section 1.1 of the
Credit Agreement is amended by adding the words ", the AmeriSteel Finance
Security Agreement" after the words "Security Agreement" in said definition.
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(f) The definition of the term "Credit Documents" is amended by adding the
words, "the AmeriSteel Finance Guaranty" after the words "Collateral Documents"
in line 4 of said definition.
(g) The definition of the term "Fabricating Accounts" in Section 1.1 of the
Credit Agreement is amended by adding the words "or to AmeriSteel Finance"
immediately after the word "Borrower" in line 2 of said definition.
(h) Section 6.8 of the Credit Agreement is amended by deleting the word
"and" at the end of clause (d) thereof, redesignating clause (e) thereof as
clause (f) and adding the following new clause (e) to said Section 6.8:
"(e) so long as there exists no Defaults hereunder transfers of Accounts by
the Borrower to AmeriSteel Finance, provided such accounts receivable are
so transferred subject to the security interest therein created under the
Security Agreement in favor of the Secured Parties (as defined in the
Security Agreement)"; and
(i) Section 6.12 of the Credit Agreement is amended by (i) deleting the
word "and" at the end of clause (f) thereof and (ii) redesignating clause (g)
thereof as clause (h) and adding the following new clause (g) after clause (f)
thereof:
"(g) Investments by the Borrower in AmeriSteel Finance consisting of cash
contributions exceeding $10,000 plus contributions of accounts receivable of the
Borrower to AmeriSteel Finance to the extent permitted by, and subject to the
conditions set forth in, Section 6.8(e); and"
(j) Section 6.13 of the Credit Agreement is amended by (i) deleting the
word "and" before clause (iii) thereof, (ii) adding the following clause after
clause (iii) thereof:"
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and (iv) transactions permitted by clause (e) of Section 6.8" and (iv) adding
the words "transactions permitted in clause (e) of Section 6.8" in the
parenthetical in clause (a) of the proviso in said Section 6.13, so that said
parenthetical shall read as follows:
"(excluding payments under the Technical Assistance Agreement or payments
permitted under section 6.11 or 6.12 or transactions permitted by clause
(e) of Section 6.8)"
(k) Article 6 of the Credit Agreement is a amended by adding the following
new Section 6.20 thereto:
"6.20 AmeriSteel Finance. The Borrower will not (a) sell any shares of
the capital stock of AmeriSteel Finance owned by the Borrower, (b) permit
AmeriSteel Finance to issue any shares of its capital stock to any Person
other than the Borrower, (c) permit AmeriSteel Finance to merge or
consolidate with any Person other than the Borrower or (d) permit
AmeriSteel Finance to (i) engage in any business other than the ownership
of the Accounts of the Borrower transferred to AmeriSteel Finance or (ii)
incur any Indebtedness other than (x) trade payables incurred in the
ordinary course of business and Indebtedness for services rendered to
AmeriSteel Finance, and (y) Indebtedness in respect or the AmeriSteel
Finance Guaranty and the guaranty by AmeriSteel Finance of the First
Mortgage Notes or (iii) transfer accounts receivable owned by AmeriSteel
Finance to any Person other than Borrower".
(l) Section 7.1 of the Credit Agreement is amended by (i) deleting the
period at the end of clause (n) thereof and substituting therefor a semicolon
and the word "or" and (ii) adding the following new clauses (a) at the end
thereof:
"(o) AmeriSteel Finance shall cease to be a wholly owned subsidiary of
the Borrower.
4. Conditions Precedent. The Lenders' consent to the AmeriSteel Finance
Transaction and to the amendments to the
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<PAGE> 160
Credit Agreement specified in Section 3 above shall not become effective until
the date (the "Amendment Effective Date") on which the Agent delivers a notice
to the Borrower and each Lender, substantially in the form of Exhibit A hereto
(the "Notice of Effectiveness"), stating that the Amendment Effective Date has
occurred; provided, however, that Sections 5 and 6 hereof shall be effective on
the date this Amendment is signed by the Borrower and the Required Banks. The
Agent shall not be obligated to deliver the Notice of Effectiveness unless the
Agent shall determine that each of the following conditions has been satisfied.
(a) The Agent shall have received counterparts of this Second
Amendment executed by the Borrower and the Required Banks;
(b) AmeriSteel Finance shall have executed and delivered to the Agent
counterparts of the AmeriSteel Finance Security Agreement and AmeriSteel
Finance Guaranty, each in form and substance satisfactory to the Agent;
(c) The Agent shall have received UCC-1 Financing Statements executed
by AmeriSteel Finance, as debtor, with respect to the security interests
created under the AmeriSteel Finance Security Agreement, such UCC-1
Financing Statements to be in proper form and sufficient number for filing
in Delaware and in each other jurisdiction specified by the Agent;
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<PAGE> 161
(d) the Agent shall have received copies of the certificate of
incorporation and by-laws of AmeriSteel Finance, certified by the Secretary
of AmeriSteel Finance and a certificate of the Secretary of State of the
State of Delaware as to the due incorporation, valid existence and good
standing of AmeriSteel Finance in said State;
(e) the Agent shall have received a certificate of the Secretary of
AmeriSteel Finance as to (i) the resolutions of the Board of Directors of
AmeriSteel Finance authorizing the execution, delivery and performance by
the AmeriSteel Finance of the AmeriSteel Finance Security Agreement, the
AmeriSteel Finance Guaranty and all other documents to be executed and
delivered by AmeriSteel Finance in connection therewith and (ii) the name,
title and signature of each officer of AmeriSteel Finance executing and
delivering the AmeriSteel Finance Security Agreement, the AmeriSteel
Finance Guaranty or any other document or certificate in connection
therewith;
(f) the Agent shall have received an opinion of ________, counsel for
AmeriSteel Finance, satisfactory in form and substance to the Agent, as to
(i) the due incorporation and valid existence of AmeriSteel Finance, (ii)
the power and authority of AmeriSteel Finance to accept the Accounts of the
Borrower to be transferred to it and to execute deliver and perform the
AmeriSteel Finance Security Agreement and the AmeriSteel Finance
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<PAGE> 162
Guaranty, (iii) the validity, binding effect and enforceability of the
AmeriSteel Finance Security Agreement and AmeriSteel Finance Guaranty, (iv)
the validity and perfection of the Security interest created under the
AmeriSteel Finance Security Agreement and (v) such other matters as the
Agent shall require;
(g) the Agent shall have been furnished with copies of all documents
delivered by AmeriSteel Finance or the Borrower in respect of the
AmeriSteel Finance Transaction to the Trustee under the First Mortgage
Indenture in connection with the Third Supplemental Indenture
(h) the Agent shall have received all other documents and instruments
requested by it in connection with the AmeriSteel Finance Transaction or
this Second Amendment; and
(i) the Borrower shall have paid the invoice of counsel for the Agent
in connection with this Second Amendment and the transactions contemplated
hereby.
5. Representations, and Warranties of the Borrower. The Borrower represents
and warrants to the Lenders and the Agent as follows:
(a) The Borrower has full corporate power and authority to enter into
this Second Amendment and to carry out the provisions of this Second
Amendment and the Credit Agreement, as amended hereby.
(b) This Second Amendment has been duly authorized by all necessary
corporate proceedings, has been duly and
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<PAGE> 163
validly executed and delivered by the Borrower, and is a valid and legally
binding obligation of the Borrower.
(c) No consent, approval, authorization, order, registration or
qualification of or with any court or regulatory authority or other
governmental body having jurisdiction over the Borrower is required for,
and the absence of which would adversely affect, the legality, validity,
binding effect or enforceability, of this Second Amendment;
(d) The execution and delivery of this Second Amendment (i) will not
violate or result in the violation of any existing provision of any law,
regulation or court order by which the Borrower or its property is bound,
or of the Articles of Incorporation or By-Laws of Borrower, (ii) will not
conflict with or result in a breach of or default under any of the terms or
provisions of any contract or agreement under which Borrower is an obligor
or by which it or its property is bound, and (iii) will not, except as
specified herein, require on the part of Borrower the filing with,
notification to, or the consent or approval of any governmental body,
agency or authority, or any other Person.
6. Miscellaneous
(a) Expenses. Without limiting the rights of the Lenders and the Agent
under Section 9.4 the Credit Agreement, the Borrower agrees to pay all
out-of-pocket costs and expenses incurred by the Agent (including, without
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<PAGE> 164
limitation, reasonable fees and disbursements of counsel to the Agent) in
connection with the preparation of this Second Amendment.
(b) WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT, THE ISSUING BANKS AND
THE LENDERS EACH HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING UNDER OR RELATING TO THIS SECOND AMENDMENT
(c) Continuing Effectiveness of Credit Agreement. Except as expressly
amended hereby, all terms, conditions, covenants, representations and warranties
contained in the Credit Agreement or any other Credit Document, and all rights
and obligations thereunder of the parties thereto, shall remain in full force
and effect. The execution, delivery and effectiveness of this Second Amendment
shall not, except as expressly provided herein, operate as waiver of any right,
power or remedy of the Agent or Lenders under the Credit Agreement or any other
Credit Documents, or constitute a waiver of any provision of the Credit
Agreement or any other Credit Documents.
(d) Counterparts. This Second Amendment may be executed in any number of
separate counterparts, all of which taken together shall be deemed to
constitute one and the same instrument, and all signatures need not appear on
any one counterpart. Any party hereto may execute and deliver a counterpart of
this Second Amendment by delivering to the Agent, by facsimile transmission, the
signature page of this
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<PAGE> 165
by facsimile transmission a counterpart of this Second Amendment signed by it
shall promptly thereafter also deliver a manually signed counterpart of this
Second Amendment to the Agent.
(e) Effectiveness. This Amendment shall become effective when counterparts
of this Amendment signed by the Borrower and the Required Lenders are received
by the Agent (including receipt by fascimile transmission); provided that
Sections 2 and 3 hereof shall in any event not become effective until the
Amendment Effective Date.
(f) Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflict
of laws rules which would make the laws of another jurisdiction applicable.
IN WITNESS WHEREOF, each party hereto has executed this Amendment by its
duly authorized officer as of the date first written above.
AmeriSteel Corporation
By: /s/ Tom J. Landa
----------------------------------
Name: Tom J. Landa
Title: Vice President and Chief
Financial Officer
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<PAGE> 166
THE BANK OF TOKYO-MITSUBISHI LTD.,
NEW YORK BRANCH, as Agent,
Co-Administrative Agent, Issuing
Bank, and Lender
By:
---------------------------------
Name:
Title:
NATIONSBANK OF FLORIDA, N.A.,
as Co-Administrative Agent,
Issuing Bank, and Lender
By:
---------------------------------
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LTD.
Atlanta Agency
By:
---------------------------------
Name:
Title:
THE SUMITOMO BANK, LIMITED
Atlanta Agency
By:
---------------------------------
Name:
Title:
THE SUMITOMO TRUST & BANKING Co., LTD.
New York Branch
By:
---------------------------------
Name:
Title:
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<PAGE> 167
EXHIBIT A
[Letterhead of Agent]
[Date]
NOTICE OF EFFECTIVENESS
To the Parties to
the Second Amendment
Referred to Below
Re: Credit Agreement dated as of June 9, 1995 (the "Credit Agreement"), as
amended, among AmeriSteel Corporation (formerly called Florida Steel
Corporation), the Lenders (as defined therein), The Bank of Tokyo
Mitsubishi, Ltd. (successor by merger to The Bank of Tokyo, Ltd.) and
Nationsbank of Florida, NA, as Issuing Banks and Co-Administrative
Agents, and the Bank of Tokyo-Mitsubishi Ltd., as Agent
Ladies and Gentlemen:
We refer to the Second Amendment dated as of December 30, 1996 to the
above-referenced Credit Agreement. We hereby notify you that the Amendment
Effective Date under said Second Amendment has occurred.
Very truly yours,
THE BANK OF TOKYO-MITSUBISHI,
LTD., New York Branch, as
Agent
By
---------------------------
<PAGE> 168
THIRD AMENDMENT
dated as of June 8, 1997
to
CREDIT AGREEMENT
dated as of June 9, 1995
(AmeriSteel Corporation)
WHEREAS, AmeriSteel Corporation (formerly called Florida Steel
Corporation), a Florida Corporation (the "Borrower"), the Lenders (as defined in
the Credit Agreement referred to below), The Bank of Tokyo-Mitsubishi, Ltd., New
York Branch (successor by merger to The Bank of Tokyo, Ltd., New York Agency)
and NationsBank, N.A. (succesor in interest to NationsBank of Florida, N.A.),
as Issuing Banks and Co-Administrative Agents, and The Bank of Tokyo-Mitsubishi,
Ltd., New York Branch, as Agent (in such capacity, the "Agent"), are parties to
a Credit Agreement dated as of June 9, 1995, as amended by a First Amendment
dated as of April 16, 1996 and a Second Amendment dated as of December 30, 1996
(as so amended, the "Credit Agreement"), pursuant to which the Lenders
established a credit facility for the Borrower, and made loans to the Borrower,
on the terms and conditions set forth in the Credit Agreement;
WHEREAS, THE BORROWER has requested the Lenders, and the Lenders are
willing on the terms and conditions set forth below, to amend the Credit
Agreement in the manner and on the terms and conditions set forth below.
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE> 169
1. Defined Terms. Except as otherwise expressly provided herein,
capitalized terms used herein which are defined in the Credit Agreement shall
have the meanings given to such terms in the Credit Agreement
2. Amendments to Credit Agreement. The Credit Agreement is hereby
amended as follows:
(a) Section 2.11.1(a) of the Credit Agreement, as heretofore
amended, is further amended by changing the date "June 9, 1997" set forth
therein (which date has been changed to June 9, 1998 pursuant to the First
Amendment to the Credit Agreement) to "June 9, 1999" so that, unless further
extended as provided in said Section 2.11.1(a), the Expiration Date shall be
June 9, 1999.
(b) Section 9.10 of the Credit Agreement is amended by adding the
following proviso at the end of the first sentence of said Section 9.10:
"and; provided, further, that the Co-Administrative Agents, acting
jointly, may waive the prohibition in Section 6.4 of the Credit
Agreement on Restricted Expenditures by the Borrower which result
in Availability being less than $10,000,000 or any Default or
Event of Default caused by such Restricted Expenditures"
3. Release of Co-Administrative Agents. Each Lender hereby
releases each Co-Administrative Agent from any and all claims which such Lender
may have against any such Co-Administrative Agent for, on account of, or
relating to any waiver given or withheld by such Co-Administrative Agent after
the effective date hereof with respect to any obligation of the Borrower under
Section 6.4 of the Credit Agreement or any
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<PAGE> 170
default by the Borrower thereunder, except for any such claim by a Lender
against a Co-Administrative Agent arising solely and directly from any such
waiver which is determined by a final, non-appealable judgment or order entered
in an action commenced in a state or Federal court sitting in New York, New York
to constitute gross negligence or willful misconduct by such Co-Administrative
Agent.
4. Representations and Warranties of the Borrower. The Borrower
represents and warrants to the Lenders and the Agent as follows:
(a) The Borrower has full corporate power and authority to
enter into this Amendment and to carry out the provisions of this Amendment and
the Credit Agreement, as amended hereby.
(b) This Amendment has been duly authorized by all necessary
corporate proceedings, has been duly and validly executed and delivered by the
Borrower, and is a valid and legally binding obligation of the Borrower.
(c) No consent, approval, authorization, order, registration
or qualification of or with any court or regulatory authority or other
governmental body having jurisdiction over the Borrower is required for, and the
absence of which would adversely affect, the legality, validity, binding effect
or enforceability, of this Amendment;
(d) The execution and delivery of this Amendment (i) will not
violate or result in the violation of any existing provision of any law,
regulation or court order by which the
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<PAGE> 171
Borrower or its property is bound, or of the Articles of Incorporation or
By-Laws of Borrower, (ii) will not conflict with or result in a breach of or
default under any of the terms or provisions of any contract or agreement under
which Borrower is an obligor or by which it or its property is bound, and (iii)
will not, except as specified herein, require on the part of Borrower the filing
with, notification to, or the consent or approval of any governmental body,
agency or authority or any other Person.
5. Miscellaneous.
(a) Expenses. Without limiting the rights of the Lenders
and the Agent under Section 9.4 of the Credit Agreement, the Borrower agrees to
pay all out-of-pocket costs and expenses incurred by the Agent (including,
without limitation, reasonable fees and disbursements of counsel to the Agent)
in connection with the preparation of this Amendment.
(b) WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT, THE
ISSUING BANKS AND THE LENDERS EACH HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING UNDER OR RELATING TO THIS
AMENDMENT.
(c) Continuing Effectiveness of Credit Agreement. Except
as expressly amended hereby, all terms, conditions, covenants, representations
and warranties contained in the Credit Agreement or any other Credit Document,
and all rights and obligations thereunder of the parties thereto, shall remain
in full force and effect. The execution, delivery and effectiveness of this
Amendment shall not, except as expressly
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<PAGE> 172
provided herein, operate as waiver of any right, power or remedy of the Agent or
Lenders under the Credit Agreement or any other Credit Documents, or constitute
a waiver of any provision of the Credit Agreement or any other Credit Documents.
(d) Counterparts. This Amendment may be executed in any
number of separate counterparts, all of which taken together shall be deemed to
constitute one and the same instrument, and all signatures need not appear on
any one counterpart. Any party hereto may execute and deliver a counterpart of
this Amendment by delivering to the Agent, by facsimile transmission, the
signature page of this Amendment signed by such party. Any party so delivering
by facsimile transmission a counterpart of this Amendment signed by it shall
promptly thereafter also deliver a manually signed counterpart of this
Amendment to the Agent.
(e) Effectiveness. This Amendment shall become effective
when counterparts of this Amendment signed by the Borrower and each Lender are
received by the Agent (including receipt by facsimile transmission).
(f) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to conflict of laws rules which would make the laws of another jurisdiction
applicable.
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<PAGE> 173
IN WITNESS WHEREOF, each party hereto has executed this Amendment by
its duly authorized officer as of the date first written above.
AMERISTEEL CORPORATION
By: /s/ Tony Landa
------------------------------
Name: Tony Landa
Vice President and
Chief Financial Officer
<PAGE> 174
THE BANK OF TOKYO-MITSUBISHI, LTD.,
New York Branch, as Agent,
Co-Administrative Agent, Issuing
Bank and Lender
By: /s/ Minoru Shimada
--------------------------------
Name: Minoru Shimada
Title: Senior Vice President
<PAGE> 175
NATIONSBANK, N.A.
(successor in interest to NationsBank
of Florida, N.A.), as Co-Administra-
tive Agent, Issuing Bank and Lender
By: /s/ Miles C. Dearden III
-----------------------------------
Name: Miles C. Dearden III
Title: Senior Vice President
<PAGE> 176
THE INDUSTRIAL BANK OF JAPAN, LTD.
Atlanta Agency
By: /s/ Kazuo Iida
--------------------------------
Name: Kazuo Iida
Title: General Manager
<PAGE> 177
THE SUMITOMO BANK, LIMITED
Atlanta Agency
By: /s/ Masayuki Fukushima
--------------------------
Name: Masayuki Fukushima
Title: Joint General Manager
<PAGE> 178
THE SUMITOMO TRUST & BANKING CO., LTD.
New York Branch
By: /s/
----------------------------------
Name:
Title:
<PAGE> 179
EXTENSION AGREEMENT
WHEREAS, AmeriSteel Corporation, formerly known as Florida Steel
Corporation (the "Borrower"), the financial institutions referred to below as
Lenders (the "Lenders"), The Bank of Tokyo-Mitsubishi, Ltd., New York Branch,
as successor by merger to The Bank of Tokyo, Ltd., New York Agency ("BTM"), and
NationsBank of Florida, N.A., as Issuing Banks and Co-Administrative Agents,
and BTM, as Agent, are parties to that certain Credit Agreement dated as of
June 9, 1995 (as from time to time amended, modified, restated or supplemented,
the "Credit Agreement") pursuant to which the Lenders have established a credit
facility for the Borrower;
WHEREAS, the Expiration Date under, and as defined in, the Credit
Agreement is currently June 9, 1997 (the "Scheduled Expiration Date");
WHEREAS, the Lenders are willing to extend the Expiration Date under
the Credit Agreement on the terms and conditions set forth below:
NOW, THEREFORE, the parties hereto agree as follows:
1. Capitalized terms used but not defined herein shall have the
meanings provided in the Credit Agreement.
2. Subject to the terms and conditions hereof, the Lenders are
willing to extend the Expiration Date to the date which is the first
anniversary of the Scheduled Expiration Date (i.e., June 9, 1998); provided,
that, if counterparts of this Agreement are not signed by each Lender and the
Borrower and accepted by the Agent by the Scheduled Expiration Date, then this
Extension Agreement shall be null and void and the Expiration Date under the
Credit Agreement shall be the Scheduled Expiration Date.
3. Upon receipt by the Agent of counterparts of this Extension
Agreement signed by all the Lenders and the Borrower, the Agent shall accept
the same by signing as indicated below and shall notify each Lender and the
Borrower that the Expiration Date has been extended as provided herein. This
Extension Agreement shall not be effective unless and until counterparts of
this Extension Agreement signed by the Borrower and all the Lenders are
received and accepted by the Agent on or before the Scheduled Expiration Date.
4. The Borrower hereby confirms that the Credit Agreement and the
other Credit documents, all rights of the Lenders, the Issuing Banks, the
Co-Administrative Agents and the Agent and obligations of the Borrower
thereunder and all liens granted by the Borrower under the Security Agreement
and the Credit Agreement are in full force and effect, and that the Borrower
has not setoffs, defenses or counterclaims to any of its obligations under the
Credit Agreement or any of the other Credit Documents.
<PAGE> 180
5. The Extension Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, bu tall of which
shall together constitute one and the same instrument.
IN WITNESS WHEREOF the parties hereto have executed this Extension
Agreement by their duly authorized officers.
AMERISTEEL CORPORATION
By: /s/ Tom Landa
------------------------------------
Name: Tom Landa
Title: CFO & VP
THE BANK OF TOKYO-MITSUBISHI, LTD.
NEW YORK BRANCH, successor by merger to The
Bank of Tokyo, Ltd., New York Agency, as
Lender, Issuing Bank and Co-Administrative
Agent
By: /s/ Akiniko Hagura
------------------------------------
Name: Akiniko Hagura
Title: Vice President
NATIONSBANK, N.A., as Lender Issuing Bank
and Co-Administrative Agent
By: /s/ Miles C. Dearden, III
------------------------------------
Name: Miles C. Dearden, III
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN, LTD.,
ATLANTA AGENCY, as Lender
By: /s/ Shusai Nagia
------------------------------------
Name: Shusai Nagia
Title: General Manager
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<PAGE> 181
THE SUMITOMO BANK, LIMITED,
ATLANTA AGENCY, as Lender
By: /s/ Masayuki Fukusihima
-------------------------------
Name: Masayuki Fukusihima
Title: Joint General Manager
THE SUMITOMO TRUST & BANKING CO.,
LTD., as Lender
By: /s/ Hidehiko Asai
------------------------------------
Name: Hidehiko Asai
Title: Deputy General Manager
Accepted by:
THE BANK OF TOKYO-MITSUBISHI, LTD.
NEW YORK BRANCH, successor by merger to
The Bank of Tokyo, Ltd., New York Agency, as Agent
By:
------------------------------------
Name:
Title:
-3-
<PAGE> 1
EXHIBIT 10.4
================================================================================
INDENTURE
Dated as of December 15, 1992
by and between
FLORIDA STEEL CORPORATION, Issuer
AND
THE CONNECTICUT NATIONAL BANK, Trustee
---------------
$100,000,000
11-1/2% First Mortgage Notes due 2000
================================================================================
<PAGE> 2
FLORIDA STEEL CORPORATION
Reconciliation and Tie between Trust Indenture
Act of 1939 and the Indenture dated as of
December 15, 1992
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C>
SS. 310(a)(1).................................................. 7.10
(a)(2).................................................. 7.10
(a)(3).................................................. N.A.
(a)(4).................................................. N.A.
(a)(5).................................................. 7.10;7.ll
(b)..................................................... 7.08;7.10;11.02
(c)..................................................... N.A.
SS. 311(a)..................................................... 7.11
(b)..................................................... 7.ll
(c)..................................................... N.A.
SS. 312(a)..................................................... 2.06
(b)..................................................... 11.02;11.03
(c)..................................................... ll.02;11.03
SS. 313(a)..................................................... 7.06
(b)(1).................................................. 7.06
(b)(2).................................................. 7.06
(c)..................................................... 7.06;11.02
(d)..................................................... 7.06
SS. 314(a)..................................................... 4.09;4.10;11.02
(b)..................................................... 10.02
(c)(1).................................................. 11.04
(c)(2).................................................. 11.04
(d)..................................................... 10.02;10.03;
10.04;10.05
(e)..................................................... 11.05
(f)..................................................... N.A.
SS. 315(a)..................................................... 7.01(b)
(b)..................................................... 7.05;11.02
(c)..................................................... 7.01(a)
(d)..................................................... 7.01(c)
(e)..................................................... 6.ll
SS. 316(a)(last sentence)...................................... 2.10
(b)(1)(A)............................................... 6.05
(b)(1)(B)............................................... 6.04
(a)(2).................................................. N.A.
(b)..................................................... 6.07
(c)..................................................... 9.04
SS. 317(a)(1).................................................. 6.08
(a)(2).................................................. 6.09
(b)..................................................... 2.05
SS. 318(a)..................................................... 11.01
</TABLE>
- ----------------
N.A. means Not Applicable
NOTE: This Reconciliation and Tie shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
SECTION 1.01. Definitions................................................. 1
SECTION 1.02. Incorporation by Reference of Trust
Indenture Act............................................. 20
SECTION 1.03. Rules of Construction....................................... 21
ARTICLE 2
THE FIRST MORTGAGE NOTES
SECTION 2.01. Designation................................................. 21
SECTION 2.02. Form and Dating............................................. 21
SECTION 2.03. Execution and Authentication;
Aggregate Principal Amount................................ 22
SECTION 2.04. Registrar and Paying Agent.................................. 23
SECTION 2.05. Paying Agent To Hold Money in Trust......................... 23
SECTION 2.06. Noteholder Lists............................................ 24
SECTION 2.07. Transfer and Exchange....................................... 24
SECTION 2.08. Replacement First Mortgage Notes............................ 25
SECTION 2.09. Outstanding First Mortgage Notes............................ 25
SECTION 2.10. Treasury First Mortgage Notes............................... 26
SECTION 2.11. Temporary First Mortgage Notes.............................. 26
SECTION 2.12. Cancellation................................................ 26
SECTION 2.13. Defaulted Interest.......................................... 27
SECTION 2.14. Deposit of Moneys........................................... 27
ARTICLE 3
REDEMPTION AND REPURCHASE
SECTION 3.01. Notices to Trustee.......................................... 28
SECTION 3.02. Selection of First Mortgage Notes
To Be Redeemed............................................ 28
SECTION 3.03. Notice of Redemption........................................ 29
SECTION 3.04. Effect of Notice of Redemption.............................. 30
SECTION 3.05. Deposit of Redemption Price................................. 30
SECTION 3.06. First Mortgage Notes Redeemed in
Part...................................................... 30
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
SECTION 3.07. Securities Exchange Act
Requirements................................................ 31
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of First Mortgage Notes............................... 31
SECTION 4.02. Maintenance of Office or Agency............................... 31
SECTION 4.03. Corporate Existence........................................... 32
SECTION 4.04. Payment of Taxes and Other Claims;
Tax Consolidation........................................... 32
SECTION 4.05. Compliance Certificates....................................... 33
SECTION 4.06. SEC Reports................................................... 34
SECTION 4.07. Waiver of Stay, Extension or Usury
Laws........................................................ 35
SECTION 4.08. Maintenance of Properties; Insur-
ance; Books and Records; Compli-
ance with Law............................................... 35
SECTION 4.09. Limitation of Restricted Payments............................. 36
SECTION 4.10. Limitation on Payment Restrictions
Affecting Subsidiaries...................................... 38
SECTION 4.11. Limitation on Incurrences of Addi-
tional Indebtedness......................................... 39
SECTION 4.12. Limitation on Issuance of Subordi-
nated Indebtedness.......................................... 40
SECTION 4.13. Guarantees of Certain Indebtedness............................ 40
SECTION 4.14. Limitation on Transactions with
Affiliates.................................................. 41
SECTION 4.15. Limitation on Asset Sales..................................... 42
SECTION 4.16. Limitation on Liens........................................... 46
SECTION 4.17. Limitation on Sale-Leaseback
Transactions................................................ 47
SECTION 4.18. Limitation on Issuance of Preferred
Stock by Subsidiaries....................................... 47
SECTION 4.19. Change of Control............................................. 47
SECTION 4.20. Maintenance of Consolidated Net
Worth....................................................... 50
SECTION 4.21. Amendment to Security Documents............................... 50
SECTION 4.22. Inspection and Confidentiality................................ 50
SECTION 4.23. Use of Proceeds............................................... 51
SECTION 4.24. Impairment of Security Interest............................... 51
SECTION 4.25. Sale or Discount of Receivables............................... 51
</TABLE>
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<TABLE>
<CAPTION>
Page
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ARTICLE 5
SUCCESSOR CORPORATION
<S> <C> <C>
SECTION 5.01. When Company May Merge, etc.................................. 52
SECTION 5.02. Surviving Person Substituted................................. 53
ARTICLE 6
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default............................................ 54
SECTION 6.02. Acceleration................................................. 56
SECTION 6.03. Other Remedies............................................... 57
SECTION 6.04. Waiver of Past Defaults...................................... 57
SECTION 6.05. Control by Majority.......................................... 58
SECTION 6.06. Limitation on Remedies....................................... 58
SECTION 6.07. Rights of Holders to Receive
Payment.................................................... 59
SECTION 6.08. Collection Suit by Trustee................................... 59
SECTION 6.09. Trustee May File Proofs of Claim............................. 59
SECTION 6.10. Priorities................................................... 60
SECTION 6.11. Undertaking for Costs........................................ 61
SECTION 6.12. Restoration of Rights and Remedies........................... 61
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee............................................ 61
SECTION 7.02. Rights of Trustee............................................ 63
SECTION 7.03. Individual Rights of Trustee................................. 64
SECTION 7.04. Trustee's Disclaimer......................................... 64
SECTION 7.05. Notice of Defaults........................................... 65
SECTION 7.06. Reports by Trustee to Holders................................ 65
SECTION 7.07. Compensation and Indemnity................................... 65
SECTION 7.08. Replacement of Trustee....................................... 66
SECTION 7.09. Successor Trustee by Merger, etc............................. 68
SECTION 7.10. Eligibility; Disqualification................................ 68
SECTION 7.11. Preferential Collection of Claims
Against the Company........................................ 68
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
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ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
<S> <C> <C>
SECTION 8.01. Termination of Obligations................................... 68
SECTION 8.02. Application of Trust Money................................... 71
SECTION 8.03. Repayment to the Company..................................... 71
SECTION 8.04. Reinstatement................................................ 72
ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders................................... 72
SECTION 9.02. With Consent of Holders...................................... 73
SECTION 9.03. Compliance with Trust Indenture Act.......................... 75
SECTION 9.04. Revocation and Effect of Consents............................ 75
SECTION 9.05. Notation on or Exchange of First
Mortgage Notes............................................. 76
SECTION 9.06. Trustee May Sign Amendments, etc............................. 76
ARTICLE 10
COLLATERAL AND SECURITY
SECTION 10.01. Collateral and Security Documents............................ 76
SECTION 10.02. Recording and Opinion........................................ 77
SECTION 10.03. Release of Collateral........................................ 78
SECTION 10.04. Possession and Use of Collateral............................. 79
SECTION 10.05. Specified Release of Collateral.............................. 79
SECTION 10.06. Disposition of Collateral Without
Release.................................................... 82
SECTION 10.07. Form and Sufficiency of Release.............................. 82
SECTION 10.08. Purchaser Protected.......................................... 82
SECTION 10.09. Authorization of Actions To Be
Taken by the Trustee Under the
Security Documents......................................... 83
SECTION 10.10 Authorization of Receipt of Funds
by the Trustee Under the Security Documents................ 83
</TABLE>
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<PAGE> 7
<TABLE>
<CAPTION>
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ARTICLE 11
APPLICATION OF TRUST MONEYS
<S> <C> <C>
SECTION 11.01. "Trust Moneys" Defined....................................... 83
SECTION 11.02. Withdrawals of Insurance Proceeds
and Condemnation Awards.................................... 85
SECTION 11.03. Withdrawal of Net Cash Proceeds,
Net Awards or Net Proceeds................................. 87
SECTION 11.04. Withdrawal of Trust Moneys for
Reinvestment............................................... 88
SECTION 11.05. Withdrawal of Trust Moneys on
Basis of Retirement of First
Mortgage Notes............................................. 89
SECTION 11.06. Investment of Trust Moneys................................... 90
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls................................. 90
SECTION 12.02. Notices...................................................... 91
SECTION 12.03. Communications by Holders with
Other Holders.............................................. 91
SECTION 12.04. Certificate and Opinion as to Con-
ditions Precedent.......................................... 92
SECTION 12.05. Statements Required in Certificate
or Opinion of Counsel...................................... 92
SECTION 12.06. Rules by Trustees, Paying Agent,
Registrar.................................................. 93
SECTION 12.07. Governing Law................................................ 93
SECTION 12.08. No Adverse Interpretation of Other
Agreements................................................. 93
SECTION 12.09. No Recourse Against Others................................... 93
SECTION 12.10. Successors................................................... 93
SECTION 12.11. Duplicate Originals.......................................... 93
SECTION 12.12. Severability................................................. 94
SECTION 12.13. Table of Contents, Headings, etc............................. 94
SECTION 12.14. Benefits of Indenture........................................ 94
SIGNATURES.................................................................. 95
</TABLE>
-v-
<PAGE> 8
EXHIBITS
I - FORM OF FIRST MORTGAGE NOTE
II - FORM OF INTERCREDITOR AGREEMENT
III - FOR OF SECURITY AGREEMENT
IV - FORM OF MORTGAGE
- -------------------
NOTE: This Table of Contents shall not, for any purpose, be
deemed to be part of the Indenture.
-vi-
<PAGE> 9
INDENTURE, dated as of December 15, 1992, by and between FLORIDA STEEL
CORPORATION, a Florida corporation and the issuer (the "Company"), and THE
CONNECTICUT NATIONAL BANK, a national banking association, as trustee (the
"Trustee").
The Company has authorized the creation of First Mortgage Notes (as
hereinafter defined), and to provide therefor, the Company has duly authorized
the execution and delivery of this Indenture. All things necessary to make the
First Mortgage Notes, when duly issued and executed by the Company and
authenticated and delivered hereunder, the valid obligations of the Company, and
to make this Indenture a valid and binding agreement of the Company, have been
done.
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Company's 11-1/2% First
Mortgage Notes due 2000 (the "First Mortgage Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means indebtedness of a Person or any of its
subsidiaries existing at the time such Person becomes a Subsidiary or assumed in
connection with the acquisition of assets from such Person and not incurred by
such Person in connection with, or in anticipation or contemplation of, such
Person becoming a Subsidiary or such acquisition.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise (the terms
"affiliated," "controlling" and "controlled" having meanings correlative to the
foregoing).
"Agent" means any Registrar, Paying Agent or co-registrar of the First
Mortgage Notes.
"Appraiser" means a Person who in the course of its business appraises
real property, and who is a member in good standing with the American Institute
of Real Estate Appraisers, recognized and licensed to do business in the
jurisdiction where the applicable Mortgaged Property is situated, and who is
acceptable to the Collateral Agent.
<PAGE> 10
-2-
"Asset Sale" means, for any Person, any sale, transfer or other
disposition or series of sales, transfers or other dispositions (including,
without limitation, by merger or consolidation or by exchange of assets and
whether by operation of law or otherwise) made by such Person or any of its
subsidiaries to any Person other than such Person or one of its Wholly Owned
Subsidiaries (or, in the case of a sale, transfer or other disposition by a
Subsidiary, to any Person other than the Company or a directly or indirectly
Wholly Owned Subsidiary of the Company) of any assets (excluding Inventory and
Accounts (each as defined in the New Revolving Credit Agreement as in effect on
the Issue Date)) of such Person or any of its subsidiaries, including, without
limitation, assets consisting of any Capital Stock or other securities held by
such Person or any of its subsidiaries (other than Capital Stock of such
Person), and any Capital Stock issued by any subsidiary of such Person, outside
of the ordinary course of business, excluding, however, any sale, transfer or
other disposition, or series of related sales, transfers or other dispositions,
having a purchase price or transaction value, as the case may be, of $50,000 or
less.
"Atlas" means Atlas Steel & Wire Corporation, a Louisiana corporation.
"Atlas Note" means the intercompany note of Atlas issued to the Company
on the Issue Date.
"Authenticating Agent" has the meaning set forth in Section 2.03.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or any
Person, as the case may be, or any authorized committee of the Board of
Directors.
"Board Resolution" means a duly adopted resolution of the Board of
Directors of the Company or any Person, as applicable.
"Business Day" means a day that is not a Legal Holiday.
"Capital Expenditures" of any Person means the expenditure of funds for
the purchase of capital equipment or fixed
<PAGE> 11
-3-
assets that shall result in an increase in the amount of such expenditure in
the property, plant or equipment reflected in the balance sheet of such Person
in accordance with GAAP.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock, including each class of common stock and preferred stock of such Person.
"Capitalized Lease Obligation" means obligations under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations determined in accordance with GAAP.
"Cash Equivalents" means (i) obligations issued or unconditionally
guaranteed by the United States of America or any agency thereof, or obligations
issued by any agency or instrumentality thereof and backed by the full faith and
credit of the United States of America, (ii) commercial paper rated the highest
grade by Moody's Investors Service, Inc. and Standard & Poor's Corporation and
maturing not more than one year from the date of creation thereof, (iii) time
deposits with, and certificates of deposit and banker's acceptances issued by,
any bank having capital surplus and undivided profits aggregating at least
$500,000,000 and maturing not more than one year from the date of creation
thereof, (iv) repurchase agreements that are secured by a perfected security
interest in an obligation described in clause (i) and are with any bank
described in clause (iii), and (v) readily marketable direct obligations issued
by any state of the United States of America or any political subdivision
thereof having one of the two highest rating categories obtainable from either
Moody's Investors Service, Inc. or Standard & Poor's Corporation.
A "Change of Control" shall be deemed to occur on the first date on
which Kyoei (or any person controlled by Kyoei) does not beneficially own
(within the meaning of Rule 13d-3 under the Exchange Act) and have the power to
vote at least a majority of the voting power of the Company' Voting Stock.
"Code" means the Internal Revenue Code of 1986, as amended.
<PAGE> 12
-4-
"Collateral" means, collectively, all of the property and assets that
are from time to time subject to the Security Documents.
"Collateral Account" means the collateral account to be established
hereunder.
"Collateral Agent" means The Connecticut National Bank, a national
banking association, in its capacity as collateral agent under the Security
Documents, and any successors in such capacity.
"Company Order" means a written order or request signed in the name of
the Company by its President or a Vice President, and by its Treasurer, an
Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to
the Trustee.
"Consolidated Interest Coverage Ratio" means, with respect to any
Person, the ratio of (1) EBITDA of such Person for the period (the "Pro Forma
Period") consisting of the most recent four full fiscal quarters for which
financial information in respect thereof is available immediately prior to the
date of the transaction giving rise to the need to calculate the Consolidated
Interest Coverage Ratio (the "Transaction Date" to (2) the aggregate Fixed
Charges of such Person for the Pro Forma Period. In addition to, but without
duplication of, the foregoing, for purposes of this definition, "EBITDA" shall
be calculated after giving effect (without duplication), on a pro forma basis
for the Pro Forma Period (but no longer), to (a) any Investment, during the
period commencing on the first day of the Pro Forma Period to and including the
Transaction Date (the "Reference Period"), in any other Person that, as a result
of such Investment, becomes a subsidiary of such Person, (b) the acquisition (by
merger, consolidation or purchase of stock or assets), during the Reference
Period, of any business or assets, which acquisition is not prohibited by this
Indenture and (c) any sales or other dispositions of assets (other than sales of
inventory in the ordinary course of business) occurring during the Reference
Period, in each case as if such Investment, acquisition or asset sale had
occurred on the first day of the Reference Period. In addition, for purposes of
this definition, "Fixed Charges" shall be calculated after giving effect
(without duplication), on a pro forma basis for the Pro Forma Period, to any
Indebtedness incurred or repaid on or after the first day of the Reference
Period.
<PAGE> 13
-5-
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the net income (or loss) of such Person and its
subsidiaries for such period, on consolidated basis, determined in accordance
with GAAP; provided that (a) the net income of any other Person in which such
Person or any of its subsidiaries has an interest (which interest does not cause
the net income of such other Person to be consolidated with the net income of
such Person and its subsidiaries in accordance with GAAP) shall be included only
to the extent of the amount of dividends or distributions actually paid to such
Person or such subsidiary by such other Person in such period; (b) the net
income of any subsidiary of such Person that is subject to any Payment
Restriction shall be excluded to the extent such Payment Restriction actually
prevented the payment of an amount that otherwise could have been paid to, or
received by, such Person or a subsidiary of such Person not subject to any
Payment Restriction; (c)(i) the net income (or loss) of any other Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition, (ii) all gains and losses realized on any Asset Sale
(without regard to the $50,000 threshold set forth in the definition thereof),
(iii) all gains and losses resulting from the cumulative effect of any
accounting change, (iv) all other extraordinary gains and losses and (v) with
respect to the Company, all losses and deferred financing costs written off in
connection with the early extinguishment of the First Mortgage Notes shall each
be excluded; and (d) with respect to the Company, any additional provisions for
environmental remediation made in the twelve-month period immediately following
the Issue Date (an "Additional Provision") (net of income tax effects determined
in accordance with GAAP) shall be excluded from the calculation of net income,
and any expenditures which reduce the Company's provision for environmental
remediation (net of income tax effects determined in accordance with GAAP) (an
"Expenditure") shall be included in the calculation of net income for the fiscal
quarter in which such Expenditures are made in an amount equal to the
Expenditures multiplied by a fraction, of which the numerator is all Additional
Provisions (net of any reversals) and the denominator is the sum of the
liability for environmental remediation existing on the Issue Date and all
Additional Provisions (in each case net of any Additional Provision); provided,
however, that any reversal of an Additional Provision (net of income tax effect
determined in accordance with GAAP) not be included in net income; and provided,
further, that the total amount of cumulative Expenditures (without taking into
account any income tax effects determined in
<PAGE> 14
-6-
accordance with GAAP) which are included in the calculation of net income shall
not exceed the amount of Additional Provisions, net of any reversals thereof.
"Consolidated Net Worth" means, with respect to any Person, the total
stockholder's equity (exclusive of any Disqualified Capital Stock) of such
Person and its subsidiaries determined on a consolidated basis in accordance
with GAAP; Provided, however, that with respect to the Company, stockholders'
equity shall be calculated to exclude the effect of any Additional Provision
(net of income tax effects determined in accordance with GAAP) and any
redemption premium paid on the Debentures but shall include the effects of any
Expenditures in an amount equal to the Expenditures multiplied by a fraction, of
which the numerator is all Additional Provisions (net of any reversals) and the
denominator is the sum of the liability for environmental remediation existing
on the Issue Date and all Additional Provisions (in each case net of reversals
of any such liability or Additional Provisions (in each case net of reversals of
any such liability or Additional Provision); provided, however, that any
reversal of an Additional Provision (net of income tax effects determined in
accordance with GAAP) shall not be included in any calculation of stockholders'
equity; and provided, further, that the total amount of cumulative Expenditures
(without taking into account any income tax effects determined in accordance
with GAAP) which are included in the calculation of stockholders' equity shall
not exceed the amount of Additional Provisions, net of any reversals thereof.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Debentures" means the up to $125,000,000 aggregate principal amount
of the Company's 14.5% Subordinated Debentures due 2000.
"Default" means any event that is, or after notice or passage of time,
or both, would be, an Event of Default.
"Disqualified Capital Stocks" means, with respect to any Person, any
Capital Stock of such Person or any of its subsidiaries that, by its terms, by
the terms of any agreement related thereto or by the terms of any security into
which it is convertible, puttable or exchangeable, is, or upon the happening of
an event or the passage of time would be, required to be redeemed or repurchased
by such Person or its subsidiaries, including at the option of the holder, in
whole or in part, or
<PAGE> 15
-7-
has, or upon the happening of an event or passage of time would have, a
redemption or similar payment due on or prior to the Maturity Date.
"EBITDA" means, with respect to any Person, for any period, without
duplication, the sum of the amounts for such period of (i) Consolidated Net
Income of such Person for such period, (ii) provisions for income taxes or
similar charges recognized by such Person and its consolidated subsidiaries for
such period, (iii) depreciation and amortization expense of such Person and its
consolidated subsidiaries accrued during such period (but only to the extent not
included in Fixed Charges), (iv) Fixed Charges of such Person and its
consolidated subsidiaries for such period and (v) other non-cash charges
reducing Consolidated Net Income and that have been customarily added back to
Consolidated Net Income by such Person in determining EBITDA, in each case
determined in accordance with GAAP; provided that the amounts set forth in
clauses (ii) through (v) shall be included only to the extent such amounts
reduced Consolidated Net Income.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to the Mortgaged Property, the
price which could be negotiated in an arm's-length transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
pressure or compulsion to complete the transaction. Fair Market Value shall be
determined by an Appraiser.
"First Mortgage Notes" and "First Mortgage Note" means the 11-1/2%
First Mortgage Notes due 2000, as amended or supplemented from time to time,
that are issued pursuant to this Indenture.
"Fixed Charges" means, with respect to any Person for any period, the
aggregate amount of (i) interest, whether expensed or capitalized, paid, accrued
or scheduled to be paid or accrued during such period (except to the extent
accrued in a prior period) in respect of all Indebtedness of such Person and its
consolidated subsidiaries (including (a) original issue discount on any
Indebtedness and (b) the interest portion of all deferred payment obligations,
calculated in accordance with
<PAGE> 16
-8-
the effective interest method, in each case to the extent attributable to such
period) and (ii) dividend requirements on Capital Stock of such Person and its
consolidated subsidiaries (whether in cash or otherwise (except dividends
payable in shares of Qualified Capital Stock)) paid, accrued or scheduled to be
paid or accrued during such period (except to the extent accrued in a prior
period) and excluding items eliminated in consolidation. For purposes of this
definition, (a) interest on a Capitalized Lease Obligation shall be deemed to
accrue at an interest rate reasonably determined by the Board of Directors of
such Person (as evidenced by a Board Resolution) to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance with GAAP, (b)
interest on Indebtedness that is determined on a fluctuating basis shall be
deemed to have accrued at a fixed rate per annum equal to the rate of interest
of such Indebtedness in effect on the date that Fixed Charges are being
calculated, (c) interest on Indebtedness that may optionally be determined at an
interest rate based upon a factor of a prime or similar rate, a eurocurrency
interbank offered rate, or other rates, shall be deemed to have been based upon
the rate actually chosen, or, if none, then based upon such optional rate chosen
as the Company may designate, and (d) Fixed Charges shall be increased or
reduced by the net cost (including amortization of discount) or benefit
associated with Interest Swap Obligations attributable to such period. For
purposes of clause (ii) above, dividend requirements shall be increased to an
amount representing the pretax earnings that would be required to cover such
dividend requirements; accordingly, the increased amount shall be equal to such
dividend requirements multiplied by a fraction, the numerator of which is one
and the denominator of which is one minus the applicable actual combined
Federal, state, local and foreign income tax rate of such Person 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 Fixed Charges. Fixed charges shall not include any amounts for any
redemption premium paid on the Debentures.
"GAAP" means generally accepted accounting principles as in effect on
the Issue Date.
"Guarantee" means a guarantee of the First Mortgage Notes on a senior
basis.
"Holder" or "Noteholder" means the Person in whose name a First
Mortgage Note is, at the time of determination, registered on the Registrar's
books.
<PAGE> 17
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"Holdings" means FLS Holdings Inc., a Delaware corporation.
"incur" means, with respect to any Indebtedness, to directly or
indirectly create, incur, assume, issue, guarantee or otherwise become liable
for or with respect to such Indebtedness (the terms "incurred, "incurrence" and
"incurring" having meanings correlative thereto).
"Indebtedness" means, with respect to any Person, without duplication,
(i) all liabilities, contingent or otherwise, of such Person (a) for borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of such Person or only to a portion thereof), (b) evidenced by bonds, notes,
debentures, drafts accepted or similar instruments or letters of credit or
representing the balance deferred and unpaid of the purchase price of any
property (other than any such balance that represents an account payable or any
other monetary obligation to a trade creditor (whether or not an Affiliate))
created, incurred, assumed or guaranteed by such Person in the ordinary course
of business of such Person in connection with obtaining goods, materials or
services and due within 12 months (or such longer period for payment as is
customarily extended by such trade creditor) of the incurrence thereof, which
account is not overdue by more than 90 days, according to the original terms of
sale, unless such account is (or such payable is being contested in good faith,
or (c) for the payment of money relating to a Capitalized Lease Obligation;
(ii) the maximum fixed repurchase price of all Disqualified Capital Stock of
such Person; (iii) reimbursement obligations of such Person with respect to
letters of credit; (iv) obligations of such Person with respect to Interest
Swap Obligations; (v) all liabilities of others of the kind described in the
preceding clauses (i), (ii), (iii) or (iv) that such Person has guaranteed or
that is otherwise its legal liability; and (vi) all obligations of others
secured by a Lien to which any of the properties or assets (including, without
limitation, leasehold interests and any other tangible or intangible property
rights) of such Person are subject, whether or not the obligations secured
thereby shall have been assumed by such Person or shall otherwise be such
Person's legal liability (provided that if the obligations so secured have not
been assumed by such Person or are not otherwise such Person's legal liability,
such obligations shall be deemed to be in an amount equal to the fair market
value of such properties or assets, as determined in good faith by the Board of
Directors of such Person, which determination shall be evidenced by a Board
<PAGE> 18
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Resolution). For purposes of the preceding sentence, the "Maximum fixed
repurchase price" of any Disqualified Capital Stock that does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
this Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock (or any equity security for which it
may be exchanged or converted), such fair market value shall be determined in
good faith by the Board of Directors of such Person, which determination shall
be evidenced by a Board Resolution.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Interest Payment Date", when used with respect to any First Mortgage
Note, means the stated maturity of an installment of interest specified in such
First Mortgage Note.
"Interest Swap Obligation" means any obligation of any Person,
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a fixed or floating rate of interest on a
stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or floating rate of interest on the same notional
amount;
Provided that the term "Interest Swap Obligation" shall also include
interest rate exchange, collar, cap, swap option or similar agreements providing
interest rate protection.
"Investment" by any Person in any other Person means any investment by
such Person in such other Person, in any transaction or series of related
transactions, individually or in the aggregate, in an amount greater than
$5,000,000, whether by a purchase of assets, share purchase, capital
contribution, loan, advance (other than reasonable loans and advances to
employees for moving and travel expenses, as salary advances or to permit the
purchase of Qualified Capital Stock of the Company and other similar customary
expenses incurred, in each case in the ordinary course of business and
consistent with past practice) or similar credit extension constituting
Indebtedness of such other Person, and any guarantee of Indebtedness of any
other Person. For purposes of this definition, (a) the amount of any Investment,
if other than cash, shall be the fair
<PAGE> 19
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market value (as determined by the Board of Directors of the Person making such
Investment), at the time such Investment is made, of any assets or property
contributed in connection with such Investment and (b) the amount of any
Investment shall be reduced by the amount of return of principal on such
Investment received by the Person making such Investment.
"Issue Date" means the date of first issuance of the First Mortgage
Notes under this Indenture.
"Kyoei" means Kyoei Steel Ltd., a Japanese corporation.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in New York, New York or in the city in which the principal
corporate trust office of the Trustee is located are required by law, regulation
or executive order to remain closed. If a payment date is a Legal Holiday,
payment may be made on the next succeeding day that is not a Legal Holiday with
the same force and effect as if made on such payment date, and no interest shall
accrue for the intervening period.
"Lien" means any mortgage, pledge, lien, encumbrance, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property, or a security interest of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, any option or
other agreement to sell and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction); provided that in no event shall an Operating Lease be deemed to
constitute a Lien hereunder or under any Security Document.
"Maturity Date" means December 15, 2000.
"Mortgage" means each mortgage (or deed of trust) dated as of the date
hereof between the Company and the Trustee, in substantially the form of Exhibit
IV hereto, as the same may be amended, supplemented or modified from time to
time in accordance with its terms.
"Mortgaged Property" has the meaning assigned to such term in the
Mortgages.
"Net Award" has the meaning assigned to such term in the Mortgages.
<PAGE> 20
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"Net Cash Proceeds" means (a) in the case of any Asset Sale or any
issuance and sale by any Person of Qualified Capital Stock, the aggregate net
proceeds received by such Person after payment of expenses, taxes, commissions
and the like incurred in connection therewith (and, in the case of any Asset
Sale, the amount of cash applied to repay Indebtedness secured by the asset
involved in such Asset Sale), whether such proceeds are in cash or in property
(valued at the fair market value thereof at the time of receipt, as determined,
with respect to any Asset Sale resulting in Net Cash Proceeds in excess of
$5,000,000, in good faith by the Board of Directors of such Person, which
determination shall be evidenced by a Board Resolution) and (b) in the case of
any conversion or exchange of any outstanding Indebtedness or Disqualified
Capital Stock of such Person for or into shares of Qualified Capital Stock of
the Company, the sum of (i) the fair market value of the proceeds received by
the Company in connection with the issuance of such Indebtedness or Disqualified
Capital Stock on the date of such issuance and (ii) any additional amount paid
by the holder to the Company upon such conversion or exchange.
"Net Proceeds" has the meaning assigned to such term in the Mortgages.
"Net Proceeds Offer" has the meaning set forth in Section 4.15.
"Net Proceeds Payment Date" has the meaning set forth in Section 4.15.
"Net Worth" means, with respect to any Person, the amount of the equity
of the holders of Capital Stock of such Person that would appear on the balance
sheet of such Person as of such date, determined in accordance with GAAP,
adjusted to exclude (to the extent included in such equity), (a) the amount of
equity attributable to Disqualified Capital Stock and (b) with respect to the
Company, the effect of the early extinguishment of, or acceleration of the
issuance costs of, the First Mortgage Notes.
"New Revolving Credit Agreement" means the Credit Agreement pursuant to
the Revolving Credit Facility to be entered into by and among the Company, BT
Commercial Corporation and the other parties thereto, as the same may be
amended, extended, renewed, restated, supplemented or otherwise modified (in
whole or in part, and without limitation as to amount, terms, conditions,
covenants and other provisions) from time to
<PAGE> 21
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time, and any agreement governing Indebtedness incurred to refund or refinance
in whole or in part the borrowings and then maximum commitments finder the New
Revolving Credit Agreement or such agreement. The Company shall promptly notify
the Trustee of any such refunding or refinancing of the New Revolving Credit
Agreement.
"New Revolving Credit Debt" means Indebtedness under the New Revolving
Credit Agreement.
"Officer" means the Chairman or Vice Chairman of the Board of
Directors, the President, any Vice President, the Chief Financial Officer, the
Treasurer, the Secretary or the Controller of the Company.
"Officers' Certificate" means a certificate signed by two Officers (one
of whom must be the principal executive officer or principal financial officer)
or by an Officer (who must be the principal executive officer or principal
financial officer) and an Assistant Treasurer or Assistant Secretary of the
Company.
"Operating Lease" means any lease the obligations under which do not
constitute Capitalized Lease Obligations.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or its Affiliates.
"Paying Agent" has the meaning provided in Section 2.04, except that
for the purposes of Articles 3 and 8 the Paying Agent shall not be the Company
or a Subsidiary of the Company.
"Payment Restriction" means, with respect to a subsidiary of any
Person, any encumbrance, restriction or limitation, whether by operation of the
terms of its charter or by reason of any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation, on the ability of (i)
such subsidiary to (a) pay dividends or make other distribution on its Capital
Stock or make payments on any obligation, liability or Indebtedness owed to such
Person or any other subsidiary of such Person, (b) make loans or advances to
such Person or any other subsidiary of such Person or (c) transfer any of its
properties or assets to such Person or any other subsidiary of such Person, or
(ii) such Person or any
<PAGE> 22
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other subsidiary of such Person to receive or retain any such (a) dividends,
distributions or payments, (b) loans or advances or (c) transfer of properties
or assets.
"Permitted Investments" by any Person means (i) any Related Business
Investment, (ii) Investments in securities not constituting cash or Cash
Equivalents and received in connection with an Asset Sale made pursuant to
Section 4.15 or any other disposition of assets not constituting an Asset Sale
by reason of the $50,000 threshold contained in the definition thereof, (iii)
cash and Cash Equivalents, (iv) Investments existing on the Issue Date, (v)
Investments specifically permitted by and made in accordance with, to the extent
applicable, Section 4.09, Section 4.11 and Section 4.14 and (vi) Investments by
Subsidiaries in other Subsidiaries.
"Permitted Liens" means (i) Liens for taxes, assessments and
governmental charges to the extent not required to be paid under the Indenture,
(ii) statutory Liens of landlords and carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other like Liens arising in the ordinary
course of business and with respect to amounts not yet delinquent or being
contested in good faith by an appropriate process of law, and for which a
reserve or other appropriate provision, if any, as shall be required by GASP
shall have been made, (iii) pledges or deposits in the ordinary course of
business to secure lease obligations or nondelinquent obligations under workers'
compensation, unemployment insurance or similar legislation, (iv) Liens to
secure the performance of public statutory obligations that are not delinquent,
appeal bonds, performance bonds or other obligations of a like nature (other
than for borrowed money), (v) easements, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of the Company or any
Subsidiary incurred in the ordinary course of business, (vi) Liens upon specific
items of inventory or other goods and proceeds of any Person securing such
person's obligations in respect of bankers' acceptances issued or created for
the account of such Person to facilitate the purchase, shipment or storage of
such inventory or other goods in the ordinary course of business, (vii) Liens
securing reimbursement obligations with respect to letters of credit that
encumber documents and other property relating to such letters of credit and the
products and proceeds thereof, (viii) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of nondelinquent
customs duties in connection with the importation
<PAGE> 23
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of goods, (ix) judgment and attachment Liens not giving rise to a Default or
Event of Default, (x) leases or subleases granted to others not interfering in
any material respect with the business of the Company or any Subsidiary (xi)
Liens encumbering customary initial deposits and margin deposits, and
other Liens incurred in the ordinary course of business that are within the
general parameters customary in the industry, in each case securing
Indebtedness under Interest Swap Obligations and forward contracts, option
futures contracts, futures options or similar agreements or arrangements
designed to protect the Company or any Subsidiary from fluctuations in the
price of commodities, (xii) Liens encumbering deposits made in the ordinary
course of business to secure nondelinquent obligations arising from statutory,
regulatory, contractual or warranty requirements of the Company or its
Subsidiaries for which a reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made, (xv) Liens arising out of
consignment or similar arrangements for the sale of goods entered into by the
Company or any Subsidiary in the ordinary course of business in accordance with
industry practice, (xiv) any interest or title of a lessor in the property
subject to any lease, whether characterized as capitalized or operating other
than any such interest or title resulting from or arising out of a default by
the Company or any Subsidiary of its obligations under such lease, and (xv)
Liens arising from filing UCC financing statements for precautionary purposes
in connection with true leases of personal property that are otherwise
permitted under this Indenture and under which the Company or any Subsidiary is
lessee.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"Plan of Liquidation" means, with respect to any Person, a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases or
otherwise) (i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such Person otherwise than as an entirety or
substantially as an entirety and (ii) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and
all or substantially all of the remaining assets of such Person to holders of
Capital Stock of such Person.
<PAGE> 24
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"Preferred Stock" means, as applied to the Capital Stock of any
corporation, Capital Stock ranking prior to any other shares of Capital Stock of
such corporation as to the payment of dividends or distribution of assets on any
voluntary or involuntary liquidation.
"principal" of a debt security means the principal of the security,
plus, when the context requires, the premium, if any, thereon.
"pro forma" means, with respect to any calculation made or required to
be made pursuant to the terms of the covenants set forth herein, a calculation
in accordance with Article 11 of Regulation S-X under the Securities Act, as
interpreted by the Company's Board of Directors in consultation with its
independent certified public accountants.
"Prospectus" means the Prospectus dated December 11, 1992 pursuant to
which the First Mortgage Notes were offered.
"Qualified Capital Stock" means, with respect to any Person, any
Capital Stock of such Person that is not Disqualified Capital Stock.
"redemption date," when used with respect to any First Mortgage Note to
be redeemed, means the date fixed by the Company for such redemption pursuant to
this Indenture and the First Mortgage Notes.
"redemption price" when used with respect to any First Mortgage Note to
be redeemed, means the price fixed for such redemption pursuant to the terms of
this Indenture and the First Mortgage Notes.
"Refinancing Indebtedness" means Indebtedness of the Company or a
Subsidiary issued in exchange for, or the proceeds from the issuance and sale
or disbursement of which are used to substantially concurrently repay, redeem,
refund, refinance, discharge or otherwise retire for value, in whole or in part
(collectively, "repay"), or constituting an "amendment" modification or
supplement to, or a deferral or renewal of (collectively, an "amendment"), any
Indebtedness of the Company or a Subsidiary (and any penalties, fees and
expenses actually incurred by the Company or such Subsidiary in connection with
the repayment or amendment thereof) existing on the Issue Date or incurred
pursuant to Section 4.11 in a principal amount (or, if such Refinancing
Indebtedness provides for an amount less
<PAGE> 25
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than the principal amount thereof to be due and payable upon the acceleration
thereof, with an original issue price) not in excess of (i) the principal amount
of the Indebtedness so refinanced (or, if such Refinancing Indebtedness
refinances Indebtedness under a revolving credit facility or other agreement
providing a commitment for subsequent borrowings, with a maximum commitment not
to exceed the maximum commitment under such revolving credit facility or other
agreement) plus (ii) unpaid accrued interest on such Indebtedness plus (iii)
penalties, fees and expenses actually incurred by the Company or such
Subsidiary, as the case may be, in connection with the repayment or amendment
thereof; provided that Refinancing Indebtedness of any Subsidiary shall not be
used to repay outstanding Indebtedness of the Company.
"Registrar" has the meaning set forth in Section 2.04.
"Related Business Investment" means any Capital Expenditure or
Investment (without regard to the $5,000,000 threshold in the definition
thereof), in each case reasonably related to the business of the Company and its
Subsidiaries as it is conducted as of the Issue Date and as such business may
thereafter evolve or change.
"Restricted Debt Prepayment" means any purchase, redemption, defeasance
(including, but not limited to, in-substance or legal defeasance) or other
acquisition or retirement for value, directly or indirectly, by the Company or a
Subsidiary, prior to the scheduled maturity or prior to any scheduled repayment
of principal, as the case may be, in respect of Indebtedness of the Company that
is subordinate in right of payment to the First Mortgage Notes.
"Restricted Payment" means any (i) Stock Payment, (ii) Investment
(other than a Permitted Investment), or (iii) Restricted Debt Prepayment.
"Revolving Credit Facility" means the revolving credit facility to be
provided to the Company pursuant to the New Revolving Credit Agreement among the
Company, BT Commercial Corporation and the other financial institutions party
thereto
"SEC" means the Securities and Exchange Commission
"Securities Acts" means the Securities Act of 1933, as amended from
time to time.
<PAGE> 26
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"Security Agreement" means the Security Agreement dated as of the date
hereof between the Company and the Trustee, in substantially the form attached
hereto as Exhibit II, as the same may be amended, supplemented or modified from
time to time in accordance with its terms.
"Security Documents" means, collectively, the Security Agreement and
the Mortgages.
"Significant Stockholder" means, with respect to any Person, any other
Person who is the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of more than 10% of any class of equity securities of such Person
that is entitled to vote on a regular basis for the election of directors of
such Person.
"Significant Subsidiary" means each subsidiary of the Company that is
either (a) a "significant subsidiary" as defined in Rule 1-02(v) of Regulation
S-X under the Securities Act and the Exchange Act (as such regulation is in
effect on the date hereof) or (b) material to the financial condition or results
of operations of the Company and its Subsidiaries taken as a whole.
"Stock Payment" means, with respect to any Person, (i) the declaration
or payment by such Person, either in cash or in property, of any dividend on
(except, in the case of the Company, dividends payable solely in Qualified
Capital Stock of the Company), or the making by such Person or any of its
Subsidiaries of any other distribution in respect of, such Person's Qualified
Capital Stock or any warrants, rights or options to purchase or acquire shares
of any class of such Capital Stock (other than exchangeable or convertible
Indebtedness of such Person), (ii) the redemption, repurchase, retirement or
other acquisition for value by such Person or any of its Subsidiaries, directly
or indirectly, of such Person's Qualified Capital Stock (and, in the case of a
Subsidiary, Qualified Capital Stock of the Company) or any warrants, rights or
options to purchase or acquire shares of any class of such Capital Stock (other
than exchangeable or convertible Indebtedness of such Person), other than, in
the case of the Company, through the issuance solely of Qualified Capital Stock
of the Company in exchange therefor, (iii) interest payments on the
Subordinated Intercompany Note or (iv) payments by the Company to Holdings
pursuant to the Tax Sharing Agreement; provided that in the case of a
Subsidiary, the term "Stock Payment" shall not include any such payment with
respect to its Capital Stock or
<PAGE> 27
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warrants, rights or options to purchase or acquire shares of any class of its
Capital Stock that are owned solely by the Company or a Wholly Owned Subsidiary.
"Subordinated Intercompany Note" means the subordinated intercompany
note of the Company issued to Holdings on the Issue Date.
"subsidiary" of any Person means (i) a corporation a majority of whose
Capital Stock with voting power, under ordinary circumstances, to elect
directors is, at the date of determination, directly or indirectly, owned by
such Person, by one or more subsidiaries of such Person or by such Person and
one or more subsidiaries of such Person, or (ii) a partnership in which such
Person or a subsidiary of such Person is, at the date of determination, a
general partner of such partnership, or (iii) any other Person (other than a
corporation or a partnership) in which such Person, a subsidiary of such Person
or such Person and one or more subsidiaries of such Person, directly or
indirectly, at the date of determination, has (x) at least a majority ownership
interest or (y) the power to elect or direct the election of a majority of the
directors or other governing body of such Person.
"Subsidiary" means any subsidiary of the Company.
"Surviving Person" has the meaning set forth in Section 5.01.
"Tax Sharing Agreement" means the Tax Sharing Agreement between the
Company and Holdings as in effect on the Issue Date.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in
Section 9.03 hereof.
"Trust Moneys" has the meaning ascribed thereto in Section 11.01.
"Trustee" means the party named as such in this Indenture until a
successor replaces such party in accordance with the provisions of this
Indenture and thereafter means such successor.
"Trust Officer" means any Vice President, any Assistant Vice President
or any other officer or assistant officer
<PAGE> 28
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of the Trustee assigned by the Trustee to administer its corporate trust
matters.
"U.S. Government Obligations" has the meaning set forth in Section
8.01.
"Voting Stock" means, with respect to any Person, Capital Stock of such
Person entitled to vote for the election of the directors of such Person.
"Wholly Owned Subsidiary" means, with respect to any Person, any
subsidiary of such Person all of the outstanding shares of Capital Stock of
which are owned directly by such Person or a Wholly Owned Subsidiary of such
Person.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC;
"indenture securities" means the First Mortgage Notes;
"indenture security holder" means a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company or any other
obligor on the First Mortgage Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by the TIA by reference to another statute or defined by SEC rule and
not otherwise defined herein have the meanings assigned to them therein.
<PAGE> 29
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SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP as in effect on the Issue Date;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE 2
THE FIRST MORTGAGE NOTES
SECTION 2.01. Designation.
The Indebtedness evidenced by the First Mortgage Notes is hereby
irrevocably designated as "senior indebtedness" (i) for all purposes of the
provisions defining subordination contained in agreements that provide that the
Indebtedness of the Company issued pursuant to such agreements is subordinate to
Indebtedness designated as senior indebtedness and (ii) for the purposes of any
future Indebtedness of the Company which the Company expressly makes subordinate
to any other Indebtedness.
SECTION 2.02. Form and Dating.
The First Mortgage Notes, and the Trustee's certificate of
authentication thereof, shall be substantially in the form set forth in Exhibit
I annexed hereto. The First Mortgage Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company shall
approve the form of the First Mortgage Notes and any notation, legend or
endorsement on them. Each First Mortgage Note shall be
<PAGE> 30
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dated the date of its issuance and shall show the date of its authentication.
The terms and provisions contained in the form of the First Mortgage
Notes, annexed hereto as Exhibit I, and the forms of the Security Agreement and
the Mortgage, annexed hereto as Exhibits III and IV, respectively, shall
constitute, and are hereby expressly made, a part of this Indenture.
SECTION 2.03. Execution and Authentication; Aggregate Principal Amount.
Two Officers of the Company shall sign the First Mortgage Notes on
behalf of the Company by either facsimile or manual signature. The Company's
seal shall be impressed, affixed, imprinted or reproduced on the First Mortgage
Notes, and may be in facsimile form.
If a person whose signature is on a First Mortgage Note as an Officer
no longer holds that office at the time the Trustee authenticates the First
Mortgage Note, the First Mortgage Note shall be valid nevertheless.
A First Mortgage Note shall not be valid until the Trustee manually
signs the certificate of authentication on the First Mortgage Note. The
signature shall be conclusive evidence that the First Mortgage Note has been
authenticated under this Indenture.
The Trustee shall authenticate First Mortgage Notes for original issue
in an aggregate principal amount not to exceed $100,000,000 upon written
orders of the Company from time to time signed by an Officer of the Company. The
order shall specify the amount of First Mortgage Notes to be authenticated and
the date on which the original issue of First Mortgage Notes is to be
authenticated. The aggregate principal amount of First Mortgage Notes issued and
outstanding at any time may not exceed $100,000,000, except as provided in
Section 2.08.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") acceptable to the Company to authenticate First Mortgage Notes. Unless
limited by the terms of such appointment, an Authenticating Agent may
authenticate First Mortgage Notes whenever the Trustee may do so. Each reference
in this Indenture to authentication by the Trustee includes authentication by
such agent. Such Authenticating Agent shall
<PAGE> 31
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have the same rights as an Agent in any dealings hereunder with the Company or
with any Affiliate of the Company.
The First Mortgage Notes shall be issuable only in registered form
without coupons and only in denominations of $1,000 and any integral multiple
thereof.
SECTION 2.04. Registrar and Paving Agent.
The Company shall maintain an office or agency where First Mortgage
Notes may be surrendered for registration of transfer or for exchange
("Registrar"), an office or agency where First Mortgage Notes may be presented
for payment ("Paying Agent") and an office or agency where notices and demands
to or upon the Company in respect of the First Mortgage Notes and this Indenture
may be served. The Registrar shall keep a register of the First Mortgage Notes
and of their transfer and exchange. The Company may have one or more
co-registrars and one or more additional Paying Agents. The term "Paying Agent"
includes any additional Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not party to this Indenture, which shall incorporate the provisions of the
TIA. The agreement shall implement the provisions of this Indenture that relate
to such Agent. The Company shall give prompt written notice to the Trustee of
the name and address of any such Agent and any change in the address of such
Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to
give the foregoing notice, the Trustee shall act as such and shall be entitled
to appropriate compensation in accordance with Section 7.07.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the First
Mortgage Notes and appoints Shawmut Trust Company, New York, New York, as co-
Registrar and additional Paying Agent. Except as otherwise provided in this
Indenture, the Company or a Subsidiary of the Company may act as Registrar
and/or Paying Agent.
SECTION 2.05. Paying Agent To Hold Money in Trust.
Each Paying Agent shall hold in trust for the benefit of the
Noteholders and the Trustee all money held by the Paying Agent for the payment
of principal of or interest on the First Mortgage Notes (whether such money has
been paid to it by the
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Company or any other obligor on the First Mortgage Notes), and the Company and
the Paying Agent shall notify the Trustee of any default by the Company (or any
other obligor on the First Mortgage Notes) in making any such payment. If the
Company or a Subsidiary of the Company acts as Paying Agent, it shall segregate
the money and hold it as a separate trust fund. Money held in trust by any
Paying Agent (other than the Company or a Subsidiary) need not be segregated
except as required by law. The Company at any time may require a Paying Agent to
pay all money held by it to the Trustee and account for any funds disbursed, and
the Trustee may at any time during the continuance of any Event of Default
specified in Section 6.01(a)(i) or (ii), upon written request to a Paying Agent,
require such Paying Agent to pay forthwith all money held by it to the Trustee
and to account for any funds disbursed. Upon making such payment, the Paying
Agent shall have no further liability for the money delivered to the Trustee.
SECTION 2.06. Noteholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Noteholders. If the Trustee is not the Registrar, the Company shall furnish
or cause the Registrar to furnish to the Trustee at least five Business Days
before each Interest Payment Date, and at such other times as the Trustee may
request in writing, a list, in such form and as of such date as the Trustee may
reasonably require, of the names and addresses of the Noteholders.
SECTION 2.07. Transfer and Exchange.
When First Mortgage Notes are presented to the Registrar or a
co-registrar with a request to register the transfer or to exchange them for an
equal principal amount of First Mortgage Notes of other authorized
denominations, the Registrar shall register the transfer or make the exchange as
requested; provided that every First Mortgage Note presented or surrendered for
registration of transfer or exchange shall be duly endorsed or be accompanied by
a written instrument of transfer in form satisfactory to the Company and the
Registrar, duly executed by the Holder thereof or his attorneys duly authorized
in writing. To permit registrations of transfer and exchanges, the Company shall
issue and execute and the Trustee shall authenticate new First Mortgage Notes
evidencing such transfer or exchange at the Registrar's request. No service
charge to the Noteholder shall be made for any registration of transfer
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or exchange, but the Company may require from the transferring or exchanging
Noteholder payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchanges pursuant to
Section 2.11, 4.15, 4.19 or 9.05).
The Registrar shall not be required to register the transfer or
exchange of (a) any First Mortgage Note for a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of First Mortgage
Notes and ending at the close of business on the day of such mailing or (b) any
First Mortgage Note selected, called or being called for redemption, except, in
the case of any First Mortgage Note to be redeemed in part, the portion thereof
not to be redeemed.
SECTION 2.08. Replacement First Mortgage Notes.
If a mutilated First Mortgage Note is surrendered to the Trustee or if
the Company and the Trustee receive an affidavit of the Holder or other evidence
to their satisfaction that a First Mortgage Note has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement First Mortgage Note if the Trustee's requirements are met. The
Trustee or the Company may require the Holders to deliver an indemnity bond
sufficient in their judgment to protect the Company, the Trustee or any Agent
from any loss which any of them may suffer if a First Mortgage Note is replaced.
The Company may charge such Holder for its expenses in replacing a First
Mortgage Note.
Every replacement First Mortgage Note shall constitute an additional
obligation of the Company.
SECTION 2.09. Outstanding First Mortgage Notes.
First Mortgage Notes outstanding at any time are all First Mortgage
Notes that have been authenticated by the Trustee, except for (a) those
cancelled by it, (b) those delivered to it for cancellation and (c) those
described in this Section as not outstanding. A First Mortgage Note does not
cease to be outstanding because the Company or one of its Affiliates holds the
First Mortgage Note.
If a First Mortgage Note is replaced pursuant to Section 2.08, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced First
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Mortgage Note is held by a bona fide purchaser in whose hands such First
Mortgage Note is a legal, valid and binding obligation of the Company.
If the Paying Agent (other than the Company or a Subsidiary) holds, on
any redemption date or the Maturity Date, money sufficient to pay all accrued
interest and principal with respect to such First Mortgage Notes payable on that
date and is not prohibited from paying such money to the Holders thereof
pursuant to the terms of this Indenture, then on and after that date such First
Mortgage Notes cease to be outstanding and interest on them ceases to accrue.
SECTION 2.10. Treasury First Mortgage Notes.
In determining whether the Holders of the required principal amount of
First Mortgage Notes have concurred in any declaration of acceleration or notice
of default or direction, amendment, modification, supplement, waiver or consent,
First Mortgage Notes owned by the Company or an Affiliate of the Company, or any
of their respective Affiliates, shall be disregarded as though they were not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, amendment, modification,
supplement, waiver or consent, only such First Mortgage Notes which the Trustee
knows are so owned shall be so disregarded.
SECTION 2.11. Temporary First Mortgage Notes.
Until definitive First Mortgage Notes are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary First Mortgage
Notes. Temporary First Mortgage Notes shall be substantially in the form of
definitive First Mortgage Notes but may have variations that the Company
considers appropriate for temporary First Mortgage Notes. Without unreasonable
delay, the Company shall prepare and the Trustee shall authenticate definitive
First Mortgage Notes in exchange for temporary First Mortgage Notes. Until such
exchange, temporary First Mortgage Notes shall be entitled to the same rights,
benefits and privileges as definitive First Mortgage Notes.
SECTION 2.12. Cancellation.
The Company at any time may deliver First Mortgage Notes to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any First Mortgage
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Notes surrendered to them for registration of transfer, exchange, redemption or
payment. The Trustee shall cancel all First Mortgage Notes surrendered for
registration of transfer, exchange, redemption, payment, replacement or
cancellation and shall (subject to the record retention requirements of the
Exchange Act) dispose of cancelled First Mortgage Notes unless the Company
directs the Trustee to return such First Mortgage Notes to the Company, and, if
so disposed, shall deliver a certificate of disposition thereof to the Company.
The Company may not issue new First Mortgage Notes to replace First Mortgage
Notes it has redeemed or paid or delivered to the Trustee for cancellation.
First Mortgage Notes that are redeemed by the Company pursuant to Section 5 of
the First Mortgage Notes, repurchased by the Company pursuant to Section 4.15 or
4.19 of the Indenture or otherwise acquired by the Company shall be surrendered
to the Trustee for cancellation.
SECTION 2.13. Defaulted Interest.
If the Company defaults on a payment of interest on the First Mortgage
Notes, it shall pay the defaulted interest, plus, to the extent permitted by
law, any interest payable on the defaulted interest, to the Persons who are
Noteholders on subsequent special record date. Such record date shall be the
fifteenth day next preceding the date fixed by the Company for the payment of
defaulted interest, whether or not such day is a Business Day. At least 15 days
before such record date, the Company shall mail to each Noteholder a notice that
states the record date, the payment date and the amount of defaulted interest
and interest payable on such defaulted interest, if any, to be paid.
SECTION 2.14. Deposit of Moneys.
On each Interest Payment Date and the Maturity Date, the Company shall
have deposited with the Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date or
the Maturity Date, as the case may be, in a timely manner that permits the
Trustee to remit payment to the Holders on such Interest Payment Date or the
Maturity Date, as the case may be.
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ARTICLE 3
REDEMPTION AND REPURCHASE
SECTION 3.01 Notices to Trustee.
If the Company elects to redeem First Mortgage Notes pursuant to
Section 5 of the First Mortgage Notes, it shall notify the Trustee and the
Paying Agent in writing of the redemption date and the principal amount of First
Mortgage Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.01 at
least 75 days before the redemption date (unless a shorter notice shall be
agreed to by the Trustee in writing), together with an Officers' Certificate
stating that such redemption shall comply with the conditions contained herein
and in the First Mortgage Notes.
SECTION 3.02. Selection of First Mortgage Notes To Be Redeemed.
If less than all of the First Mortgage Notes are to be redeemed, the
Trustee shall select the First Mortgage Notes to be redeemed in compliance with
the requirements of the principal national securities exchange, if any, on which
the First Mortgage Notes being redeemed are listed or, if the First Mortgage
Notes are not listed on a national securities exchange, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate.
The Trustee shall make the selection from the First Mortgage Notes
outstanding and not previously called for redemption. The Trustee shall promptly
notify the Company in writing of such First Mortgage Notes selected for
redemption and, in the case of First Mortgage Notes selected for partial
redemption, the principal amount to be redeemed. The Trustee may select for
redemption portions (equal to $l,000 or any integral multiple thereof) of the
principal of First Mortgage Notes that have denominations larger than $l,000.
First Mortgage Notes and portions of them the Trustee selects shall be in
amounts of $l,000 or integral multiples of $1,000. Provisions of this Indenture
that apply to First Mortgage Notes called for redemption also apply to portions
of First Mortgage Notes called for redemption.
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SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days prior to a redemption date,
the Company shall mail or cause the mailing of a notice of redemption by
first-class mail to each Holder of First Mortgage Notes to be redeemed and the
Trustee and Paying Agent.
The notice shall identify the First Mortgage Notes to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price and the amount of accrued interest, if any, to
be paid;
(3) the name and address of the Paying Agent;
(4) that First Mortgage Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price and accrued interest, if
any;
(5) that, unless the Company defaults in making the redemption payment,
interest on First Mortgage Notes called for redemption ceases to accrue on and
after the redemption date and the only remaining right of the Holders is to
receive payment of the redemption price upon surrender to the Trustee or the
Paying Agent of the First Mortgage Notes redeemed;
(6) if any First Mortgage Note is being redeemed in part, the portion
of the principal amount (equal to $1,000 or any integral multiple thereof) of
such First Mortgage Note to be redeemed and that, on and after the redemption
date, upon surrender of such First Mortgage Note, a new First Mortgage Note or
First Mortgage Notes in principal amount equal to the unredeemed portion thereof
shall be issued without charge to the Noteholder; and
(7) if less than all of the First Mortgage Notes are to be redeemed,
the identification of the particular First Mortgage Notes (or portion thereof)
to be redeemed, as well as the aggregate principal amount of First Mortgage
Notes to be redeemed and the aggregate principal amount of the First Mortgage
Notes estimated to be outstanding after the redemption.
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At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed, First Mortgage Notes called for
redemption become due and payable on the redemption date and at the redemption
price and shall cease to bear interest from and after the redemption date
(unless the Company shall default in the payment of the redemption price or
accrued interest). Upon surrender to the Paying Agent, such First Mortgage Notes
shall be paid at the redemption price, plus accrued interest to the redemption
date but interest installments with respect to Interest Payment Dates that are
on or prior to such redemption date shall be payable on the relevant Interest
Payment Dates to Holders of record at the close of business on the relevant
record date referred to in the First Mortgage Notes.
SECTION 3.05. Deposit of Redemption Price.
At least one Business Day prior to the redemption date, the Company
shall deposit with the Paying Agent in immediately available funds money
sufficient to pay the redemption price of and accrued interest on all First
Mortgage Notes or portions thereof to be redeemed on that date.
If any First Mortgage Note surrendered for redemption in the manner
provided in the First Mortgage Notes shall not be so paid on the redemption date
due to the failure of the Company to deposit sufficient funds with the Paying
Agent, interest shall continue to accrue from the redemption date until such
payment is made on the unpaid principal and, to the extent lawful, on any
interest not paid on such unpaid principal, in each case at the date and in the
manner provided in the First Mortgage Notes.
SECTION 3.06. First Mortgage Notes Redeemed in Part.
Upon surrender of a First Mortgage Note that is redeemed in part, the
Company shall issue and the Trustee shall authenticate for the Holder a new
First Mortgage Note equal in principal amount to the unredeemed portion of the
First Mortgage Note surrendered.
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SECTION 3.07. Securities Exchange Act Requirements.
In connection with any repurchase of First Mortgage Notes pursuant to
this Indenture, the Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such requirements, laws and regulations are applicable.
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of First Mortgage Notes.
The Company shall pay, or cause to be paid, the principal of and
interest on the First Mortgage Notes on the dates and in the manner provided in
the First Mortgage Notes and this Indenture. An installment of principal or
interest shall be considered paid on the date due if the Trustee or Paying Agent
(other than the Company or any Subsidiary) holds on that date money in
immediately available funds designated for and sufficient to pay such
installment. The Company agrees with the Trustee to deposit such funds with the
Trustee or Paying Agent prior to the close of business on the Business Day
immediately preceding the date such payment is due.
The Company shall pay interest on overdue principal and (to the extent
permitted by law) on overdue installments of interest at a rate equal to 13-1/2%
per annum.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan in the City of
New York, an office or agency where First Mortgage Notes may be surrendered for
registration of transfer or exchange or for presentation for payment and where
notices and demands to or upon the Company in respect of the First Mortgage
Notes and this Indenture may be served. The Company shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee as set forth in Section 12.02 hereof.
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The Company may also from time to time designate one or more other
offices or agencies where the First Mortgage Notes may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or recission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan in the City of New York, for such purposes. The
Company shall give prompt written notice to the Trustee of such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby initially designates the office of Shawmut Trust
Company located at 40 Broad Street, New York, New York 10004 and the corporate
trust office of the Trustee located at 777 Main Street, Hartford, Connecticut
06115, as such offices of the Company in accordance with Section 2.04 hereof.
SECTION 4.03. Corporate Existence.
Subject to Article 5, the Company shall do or cause to be done, at its
own cost and expense, all things necessary to and shall cause each Subsidiary
to, preserve and keep in full force and effect the corporate existence and the
rights (charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate existence of any
Subsidiary, if in the judgment of the Board of Directors of the Company, (a)
such preservation or existence is not desirable in the conduct of business of
the Company or such Subsidiary and (b) the loss of such right, license or
franchise or the dissolution of such Subsidiary is not adverse in any material
respect to the Holders.
SECTION 4.04. Payment of Taxes and Other Claims; Tax Consolidation.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or upon the income,
profits or property of the Company or any Subsidiary, and (b) all lawful claims
for labor, materials and supplies that, if unpaid, might by law become a Lien
upon the property of the Company or any Subsidiary; provided, however, that,
subject to the terms of the applicable Security Documents, the Company shall not
be
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required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which adequate
reserves (in the good faith judgment of the Board of Directors of the Company)
have been made.
SECTION 4.05. Compliance Certificates.
(a) The Company shall deliver to the Trustee, within 45 days after the
end of each of the respective first three quarters of the Company's fiscal year,
and within 90 days after the end of its respective fiscal year, Officers'
Certificates of the Company stating (i) that a review of the activities of the
Company during the preceding fiscal quarter or year, as the case may be, has
been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, (ii) that, to the best knowledge of such Officer, the
Company has kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which such Officer may have knowledge, their status and
what action the Company is taking or proposes to take with respect thereto) and
(iii) that to the best of his knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the First Mortgage Notes are prohibited (or, if such event
has occurred, describing the event and what action the Company is taking or
proposes to take with respect thereto).
(b) So long as (and to the extent) not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
annual financial statements delivered pursuant to Section 4.06 shall be
accompanied by a written statement of the Company's independent public
accountants that in making the examination necessary for certification of such
annual financial statements nothing has come to their attention that would lead
them to believe that the Company has violated any provisions of this Indenture
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be liable
directly or indirectly to any Person for
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any failure to obtain knowledge of any such violation that would not be
disclosed in the course of an audit examination conducted in accordance with
generally accepted auditing standards.
(c) The Company shall, so long as any of the First Mortgage Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SECTION 4.06. SEC Resorts.
(a) In accordance with the provisions of TIA S 314(a), at any time that
the Company has a class of securities registered under the Exchange Act, the
Company shall file with the Trustee, within 15 days after it files them with the
SEC, copies of the annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) which the Company is required to file with the
SEC pursuant to Section 13 or 15(d) of the Exchange Act. The Company also shall
comply with the other provisions of TIA S 314(a). In addition, at any time that
the Company has a class of equity securities registered under the Exchange Act,
the Company shall cause its annual report to stockholders and any quarterly or
other financial reports furnished by it to stockholders generally to be filed
with the Trustee and mailed, no later than the date such materials are mailed or
made available to the Company's stockholders, to the Holders at their addresses
as set forth in the register of securities maintained by the Registrar.
(b) At any time that the Company does not have a class of securities
registered under the Exchange Act, the Company shall furnish to the Trustee (who
is hereby authorized and directed to furnish a copy thereof to any person
requesting the same in writing) and shall mail (or cause to be mailed by the
Trustee at the Company's expense) to each of the Holders at their addresses as
set forth in the register of the First Mortgage Notes maintained by the
Registrar within 60 days after the close of each of the first three quarters of
each fiscal year and within 105 days after the close of each fiscal year
consolidated balance sheets of the Company as of the end of each such quarter or
fiscal year, as the case may be, and consolidated statements of income and
changes in financial position of the
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Company for the period commencing at the end of the Company's previous fiscal
year and ending with the end of such quarter or fiscal year, as the case may be,
all such financial statements setting forth in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year,
all in reasonable detail and duly certified (subject to year-end adjustments) by
an Officer of the Company as having been prepared in accordance with GAAP
consistently applied, and, in the case of annual consolidated financial
statements, certified by independent public accountants of recognized standing
and a discussion and analysis of the results of operations and financial
condition of the Company and its subsidiaries for the periods presented, which
discussion and analysis shall be prepared by the management of the Company in a
manner responsive to the requirements of Item 303 (or any successor item or
section) of Regulation S-K under the Exchange Act. All financial statements
shall be prepared in accordance with GAAP consistently applied, except for
changes with which the Company's independent public accountants concur and
except that quarterly statements may be subject to year-end adjustments.
SECTION 4.07. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury law
or other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the First Mortgage Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or that may affect the covenants or the performance of this Indenture; and (to
the extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it shall not hinder,
delay or impede the execution of any power herein granted to the Trustee but
shall suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.08. Maintenance of Properties; Insurance; Books and Records;
Compliance with Law.
(a) Subject to the applicable provisions of the Security Documents,
the Company shall, and shall cause each Subsidiary to, at all times cause all
properties used or useful in the conduct of its business to be maintained and
kept in good working order and condition, ordinary wear and tear
<PAGE> 44
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excepted, and shall cause to be made all necessary (in the good faith opinion
of management) repairs, renewals, replacements, additions, betterments and
improvements thereto.
(b) The Company shall and shall cause each Subsidiary to maintain
insurance with insurance companies or associations with a rating of "A" or
better, as established by Best's Rating Guide (or an equivalent rating with
such other publication of a similar nature as shall be in current use), subject
to the provisions of the applicable Security Documents, in such amounts and
covering such risks as are usually and customarily carried with respect to
similar facilities according to their respective locations.
(c) The Company shall and shall cause each Subsidiary to keep
proper books of record and account in which full and correct entries shall be
made of all financial transactions and the assets and business of the Company
and each Subsidiary, in accordance with GAAP consistently applied to the
Company and its Subsidiaries taken as a whole.
(d) Except as otherwise provided in the Security Documents, the
Company shall and shall cause each Subsidiary to comply with all statutes,
laws, ordinances, or government rules and regulations to which it is subject,
non-compliance with which would adversely affect the business, prospects,
earnings, properties, assets or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole.
SECTION 4.09. Limitation on Restricted Payments.
(a) The Company shall not, and shall cause each Subsidiary not
to, directly or indirectly, make any Restricted Payment if, at the time of such
Restricted Payment, or after giving effect thereto, (i) a Default or an Event
of Default shall have occurred and be continuing, or (ii) the aggregate amount
expended for all Restricted Payments subsequent to the Issue Date, including
such Restricted Payment (the amount of any Restricted Payment, if other than
cash, to be the fair market value thereof at the date of payment as determined
in good faith by the Board of Directors of the Company), subsequent to the
Issue Date, shall exceed the sum of (x) 50% of the aggregate Consolidated Net
Income (or if such aggregate Consolidated Net Income is a loss, minus 100% of
such loss) of the Company earned subsequent to the Issue Date and on or prior
to the date that the Restricted Payment occurs (the "Reference Date") plus (y)
100% of the aggregate Net Cash Proceeds received by the
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Company from any Person (other than a Subsidiary) from the issuance and sale
(including upon exchange or conversion for other securities of the Company)
subsequent to the Issue Date and on or prior to the Reference Date of Qualified
Capital Stock (excluding (A) Qualified Capital Stock paid as a dividend on any
Capital Stock or as interest on any Indebtedness and (B) any Net Cash Proceeds
from issuances and sales financed directly or indirectly using funds borrowed
from the Company or any Subsidiary, until and to the extent such borrowing is
repaid).
(b) Notwithstanding the foregoing, if no Default or Event of
Default shall have occurred and be continuing as a consequence thereof, the
provisions of Section 4.09(a) shall not prohibit:
(i) the payment of any dividend within 60 days after the date of
its declaration if the dividend would have been permitted on the date of
declaration;
(ii) the acquisition of any shares of Capital Stock of the Company
or the repayment of any Indebtedness of the Company in exchange for or
solely out of the proceeds of the substantially concurrent sale (other than
to a Subsidiary) of shares of Qualified Capital Stock;
(iii) the making of Restricted Payments in an aggregate amount not
to exceed $20,000,000;
(iv) the acquisition and cancellation by the Company of any of the
Debentures;
(v) payments to Holdings in an amount equal to the scheduled
interest payments on the Subordinated Intercompany Note as in effect on the
date of issuance of the Subordinated Intercompany Note, in each case made
not more than 2 Business Days prior to the date on which such interest
payments on the Subordinated Intercompany Note are due;
(vi) payments by the Company to fund the operating expenses of
Holdings in an amount not to exceed $500,000 per annum; and
(vii) payments by the Company to Holdings pursuant to the Tax
Sharing Agreement;
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provided that the declaration of each dividend paid in accordance with
clause (i) above, each acquisition made in accordance with clause (ii)
above and each Restricted Payment made in accordance with clause (iii)
above shall be counted for purposes of computing amounts expended
pursuant to clause (ii) of Section 4.09(a) and the amounts paid with
respect to clauses (iv) - (vii) shall not be counted.
SECTION 4.10. Limitation on Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any Subsidiary to,
directly or indirectly, create or suffer to exist, or allow to become
effective, any consensual Payment Restriction with respect to any Subsidiary,
except for (a) any such restrictions contained in (i) the New Revolving Credit
Agreement and related documents as in effect on the Issue Date as any such
payment restriction may apply to any present or future Subsidiary, (ii) this
Indenture, (iii) applicable law, (iv) Indebtedness of a Person existing at the
time such Person becomes a Subsidiary (provided that (x) such Indebtedness is
not incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary, (y) such restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person so acquired, and (z)
such Indebtedness is otherwise permitted to be incurred pursuant to Section
4.11), and (v) secured Indebtedness otherwise permitted to be incurred pursuant
to Section 4.11 and that limits the right of the debtor to dispose of the
assets securing such Indebtedness, (b) customary non-assignment provisions
restricting subletting or assignment of any lease or assignment entered into by
a Subsidiary, (c) customary net worth provisions contained in leases and other
agreements entered into by a Subsidiary in the ordinary course of business, (d)
customary restrictions 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 or assets of such Subsidiary, (e) customary provisions
in instruments or agreements relating to a Lien permitted to be created,
incurred or assumed pursuant to Section 4.16 prohibiting the transfer of the
property subject to the such Lien, and (f) restrictions contained in
Indebtedness incurred to refinance, refund, extend or renew Indebtedness
referred to in clause (a) above, provided that the restrictions contained
therein are no more restrictive than those provided for in such Indebtedness
being refinanced, refunded, extended or renewed.
<PAGE> 47
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SECTION 4.11. Limitation on Incurrences of Additional Indebtedness.
(a) The Company shall not, and shall not permit any Subsidiary,
directly or indirectly, to incur any Indebtedness; provided that if no Default
or Event of Default shall have occurred and be continuing at the time or as a
consequence of the incurrence of any such Indebtedness, the Company may incur
Indebtedness if on the date of the incurrence of such Indebtedness the
Consolidated Interest Coverage Ratio of the Company would be greater than 2.0 to
1.0 for the period from the Issue Date through and including September 30, 1993;
greater than 2.25 to 1.0 for the period from October 1, 1993 through and
including September 30, 1994; and greater than 2.5 to 1.0 thereafter; provided,
further, that if no Default or Event of Default shall have occurred and be
continuing at the time or as a consequence of the incurrence of any such
Indebtedness, the Company may incur Indebtedness the proceeds of which are
applied exclusively to finance Capital Expenditures of the Company if on the
date of the incurrence of such Indebtedness the Consolidated Interest Coverage
Ratio of the Company (which, for this purpose only, shall be calculated by using
a Pro Forma Period for EBITDA of the most recent twelve full fiscal quarters for
which financial information is available immediately prior to the Transaction
Date and dividing such EBITDA amount by three) would be greater than 2.0 to 1.0
for the period from the Issue Date through and including September 30, 1993,
2.25 to 1.0 for the period from October 1, 1993 through and including September
30, 1994, and 2.5 to 1.0 thereafter; and provided, further, that a Subsidiary
may incur Acquired Indebtedness to the extent such Indebtedness could have been
incurred by the Company pursuant to the second next preceding proviso.
(b) The limitations set forth in Section 4.11(a) shall not apply to:
(i) Indebtedness of the Company and its Subsidiaries outstanding
immediately after the issuance of the First Mortgage Notes,
(ii) New Revolving Credit Debt in an aggregate principal amount at
time outstanding not to exceed the greater of (x) $100,000,000 and (y) the
sum of 85% of Eligible Accounts Receivable plus 65% of Eligible Inventory
that is scrap, billets, rebar and merchant bar plus 60% of all other
Eligible Inventory (each as defined in the New
<PAGE> 48
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Revolving Credit Agreement as in effect on the Issue Date),
(iii) the Subordinated Intercompany Note and the Atlas Note,
(iv) Indebtedness of the Company under Interest Swap Obligations,
(v) Refinancing Indebtedness,
(vi) Indebtedness of the Company, the proceeds of which are used
solely to finance Capital Expenditures of the Company; provided that such
Indebtedness does not exceed an aggregate of $25,000,000 outstanding at
any one time,
(vii) additional Indebtedness of the Company not to exceed
$30,000,000 at any time outstanding
SECTION 4.12. Limitation on Issuance of Subordinated Indebtedness.
The Company shall not issue any Indebtedness that is subordinate by its
express terms to any Indebtedness of the Company unless the First Mortgage Notes
constitute senior indebtedness or such other terms as denotes priority status
under the terms of such subordinated Indebtedness.
SECTION 4.13. Guarantees of Certain Indebtedness.
The Company shall not permit any Subsidiary to (a) Incur, guarantee or
secure through the granting of Liens the payment of any portion of the New
Revolving Credit Debt or (b) pledge any intercompany notes representing
obligations of any Subsidiary to secure the payment of any portion of the New
Revolving Credit Debt, in each case unless such Subsidiary, the Company and the
Trustee execute and deliver a supplemental indenture evidencing such
Subsidiary's Guarantee of the First Mortgage Notes, such Guarantee to be a
senior unsecured obligation of such Subsidiary; provided, however, that the
foregoing restrictions shall not apply to the pledge by the Company in favor of
the New Revolving Credit Debt of an intercompany note from Atlas secured by a
Lien on inventory and accounts receivable of Atlas.
<PAGE> 49
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SECTION 4.14. Limitation on Transactions with Affiliates.
(a) Neither the Company nor any Subsidiary shall (i) sell, lease,
transfer or otherwise dispose of any of its properties, assets or securities
to, (ii) purchase any property, assets or securities from, (iii) make any
Investment in, or (iv) enter into or suffer to exist any contract or agreement
with, or for the benefit of, any Affiliate (other than the Company or a
Subsidiary of the Company) in which the Company itself or a Subsidiary owns,
directly or indirectly, any equity interest of a Significant Stockholder (and
any Affiliate of such Significant Stockholder) of the Company or any Subsidiary
(an Affiliate Transaction"), other than Affiliate Transactions (including lease
transactions and engineering or technological assistance agreements and similar
arrangements with Kyoei) in the ordinary course of business, that are fair to
the Company or such Subsidiary, as the case may be, and are on terms at least
as favorable as would reasonably have been obtainable at such time from an
unaffiliated party; provided, that neither the Company nor any Subsidiary shall
enter into Affiliate Transactions having a value that exceeds $5,000,000
individually or $10,000,000 in the aggregate in any twelve-month period unless
the Board of Directors of the Company or such Subsidiary, as the case may be,
pursuant to a Board Resolution, reasonably and in good faith determines that
such Affiliate Transaction is fair to the Company or such Subsidiary, as the
case may be, and is on terms at least as favorable as would reasonably have
been obtainable at such time from an unaffiliated party.
(b) The limitations set forth in Section 4.14(a) shall not apply to
(i) any Restricted Payment that is made in compliance with Section 4.09, (ii)
reasonable and customary fees and compensation paid to, and indemnity provided
on behalf of, officers, directors, employees or consultants of the Company or
any Subsidiary, as determined by the Board of Directors of the Company or such
Subsidiary or the senior management thereof in good faith, (iii) transactions
exclusively between or among the Company and any of its Wholly Owned
Subsidiaries or exclusively between or among such Subsidiaries; Provided that
such transactions are not otherwise prohibited by this Indenture or the
Security Documents, and (iv) any agreement as in effect as of the Issue Date or
any amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) so long as any such amendment is not adverse
to the Holders in any material respect, (v) the existence of, or the
performance by the Company or any Subsidiary of its
<PAGE> 50
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obligations under the terms of, any stockholders agreement (including any
registration rights agreement or purchase agreement related thereto) to which
it is party as of the Issue Date and any similar agreements which it may enter
into thereafter; provided that the existence of, or the performance by the
Company or any Subsidiary of obligations under any future amendment to, any
such existing agreement or under any similar agreement entered into after the
Issue Date shall only be permitted by this clause (v) to the extent that the
terms of any such amendment or new agreement are not otherwise adverse to the
Holders in any material respect, and (vi) transactions permitted by, and
complying with, the provisions set forth in Article 5.
SECTION 4.15. Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any Subsidiary to,
consummate an Asset Sale (other than any Asset Sale relating to all or any
portion of the 432 acres of undeveloped land owned by the Company and located
in Tampa, Florida) unless (i) the Company or its applicable Subsidiary receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold and (ii) at least 75% of the consideration so received
by the Company or such Subsidiary is in the form of cash.
(b) Upon consummation of any Asset Sale that involves the sale of
Collateral or upon the receipt by the Trustee of any Net Proceeds or Net Award
pursuant to the provisions of Section 1.12.3 or 1.12.4(a) or (b) of any
Mortgage, the Company shall, or shall cause its applicable Subsidiary to,
within 180 days of the receipt of the proceeds therefrom, either (i) reinvest
the Net Cash Proceeds of such Asset Sale in a manner that would constitute a
Related Business Investment; provided that the property acquired as a Related
Business Investment shall be subject to a first priority Lien in favor of the
Trustee and shall constitute Collateral or (ii) apply or cause to be applied
such Net Cash Proceeds, Net Proceeds or Net Award to the purchase of First
Mortgage Notes tendered to the Company for purchase at a price equal to 100% of
the principal amount thereof, plus accrued interest thereon to the date of
purchase pursuant to an offer to purchase made by the Company as set forth
below (a "Net Proceeds Offer"), provided that the first $10,000,000 of Net Cash
Proceeds from Asset Sales (during the period in which First Mortgage Notes are
outstanding) that are not applied in accordance with clause (i) above are not
subject to this clause (ii); and provided further that the
<PAGE> 51
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Company shall only be required to make a Net Proceeds Offer pursuant to clause
(ii) above if the aggregate amount of Net Cash Proceeds, Net Proceeds or Net
Award subject to clause (ii) above exceeds $3,000,000, and then all such Net
Cash Proceeds, Net Proceeds or Net Awards so available shall be used to make
Net Proceeds Offer. Prior to the time that the Company is required to make a
Net Proceeds Offer, all Net Cash Proceeds in excess of the first $10,000,000
of Net Cash Proceeds from Asset Sales that are not applied in accordance with
clause (i) above and all Net Proceeds and Net Awards received by the Trustee
pursuant to Section 1.12.3, 1.12.4(a) or 1.12.4(b) of any Mortgage will be
deposited in the Collateral Account under this Indenture. Net Cash Proceeds,
Net Proceeds or Net Awards so deposited may be withdrawn from the Collateral
Account pursuant to Article 11 hereof.
(c) The Company shall provide the Trustee with notice of the Net
Proceeds Offer at least 30 days before any notice of any Net Proceeds Offer is
mailed to Holders of the First Mortgage Notes (unless shorter notice is
acceptable to the Trustee). Notice of a Net Proceeds Offer shall be mailed by
the Company to all Holders of First Mortgage Notes, with a copy to the Trustee
and the Paying Agent, not less than 60 days nor more than 180 days after the
relevant Asset Sale or after the destruction or condemnation resulting in such
Net Proceeds or Net Award at their last registered address which notice shall
specify the purchase date (which shall be no earlier than 30 days nor later
than 50 days from the date such notice is mailed) (the "Net Proceeds Payment
Date"). The Net Proceeds Offer shall remain open from the time of mailing for
at least 20 Business Days and until at least 5:00 p.m., New York City time, on
the Net Proceeds Payment Date. The notice, which shall govern the terms of the
Net Proceeds Offer, shall include such disclosures as are required by law and
shall state:
(i) that the Net Proceeds Offer is being made pursuant to this
Section 4.15;
(ii) the purchase price (including the amount of accrued interest,
if any) for each First Mortgage Note and the Net Proceeds Payment Date;
(iii) that any First Mortgage Note not tendered or accepted for
payment shall continue to accrue interest in accordance with the terms
thereof;
<PAGE> 52
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(iv) that any First Mortgage Note accepted for payment
pursuant to the Net Proceeds Offer shall cease to accrue interest
after the Net Proceeds Payment Date;
(v) that Holders electing to have First Mortgage Notes
purchased pursuant to a Net Proceeds Offer must surrender their First
Mortgage Notes, with the form "Option of Noteholder to Elect Purchase"
on the reverse of the First Mortgage Notes completed, to the Paying
Agent at the address specified in the notice prior to 5:00 p.m., New
York City time, on the Business Day immediately preceding the Net
Proceeds Payment Date and must complete any form letter of transmittal
proposed by the Company and acceptable to the Trustee and the Paying
Agent;
(vi) that Holders shall be entitled to withdraw their
elections if the Paying Agent receives, not later than 5:00 p.m., New
York City time, on the Business Day immediately preceding the Net
Proceeds Payment Date, a telegram, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of First
Mortgage Notes the Holder delivered for purchase, the First Mortgage
Note certificate number (if any) and a statement that such Holder is
withdrawing his election to have such First Mortgage Notes purchased;
(vii) that if First Mortgage Notes in a principal amount
in excess of the Holders' pro rata share of the Net Cash Proceeds, Net
Proceeds or Net Award are tendered pursuant to the Net Proceeds Offer,
the Company shall purchase First Mortgage Notes on a pro rata basis
among the First Mortgage Notes tendered (with such adjustments as may
be deemed appropriate by the Company so that only First Mortgage Notes
in denominations of $1,000 or integral multiples of $1,000 shall be
acquired);
(viii) that Holders whose First Mortgage Notes are
purchased only in part shall be issued new First Mortgage Notes equal
in principal amount to
<PAGE> 53
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the unpurchased portion of the First Mortgage Notes surrendered; and
(ix) the instructions that Holders must follow to tender
their First Mortgage Notes.
On or before the Net Proceeds Payment Date, the Company shall
(i) accept for payment, on a pro rata basis among the First Mortgage Notes,
First Mortgage Notes or portions thereof tendered pursuant to the Net Proceeds
Offer and (ii) deliver to the Paying Agent the First Mortgage Notes so accepted
together with an Officers' Certificate setting forth the First Mortgage Notes
or portions thereof tendered to and accepted for payment by the Company. The
Paying Agent shall promptly mail or deliver to each Holder of First Mortgage
Notes so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail or deliver to each such Holder a
new First Mortgage Note equal in principal amount to any unpurchased portion of
the First Mortgage Notes surrendered upon receipt from the Company thereof. Any
First Mortgage Note not so accepted shall be promptly mailed or delivered by the
Company to the Holder thereof. The Company shall publicly announce the results
of the Net Proceeds Offer on the first Business Day following the Net Proceeds
Payment Date. To the extent the Holders' pro rata portion of a Net Proceeds
Offer is not fully subscribed to by such Holders, the Company may retain (free
and clear of the Lien of this Indenture and the Security Documents) such
unutilized portion. The Paying Agent shall promptly deliver to the Company the
balance of any such Trust Moneys held by the Paying Agent after payment to the
Holders as aforesaid. For purposes of this Section 4.15, so long as the
Collateral Agent is also the Trustee, the Collateral Agent shall act as the
Paying Agent and, otherwise, the Trustee shall act as Paying Agent.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of First Mortgage Notes
pursuant to the Net Proceeds Offer. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section 4.15,
the Company shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under this Section
4.15 by virtue thereof.
<PAGE> 54
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SECTION 4.16. Limitation on Liens.
The Company shall not, and shall not permit any of its Subsidiaries
to, incur or suffer to exist any Liens upon any of their respective assets,
except for (i) existing and future Liens on Inventory and Accounts (each as
defined in the New Revolving Credit Agreement as in effect on the Issue Date)
securing New Revolving Credit Debt, (ii) Permitted Liens, (iii) Liens securing
Acquired Indebtedness; provided that such Liens (a) are not incurred in
connection with, or in contemplation of, the acquisition of the property or
assets acquired, and (b) do not extend to or cover any property or assets of
the Company or any Subsidiary other than the property or assets so acquired,
(iv) Liens securing Indebtedness to the extent incurred to refinance secured
Indebtedness outstanding as of the Issue Date; provided that such refinancing
Indebtedness shall be secured solely by the assets securing such currently
outstanding Indebtedness being refinanced, (v) Liens to secure certain
Indebtedness that is otherwise permitted hereunder and that is used to finance
the cost of the property subject thereto; provided that (a) any such Lien is
created solely for the purpose of securing Indebtedness representing, or
incurred to finance, refinance or refund, the cost (including sales and excise
taxes, installation and delivery charges and other direct costs of, and other
direct expenses paid or charged in connection with, such purchase or
construction) of the property subject thereto, (b) the principal amount of the
Indebtedness secured by such Lien does not exceed 100% of such cost, (c) such
Lien does not extend to or cover any other property other than such item of
property and any improvements on such item of property and (d) the principal
amount of Indebtedness secured by such Liens shall not exceed (x) $25,000,000
outstanding at any time and (y) $5,000,000 incurred in any twelve-month period,
(vi) Liens existing on the Issue Date, (vii) additional Liens on assets and
properties of the Company, securing Indebtedness permitted to be incurred
hereunder in an amount not to exceed $20,000,000, provided that if such
additional Liens are on assets that comprise Collateral, such Liens shall be
pari passu with, or subordinate to, the Lien on such Collateral in favor of the
Trustee, and the holders or representative of such Indebtedness shall enter
into an intercreditor agreement with the Trustee substantially in the form of
Exhibit II hereto, with such changes to reflect a subordinate Lien position as
may be necessary, (viii) Liens in favor of the Trustee, and (ix) any
replacement, extension or renewal, in whole or in part, of any Lien described
in the foregoing clauses, provided that to the extent any such clause limits
the amount secured or the
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assets subject to such Liens, no extension or renewal shall increase the amount
or the assets subject to such Liens beyond the amounts set forth in such
limits.
SECTION 4.17 Limitation on Sale-Leaseback Transactions.
The Company shall not enter into, renew or extend, or permit any
Subsidiary to enter into, renew or extend, any transaction or series of related
transactions pursuant to which the Company or any such Subsidiary sells or
transfers any property or asset in connection with the leasing, or the resale
against installment payments, or as part of an arrangement involving the
leasing or the resale against installment payments, of such property or asset to
the seller or transferor (a"Sale-Leaseback Transaction") except a
Sale-Leaseback Transaction involving only the sale and transfer of property or
assets acquired after the Issue Date and not constituting Collateral, provided
that (i) net proceeds received from the Sale-Leaseback Transaction shall be
deemed to be proceeds of Indebtedness incurred in an amount equal to such net
proceeds and (ii) after giving effect to such Sale-Leaseback Transaction on a
pro forma basis, (a) the Company shall be in compliance with Section 4.11 and
(b) such property or assets shall be used in the ordinary course of business of
the Company or such Subsidiary.
SECTION 4.18 Limitation on Issuance of Preferred Stock by Subsidiaries
The Company shall not permit any Subsidiary to, directly or
indirectly, issue, contingently or otherwise, any shares of such Subsidiary's
Preferred Stock, warrants, rights or options to purchase or acquire shares of
such Subsidiary's Preferred Stock now or hereafter authorized for issuance
except to the Company or a Wholly Owned Subsidiary of the Company.
SECTION 4.18 Change of Control
In the event of a Change of Control (the date of such occurrence, the
"Change of Control Date"), the Company shall notify the Holders of First
Mortgage Notes in writing of such occurrence and shall make an offer to
purchase (the "Change of Control Offer") on a Business Day (the "Change of
Control Payment Date") not earlier than 30 days nor later than 60 days from the
date such notice is mailed all First Mortgage Notes then outstanding at a
purchase price equal to 101% of the
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principal amount thereof plus accrued interest to the Change of Control Payment
Date, if any.
Notice of a Change of Control Offer shall be mailed by the
Company within 30 days following the Change of Control Date to the Holders of
First Mortgage Notes at their last registered addresses with a copy to the
Trustee and the Paying Agent. The Change of Control Offer shall remain open
from the time of mailing for at least 20 Business Days and until 5:00 p.m., New
York City time, on the Change of Control Payment Date. The notice, which shall
govern the terms of the Change of Control Offer, shall include such disclosures
as are required by law and shall state:
(a) that the Change of Control Offer is being made
pursuant to this Section 4.19 and that all First Mortgage Notes shall
be accepted for payment;
(b) the purchase price (including the amount of accrued
interest, if any) for each First Mortgage Note and the Change of
Control Payment Date;
(c) that any First Mortgage Note not tendered or
accepted for payment shall continue to accrue interest in accordance
with the terms thereof;
(d) that any First Mortgage Note accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(e) that Holders electing to have First Mortgage Notes
purchased pursuant to a Change of Control Offer must surrender their
First Mortgage Notes to the Paying Agent at the address specified in
the notice prior to 5:00 p.m., New York City time, on the Change of
Control Payment Date and must complete any form letter of transmittal
proposed by the Company and acceptable to the Trustee and the Paying
Agent;
(f) that Holders shall be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New
York City time, on the Change of Control Payment Date, a telegram,
facsimile transmission or letter setting forth the name of the Holder,
the principal amount of First Mortgage Notes the Holder delivered for
purchase, the First Mortgage Note certificate number (if any) and a
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statement that such Holder is withdrawing his election to have such First
Mortgage Notes purchased;
(g) that Holders whose First Mortgage Notes are
purchased only in part shall be issued First Mortgage Notes equal in
principal amount to the unpurchased portion of the First Mortgage
Notes surrendered;
(h) the instructions that Holders must follow to tender
their First Mortgage Notes; and
(i) the circumstances and relevant facts regarding such
Change of Control (including, but not limited to, information with
respect to pro forma historical financial information after giving
effect to such Change of Control, information regarding the Persons
acquiring control and such Person's business plans going forward).
On the Change of Control Payment Date, the Company shall (i)
accept for payment First Mortgage Notes or portions thereof tendered pursuant
to the Change of Control Offer, (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all First Mortgage Notes or portions
thereof so tendered and accepted and (iii) deliver to the Trustee the First
Mortgage Notes so accepted together with an Officers' Certificate setting forth
the First Mortgage Notes or portions thereof tendered to and accepted for
payment by the Company. The Paying Agent shall promptly mail or deliver to the
Holders of First Mortgage Notes so accepted payment in an amount equal to the
purchase price, and the Trustee shall promptly authenticate and mail or deliver
to such Holders a new First Mortgage Note equal in principal amount to any
unpurchased portion of the First Mortgage Note surrendered upon receipt from
the Company thereof. Any First Mortgage Notes not so accepted shall be promptly
mailed or delivered by the Company to the holder thereof. The Company shall
publicly announce the results of the Change of Control Offer not later than the
first Business Day following the Change of Control Payment Date.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act, and any other securities
laws or regulations in connection with the repurchase of First Mortgage Notes
pursuant to a Change of Control Offer. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section 4.19,
the Company shall comply with the applicable securities laws and regulations
and shall not be deemed to have
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breached its obligations under this Section 4.19 by virtue thereof.
SECTION 4.20. Maintenance of Consolidated Net Worth.
The Company shall maintain, as of the end of each fiscal quarter of
the Company, a Consolidated Net Worth in excess of $75,000,000.
SECTION 4.21. Amendment to Security Documents.
The Company shall not amend, modify or supplement, or permit or
consent to any amendment, modification or supplement of, the Security Documents
in any way that would be adverse to the Holders of the First Mortgage Notes.
SECTION 4.22. Inspection and Confidentiality.
(a) The Company shall, and shall cause each of its Subsidiaries
to, permit authorized representatives of the Trustee and the Collateral Agent
to visit and inspect the properties of the Company or its Subsidiaries, and any
or all books, records and documents in the possession of the Company relating
to the Collateral, and to make copies and take extracts therefrom and to visit
and inspect the Collateral, all upon reasonable prior notice and at such
reasonable times during normal business hours and as often as may be reasonably
requested.
(b) The Trustee and the Collateral Agent and their respective
authorized representatives referred to in Section 4.22(a) agree not to use any
information obtained pursuant to this Section 4.22 for any unlawful purpose and
to keep confidential and not to disclose any such information to any Person
except that (i) the recipient of the information may disclose any information
that becomes publicly available other than as a result of disclosure by such
recipient, (ii) the recipient of the information may disclose any information
that its counsel reasonably concludes is necessary to be disclosed by law,
pursuant to any court or administrative order or ruling or in any pending legal
or administrative proceeding or investigation after prior written notice,
reasonable under the circumstances, to the Company, and (iii) the recipient of
the information may disclose any information necessary to be disclosed pursuant
to any provision of the TIA.
<PAGE> 59
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SECTION 4.23. Use of Proceeds.
The Company shall use any of the proceeds of the First Mortgage Notes
in the manner described in the Prospectus. The Company shall not use any part
of such proceeds to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin stock. Neither the
issuance of any First Mortgage Note nor the use of the proceeds thereof shall
violate or be inconsistent with the provisions of Regulations G, T, U or X of
the Board of Governors of the Federal Reserve System.
SECTION 4.24. Impairment of Security Interest.
The Company shall not take or omit to take any action, which action or
omission might or would have the result of affecting or impairing the security
interest in favor of the Trustee for the benefit of the Noteholders, with
respect to the Collateral, and the Company shall not grant to any Person (other
than the Trustee and the Holders of the First Mortgage Notes) any interest
whatsoever in the Collateral, except, in either case, as expressly permitted by
this Indenture and the Security Documents.
SECTION 4.25. Sale or Discount of Receivables.
As long as any Indebtedness is outstanding under the New Revolving
Credit Agreement (unless such Indebtedness is permitted by and incurred under
Section 4.11(a) or Section 4.11(b)(vii)), the Company will not, nor will it
permit any of its Subsidiaries to, sell, with or without recourse, or discount
or otherwise sell for less than the face value thereof, any of its Eligible
Accounts Receivable (as defined in the New Revolving Credit Agreement as in
effect on the date hereof without giving effect to subclause (o) of the
definition thereof). Notwithstanding the foregoing, the Company or any
Subsidiary may sell, with or without recourse, or discount or otherwise sell
for less than the face value thereof, any of its respective accounts receivable
in connection with the exercise of any rights or remedies of the lenders under
the New Revolving Credit Agreement or to satisfy any obligations thereunder.
<PAGE> 60
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ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge etc.
The Company, in a single transaction or through a series of related
transactions, shall not (a) consolidate with or merge with or into any other
person, or transfer (by lease, assignment, sale or otherwise) all or
substantially all of its properties and assets as an entirety or substantially
as an entirety to another Person or group of affiliated Persons, or (b) adopt a
Plan of Liquidation, unless, in either case,
(i) either the Company shall be the continuing Person,
or the Person (if other than the Company) formed by such consolidation
or into which the Company is merged or to which all or substantially
all of the properties and assets of the Company as an entirety or
substantially as an entirety (or, in the case of a Plan of
Liquidation, one Person to which assets are transferred) (the Company
or such other person, the "Surviving Person") shall be a corporation
organized and validly existing under the laws of the United States,
any state thereof or the District of Columbia and shall expressly
assume, by a supplemental indenture, all the obligations of the
Company under the First Mortgage Notes, the Indenture and the Security
Documents;
(ii) immediately after and giving effect to such
transaction and the assumption contemplated by clause (i) above and
the incurrence or anticipated incurrence of any Indebtedness to be
incurred in connection therewith,
(A) the Surviving Person shall have a
Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately preceding
the transaction, and
(B) if the Consolidated Interest Coverage Ratio
of the Company immediately preceding the transaction is
within a range set forth under column X below, then the
Surviving Person shall have a Consolidated Interest Coverage
Ratio at least equal to the lesser of (1) the actual
Consolidated Interest Coverage Ratio of the Company
multiplied by the appropriate
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percentage set forth in column Y and (2) the ratio set forth in column Z below:
<TABLE>
<CAPTION>
X Y Z
<S> <C> <C>
1.11 to 1.99 90% 1.60
2.00 to 2.99 80% 2.10
3.00 to 3.99 70% 2.40
4.0 or more 60% 2.50
</TABLE>
; provided that, if, immediately after giving effect to such
transaction on a pro forma basis, the Consolidated Interest Coverage
Ratio of the Company or the Surviving Person, as the case may be, is
3.00:1 or more, the calculation in the preceding subclause (ii)(B)
shall be inapplicable and such transaction shall be deemed to have
complied with the requirements of such provision; and
(iii) immediately preceding and immediately after giving effect to
such transaction and the assumption of the obligations as set forth in clause
(i) above and the incurrence or anticipated incurrence of any Indebtedness to
be incurred in connection therewith, no Default or Event of Default shall have
occurred and be continuing. For purposes of the foregoing, the transfer (by
lease, assignment, sale or otherwise) of all or substantially all of the
properties and assets of one or more Subsidiaries, the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
SECTION 5.02. Surviving Person Substituted.
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company or any adoption of a Plan of
Liquidation in accordance with Section 5.01, the Surviving Person formed by
such consolidation or into which the Company is merged or to which such
transfer is made (or, in the case of a Plan of Liquidation, to which assets are
transferred) shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such Surviving Person had been named as the Company herein.
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ARTICLE 6
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
(a) An "Event of Default" occurs if:
(i) the Company defaults in the payment of interest on any First
Mortgage Note when the same becomes due and payable and the Default continues
for a period of 30 days;
(ii) the Company defaults in the payment of the principal of any
First Mortgage Note when the same becomes due and payable, whether at maturity,
upon redemption, acceleration or otherwise;
(iii) the Company fails to observe or perform any of its agreements
or covenants in, or provisions of, the First Mortgage Notes, the Security
Documents or this Indenture, and such failure continues for the period and after
the notice specified below;
(iv) the Company defaults in the payment of any Indebtedness,
whether such Indebtedness now exists or shall hereafter be created, if both (i)
such default either (x) results from the failure to pay any such Indebtedness
at its stated final maturity (after giving effect to the extension of such
maturity date by the holders of such Indebtedness and after the expiration of
any grace period in respect of such final scheduled principal installment
contained in the instrument under which such Indebtedness is outstanding), or
(y) relates to an obligation other than the obligation to pay such Indebtedness
at its stated final maturity and results in the holder(s) of such Indebtedness
causing such Indebtedness to become due prior to its stated maturity and the
causing of such Indebtedness to become due prior to its stated maturity is not
rescinded, annulled or otherwise cured within 10 days after the Company
receives notice that such Indebtedness is due prior to its stated maturity, and
(ii) the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness in default in paying principal at stated
final maturity or the maturity of which has been so accelerated, aggregate
$5,000,000 or more at any one time outstanding;
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(v) the occurrence of a default or event of default (in each case
that shall continue beyond the expiration of any applicable grace periods)
under or the occurrence of any other event that would permit the acceleration
of the maturity of any Indebtedness that is secured by a Lien on property
permitted by clauses (v) or (vi) of Section 4.16, which default or event of
default could result in foreclosure on property having an aggregate value in
excess of $2,000,000;
(vi) the occurrence of a default or event of default (in each case
that shall continue beyond the expiration of any applicable grace period) under
or the occurence of any other event that would permit the acceleration of any
Indebtedness which is secured by a Lien on Collateral permitted by clause (vii)
of Section 4.16;
(vii) any final judgment or order for the payment of money in
excess of $5,000,000 shall be entered against the Company or any Significant
Subsidiary and shall not be discharged for a period of 60 days after the
judgment becomes final and non-appealable;
(viii) either the Company or any Significant Subsidiary pursuant to
or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief against
it in an involuntary case or proceeding;
(C) consents to the appointment of a Custodian of it or
for all or substantially all of its property; or
(D) makes a general assignment for the benefit of its
creditors;
(ix) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case or proceeding;
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(B) appoints a Custodian of the Company or any
Significant Subsidiary or for all or any substantial part of
their respective properties; or
(C) orders the liquidation of the Company or
any Significant Subsidiary of the Company;
and in each case the order or decree remains unstayed and in effect
for 60 days; and
(x) the lenders under the New Revolving Credit Agreement
commence judicial proceedings to foreclose upon any material portion
of the assets of the Company and its Subsidiaries or have exercised
any right under applicable law or such security documents to take
ownership of any such material portion of such assets in lieu of
foreclosure.
(b) A Default under Section 6.01(a)(iii) is not an Event
of Default until the Trustee notifies the Company, or the Holders of
at least 25% in principal amount of the then outstanding First
Mortgage Notes notify the Company and the Trustee, and the Company
does not cure the Default within 30 days after receipt of the notice;
provided, however, that any default under Sections 4.09, 4.15, 4.17,
4.19, 4.24 or 5.01 shall constitute an Event of Default upon receipt
by the Company of a notice specifying such Default. Any notice of
default delivered hereunder must specify the Default in reasonable
detail, demand that it be remedied and state that the notice is a
"Notice of Default" hereunder.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default
specified in Section 6.01(a)(viii) or 6.01(a)(ix)) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of at
least 25% of the aggregate principal amount of the First Mortgage
Notes then outstanding by notice to the Company and the Trustee, may
declare the principal of and accrued and unpaid interest on all the
First Mortgage Notes to be due and payable. If an Event of Default
specified in Section 6.01(a)(viii) or 6.01(a)(ix) occurs, then the
principal of, and accrued but unpaid interest on, all the First
Mortgage Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the
Trustee or any Holder. The Holders of a majority in aggregate
principal amount of the then outstanding First Mortgage Notes
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may, by written notice to the Trustee, rescind such declaration of acceleration
if the rescission of acceleration would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived, other
than the nonpayment of principal or accrued interest that has become due solely
as a result of such acceleration.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect
the payment of principal of or interest on the First Mortgage Notes or to
enforce the performance of any provision of the First Mortgage Notes, this
Indenture or the Security Documents.
All rights of action and claims under this Indenture or the
First Mortgage Notes may be enforced by the Trustee even if the Trustee does
not possess any of the First Mortgage Notes or does not produce any of them in
the proceeding. A delay or omission by the Trustee or any Noteholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative to the extent permitted by law.
Each Noteholder, by accepting a First Mortgage Note,
acknowledges that the exercise of remedies by the Trustee with respect to the
Collateral is subject to the terms and conditions of the Security Documents and
the proceeds received upon realization of the Collateral shall be applied by the
Trustee in accordance with Section 6.10 hereof.
SECTION 6.04. Waiver of Past Defaults.
Subject to Sections 6.07 and 9.02 hereof, the Holders of at
least a majority in principal amount of the outstanding First Mortgage Notes by
notice to the Trustee may waive an existing Default or Event of Default and its
consequences except a Default specified in Section 6.01(a)(viii) and
6.01(a)(ix) hereof or in respect of any provision hereof that cannot be
modified or amended without the consent of the Holder so affected pursuant to
Section 9.02 hereof. When a Default or Event of Default is waived, it is cured
and ceases.
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SECTION 6.05. Control by Majority.
The Holders of at least a majority in principal amount of the
outstanding First Mortgage Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it; provided, however, that the Trustee may
refuse to follow any direction that (i) conflicts with law or this Indenture,
(ii) the Trustee determines may be unduly prejudicial to the rights of another
Noteholder, or (iii) may involve the Trustee in personal liability unless the
Trustee has indemnification satisfactory to it in its sole discretion against
any loss or expense caused by its following such direction; and provided,
further, that the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction.
SECTION 6.06. Limitation on Remedies.
Except as provided in Section 6.07 hereof, a Noteholder may not pursue
any remedy with respect to this Indenture or the First Mortgage Notes unless:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(b) the Holders of at least 25% in aggregate principal amount of the
outstanding First Mortgage Notes make a written request to the Trustee to
pursue the remedy;
(c) such Holder or Holders offer to the Trustee indemnity satisfactory
to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the outstanding First Mortgage Notes do not give the Trustee a
direction that, in the opinion of the Trustee, is inconsistent with the
request.
The foregoing limitations shall not apply to a suit instituted by a
Holder for the enforcement of the payment of principal of or accrued interest on
such First Mortgage Note on
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or after the respective due dates set forth in such First Mortgage Notes.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over such other
Noteholder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a First Mortgage Note to receive payment of principal of and
interest on the First Mortgage Note, on or after the respective due dates
expressed in the First Mortgage Note, or to bring suit for the enforcement of
any such payment on or after such respective dates, is absolute and
unconditional and shall not be impaired or affected without the consent of the
Holder except to the extent that the institution or prosecution of such suit or
entry of judgment therein would, under applicable law, result in the surrender,
impairment or waiver of the Lien of this Indenture and the Security Documents
upon the Collateral.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a)(i) or 6.01(a)(ii)
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company (or any other obligor upon
the First Mortgage Notes) for the whole amount of principal and accrued interest
remaining unpaid, together with interest over-due on principal and, to the
extent that payment of such interest is lawful, interest on overdue installments
of interest, in each case at the rate per annum borne by the First Mortgage
Notes, and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee shall be entitled and empowered to file such proofs of
claim and other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and the Noteholders allowed in any judicial proceedings relative to
the Company (or any other obligor upon the
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First Mortgage Notes), its creditors or its property and shall be entitled and
empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any custodian in
any such judicial proceedings is hereby authorized by each Noteholder to make
such payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Noteholders, to pay to the Trustee
any amount due to it for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.07. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the First Mortgage Notes or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Noteholder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07 hereof and
for amounts due under the Security Documents (other than payments of
interest and principal described in the next two sub-clauses)
Second: to Noteholders for interest accrued on the First Mortgage
Notes, ratably, without preference or priority of any kind, according to
the amounts due and payable on the First Mortgage Notes for interest;
Third: to Noteholders for principal amounts owing under the First
Mortgage Notes, ratably, without preference or priority of any kind,
according to the amounts due and payable on the First Mortgage Notes for
principal; and
Fourth: to the Company or any other obligors on the First Mortgage
Notes, as their interests may appear, or as a court of competent
jurisdiction may direct.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Noteholders pursuant to this
Section 6.10.
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SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by Holders of more than 10% in aggregate
principal amount of the outstanding First Mortgage Notes.
SECTION 6.12. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and shill in its exercise as a prudent
person would exercise or use under the circumstances in the conduct of its own
affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others
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and no implied covenants or obligations shall be read into this
Indenture against the Trustee.
(ii) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) This paragraph does not limit the effect of
paragraph (b) of this Section 7.01.
(ii) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Sections 6.02, 6.04 or 6.05.
(iv) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder
or in the exercise of any of its rights or powers unless it receives
indemnity satisfactory to it for the repayment of such funds or
against such risk or liability.
(v) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (i), (ii), (iii) and
(vi) of this Section 7.01(c).
(vi) Subject to Section 11.04 hereof, the Trustee shall
not be liable for interest on any money received by it except as the
Trustee may agree with the Company. Money held in trust by the Trustee
need not be segregated from other funds except to the extent required
by law.
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SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document,
but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney in accordance with Section
4.22.
(b) Before the Trustee acts or refrains from acting with respect to
any matter contemplated by this Indenture, it may require an Officers'
Certificate or an Opinion of Counsel, which shall conform to Section 12.05
hereof. The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on such Certificate or Opinion.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent (other
than the negligence or wilful misconduct of an agent who is an employee of
the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(e) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization
and protection in respect of any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of
such counsel.
(f) Subject to Section 9.02 hereof, the Trustee may (but shall not be
obligated to), without the consent of
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the Holders, give any consent, waiver or approval required under the
Security Documents or by the terms hereof with respect to the
Collateral, but shall not without the consent of the Holders of a
majority in aggregate principal amount of the First Mortgage Notes at
the time outstanding (i) give any consent, waiver or approval or (ii)
agree to any amendment or modification of the Security Documents, in
each case, that shall have an adverse effect on the interests of any
Holder. The Trustee shall be entitled to request and conclusively rely
on an Opinion of Counsel with respect to whether any consent, waiver,
approval, amendment or modification shall have an adverse effect on the
interests of any Holder.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledges of First Mortgage Notes or any securities of the Company or its
Affiliates and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not Trustee. Any agent may do the same with
like rights. However, the Trustee is subject to Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The statements contained herein and in the First Mortgage Notes,
except the certificate of authentication on the First Mortgage Notes, shall be
taken as the statements of the Company, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as to
the value or condition of the Collateral or any part thereof, or as to the title
of the Company thereto or as to the security afforded thereby or hereby, or as
to the validity or genuineness of any Collateral pledged and deposited with the
Trustee, or as to the validity or sufficiency of this Indenture or of the First
Mortgage Notes. The Trustee shall not be accountable for the use or application
by the Company of the First Mortgage Notes or the proceeds thereof or of any
money paid to the Company or any Person designated by the Company under any
provision hereof. The Trustee makes no representations with respect to the
effectiveness or adequacy of this Indenture or the Security Documents, or the
validity or perfection, if any, of Liens granted under this Indenture or the
Security Documents. The Trustee shall not be responsible for independently
ascertaining or maintaining such validity or perfection, if any, and shall be
fully protected in relying upon certificates and opinions
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delivered to it in accordance with the terms of this Indenture or the Security
Documents.
SECTION 7.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and it is
known to the Trustee, the Trustee shall mail to each Noteholder notice of the
Default or Event of Default within 90 days after the occurrence of the Default
or Event of Default. Except in the case of a Default or an Event of Default in
payment of principal of or interest on any First Mortgage Note (including the
failure to make a mandatory redemption or repurchase pursuant hereto), the
Trustee may withhold the notice if and so long as the Trustee in good faith
determines that withholding the notice is in the interest of Noteholders.
SECTION 7.06. Reports by Trustee to Holders.
To the extent required by TIA SS. 313(a), within 60 days after May 15
of each year commencing with 1993 and for as long as there are First Mortgage
Notes outstanding hereunder, the Trustee shall mail to each Holder the Company's
brief report dated as of such date that complies with TIA SS. 313(a). The
Trustee also shall comply with TIA SS. 313(b), (c) and (d).A copy of such report
at the time of its mailing to Holders shall be filed with the SEC, if required,
and each stock exchange, if any, on which the First Mortgage Notes are listed.
The Company shall promptly notify the Trustee if the First Mortgage
Notes become listed on any national securities exchange and the Trustee shall
comply with TIA S 313(d).
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services rendered hereunder and under the Security
Documents. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it hereunder or under the Security Documents. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents, accountants, experts and counsel.
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The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability or expense incurred by it in connection with the
administration of this Indenture and the Security Documents and its respective
duties hereunder or thereunder. The Trustee shall notify the Company promptly of
any claim asserted against it for which it may seek indemnity. The Company need
not reimburse any expense or indemnify against any loss or liability incurred by
the Trustee through the Trustee's negligence or bad faith.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the First Mortgage Notes on all money or
property held or collected by the Trustee except money or property held in trust
to pay principal of or interest on particular First Mortgage Notes.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 6.01(a)(viii) or 6.01(a)(ix), the
expenses and the compensation for the services are intended to constitute
expenses of administration under any Bankruptcy Law.
The Company's obligations under this Section 7.07 and any Lien arising
hereunder shall survive the resignation or removal of any Trustee, the discharge
of the Company's obligations pursuant to Article 8 of this Indenture and/or the
termination of this Indenture.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company in writing, such
resignation to be effective upon the appointment of a successor Trustee. The
Holders of a majority in principal amount of the outstanding First Mortgage
Notes may remove the Trustee by so notifying the Trustee in writing and may
appoint a successor Trustee with the Company's written consent. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10:
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
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If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the outstanding First Mortgage Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately thereafter,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee (subject to the Lien provided in Section 7.07), the
resignation or removal of the retiring Trustee shall become effective and the
successor Trustee shall have all the rights, powers and duties of the retiring
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Noteholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding First Mortgage
Notes may petition any court of competent jurisdiction for the appointment of
another successor Trustee.
If any Trustee fails to comply with Section 7.10, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Any resignation or removal of the Trustee pursuant to this Indenture
shall be deemed to be a resignation or removal of the Trustee in its capacity as
Collateral Agent under the Security Documents and any appointment of a successor
Trustee pursuant to this Indenture shall be deemed to be an appointment of a
successor Collateral Agent under the Security Documents and such successor shall
assume all of the obligations of the Trustee in its capacity as Collateral Agent
under the Security Documents.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
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SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall be the successor Trustee (and successor Collateral Agent under the
Security Documents), provided such corporation shall be otherwise qualified and
eligible under this Article 7.
SECTION 7.10. Eligibility: Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA SS. 310(a)(1) and (2). The Trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIA SS.
310(b); provided, however, that there shall be excluded from the operation of
TIA SS. 310(b)(1) any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of the Company
are outstanding, if the requirements for such exclusion set forth in TIA SS.
310(b)(1) are met. The provisions of TIA SS. 310 shall apply to the Company, as
obligor of the First Mortgage Notes.
SECTION 7.11. Preferential Collection of Claims Against the Company.
The Trustee, in its capacity as Trustee hereunder and in its capacity
as Collateral Agent under the Security Documents, shall comply with TIA SS.
311(a), excluding any creditor relationship listed in TIA SS. 311(b). A Trustee
who has resigned or been removed shall be subject to TIA SS. 311(a) to the
extent indicated therein. The provisions of TIA SS. 311 shall apply to the
Company, as obligor of the First Mortgage Notes.
ARTICLE 8
DISCHARGE OF INDENTURE: DEFEASANCE
SECTION 8.01. Termination of Obligations.
(a) When (i) the Company delivers to the Trustee all outstanding
First Mortgage Notes (other than First Mortgage Notes replaced pursuant to
Section 2.08, it being understood
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that such First Mortgage Notes are no longer outstanding) for cancellation or
(ii) all outstanding First Mortgage Notes have become due and payable and the
Company irrevocably deposits with the Trustee funds or U.S. Government
Obligations sufficient (without reinvestment thereof) to pay at maturity all
outstanding First Mortgage Notes, including all interest thereon to the date of
such deposit (in the case of First Mortgage Notes which have become due and
payable) or to the Maturity Date or redemption date, as the case may be (other
than First Mortgage Notes replaced pursuant to Section 2.08, it being understood
that such First Mortgage Notes are no longer outstanding), and if in either case
the Company pays all other sums payable hereunder by the Company, then this
Indenture shall, subject to Sections 8.01(c) and 8.04, cease to be of further
effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of the Company accompanied by an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
discharge of the First Mortgage Notes as contemplated by this Article 8 have
been complied with, and at the cost and expense of the Company.
(b) Subject to Sections 8.01(c), 8.01(d) and 8.04, the Company at any
time may terminate (i) all its obligations under the First Mortgage Notes, this
Indenture and the Security Documents ("legal defeasance option") or (ii) its
obligations under Sections 4.09 through 4.24 (the "covenant defeasance option").
The Company may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
First Mortgage Notes may not be accelerated because of an Event of Default. If
the Company exercises its covenant defeasance option, payment of the First
Mortgage Notes may not be accelerated because of an Event of Default specified
in Section 6.01(iii) arising from a violation of any of Sections 4.09 through
4.24.
(c) Notwithstanding clause (a) or the exercise of the legal
defeasance option as set forth above, the Company's obligations in Sections
2.04, 2.05, 2.06, 2.07, 2.08, 2.13, 4.07, 7.07, 7.08, 8.03 and 8.04 shall
survive until the First Mortgage Notes have been paid in full. Thereafter, the
Company's obligations in Sections 7.07, 8.03 and 8.04 shall survive.
(d) The Company may exercise its legal defeasance option or its
covenant defeasance option only if:
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(i) the Company shall have irrevocably deposited or
caused to be deposited with the Trustee or the Paying Agent and
conveyed all right, title and interest for the benefit of the Holders
of the First Mortgage Notes, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee, as trust
funds in trust solely for the benefit of the Holders for that purpose,
money or direct non-callable obligations of, or noncallable
obligations guaranteed by, the United States of America for the
payment of which guarantee or obligation the full faith and credit of
the United States is pledged ("U.S. Government Obligations"), maturing
as to principal and interest in such amounts and at such times as are
sufficient, without consideration of any reinvestment of such
interest, to pay principal of and interest on the outstanding First
Mortgage Notes to maturity or redemption, as the case may be, as
certified by the Company in an Officers' Certificate;
(ii) the Trustee shall have been irrevocably instructed
pursuant to such Officers' Certificate to apply such money or the
proceeds of such U.S. Government Obligations to the payment of said
principal and interest with respect to the First Mortgage Notes;
(iii) no Default or Event of Default shall have occurred
and be continuing on the date of such deposit;
(iv) the Company shall have delivered to the Trustee
(A) either (1) a ruling directed to the Trustee received from the
Internal Revenue Service to the effect that the Holders of such First
Mortgage Notes shall not recognize income, gain or loss for Federal
income tax purposes as a result of the Company's exercise of its
option under this Section 8.01 and shall be subject to Federal income
tax on the same amount and in the same manner and at the same times as
would have been the case if such option had not been exercised, or (2)
an Opinion of Counsel to the same effect as the ruling described in
clause (1) accompanied by a ruling to that effect published by the
Internal Revenue Service, unless there has been a change in the
applicable Federal income tax law since the date the First Mortgage
Notes were originally issued, such that a ruling from the Internal
Revenue Service is no longer required, and (a) an Opinion of Counsel
to the effect that, after the passage of 90 days following the
deposit, the trust funds shall not be subject to the effect of any
applicable
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bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and
(v) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for herein relating to the satisfaction
and discharge of this Indenture have been complied with.
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates hereunder; provided, however,
that no deposit under 8.01(d)(i) shall be effective to terminate the obligations
of the Company under the First Mortgage Notes, this Indenture or the Security
Documents prior to 90 days following any such deposit, except that in the event
that the Company exercises its covenant defeasance option, the Company shall,
upon delivery to the Trustee of the items specified in paragraphs (i)-(v), be
relieved of its obligations set forth in Sections 4.09 to 4.24.
(e) The Company shall pay any taxes or other expenses
incurred by any trust created pursuant to this Article 8.
SECTION 8.02. Application of Trust Money.
The Trustee or Paying Agent shall hold in trust money or U.S.
Government Obligations deposited with it pursuant to Section 8.01, and shall
apply the deposited money and the money from U.S. Government Obligations in
accordance with this Indenture to the payment of principal of and interest on
the First Mortgage Notes. The Trustee shall be under no obligation to invest
said money or U.S. Government Obligations except as it may agree with the
Company.
SECTION 8.03. Repayment to the Company.
Subject to Section 7.07 and Section 8.01, the Trustee and the Paying
Agent shall promptly pay to the Company upon request any excess money or U.S.
Government Obligations held by them at any time and thereupon shall be relieved
from all liability with respect to such money. The Trustee and the Paying Agent
shall pay to the Company upon request any money held by them for the payment of
principal or interest that remains unclaimed for two years; provided, however,
that the Company
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shall, if requested by the Trustee or such Paying Agent, give the Trustee or
such Paying Agent appropriate indemnification against any and all liability
which may be incurred by them by reason of such payment; and provided, further,
that the Trustee or such Paying Agent, before being required to make any
payment, may at the expense of the Company cause to be published once in a
newspaper of general circulation in the City of New York or mail to each Holder
entitled to such money notice that such money remains unclaimed and that after a
date specified therein, which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining shall
be repaid to the Company. After payment to the Company, Noteholders entitled to
such money must look to the Company for payment as general creditors unless an
applicable law designates another Person.
SECTION 8.04. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture, the First Mortgage Notes and the
Security Documents shall be revived and reinstated as though no deposit had
occurred pursuant to this Indenture until such time as the Trustee or Paying
Agent is permitted to apply all such money or U.S. Government Obligations in
accordance with this Indenture; provided, however, that if the Company has made
any payment of interest on or principal of any First Mortgage Notes because of
the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such First Mortgage Notes to receive such payment from
the money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company, when authorized by a Board Resolution, and the Trustee or
the Collateral Agent, as applicable, may amend, waive or supplement this
Indenture, the Security Documents or the First Mortgage Notes without notice to
or consent of any Noteholder:
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(a) to cure any ambiguity, defect or inconsistency, provided that
such amendment or supplement does not adversely affect the rights of any
Noteholder;
(b) to provide for uncertificated First Mortgage Notes in addition to
or in place of certificated First Mortgage Notes, provided that the Trustee
consents to such amendment;
(c) to comply with any requirements of the SEC in order to maintain
the qualification of this Indenture under the TIA, as contemplated by
Section 9.03 or otherwise;
(d) to evidence the succession in accordance with Article 5 hereof of
another Person to the Company and the assumption by any such successor of
the covenants of the Company herein and in the First Mortgage Notes;
(e) to pledge or grant a security interest in favor of the Trustee as
additional security for the payment and performance of the Company's
obligations under this Indenture, in any property or assets, including any
that are required to be pledged or in which a security interest is required
to be granted, to the Trustee pursuant to the Security Documents or
otherwise; or
(f) to make any change that does not adversely affect the rights of
any Noteholder hereunder.
SECTION 9.02. With Consent of Holders.
(a) Subject to Section 6.07, the Company, when authorized by a Board
Resolution, and the Trustee or the Collateral Agent, as applicable, may amend or
supplement this Indenture, the Security Documents or the First Mortgage Notes
with the written consent of the Holders of at least a majority in aggregate
principal amount of the First Mortgage Notes then outstanding. Subject to
Section 6.07, the Holders of at least a majority in aggregate principal amount
of the First Mortgage Notes then outstanding by written notice to the Trustee
may waive compliance by the Company with any provision of this Indenture, the
Security Documents or the First Mortgage Notes.
(b) Notwithstanding the provisions of Section 9.02(a), without the
consent of each Noteholder affected, an
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amendment, supplement or waiver, including a waiver pursuant to Section 6.04,
may not:
(i) change the principal amount of First Mortgage Notes
whose Holders must consent to an amendment, supplement or waiver of
any provision of this Indenture, the First Mortgage Notes or the
Security Documents;
(ii) reduce the rate of or extend the time for payment
of interest on any First Mortgage Note
(iii) reduce the principal amount of any First Mortgage
Note;
(iv) change the Maturity Date of any First Mortgage Note or
alter the redemption or repurchase provisions in this Indenture, the
First Mortgage Notes or the Security Documents in a manner adverse to
any Holder;
(v) make any change in this Section 9.02 or Section 6.07;
(vi) affect the ranking of the First Mortgage Notes or the
Liens in favor of the Trustee and the holders of the First Mortgage
Notes in a manner adverse to the Holders or release all or
substantially all of the Collateral; or
(vii) make the principal of or interest on any First Mortgage
Note payable in money other than that stated in the First Mortgage
Note or in any manner other than as provided in this Indenture and the
First Mortgage Notes.
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment, supplement or
waiver.
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SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment of or supplement to this Indenture or the First
Mortgage Notes shall be set forth in a supplemental indenture that complies with
the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of a
First Mortgage Note or portion of a First Mortgage Note that evidences the same
debt as the consenting Holder's First Mortgage Note, even if notation of the
consent is not made on any First Mortgage Note. However, any such Holder or
subsequent Holder may revoke the consent as to its First Mortgage Note or
portion of a First Mortgage Note. Such revocation shall be effective only if the
Trustee receives the notice of revocation before the date the amendment,
supplement or waiver becomes effective. Notwithstanding the foregoing, nothing
set forth in this paragraph shall impair the right of any Holder under SS.
316(b) of the TIA.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. The record date, if so fixed, shall be fixed at the later
of 15 days prior to the first solicitation of such consent or the date of the
most recent list of Holders furnished to the Trustee prior to such solicitation
pursuant to Section 2.06. If a record date is fixed, then notwithstanding the
last two sentences of the immediately preceding paragraph, those Persons who
were Holders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to consent to such amendment, supplement or
waiver or to revoke any consent previously given, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Noteholder, unless it makes a change described in any of clauses (i)
through (vii) of Section 9.02(b). In that case the amendment, supplement or
waiver shall bind every subsequent Holder of a First Mortgage Note or portion of
a First Mortgage Note that evidences the same debt as the consenting Holder's
First Mortgage Note.
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SECTION 9.05. Notation on or Exchange of First Mortgage Notes.
If an amendment, supplement or waiver changes the terms of a First
Mortgage Note, the Trustee may require the Holder of the First Mortgage Note to
deliver it to the Trustee or require the Holder to place an appropriate notation
on the First Mortgage Note. The Trustee may place an appropriate notation on the
First Mortgage Note about the changed terms and return it to the Holder, and the
Trustee may place an appropriate notation on any First Mortgage Note thereafter
authenticated. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the First Mortgage Note shall issue and the Trustee
shall authenticate a new First Mortgage Note that reflects the changed terms.
Failure to make the appropriate notation or to issue a new First Mortgage Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. Trustee May Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article 9 is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, execute any such amendment, supplement or waiver which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
The Company may not sign an amendment until its Board of Directors approves it.
ARTICLE 10
COLLATERAL AND SECURITY
SECTION 10.01. Collateral and Security Documents.
(a) In order to secure the due and punctual payment of the principal
of and interest on the First Mortgage Notes when and as the same shall be due
and payable, whether on an Interest Payment Date, at maturity, by acceleration,
repurchase, redemption or otherwise, and interest on the overdue principal of
and interest (to the extent permitted by law), if any, on the First Mortgage
Notes and the performance of all other obligations of the Company to the Holders
or the Trustee under this Indenture and the First Mortgage Notes, the Company
and the Trustee have simultaneously with the execution of this
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Indenture entered into the Security Documents pursuant to which the Company has
granted to the Trustee for the benefit of the Noteholders a first priority Lien
on and security interest in the Collateral. The Trustee and the Company hereby
agree that the Trustee holds the Collateral in trust for the benefit of the
Noteholders pursuant to the terms of the Security Documents. The Trustee is
authorized and directed to enter into an intercreditor agreement dated as of
December 21, 1992 with BT Commercial Corporation, as agent under the New
Revolving Credit Agreement (the "Intercreditor Agreement").
(b) Each Noteholder, by accepting a First Mortgage Note, agrees to
all of the terms and provisions of the Security Documents and the Intercreditor
Agreement, as the same may be amended from time to time pursuant to the
provisions of the Security Documents, the Intercreditor Agreement and this
Indenture.
SECTION 10.02. Recording and Opinions.
(a) The Company shall take or cause to be taken all action required
to perfect, maintain, preserve and protect the Lien on and security interest in
the Collateral granted by the Security Documents, including without limitation,
the filing of financing statements, continuation statements and any instruments
of further assurance, in such manner and in such places as may be required by
law fully to preserve and protect the rights of the Holders and the Trustee
under this Indenture and the Security Documents to all property comprising the
Collateral. The Company shall from time to time promptly pay all financing and
continuation statement recording and/or filing fees, charges and taxes relating
to this Indenture and the Security Documents, any amendments thereto and any
other instruments of further assurance required pursuant to the Security
Documents.
(b) The Company shall furnish to the Trustee at the time of execution
and delivery of this Indenture, Opinion(s) of Counsel either (a) substantially
to the effect that, in the opinion of such Counsel, this Indenture and the grant
of a security interest in the Collateral intended to be made by the Security
Documents and all other instruments of further assurance, including, without
limitation, financing statements, have been properly recorded and filed to the
extent necessary to perfect the security interests in the Collateral created by
the Security Documents and reciting the details of such action, and stating that
as to the security interests created pursuant to
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the Security Documents, such recordings and filings are the only recordings and
filings necessary to give notice thereof and that no re-recordings or refilings
are necessary to maintain such notice (other than as stated in such opinion), or
(b) to the effect that, in the opinion of such counsel, no such action is
necessary to perfect such security interests. Promptly after execution and
delivery of this Indenture, the Company shall deliver the opinion(s) required by
Section 314(b) of the TIA.
(c) The Company shall furnish to the Trustee on December l in each
year, beginning with December l, 1993, an Opinion of Counsel, dated as of such
date, either (i)(A) stating that, in the opinion of such counsel, action has
been taken with respect to the recording, filing, re-recording and refiling of
all supplemental indentures, financing statements and continuation statements as
is necessary to maintain the Lien of the Security Documents and reciting with
respect to the security interests in the Collateral the details of such action
or referring to prior Opinions of Counsel in which such details are given, and
(B) stating that, based on relevant laws as in effect on the date of such
Opinion of Counsel, all financing statements and continuation statements have
been executed and filed that are necessary as of such date and during the
succeeding 12 months fully to maintain the security interest of the Noteholders
and the Trustee hereunder and under the Security Documents with respect to the
Collateral, or (ii) stating that, in the opinion of such Counsel, no such action
is necessary to maintain such Lien.
SECTION 10.03. Release of Collateral.
(a) The Trustee, in its capacity as Collateral Agent under the
Security Documents, shall not at any time release Collateral from the security
interest created by this Indenture and the Security Documents unless such
release is in accordance with the provisions of this Indenture and the Security
Documents.
(b) At any time when an Event of Default shall have occurred and be
continuing, no release of Collateral pursuant to the provisions of this
Indenture and the Security Documents shall be effective as against the Holders
of the First Mortgage Notes.
(c) The release of any Collateral from the terms of the Security
Documents shall not be deemed to impair the
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security under this Indenture in contravention of the provisions hereof if
and to the extent the Collateral is released pursuant to this Indenture and the
Security Documents. To the extent applicable, the Company shall cause TIA
Section 314(d) relating to the release of property from the Lien of the
Security Documents and relating to the substitution therefor of any property to
be subjected to the Lien of the Security Documents to be complied with. Any
certificate or opinion required by TIA Section 314(d) may be made by an Officer
of the Company, except in cases where TIA Section 314(d) requires that such
certificate or opinion be made by an independent Person, which Person shall be
an independent engineer, appraiser or other expert selected or approved by the
Trustee in the exercise of reasonable care.
SECTION 10.04. Possession and Use of Collateral
Subject to and in accordance with the provisions of this Indenture and the
Security Documents, so long as no Event of Default shall have occurred and be
continuing the Company shall have the right to remain in possession and retain
exclusive control of the Collateral other than Trust Moneys held by the
Trustee, to operate, manage, develop, lease, use, consume and enjoy the
Collateral (other than Trust Moneys held by the Trustee), to alter or repair
any Collateral consisting of machinery or equipment so long as such alterations
and repairs do not diminish the value thereof or impair the Lien of the
Security Documents thereon and to collect, receive, use, invest and dispose of
the reversions, remainders, interest, rents, lease payments, issues, profits,
revenues, proceeds and other income thereof.
SECTION 10.05. Specified Releases of Collateral.
(a) Satisfaction and Discharge. The Company shall be entitled to obtain a
full release of all of the Collateral from the Liens of this Indenture and of
the Security Documents upon compliance with the conditions precedent set forth
in Article 8 for satisfaction and discharge of this Indenture or for legal
defeasance pursuant to Section 8.01(d). Upon delivery by the Company to the
Trustee of an Officers' Certificate and an Opinion of Counsel, each to the
effect that such conditions precedent have been complied with (and which may be
the same Officers' Certificate and Opinion of Counsel required by Section
8.01), the Trustee shall forthwith take all necessary action (at the request of
and the expense of the Company) to release and reconvey to the Company all of
the Collateral, and
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shall deliver such Collateral in its possession to the Company including,
without limitation, the execution and delivery of releases and satisfactions
wherever required.
(b) Sales of Collateral Permitted by Section 4.15. The Company shall
be entitled to obtain a release of items of Collateral (the "Released
Interests") subject to an Asset Sale upon compliance with the condition
precedent that the Company shall have delivered to the Trustee the following:
(i) Company Order. A Company Order requesting release of Released
Interests, such Company Order (A) specifically describing the proposed
Released Interests, (B) specifying the value of such Released Interests on
a date within 60 days of the Company Order (the "Valuation Date"), (C)
stating that the purchase price received is at least equal to the value of
the Released Interest, (D) stating that the release of such Released
Interests will not interfere with or impede the Trustee's ability to
realize the value of the remaining Collateral and will not impair the
maintenance and operation of the remaining Collateral, (E) confirming the
sale of, or an agreement to sell, such Released Interests in a bona fide
sale to a Person that is not an Affiliate of the Company or, in the event
that such sale is to a Person that is an Affiliate, that such sale is
being made in accordance with Section 4.14, (F) certifying that such Asset
Sale complies with the terms and conditions of Section 4.15 hereof and (G)
in the event that there is to be a substitution of property for the
Collateral to be sold, specifying the property intended to be substituted
for the Collateral to be sold;
(ii) Officers' Certificate. An Officers' Certificate certifying that
(A) such Asset Sale covers only the Released Interests and complies with
the terms and conditions of an Asset Sale pursuant to Section 4.15, (B)
all Net Cash Proceeds from the sale of any of the Released interests will
be applied pursuant to Section 4.15, (C) there is no Default or Event of
Default in effect or continuing on the date thereof, the Valuation Date or
the date of such Asset Sale, (D) the release of the Collateral will not
result in a Default or Event of Default hereunder and (E) all conditions
precedent to such release have been complied with; and
(iii) Other Documents. All documentation required by Section 314(d)
of the TIA.
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(c) Eminent Domain and Other Governmental Takings. The Company shall
be entitled to obtain a release of, and the Trustee shall release, items of
Collateral taken by eminent domain or sold pursuant to the exercise by the
United States of America or any State, municipality or other governmental
authority of any right which it may then have to purchase, or to designate a
purchaser or to order a sale of, all or any part of the Collateral, upon
compliance with the condition precedent that the Company shall have delivered
to the Trustee the following:
(i) Officer's Certificate. An Officer's Certificate (A) stating that
such property has been taken by eminent domain and the amount of the award
therefor, or that such property has been sold pursuant to a right vested
in the United States of America, or a State, municipality or other
governmental authority to purchase, or to designate a purchaser, or order
a sale of such property and the amount of the proceeds of such sale, and
(B) stating that all conditions precedent to such release have been
complied with;
(ii) Opinion of Counsel. An Opinion of Counsel to the effect that (A)
such property has been lawfully taken by exercise of the right of eminent
domain, or has been sold pursuant to the exercise of a right vested in the
United States of America or a State, municipality or other governmental
authority to purchase, or to designate a purchaser or order a sale of,
such property, (B) in the case of any such taking by eminent domain, the
award for such property has become final or an appeal therefrom is not
advisable in the interests of the Company or the Holders, and (C) all
conditions precedent herein provided relating to such release have been
complied with; and
(iii) Eminent Domain Award. Subject to the requirements of any Prior
Lien (as defined in the applicable Mortgage) on the Collateral so taken,
cash equal to the amount of the award for such property or the proceeds of
such sale, to be held as Trust Moneys subject to the disposition thereof
pursuant to Article 11 hereof.
Upon compliance by the Company with the condition precedent set forth
above, and upon delivery by the Company to the Trustee of an Opinion of Counsel
to the effect that such condition precedent has been complied with, the Trustee
shall
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cause to be released and reconveyed to the Company, the Released Interests.
SECTION 10.06. Disposition of Collateral Without Release.
So long as no Event of Default shall have occurred and be continuing, the
Company may, without any release or consent by the Collateral Agent or the
Trustee, sell or otherwise dispose of any machinery, equipment, furniture,
apparatus, tools or implements or other similar property subject to the Lien
of the Security Documents, which may have become worn out or obsolete, not
exceeding individually, in fair market value, $25,000.
SECTION 10.07. Form and Sufficiency of Release.
In the event that the Company has sold, exchanged, or otherwise disposed
of or proposes to sell, exchange or otherwise dispose of any portion of the
Collateral that under the provisions of Section 10.05 or 10.06 may be sold,
exchanged or otherwise disposed of by the Company, and the Company requests the
Trustee to furnish a written disclaimer, release or quitclaim of any interest
in such property under this Indenture and the Security Documents, the Trustee,
in its capacity as Collateral Agent under the Security Documents, shall
execute, acknowledge and deliver to the Company (in proper and recordable form)
such an instrument promptly after satisfaction of the conditions set forth
herein for delivery of any such release. Notwithstanding the preceding
sentence, all purchasers and grantees of any property or rights purporting to
be released herefrom shall be entitled to rely upon any release executed by the
Trustee hereunder as sufficient for the purpose of this Indenture and as
constituting a good and valid release of the property therein described from
the Lien of this Indenture or of the Security Documents.
SECTION 10.08. Purchaser Protected.
No purchaser or grantee of any property or rights purporting to be
released herefrom shall be bound to ascertain the authority of the Trustee to
execute the release or to inquire as to the existence of any conditions herein
prescribed for the exercise of such authority; nor shall any purchaser or
grantee of any property or rights permitted by this Indenture to be sold or
otherwise disposed of by the Company be under any obligation to ascertain or
inquire into the authority of the Company to make such sale or other
disposition.
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SECTION 10.09. Authorization of Actions To Be Taken by the Trustee Under the
Security Documents.
Subject to the provisions of the Security Documents, (a) the Trustee may,
in its sole discretion and without the consent of the Noteholders, take all
actions it deems necessary or appropriate in order to (i) enforce any of the
terms of the Security Documents and (ii) collect and receive any and all
amounts payable in respect of the obligations of the Company hereunder and (b)
the Trustee shall have power to institute and to maintain such suits and
proceedings as it may deem expedient to prevent any impairment of the
Collateral by any acts that may be unlawful or in violation of the Security
Documents or this Indenture, and such suits and proceedings as the Trustee may
deem expedient to preserve or protect its interests and the interests of the
Noteholders in the Collateral (including the power to institute and maintain
suits or proceedings to restrain the enforcement of or compliance with any
legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance
with, such enactment, rule or order would impair the security interest
thereunder or be prejudicial to the interests of the Noteholders or of the
Trustee.)
In the event that pursuant to Section 4.16(vii) hereof the Company shall
elect to grant additional Liens on assets that comprise Collateral, the Trustee
is authorized to execute and deliver an intercreditor agreement in the form of
Exhibit II hereto.
SECTION 10.10. Authorization of Receipt of Funds by the Trustee Under the
Security Documents.
The Trustee is authorized to receive any funds for the benefit of
Noteholders distributed under the Security Documents, and to make further
distributions of such funds to the holders in accordance with the provisions of
Article 11 and the other provisions of this Indenture.
ARTICLE 11
APPLICATION OF TRUST MONEYS
SECTION 11.01. "Trust Moneys" Defined.
All cash or Cash Equivalents received by the Trustee:
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(a) upon the release of property from the Lien of the Security
Documents; or
(b) as proceeds of insurance upon any, all or part of the Collateral
(other than any liability insurance proceeds payable to the Trustee for
any loss, liability or expense incurred by it); or
(c) as proceeds of any other sale or other disposition of all or any
part of the Collateral by or on behalf of the Trustee or any collection,
recovery, receipt, appropriation or other realization of or from all or
any part of the Collateral pursuant to the Security Documents or
otherwise; or
(d) for application under this Article 11 as elsewhere provided in
this Indenture or the Security Documents, or whose disposition is not
elsewhere otherwise specifically provided for herein or in the Security
Documents;
(all such moneys being herein sometimes called "Trust Moneys"; provided,
however, that Trust Moneys shall not include any property deposited with the
Trustee pursuant to Section 3.05 or Article 8 or delivered to or received by
the Trustee for application in accordance with Section 6.10 hereof) shall be
held by the Trustee for the benefit of the Holders as a part of the Collateral
and, upon any entry upon or sale or other disposition of the Collateral or any
part thereof pursuant to the Security Documents, said Trust Moneys shall be
applied in accordance with Section 6.10; but, prior to any such entry, sale or
other disposition, all or any part of the Trust Moneys may be withdrawn, and
shall be released, paid or applied by the Trustee, from time to time as
provided in this Article ll.
On the issue Date there shall be established and, at all times
hereafter until this Indenture shall have terminated, there shall be maintained
with the Trustee an account which shall be entitled the "Collateral Account"
(the "Collateral Account"). The Collateral Account shall be established and
maintained by the Trustee at its corporate trust offices. All Trust Moneys
which are received by the Trustee shall be deposited in the Collateral Account
and thereafter shall be held, applied and/or disbursed by the Trustee in
accordance with the terms of this Article.
<PAGE> 93
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SECTION 11.02. Withdrawals of Insurance Proceeds
and Condemnation Awards.
To the extent that any Trust Moneys consist of either (i) the
proceeds of insurance upon any part of the Collateral or (ii) any award for or
the proceeds for any of the Collateral being taken by eminent domain or sold
pursuant to the exercise by the United States of America or any state,
municipality or other governmental authority of any right which it may then
have to purchase, or to designate a purchaser or to order a sale of any part of
the Collateral, such Trust Moneys may be withdrawn by the Company and shall be
paid by the Trustee upon a request by a Company Order to reimburse the Company
for expenditures made, or to pay costs incurred, by the Company to repair,
rebuild or replace the property destroyed, damaged or taken, upon receipt by
the Trustee of the following:
(a) an Officers' Certificate of the Company, dated not more than 30
days prior to the date of the application for the withdrawal and payment
of such Trust Moneys:
(i) that expenditures have been made, or costs incurred, by the
Company in a specified amount for the purpose of making certain
repairs, rebuildings and replacements of the Collateral, which shall
be briefly described, and stating the fair value thereof to the
Company at the date of the expenditure or incurrence thereof by the
Company;
(ii) that no part of such expenditures or costs has been or is
being made the basis for the withdrawal of any Trust Moneys in any
previous or then pending application pursuant to this Section 11.02;
(iii) that there is no outstanding Indebtedness, other than
costs for which payment is being requested, known to the Company,
after due inquiry, for the purchase price or construction of such
repairs, rebuildings or replacements, or for labor, wages, materials
or supplies in connection with the making thereof, which, if unpaid,
might become the basis of a vendors', mechanics', laborers',
materialmen's, statutory or other similar Lien upon any of such
repairs, rebuildings or replacement, which Lien might, in the opinion
of the signers of such certificate, materially impair the security
afforded by such repairs, rebuildings or replacement;
<PAGE> 94
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(iv) that the property to be repaired, rebuilt or replaced is
necessary or desirable in the conduct of the Company's business;
(v) whether any part of such repairs, rebuildings or
replacements within six months before the date of acquisition thereof
by the Company has been used or operated by others than the Company
in a business similar to that in which such property has been or is
to be used or operated by the Company, and whether the fair value to
the Company, at the date of such acquisition, of such part of such
repairs, rebuildings or replacement is at least $25,000, and 1% of
the aggregate principal amount of the outstanding First Mortgage
Notes;
(vi) that no Default or Event of Default shall have occurred and
be continuing; and
(vii) that all conditions precedent herein provided for relating
to such withdrawal and payment have been complied with;
(b) all documentation required under Section 314(d) of the TIA; and
(c) an Opinion of Counsel substantially stating:
(i) that the instruments that have been or are therewith
delivered to the Trustee conform to the requirements of this
Indenture and the Security Documents, and that, upon the basis of
such request of the Company and the accompanying documents specified
in this Section 11.02, all conditions precedent herein provided for
relating to such withdrawal and payment have been complied with, and
the Trust Moneys whose withdrawal is then requested may be lawfully
paid over under this Section 11.02;
(ii) that the Trustee has a valid and perfected Lien on such
repairs, rebuildings and replacements, that the same and every part
thereof are subject to no Liens prior to the Lien of the Security
Documents, except Liens of the type permitted under the Security
Documents to which the property so destroyed or damaged shall have
been subject at the time of such destruction or damage; and
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(iii) that all of the Company's right, title and interest in and
to said repairs, rebuildings or replacements, or combination thereof,
are then subject to the Lien of the Security Documents.
Upon compliance with the foregoing provisions of this Section 11.02,
the Trustee shall pay on the written request of the Company an amount of Trust
Moneys of the character aforesaid equal to the amount of the expenditures or
costs stated in the Officers' Certificate required by clause (i) of subsection
(a) of this Section 11.02, or the fair value to the Company of such repairs,
rebuildings and replacements stated in such Officers' Certificate (or in such
independent appraiser's or independent financial advisor's certificate, if
required by the TIA), whichever is less; provided, however, that
notwithstanding the above, so long as no Default or Event of Default shall have
occurred and be continuing, in the event that any insurance proceeds or award
for such property or proceeds of such sale does not exceed the lesser of
$25,000 or 1% of the principal amount of the outstanding First Mortgage Notes,
and, in the good faith estimate of the Company, such destruction or damage
resulting in such insurance proceeds does not detrimentally affect the value or
use of the applicable Collateral in any material respect, upon delivery to the
Trustee of an Officers' Certificate of the Company to such effect, the Trustee
shall release to the Company such insurance proceeds or condemnation award for
such property or proceeds of such sale, free of the Lien hereof and of the
Security Documents.
SECTION 11.03. Withdrawal of Net Cash Proceeds,
Net Awards or Net Proceeds.
To the extent that any Trust Moneys consist of Net Cash Proceeds received
by the Trustee pursuant to the provisions of Section 4.15 hereof or a Net Award
or Net Proceeds received by the trustee pursuant to the provisions of Section
1.12.3 or 1.12.4(a) or (b) of any Mortgage, such Trust Moneys may be withdrawn
by the Company and shall be paid by the Trustee to the company (or as otherwise
directed by the Company) upon a Company Order to the Trustee and upon receipt
by the Trustee of the following:
(a) an Officers' Certificate, dated not more than five days prior to
the Net Proceeds Payment Date stating:
(i) that no Event of Default exists;
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(ii) (A) that such Trust Moneys constitute Net Cash Proceeds or
a Net Award or Net Proceeds (each as defined in the Mortgages), (B)
that pursuant to and in accordance with Section 4.15, the Company has
made a Net Proceeds Offer, (C) the amount of money to be applied to
the repurchase of the First Mortgage Notes pursuant to the Net
Proceeds Offer, and (D) the amount of money to be retained by the
Company;
(iii) the Net Proceeds Payment Date; and
(iv) that all conditions precedent and covenants herein provided
for relating to such application of Trust Moneys have been complied
with; and
(b) all documentation required under Section 314(d) of the TIA; and
(c) an Opinion of Counsel stating that the documents that have been
or are therewith delivered to the Collateral Agent and the Trustee conform to
the requirements of this Indenture and that all conditions precedent herein
provided for relating to such application of Trust Moneys have been complied
with.
Upon compliance with the foregoing provisions of this Section, the
Trustee shall apply the Trust Moneys as directed and specified by such Company
Order.
SECTION 11.04. Withdrawal of Trust Moneys for Reinvestment.
To the extent that any Trust Moneys consist of Net Cash Proceeds
received by the Trustee pursuant to the provisions of Section 4.15, and the
Company intends to reinvest such Net Cash Proceeds in a manner that would
constitute a Related Business Investment (the "Released Trust Moneys"), such
Trust Moneys may be withdrawn by the Company and shall be paid by the Trustee
to the Company (or as otherwise directed by the Company) upon a Company Order
to the Trustee and upon receipt by the Trustee of the following:
(a) A notice (each, a "Trust Moneys Release Notice"), which shall (i)
refer to this Section 11.04, (ii) contain all documents referred to below,
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(iii) describe with particularity the Released Trust Moneys and the Asset
Sale from which such Released Trust Moneys were held as Collateral, (iv)
describe with particularity the investment to be made with respect to the
Released Trust Moneys and (v) be accompanied by a counterpart of the
instruments proposed to give effect to the release fully executed and
acknowledged (if applicable) by all parties thereto other than the
Trustee;
(b) An Officer's Certificate certifying that (i) the release of the
Released Trust Moneys complies with the terms and conditions of Section
4.15 of this Indenture, (ii) there is no Default or Event of Default in
effect or continuing on the date thereof, (iii) the release of the
Released Trust Moneys will not result in a Default or Event of Default
hereunder and (iv) all conditions precedent to such release have been
complied with;
(c) All documentation required under 314(d) of the TIA; and
(d) An opinion of counsel stating that the documents that have been
or are therewith delivered to the Collateral Agent and the Trustee conform
to the requirements of this Indenture and that all conditions precedent
herein provided for relating to such application of Trust Moneys have been
complied with.
Upon compliance with the foregoing provisions of this Indenture, the
Trustee shall apply the Released Trust Moneys as directed and specified by
the Company.
SECTION 11.05. Withdrawal of Trust Moneys on Basis of Retirement of
First Mortgage Notes.
Trust Moneys may be withdrawn by the Company to be applied to the
redemption and retirement of the First Mortgage Notes and shall be paid by the
Trustee to the Company (or as otherwise directed by the Company) upon a Company
Order to the Trustee and upon receipt by the Trustee of the following:
(a) a Board Resolution requesting the withdrawal and payment of a
specified amount of Trust Moneys;
(b) an Officer's Certificate, dated not more than 30 days prior to
the date of the application for the withdrawal and payment of such Trust
Moneys, certifying that
<PAGE> 98
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(i) there is no Default or Event of Default in effect or continuing
on the date thereof and (ii) all conditions precedent herein provided
relating to such withdrawal and application have been complied with;
and
(c) an opinion of counsel stating that the Trust Moneys whose
withdrawal and payment is then requested may be lawfully paid over
under this Section and that all conditions precedent herein provided
relating to such withdrawal have been complied with.
Upon compliance with the foregoing provisions of this Indenture,
the Trustee shall apply the Trust Moneys as directed and specified by such
Company Order.
SECTION 11.06. Investment of Trust Moneys.
All or any part of any Trust Moneys held by the Trustee shall
from time to time be invested or reinvested by the Trustee in any Cash
Equivalents pursuant to the written direction of the Company, which shall
specify the Cash Equivalents in that such Trust Moneys shall be invested.
Unless an Event of Default occurs and is continuing, any interest on such Cash
Equivalents (in excess of any accrued interest paid at the time of purchase)
that may be received by the Trustee shall be forthwith paid to the Company.
Such Cash Equivalents shall be held by the Trustee as a part of the Collateral,
subject to the same provisions hereof as the cash used by it to purchase such
Cash Equivalents.
The Trustee shall not be liable or responsible for any loss
resulting from such investments or sales except only for its own grossly
negligent action, its own grossly negligent failure to act or its own willful
misconduct in complying with this Section 11.06.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of the TIA, the duties imposed
by the TIA shall control.
<PAGE> 99
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SECTION 12.02. Notices.
Any notice or communication shall be sufficiently given if in
writing and delivered in person or mailed by overnight carrier or first-class
mail (return receipt requested) addressed as follows or telecopied (receipt
confirmed):
If to the Company:
Florida Steel Corporation
1715 Cleveland Street
Tampa, Florida 33606
Attention: Chief Financial Officer
Telecopy No.: (813) 251-88ll (ext. 287)
If to the Trustee:
The Connecticut National Bank
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Department
Telecopy No.: (203) 240-7920
The parties hereto by notice to the other parties may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Noteholder shall be
mailed to such Noteholder, first-class postage pre-paid, at such Noteholder's
address as it appears on the First Mortgage Note register maintained by the
Registrar and shall be sufficiently given to such Noteholder if so mailed
within the time prescribed. Copies of any such communication or notice to a
Noteholder shall also be mailed to the Trustee.
Failure to mail a notice or communication to a noteholder or any
defect in it shall not affect its sufficiency with respect to any other
Noteholders. Except for a notice to the trustee, which is deemed given only
when received, if a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 12.03. Communications by Holders with Other Holders.
Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or the First
Mortgage Notes. The Company, the
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Trustee, the Registrar and any other Person shall have the protection of TIA
Section 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with;
and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 12.05. Statements Required in Certificate
or Opinion of Counsel.
Each certificate or Opinion of Counsel with respect to
compliance with a condition or covenant provided for in this Indenture shall
include:
(a) a statement that the person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
<PAGE> 101
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SECTION 12.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a
meeting of Noteholders. The Paying Agent or Registrar may make reasonable rules
for its functions.
SECTION 12.07. Governing Law.
The laws of the State of New York shall govern this Indenture
and the First Mortgage Notes without regard to principles of conflicts of law.
The Company and the Trustee agree to submit to the non-exclusive jurisdiction
of the courts of the State of New York in any action or proceeding arising out
of or relating to this Indenture or the First Mortgage Notes.
SECTION 12.08. No Adverse Interpretation of Other
Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any Subsidiary. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 12.09. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the
Company or the Trustee shall not have any liability for any obligations of the
Company under the First Mortgage Notes or the Indenture or for any claim based
on, in respect of or by reason of such obligations or their creation. Each
Noteholder by accepting a First Mortgage Note waives and releases all such
liability.
SECTION 12.10. Successors.
All agreements of the Company in this Indenture and the First
Mortgage Notes shall bind its successors. All agreements of the Trustee in this
Indenture shall bind its successors.
SECTION 12.11. Duplicate Originals.
The parties may sign any number of copies of this Indenture.
This Indenture may be executed in counterparts, each of which shall be an
original, but all of them together represent the same agreement.
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SECTION 12.12. Severability.
In case any provision in this Indenture or in the First Mortgage
Notes shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, and a Holder shall have no claim therefor against any party
hereto.
SECTION 12.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table, and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 12.14. Benefits of Indenture.
Nothing in this Indenture or in the First Mortgage Notes,
express or implied, shall give to any Person, other than the parties hereto or
named herein and their successors hereunder and the Holders, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
<PAGE> 103
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, as of the date first written above.
FLORIDA STEEL CORPORATION,
as Issuer
By:/s/ Marvin Hill
--------------------------------------
Title: CFO and Secretary
THE CONNECTICUT NATIONAL BANK,
as Trustee
By:/s/
--------------------------------------
Title: CORPORATE TRUST OFFICER
<PAGE> 104
FLORIDA STEEL CORPORATION
No. $
11-1/2% FIRST MORTGAGE NOTE DUE 2000
FLORIDA STEEL CORPORATION promises to pay to ________________ or
registered assigns the principal sum of ______________ Dollars on ____________.
Interest Payment Dates: June 15, December 15 and at maturity
Record Dates: June 1, December 1 and 15 days prior to maturity
FLORIDA STEEL CORPORATION
By:
-------------------------------
By:
-------------------------------
Dated:
--------------------
Certificate of Authentication
This is one of the 11-1/2% First Mortgage Notes Due 2000 referred to in the
within-mentioned Indenture.
THE CONNECTICUT NATIONAL BANK
By:
-------------------------------
Authorized Representative
<PAGE> 105
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(REVERSE OF SECURITY)
FLORIDA STEEL CORPORATION
11-1/2% FIRST MORTGAGE NOTE DUE 2000
1. Interest. FLORIDA STEEL CORPORATION, a Florida corporation (the
"Company"), promises to pay, until the principal hereof is paid or made
available for payment, interest on the principal amount set forth on the reverse
side hereof at a rate of 11-1/2% per annum. Interest on the First Mortgage Notes
will accrue from and including the most recent date to which interest has been
paid or, if no interest has been paid, from and including the original date of
issuance. Interest will be payable semiannually in arrears on June 15, December
15 and at the stated maturity, commencing June 15, 1993. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months. The
Company will pay interest on overdue principal and on overdue interest (to the
full extent permitted by law) at a rate of 13-1/2% per annum.
2. Method of Payment. The Company will pay interest on the First
Mortgage Notes (except defaulted interest) to the Persons who are registered
Holders of First Mortgage Notes at the close of business on the June 1 or
December 1 next preceding the interest payment date and on the 15th day next
preceding the date of maturity. Holders must surrender First Mortgage Notes to
a Paying Agent to collect principal payments. The Company will pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, The Connecticut National
Bank (the "Trustee") will act as Paying Agent and Registrar, and Shawmut Trust
Company will act as Co-Registrar and as additional Paying Agent. The Company
may change any Paying Agent, Registrar or co-Registrar.
4. Indenture. The Company issued the First Mortgage Notes under an
Indenture dated as of December 15, 1992 (the "Indenture") between the Company
and the Trustee. This First Mortgage Note is one of the First Mortgage Notes of
the Company issued under the Indenture. The terms of the First Mortgage Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb), as amended from time to time. The First Mortgage Notes are
subject to all such terms, and Holders are referred to the Indenture and such
Act
<PAGE> 106
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for a statement of them. Capitalized and certain other terms used herein and
not otherwise defined have the meanings set forth in the Indenture. The First
Mortgage Notes are secured obligations of the Company limited in aggregate
principal amount to $100,000,000. The Indenture limits, among other things, the
incurrence of Indebtedness by the Company and its Subsidiaries; the creation of
Liens by the Company; purchases, redemptions, and other acquisitions or
retirements of Capital Stock of the Company and its Subsidiaries; transactions
by the Company and its Subsidiaries with their respective Affiliates and the
ability of the Company to merge with or into another entity. The limitations
are subject to a number of important qualifications and exceptions. The Company
must report to the Trustee quarterly on compliance with the limitations
contained in the Indenture.
5. Optional Redemption. The Company, at its option, may redeem any
or all of the First Mortgage Notes, in whole or in part, at any time and from
time to time, on or after December 15, 1996 at the redemption prices (expressed
in percentages of principal amount) set forth below plus accrued and unpaid
interest to the redemption date, if redeemed during the 12-month period
beginning December 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<C> <C>
1996........................... 103.8333
1997........................... 101.9160
1998 and thereafter............ 100.0000
</TABLE>
6. Notice of Redemption. Notice of redemption will be mailed at
least 30 days but not more than 60 days prior to the redemption date to each
Holder of First Mortgage Notes to be redeemed at his registered address. On and
after the redemption date, unless the Company defaults in making the redemption
payment, interest ceases to accrue on First Mortgage Notes or portions thereof
called for redemption.
7. Offers To Purchase. Sections 4.15 and 4.19 of the Indenture
provide that upon the occurrence of a Change of Control and after certain Asset
Sales, and subject to further limitations contained therein, the Company will
make an offer to purchase certain amounts of First Mortgage Notes in accordance
with the procedures set forth in the Indenture.
8. Security Documents. In order to secure the due and punctual
payment of the principal of and interest on the
<PAGE> 107
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First Mortgage Notes and all other amounts payable by the Company under the
Indenture and the First Mortgage Notes when and as the same will be due and
payable, whether at maturity, by acceleration or otherwise, according to the
terms of the First Mortgage Notes and the Indenture, the Company has granted
security interests in and Liens on the Collateral owned by it to the Trustee
for the benefit of the Holders of First Mortgage Notes pursuant to the
Indenture and the Security Documents. The First Mortgage Notes will be secured
by Liens on and security interests in the Collateral that are subject only to
certain permitted encumbrances.
Each Holder, by accepting a First Mortgage Note, agrees to all of the
terms and provisions of the Security Documents, as the same may be amended from
time to time pursuant to the respective provisions thereof and the Indenture.
The Trustee and each Holder acknowledge that a release of any of the
Collateral or any Lien strictly in accordance with the terms and provisions of
the Security Documents and the terms and provisions of the Indenture will not
be deemed for any purpose to be an impairment of the security under the
Indenture.
9. Denominations, Transfer, Exchange. The First Mortgage Notes
are in registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. A Holder may transfer or exchange First Mortgage Notes in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
to it any taxes and fees required by law or permitted by the Indenture. The
Registrar need not transfer or exchange any First Mortgage Notes or portion of
a First Mortgage Note selected for redemption, or transfer or exchange any
First Mortgage Notes for a period of 15 days before a selection of First
Mortgage Notes to be redeemed.
10. Persons Deemed Owners. The registered Holder of a First
Mortgage Note may be treated as the owner of it for all purposes.
11. Unclaimed Honey. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee or Paying Agent will pay
the money back to the Company at its request. After that, Holders entitled to
the money must look to the Company for payment as general creditors unless any
law designates another Person.
<PAGE> 108
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12. Amendment, Supplement, Waiver. The Company and the Trustee
may, without the consent of the Holders of any outstanding First Mortgage
Notes, amend, waive or supplement the Indenture, the Security Documents or the
First Mortgage Notes for certain specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies, maintaining the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended, making any change that does not adversely affect the rights of any
Holder or pledging or granting a security interest in favor of the Trustee as
additional security for the payment and performance of the obligations under
the Indenture, in any property or assets, including any which is required to be
pledged or hypothecated, or in which a security interest is required to be
granted, to the Trustee pursuant to the Security Documents or otherwise. Other
amendments and modifications of the Indenture, the First Mortgage Notes or the
Security Documents may be made by the Company and the Trustee with the consent
of the Holders of not less than a majority of the aggregate principal amount of
the outstanding First Mortgage Notes, subject to certain exceptions requiring
the consent of the Holders of the particular First Mortgage Notes to be
affected.
13. Successor Corporation. When a successor corporation assumes
all the obligations of its predecessor under the First Mortgage Notes and the
Indenture and the transaction complies with the terms of Article 5 of the
Indenture, the predecessor corporation will be released from those obligations.
14. Defaults and Remedies. Events of Default are set forth in the
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.01(a)(viii) or
6.01(a)(ix) of the Indenture) occurs and is continuing, then the Trustee by
notice to the Company or the Holders of not less than 25% in aggregate principal
amount of the outstanding First Mortgage Notes by notice to the Company and the
Trustee may declare the principal of and interest on all of the First Mortgage
Notes to be due and payable immediately. If an Event of Default specified in
Section 6.01(a)(viii) or 6.01(a)(ix) of the Indenture occurs and is continuing,
the principal of and interest on all of the First Mortgage Notes shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder. Holders may not enforce the
Indenture or the First Mortgage Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the First Mortgage Notes. Subject to certain limitations, Holders
of a majority in principal amount of the then outstanding First
<PAGE> 109
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Mortgage Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders notice of any continuing default (except
a default in payment of principal or interest) if it determines that
withholding notice is in their interests. The Company must furnish compliance
certificates to the Trustee.
15. Trustee Dealings with Company. The Trustee, in its individual
or any other capacity, may make loans to, accept deposits and pledges from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not Trustee.
16. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company will not have any liability for any
obligations of the Company under the First Mortgage Notes, the Indenture or the
Security Documents or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder by accepting a First Mortgage
Note waives and releases all such liability. The waiver and release are part of
the consideration for the issue of the First Mortgage Notes.
17. Discharge. The Company's obligations pursuant to the
Indenture will be discharged, except for obligations pursuant to certain
sections thereof, subject to the terms of the Indenture, upon the payment of
all the First Mortgage Notes or upon the irrevocable deposit with the Trustee
of money or U.S. Government Obligations sufficient to pay when due principal of
and interest on the First Mortgage Notes to maturity or redemption, as the case
may be.
18. Authentication. This First Mortgage Note will not be valid
until the Trustee signs the certificate of authentication on the other side of
this First Mortgage Note.
19. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (tenants in common), TENANT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
<PAGE> 110
-7-
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
FLORIDA STEEL CORPORATION
1715 Cleveland Street
Tampa, Florida 33606
Attention: Chief Financial Officer
<PAGE> 111
ASSIGNMENT FORM
If you, the Holder, want to assign this First Mortgage Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this First Mortgage Note to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
----------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this First Mortgage Note on the books of the Company. The
agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Your signature:
---------------------- --------------------------------------
(Sign exactly as your name appears
on the other side of this First
Mortgage Note)
Signature Guarantee:
------------------------------------------------------------
<PAGE> 112
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this First Mortgage Note purchased by the Company
pursuant to Sections 4.15 or 4.19 of the Indenture, check the Box: [ ]
If you wish to have a portion of this First Mortgage Note purchased by
the Company pursuant to Sections 4.15 or 4.19 of the Indenture, state the
amount:
$
-----------------
Date: Your Signature:
--------------------- --------------------------------------
(Sign exactly as your name appears on
the other side of this First Mortgage
Note)
Signature Guarantee:
-----------------------
<PAGE> 113
EXHIBIT B
FIRST SUPPLEMENTAL INDENTURE dated as of September 9, 1993, between
FLORIDA STEEL CORPORATION, a Florida corporation (the "company") and SHAWMUT
BANK CONNECTICUT, NATIONAL ASSOCIATION (formerly known as THE CONNECTICUT
NATIONAL BANK), as Trustee (the "Trustee") under the Indenture (as defined
below).
WHEREAS, the Company heretofore executed and delivered to the Trustee
an Indenture dated as Of December 15, 1992 (the "Indenture"), providing for the
creation of the Company's 11-1/2% First Mortgage Notes due 2000 (the "First
Mortgage Notes"); and
WHEREAS, Section 9.01 of the Indenture provides that the Company and
the Trustee may in certain circumstances amend, waive or supplement the
Indenture without notice to or the consent of any Noteholder of the First
Mortgage Notes, and the Company desires to amend certain provisions of the
Indenture, as set forth in Article I hereof; and
WHEREAS, the Company has fulfilled certain requirements of the Trustee
to evidence the Company's ability to rely on the provisions of Section 9.01 of
the Indenture in order to amend the Indenture; and
WHEREAS, all things necessary to make this First Supplemental
Indenture a valid agreement of the Company, enforceable in accordance with its
terms, have been done;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH, that,
for and in consideration of the premises, the Company agrees with the Trustee
as follows:
ARTICLE I
AMENDMENT OF INDENTURE
Section 1.01. Definitions. Section 1.01 of the Indenture is hereby
amended to and the following definition thereto in the appropriate alphabetical
sequence:
<PAGE> 114
"Merger Agreement" means the Agreement and Plan of Merger dated as of
June 26, 1992, as amended, by and among Holdings, Kyoei and FLS Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Kyoei.
Section 1.02. Amendments to Sections 4.11 and 4.14. Each of Section
4.11 and Section 4.14 of the Indenture is hereby amended to add the following
paragraph at the end thereof:
(c) Notwithstanding anything to the contrary in this Section,
the Company may (i) incur and permit to exist Indebtedness to Holdings
in an aggregate amount equal to the sum of (A) $17,641,567.92 the
amount which Holdings has, pursuant to the Merger Agreement, set aside
for payment to the holders of its Series A Cumulative Exchangeable
Preferred Stock ("Preferred Stock") who have (x) exercised or
attempted to exercise their statutory appraisal rights, or (y) not
surrendered certificates for the shares of Preferred Stock that they
own (of record or otherwise) for cancellation pursuant to the Merger
Agreement, and (B) the investment income on the amount set forth in
clause (A), by issuance of a demand note registered in the name of
Holdings (the "Demand Note"), in respect of which no interest shall be
payable, and (ii) repay such Demand Note, in whole or in part, in any
transaction or any series of transactions, pursuant to the provisions
of the Demand Note; provided that the Company shall apply all the
proceeds from the sale of the Demand Note to reduce borrowings under
the Revolving Credit Facility and, for so long as any Indebtedness is
outstanding under the Demand Note, the Company's outstanding
borrowings under the Revolving Credit Facility at any time shall not
exceed an amount equal to the amount of the borrowings permitted under
such Facility (in accordance with the terms of such Facility and
Sections 4.11(A) and (b)) at such time less the amount of indebtedness
outstanding at such time under the Demand Note.
2
<PAGE> 115
ARTICLE II
Sundry Provisions
Section 2.01. Instruments to be Read Together. This First Supplemental
Indenture is an indenture supplemental to and in implementation of the
Indenture, and the Indenture and this First Supplemental Indenture shall
henceforth be read together.
Section 2.02. Confirmation. The Indenture as amended and supplemented
by this First Supplemental Indenture is in all respects confirmed and
preserved.
Section 2.03. Terms Defined. All terms defined elsewhere in the
Indenture have the same meanings herein .
Section 2.04. Counterparts. This First Supplemental Indenture may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
Section 2.05. Effectiveness. The provisions of this First Supplemental
Indenture will take effect immediately upon its execution and delivery by the
Trustee in accordance with the Indenture.
Section 2.06. Governing Law. This First Supplemental Indenture shall
be construed in accordance with and governed by the laws of the State of New
York.
Section.07. Acceptance by Trustee. The Trustee accepts the amendments
of the Indenture effected by this First Supplemental Indenture and agrees to
execute the trusts created by the Indenture as hereby amended, but only upon
the terms and conditions set forth in the indenture, including the terms and
provisions defining and limiting the liabilities and responsibilities of the
trustee, which terms, conditions and provisions DEFINE AND LIMIT its
liabilities and responsibilities in the performance of the trust created by the
Indenture, as amended, ratified and approved hereby; without limiting the
generality of the foregoing, the Trustee has no responsibility for the
correctness or accuracy or completeness
3
<PAGE> 116
of the recitals of fact herein contained, which shall be taken as statements of
the Company, and makes no representations as to the validity or sufficiency of
this First Supplemental Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, as of the date first above written.
FLORIDA STEEL CORPORATION,
as Issuer
By
--------------------------------
Marvin F. Hill
Vice President and Chief
Financial Officer
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Trustee
By
--------------------------------
Name:
Title:
4
<PAGE> 117
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE dated as of June 1, 1995, between
FLORIDA STEEL CORPORATION, a Florida corporation (the "Company") and SHAWMUT
BANK CONNECTICUT, NATIONAL ASSOCIATION (formerly known as THE CONNECTICUT
NATIONAL BANK), as Trustee (the "Trustee") under the Indenture (as defined
below).
WHEREAS, the Company heretofore executed and delivered to the Trustee
an Indenture dated as of December 15, 1992 (as amended by that certain First
Supplemental Indenture dated as of September 9, 1993, the "Indenture"),
providing for the creation of the Company's 11-1/2% First Mortgage Notes due
2000 (the "First Mortgage Notes"); and
WHEREAS, Section 9.01 of the Indenture provides that the Company and
the Trustee may in certain circumstances amend, waive or supplement the
Indenture without notice to or the consent of any Noteholder of the First
Mortgage Notes, and the Company desires to amend certain provisions of the
Indenture, as set forth in Article I hereof; and
WHEREAS, the Company has fulfilled certain requirements of the Trustee
to evidence the Company's ability to rely on the provisions of Section 9.01 of
the Indenture in order to amend the Indenture; and
WHEREAS, all things necessary to make this Second Supplemental
Indenture a valid agreement of the Company, enforceable in accordance with its
terms, have been done;
NOW, THEREFORE, for and in consideration of the premises, the Company
agrees with the Trustee as follows:
ARTICLE I
Amendment of Indenture
Section 1.01. Definitions. Section 1.01 of the Indenture is hereby
amended to delete the present definition of "New Revolving Credit Agreement"
and to substitute the following in lieu thereof:
"New Revolving Credit Agreement" means the Credit Agreement
pursuant to the Revolving Credit Facility entered into by and among
the Company, BT Commercial Corporation and the other parties thereto,
as the same may be amended, extended, renewed, supplemented or
otherwise modified (in whole or in part, and without limitation as to
amount, terms, conditions, covenants and other provisions) from time
to time, and any agreement governing Indebtedness incurred to refund
or refinance in whole or in part (and without limitation as to terms,
<PAGE> 118
conditions, covenants and other provisions) the borrowings and the maximum
commitments under the New Revolving Credit Agreement or such agreement. The
borrowings and maximum commitments under the New Revolving Credit Agreement or
such agreement may be increased from time to time as long as the aggregate
amount outstanding at any time under the Revolving Credit Agreement or such
agreement is not in excess of the greater of the dollar amount set forth in
section 4.11(b)(ii)(x) or the dollar amount set forth in section
4.11(b)(ii)(y). The Company shall promptly notify the Trustee of any such
refunding or refinancing of the New Revolving Credit Agreement.
ARTICLE II
Sundry Provisions
Section 2.01. Instruments to be Read Together. This Second
Supplemental Indenture is an indenture supplemental to and in implementation of
the Indenture, and the Indenture and this Second Supplemental Indenture shall
henceforth be read together.
Section 2.02. Confirmation. The Indenture as amended and supplemented
by this Second Supplemental Indenture is in all respects confirmed and
preserved.
Section 2.03. Terms Defined. All terms defined elsewhere in the
Indenture have the same meanings herein.
Section 2.04. Counterparts. This Second Supplemental Indenture may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
Section 2.05. Effectiveness. The provisions of this Second
Supplemental Indenture will take effect immediately upon its execution and
delivery by the Trustee in accordance with the Indenture.
Section 2.06. Governing Law. This Second Supplemental Indenture shall
be construed in accordance with and governed by the laws of the State of New
York.
Section 2.07. Acceptance by Trustee. The Trustee accepts the
amendments of the Indenture effected by this Second Supplemental Indenture and
agrees to execute the trusts created by the Indenture as hereby amended, but
only upon the terms and conditions set forth in the Indenture, including the
terms and provisions defining and limiting the liabilities and responsibilities
of the Trustee, which terms, conditions and provisions define and limit its
liabilities and responsibilities in the performance of the trust created by the
Indenture, as amended, ratified and approved hereby; without limiting the
generality of the foregoing, the Trustee has no
2.
<PAGE> 119
responsibility for the correctness or accuracy or completeness of the recitals
of fact herein contained, which shall be taken as statements of the Company,
and makes no representations as to the validity or sufficiency of this Second
Supplemental Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed, as of the date first above written.
FLORIDA STEEL CORPORATION, as Issuer
By:
---------------------------------
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, as Trustee
By:
---------------------------------
Name:
Title:
3.
<PAGE> 120
THIRD SUPPLEMENTAL INDENTURE
THIRD SUPPLEMENTAL INDENTURE dated as of December 31, 1996, between
AMERISTEEL CORPORATION (f/k/a Florida Steel Corporation), a Florida corporation
(the "Company"), AMERISTEEL FINANCE, INC., a Delaware corporation ("AFI") and
FLEET NATIONAL BANK, as successor to Shawmut Bank Connecticut, National
Association, and The Connecticut National Bank ("Fleet"), and as Trustee under
the Indenture (as such term is defined below).
WHEREAS, the Company heretofore executed and delivered to the Trustee
an Indenture dated as of December 15, 1992 (as amended by that certain First
Supplemental Indenture dated as of September 9, 1993 and that certain Second
Supplemental Indenture dated as of June 1, 1995, the "Indenture"), providing
for the creation of the Company's 11-1/2% First Mortgage Notes due 2000 (the
"First Mortgage Notes"); and
WHEREAS, Section 4.13 of the Indenture provides that the Company shall
not permit any subsidiary to incur, guarantee or secure through the granting of
Liens the payment of any portion of the New Revolving Credit Debt unless such
Subsidiary, the Company and the Trustee execute and deliver ~ supplemental
indenture evidencing such Subsidiary's Guarantee of the First Mortgage Notes,
such Guarantee to be a senior unsecured obligation of such Subsidiary; and
WHEREAS, AFI wishes to guarantee and secure through the granting of
Liens on Accounts receivables of AFI the payment of the New Revolving Credit
Debt and desires to guarantee the First Mortgage Notes in accordance with
Section 4.13 of the Indenture; and
WHEREAS, Section 9.01 of the Indenture provides that the Company and
the Trustee may in curtain circumstances amend, waive or supplement the
Indenture without notice to or the consent of any Noteholder of the First
Mortgage Notes, and the Company desires to supplement the Indenture, as set
forth in Article I thereof under such procedure, and
WHEREAS, the Company has fulfilled all of the requirements of the
Trustee to evidence the Companies ability to rely on the provisions of Section
9.01 of the Indenture in order to supplement the Indenture; and
WHEREAS, all things necessary to make this Third Supplemental
Indenture a valid agreement of the Company, enforceable in accordance With its
terms, have been done;
NOW, THEREFORE, for and in consideration of the premises, the Company
and AFI agree with the Trustee as follows:
<PAGE> 121
ARTICLE I
Guaranteed by AFI
All hereby unconditionally guarantees to the Noteholders and their
successors and assigns the due and punctual payment of the Indebtedness
evidenced by the First Mortgage Notes, and agrees that from time to time,
without notice to AFI and without affecting any liability of the AFI, any
Collateral for payment of the First Mortgage Notes may be exchanged, released,
surrendered, sold (by foreclosure or otherwise) applied or otherwise dealt with
at the election of the NoteHolders, all in accordance with the terms and
conditions of the First Mortgage Notes.
ARTICLE II
Sundry Provision
section 2.01. Instruments to be Read together. This Third Supplemental
Indenture is an indenture supplemental to and in implementation of the
Indenture, and the Indenture and this Third Supplemental Indenture shall
henceforth be read together.
Section 2.02. Confirmation. The Indenture as amended and supplemented
by this Third Supplemental Indenture is in all respects confirmed and
preserved.
Section 2.03. Terms Defined All terms defined elsewhere in the
Indenture have the same meanings herein.
Section 2.04. Counterparts. This Third Supplemental Indenture may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
Section 2.05. Effectiveness. The provisions of this Third
Supplemental Indenture will take effect immediately upon its execution and
delivery by the Trustee in accordance with the Indenture.
Section 2.06. Governing Law. This third supplemental Indenture shall
be in accordance with and governed by the laws of the State of New
York.
Section 2.07. Acceptance by Trustee. The Trustee accepts the
supplement of the Indenture effected by this Third Supplemental Indenture and
agrees to execute the trusts created by the Indenture as hereby amended, but
only upon the terms and conditions set forth in the Indenture, including the
terms and provisions defining and limiting the liabilities and
responsibilities of the Trustee, which terms, conditions and provisions define
and limit its liabilities and responsibilities in the performance of the trust
created by the Indenture, as amended, ratified and approved hereby; without
limiting the generality of the foregoing, the Trustee has no responsibility for
the correctness or accuracy or completeness of
<PAGE> 122
the recitals of fact herein contained, which shall be taken as statements of
the Company, and makes no representations as to the validity or sufficiency this
Third Supplemental Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed, as of the date first above written.
AMERISTEEL CORPORATION, f/k/a
Florida Steel Corporation, as Issuer
By:/s/ Tom Landa
----------------------------------------
Name: Tom Landa
Title: Vice President and Chief Financial
Officer
AMERISTEEL FINANCE, INC.
By:/s/ Tom Rose
----------------------------------------
Name: Tom Rose
Title: President
FLEET NATIONAL BANK, as successor to
Shawmut Bank Connecticut, National
Association, and The Connecticut National
Bank as Trustee under the Indenture
By:/s/ Dennis Fisher
----------------------------------------
Name: Dennis Fisher
Title: Assistant Vice President
<PAGE> 1
EXHIBIT 23.2
CONSENT TO USE OF REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of our
report (and to all references to our firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Tampa, Florida
December 8, 1997
