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REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AMERISTEEL CORPORATION
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
FLORIDA 3312 59-0792436
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification) Identification No.)
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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)
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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)
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COPIES TO:
ALBERT C. O'NEILL, JR., ESQUIRE
TRENAM, KEMKER, SCHARF, BARKIN,
FRYE, O'NEILL & MULLIS
P.O. BOX 1102
TAMPA, FLORIDA 33601-1102
(813) 223-7474
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) of the Securities Act of 1933, as amended, check the
following box and list the Securities Act registration number of the earlier
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(b) of
the Securities Act, check the following box and list the Securities Act
registration number of the earlier registration statement for the same
offering. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
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8 3/4% Senior Notes Due 2008......... $130,000,000 100%(1) $130,000,000(1) $38,350
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Guarantees of the 8 3/4% Senior Notes
Due 2008........................... $130,000,000 None(2) None(2) --
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(1) Pursuant to Rule 457(f)(2) under the Securities Act of 1933, the
registration fee has been based on the book value of the securities to be
received by the Registrant in exchange for the securities to be issued
hereunder in the Exchange Offer described herein.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is
payable for the Guarantees.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT WILL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT WILL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED JUNE , 1998
OFFER TO EXCHANGE
ALL OUTSTANDING
8 3/4% SENIOR NOTES DUE 2008
($130,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
8 3/4% SENIOR NOTES DUE 2008
OF
AMERISTEEL CORPORATION
The Exchange Offer will expire at 5:00 p.m., New York City time on
, 1998, unless extended.
AmeriSteel Corporation, a Florida corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange its 8 3/4% Senior Notes Due 2008 (the "New Notes" and
"Exchange Notes"), in an offering which has been registered under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement on Form S-4 (together with any amendments thereto, the "Registration
Statement") of which this Prospectus constitutes a part, for an equal principal
amount of its outstanding 8 3/4% Senior Notes Due 2008 (the "Old Notes"), of
which an aggregate of $130,000,000 in principal amount is outstanding as of the
date hereof (the "Exchange Offer"). The New Notes and the Old Notes are
sometimes referred to herein collectively as the "Notes." The form and terms of
the New Notes will be the same as the form and terms of the Old Notes except
that the New Notes will not bear legends restricting the transfer thereof. The
New Notes will be obligations of the Company entitled to the benefits of the
Indenture, dated as of April 3, 1998 (the "Indenture"), by and among the
Company, as issuer, each of the Company's Restricted Subsidiaries (the
"Subsidiary Guarantors"), as Guarantors, and State Street Bank and Trust
Company, as Trustee (the "Trustee"), relating to the Notes. See "Description of
the New Notes." Following the completion of the Exchange Offer, none of the New
Notes will be entitled to any rights under the Registration Rights Agreement,
dated as of March 30, 1998 (the "Registration Rights Agreement"), by and among
the Company and the initial purchaser (the "Initial Purchaser") named therein.
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE NEW NOTES.
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 ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS
FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
The date of this Prospectus is , 1998.
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[PICTURE OF ANGLE, FLAT, REBAR AND CHANNEL STEEL PRODUCTS
AND REPRESENTATIVE APPLICATIONS OF SUCH PRODUCTS]
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AVAILABLE INFORMATION
The Company has filed the Registration Statement with the Securities and
Exchange Commission (the "Commission") under the Securities Act with respect to
the New Notes. This Prospectus, which constitutes a part of the Registration
Statement, omits certain information contained in the Registration Statement and
reference is made to the Registration Statement and the exhibits and schedules
thereto for further information with respect to the Company and the New Notes
offered hereby. This Prospectus contains summaries of the material terms and
provisions of certain documents and in each instance reference is made to the
copy of such document filed as an exhibit to the Registration Statement. Each
such summary is qualified in its entirety by such reference.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Prospectus. Unless
otherwise indicated, all references in this Prospectus to the "Company" shall be
deemed to refer to AmeriSteel Corporation and its wholly-owned subsidiary,
AmeriSteel Finance 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 1.8 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.
For the twelve months ended March 31, 1998, the Company had net sales and
EBITDA (as defined herein) of $664.6 million and $100.6 million, respectively.
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 four 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 Company's headquarters are located at 5100 W. Lemon Street, Suite 312,
Tampa, Florida 33609, and its telephone number is (813) 286-8383.
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 twelve months ended March
31, 1998, approximately 24% of the Company's net sales were derived from
fabricated rebar, 27% from stock rebar (rebar produced by the mills and sold to
third parties), 33% from merchant bars, 5% from rods and 11% 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
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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.
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 $129 per ton for the twelve months ended March
31, 1998. 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 $123 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 1,900 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.
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 1998
revenues of $168.7 million, or approximately 25% 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
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customer satisfaction, the Company has had, on average, a relationship of
at least 10 years with its top 25 customers.
THE PRIOR OFFERING
The outstanding $130.0 million principal amount of Old Notes were sold by
the Company to the Initial Purchaser on April 3, 1998 (the "Closing Date")
pursuant to the Purchase Agreement among the Company and the Initial Purchaser
(the "Prior Offering"). The Prior Offering was designed as a refinancing plan
(the "Refinancing") to reduce the amount and extend the maturities of the
Company's outstanding long-term debt, increase shareholders' equity, reduce
interest expense and improve operational and financial flexibility. The
Refinancing includes (i) the Prior Offering, (ii) the redemption of the
Company's $100,000,000 11 1/2 First Mortgage Notes due December 15, 2000 (the
"First Mortgage Notes") and (iii) the repayment of $20 million of the Company's
$40 million Subordinated Intercompany Note. The Initial Purchaser subsequently
resold the Old Notes in reliance on Rule 144A under the Securities Act. The
Company, the Subsidiary Guarantors and the Initial Purchaser also entered into
the Registration Rights Agreement pursuant to which the Company granted certain
registration rights for the benefit of the holders of the Old Notes. The
Exchange Offer is intended to satisfy certain of the Company's obligations under
the Registration Rights Agreement with respect to the Old Notes.
THE EXCHANGE OFFER
The Exchange Offer......... The Company is offering upon the terms and subject
to the conditions set forth herein and in the
accompanying letter of transmittal, to exchange
$1,000 in principal amount of its 8 3/4% Senior
Notes due 2008 for each $1,000 in principal amount
of the outstanding Old Notes. As of the date of
this Prospectus, $130.0 million in aggregate
principal amount of the Old Notes is outstanding.
Expiration Date............ 5:00 p.m., New York City time, on , 1998
as the same may be extended.
Conditions of the Exchange
Offer.................... The Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being
tendered for exchange. The only condition to the
Exchange Offer is the declaration by the Commission
of the effectiveness of the Registration Statement
of which this Prospectus constitutes a part.
Accrued Interest........... The New Notes will bear interest at a rate equal to
8 3/4% per annum. Interest shall accrue from
or from the most recent interest payment
date with respect to the Old Notes to which
interest was paid or duly provided for. See
"Description of the Notes -- Principal, Maturity
and Interest."
Procedures for Tendering
Old Notes................ Unless a tender of Old Notes is effected pursuant
to the procedures for book-entry transfer as
provided herein, each holder desiring to accept the
Exchange Offer must complete and sign the Letter of
Transmittal, have the signature thereon guaranteed
if required by the Letter of Transmittal, and mail
or deliver the Letter of Transmittal, together with
the Old Notes or a Notice of Guaranteed Delivery
and any other required documents (such as evidence
of authority to act, if the Letter of Transmittal
is signed by someone acting in a fiduciary or
representative capacity), to the Exchange
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Agent (as defined herein) at the address set forth
on the back cover page of this Prospectus prior to
5:00 p.m., New York City time, on the Expiration
Date. Any beneficial owner of the Old Notes whose
Old Notes are registered in the name of a nominee,
such as a broker, dealer, commercial bank or trust
company and who wishes to tender Old Notes in the
Exchange Offer, should instruct such entity or
person to promptly tender on such beneficial
owner's behalf. See "The Exchange
Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures............... Holders of Old Notes who wish to tender their Old
Notes and (i) whose Old Notes are not immediately
available or (ii) who cannot deliver their Old
Notes or any other documents required by the Letter
of Transmittal to the Exchange Agent prior to the
Expiration Date (or complete the procedure for
book-entry transfer on a timely basis), may tender
their Old Notes according to the guaranteed
delivery procedures set forth in the Letter of
Transmittal. See "The Exchange Offer -- Guaranteed
Delivery Procedures."
Acceptance of Old Notes and
Delivery of New Notes.... Upon effectiveness of the Registration Statement of
which this Prospectus constitutes a part and
consummation of the Exchange Offer, the Company
will accept any and all Old Notes that are properly
tendered in the Exchange Offer prior to 5:00 p.m.,
New York City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer will be
delivered promptly after acceptance of the Old
Notes. See "The Exchange Offer -- Terms of Exchange
Offer."
Withdrawal Rights.......... Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
Expiration Date. See "The Exchange
Offer -- Withdrawal of Tenders."
The Exchange Agent......... State Street Bank and Trust Company is the exchange
agent (in such capacity, the "Exchange Agent"). The
address and telephone number of the Exchange Agent
are set forth in "The Exchange Offer -- The
Exchange Agent."
Fees and Expenses.......... All expenses incident to the Company's consummation
of the Exchange Offer and compliance with the
Registration Rights Agreement will be borne by the
Company. The Company will also pay certain transfer
taxes applicable to the Exchange Offer. See "The
Exchange Offer -- Fees and Expenses."
Resales of the New Notes... Based on existing interpretations by the staff of
the Commission set forth in no-action letters
issued to third parties, the Company believes that
New Notes issued pursuant to the Exchange Offer to
a holder in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by a
holder (other than (i) a broker-dealer who
purchased the Old Notes directly from the Company
for resale pursuant to Rule 144A under the
Securities Act or any other available exemption
under the Securities Act or (ii) a person that is
an affiliate of the Company within the meaning of
Rule 405 under the Securities Act), without
compliance with the registration and prospectus
delivery provisions of the Securities Act, provided
that such holder is acquiring the New Notes in the
ordinary course of
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business and is not participating, and has no
arrangement or understanding with any person to
participate, in a distribution of the New Notes.
Holders wishing to accept the Exchange Offer must
represent to the Company, as required by the
Registration Rights Agreement, that such conditions
have been met. In addition, if such holder is not a
broker-dealer, it must represent that it is not
engaged in, and does not intend to engage in, a
distribution of the New Notes. Each broker-dealer
that receives New Notes in exchange for Old Notes,
where such Old Notes were acquired by such broker
as a result of market-making or other trading
activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such
New Notes. For a period of 180 days from the
Expiration Date, the Company will make this
Prospectus, as amended or supplemented available to
any broker-dealer for use in connection with any
such resale. See "The Exchange Offer -- General."
Effect of Not Tendering Old
Notes for Exchange....... Old Notes that are not tendered or that are not
properly tendered will, following the expiration of
the Exchange Offer, continue to be subject to the
existing restrictions upon transfer thereof. The
Company will have no further obligations to provide
for the registration under the Securities Act of
such Old Notes and such Old Notes will, following
the expiration of the Exchange Offer, bear interest
at the same rate as the New Notes. See "The
Exchange Offer -- Interest on the New Notes."
Certain Federal Income Tax
Consequences............. The Company believes that the exchange pursuant to
the Exchange Offer will not be a taxable event for
federal income tax purposes.
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THE NOTES
Securities Offered......... $130,000,000 aggregate principal amount of 8 3/4%
Senior Notes due 2008.
Maturity Date.............. April 15, 2008.
Interest Payment Dates..... April 15 and October 15, commencing October 15,
1998.
Optional Redemption........ The Notes will be redeemable at the Company's
option, in whole or in part, at any time on or
after April 15, 2003 at the redemption prices set
forth herein, plus accrued and unpaid interest, if
any, to the date of redemption. In addition, at any
time on or prior to April 15, 2001, the Company may
redeem up to 35% of the sum of (i) the initial
aggregate principal amount of the Notes and (ii)
the initial aggregate principal amount of any
additional Notes with the net proceeds of one or
more Public Equity Offerings (as defined herein) at
a redemption price equal to 108.75% of the
principal amount thereof, plus accrued and unpaid
interest, if any, to the date of redemption;
provided that at least 65% of the initial aggregate
principal amount of the Notes remains outstanding.
See "Description of the Notes -- Optional
Redemption."
Ranking.................... The Notes are senior unsecured obligations of the
Company, and will rank senior in right of payment
to all other existing and future subordinated
indebtedness of the Company and pari passu in right
of payment with all obligations of the Company
under the Revolving Credit Agreement (as defined
herein) and all other existing and future
unsubordinated indebtedness of the Company.
However, borrowings under the Revolving Credit
Agreement are secured by substantially all accounts
receivable and inventory of the Company and,
accordingly, the Notes will be effectively
subordinated to the borrowings outstanding under
the Revolving Credit Agreement to the extent of the
value of the assets securing such borrowings. As of
March 31, 1998, on a pro forma basis after giving
effect to the Refinancing, the Company would have
had approximately $69.6 million of senior
indebtedness outstanding other than the Notes, of
which $33.7 million would have been indebtedness
secured under the Revolving Credit Agreement. The
Indenture permits the Company and its subsidiaries
to incur additional indebtedness (including secured
indebtedness), subject to certain limitations. See
"Description of the Notes."
Guarantees................. The Notes are unconditionally guaranteed on a joint
and several basis (the "Subsidiary Guarantees") by
the Subsidiary Guarantors, subject to certain
exceptions. The Subsidiary Guarantees rank senior
to all existing and future subordinated
indebtedness of the Subsidiary Guarantors and pari
passu with all other unsubordinated indebtedness of
the Subsidiary Guarantors, including the guarantees
of indebtedness under the Revolving Credit
Agreement. See "Description of the
Notes -- Subsidiary Guarantees."
Change of Control.......... Upon the occurrence of a Change of Control (as
defined herein), the Company will be required to
make an offer to repurchase all outstanding Notes
at 101% of the principal amount thereof plus
accrued and unpaid interest thereon to the date of
repurchase. See
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"Description of the Notes -- Repurchase at the
Option of Holders -- Change of Control."
Covenants.................. The Indenture restricts, among other things, the
Company's ability to incur additional indebtedness,
pay dividends or make certain other restricted
payments, create certain liens, transfer assets to
subsidiaries, issue preferred stock of subsidiaries
and, enter into certain transactions with
stockholders and affiliates, certain mergers and
consolidations, and certain asset sales. The
Indenture also limits restrictions on the ability
of subsidiaries to make dividends and other
distributions to the Company. See "Description of
the Notes -- Certain Covenants."
Exchange Offer;
Registration Rights........ Pursuant to the Registration Rights Agreement, the
Company filed with the Commission, within 60 days
following the Closing Date, and will use its best
efforts to cause to become effective within 120
days of the Closing Date, a registration statement
with respect to the Exchange Offer for a new issue
of debt securities of the Company registered under
the Securities Act, with terms substantially
identical to those of the Notes. If the Exchange
Offer is not permitted by applicable law or is not
consummated within 150 days of the Closing Date, or
in certain other circumstances, the Company will be
required to provide a shelf registration statement
with respect to resales of the Notes by the holders
thereof. If the Company fails to satisfy these
registration obligations, special interest will
accrue and be payable on the Notes either
temporarily or until the maturity date of the
Notes. See "Exchange Offer -- Terms of the Exchange
Offer."
Use of Proceeds............ The Company used the net proceeds from the Prior
Offering to redeem the First Mortgage Notes and
will use the remaining proceeds to repay $20
million of the Company's Subordinated Intercompany
Note and amounts owed under the Company's Revolving
Credit Agreement and for general corporate
purposes.
The Company will not receive any proceeds from the
Exchange Offer.
There has previously been only a limited secondary market, and no public
market, for the Old Notes. The Old Notes are eligible for trading in the Private
Offering, Resales and Trading through Automatic Linkages ("PORTAL") market. In
addition, the Initial Purchaser has advised the Company that it currently
intends to make a market in the New Notes; however, the Initial Purchaser is not
obligated to do so and any market making activities may be discontinued by the
Initial Purchaser at any time. Therefore, there can be no assurance that an
active market for the New Notes will develop. If such a trading market develops
for the New Notes, future trading prices will depend on many factors, including,
among other things, prevailing interest rates, the Company's results of
operations and the market for similar securities. Depending on such factors, the
New Notes may trade at a discount from their face value. See "Risk
Factors -- Absence of Public Market for the Notes."
The Old Notes were issued originally in global form (the "Global Old
Note"). The Global Old Note was deposited with, or on behalf of, The Depository
Trust Company (the "DTC") and registered in the name of Cede & Co., as nominee
of DTC (such nominee being referred to herein as the "Global Note Holder"). The
use of the Global Old Note to represent certain of the Old Notes permits DTC
participants, and anyone holding a beneficial interest in an Old Note registered
in the name of such a participant, to transfer interests in the Old Notes
electronically in accordance with DTC's established
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procedures without the need to transfer a physical certificate. New Notes issued
in exchange for the Global Old Note will also be issued initially as a note in
global form (the "Global New Note" and, together with the Global Old Note, the
"Global Notes") and deposited with, or on behalf of, DTC. After the initial
issuance of the Global New Note, New Notes in certificated form will be issued
in exchange for a holder's proportionate interest in the Global New Note only as
set forth in the Indenture.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the same rights and will be subject to
the same limitations applicable thereto under the Indenture (except for those
rights which terminate upon consummation of the Exchange Offer). Following
consummation of the Exchange Offer, the holders of Old Notes will continue to be
subject to the existing restrictions upon transfer thereof and the Company will
have no further obligation to such holders (other than to certain holders under
certain limited circumstances) to provide for registration under the Securities
Act of the Old Notes held by them. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered Old Notes
could be adversely affected.
This Prospectus, together with the Letter of Transmittal is being sent to
all registered holders of Old Notes as of , 1998.
The Company will not receive any proceeds from this Exchange Offer.
Pursuant to the Registration Rights Agreement, the Company will bear certain
registration expenses.
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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
The following table sets forth certain unaudited pro forma financial
information and certain historical information of the Company. The summary
historical financial data for the year ended March 31, 1998 has been derived
from, and should be read in conjunction with, the Company's audited consolidated
financial statements, including the notes thereto, included elsewhere in this
Prospectus, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The unaudited summary pro forma financial information for the Company for
the year ended March 31, 1998 is for illustrative purposes only and is not
necessarily indicative of what the actual results of operations and financial
position of the Company would have been as of and for the periods indicated, nor
does it purport to represent the Company's future financial position and results
of operations. Such unaudited summary pro forma financial information has been
derived from, and should be read in conjunction with, the Company's unaudited
pro forma consolidated financial statements, including the notes thereto.
11
<PAGE> 14
<TABLE>
<CAPTION>
PRO FORMA
-------------------------
ACTUAL YEAR ENDED
FISCAL YEAR MARCH 31,
1998 ADJUSTMENTS 1998
----------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS:
Net sales.................................................. $664,566 -- $664,566
Operating expenses:
Cost of sales............................................ 540,422 -- 540,422
Selling and administrative............................... 27,811 -- 27,811
Depreciation............................................. 19,494 -- 19,494
Amortization of goodwill................................. 4,130 -- 4,130
-------- ------- --------
Income from operations..................................... 72,709 -- 72,709
Other expenses:
Interest................................................. 19,775 (1,407)(a) 18,368
Amortization of deferred financing costs................. 652 (256)(b) 396
-------- ------- --------
20,427 (1,663) 18,764
Income before income taxes and extraordinary item.......... 52,282 1,663 53,945
Income taxes............................................... 22,000 648(c) 22,648
-------- ------- --------
Income before extraordinary item........................... 30,282 1,015 31,297
Extraordinary item......................................... -- (2,440)(d) (2,440)
-------- ------- --------
Net income................................................. $ 30,282 $(1,425) $ 28,857
======== ======= ========
Earnings per common share -- basic......................... $ 3.00 $ (.14) $ 2.86
======== ======= ========
Earnings per common share -- diluted....................... $ 2.98 $ (.14) $ 2.84
======== ======= ========
Basic weighted average shares outstanding (000s)........... 10,103 10,103
Diluted weighted average shares outstanding (000s)......... 10,174 10,174
Cash dividends declared per common share................... $ 0.60 $ -- $ 0.60
OTHER CONSOLIDATED FINANCIAL DATA AND SELECTED RATIOS:
EBITDA(1).................................................. $100,556 $100,556
EBITDA margin.............................................. 15.1% 15.1%
Capital expenditures....................................... $ 21,107 $ 21,107
Ratio of EBITDA to interest expense(2)..................... 4.9x 5.4x
Ratio of earnings to fixed charges(3)...................... 3.4x 3.6x
Ratio of total debt to EBITDA(4)........................... 2.2x 2.2x
CONSOLIDATED BALANCE SHEET DATA (END OF PERIOD):
Current assets............................................. $210,610 $209,352
Current liabilities........................................ 87,917 86,574
Working capital............................................ 122,693 122,778
Total assets............................................... 562,130 562,344
Long term debt............................................. 214,465 218,123
Shareholders' equity....................................... 185,715 183,614
</TABLE>
- ---------------
(1) EBITDA represents income from operations plus depreciation, amortization and
non-cash deferred compensation expense and excludes gains or losses from
asset sales. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to service indebtedness and a similar
measure is used in the Indenture to determine compliance with certain
covenants. However, EBITDA should not be considered as an alternative to
income from operations or to cash flows from operating activities (as
determined in accordance with generally accepted accounting principles) and
should not be construed as an indication of a company's operating
performance or as a measure of liquidity.
(2) In calculating the ratio of EBITDA to interest expense, interest expense
includes amortization of deferred financing costs. See "Capitalization."
(3) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income tax provision and extraordinary item plus fixed
charges. Fixed charges consist of interest incurred (which includes
amortization of deferred financing costs) whether expensed or capitalized
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest.
(4) In calculating the ratio of total debt to EBITDA, total debt equals pro
forma total debt as of March 31, 1998. See "Capitalization." EBITDA equals
pro forma EBITDA for the year ended March 31, 1998.
12
<PAGE> 15
<TABLE>
<S> <C> <C>
(a) Adjust annual interest expense to reflect new debt structure
consisting of the following: issuance of $130 million 8 3/4%
Senior Notes, redemption of $100 million 11 1/2% First
Mortgage Notes, payoff of $20 million Subordinated
Intercompany Note, and use of remaining proceeds to lower
outstanding borrowings under the Revolving Credit
Agreement................................................... $(2,063)
To reflect one-time net interest costs associated with 41
day period during which First Mortgage Notes may not be
redeemed, and 90 day period before Subordinated Intercompany
Note is paid off, partially offset by proceeds invested in
overnight funds............................................. 656
-------
Net interest expense adjustment............................. $(1,407)
=======
(b) Adjust amortization of deferred financing costs to reflect
Senior Notes annual expense of $300,000 and savings of
$556,000 related to First Mortgage Notes.................... $ (256)
=======
(c) Adjust income tax expense for adjustments in (a) & (b) notes
at 39% effective tax rate................................... $ 648
=======
(d) Record extraordinary item to reflect writeoff of unamortized
deferred finance costs and call premium associated with
redemption of the First Mortgage Notes, net of 39% effective
tax charge.................................................. $(2,440)
=======
</TABLE>
13
<PAGE> 16
SUMMARY FINANCIAL AND OPERATING DATA
The summary statement of operations and balance sheet data for the years
presented are derived from the audited financial statements of the Company. The
results for the year ended March 31, 1998 are not necessarily indicative of the
results to be expected for the fiscal year ending March 31, 1999. 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 presented are qualified in their entirety by reference to the
more detailed Consolidated 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>
YEAR ENDED MARCH 31,
----------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND AVERAGE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales................................................... $547,118 $639,908 $628,404 $617,289 $664,566
Operating expenses:
Cost of sales............................................. 498,692 545,725 533,965 531,190 540,422
Selling and administrative................................ 27,293 29,959 29,605 29,068 27,811
Depreciation.............................................. 15,369 14,046 14,619 16,654 19,494
Amortization of goodwill.................................. 4,061 4,130 4,130 4,130 4,130
Other operating expenses(1)............................... 10,920 -- 16,013 -- --
-------- -------- -------- -------- --------
556,335 593,860 598,332 581,042 591,857
Income (loss) from operations............................... (9,217) 46,048 30,072 36,247 72,709
Other expenses:
Interest.................................................. 21,027 23,330 22,000 19,473 19,775
Amortization of deferred financing costs.................. 2,552 2,863 1,956 934 652
-------- -------- -------- -------- --------
23,579 26,193 23,956 20,407 20,427
Income (loss) before income taxes (benefit) & extraordinary
item...................................................... (32,796) 19,855 6,116 15,840 52,282
Income taxes (benefit)...................................... (10,833) 9,354 3,996 7,788 22,000
-------- -------- -------- -------- --------
Income (loss) before extraordinary item..................... (21,963) 10,501 2,120 8,052 30,282
Extraordinary item, net of income tax benefit(2)............ (748) -- -- -- --
-------- -------- -------- -------- --------
Net income (loss)........................................... $(22,711) $ 10,501 $ 2,120 $ 8,052 $ 30,282
======== ======== ======== ======== ========
Earnings (loss) per common share -- basic................... $ (2.27) $ 1.05 $ .21 $ .80 $ 3.00
======== ======== ======== ======== ========
Earnings (loss) per common share -- diluted................. $ (2.27) $ 1.05 $ .21 $ .80 $ 2.98
======== ======== ======== ======== ========
Cash dividends declared per common share.................... $ -- $ -- $ -- $ -- $ .60
======== ======== ======== ======== ========
OTHER FINANCIAL DATA AND SELECTED RATIOS:
EBITDA(3)................................................... $ 19,313 $ 65,574 $ 64,033 $ 58,323 $100,556
EBITDA margin............................................... 3.5% 10.2% 10.2% 9.4% 15.1%
Capital expenditures........................................ $ 18,193 $ 25,781 $ 36,894 $ 34,382 21,107
Ratio of EBITDA to interest expense(4)...................... 0.8x 2.5x 2.7x 2.9x 4.9x
Ratio of earnings to fixed charges(5)....................... * 1.7x 1.2x 1.7x 3.4x
Ratio of total debt to EBITDA............................... 12.8x 4.0x 4.2x 4.1x 2.2x
BALANCE SHEET DATA (END OF PERIOD):
Current assets.............................................. $187,672 $223,444 $200,109 $182,519 $210,610
Current liabilities......................................... 76,006 102,080 85,588 73,792 87,917
Working capital............................................. 111,666 121,364 114,521 108,727 122,693
Total assets................................................ 523,706 561,748 554,896 535,685 562,130
Long term debt.............................................. 247,128 243,030 252,525 237,474 214,465
Shareholders' equity........................................ 124,999 137,750 141,747 150,564 185,715
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------
1994 1995 1996 1997 1998
----- ----- ----- ----- ------
(IN THOUSANDS, EXCEPT PER SHARE AND AVERAGE
DATA)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Shipped Tons
Stock rebar............................................... 466 536 508 472 550
Merchant bar.............................................. 468 549 544 512 576
Rod....................................................... 121 129 133 105 92
----- ----- ----- ----- ------
Subtotal mill finished goods.............................. 1,055 1,214 1,185 1,089 1,218
Fabricated rebar.......................................... 330 347 315 326 338
Billets................................................... 263 141 175 281 172
----- ----- ----- ----- ------
Total shipped tons........................................ 1,648 1,702 1,675 1,696 1,728
===== ===== ===== ===== ======
Average mill finished goods prices (per ton)................ $310 $342 $337 $333 $351
Average yielded scrap cost (per ton)........................ 119 130 131 130 133
Average metal spread (per ton)(6)........................... 191 212 206 203 218
Average mill conversion costs (per ton)..................... 146 135 135 138 129
</TABLE>
- ---------------
* Amount results in a deficiency.
(1) 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 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) EBITDA represents income from operations plus depreciation, amortization and
non-cash deferred compensation expense and excludes gains or losses from
asset sales and non-recurring charges. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to service
indebtedness and a similar measure is used in the Indenture to determine
compliance with certain covenants. However, EBITDA should not be considered
as an alternative to income from operations or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of a company's
operating performance or as a measure of liquidity.
(4) Interest expense includes amortization of deferred financing costs.
(5) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income tax provision and extraordinary item plus fixed
charges. Fixed charges consist of interest incurred (which includes
amortization of deferred financing costs) whether expensed or capitalized
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest. Earnings were
inadequate to cover fixed charges for fiscal 1994 by $7.6 million.
(6) Average metal spread equals average mill finished goods prices minus average
yielded scrap cost.
15
<PAGE> 18
RISK FACTORS
Before purchasing the Notes offered hereby, a prospective investor should
consider the following specific factors, as well as the other information
included in this Prospectus, in evaluating the Company, its business and the
Notes.
SIGNIFICANT INDEBTEDNESS AND DEBT SERVICE
The Company has significant outstanding indebtedness. As of March 31, 1998,
on a pro forma basis after giving effect to the Refinancing, the Company would
have had approximately $69.6 million of senior Indebtedness outstanding other
than the Notes, of which $33.7 million would have been indebtedness secured
under the Revolving Credit Agreement. See "Capitalization." In addition, subject
to the limitations set forth in the Indenture, the Company and its subsidiaries
could have incurred additional indebtedness, including up to an additional $61.1
million under the Revolving Credit Agreement. See "Selected Financial Data."
The Company's leverage will have important consequences to the Holders,
including the following: (i) the ability of the Company in the future to obtain
additional financing for working capital, capital expenditures, acquisitions or
other purposes may be limited; (ii) a significant portion of the Company's cash
flow from operations will be required to meet the Company's debt service
obligations, which will reduce the funds available to the Company for its
operations and future business opportunities; (iii) the Company's degree of
leverage may make it more vulnerable to a downturn in its business and may limit
its ability to respond to price competition or changes in the economy generally;
and (iv) the Company may not have sufficient funds to repay or refinance the
Notes at maturity.
The Company's ability to make scheduled payments on the principal of, or
interest on, or to refinance, its indebtedness will depend on its future
operating performance and cash flow, which are subject to prevailing economic
conditions, prevailing interest rate levels, and financial, competitive,
business and other factors, many of which are beyond its control, as well as the
availability of borrowings under the Revolving Credit Agreement or successor
agreements. However, based upon the current and anticipated level of operations,
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, planned capital expenditures and
expected dividend payments for the foreseeable future. There can be no
assurance, however, that the Company's business will continue to generate cash
flow at or above current levels. If the Company is unable to generate sufficient
cash flow from operations in the future to service its indebtedness, it may be
required to refinance all or a portion of its existing indebtedness, including
the Notes, or to obtain additional financing. There can be no assurance that any
such refinancing would be possible or that any additional financing could be
obtained. The inability to obtain other additional financing could have a
material adverse effect on the Company.
RESTRICTIVE COVENANTS AND ASSET ENCUMBRANCES
The Revolving Credit Agreement and the Indenture contain numerous
restrictive covenants, which limit the discretion of the management of the
Company with respect to certain business matters. These covenants place
significant restrictions on, among other things, the ability of the Company to
incur additional indebtedness, to create liens or other encumbrances, to pay
dividends or make other restricted payments, to make investments, loans and
guarantees and to sell or otherwise dispose of a substantial portion of assets
to, or merge or consolidate with, another entity. The Revolving Credit Agreement
also contains a number of financial covenants that require the Company to meet
certain financial ratios and tests and provide that a "change of control" will
constitute an event of default. A failure to comply with the obligations
contained in the Revolving Credit Agreement or the Indenture, if not cured or
waived, could permit acceleration of the related indebtedness and acceleration
of indebtedness under other instruments that contain cross-acceleration or
cross-default provisions.
16
<PAGE> 19
In addition, the obligations of the Company under the Revolving Credit
Agreement are secured by substantially all accounts receivable and inventory of
the Company. As the Notes are unsecured, the Notes and the Subsidiary Guarantees
will be effectively subordinated to the loans outstanding under the Revolving
Credit Agreement and the guarantees by the subsidiaries of such loans, to the
extent of the value of the assets securing such loans and guarantees. In the
case of an event of default under the Revolving Credit Agreement, the lenders
under the Revolving Credit Agreement would be entitled to exercise the remedies
available to a secured lender under applicable law. If the Company were
obligated to repay all or a significant portion of its indebtedness, there can
be no assurance that the Company would have sufficient cash to do so or that the
Company could successfully refinance such indebtedness. Other indebtedness of
the Company that may be incurred in the future may contain financial or other
covenants more restrictive than those applicable to the Revolving Credit
Agreement or the Notes.
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 46% of the Company's cost of
sales in fiscal 1998. 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.
17
<PAGE> 20
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 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.
Since April 1, 1994, the Company has spent approximately $34 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 $12.7
million and has included this amount in the Company's recorded liabilities as of
March 31, 1998. 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
18
<PAGE> 21
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
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 I to March 31, 1998 consolidated financial statements -- Environmental
Matters."
INABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control (as defined in the Indenture), the Company is
required to offer to repurchase all outstanding Notes at 101% of the principal
amount thereof plus accrued and unpaid interest to the date of repurchase. In
addition, a Change of Control would result in an event of default under the
Revolving Credit Agreement, which could result in the acceleration of the
Company's obligations thereunder. Any such requirement to offer to purchase
outstanding Notes could also result in the Company having to refinance the
indebtedness then outstanding under the Revolving Credit Agreement. There can be
no assurance that sufficient funds will be available at the time of any Change
of Control to make any required repurchases of Notes tendered or to refinance
such indebtedness outstanding under the Revolving Credit Agreement, or that
restrictions in the Revolving Credit Agreement will allow the Company to make
such required repurchases of Notes. In addition, the Company could enter into
certain transactions, including certain recapitalizations, that would not
constitute a Change of Control but would increase the amount of debt outstanding
at such time. See "Description of the Notes -- Repurchase at the Option of
Holders -- Change of Control."
VOTING CONTROL BY PRINCIPAL STOCKHOLDER
Kyoei, through its wholly owned subsidiary, FLS Holdings Inc. ("FLS"), is
the beneficial owner of 9,000,000 shares of the Company's Class B Common Stock,
which Class B Common Stock is entitled to two votes per share and will represent
approximately 85.2% of the combined voting power of all classes of voting stock.
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" and "Principal Stockholders."
FRAUDULENT CONVEYANCE CONSIDERATIONS
Each Subsidiary Guarantor's guarantee of the obligations of the Company
under the Notes may be subject to review under relevant federal and state
fraudulent conveyance statutes (the "Fraudulent Conveyance Statutes") in a
bankruptcy, reorganization or rehabilitation case or similar proceeding or a
lawsuit by or on behalf of unpaid creditors of such Subsidiary Guarantors. If a
court were to find under relevant Fraudulent Conveyance Statutes that, at the
time the Notes were issued, (a) a Subsidiary Guarantor guaranteed the Notes with
the intent of hindering, delaying or defrauding current or future creditors or
(b)(i) a Subsidiary Guarantor received less than reasonably equivalent value or
fair consideration for guaranteeing the Notes and (ii)(A) was insolvent or was
rendered insolvent by reason of such Note Guarantee, (B) was engaged, or about
to engage, in a business or transaction for which its assets constituted
unreasonably small capital, (C) intended to incur, or believed that it would
incur, obligations beyond its ability to pay as such obligations matured (as all
of the foregoing terms are defined in or interpreted under such Fraudulent
Conveyance Statutes) or
19
<PAGE> 22
(D) was a defendant in an action for money damages, or had a judgment for money
damages docketed against it (if, in either case, after final judgment, the
judgment is unsatisfied), such court could avoid or subordinate such guarantee
of the Notes to presently existing and future indebtedness of such Subsidiary
Guarantor and take other action detrimental to the Holders, including, under
certain circumstances, invalidating such guarantee of the Notes.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the federal or state law that is being applied in any such
proceeding. Generally, however, a Subsidiary Guarantor would be considered
insolvent if, at the time it incurred its Subsidiary Guarantee, either (i) the
fair market value (or fair saleable value) of its assets is less than the amount
required to pay the probable liability on its total existing indebtedness and
liabilities (including contingent liabilities) as they become absolute and
mature or (ii) it is incurring obligations beyond its ability to pay as such
obligations mature or become due.
The Board of Directors and management of the Company believe that at the
time of issuance of the Notes and the guarantees of the Notes, each Subsidiary
Guarantor (i) will be (a) neither insolvent nor rendered insolvent thereby, (b)
in possession of sufficient capital to meet its obligations as the same mature
or become due and to operate its business effectively and (c) incurring
obligations within its ability to pay as the same mature or become due and (ii)
will have sufficient assets to satisfy any probable judgment against it in any
pending action. There can be no assurance, however, that such beliefs will prove
to be correct or that a court passing on such questions would reach the same
conclusions.
ABSENCE OF PUBLIC MARKET FOR THE NOTES
There is no existing trading market for the Notes. Although the Initial
Purchaser has advised the Company that it currently intends to make a market in
the Notes, it is not obligated to do so and may discontinue such market-making
at any time without notice. In addition, such market activity may be limited
during the Exchange Offer. Although the Notes are eligible for trading in the
PORTAL market, there can be no assurance as to the development of any market or
the liquidity of any market that may develop for the Notes or the Exchange
Notes.
The Company filed, within 60 days after the initial issuance of the Notes,
a registration statement under the Securities Act with respect to the Exchange
Notes and will use its best efforts to have such registration statement declared
effective by the Commission within 120 days after such initial issuance and
consummate such exchange offer within 150 days after such original issuance. The
Commission, however, has broad discretion to determine whether any registration
statements will be declared effective and may delay or deny the effectiveness of
any such registration statement filed by the Company for a variety of reasons.
Failure to have the registration statements declared effective could adversely
affect the liquidity and price of the Notes. If the Company does not comply with
its registration obligation with respect to the Notes in a timely manner, it
will be required to pay additional interest (in addition to the scheduled
interest) until such obligations are complied with. See "Exchange Offer -- Terms
of the Exchange Offer."
20
<PAGE> 23
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1998 and the pro forma capitalization adjusted as of such date to
reflect the Refinancing. The table should be read in conjunction with the
Consolidated Financial Statements and Notes thereto included elsewhere in this
Offering Memorandum.
<TABLE>
<CAPTION>
AS OF MARCH 31,
1998
--------------------
ACTUAL PRO FORMA
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt (including current portion of long-term
debt)..................................................... $ 7,106 $ 7,106
======== ========
Long-term debt (less current portion)
Revolving Credit Agreement(1)............................. $ 40,070 $ 33,728
Industrial Revenue Bonds.................................. 34,395 34,395
First Mortgage Notes...................................... 100,000 --
8 3/4% Senior Notes....................................... -- 130,000
Subordinated Intercompany Note............................ 40,000 20,000
-------- --------
Total long-term debt.............................. $214,465 $218,123
Shareholders' equity(2):
Class A Common Stock, $0.01 par value, 100,000,000 shares
authorized; no shares issued and outstanding........... -- --
Class B Common Stock, $0.01 par value, 22,000,000 shares
authorized; 10,568,555 shares issued and outstanding... 106 106
Capital in excess of par.................................. 167,283 167,283
Retained earnings......................................... 19,886 17,785
Deferred compensation..................................... (1,560) (1,560)
-------- --------
Total shareholders' equity........................ $185,715 $183,614
-------- --------
Total capitalization........................................ $400,180 $401,737
======== ========
</TABLE>
- ---------------
(1) In addition to the proceeds from the Offering of $5.1 million, approximately
$1.2 million of cash on hand has been applied to reduce amounts outstanding
under the Company's Revolving Credit Agreement.
(2) Excludes 327,974 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 March 31, 1998.
21
<PAGE> 24
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Consolidated Statement of Financial
Position of the Company at March 31, 1998 gives effect to the Prior Offering and
the application of the net proceeds therefrom as if each such event had occurred
on March 31, 1998. The following Unaudited Pro Forma Consolidated Statement of
Operations of the Company for the year ended March 31, 1998 gives effect to the
Prior Offering and the application of the proceeds therefrom, as if the Prior
Offering had occurred on April 1, 1997. The Unaudited Pro Forma Consolidated
Financial Statements should be read in conjunction with the consolidated
financial statements of the Company, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Unaudited Pro Forma Consolidated Financial Statements do not
purport to be indicative of the results that would have actually been obtained
had the Prior Offering been completed as of the assumed dates and for the
periods presented, or that may be obtained in the future.
<TABLE>
<CAPTION>
PRO FORMA
---------------------------
ACTUAL YEAR ENDED
FISCAL YEAR MARCH 31,
1998 ADJUSTMENTS 1998
----------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS:
Net sales............................................ $664,566 $ -- $664,566
Operating expenses:
Cost of sales...................................... 540,422 -- 540,422
Selling and administrative......................... 27,811 -- 27,811
Depreciation....................................... 19,494 -- 19,494
Amortization of goodwill........................... 4,130 -- 4,130
-------- ------- --------
Income from operations............................... 72,709 -- 72,709
Other expenses:
Interest........................................... 19,775 (1,407)(a) 18,368
Amortization of deferred financing costs........... 652 (256)(b) 396
-------- ------- --------
20,427 (1,663) 18,764
Income before income taxes and extraordinary item.... 52,282 1,663 53,945
Income taxes......................................... 22,000 648(c) 22,648
-------- ------- --------
Income before extraordinary item..................... 30,282 1,015 31,297
Extraordinary item................................... -- (2,440)(d) (2,440)
-------- ------- --------
Net income........................................... $ 30,282 $(1,425) $ 28,857
======== ======= ========
Earnings per common share -- basic................... $ 3.00 $ (.14) $ 2.86
Earnings per common share -- diluted................. $ 2.98 $ (.14) $ 2.84
Basic weighted average shares outstanding (000s)..... 10,103 10,103
Diluted weighted average shares outstanding (000s)... 10,174 10,174
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL --------------------------
MARCH 31, MARCH 31,
1998 ADJUSTMENTS 1998
----------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF FINANCIAL POSITION:
Cash and cash equivalents............................. $ 1,258 $(1,258)(e) $ --
Net accounts receivable............................... 73,330 -- 73,330
Inventories........................................... 130,413 -- 130,413
Deferred tax assets................................... 5,200 -- 5,200
Other current assets.................................. 409 -- 409
-------- ------- --------
Total current assets........................ 210,610 -- 209,352
Assets held for sale.................................. 13,689 -- 13,689
Property, plant and equipment, net.................... 251,172 -- 251,172
Goodwill.............................................. 81,643 -- 81,643
Deferred financing costs.............................. 5,009 1,472(f) 6,481
Other assets.......................................... 7 -- 7
-------- ------- --------
Total assets................................ $562,130 $ 214 $562,344
-------- ------- --------
Trade accounts payables............................... $ 49,518 -- $ 49,518
Salaries, wages and employee benefits................. 16,469 -- 16,469
Current environmental remediation liabilities......... 4,863 -- 4,863
Other current liabilities............................. 5,126 (1,343)(g) 3,783
Interest payable...................................... 4,835 -- 4,835
Current maturities of long-term borrowings............ 7,106 -- 7,106
-------- ------- --------
Total current liabilities................... 87,917 (1,343) 86,574
Long-term borrowings, less current portion............ 214,465 3,658(h) 218,123
Other liabilities..................................... 23,433 -- 23,433
Deferred income taxes................................. 50,600 -- 50,600
Shareholders' equity
Class A common stock................................ -- -- --
Class B common stock................................ 106 -- 106
Capital in excess of par............................ 167,283 -- 167,283
Retained earnings................................... 19,886 (2,101)(i) 17,785
Deferred compensation............................... (1,560) -- (1,560)
-------- ------- --------
Total shareholders' equity.................. 185,715 -- 183,614
-------- ------- --------
Total liabilities and shareholders'
equity.................................... $562,130 $ 214 $562,344
-------- ------- --------
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
(a) Adjust annual interest expense to reflect new debt structure
consisting of the following: issuance of $130 million 8 3/4%
Senior Notes, redemption of $100 million 11 1/2% First
Mortgage Notes, payoff of $20 million Subordinated
Intercompany Note, and use of remaining proceeds to lower
outstanding borrowings under the Revolving Credit
Agreement................................................... $(2,063)
To reflect one-time net interest costs associated with 41
day period during which First Mortgage Notes may not be
redeemed, and 90 day period before Subordinated Intercompany
Note is paid off, partially offset by proceeds invested in
overnight funds............................................. $ 656
-------
Net interest expense adjustment............................. $(1,407)
=======
(b) Adjust amortization of deferred financing costs to reflect
Senior Notes annual expense of $300,000 and savings of
$556,000 related to First Mortgage Notes.................... $ (256)
=======
(c) Adjust income tax expense for adjustments in "a" and "b"
notes at 39% effective tax rate............................. $ 648
=======
</TABLE>
23
<PAGE> 26
<TABLE>
<S> <C> <C>
(d) Record extraordinary item to reflect writeoff of unamortized
deferred finance costs and call premium associated with
redemption of the First Mortgage Notes, net of 39% effective
tax charge.................................................. $(2,440)
=======
(e) To reflect use of available cash towards the costs
associated with the Refinancing............................. $(1,258)
=======
(f) To reflect the incurrence of $3,000 in deferred finance
costs associated with the Senior Notes and the writeoff of
$1,528 of unamortized deferred finance costs of the First
Mortgage Notes.............................................. $ 1,472
=======
(g) To reflect the tax benefit of the extraordinary charge
related to the redemption of the First Mortgage Notes....... $ 1,343
=======
(h) To adjust long term debt to reflect the difference between
the face value of the Senior Notes and the net proceeds, and
the call premium associated with the First Mortgage Notes
redemption, partially offset by the use of available
cash........................................................ $ 3,658
=======
(i) To reflect the after tax charge to retained earnings
associated with the writeoff of unamortized deferred finance
costs and the call premium related to the First Mortgage
Notes redemption............................................ $(2,101)
=======
</TABLE>
24
<PAGE> 27
SELECTED FINANCIAL DATA
The selected statement of operations and balance sheet data for the years
presented are derived from the audited financial statements of the Company. The
results for the year ended March 31, 1998 are not necessarily indicative of the
results to be expected for the fiscal year ending March 31, 1999. 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 presented are qualified in their entirety by reference to the
more detailed Consolidated 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>
YEAR ENDED MARCH 31,
----------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND AVERAGE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales.................................................. $547,118 $639,908 $628,404 $617,289 $664,566
Operating expenses:
Cost of sales............................................ 498,692 545,725 533,965 531,190 540,422
Selling and administrative............................... 27,293 29,959 29,605 29,068 27,811
Depreciation............................................. 15,369 14,046 14,619 16,654 19,494
Amortization of goodwill................................. 4,061 4,130 4,130 4,130 4,130
Other operating expenses(1).............................. 10,920 -- 16,013 -- --
-------- -------- -------- -------- --------
556,335 593,860 598,332 581,042 591,857
Income (loss) from operations.............................. (9,217) 46,048 30,072 36,247 72,709
Other expenses:
Interest................................................. 21,027 23,330 22,000 19,473 19,775
Amortization of deferred financing costs................. 2,552 2,863 1,956 934 652
-------- -------- -------- -------- --------
23,579 26,193 23,956 20,407 20,427
Income (loss) before income taxes (benefit) & extraordinary
item..................................................... (32,796) 19,855 6,116 15,840 52,282
Income taxes (benefit)..................................... (10,833) 9,354 3,996 7,788 22,000
-------- -------- -------- -------- --------
Income (loss) before extraordinary item.................... (21,963) 10,501 2,120 8,052 30,282
Extraordinary item, net of income tax benefit(2)........... (748) -- -- -- --
-------- -------- -------- -------- --------
Net income (loss).......................................... $(22,711) $ 10,501 $ 2,120 $ 8,052 $ 30,282
======== ======== ======== ======== ========
Earnings (loss) per common share -- basic.................. $ (2.27) $ 1.05 $ .21 $ .80 $ 3.00
======== ======== ======== ======== ========
Earnings (loss) per common share -- diluted................ $ (2.27) $ 1.05 $ .21 $ .80 $ 2.98
======== ======== ======== ======== ========
Cash dividends declared per common share................... $ -- $ -- $ -- $ -- $ .60
======== ======== ======== ======== ========
OTHER FINANCIAL DATA AND SELECTED RATIOS:
EBITDA(3).................................................. $ 19,313 $ 65,574 $ 64,033 $ 58,323 $100,556
EBITDA margin.............................................. 3.5% 10.2% 10.2% 9.4% 15.1%
Capital expenditures....................................... $ 18,193 $ 25,781 $ 36,894 $ 34,382 21,107
Ratio of EBITDA to interest expense(4)..................... 0.8x 2.5x 2.7x 2.9x 4.9x
Ratio of earnings to fixed charges(5)...................... * 1.7x 1.2x 1.7x 3.4x
Ratio of total debt to EBITDA.............................. 12.8x 4.0x 4.2x 4.1x 2.2x
BALANCE SHEET DATA (END OF PERIOD):
Current assets............................................. $187,672 $223,444 $200,109 $182,519 $210,610
Current liabilities........................................ 76,006 102,080 85,588 73,792 87,917
Working capital............................................ 111,666 121,364 114,521 108,727 122,693
Total assets............................................... 523,706 561,748 554,896 535,685 562,130
Long term debt............................................. 247,128 243,030 252,525 237,474 214,465
Shareholders' equity....................................... 124,999 137,750 141,747 150,564 185,715
</TABLE>
25
<PAGE> 28
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------
1994 1995 1996 1997 1998
----- ----- ----- ----- ------
(IN THOUSANDS, EXCEPT PER SHARE AND AVERAGE
DATA)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Shipped Tons
Stock rebar............................................... 466 536 508 472 550
Merchant bar.............................................. 468 549 544 512 576
Rod....................................................... 121 129 133 105 92
----- ----- ----- ----- ------
Subtotal mill finished goods.............................. 1,055 1,214 1,185 1,089 1,218
Fabricated rebar.......................................... 330 347 315 326 338
Billets................................................... 263 141 175 281 172
----- ----- ----- ----- ------
Total shipped tons........................................ 1,648 1,702 1,675 1,696 1,728
===== ===== ===== ===== ======
Average mill finished goods prices (per ton)................ $310 $342 $337 $333 $351
Average yielded scrap cost (per ton)........................ 119 130 131 130 133
Average metal spread (per ton)(6)........................... 191 212 206 203 218
Average mill conversion costs (per ton)..................... 146 135 135 138 129
</TABLE>
- ---------------
* Amount results in a deficiency.
(1) 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 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) EBITDA represents income from operations plus depreciation, amortization and
non-cash deferred compensation expense and excludes gains or losses from
asset sales and non-recurring charges. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to service
indebtedness and a similar measure is used in the Indenture to determine
compliance with certain covenants. However, EBITDA should not be considered
as an alternative to income from operations or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of a company's
operating performance or as a measure of liquidity.
(4) Interest expense includes amortization of deferred financing costs.
(5) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income tax provision and extraordinary item plus fixed
charges. Fixed charges consist of interest incurred (which includes
amortization of deferred financing costs) whether expensed or capitalized
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest. Earnings were
inadequate to cover fixed charges for fiscal 1994 by $7.6 million.
(6) Average metal spread equals average mill finished goods prices minus average
yielded scrap cost.
26
<PAGE> 29
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 Consolidated 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>
YEAR ENDED MARCH 31,
------------------------------
1996 1997 1998
-------- -------- --------
(IN THOUSANDS, EXCEPT
PERCENTAGES)
<S> <C> <C> <C>
Net sales................................................... $628,404 $617,289 $664,566
Cost of sales............................................... 533,965 531,190 540,422
Cost of sales as a percent of net sales..................... 85.0% 86.1% 81.3%
Selling and administrative.................................. 29,605 29,068 27,811
Depreciation................................................ 14,619 16,654 19,494
Amortization of goodwill.................................... 4,130 4,130 4,130
Other operating expenses.................................... 16,013 -- --
-------- -------- --------
Income from operations............................ $ 30,072 $ 36,247 $ 72,709
Interest expense............................................ 22,000 19,473 19,775
Amortization of deferred financing costs.................... 1,956 934 652
Income taxes................................................ 3,996 7,788 22,000
-------- -------- --------
Net income........................................ $ 2,120 $ 8,052 $ 30,282
======== ======== ========
</TABLE>
27
<PAGE> 30
FISCAL 1998 VERSUS FISCAL 1997
<TABLE>
<CAPTION>
TONS SHIPPED (THOUSANDS) AVERAGE SELLING PRICES (PER TON)
------------------------- --------------------------------
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
------------------------- --------------------------------
1997 1998 1997 1998
----- ----- ----------- -----------
<S> <C> <C> <C> <C>
Mill Finished Goods:
Stock Rebar............. 472 550 $316 $331
Merchant Bar............ 512 576 352 371
Rods.................... 105 92 322 345
----- ----- ---- ----
1,089 1,218 333 351
Fabricated Rebar.......... 326 338 451 456
Billets................... 281 172 227 234
----- -----
Total........... 1,696 1,728
===== =====
</TABLE>
NET SALES. Net sales in fiscal 1998 increased approximately 8% from fiscal
1997 as both prices and sales volumes of finished goods increased. Mill finished
goods sales prices increased over 5% and shipments increased approximately 12%.
The volume shift towards higher margin finished goods and away from
semi-finished billets is a direct result of higher production levels resulting
from completion and optimization of rolling mill modernization projects at the
Charlotte, Jacksonville and Jackson mills.
COST OF SALES. Increased production levels, lower average unit costs and
the shift of shipment mix towards higher margin finished steel products resulted
in cost of sales declining from approximately 86% of net sales to approximately
81% despite an average $3 per ton increase in scrap cost.
SELLING AND ADMINISTRATIVE. Selling and administrative expenses for the
year ended March 31, 1998 were 4.2% of net sales compared with 4.7% of net sales
in fiscal 1997. The decrease is attributable to one-time credits including a net
gain of $1.8 million on disposition of certain assets held for sale and receipt
of $6.8 million in connection with an insurance settlement. These were offset by
a charge of $1.2 million for expenses associated with the canceled initial
public offering and debt restructuring in December 1997, $2.6 million increased
provisions for incentive wages, $2.4 million increased environmental costs and
related professional fees and a $1.4 million charge related to startup expenses
associated with the electric arc furnace/emission control dust ("the EC dust")
recycling facility at the Jackson, Tennessee mill.
DEPRECIATION. Depreciation increased to $19.5 million in fiscal 1998 from
$16.7 million in fiscal 1997 due to increased capital expenditures at all four
mills during the last three years.
INTEREST EXPENSE. Interest expense increased from $19.5 million in fiscal
1997 to $19.8 million in fiscal 1998. Capitalized interest decreased from $2.0
million to $0.5 million in fiscal 1998 partially offset by a $16.3 million net
reduction in debt. Average annual interest rates increased moderately from 8.7%
in fiscal 1997 to 8.9% in fiscal 1998.
INCOME TAXES. The Company's effective federal and state income tax rate
for fiscal 1998 and 1997 was 39% excluding the effect of goodwill amortization,
which is not deductible for income tax purposes.
28
<PAGE> 31
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 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. In September 1995, the Company closed the Tampa
rolling mill. 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 I to March 31, 1998 consolidated 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.
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.
29
<PAGE> 32
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.
QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1997 1997 1997 1997 1998
------------- ------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT AVERAGE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS:
Net sales............ $149,433 $168,359 $175,446 $155,120 $165,641
Operating expenses:
Cost of sales...... 126,415 135,037 142,214 125,755 137,416
Selling and
administrative... 7,623 7,572 5,262 7,775 7,202
Depreciation....... 4,370 4,827 4,816 4,909 4,942
Amortization of
goodwill......... 1,033 1,033 1,032 1,033 1,032
-------- -------- -------- -------- --------
$139,441 $148,469 $153,324 $139,472 $150,592
Income from
operations....... 9,992 19,890 22,122 15,648 15,049
Other expense:
Interest........... 4,789 5,188 4,927 4,730 4,930
Amortization of
deferred
financing
costs............ 234 234 119 148 151
-------- -------- -------- -------- --------
$ 5,023 $ 5,422 $ 5,046 $ 4,878 $ 5,081
Income before income
taxes.............. 4,969 14,468 17,076 10,770 9,968
Income taxes......... 2,340 6,045 7,063 4,603 4,289
-------- -------- -------- -------- --------
Net
income.... $ 2,629 $ 8,423 $ 10,013 $ 6,167 $ 5,679
======== ======== ======== ======== ========
SELECTED OPERATING
DATA:
Shipped Tons
Stock rebar........ 125 140 151 124 135
Merchant bar....... 135 136 147 145 148
Rod................ 25 29 19 24 20
-------- -------- -------- -------- --------
Subtotal mill
finished goods... 285 305 317 293 303
Fabricated rebar... 74 85 89 80 84
Billets............ 47 56 50 28 38
-------- -------- -------- -------- --------
Total shipped
tons............. 406 446 456 401 425
======== ======== ======== ======== ========
Average mill finished
goods prices (per
ton)............... $ 334 $ 346 $ 352 $ 351 $ 354
Average yielded scrap
cost (per ton)..... 125 129 134 133 138
Average metal spread
(per ton).......... 209 217 218 218 216
Average mill
conversion costs
(per ton).......... 134 125 130 132 128
</TABLE>
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<PAGE> 33
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary financial obligations outstanding as of March 31,
1998 were the $100 million aggregate principal amount of First Mortgage Notes, a
$140 million revolving credit facility (the "Revolving Credit Agreement"), and a
$40 million aggregate principal amount Subordinated Intercompany Note with
maturity dates through February 25, 2004 and owed to the Holding Company.
In December 1997, the Company declared and paid a special dividend of $6.1
million to its stockholders at $0.60 per share.
On March 26, 1998 the Company sold 454,545 shares of Class B common stock
for $10 million to an institutional investor. The proceeds were used to retire
$10 million of Subordinated Intercompany Note.
On April 6, 1998 the Company sold $130 million of 8.75% Senior Notes. The
net proceeds of approximately $127.0 million were used first to redeem the $100
million First Mortgage Notes on May 11, 1998 at a price of 101.916% and $20
million will be used to redeem a portion of the Subordinated Intercompany Note
before June 30, 1998. The remaining proceeds will be used to reduce outstanding
Revolving Credit Agreement borrowings and for general corporate purposes. See
"Note L to March 31, 1998 consolidated financial statements -- Subsequent
Events" for further information regarding the $130 million Senior Notes.
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 March 31, 1998,
the Revolving Credit Agreement had a borrowing base of approximately $133.1
million, of which approximately $54.8 million was available to the Company for
further borrowings, $40.1 million was outstanding and $38.2 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 2015, respectively, and $1.5 million which is due November
1998 and is classified as short term.
The First Mortgage Notes, the new Senior 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."
Net cash provided by operating activities for the year ended March 31, 1998
was $35.5 million compared with $43.9 million for fiscal 1997. Cash flow from
net income increased by $22.2 million but was offset by a $30.8 million increase
in inventories. Accounts receivable also increased by $9.1 million due to
increased sales prices and volumes. The Company used $21.3 million to repay debt
and $21.1 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.
Over the years, the Company has expanded capacity by means of modernizing
and upgrading facilities. Capital expenditures were $21.1 million for the year
ended March 31, 1998, $34.4 million for the year ended March 31, 1997 and $36.9
million for the year ended March 31, 1996. The Company anticipates spending up
to $30.0 million for capital expenditures in fiscal 1999.
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<PAGE> 34
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.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS
131) 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 determined that the adoption of SFAS
131 will not have a material effect on the consolidated financial statements.
In February 1998, the Financial Accounting Standards Board issued Statement
No. 132, "Employers Disclosures about Pensions and Other Post Retirement
Benefits" (SFAS 132) which standardizes the disclosure requirements for defined
contribution plans and defined benefit plans. The statement is effective for
financial statements relating to fiscal years beginning after December 15, 1997.
Management has determined that the adoption of SFAS 132 will not have a material
effect on the consolidated financial statements.
YEAR 2000
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 and is currently in the middle of the implementation and
startup of this plan. Through March 31, 1998 the Company has spent approximately
$1.8 million towards the purchase of network compatible computer hardware and
software. The Company is currently in the process of migrating its core business
operating software from a mainframe environment to client server compatible
systems. The Company's main software programs are being re-written to comply
with both the new data processing foundation and to be Year 2000 compliant. In
addition, the Company has contracted with major software providers to implement
core financial, payroll, and database programs which will be fully integrated
with the Company's in-house operating software and systems. The Company believes
that it will be Year 2000 compliant without a material impact on its operations
or financial results.
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 welfare (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
$12.7 million and has included this amount in the Company's recorded liabilities
as of March 31, 1998. 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
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<PAGE> 35
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 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 I to March 31, 1998 consolidated 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.
OTHER MATTERS
The Company, through a third-party contractor and operator, constructed a
facility at the Company's Jackson mill designed to utilize a technology
developed by the third party to recycle the Company's EC dust which is 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 the 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 as crude zinc oxide. The residual of the dust exits
the furnace in the form of a reduced iron unit that can be fed into an electric
furnace as a scrap substitute. In the second stage of the process, the crude
zinc oxide is fed into a wet chemical process to extract lead and cadmium and
produce a high quality saleable zinc oxide.
The facility began operations in March 1997, however the second stage
operations are undergoing further development given that new technology is
involved in the process. In fiscal 1998, the contractor and third-party operator
of the facility defaulted under its agreements with the Company. As a result,
the Company expects to incur additional costs and capital expenditures in
connection with the development and operation of the facility. The Company's
depreciation policy for the facility, with a net book value of $23.3 million at
March 31, 1998, is to depreciate the facility over its expected remaining useful
life of 14 years and to periodically evaluate the remaining life and
recoverability of the equipment. There can be no assurance, however, that the
technology or the two-stage facility and process will be commercially developed
and operated on a cost efficient basis.
33
<PAGE> 36
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 four 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 year ended March 31, 1998,
approximately 24% of the Company's net sales were derived from fabricated rebar,
27% from stock rebar, 33% from merchant bars, 5% from rods and 11% from semi-
finished billets.
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<PAGE> 37
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.
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 $129 per ton for the year ended March 31, 1998. 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 $123 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 1,900 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.
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 1998 revenues of $168.7
million, or approximately 25% 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
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<PAGE> 38
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.
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,
---------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Fabricated Rebar............................................ 24% 24% 24%
Stock Rebar................................................. 25 24 27
Merchant Bars............................................... 32 30 33
Rods........................................................ 7 5 5
Billets and other........................................... 12 17 11
--- --- ---
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.
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<PAGE> 39
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 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") 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. Based on the latest industry data of apparent rebar consumption by region
from CRSI's 1996 data, AmeriSteel has a 13% market share in the continental U.S.
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.
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 14.1 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.
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<PAGE> 40
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
1998 no one customer accounted for more than 4.9% of net sales and the five
largest customers accounted for approximately 12.2% 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 205,000 tons at March 31, 1998. The Company expects almost all
of the backlog at March 31, 1998 to be filled through the third quarter fiscal
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.
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.
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<PAGE> 41
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>
ANNUAL FISCAL 1998 CAPACITY FISCAL 1998 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 450 443 98% 400 346 87%
Jackson, TN.......... 1981 600 570 95 480 454 95
Jacksonville, FL..... 1976 600 553 92 510 504 99
Knoxville, TN........ 1987(1) 330 309 94 360 348 97
----- ----- -- ----- ----- --
Total....... 1,980 1,875 95% 1,750 1,652 94%
===== ===== == ===== ===== ==
</TABLE>
- ---------------
(1) Purchase Date
The Company's four minimills, together with certain other assets, served 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 was completed in December 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.
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<PAGE> 42
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.
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.
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>
40
<PAGE> 43
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 46% of the Company's costs of sales in fiscal 1998. 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 is using
DJJ 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 and DJJ are currently renegotiating
their arrangements. 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.
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 1998:
<TABLE>
<CAPTION>
APPROXIMATE
ANNUAL COST
MILL SUPPLIER CENTS/KWH (IN MILLIONS)
- ---- -------- --------- -------------
<S> <C> <C> <C>
Jackson................................................ TVA 2.6 $8.2
Knoxville.............................................. TVA/KUB 2.8 5.3
Charlotte.............................................. Duke 2.5 6.4
Jacksonville........................................... FP&L 3.9 12.1
</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.
41
<PAGE> 44
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 Financial Condition and
Results of Operations -- Compliance with Environmental Laws and Regulations" and
"Note I to March 31, 1998 consolidated 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.
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 33% 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.
42
<PAGE> 45
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 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 March 31, 1998, the Company had 1,895 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 March 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF
GROUP EMPLOYEES
- ----- ----------
<S> <C>
Mills
Jackson................................................... 305
Knoxville................................................. 212
Jacksonville.............................................. 276
Charlotte................................................. 268
-----
Total Mills....................................... 1,061
Mill Sales.................................................. 25
Fabricating................................................. 535
Rail/Atlas.................................................. 181
Corporate................................................... 93
-----
Total Company..................................... 1,895
=====
</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 55 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
43
<PAGE> 46
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Compliance with Environmental Laws and Regulations" and "Note I to
March 31, 1998 consolidated financial statements -- Environmental Matters" for a
discussion of the Company's liabilities with respect to the investigation and/or
remediation at certain sites.
44
<PAGE> 47
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Board of Directors consists of eight members. 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..................... 55 Chairman of the Board, Chief Executive Officer and
Director
J. Donald Haney...................... 62 Group Vice President, Fabricated Reinforcing Steel, and
Director
Shuzo Hikita......................... 55 Vice President, Engineering and Technology, and Director
Tom J. Landa......................... 46 Vice President, Chief Financial Officer, Secretary and
Director
Koichi Takashima..................... 75 Director
Akihiko Takashima.................... 61 Director
Hideichiro Takashima................. 40 Director
Ryutaro Yoshioka..................... 59 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.................. 50 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.
45
<PAGE> 48
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.
46
<PAGE> 49
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.
EXECUTIVE COMPENSATION
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 recent 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"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
------------------------------------------
SECURITIES
ANNUAL COMPENSATION 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.............. 1998 $255,000 $255,000 $ -- -- $4,750
Chairman of the Board 1997 255,000 65,687 -- -- 3,278
and Chief Executive 1996 255,000 80,453 -- -- 4,617
Officer
J. Donald Haney............... 1998 216,684 219,120 33,750 2,700 4,334
Group Vice President, 1997 210,954 53,893 -- 3,500 3,032
Fabricated Reinforcing 1996 196,974 64,445 -- 1,368 2,620
Steel
Tom J. Landa.................. 1998 176,886 179,016 33,750 2,500 3,537
Vice President and 1997 170,217 43,886 -- -- 3,647
Chief Financial 1996 160,389 153,019 150,000 12,960 --
Officer(3)
Dennie Andrew................. 1998 165,960 166,956 33,750 2,500 3,319
Vice President, Steel 1997 84,588 26,227 -- 3,000 2,939
Mill Operations(4)
James S. Rogers, II........... 1998 129,514 129,514 33,750 2,000 2,590
Vice President, Human
Resources(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 the 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, Andrew and Rogers 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.
(3) Includes a $100,000 signing bonus pursuant to Mr. Landa's employment offer
in March 1995.
(4) Mr. Andrew was promoted to an Executive Officer position in October 1997. He
was not employed by the Company in the 1996 fiscal year.
(5) Mr. Rogers was hired as an Executive Officer in fiscal 1998.
47
<PAGE> 50
Options Grants Table
The following table shows information concerning stock options granted
during fiscal 1998 for each Named Executive Officer.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED
-------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ----------- ------------ -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Phillip E. Casey............. -- -- -- -- -- --
J. Donald Haney.............. 2,700 3.71% $13.50 06/05/07 22,923 58,092
Tom J. Landa................. 2,500 3.44 13.50 06/05/07 21,225 53,789
Dennie Andrew................ 2,500 3.44 13.50 06/05/07 21,225 53,789
James S. Rogers, II.......... 2,000 2.75 13.50 06/05/07 16,980 43,030
</TABLE>
The options were granted under the Company's 1998 Equity Ownership Plan and
vest over three years beginning April 1, 1999 at an exercise price of $13.50 per
share.
Option Exercises and Year-End Value Table
No stock options were exercised by any of the Company's executive officers
during fiscal 1998. The following table shows information concerning stock
option values as of the end of fiscal 1998 for each Named Executive Officer.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR-END (#) YEAR-END ($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ---- ------------------------- ----------------------------
<S> <C> <C>
Phillip E. Casey...................... 0/0 0/0
J. Donald Haney....................... 456/7,112 456/4,412
Tom J. Landa.......................... 4,320/11,140 4,320/8,640
Dennie Andrew......................... 0/5,500 0/3,000
James S. Rogers, II................... 0/2,000 0/0
</TABLE>
- ---------------
(1) The latest appraisal of the Company's common stock, made as of March 31,
1998, sets forth a fair market value per share of $20.00, which is the
exercise price of all options.
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................................. $ 26,887 $ 33,609 $ 40,331 $ 47,053 $ 52,053
150,000................................. 41,887 52,359 62,831 73,303 80,803
200,000................................. 56,887 71,109 85,331 99,553 109,553
235,000................................. 67,387 84,234 101,081 117,928 129,678
250,000................................. 71,887 89,859 107,831 125,803 138,303
300,000................................. 86,887 108,609 130,331 152,053 167,053
350,000................................. 101,887 127,359 152,831 178,303 195,803
</TABLE>
48
<PAGE> 51
Under the Retirement Plan, the compensation taken into account generally
includes all salary, bonuses and other taxable compensation subject to an annual
compensation limit, which currently is $160,000. As of March 31, 1998, the final
average compensation and years of credited service for the Named Executive
Officers for purposes of the Retirement Plan were as follows: $158,769 and four
years for Phillip E. Casey; $198,896 for benefits earned through September 30,
1994 and $151,428 for benefits earned subsequently and 40 years for J. Donald
Haney; $151, 667 and three years for Tom J. Landa; $152,895 and two years for
Dennie Andrew; and $160,000 and 17 years for James S. Rogers, II. The benefits
under the Retirement Plan are not subject to any deduction for Social Security
or other offset amounts.
EXECUTIVE EMPLOYMENT AGREEMENT
Effective June 1, 1994, the Company entered into a five-year 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.
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 238,902 shares of Class A Common Stock are reserved for issuance
under the plan. An aggregate of 147,500 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 1/2% each year beginning approximately two years after the date
of grant and expire after 10 years. The Board of Directors may 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 1/2% 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 March 31, 1998, an aggregate of
30,444 shares of Class B Common Stock purchased by employees under the plan
remain outstanding, and an aggregate of 180,474 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.
49
<PAGE> 52
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Executive Compensation Committee are Koichi
Takashima, Hidelchiro 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 1998. 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 $408,000, $2,000 and $49,000 in fiscal 1996, 1997 and 1998,
respectively.
50
<PAGE> 53
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Class B Common Stock as of the date of
this Offering Memorandum 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. No shares of Class A Common Stock are outstanding.
BENEFICIAL OWNERSHIP(1)
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER COMMON STOCK(2)
--------- ---------------
<S> <C> <C>
Kyoei Steel, Ltd.(3)........................................ 9,000,000 85.2
Phillip E. Casey(4)......................................... 1,005,792 9.5
J. Donald Haney............................................. 6,676 *
Tom J. Landa................................................ 14,660 *
Koichi Takashima............................................ 500 *
Akihiko Takashima........................................... 0 --
Hideichiro Takashima........................................ 300 *
Ryutaro Yoshioka............................................ 0 --
Dennie Andrew............................................... 2,500 *
James S. Rogers, II......................................... 2,500 *
All Directors and Executive Officers as a Group (13
persons).................................................. 1,042,095 9.9
</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) Reflects the Equity Investment.
(3) 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.
(4) 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. Mr. Casey's address is 5100 W. Lemon Street, Suite 312,
Tampa, Florida 33609.
DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS
REVOLVING CREDIT AGREEMENT
On June 9, 1995, the Company entered into a revolving credit agreement (as
amended and extended, the "Revolving Credit Agreement"), which provides up to
$140 million in borrowings subject to a "borrowing base." The borrowing base is
an amount not to exceed the sum of 85% of eligible accounts receivable plus 65%
of eligible inventory (as such terms are defined in the Revolving Credit
Agreement). Letters of credit are subject to an aggregate sublimit of $50
million. The Revolving Credit Agreement expires on June 9, 1999.
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<PAGE> 54
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.
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, 1998 was 7.1%.
As of March 31, 1998, the Company had approximately $40 million in
outstanding borrowings and approximately $41 million of outstanding letters of
credit under the Revolving Credit Agreement, primarily to secure repayment of
amounts borrowed through industrial revenue bonds and for insurance-related
matters and surety bonds.
SUBORDINATED INTERCOMPANY NOTE
The Company has issued to FLS a $40 million promissory note (the
"Subordinated Intercompany Note") with maturing dates through February 25, 2004.
The Subordinated Intercompany Note bears interest at a variable rate based on
the lesser of the Eurodollar rate plus .7% or 12%. The weighted average interest
rate at March 31, 1998 was approximately 7.6%. The Subordinated Intercompany
Note is subordinate to Senior Indebtedness.
FLS, in turn, owes two institutional lenders an aggregate principal amount
equal to the principal amount outstanding under the Subordinated Intercompany
Note. Of these borrowings, $20 million matures in 2003 and the remaining $20
million matures in 2004.
INDUSTRIAL REVENUE BONDS
The Company also has $35.9 million in 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. $1.5 million of the IRBs matures in fiscal 1999, $9.4 million
matures in fiscal 2004, $5.0 million matures in fiscal 2015 and the remaining
$20 million matures in fiscal 2018. The IRBs are backed by irrevocable letters
of credit issued pursuant to the Revolving Credit Agreement.
DESCRIPTION OF NEW NOTES
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that (i) the New Notes
have been registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof and (ii) holders of the New Notes will
not be, and upon consummation of the Exchange Offer, holders of the Old Notes
will no longer be, entitled to certain rights under the Registration Rights
Agreement intended for the holders of unregistered securities, except in limited
circumstances. The Exchange Offer shall be deemed consummated upon the
occurrence of the delivery by the Company to the Registrar under the Indenture
of the New Notes in the same aggregate principal amount as the aggregate
principal amount of Old Notes that are tendered by holders thereof pursuant to
the Exchange Offer. See "The Exchange Offer -- Termination" and "Procedures for
Tendering" and "Description of Notes."
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<PAGE> 55
THE EXCHANGE OFFER
GENERAL
The Company, the Subsidiary Guarantors and the Initial Purchaser have
entered into a Registration Rights Agreement on March 30, 1998. Pursuant to the
Registration Rights Agreement the Company and the Subsidiary Guarantors have
agreed, for the benefit of the Holders (as defined herein), at the expense of
the Company and the Subsidiary Guarantors, to (i) file on or prior to the 60th
calendar day following the Closing Date a Registration Statement with the
Commission with respect to a registered offer to exchange the Old Notes for
Exchange Notes to be issued under the Indenture in the same aggregate principal
amount as and with terms that will be identical in all respects to the Old Notes
(except that the Exchange Notes will not contain terms with respect to the
interest rate step-up provision and transfer restrictions), (ii) use its best
efforts to cause the Registration Statement to be declared effective under the
Securities Act on or prior to the 120th calendar day following the Closing Date
and (iii) use its best efforts to consummate the Exchange Offer on or prior to
the 150th calendar day following the Closing Date. Promptly after the
Registration Statement is declared effective, the Company will offer the
Exchange Notes in exchange for surrender of the Old Notes. The Company will keep
the Exchange Offer open for not less than 30 days and not more than 45 days (or
longer if required by applicable law) after the date notice of the Exchange
Offer is mailed to the Holders. For each Old Note tendered to the Company
pursuant to the Exchange Offer and not validly withdrawn by the Holder thereof,
the Holder of such Old Note will receive an Exchange Note having a principal
amount equal to the principal amount of such surrendered Old Note.
Based on existing interpretations of the Securities Act by the staff of the
commission set forth in several no-action letters to third parties, and subject
to the immediately following sentence, the Company believes that the Exchange
Notes that will be issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by a holder (other than (i) a
broker-dealer who purchased the Old Notes directly from the Company for resale
pursuant to Rule 144A under the Securities Act or any other available exemption
under the Securities Act or (ii) a person that is an affiliate of the Company
within the meaning of Rule 405 under the Securities Act), without compliance
with the registration and prospectus delivery provision of the Securities Act.
However, any purchaser of Old Notes who is an "affiliate" of the Company or who
intends to participate in the Exchange Offer for the purpose of distributing the
Exchange Notes (i) will not be able to rely on the interpretation by the staff
of the Commission set forth in the above-mentioned no-actions letters, (ii) will
not be able to tender its Old Notes in the Exchange Offer and (iii) must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any sale or transfer of the Old Notes unless such sale or
transfer is made pursuant to an exemption from such requirements.
TERMS OF THE EXCHANGE OFFER
Each Holder who wishes to exchange Old Notes for Exchange Notes in the
Exchange Offer will be required to represent that (i) it is not an affiliate of
the Company, (ii) any Exchange Notes to be received by it were acquired in the
ordinary course of its business and (iii) at the time of commencement of the
Exchange Offer, it has no arrangement with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes.
In addition, in connection with any resales of Exchange Notes, any broker-dealer
(an "Exchanging Dealer") who acquired the Notes for its own account as a result
of market-making activities or other trading activities must deliver a
prospectus meeting the requirements of the Securities Act. The Commission has
taken the position that Exchanging Dealers may fulfill their prospectus delivery
requirements with respect to the Exchange Notes (other than a resale of an
unsold allotment from the original sale of the Notes) with the prospectus
contained in the Registration Statement. Under the Registration Rights
53
<PAGE> 56
Agreement, the Company is required to allow Exchanging Dealers to use the
prospectus contained in the Registration Statement in connection with the resale
of such Exchange Notes.
In the event that any changes in law or applicable interpretations of the
staff of the Commission do not permit the Company to effect the Exchange Offer,
or if for any reason the Exchange Offer is not consummated within 150 days of
the Closing Date or in certain other circumstances, the Company and the
Subsidiary Guarantors will, at their expense, (i) as promptly as practicable,
and in any event on or prior to 30 days after such filing obligation arises (and
within 180 days after the Closing Date), file with the Commission a shelf
registration statement (the "Shelf Registration Statement") covering resales of
the Old Notes, (ii) use their best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act on or prior to 45
days after such filing occurs and (iii) keep effective the Shelf Registration
Statement until two years after its effective date (or such shorter period that
will terminate when all the Old Notes covered thereby have been sold pursuant
thereto or in certain other circumstances). The Company will, in the event of
the filing of a Shelf Registration Statement, provide to each Holder covered by
the Shelf Registration Statement copies of the prospectus that is a part of the
Shelf Registration Statement, notify each such Holder when the Shelf
Registration Statement for the Old Notes has become effective and take certain
other actions as are required to permit unrestricted resales of the Old Notes. A
Holder that sells such Old Notes pursuant to the Shelf Registration Statement
generally will be required to be named as a selling securityholder in the
related prospectus and to deliver a prospectus to the purchaser, will be subject
to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement that are applicable to such Holder (including
certain indemnification obligations). In addition, each Holder will be required
to deliver certain information to be used in connection with the Shelf
Registration Statement in order to have its Old Notes included in the Shelf
Registration Statement.
In the event that either (a) the Registration Statement is not filed with
the Commission on or prior to the 60th calendar day following the Closing Date
or (b) the Exchange Offer is not consummated or a Shelf Registration Statement
is not declared effective on or prior to the 150th calendar day following the
Closing Date, the interest rate borne by the Old Notes will be increased by 0.5
percent per annum for the first 30 days following the 60-day period referred to
in clause (a) above or the first 90 days following the 150-day period referred
to in clause (b) above. Such interest will increase by an additional 0.5 percent
per annum at the beginning of each subsequent 30-day period in the case of
clause (a) above or 90-day period in the case of clause (b) above; provided,
however, that in no event will the interest rate borne by the Old Notes be
increased by more than 1.5 percent. Upon the filing of the Registration
Statement, the consummation of the Exchange Offer or the effectiveness of a
Shelf Registration Statement, as the case may be, the interest rate borne by the
Old Notes from the date of such filing, consummation or effectiveness, as the
case may be, will be reduced to the original interest rate set forth on the
cover of this Prospectus; provided, however, that, if after any such reduction
in interest rate, a different event specified in clause (a) or (b) above occurs,
the interest rate may again be increased pursuant to the foregoing provisions.
The summary herein of certain provisions of the Registration Rights
Agreement does no purport to be complete and is qualified in its entirety by
reference to the Registration Rights Agreement.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all Old
Notes validly tendered prior to 5:00 p.m., New York City time, on the Expiration
Date. The Company will issue $1,000 in principal amount of New Notes (and
integral multiples in excess thereof) in exchange for an equal principal amount
of outstanding Old Notes tendered and accepted in the Exchange Offer. Holders
may tender some or all of their Old Notes pursuant to the Exchange Offer in any
denomination of $1,000 or in integral multiples in excess thereof.
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes that the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be
54
<PAGE> 57
offered for resale, resold and otherwise transferred by holders thereof (other
than any such holder that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the distribution
of such New Notes. Any holder of Old Notes who tenders in the Exchange Offer for
the purpose of participating in a distribution of the New Notes cannot rely on
such interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes.
The form and terms of the New Notes will be the same as the form and terms
of the Old Notes except that the New Notes will not bear legends restricting the
transfer thereof. The New Notes will evidence the same debt as the Old Notes.
The New Notes will be issued under and entitled to the benefits of the
Indenture.
As of the date of this Prospectus, $130,000,000 million aggregate principal
amount of the Old Notes are outstanding and CEDE & Co., the nominee of DTC, is
the only registered holder thereof. In connection with the issuance of the Old
Notes, the Company arranged for the Old Notes to be eligible for trading in the
PORTAL Market, the National Association of Securities Dealers' screen based,
automated market trading of securities eligible for resale under Rule 144A, and
to be issued and transferable in book-entry form through the facilities of DTC.
The New Notes will also be issuable and transferable in book-entry form through
DTC.
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of , 1998 (the "Record
Date").
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. See "Exchange Agent." The Exchange Agent will act as agent for
the tendering holders of Old Notes for the purpose of receiving New Notes from
the Company and delivering New Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"Fees and Expenses."
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Exchange Act and the rules and regulations of the Commission thereunder.
Old Notes that are not tendered for exchange in the Exchange Offer will remain
outstanding and continue to accrue interest, but will not be entitled to any
rights or benefits under the Registration Rights Agreement.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m. New York City time, on
, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date to which the Exchange Offer is extended.
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<PAGE> 58
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is extending the
Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Old Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and to refuse to
accept Old Notes not previously accepted, if any of the conditions set forth
herein under "Termination" shall have occurred and shall not have been waived by
the Company (if permitted to be waived by the Company), by giving oral or
written notice of such delay, extension or termination to the Exchange Agent,
and (ii) to amend the terms of the Exchange Offer in any manner, deemed by it to
be advantageous to the holders of the Old Notes. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment in a manner reasonably calculated to inform the
holders of the Old Notes of such amendment.
Without limiting the manner in which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, the Company shall have no obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from the last Interest Payment Date on
which interest was paid on the Old Notes, or if interest has not yet been paid
on the Old Notes, from April 3, 1998. Such interest will be paid with the first
interest payment on the New Notes. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the New Notes.
The New Notes will bear interest at a rate of 8 3/4% per annum. Interest on
the New Notes will be payable semi-annually, in arrears on each Interest Payment
Date following the consummation of the Exchange Offer. Untendered Old Notes that
are not exchanged for New Notes pursuant to the Exchange Offer will bear
interest at a rate of 8 3/4% per annum after the Expiration Date.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes (unless the book-entry transfer procedures described below are used) and
any other required documents, to the Exchange Agent for receipt prior to 5:00
p.m., New York City time, on the Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account in
accordance with DTC's procedure for such transfer Although delivery of Old Notes
may be effected through book-entry transfer into the Exchange Agent's account at
DTC, the Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, must, in any case, be
transmitted to and received or confirmed by the Exchange Agent at its addresses
set forth in this Prospectus prior to 5:00 p.m., New York City time, on the
Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
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<PAGE> 59
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. Holders may also request that their respective brokers,
dealers, commercial banks, trust companies or nominees effect such tender for
such holders.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes should
be sent to the Company.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Company or any other person
who has obtained a properly completed bond power from the registered holder or
any person whose Old Notes are held of record by DTC who desires to deliver such
Old Notes by book-entry Transfer at DTC.
Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial holder wishes to
tender on his own behalf, such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such holder's
name or obtain a properly completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution") that is a participant
in a recognized medallion signature guarantee program unless the Old Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by appropriate bond powers which authorize such person
to tender the Old Notes on behalf of the registered holder, in either case
signed as the name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
submit evidence satisfactory to the Company of their authority to so act with
the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the absolute right to waive any irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
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<PAGE> 60
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Old Notes nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such irregularities have
been cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost by the Exchange Agent to the
tendering holder of such Old Notes unless otherwise provided in the Letter of
Transmittal as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date, or, as set forth under "Termination," to terminate the
Exchange Offer and (b) to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers may differ from the terms of the Exchange
Offer.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or if such holder cannot complete the procedure for book-entry
transfer on a timely basis, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of
Old Notes tendered, stating that the tender is being made thereby, and
guaranteeing that, within three business days after the Expiration Date,
the Letter of Transmittal (or facsimile thereof), together with the
certificate(s) representing the Old Notes (unless the book-entry transfer
procedures are to be used) to be tendered in proper form for transfer and
any other documents required by the Letter of Transmittal, will be
deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Old Notes in proper form for transfer (or confirmation of a
book-entry transfer into the Exchange Agent's account at DTC of Old Notes
delivered electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within three business days
after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the
Depositor in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any
58
<PAGE> 61
required signature guarantees) or be accompanied by documents of transfer
sufficient to permit the Trustee with respect to the Old Notes to register the
transfer of such Old Notes into the name of the Depositor withdrawing the tender
and (iv) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) of such withdrawal notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer, and no New Notes will be issued
with respect thereto unless the Old Notes so withdrawn are validly retendered.
Any Old Notes that have been tendered but which are not accepted for exchange
will be returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under "Procedures for Tendering" at any time prior to
the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange New Notes for any Old Notes not
theretofore accepted for exchange, and may terminate or amend the Exchange Offer
as provided herein before the acceptance of such Old Notes if: (i) any action or
proceeding is instituted or threatened in any court or by or before any
governmental agency with respect to the Exchange Offer, which, in the Company's
judgment, might materially impair the Company's ability to proceed with the
exchange Offer or (ii) any law, statute, rule or regulation is proposed, adopted
or enacted, or any existing law, statute, rule or regulation is interpreted by
the staff of the Commission in a manner, which, in the Company's judgment, might
materially impair the Company's ability to proceed with the Exchange Offer.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject to the rights of such holders of tendered Old Notes to
withdraw their tendered Old Notes, or (iii) waive such termination event with
respect to the Exchange Offer and accept all properly tendered Old Notes that
have not been withdrawn. If such waiver constitutes a material change in the
Exchange Offer, the Company will disclose such change by means of a supplement
to this Prospectus that will be distributed to each registered holder of Old
Notes, and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the waiver and the manner
of disclosure to the registered holders of the Old Notes, if the Exchange Offer
would otherwise expire during such period.
EXCHANGE AGENT
The State Street Bank and Trust Company has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance and requests
for additional copies of this Prospectus or of the Letter of Transmittal should
be directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery:
</TABLE>
By Facsimile for Eligible Institutions:
(212) .
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FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or by telephone.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Old Notes and in handling or
forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes not tendered or accepted for exchange are to
be delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Old Notes tendered, or if tendered Old
Notes are registered in the name of any person other than the person signing the
Letter of Transmittal, or if a transfer tax is imposed for any reason other than
the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value, as reflected in the Company's accounting records on the
date of the exchange. Accordingly, no gain or loss for accounting purposes will
be recognized by the Company upon the consummation of the Exchange Offer. The
expenses of the Exchange Offer will be amortized by the Company over the term of
the New Notes under generally accepted accounting principles.
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DESCRIPTION OF THE NOTES
GENERAL
The Notes offered hereby were initially issued under an indenture dated
April 3, 1998 among the Company, as issuer, each of the Company's Restricted
Subsidiaries, as Guarantors, and State Street Bank and Trust Company, as
Trustee, a copy of the form of which will be made available to prospective
purchasers of the Notes upon request. Upon the issuance of the Exchange Notes,
or the effectiveness of the Shelf Registration Statement, the Indenture will be
subject to and governed by the Trust Indenture Act of 1939, as amended. The
following summary of the material provisions of the Indenture does not purport
to be complete and is subject to, and qualified in its entirety by, reference to
the provisions of the Indenture, including the definitions of certain terms
contained therein and those terms made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended. For definitions of certain capitalized
terms used in the following summary, see "Certain Definitions" below.
PRINCIPAL, MATURITY AND INTEREST
The Notes will mature on April 15, 2008, will be limited in aggregate
principal amount to $130 million and will be senior unsecured obligations of the
Company. The Indenture provides for the issuance of up to $100 million aggregate
principal amount of additional Notes having identical terms and conditions to
the Notes offered hereby (the "Additional Notes"), subject to compliance with
the covenants contained in the Indenture. Any Additional Notes will be part of
the same issue as the Notes offered hereby and will vote on all matters with the
Notes offered hereby. For purposes of this "Description of the Notes," reference
to the Notes does not include Additional Notes. Interest on the Notes will
accrue at the rate of 8 3/4% per annum and will be payable semi-annually on each
October 15 and April 15, commencing October 15, 1998, to the Holders of record
on the immediately preceding October 1 and April 1. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the original date of issuance (the "Issue Date").
Interest will be computed on the basis of a 360-day year comprising twelve
30-day months. The Notes will be payable both as to principal and interest at
the office or agency of the Company in The City of New York maintained for such
purposes (which initially will be the office of the Trustee located at 61
Broadway, 15th Floor, New York, New York 10006) or, at the option of the
Company, payment of interest may be paid by check mailed to the address of the
person entitled thereto as such address appears in the security register. The
Notes will be issued only in registered form without coupons and only in
denominations of $1,000 and any integral multiple thereof. No service charge
will be made for any registration of transfer or exchange or redemption of
Notes, but the Company may require payment in certain circumstances of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith.
Notes that remain outstanding after the consummation of the Exchange Offer
and Exchange Notes issued in connection with the Exchange Offer will be treated
as a single class of securities under the Indenture.
The Notes will not be entitled to the benefit of any sinking fund.
RANKING
The Notes will be senior unsecured obligations of the Company, ranking
senior in right of payment to all future subordinated Indebtedness of the
Company and pari passu with all existing and future senior Indebtedness of the
Company.
SUBSIDIARY GUARANTEES
Payment of the principal of (and premium, if any) and interest on the
Notes, when and as the same become due and payable, will be guaranteed, jointly
and severally, on a senior unsecured basis
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(the "Subsidiary Guarantees") by the Subsidiary Guarantors referred to below.
The obligations of the Subsidiary Guarantors under the Subsidiary Guarantees
will be limited so as not to constitute a fraudulent conveyance under applicable
law. See "Risk Factors -- Fraudulent Conveyance Considerations."
As of the Closing Date, the Company will have no Subsidiaries other than
AmeriSteel Finance, Inc. The Indenture requires that AmeriSteel Finance, Inc.
and each future Restricted Subsidiary be a Subsidiary Guarantor. Under certain
circumstances, the Company will be able to designate future Subsidiaries as
Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to many
of the restrictive covenants set forth in the Indenture and will not be
Subsidiary Guarantors.
The Indenture provides that, in the event of a sale, transfer or other
disposition of all of the Capital Stock of a Subsidiary Guarantor to a person
that is not an Affiliate of the Company in compliance with the terms of the
Indenture, or in the event all or substantially all of the assets of a
Subsidiary Guarantor are sold, transferred or otherwise disposed of to a person
that is not an Affiliate of the Company in compliance with the terms of the
Indenture, then such Subsidiary Guarantor will be deemed automatically and
unconditionally released and discharged from all of its obligations under its
Subsidiary Guarantee without any further action on the part of the Trustee or
any Holder; provided that the Net Cash Proceeds of such sale, transfer or other
disposition are applied in accordance with "-- Repurchase at the Option of
Holders -- Asset Sales." In addition, any Subsidiary Guarantor that is
designated as an Unrestricted Subsidiary in accordance with the terms of the
Indenture may be released and relieved of its obligations under its Subsidiary
Guarantee.
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to April 15,
2003. Thereafter, the Notes will be redeemable, at the option of the Company, as
a whole or from time to time in part, on not less than 30 nor more than 60 days'
prior notice to the Holders at the redemption prices (expressed as percentages
of principal amount) set forth below, together with accrued interest, if any, to
the redemption date, if redeemed during the 12-month period beginning on April
15 of the years indicated below (subject to the right of holders of record on
the relevant record date to receive interest due on an interest payment date):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2003........................................................ 104.375%
2004........................................................ 102.917%
2005........................................................ 101.458%
2006 and thereafter......................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time or from time to time on or prior
to April 15, 2001, the Company may redeem, on one or more occasions, up to 35%
of the sum of (i) the initial aggregate principal amount of the Notes and (ii)
the initial aggregate principal amount of any Additional Notes with the net
proceeds of one or more Public Equity Offerings at a redemption price equal to
108.75% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the redemption date (subject to the right of holders of record on the
relevant record date to receive interest due on an interest payment date);
provided that, immediately after giving effect to such redemption, at least 65%
of the initial aggregate principal amount of the Notes (excluding the Additional
Notes) remains outstanding; and provided further that such redemptions shall
occur within 60 days of the date of closing of each Public Equity Offering.
If less than all the Notes or Additional Notes, if any, are to be redeemed,
the particular Notes or Additional Notes to be redeemed will be selected not
more than 60 days prior to the redemption date by the Trustee by such method as
the Trustee deems fair and appropriate.
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MANDATORY REDEMPTION
Except as set forth below under "-- Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
If a Change of Control occurs at any time, then each Holder will have the
right to require that the Company purchase such Holder's Notes, in whole or in
part in integral multiples of $1,000, at a purchase price in cash equal to 101%
of the principal amount of such Notes, plus accrued and unpaid interest, if any,
to the date of purchase, pursuant to the offer described below (the "Change of
Control Offer") and the other procedures set forth in the Indenture.
Within 30 days following any Change of Control, the Company will notify the
Trustee thereof and give written notice of such Change of Control to each Holder
of Notes and Additional Notes by first-class mail, postage prepaid, at its
address appearing in the security register, stating, among other things: (i) the
purchase price and the purchase date, which will be a Business Day no earlier
than 30 days nor later than 60 days from the date such notice is mailed or such
later date as is necessary to comply with requirements under the Exchange Act;
(ii) that any Note or Additional Note not tendered will continue to accrue
interest; (iii) that, unless the Company defaults in the payment of the purchase
price, any Notes or Additional Notes accepted for payment pursuant to the Change
of Control Offer will cease to accrue interest after the Change of Control
purchase date; and (iv) certain other procedures that a Holder must follow to
accept a Change of Control Offer or to withdraw such acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the Notes and Additional Notes that might be tendered by Holders of Notes and
Additional Notes seeking to accept the Change of Control Offer. The failure of
the Company to make or consummate the Change of Control Offer or pay the
applicable Change of Control purchase price when due would result in an Event of
Default and would give the Trustee and the Holders of Notes and Additional Notes
the rights described under "-- Events of Default and Remedies."
One of the events that constitutes a Change of Control under the Indenture
is the disposition of "all or substantially all" of the Company's assets. This
term has not been interpreted under New York law (which is the governing law of
the Indenture) to represent a specific quantitative test. As a consequence, in
the event Holders of Notes and Additional Notes elect to require the Company to
purchase Notes and Additional Notes and the Company elects to contest such
election, there can be no assurance as to how a court interpreting New York law
would interpret the phrase in many circumstances.
The existence of a Holder's right to require the Company to purchase such
Holder's Notes or Additional Notes upon a Change of Control may deter a third
party from acquiring the Company in a transaction that constitutes a Change of
Control.
The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford Holders of Notes or Additional
Notes the right to require the Company to repurchase such Notes or Additional
Notes in the event of a highly leveraged transaction or certain transactions
with the Company's management or its affiliates, including a reorganization,
restructuring, merger or similar transaction involving the Company (including,
in certain circumstances, an acquisition of the Company by management or its
affiliates) that may adversely affect Holders, if such transaction is not a
transaction defined as a Change of Control. See "-- Certain Definitions" below
for the definition of "Change of Control." A transaction involving the Company's
management or its affiliates, or a transaction involving a recapitalization of
the Company, would result in a Change of Control if it is the type of
transaction specified in such definition.
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The Company will comply with the applicable tender offer rules, including
Rule-14e under the Exchange Act, and any other applicable securities laws and
regulations, to the extent such laws and regulations are applicable in the event
that the Company is required to repurchase Notes as described above.
The Company will not, and will not permit any Restricted Subsidiary to,
create any restriction (other than restrictions existing under Indebtedness as
in effect on the Closing Date or in refinancings of such Indebtedness) that
would materially impair the ability of the Company to make a Change of Control
Offer to purchase the Notes or Additional Notes tendered for purchase.
Asset Sales
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any Asset Sale unless (i) the consideration received by the Company or
such Restricted Subsidiary for such Asset Sale is not less than the fair market
value of the assets sold (as determined by the Board of Directors of the
Company, whose good faith determination will be conclusive) and (ii) the
consideration received by the Company or the relevant Restricted Subsidiary in
respect of such Asset Sale consists of at least 75% cash or cash equivalents;
provided, however, that the Company may receive up to $5 million in the form of
non-cash consideration in connection with the Atlas Disposition.
If the Company or any Restricted Subsidiary engages in an Asset Sale, the
Company may, at its option, within 12 months after such Asset Sale, (i) apply
all or a portion of the Net Cash Proceeds to the permanent reduction of amounts
outstanding under the Bank Credit Agreement or to the repayment of other senior
Indebtedness of the Company or a Restricted Subsidiary or (ii) invest (or enter
into a legally binding agreement to invest) all or a portion of such Net Cash
Proceeds in properties and assets to replace the properties and assets that were
the subject of the Asset Sale or in properties and assets that will be used in
businesses of the Company or its Restricted Subsidiaries, as the case may be,
existing on the Closing Date. If any such legally binding agreement to invest
such Net Cash Proceeds is terminated, the Company may, within 90 days of such
termination or within 12 months of such Asset Sale, whichever is later, invest
such Net Cash Proceeds as provided in clause (i) or (ii) (without regard to the
parenthetical contained in such clause (ii)) above. The amount of such Net Cash
Proceeds not so used as set forth above in this paragraph constitutes "Excess
Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5 million, the
Company will, within 30 days thereafter, make an offer to purchase from all
Holders of Notes and Additional Notes, if any, on a pro rata basis, in
accordance with the procedures set forth in the Indenture, the maximum principal
amount (expressed as a multiple of $1,000) of Notes and Additional Notes, if
any, that may be purchased with the Excess Proceeds, at a purchase price in cash
equal to 100% of the principal amount thereof, plus accrued interest, if any, to
the date such offer to purchase is consummated. To the extent that the aggregate
principal amount of Notes and Additional Notes, if any, tendered pursuant to
such offer to purchase is less than the Excess Proceeds, the Company may use
such deficiency for general corporate purposes. If the aggregate principal
amount of Notes and Additional Notes, if any, validly tendered and not withdrawn
by holders thereof exceeds the Excess Proceeds, the Notes and Additional Notes,
if any, to be purchased will be selected on a pro rata basis. Upon completion of
such offer to purchase, the amount of Excess Proceeds will be reset to zero.
The Company will comply with the applicable tender offer rules, including
Rule-14e under the Exchange Act, and any other applicable securities laws and
regulations, to the extent such laws and regulations are applicable in the event
that the Company is required to repurchase Notes as described above.
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<PAGE> 67
CERTAIN COVENANTS
Restricted Payments
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, take any of the following actions:
(a) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Capital Stock of the Company or any
Restricted Subsidiary, other than (i) dividends or distributions payable
solely in Qualified Equity Interests, (ii) dividends or distributions by a
Restricted Subsidiary payable to the Company or another Restricted
Subsidiary or (iii) pro rata dividends or distributions on common stock or
equity interests of Restricted Subsidiaries held by minority shareholders,
provided that such dividends do not in the aggregate exceed the minority
shareholders' pro rata share of such Restricted Subsidiaries' net income
from the first day of the Company's fiscal quarter during which the Closing
Date occurs;
(b) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock, or any options,
warrants or other rights to acquire such shares of Capital Stock, of the
Company, any Restricted Subsidiary or any Affiliate of the Company (other
than, in either case, any such Capital Stock owned by the Company or any of
its Restricted Subsidiaries);
(c) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Indebtedness;
and
(d) make any Investment (other than a Permitted Investment) in any
person (such payments or other actions described in (but not excluded from)
clauses (a) through (d) being referred to as "Restricted Payments"), unless
at the time of, and immediately after giving effect to, the proposed
Restricted Payment:
(i) no Default or Event of Default has occurred and is continuing,
(ii) the Company could incur at least $1.00 of additional
Indebtedness pursuant to the first paragraph of "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Disqualified
Stock," and
(iii) the aggregate amount of all Restricted Payments made after
the Closing Date does not exceed the sum of:
(A) 50% of the aggregate Consolidated Adjusted Net Income of the
Company during the period (taken as one accounting period) from the
first day of the Company's fiscal quarter during which the Closing
Date occurs to the last day of the Company's most recently ended
fiscal quarter for which internal financial statements are available
at the time of such proposed Restricted Payment (or, if such
aggregate cumulative Consolidated Adjusted Net Income is a loss,
minus 100% of such amount);
(B) the aggregate net cash proceeds received by the Company
after the Closing Date from the issuance or sale (other than to a
Subsidiary) of either (1) Qualified Equity Interests of the Company
(excluding from this computation (x) proceeds of the Equity
Investment and (y) proceeds of a Public Equity Offering received by
the Company that are used by it to redeem Notes as discussed above)
or (2) debt securities or Disqualified Stock that have been converted
into or exchanged for Qualified Stock of the Company, together with
the aggregate net cash proceeds received by the Company at the time
of such conversion or exchange; and
(C) $10 million.
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Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may take the following actions, so long as no Default or Event of Default has
occurred and is continuing or would occur:
(a) the payment of any dividend in cash or Qualified Equity Interests
of the Company within 60 days after the date of declaration thereof, if at
the declaration date such payment would not have been prohibited by the
foregoing provisions;
(b) the repurchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company, in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary) of, Qualified Equity Interests of the
Company;
(c) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary) of, shares of Qualified Equity Interests
of the Company;
(d) the purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness in exchange for, or out
of the net cash proceeds of a substantially concurrent issuance or sale
(other than to a Subsidiary) of, Subordinated Indebtedness, so long as the
Company or a Restricted Subsidiary would be permitted to refinance such
original Subordinated Indebtedness with such new Subordinated Indebtedness
pursuant to clause (iv) of the definition of Permitted Indebtedness;
(e) the repurchase for value of shares of Capital Stock of the Company
pursuant to and in accordance with the Company's right to make such
repurchase under the terms of the Shares in Success Plan, the Equity
Ownership Plan or the Short-Term Incentive Plan in an amount not to exceed
$500,000 in any fiscal year;
(f) (A) the repayment of up to $10 million principal amount of the
Subordinated Intercompany Note with the proceeds of the Equity Investment;
(B) the repayment of up to $20 million principal amount of the Subordinated
Intercompany Note with the proceeds of the Offering; or (C) the refinancing
or other restructuring of up to $20 million principal amount of the
Subordinated Intercompany Note; provided, however, that any Indebtedness
resulting from such refinancing or restructuring (x) is subordinate to the
Notes, under subordination terms substantially similar to those contained
in the Subordinated Intercompany Note, (y) is in an aggregate principal
amount not greater than the amount being refinanced or restructured and (z)
includes scheduled principal repayments in an amount not to exceed $3.5
million in any fiscal year;
(g) following the first Public Equity Offering, the payment of any
regular quarterly dividends in respect of the Company's common stock, out
of funds legally available therefor, in an amount not to exceed, in any
fiscal year, the lesser of (i) $2.5 million or (ii) 4% of the Net Cash
Proceeds received by the Company in such Public Equity Offering; and
(h) the repurchase of any Subordinated Indebtedness at a purchase
price not greater than 101% of the principal amount of such Subordinated
Indebtedness in the event of a Change of Control in accordance with
provisions similar to the "Change of Control" covenant; provided that,
prior to or simultaneously with such repurchase, the Company has made the
Change of Control Offer as provided in such covenant with respect to the
Notes and has repurchased all Notes validly tendered for payment in
connection with such Change of Control Offer.
The actions described in clauses (b), (c), (e), (g) and (h) of this
paragraph will be Restricted Payments that will be permitted to be taken in
accordance with this paragraph but will reduce the amount that would otherwise
be available for Restricted Payments under clause (iii) of the first paragraph
of this covenant and the actions described in clauses (a), (d) and (f) of this
paragraph will be Restricted Payments that will be permitted to be taken in
accordance with this paragraph and will
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not reduce the amount that would otherwise be available for Restricted Payments
under clause (iii) of the first paragraph of this covenant.
For the purpose of making any calculations under the Indenture (i) if a
Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will
be deemed to have made an Investment in an amount equal to the greatest of the
fair market value or net book value of the net assets of such Restricted
Subsidiary at the time of such designation as determined by the Board of
Directors of the Company, and (ii) any property transferred to or from an
Unrestricted Subsidiary will be valued at fair market value at the time of such
transfer, as determined by the Board of Directors of the Company. The amount of
all Restricted Payments (other than cash) shall be the fair market value on the
date of the Restricted Payment of the asset(s) or securities proposed to be
transferred or issued by the Company or such Restricted Subsidiary, as the case
may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an officer's certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required under "-- Certain Covenants -- Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
If the aggregate amount of all Restricted Payments calculated under the
foregoing provision includes an Investment in an Unrestricted Subsidiary or
other person that thereafter becomes a Restricted Subsidiary, the aggregate
amount of all Restricted Payments calculated under the foregoing provision will
be reduced by the lesser of (x) the net asset value of such Subsidiary at the
time it becomes a Restricted Subsidiary and (y) the initial amount of such
Investment.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under the foregoing
provision will be reduced by the amount of any net reduction in such Investment
(resulting from the payment of interest or dividends, loan repayment, transfer
of assets or otherwise, other than the redesignation of an Unrestricted
Subsidiary or other person as a Restricted Subsidiary), to the extent such net
reduction is not included in the Company's Consolidated Adjusted Net Income;
provided that the total amount by which the aggregate amount of all Restricted
Payments may be reduced may not exceed the lesser of (x) the cash proceeds
received by the Company and its Restricted Subsidiaries in connection with such
net reduction and (y) the initial amount of such Investment.
In computing the Consolidated Adjusted Net Income of the Company for
purposes of the foregoing clause (iii)(A), (i) the Company may use audited
financial statements for the portions of the relevant period for which audited
financial statements are available on the date of determination and unaudited
financial statements and other current financial data based on the books and
records of the Company for the remaining portion of such period and (ii) the
Company will be permitted to rely in good faith on the financial statements and
other financial data derived from its books and records that are available on
the date of determination. If the Company makes a Restricted Payment that, at
the time of the making of such Restricted Payment, would in the good faith
determination of the Company be permitted under the requirements of the
Indenture, such Restricted Payment will be deemed to have been made in
compliance with the Indenture notwithstanding any subsequent adjustments made in
good faith to the Company's financial statements affecting Consolidated Adjusted
Net Income of the Company for any period.
Incurrence of Indebtedness and Issuance of Disqualified Stock
The Company will not, and will not permit any Restricted Subsidiary to,
create, issue, assume, guarantee or in any manner become directly or indirectly
liable for the payment of, or otherwise incur (collectively, "incur"), any
Indebtedness (including Acquired Indebtedness and the issuance of
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Disqualified Stock), except that the Company may incur Indebtedness if, at the
time of such event, the Fixed Charge Coverage Ratio for the immediately
preceding four full fiscal quarters for which internal financial statements are
available, taken as one accounting period, would have been equal to at least
2.25 to 1.0.
In making the calculation under the preceding paragraph for any
four-quarter period that includes the Closing Date, pro forma effect will be
given to the Refinancing, as if the Refinancing had occurred at the beginning of
such four-quarter period. In addition (but without duplication), in making the
calculation under the preceding paragraph, pro forma effect will be given to:
(i) the incurrence of such Indebtedness and (if applicable) the application of
the net proceeds therefrom, including to refinance other Indebtedness, as if
such Indebtedness was incurred and the application of such proceeds occurred at
the beginning of such four-quarter period; (ii) the incurrence, repayment or
retirement of any other Indebtedness by the Company or its Restricted
Subsidiaries since the first day of such four-quarter period as if such
Indebtedness was incurred, repaid or retired at the beginning of such four-
quarter period; and (iii) the acquisition (whether by purchase, merger or
otherwise) or disposition (whether by sale, merger or otherwise) of any company,
entity or business acquired or disposed of by the Company or its Restricted
Subsidiaries, as the case may be, since the first day of such four-quarter
period, as if such acquisition or disposition occurred at the beginning of such
four-quarter period. In making a computation under the foregoing clause (i) or
(ii), (A) the amount of Indebtedness under a revolving credit facility will be
computed based on the average daily balance of such Indebtedness during such
four-quarter period, (B) if such Indebtedness bears, at the option of the
Company, a fixed or floating rate of interest, interest thereon will be computed
by applying, at the option of the Company, either the fixed or floating rate,
and (C) the amount of any Indebtedness that bears interest at a floating rate
will be calculated as if the rate in effect on the date of determination had
been the applicable rate for the entire period (taking into account any Hedging
Obligations applicable to such Indebtedness if such Hedging Obligations have a
remaining term at the date of determination in excess of 12 months).
Notwithstanding the foregoing, the Company may, and may permit its
Restricted Subsidiaries to, incur the following Indebtedness ("Permitted
Indebtedness"):
(i) Indebtedness of the Company or any Subsidiary Guarantor under the
Bank Credit Agreement (and the incurrence by any Subsidiary Guarantor of
guarantees thereof) in an aggregate principal amount at any one time
outstanding not to exceed the greater of (A) the Borrowing Base or (B) $140
million, less any amounts applied to the permanent reduction of such credit
facilities pursuant to the provisions of "-- Repurchase at the Option of
Holders -- Asset Sales";
(ii) Indebtedness represented by the Notes (other than the Additional
Notes) and the Subsidiary Guarantees;
(iii) Existing Indebtedness;
(iv) the incurrence by the Company of Permitted Refinancing
Indebtedness in exchange for, or the net proceeds of which are used to
refund, refinance or replace, any Indebtedness that is permitted to be
incurred under clause (ii) or (iii) above;
(v) Indebtedness owed by the Company to any Wholly Owned Restricted
Subsidiary or owed by any Restricted Subsidiary to the Company or a Wholly
Owned Restricted Subsidiary (provided that such Indebtedness is held by the
Company or such Restricted Subsidiary); provided, however, that any
Indebtedness of the Company owing to any such Restricted Subsidiary is
unsecured and subordinated in right of payment from and after such time as
the Notes shall become due and payable (whether at Stated Maturity,
acceleration, or otherwise) to the payment and performance of the Company's
obligations under the Notes;
(vi) Indebtedness of the Company or any Restricted Subsidiary under
Hedging Obligations incurred in the ordinary course of business;
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(vii) Indebtedness of the Company or any Restricted Subsidiary
consisting of guarantees, indemnities or obligations in respect of purchase
price adjustments in connection with the acquisition or disposition of
assets, including, without limitation, shares of Capital Stock;
(viii) either (A) Capitalized Lease Obligations of the Company or any
Restricted Subsidiary or (B) Indebtedness under purchase money mortgages or
secured by purchase money security interests so long as (x) such
Indebtedness is not secured by any property or assets of the Company or any
Restricted Subsidiary other than the property and assets so acquired and
(y) such Indebtedness is created within 60 days of the acquisition of the
related property or any Permitted Refinancing Indebtedness thereof;
provided that the aggregate amount of Indebtedness under clauses (A) and
(B) does not exceed 10% of Consolidated Tangible Assets at any one time
outstanding;
(ix) Indebtedness of the Company or any Restricted Subsidiary pursuant
to Trade Loan Agreements in an aggregate principal amount not to exceed $5
million at any one time outstanding;
(x) Guarantees by any Restricted Subsidiary made in accordance with
the provisions of "-- Certain Covenants -- Guarantees of Indebtedness by
Restricted Subsidiaries"; and
(xi) Indebtedness of the Company or any Restricted Subsidiary not
permitted by any other clause of this definition, in an aggregate principal
amount not to exceed $25 million at any one time outstanding.
Liens
The Company will not, and will not permit any Restricted Subsidiary to
directly or indirectly, create, incur, assume or suffer to exist any Lien of any
kind on or with respect to any of its property or assets, including any shares
of stock or debt of any Restricted Subsidiary whether owned at the Closing Date
or thereafter acquired, or any income, profits or proceeds therefrom, or assign
or otherwise convey any right to receive income thereon, unless (a) in the case
of any Lien securing Subordinated Indebtedness, the Notes are secured by a Lien
on such property, assets or proceeds that is senior in priority to such Lien and
(b) in the case of any other Lien, the Notes are equally and ratably secured
with the obligation or liability secured by such Lien.
Notwithstanding the foregoing, the Company may, and may permit any
Subsidiary to, incur the following Liens ("Permitted Liens"):
(i) Liens (other than (A) Liens securing Indebtedness under the Bank
Credit Agreement and (B) Liens securing the First Mortgage Notes more than
60 days after the Closing Date) existing as of the Closing Date;
(ii) Liens on property or assets of the type specified in the Bank
Credit Agreement as of the Closing Date of the Company or any Restricted
Subsidiary securing Indebtedness under the Bank Credit Agreement or one or
more other credit facilities in a principal amount not to exceed the
principal amount of the outstanding Indebtedness permitted by clause (i) of
the definition of "Permitted Indebtedness";
(iii) Liens on any property or assets of a Restricted Subsidiary
granted in favor of the Company or any Wholly Owned Restricted Subsidiary;
(iv) any interest or title of a lessor under any Capitalized Lease
Obligation or Sale and Leaseback Transaction that was not entered into in
violation of "-- Certain Covenants -- Incurrence of Indebtedness and
Issuance of Disqualified Stock";
(v) Liens securing Acquired Indebtedness created prior to (and not in
connection with or in contemplation of) the incurrence of such Indebtedness
by the Company or any Restricted Subsidiary; provided that such Lien does
not extend to any property or assets of the Company
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other than the property and assets acquired in connection with the
incurrence of such Acquired Indebtedness;
(vi) Liens securing Hedging Obligations permitted to be incurred
pursuant to clause (vi) of the definition of "Permitted Indebtedness";
(vii) Liens arising from purchase money mortgages and purchase money
security interests incurred in the ordinary course of the business of the
Company; provided that (A) the related Indebtedness is not secured by any
property or assets of the Company or any Restricted Subsidiary other than
the property and assets so acquired, (B) the Lien securing such
Indebtedness is created within 60 days of such acquisition, and (C) the
related Indebtedness was not incurred in violation of "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Disqualified
Stock";
(viii) Liens on Fixed Assets of the Company or a Restricted
Subsidiary; provided that the aggregate net book value of all such Fixed
Assets does not exceed 10% of the Consolidated Tangible Assets at any one
time outstanding;
(ix) statutory Liens or landlords', carriers', warehouseman's,
mechanics', suppliers', materialmen's, repairmen's 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 appropriate proceedings
and, if required by GAAP, a reserve or other appropriate provision has been
made therefor;
(x) Liens for taxes, assessments, government charges or claims that
are not yet due or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and, if required
by GAAP, a reserve or other appropriate provision has been made therefor;
(xi) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance bonds and other obligations of a like
nature incurred in the ordinary course of business (other than contracts
for the payment of money);
(xii) easements, rights-of-way, restrictions and other similar charges
or encumbrances not interfering in any material respect with the business
of the Company or any Restricted Subsidiary incurred in the ordinary course
of business;
(xiii) deposits or pledges to secure obligations under workmen's
compensation, social security or similar laws, or under unemployment
insurance;
(xiv) Liens arising by reason of any judgment, decree or order of any
court, so long as such Lien is adequately bonded or adequately covered by
insurance as to which the insurance company has not disclaimed or disputed
in writing its obligations for coverage and any appropriate legal
proceedings that may have been duly initiated for the review of such
judgment, decree or order have not been finally terminated or the period
within which such proceedings may be initiated has not expired; and
(xv) any extension, renewal or replacement, in whole or in part, of
any Lien described in the foregoing clauses (i) through (xiv); provided
that any such extension, renewal or replacement is no more restrictive in
any material respect than the Lien so extended, renewed or replaced and
does not extend to any additional property or assets.
Dividends and Other Payment Restrictions Affecting Restricted Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make
any other distributions on or in respect of its Capital Stock, (b) pay any
Indebtedness owed to the Company or any other Restricted Subsidiary, (c) make
loans or advances to the Company or any other Restricted Subsidiary, or (d)
transfer any of its properties or assets to the
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Company or any other Restricted Subsidiary, except for such encumbrances or
restrictions existing under or by reason of:
(i) any agreement in effect on the Closing Date;
(ii) customary non-assignment provisions of any lease governing a
leasehold interest of the Company or any Restricted Subsidiary;
(iii) the refinancing or successive refinancing of Indebtedness
incurred under the agreements in effect on the Closing Date, so long as
such encumbrances or restrictions are no less favorable to the Company or
any Restricted Subsidiary than those contained in such original agreement;
or
(iv) any agreement or other instrument of a person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance
or restriction is not applicable to any person, or the properties or assets
of any person, other than the person, or the property or assets of the
person, so acquired.
Merger, Consolidation or Sale of Assets
The Company may not, in a single transaction or series of related
transactions, consolidate or merge with or into (whether or not the Company is
the surviving corporation), or directly and/or indirectly through its
Subsidiaries, sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of its properties or assets (determined on a consolidated
basis for the Company and its Subsidiaries taken as a whole) in one or more
related transactions to, another corporation, person or entity unless:
(a) either (i) the Company is the surviving corporation or (ii) in the
case of a transaction involving the Company, the entity or the person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (the "Surviving Entity") is a
corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia and assumes all the obligations
of the Company under the Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee;
(b) immediately after giving effect to such transaction and treating
any obligation of the Company in connection with or as a result of such
transaction as having been incurred as of the time of such transaction, no
Default or Event of Default has occurred and is continuing;
(c) the Company (or the Surviving Entity if the Company is not the
continuing obligor under the Indenture) could, at the time of such
transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the first paragraph of "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Disqualified
Stock";
(d) if the Company is not the continuing obligor under the Indenture,
each Subsidiary Guarantor, unless it is the other party to the transaction
described above, has by supplemental indenture confirmed that its
Subsidiary Guarantee applies to the Surviving Entity's obligations under
the Indenture and the Notes;
(e) if any of the property or assets of the Company or any of its
Restricted Subsidiaries would thereupon become subject to any Lien, the
provisions of "-- Certain Covenants -- Liens" are complied with;
(f) immediately after giving effect to such transaction on a pro forma
basis, the Consolidated Net Worth of the Company (or of the Surviving
Entity if the Company is not the continuing obligor under the Indenture) is
equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction; and
(g) the Company delivers, or causes to be delivered, to the Trustee,
in form and substance reasonably satisfactory to the Trustee, an officers'
certificate and an opinion of counsel, each
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stating that such transaction complies with the requirements identified
under this caption "-- Merger, Consolidation or Sale of Assets";
provided, however, that any sale, transfer or disposition of all of the Capital
Stock, or all or substantially all of the assets, of a Subsidiary Guarantor will
not be restricted by the foregoing provisions but will be governed by the
provisions described under "Subsidiary Guarantees."
The Indenture will provide that no Subsidiary Guarantor may consolidate
with or merge with or into any other person or convey, sell, assign, transfer,
lease or otherwise disposed of its properties and assets substantially as an
entity to any other person (other than the Company or another Subsidiary
Guarantor) unless: (a) subject to the provisions of the following paragraph, the
person formed by or surviving such consolidation or merger (if other than such
Subsidiary Guarantor) or to which such properties and assets are transferred
assumes all of the obligations of such Subsidiary Guarantor under the Indenture
and its Subsidiary Guarantee, pursuant to a supplemental indenture in form and
substance satisfactory to the Trustee and (b) immediately after giving effect to
such transaction, no Default or Event of Default has occurred and is continuing.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
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.
In the event of any transaction described in and complying with the
conditions listed in the first paragraph of this covenant in which the Company
is not the continuing obligor under the Indenture, the Surviving Entity will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, and thereafter the Company will, except in the
case of a lease, be discharged from all its obligations and covenants under the
Indenture and the Notes.
Transactions with Affiliates
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into or suffer to exist any transaction with, or
for the benefit of, any Affiliate of the Company or any beneficial owner of 5%
or more of any class of the Capital Stock of the Company at any time outstanding
("Interested Persons"), unless (a) such transaction is on terms that are no less
favorable to the Company or such Restricted Subsidiary, as the case may be, than
those that could have been obtained in an arm's length transaction with third
parties who are not Interested Persons and (b) the Company delivers to the
Trustee (i) with respect to any transaction or series of related transactions
entered into after the Closing Date involving aggregate payments in excess of $3
million, a resolution of the Board of Directors of the Company set forth in an
officers' certificate certifying that such transaction or transactions complies
with clause (a) above and that such transaction or transactions have been
approved by the Board of Directors (including a majority of the Disinterested
Directors) of the Company and (ii) with respect to a transaction or series of
related transactions involving aggregate payments equal to or greater than $5
million, a written opinion as to the fairness to the Company or such Restricted
Subsidiary of such transaction or series of transactions from a financial point
of view issued by an accounting, appraisal or investment banking firm, in each
case of national standing.
The foregoing covenant will not restrict:
(A) transactions among the Company and/or its Restricted Subsidiaries;
(B) the Company from paying reasonable and customary regular
compensation and fees to directors of the Company or any Restricted
Subsidiary who are not employees of the Company or any Restricted
Subsidiary;
(C) transactions permitted by the provisions of "-- Certain
Covenants -- Restricted Payments"; and
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(D) the performance of the Company's obligations under the Technical
Assistance Agreement, as in effect at the Closing Date, in an annual amount
not to exceed $1 million; provided that any amendments or modifications to
the terms of the Technical Assistance Agreement are no less favorable to
the Company than those that could have been obtained in an arm's length
transaction with third parties who are not Interested Persons.
Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries
The Company (a) will not permit any Restricted Subsidiary to issue any
Capital Stock (other than to the Company or a Wholly Owned Restricted
Subsidiary) and (b) will not, and will not permit any Restricted Subsidiary to,
transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any
Restricted Subsidiary to any Person (other than the Company or a Wholly Owned
Restricted Subsidiary); provided, however, that this covenant will not prohibit
(i) the sale or other disposition of all, but not less than all, of the issued
and outstanding Capital Stock of a Restricted Subsidiary owned by the Company
and its Restricted Subsidiaries in compliance with the other provisions of the
Indenture or (ii) the ownership by directors of director's qualifying shares or
the ownership by foreign nationals of Capital Stock of any Restricted
Subsidiary, to the extent mandated by applicable law.
The Company will not permit any Restricted Subsidiary to issue any
Preferred Stock.
Payments for Consent
The Indenture will provide that neither the Company nor any of its
Restricted Subsidiaries will, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of the Indenture or the Notes unless such consideration is offered
to be paid or is paid to all Holders that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
Issuances of Guarantees by New Restricted Subsidiaries
The Company will provide to the Trustee, on the date that any Person
becomes a Restricted Subsidiary, a supplemental indenture to the Indenture,
executed by such new Restricted Subsidiary, providing for a full and
unconditional guarantee on a senior basis by such new Restricted Subsidiary of
the Company's obligations under the Notes and the Indenture to the same extent
as that set forth in the Indenture, provided that in the case of any new
Restricted Subsidiary that becomes a Restricted Subsidiary through the
acquisition of a majority of its voting Capital Stock by the Company or any
other Restricted Subsidiary, such guarantee may be subordinated to the extent
required by the obligations of such new Restricted Subsidiary existing on the
date of such acquisition that were not incurred in contemplation of such
acquisition.
Unrestricted Subsidiaries
(a) The Board of Directors of the Company may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary so long as (i) neither the Company nor any Restricted Subsidiary is
directly or indirectly liable for any Indebtedness of such Subsidiary, (ii) no
default with respect to any Indebtedness of such Subsidiary would permit (upon
notice, lapse of time or otherwise) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity, (iii) any Investment in such Subsidiary made as a result of
designating such Subsidiary an Unrestricted Subsidiary will not violate the
provisions of "-- Certain Covenants -- Restricted Payments," (iv) neither the
Company nor any Restricted Subsidiary has a contract, agreement, arrangement,
understanding or obligation of any kind, whether written or oral, with such
Subsidiary other than those that might be obtained at the time from persons who
are not Affiliates of the Company, (v) neither the Company nor any Restricted
Subsidiary has
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any obligation to subscribe for additional shares of Capital Stock or other
equity interest in such Subsidiary, or to maintain or preserve such Subsidiary's
financial condition or to cause such Subsidiary to achieve certain levels of
operating results, and (vi) such Unrestricted Subsidiary has at least one
director on its Board of Directors that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries. Notwithstanding the
foregoing, the Company may not designate any of its Subsidiaries existing as of
the Closing Date or any successor to any of them as an Unrestricted Subsidiary
and may not sell, transfer or otherwise dispose of any properties or assets of
any such Subsidiary to an Unrestricted Subsidiary, other than in the ordinary
course of business.
(b) The Board of Directors of the Company may designate any Unrestricted
Subsidiary as a Restricted Subsidiary; provided that (i) no Default or Event of
Default has occurred and is continuing following such designation and (ii) the
Company could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the first paragraph of "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Disqualified Stock"
(treating any Indebtedness of such Unrestricted Subsidiary as the incurrence of
Indebtedness by a Restricted Subsidiary).
Reports
The Company will file with the Commission all such annual reports,
quarterly reports and other documents that the Company would be required to file
if it were subject to Section 13(a) or 15(d) under the Exchange Act. The Company
will also be required (a) to supply to the Trustee and each Holder, or supply to
the Trustee for forwarding to each such Holder, without cost to such Holder,
copies of such reports and other documents within 15 days after the date on
which the Company files such reports and documents with the Commission or the
date on which the Company would be required to file such reports and documents
if the Company were so required and (b) if filing such reports and documents
with the Commission is not accepted by the Commission or is prohibited under the
Exchange Act, to supply at the Company's cost copies of such reports and
documents to any prospective Holder promptly upon written request.
EVENTS OF DEFAULT AND REMEDIES
The following will be "Events of Default" under the Indenture:
(a) default in the payment of any interest on any Note when it becomes
due and payable, and continuance of such default for a period of 30 days;
(b) default in the payment of the principal of (or premium, if any,
on) any Note when due;
(c) failure to perform or comply with the Indenture provisions
described under "-- Repurchase at the Option of Holders -- Change of
Control," "-- Repurchase at the Option of Holders -- Asset Sales,"
"-- Certain Covenants -- Restricted Payments," or "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Disqualified
Stock";
(d) default in the performance, or breach, of any covenant or
agreement of the Company or any Subsidiary Guarantor contained in the
Indenture or in any Subsidiary Guarantee (other than a default in the
performance, or breach, of a covenant or agreement that is specifically
dealt with elsewhere herein), and continuance of such default or breach for
a period of 60 days after written notice has been given to the Company by
the Trustee or to the Company and the Trustee by the Holders of at least
25% in aggregate principal amount of the Notes then outstanding;
(e) (i) an event of default has occurred under any mortgage, bond,
indenture, loan agreement or other document evidencing an issue of
Indebtedness of the Company or any Restricted Subsidiary, which issue has
an aggregate outstanding principal amount of not less than $5 million, and
such default has resulted in such Indebtedness becoming, whether by
declaration or otherwise, due and payable prior to the date on which it
would otherwise become due and payable or (ii) a default in any payment
when due at final maturity of any such Indebtedness;
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(f) failure by the Company or any of its Restricted Subsidiaries to
pay one or more final judgments the uninsured portion of which exceeds in
the aggregate $5 million, which judgment or judgments are not paid,
discharged or stayed for a period of 60 days;
(g) any Subsidiary Guarantee ceases to be in full force and effect or
is declared null and void or any such Subsidiary Guarantor denies that it
has any further liability under any Subsidiary Guarantee, or gives notice
to such effect (other than by reason of the termination of the Indenture or
the release of any such Subsidiary Guarantee in accordance with the
Indenture); or
(h) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary.
If an Event of Default (other than as specified in clause (h) above) occurs
and is continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may, and the Trustee at the
request of such Holders will, declare the principal of, and accrued interest on,
all of the outstanding Notes immediately due and payable and, upon any such
declaration, such principal and such interest will become due and payable
immediately.
If an Event of Default specified in clause (h) above occurs and is
continuing, then the principal of and accrued interest on all of the outstanding
Notes will ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration under the Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration and its consequences if: (i) the Company has paid or deposited
with the Trustee a sum sufficient to pay (A) all overdue interest on all Notes,
(B) all unpaid principal of (and premium, if any, on) any outstanding Notes that
has become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Notes, (C) to the extent that payment of such
interest is lawful, interest upon overdue interest and overdue principal at the
rate borne by the Notes, and (D) all sums paid or advanced by the Trustee under
the Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel; and (ii) all Events of Default,
other than the non-payment of amounts of principal of (or premium, if any, on)
or interest on the Notes that have become due solely by such declaration of
acceleration, have been cured or waived. No such rescission will affect any
subsequent default or impair any right consequent thereon.
No Holder has any right to institute any proceeding with respect to the
Indenture or any remedy thereunder, unless the Holders of at least 25% in
aggregate principal amount of the outstanding Notes have made written request,
and offered reasonable indemnity, to the Trustee to institute such proceeding
within 60 days after receipt of such notice and the Trustee, within such 60-day
period, has not received directions inconsistent with such written request by
Holders of a majority in aggregate principal amount of the outstanding Notes.
Such limitations do not apply, however, to a suit instituted by a Holder for the
enforcement of the payment of the principal of, premium, if any, or interest on
such Note on or after the respective due dates expressed in such Note.
The Holders of not less than a majority in aggregate principal amount of
the outstanding Notes may, on behalf of the Holders of all of the Notes, waive
any past defaults under the Indenture, except a default in the payment of the
principal of (and premium, if any) or interest on any Note, or in respect of a
covenant or provision that under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee will mail to each Holder notice of the Default or
Event of Default within 90 days after the occurrence thereof. Except in the case
of a Default or an Event of Default in payment of principal of (and premium, if
any, on) or interest on any Notes, the Trustee may withhold the notice to the
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Holders if a committee of its trust officers in good faith determines that
withholding such notice is in the interests of the Holders.
The Company is required to furnish to the Trustee annual statements as to
the performance by the Company and the Subsidiary Guarantors of their
obligations under the Indenture and as to any default in such performance. The
Company is also required to notify the Trustee within five days of any Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No past, present or future director, officer, employee, incorporator or
stockholder of the Company or any Subsidiary Guarantor, as such, shall have any
liability for any obligations of the Company or the Subsidiary Guarantors under
the Notes, the Indenture or the Subsidiary Guarantees, as applicable, or any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, terminate the obligations
of the Company and the Subsidiary Guarantors with respect to the outstanding
Notes ("legal defeasance"). Such legal defeasance means that the Company will be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of (and premium, if any, on) and
interest on such Notes when such payments are due, (ii) the Company's
obligations to issue temporary Notes, register the transfer or exchange of any
Notes, replace mutilated, destroyed, lost or stolen Notes, maintain an office or
agency for payments in respect of the Notes and segregate and hold such payments
in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee
and (iv) the legal defeasance provisions of the Indenture. In addition, the
Company may, at its option and at any time, elect to terminate the obligations
of the Company and any Subsidiary Guarantor with respect to certain covenants
set forth in the Indenture and described under "-- Certain Covenants" above, and
any omission to comply with such obligations would not constitute a Default or
an Event of Default with respect to the Notes ("covenant defeasance").
In order to exercise either legal defeasance or covenant defeasance: (a)
the Company must irrevocably deposit or cause to be deposited with the Trustee,
as trust funds in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders, money in an amount, or U.S. Government
Obligations (as defined in the Indenture) that through the scheduled payment of
principal and interest thereon will provide money in an amount, or a combination
thereof, sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay and discharge the principal of (and
premium, if any, on) and interest on the outstanding Notes at maturity (or upon
redemption, if applicable) of such principal or installment of interest; (b) no
Default or Event of Default has occurred and is continuing on the date of such
deposit or, insofar as an event of bankruptcy under clause (h) of "Events of
Default" above is concerned, at any time during the period ending on the 91st
day after the date of such deposit; (c) such legal defeasance or covenant
defeasance may not result in a breach or violation of, or constitute a default
under, the Indenture or any material agreement or instrument to which the
Company or any Subsidiary Guarantor is a party or by which it is bound; (d) in
the case of legal defeasance, the Company must deliver to the Trustee an opinion
of counsel stating that the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or since the date hereof,
there has been a change in applicable federal income tax law, to the effect, and
based thereon such opinion must confirm that, the Holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such legal defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such legal defeasance had not occurred;
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(e) in the case of covenant defeasance, the Company must have delivered to the
Trustee an opinion of counsel to the effect that the Holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such covenant defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such covenant defeasance had not occurred; and (f) the Company must
have delivered to the Trustee an officers' certificate and an opinion of
counsel, each stating that all conditions precedent relating to either the legal
defeasance or the covenant defeasance, as the case may be, have been complied
with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer document and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note for a
period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Modifications and amendments of the Indenture and any Subsidiary Guarantee
may be made by the Company, any affected Subsidiary Guarantor and the Trustee
with the consent of the Holders of a majority in aggregate outstanding principal
amount of the Notes; provided, however, that no such modification or amendment
may, without the consent of the Holder of each outstanding Note affected
thereby:
(a) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the coin or currency in which any Note or any premium or
the interest thereon is payable, or impair the right to institute suit for
the enforcement of any such payment after the Stated Maturity thereof (or,
in the case of redemption, on or after the redemption date);
(b) reduce the percentage in principal amount of outstanding Notes,
the consent of whose Holders is required for any waiver of compliance with
certain provisions of, or certain defaults and their consequences provided
for under, the Indenture;
(c) waive a default in the payment of principal of, or premium, if
any, or interest on the Notes or reduce the percentage or aggregate
principal amount of outstanding Notes the consent of whose Holders is
necessary for waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults; or
(d) release any Subsidiary Guarantor that is a Significant Subsidiary
from any of its obligations under its Subsidiary Guarantee or the Indenture
other than in accordance with the terms of the Indenture.
The Holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
Without the consent of any Holders, the Company and the Trustee, at any
time and from time to time, may enter into one or more indentures supplemental
to the Indenture for any of the following purposes: (1) to evidence the
succession of another person to the Company and the assumption by any such
successor of the covenants of the Company in the Indenture and in the Notes; (2)
to add to the covenants of the Company for the benefit of the Holders, or to
surrender any right or power herein conferred upon the Company; (3) to add
additional Events of Defaults; (4) to provide for uncertificated Notes in
addition to or in place of the certificated Notes; (5) to evidence and provide
for the
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acceptance of appointment under the Indenture by a successor Trustee; (6) to
secure the Notes; (7) to cure any ambiguity, to correct or supplement any
provision in the Indenture that may be defective or inconsistent with any other
provision in the Indenture, or to make any other provisions with respect to
matters or questions arising under the Indenture, provided that such actions
pursuant to this clause do not adversely affect the interests of the Holders in
any material respect; or (8) to comply with any requirements of the Commission
in order to effect and maintain the qualification of the Indenture under the
Trust Indenture Act.
CONCERNING THE TRUSTEE
State Street Bank and Trust Company, the Trustee under the Indenture, will
be the initial paying agent and registrar for the Notes.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. Under the Indenture, the Holders of a majority in outstanding
principal amount of the Notes will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee, subject to certain exceptions. If an Event of Default has occurred and
is continuing, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein, contain limitations on the rights of
the Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that, if it
acquires any conflicting interest (as defined), it must eliminate such conflict
upon the occurrence of an Event of Default or else resign.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes to be resold as set
forth herein will initially be issued in the form of one Global Note (the
"Global Note"). The Global Note will be deposited on the Closing Date with, or
on behalf of, The Depository Trust Company (the "Depositary") and registered in
the name of Cede & Co., as nominee of the Depositary (such nominee being
referred to herein as the "Global Note Holder").
The Notes offered and sold in reliance on Regulation S will initially be
represented by a single, permanent Global Note in definitive, fully registered
book-entry form (the "Offshore Global Note"), which will be registered in the
name of the Global Note Holder and deposited on behalf of the purchasers of the
Notes represented thereby with a custodian for the Global Note Holder for credit
to the respective accounts of the purchasers (or to such other accounts as they
may direct) at the Euroclear System ("Euroclear") or Cedel Bank, societe anonyme
("Cedel Bank"). Prior to the 40th day after the later of the commencement of the
Offering and the Closing Date, interests in the Offshore Global Note may only be
held through Euroclear or Cedel Bank.
The Notes offered and sold to "qualified institutional buyers" ("QIBs") in
reliance on Rule 144A under the Securities Act will be represented by a single,
permanent Global Note in definitive, fully registered book-entry form (the "U.S.
Global Note" and, together with the Offshore Global Note, the "Global Notes"),
which will be registered in the name of the Global Note Holder and deposited on
behalf of purchasers of the Notes represented thereby with a custodian for the
Global Note Holder for credit to the respective accounts of the purchasers (or
to such other accounts as they may direct) at the Global Note Holder.
The Notes that were (i) originally issued to or transferred to
institutional "accredited investors" (as such terms are defined under "Notice to
Investors" elsewhere herein) who are not QIBs (the "Non-Global Purchasers") or
(ii) issued as described below under "-- Certificated Notes" will be issued in
registered, definitive, certificated form (the "Certificated Notes"). Upon the
transfer to a
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QIB or in an offshore transaction under Rule 903 or Rule 904 under Regulation S
of Certificated Notes initially issued to a Non-Global Purchaser, such
Certificated Notes may, unless the Global Notes have previously been exchanged
in whole for Certificated Notes, be exchanged for an interest in a Global Note
representing the principal amount of the Notes being transferred upon delivery
of appropriate certificates to the Trustee. For a description of certain
restrictions on the transferability of the Notes, see "Notice to Investors."
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchaser), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
Investors may hold their interests in the Offshore Global Note directly
through Cedel or Euroclear, if they are participants in such systems, or
indirectly through organizations which are participants in such systems.
Beginning 40 days after the later of the commencement of the Offering and the
Closing Date (but not earlier), investors may also hold such interests through
organizations other than Cedel or Euroclear that are Participants in the DTC
system. Cedel and Euroclear will hold such interests in the Offshore Global Note
on behalf of their participants through customers' securities accounts in their
respective names on the books of their respective depositaries, which in turn
will hold such interests in the Offshore Global Note in customers' securities
accounts in the depositaries' names on the books of DTC.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, and interest on
any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Note Holder in its capacity as the registered Holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons in
whose names Notes, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes. The Company believes,
however, that it is currently the policy of the Depositary to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
Transfers between Participants in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of a certificated Note for any reason, including to
sell Notes to persons in states which require physical delivery of such
securities or to pledge such securities, such holder must transfer its interest
in the Global Notes in
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accordance with the normal procedures of DTC and in accordance with the
procedures set forth in the Indenture.
Before the 40th day after the later of the commencement of the Offering and
the Issue Date, transfers by an owner of a beneficial interest in the Offshore
Global Note to a transferee who takes delivery of such interest through the U.S.
Global Note will be made only in accordance with the applicable procedures and
upon receipt by the Trustee of a written certification from the transferor of
the beneficial interest in the form provided in the Indenture to the effect that
such transfer is being made to a person whom the transferor reasonably believes
is a QIB within the meaning of Rule 144A, in a transaction meeting the
requirements of Rule 144A or an institutional "accredited investor."
Transfers by an owner of a beneficial interest in the U.S. Global Note to a
transferee who takes delivery of such interest through the Offshore Global Note,
whether before, on or after the 40th day after the later of the commencement of
the Offering and the Issue Date, will be made only upon receipt by the Trustee
of a certification to the effect that such transfer is being made in accordance
with Regulation S. Transfers of Physical Notes held by institutional "accredited
investors" to persons who will hold through the U.S. Global Note or the Offshore
Global Note will be subject to certifications provided by the Trustee.
Certificated Notes
Transferees of Notes who are not QIBs may hold Notes only in the form of
Certificated Notes. All such Certificated Notes would be subject to the legend
requirements described herein under "Notice to Investors." In addition, if (i)
the Company notifies the Trustee in writing that the Depositary is no longer
willing or able to act as a depositary and the Company is unable to locate a
qualified successor within 90 days or (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in the form
of Certificated Securities under the Indenture then, upon surrender by the
Global Note Holder of its Global Note, Certificated Notes will be issued to each
person that the Global Note Holder and the Depositary identify as being the
beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
and/or Registration Rights Agreement without charge by writing to AmeriSteel
Corporation, 5100 W. Lemon Street, Suite 312, Tampa, Florida 33609, Attention:
Tom J. Landa.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a person (a) existing at the
time such person is merged with or into the Company or becomes a Subsidiary or
(b) assumed in connection with the acquisition of assets from such person.
"Affiliate" means, with respect to any specified person, (a) any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person or (b) any other person that
owns, directly or indirectly, 5% or more of such specified person's Capital
Stock or any executive officer or director of any such specified person or other
person or, with respect to any natural person, any person having a relationship
with such person by blood, marriage or adoption not more remote than first
cousin. For the purposes of this definition, "control," when used with respect
to any specified 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; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
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"Asset Sale" means the sale, lease, conveyance or other disposition of any
assets (including, without limitation, by way of merger, consolidation or
similar arrangement) (collectively, a "transfer") by the Company or any
Restricted Subsidiary other than in the ordinary course of business, whether in
a single transaction or a series of related transactions. For the purposes of
this definition, the term "Asset Sale" does not include any transfer of
properties or assets (i) that is governed by the provisions of the Indenture
described under "-- Certain Covenants -- Consolidation, Merger and Sale of
Assets," (ii) between or among the Company and its Restricted Subsidiaries
pursuant to transactions that do not violate any other provision of the
Indenture, (iii) representing obsolete or permanently retired equipment and
facilities, (iv) to an Unrestricted Subsidiary, if permitted under "-- Certain
Covenants -- Restricted Payments," (v) that are being held for sale, as
reflected in the Company's financial statements as of December 31, 1997 or (vi)
the gross proceeds of which (exclusive of indemnities) do not exceed $1 million
for any particular item or $3 million in the aggregate for any fiscal year.
"Atlas Disposition" means the sale or other disposition of all or
substantially all of the assets of the Atlas Steel and Wire division of the
Company.
"Bank Credit Agreement" means a bank credit facility between the Company
and one or more bank lenders, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, which term shall include the Revolving Credit Agreement, as any such
facility may be amended, modified, increased, renewed, refunded, replaced,
restated or refinanced from time to time.
"Banks" means the banks and other financial institutions that from time to
time are lenders under the Bank Credit Agreement.
"Borrowing Base" means, as of any date, an amount equal to the sum of (a)
80% of the face amount of all accounts receivable owned by the Company and its
Restricted Subsidiaries as of such date that are not more than 90 days past due,
and (b) 60% of the book value of all inventory owned by the Company and its
Subsidiaries as of such date, all calculated on a consolidated basis and in
accordance with GAAP.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York are authorized or
obligated by law or executive order to close.
"Capital Stock" of any person means any and all shares, interests,
partnership interests, participations, rights in or other equivalents (however
designated) of such person's equity interest (however designated), whether now
outstanding or issued after the Closing Date.
"Capitalized Lease Obligation" means, with respect to any person, an
obligation incurred or assumed under or in connection with any capital lease of
real or personal property that, in accordance with GAAP, has been recorded as a
capitalized lease.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) other than Kyoei Steel Ltd. and its
Affiliates is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of more than 35% of the
voting power of all classes of Voting Stock of the Company;
(b) the Company, either individually or in conjunction with one or
more Subsidiaries, sells, assigns, conveys, transfers, leases or otherwise
disposes of, or the Subsidiaries sell, assign, convey, transfer, lease or
otherwise dispose of, all or substantially all of the properties of the
Company and the Subsidiaries, taken as a whole (either in one transaction
or a series of related transactions), including Capital Stock of the
Subsidiaries, to any person (other than the Company or a Restricted
Subsidiary);
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(c) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the stockholders of the Company was
approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in
office; or
(d) the Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution, other than in a transaction that complies with
"-- Certain Covenants -- Merger, Consolidation or Sale of Assets."
"Closing Date" means the date on which the Notes are originally issued
under the Indenture.
"Common Stock" means the Company's shares of Class A Common Stock, par
value $.01 per share, and the Company's shares of Class B Common Stock, par
value $.01 per share.
"Consolidated Adjusted Net Income" means, for any period, the net income
(or net loss) of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted to the
extent included in calculating such net income or loss by excluding (a) any net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to Asset Sales, (c) the portion of net income (or
loss) of any person (other than the Company or a Restricted Subsidiary),
including Unrestricted Subsidiaries, in which the Company or any Restricted
Subsidiary has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to the Company or any Restricted
Subsidiary in cash during such period, (d) the net income (or loss) of any
person combined with the Company or any Restricted Subsidiary on a "pooling of
interests" basis attributable to any period prior to the date of combination,
and (e) the net income (but not the net loss) of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by such Restricted Subsidiary is at the date of determination restricted,
directly or indirectly, except to the extent that such net income is actually
paid to the Company or a Restricted Subsidiary thereof by loans, advances,
intercompany transfers, principal repayments or otherwise; provided that, if any
Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated
Adjusted Net Income will be reduced (to the extent not otherwise reduced in
accordance with GAAP) by an amount equal to (A) the amount of the Consolidated
Adjusted Net Income otherwise attributable to such Restricted Subsidiary
multiplied by (B) the quotient of (1) the number of shares of outstanding common
stock of such Restricted Subsidiary not owned on the last day of such period by
the Company or any of its Restricted Subsidiaries divided by (2) the total
number of shares of outstanding common stock of such Restricted Subsidiary on
the last day of such period.
"Consolidated EBITDA" means, for any period, the sum of, without
duplication, Consolidated Adjusted Net Income for such period, plus (or, in the
case of clause (d) below, plus or minus) the following items to the extent
included in computing Consolidated Adjusted Net Income for such period (a) Fixed
Charges for such period, plus (b) the provision for federal, state, local and
foreign income taxes of the Company and its Restricted Subsidiaries for such
period, plus (c) the aggregate depreciation and amortization expense of the
Company and its Restricted Subsidiaries for such period, plus (d) any other
non-cash charges for such period, and minus non-cash credits for such period,
other than non-cash charges or credits resulting from changes in prepaid assets
or accrued liabilities in the ordinary course of business; provided that fixed
charges, income tax expense, depreciation and amortization expense and non-cash
charges and credits of a Restricted Subsidiary will be included in Consolidated
EBITDA only to the extent (and in the same proportion) that the net income of
such Subsidiary was included in calculating Consolidated Adjusted Net Income for
such period.
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"Consolidated Net Worth" means, at any date of determination, stockholders'
equity of the Company and its Restricted Subsidiaries as set forth on the most
recently available quarterly or annual consolidated balance sheet of the Company
and its Restricted Subsidiaries, less any amounts attributable to Disqualified
Stock or any equity security convertible into or exchangeable for Indebtedness,
the cost of treasury stock and the principal amount of any promissory notes
receivable from the sale of the Capital Stock of the Company or any of its
Restricted Subsidiaries and less to the extent included in calculating such
stockholders' equity of the Company and its Restricted Subsidiaries, the
stockholders' equity attributable to Unrestricted Subsidiaries, each item to be
determined in conformity with GAAP (excluding the effects of foreign currency
adjustments under Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 52).
"Consolidated Tangible Assets" means, at any date of determination, the
total assets, less goodwill and other intangibles (other than patents,
trademarks, copyrights, licenses and other intellectual property), shown on the
balance sheet of the Company and its Restricted Subsidiaries as of the most
recent date for which such a balance sheet is available, determined on a
consolidated basis in accordance with GAAP less all write-ups (other than
write-ups in connection with acquisitions) subsequent to the date of the
Indenture in the book value of any asset (except any such intangible assets)
owned by the Company or any of its Restricted Subsidiaries. At December 31,
1997, on a pro forma basis giving effect to the Refinancing, the Consolidated
Tangible Assets of the Company were approximately $453 million.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors, to make a finding or otherwise
take action under the Indenture, a member of the Board of Directors who does not
have any material direct or indirect financial interest in or with respect to
such transaction or series of transactions.
"Disqualified Stock" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise (i) is or upon the happening of an
event or passage of time would be, required to be redeemed prior to the final
Stated Maturity of the Notes, (ii) is redeemable at the option of the Holder
thereof, at any time prior to such final Stated Maturity or (iii) at the option
of the Holder thereof is convertible into or exchangeable for debt securities at
any time prior to such final Stated Maturity; provided that any Capital Stock
that would not constitute Disqualified Stock but for provisions therein giving
Holders thereof the right to cause the issuer thereof to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes will not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the Holders of such
Capital Stock than the provisions described under "-- Repurchase at the Option
of Holders -- Change of Control" and "-- Asset Sales" described herein and such
Capital Stock specifically provides that the issuer will not repurchase or
redeem any such stock pursuant to such provision prior to the Company's
repurchase of such Notes as are required to be repurchased pursuant to the
provisions described under "-- Repurchase at the Option of Holders -- Change of
Control" and "-- Asset Sales."
"Equity Investment" means the March 26, 1998 sale of 454,545 shares of the
Company's Class B Common Stock to an institutional investor for $10.0 million.
"Equity Ownership Plan" means the Company's Equity Ownership Plan,
effective as of April 1, 1995, as in effect on the Closing Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Existing Indebtedness" means the Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the Bank Credit
Agreement) in existence on the date of the Indenture, until such amounts are
repaid, including but not limited to the Industrial Revenue Bonds.
"First Mortgage Notes" means the Company's 11 1/2% First Mortgage Notes due
December 15, 2000.
"Fixed Assets" means, at any date of determination, property, plant and
equipment, including the property, plant and equipment portion of assets held
for sale (as reflected in the Company's financial statements as of the most
recent date for which such statements are available).
"Fixed Charges" means, for any period, without duplication, the sum of (a)
the amount that, in conformity with GAAP, would be set forth opposite the
caption "interest expense" (or any like caption) on a consolidated statement of
operations of the Company and its Restricted Subsidiaries for such period,
including, without limitation, (i) amortization of debt discount, (ii) the net
cost of interest rate contracts (including amortization of discounts), (iii) the
interest portion of any deferred payment obligation, (iv) amortization of debt
issuance costs and (v) the interest component of Capitalized Lease Obligations,
(b) cash dividends paid on Preferred Stock and Disqualified Stock by the Company
and any Restricted Subsidiary (to any person other than the Company and its
Restricted Subsidiaries), computed on a tax effected basis, and (c) all interest
on any Indebtedness of any person guaranteed by the Company or any of its
Restricted Subsidiaries or unsecured by a lien on the assets of the Company or
any of its Restricted Subsidiaries; provided, however, that Fixed Charges will
not include (i) any gain or loss from extinguishment of debt, including the
write-off of debt issuance costs, and (ii) the fixed charges of a Restricted
Subsidiary to the extent (and in the same proportion) that the net income of
such Subsidiary was excluded in calculating Consolidated Adjusted Net Income
pursuant to clause (e) of the definition thereof for such period.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of
Consolidated EBITDA for such period to Fixed Charges for such period.
"FLS" means FLS Holdings Inc., a wholly owned subsidiary of Kyoei Steel
Ltd.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, that
are in effect on the Closing Date.
"Guarantee" means a guarantee of the Notes on a senior basis.
"Guarantors" means, collectively, all Restricted Subsidiaries; provided
that any Person that becomes an Unrestricted Subsidiary in compliance with the
"Restricted Payments" covenant shall not be included in "Guarantors" after
becoming an Unrestricted Subsidiary.
"Hedging Obligations" means the obligations of any person under (i)
interest rate swap agreements, interest rate cap agreements and interest rate
collar agreements and (ii) other agreements or arrangements designed to protect
such person against fluctuations in interest rates or the value of foreign
currencies.
"Holder" means the person in whose name a Note is, at the time of
determination, registered on the Registrar's books.
"Indebtedness" means (without duplication), with respect to any person,
whether recourse is to all or a portion of the assets of such person and whether
or not contingent, (a) every obligation of such person for money borrowed, (b)
every obligation of such person evidenced by bonds, debentures, notes or other
similar instruments, (c) every reimbursement obligation of such person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such person, (d) every obligation of such person issued or
assumed as the deferred purchase price of property or services, (e) the
attributable value of every Capitalized Lease Obligation of such person, (f) all
Disqualified Stock of such person valued at its maximum fixed repurchase price,
plus accrued and unpaid dividends, (g) all obligations of such person under or
in respect of Hedging Obligations, and (h) every obligation of the type referred
to in clauses (a) through (g) of another person and all dividends of another
person the payment of which, in either case, such person has guaranteed. For
purposes of this definition, the "maximum fixed repurchase price" of any
Disqualified Stock that does
84
<PAGE> 87
not have a fixed repurchase price will be calculated in accordance with the
terms of such Disqualified Stock as if such Disqualified Stock were purchased on
any date on which Indebtedness is required to be determined pursuant to the
Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Stock, such fair market value will be determined in
good faith by the board of directors of the issuer of such Disqualified Stock.
Notwithstanding the foregoing, trade accounts payable and accrued liabilities
arising in the ordinary course of business and any liability for federal, state
or local taxes or other taxes owed by such person will not be considered
Indebtedness for purposes of this definition.
"Industrial Revenue Bonds" means the Company's industrial revenue bonds
issued to construct certain of the Company's facilities outstanding as of the
Closing Date.
"Investment" in any person means, (i) directly or indirectly, any advance,
loan or other extension of credit (including, without limitation, by way of
guarantee or similar arrangement) or capital contribution to such person, the
purchase or other acquisition of any stock, bonds, notes, debentures or other
securities issued by such person, the acquisition (by purchase or otherwise) of
all or substantially all of the business or assets of such person, or the making
of any investment in such person, (ii) the designation of any Restricted
Subsidiary as an Unrestricted Subsidiary and (iii) the fair market value of the
Capital Stock (or any other Investment), held by the Company or any of its
Restricted Subsidiaries, of (or in) any person that has ceased to be a
Restricted Subsidiary. Investments exclude extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices.
"Kyoei Steel Ltd." means Kyoei Steel Ltd. and its successors.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon, or with respect to, any
property of any kind, real or personal, movable or immovable, now owned or
hereafter acquired. A person will be deemed to own subject to a Lien any
property that such person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or cash equivalents, including payments in respect
of deferred payment obligations when received in the form of, or stock or other
assets when disposed for, cash or cash equivalents (except to the extent that
such obligations are financed or sold with recourse to the Company or any
Restricted Subsidiary), net of (a) brokerage commissions and other fees and
expenses (including fees and expenses of legal counsel and investment banks)
related to such Asset Sale, (b) provisions for all taxes payable as a result of
such Asset Sale, (c) payments made to retire Indebtedness where such
Indebtedness is secured by the assets that are the subject of such Asset Sale,
(d) amounts required to be paid to any person (other than the Company or any
Restricted Subsidiary) owning a beneficial interest in the assets that are
subject to the Asset Sale, and (e) appropriate amounts to be provided by the
Company or any Restricted Subsidiary, as the case may be, as a reserve required
in accordance with GAAP against any liabilities associated with such Asset Sale
and retained by the seller after such Asset Sale, including pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale.
"Permitted Investments" means any of the following:
(a) Investments in (i) securities with a maturity of one year or less
issued or directly and fully guaranteed or insured by the United States or
any agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof); (ii)
certificates of deposit or acceptances with a maturity of one year or less
of any financial institution that is a member of the Federal Reserve System
having combined capital and surplus of not less than $200,000,000; (iii)
any shares of money market mutual or similar funds having assets in excess
of $200,000,000; and (iv) commercial paper with a maturity of one year or
less issued by a corporation that is not an Affiliate of the Company and is
organized under the laws of
85
<PAGE> 88
any state of the United States or the District of Columbia and having a
rating (A) from Moody's Investors Service, Inc. of at least P-1 or (B) from
Standard & Poor's Ratings Group of at least A-1;
(b) Investments by the Company or any Wholly Owned Restricted
Subsidiary in another person, if as a result of such Investment (i) such
other person becomes a Restricted Subsidiary that is a Subsidiary Guarantor
or (ii) such other person is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to, the Company
or a Restricted Subsidiary that is a Subsidiary Guarantor;
(c) Investments by the Company or a Restricted Subsidiary in the
Company or a Subsidiary Guarantor;
(d) Investments in existence on the Closing Date;
(e) promissory notes received as a result of Asset Sales permitted
under the covenant;
(f) loans or advances to officers, directors and employees of the
Company or any of its Restricted Subsidiaries made in the ordinary course
of business after the date of the initial issuance of the Notes in an
amount not to exceed $1 million in the aggregate at any one time
outstanding; and
(g) other Investments that do not exceed $5 million in the aggregate
at any one time outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that: (i) the principal amount of such Permitted Refinancing
Indebtedness does not exceed the principal amount of the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded plus the lesser of
the amount of any premium required to be paid in connection with such
refinancings pursuant to the terms of such indebtedness or the amount of any
premium reasonably determined by the Company as necessary to accomplish such
refinancing (plus the amount of reasonable expenses incurred in connection
therewith); (ii) such Permitted Refinancing Indebtedness has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Restricted Subsidiary of the Company that is the obligor
on the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and provided further that "Permitted Refinancing Indebtedness" shall
not be permitted with respect to Existing Indebtedness comprising (x) the First
Mortgage Notes, (y) the Subordinated Intercompany Note (other than as described
in clause (f) of the second paragraph of "-- Certain Covenants -- Restricted
Payments") or (z) clause (ix) of the definition of "Permitted Indebtedness."
"Preferred Stock" means, with respect to any person, any and all shares,
interests, partnership interests, participation, rights in or other equivalents
(however designated) of such person's preferred or preference stock, whether now
outstanding or issued after the Closing Date, and including, without limitation,
all classes and series of preferred or preference stock of such person.
"Public Equity Offering" means an offer and sale of common stock (which is
Qualified Stock) of the Company pursuant to a registration statement that has
been declared effective by the Commission
86
<PAGE> 89
pursuant to the Securities Act (other than a registration statement on Form S-8
or otherwise relating to equity securities issuable under any employee benefit
plan of the Company).
"Qualified Equity Interest" means any Qualified Stock and all warrants,
options or other rights to acquire Qualified Stock (but excluding any debt
security that is convertible into or exchangeable for Capital Stock).
"Qualified Stock" of any person means any and all Capital Stock of such
person, other than Disqualified Stock.
"Refinancing" means (i) the Offering, (ii) the Equity Investment, (iii) the
redemption of the First Mortgage Notes and (iv) the repayment of $30 million of
the Subordinated Intercompany Note.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Revolving Credit Agreement" means the $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., as Issuing Banks and
Co-Administrative Agents, and The Bank of Tokyo, Ltd., as agent, as amended.
"Sale and Leaseback Transaction" means any transaction or series of related
transactions pursuant to which a person sells or transfers any property or asset
in connection with the leasing, or the resale against installment payments, of
such property or asset to the seller or transferor.
"Shares in Success Plan" means the Company's stock purchase/stock option
Shares in Success Plan, dated as of July 1, 1995, as in effect on the Closing
Date.
"Short-Term Incentive Plan" means the Company's 1995 Short-Term Incentive
Plan pursuant to which 48,836 shares of Class B Common Stock were issued.
"Significant Subsidiary" means any Restricted Subsidiary of the Company
that, together with its Subsidiaries, (a) for the most recent fiscal year of the
Company, accounted for more than 10% of the consolidated net sales of the
Company and its Subsidiaries, (b) as of the end of such fiscal year, was the
owner of more than 10% of the consolidated assets of the Company and its
Restricted Subsidiaries, in the case of either (a) or (b), as set forth on the
most recently available consolidated financial statements of the Company for
such fiscal year or (c) was organized or acquired after the beginning of such
fiscal year and would have been a Significant Subsidiary if it had been owned
during such entire fiscal year.
"Special Dividend" means the $6.1 million dividend paid by the Company in
December 1997.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness or any installment of interest
thereon is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Subsidiary Guarantor that is subordinated in right of payment to the Notes or
the Subsidiary Guarantees issued by such Subsidiary Guarantor, as the case may
be; provided, however, that, for purposes of the "Restricted Payments" covenant,
"Subordinated Indebtedness" shall not include the Subordinated Intercompany
Note.
"Subordinated Intercompany Note" means the $50 million subordinated note of
the Company to FLS due December 31, 2002.
"Subsidiary" means any person a majority of the equity ownership or Voting
Stock of which is at the time owned, directly or indirectly, by the Company
and/or one or more other Subsidiaries of the Company.
"Technical Assistance Agreement" means the technical assistance agreement
by and between the Company and Kyoei Steel Ltd. which became effective on April
1, 1997 and expires on March 31, 1999.
87
<PAGE> 90
"Trade Loan Agreements" means any obligation for Indebtedness owed to U.S.
affiliates or agents of Japanese trading houses.
"Unrestricted Subsidiary" means (a) any Subsidiary that is designated by
the Board of Directors of the Company as an Unrestricted Subsidiary in
accordance with the "Unrestricted Subsidiaries" covenant and (b) any Subsidiary
of an Unrestricted Subsidiary.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the Holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any person (irrespective of whether or not, at the time, stock of
any other class or classes has, or might have, voting power by reason of the
happening of any contingency).
"Weighted Average Life to Maturity" means, as of the date of determination
with respect to any Indebtedness or Disqualified Stock, the quotient obtained by
dividing (a) the sum of the products of (i) the number of years from the date of
determination to the date or dates of each successive scheduled principal or
liquidation value payment of such Indebtedness or Disqualified Stock,
respectively, multiplied by (ii) the amount of each such principal or
liquidation value payment by (b) the sum of all such principal or liquidation
value payments.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all
of the outstanding voting securities (other than directors' qualifying shares or
shares of foreign Restricted Subsidiaries required to be owned by foreign
nationals pursuant to applicable law) of which are owned, directly or
indirectly, by the Company.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company by Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, Professional
Association, Tampa, Florida.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The AmeriSteel Corporation & Subsidiary Consolidated Financial Statements
and Notes thereto as of March 31, 1997 and 1998 and for each of the three years
in the period ended March 31, 1998 included in this Prospectus have been audited
by Arthur Andersen LLP, independent certified public accountants, as indicated
in their report with respect thereto, and are included herein in reliance upon
the authority of said firm experts in giving said reports.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder, and in accordance therewith files periodic reports,
proxy and other information statements with the Commission. This Prospectus does
not contain all of the information set forth in such documents filed with the
Commission. All reports, proxy information statements and other information
filed by the Company with the Commission 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 Commission's World Wide Web site 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.
88
<PAGE> 91
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Consolidated Statements of Financial Position as of March
31, 1998 and 1997......................................... F-3
Consolidated Statements of Income for the Years Ended March
31, 1998, 1997 and 1996................................... F-4
Consolidated Statements of Shareholders' Equity for the
Years Ended March 31, 1998, 1997 and 1996................. F-5
Consolidated Statements of Cash Flows for the Years Ended
March 31, 1998, 1997 and 1996............................. F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 92
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To AmeriSteel Corporation:
We have audited the accompanying consolidated statements of financial
position of AmeriSteel Corporation (a Florida corporation) and subsidiary as of
March 31, 1998 and 1997, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended March 31, 1998. 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 and
subsidiary as of March 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tampa, Florida,
April 24, 1998 (except with
respect to the matters discussed
in Note L, as to which the
date is June 2, 1998)
F-2
<PAGE> 93
AMERISTEEL CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
MARCH 31,
-------------------
1998 1997
-------- --------
($ IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 1,258 $ 1,645
Accounts receivable, less allowance of $1,000 at March 31,
1998 and March 31, 1997 for estimated losses............ 73,330 68,563
Inventories............................................... 130,413 106,173
Deferred tax assets....................................... 5,200 5,000
Other current assets...................................... 409 1,138
-------- --------
TOTAL CURRENT ASSETS............................... 210,610 182,519
ASSETS HELD FOR SALE........................................ 13,689 14,838
PROPERTY, PLANT AND EQUIPMENT
Land and improvements..................................... 15,517 14,942
Building and improvements................................. 35,892 35,116
Machinery and equipment................................... 261,265 250,299
Construction in progress.................................. 14,918 7,802
-------- --------
327,592 308,159
Less allowances for depreciation.......................... (76,420) (58,138)
-------- --------
NET PROPERTY, PLANT AND EQUIPMENT........................... 251,172 250,021
GOODWILL.................................................... 81,643 85,773
DEFERRED FINANCING COSTS.................................... 5,009 2,523
OTHER ASSETS................................................ 7 11
-------- --------
TOTAL ASSETS....................................... $562,130 $535,685
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable.................................... $ 49,518 $ 44,666
Salaries, wages and employee benefits..................... 16,469 14,598
Current environmental remediation liabilities............. 4,863 5,079
Other current liabilities................................. 5,126 4,355
Interest payable.......................................... 4,835 4,659
Current maturities of long-term borrowings (including note
payable to Parent of $367 and $435 at March 31, 1998 and
1997, respectively)..................................... 7,106 435
-------- --------
TOTAL CURRENT LIABILITIES.......................... 87,917 73,792
LONG-TERM BORROWINGS, LESS CURRENT PORTION.................. 214,465 237,474
OTHER LIABILITIES........................................... 23,433 21,555
DEFERRED INCOME TAXES....................................... 50,600 52,300
SHAREHOLDERS' EQUITY
Class A Common Stock, $.01 par value, 100,000,000 and 0
shares authorized at March 31, 1998 and 1997,
respectively. No shares issued and outstanding at March
31, 1998 and 1997....................................... -- --
Class B Common Stock, $.01 par value, 22,000,000 and
30,000,000 shares authorized at March 31, 1998 and 1997,
respectively 10,568,555 and 10,079,028 shares issued and
outstanding at March 31, 1998 and 1997, respectively.... 106 101
Capital in excess of par.................................. 167,283 156,816
Retained earnings (accumulated deficit)................... 19,886 (4,328)
Deferred compensation..................................... (1,560) (2,025)
-------- --------
TOTAL SHAREHOLDERS' EQUITY......................... 185,715 150,564
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......... $562,130 $535,685
======== ========
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE> 94
AMERISTEEL CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------
1998 1997 1996
--------- --------- ---------
($ IN THOUSANDS EXCEPT EARNINGS
PER SHARE DATA)
<S> <C> <C> <C>
NET SALES................................................... $664,566 $617,289 $628,404
Operating Expenses:
Cost of sales............................................. 540,422 531,190 533,965
Selling and administrative................................ 27,811 29,068 29,605
Depreciation.............................................. 19,494 16,654 14,619
Amortization of goodwill.................................. 4,130 4,130 4,130
Other operating expenses.................................. -- -- 16,013
-------- -------- --------
591,857 581,042 598,332
-------- -------- --------
INCOME FROM OPERATIONS...................................... 72,709 36,247 30,072
Other Expenses:
Interest.................................................. 19,775 19,473 22,000
Amortization of deferred financing costs.................. 652 934 1,956
-------- -------- --------
20,427 20,407 23,956
-------- -------- --------
INCOME BEFORE INCOME TAXES.................................. 52,282 15,840 6,116
Income taxes................................................ 22,000 7,788 3,996
-------- -------- --------
NET INCOME.................................................. $ 30,282 $ 8,052 $ 2,120
======== ======== ========
EARNINGS PER COMMON SHARE -- BASIC (NOTE B)................. $ 3.00 $ 0.80 $ 0.21
======== ======== ========
DILUTED (NOTE B)............................................ $ 2.98 $ 0.80 $ 0.21
======== ======== ========
Weighted average number of common shares outstanding...... 10,103 10,087 10,062
Weighted average number of common and common equivalent
shares................................................. 10,174 10,087 10,062
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE> 95
AMERISTEEL CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
[CAPTION]
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK CAPITAL EARNINGS
------------------- 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,
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
Common stock
issuance........... 495,005 5 10,541 -- (540) 10,006
Repurchase of common
stock.............. (5,478) -- (74) -- -- (74)
Net income............ -- -- -- 30,282 -- 30,282
Dividends paid........ -- -- -- (6,068) -- (6,068)
Reduction in deferred
compensation....... -- -- -- -- 1,005 1,005
---------- ---- -------- -------- ------- --------
BALANCES AT MARCH 31,
1998.................. 10,568,555 $106 $167,283 $ 19,886 $(1,560) $185,715
========== ==== ======== ======== ======= ========
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE> 96
AMERISTEEL CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------
1998 1997 1996
-------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 30,282 $ 8,052 $ 2,120
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation.............................................. 19,494 16,654 14,619
Amortization.............................................. 4,782 5,064 6,086
Deferred income taxes..................................... (1,900) (200) (1,200)
Loss on disposition of property, plant and equipment...... 2,524 317 14,312
Gain on disposition of assets held for sale............... (1,756) -- --
Deferred compensation..................................... 1,005 975 900
Changes in operating assets and liabilities:
Accounts receivable....................................... (4,767) 4,347 7,450
Inventories............................................... (24,240) 6,580 14,927
Other current assets...................................... 729 (85) (303)
Other assets.............................................. 4 (4) 21
Trade accounts payable.................................... 4,852 4,432 (9,130)
Salaries, wages and employee benefits..................... 1,871 262 (2,184)
Other current liabilities................................. 479 (828) 769
Environmental remediation................................. 384 (1,400) (5,421)
Interest payable.......................................... 176 (281) (318)
Income taxes payable...................................... 292 126 514
Other liabilities......................................... 1,278 (81) 929
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 35,489 43,930 44,091
INVESTING ACTIVITIES
Additions to property, plant and equipment................ (21,107) (34,382) (36,894)
Purchase of assets held for sale.......................... (129) (454) --
Proceeds from sales of property, plant and equipment...... 251 876 788
Proceeds from sale of assets held for sale................ 3,034 1,550 794
Restricted IRB Funds...................................... (2,313) 13,700 (13,700)
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES....................... (20,264) (18,710) (49,012)
FINANCING ACTIVITIES
(Payments to) proceeds from short-term and long-term
borrowings, net......................................... (16,338) (29,558) 21,227
Additions to deferred financing costs..................... (3,138) -- (909)
Prepurchase of subordinated debentures.................... -- -- (13,035)
Proceeds from sale of common stock........................ 10,006 -- 977
Redemption of common stock................................ (74) (210) --
Dividends paid............................................ (6,068) -- --
-------- -------- --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES......... (15,612) (29,768) 8,260
-------- -------- --------
(DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS............. (387) (4,548) 3,339
Cash and cash equivalents at beginning of period............ 1,645 6,193 2,854
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 1,258 $ 1,645 $ 6,193
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest (net of amount capitalized).......... $ 19,599 $ 19,754 $ 22,318
======== ======== ========
Cash paid for income taxes.................................. $ 21,709 $ 7,862 $ 4,682
======== ======== ========
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE> 97
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998, 1997 AND 1996
NOTE A -- BASIS OF PRESENTATION
The consolidated financial statements include the accounts of AmeriSteel
Corporation, a Florida corporation and its wholly owned subsidiary (AmeriSteel
Finance Corporation, a Delaware corporation) (together, the "Company") after
elimination of all significant intercompany balances and transactions. 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 Company is a majority-owned subsidiary of FLS
Holdings, Inc. ("the Parent").
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
1998, 1997, and 1996 have been approximately $(28,000), $106,000 and $184,000,
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, 1998, 1997 and
1996, 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: Assets held for sale consists primarily of real
estate and machinery and equipment held for sale which are carried at the lower
of cost or net realizable value.
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 the income statement.
Interest costs for property, plant and equipment construction expenditures
of approximately $0.5 million and $2.0 million were capitalized for the years
ended March 31, 1998 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 other equipment.
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, 1998 and 1997, the Company had $2.7 million and $0 million,
respectively, of such restricted IRB funds on its balance sheet.
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 $21.6 million and $17.5 million at March 31, 1998
and 1997, respectively. Goodwill is being amortized over a 25-year period.
Deferred Financing Costs: The deferred financing costs as of March 31,
1998 and 1997, are net of accumulated amortization of $9.6 million and $9.0
million, respectively. These amounts will be amortized over the term of the
respective debt instruments, which range from 1 to 10 years. The
F-7
<PAGE> 98
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company incurred financing costs of approximately $3.0 million in March 1998
related to the $130 million Senior Notes (see "Note D").
Earnings per Common Share: In fiscal 1998, the Company adopted Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128).
Basic earnings per common share is based upon the weighted average number of
common shares and the diluted earnings per common share is based upon the
weighted average number of common shares plus the dilutive common equivalent
shares outstanding during the period. The following is a reconciliation of the
denominators of the basic and diluted earnings per common share computations
shown on the face of the accompanying consolidated statements of income (in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Basic weighted average number of common shares.............. 10,103 10,087 10,062
Dilutive effect of options outstanding...................... 71 -- --
Diluted weighted average number of common and common
equivalent shares outstanding............................. 10,174 10,087 10,062
</TABLE>
The Company's previously reported primary earnings per common share and
fully diluted earnings per common share for fiscal 1997 and 1996 did not differ
from the basic earnings per common share and the diluted earnings per common
share, respectively, calculated under SFAS 128.
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 June 1997, the Financial Accounting
Standards Board issued Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131) 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 determined
that the adoption of SFAS 131 will not have a material effect on the
consolidated financial statements.
In February 1998, the Financial Accounting Standards Board issued Statement
No. 132, "Employers Disclosures about Pensions and Other Post Retirement
Benefits" (SFAS 132) which standardizes the disclosure requirements for defined
contribution plans and defined benefit plans. The statement is effective for
financial statements relating to fiscal years beginning after December 15,
F-8
<PAGE> 99
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1997. Management has determined that the adoption of SFAS 132 will not have a
material effect on the consolidated financial statements.
Reclassifications: Certain amounts in the fiscal 1996 and 1997 financial
statements have been reclassified to conform to the fiscal 1998 financial
statement presentation.
NOTE C -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
-------------------
1998 1997
-------- --------
($ IN THOUSANDS)
<S> <C> <C>
Finished goods.............................................. $ 87,511 $ 59,299
Work in-process............................................. 9,694 14,175
Raw materials and operating supplies........................ 33,208 32,699
-------- --------
$130,413 $106,173
======== ========
</TABLE>
NOTE D -- BORROWINGS
Long-term borrowings consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
-------------------
1998 1997
-------- --------
($ IN THOUSANDS)
<S> <C> <C>
Revolving Credit Agreement.................................. $ 40,070 $ 51,340
Industrial Revenue Bonds.................................... 35,875 30,875
First Mortgage Notes........................................ 100,000 100,000
Subordinated Intercompany Note.............................. 40,000 50,000
Trade Loan Agreements....................................... 5,259 5,259
Note to Parent.............................................. 367 435
-------- --------
221,571 237,909
Less current maturities..................................... 7,106 435
-------- --------
$214,465 $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 continued to be in compliance with these covenants
throughout fiscal 1998. 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, 1998 was 7.1%.
The Company's industrial revenue bonds ("IRBs") were issued to obtain
funding to construct facilities in Jackson, Tennessee; Charlotte, North
Carolina; Jacksonville, Florida; and Plant City,
F-9
<PAGE> 100
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Florida. The interest rates on these bonds range from 50% to 75% of the prime
rate. $1.5 million of the IRBs matures in November 1998. $9.4 million of the
IRBs matures in fiscal 2004, $5.0 million matures in fiscal 2015 and the
remaining $20.0 million matures in fiscal 2018. The $5.0 million IRBs maturing
in fiscal 2015 were issued in September 1997 for construction of a facility at
the Jackson mill to recycle EC dust. The IRBs are backed by irrevocable letters
of credit issued pursuant to the Revolving Credit Agreement. As of March 31,
1998, the Company had approximately $40.5 million of outstanding letters of
credit, primarily for IRBs, insurance-related matters and surety bonds.
The First Mortgage Notes were collateralized senior obligations of the
Company limited in aggregate principal amount to $100 million and mature on
December 15, 2000 if not called before that date (see below.) Interest on the
First Mortgage Notes accrued at the rate of 11.5% per annum and was payable
semiannually on each June 15 and December 15. The Company had assigned and
pledged a security interest in substantially all the real and personal property
of the four mills. The First Mortgage Notes ranked 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 ranked senior to all subordinated
indebtedness of the Company. The First Mortgage Notes contained covenants that
included, 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
continued to be in compliance with these covenants throughout fiscal 1998.
On March 30, 1998 the Company entered into a binding agreement to refinance
the First Mortgage Notes by issuing $130 million of 8.75% unsecured Senior
Notes, (the "Senior Notes"). The Senior Notes were issued on April 6, 1998 and
mature on April 15, 2008. The First Mortgage Notes were subsequently redeemed in
whole on May 11, 1998 at a call premium of 101.916%. See "Note L -- Subsequent
Events" for a detailed discussion of the Senior Notes and the redemption of the
First Mortgage Notes.
On March 31, 1998 the Company redeemed $10 million of a $50 million note to
a related party (the "Subordinated Intercompany Note") from proceeds from the
sale of 454,545 shares of Class B common stock to an institutional investor.
After this redemption, the Company's outstanding Subordinated Intercompany Note
was $40 million with maturing dates through February 25, 2004. The Subordinated
Intercompany Note bears interest at variable rates. The weighted average
interest rate at March 31, 1998 was 7.60%. The Company intends to redeem an
additional $20 million of Subordinated Intercompany Note before June 30, 1998
from proceeds of the Senior Notes. See "Note L -- Subsequent Events" for a
detailed discussion of Senior Notes.
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 consolidated statements of financial position.
The Company has borrowed $5.3 million as of March 31, 1998, under the Trade
Loan Agreements. The loan bears interest at 7.3% and matures on June 30, 1998.
Proceeds were used for the purchase of steel mill equipment.
F-10
<PAGE> 101
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The maturities of long-term borrowings for the fiscal years subsequent to
March 31, 1998 are as follows:
<TABLE>
<CAPTION>
FISCAL AMOUNT
- ------ ----------------
($ IN THOUSANDS)
<S> <C>
1999.................................................... $ 7,106
2000.................................................... 40,070
2001.................................................... --
2002.................................................... --
2003.................................................... 40,000
Thereafter.............................................. 134,395
--------
$221,571
========
</TABLE>
NOTE E -- INCOME TAXES
The provision for income taxes is comprised of the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------
1998 1997 1996
------- ------ -------
($ IN THOUSANDS)
<S> <C> <C> <C>
Currently payable:
Federal................................................. $20,940 $7,391 $ 4,592
State................................................... 2,960 597 604
------- ------ -------
23,900 7,988 5,196
Deferred provision (benefit):
Federal................................................. (200) (594) (1,301)
State................................................... (1,700) 394 101
------- ------ -------
(1,900) (200) (1,200)
------- ------ -------
$22,000 $7,788 $ 3,996
======= ====== =======
</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 MARCH 31,
-------------------------
1998 1997 1996
------- ------ ------
($ IN THOUSANDS)
<S> <C> <C> <C>
Tax provision at statutory rates........................... $18,299 $5,544 $2,141
State income taxes, net of federal income tax effect....... 2,142 722 244
Goodwill amortization...................................... 1,445 1,446 1,611
Other items, net........................................... 114 76 --
------- ------ ------
$22,000 $7,788 $3,996
======= ====== ======
</TABLE>
F-11
<PAGE> 102
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the deferred tax assets and liabilities consisted of the
following at March 31:
<TABLE>
<CAPTION>
1998 1997
-------- --------
($ IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX ASSET
Allowance for doubtful accounts........................... $ 390 $ 390
Worker's compensation accrual............................. 1,097 1,413
Employee benefits and related accruals.................... 2,666 2,351
Environmental remediation accrual......................... 3,563 3,414
Federal loss carryforward................................. 1,103 1,654
State loss carryforward................................... -- 40
Pension accrual........................................... 2,823 2,334
Post retirement benefits accrual.......................... 3,313 3,306
Other..................................................... 514 856
-------- --------
15,469 15,758
-------- --------
DEFERRED TAX LIABILITY
Inventories............................................... (996) (1,992)
Property, plant and equipment............................. (56,932) (57,903)
Assets held for sale...................................... (2,161) (2,432)
Deferred compensation..................................... (359) (731)
Property taxes............................................ (421) --
-------- --------
(60,869) (63,058)
-------- --------
NET DEFERRED TAX LIABILITY.................................. $(45,400) $(47,300)
======== ========
</TABLE>
The Company has a Federal net operating loss carryforward of approximately
$3.1 million expiring in 2009. As a result of a change in tax fiscal year,
recognition of Federal net operating loss carryforwards are limited to
approximately $1.6 million each year.
NOTE F -- BENEFIT PLANS
The Company maintains a defined benefit pension plan covering substantially
all employees. The benefits are based on years of service and compensation
during the period of employment. Annual contributions are made in conformity
with minimum funding requirements and maximum deductible limitations.
F-12
<PAGE> 103
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The plan's funded status and the amounts recognized in the accompanying
consolidated statements of financial position are as follows:
<TABLE>
<CAPTION>
MARCH 31,
---------------------
1998 1997
--------- ---------
($ IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation including vested benefits
of $76,978 and $66,249, at March 31, 1998 and 1997,
respectively........................................... $ 81,019 $ 71,157
======== ========
Projected benefit obligation for service rendered to date... $(97,531) $(84,646)
Plan assets at fair value................................... 102,537 85,828
-------- --------
Projected benefit obligation less than plan assets.......... 5,006 1,182
Unrecognized net gain....................................... (11,769) (6,549)
Unrecognized prior service cost............................. (354) (390)
-------- --------
Net accrued pension cost included in other long term
liabilities............................................... $ (7,117) $ (5,757)
======== ========
</TABLE>
The weighted average discount rates used in determining the actuarial
present value of the accumulated benefit obligation were 7.25% and 7.75%, for
the years ended March 31, 1998 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, 1998 and 1997.
Pension cost included in the accompanying consolidated statements of income
is comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1998 1997 1996
-------- ------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
Service cost.......................................... $ 2,542 $ 2,802 $ 2,695
Interest cost......................................... 6,395 6,223 5,756
Actual income from plan assets........................ (21,221) (7,395) (14,561)
Net amortization and deferral......................... 13,645 249 8,025
-------- ------- --------
Net pension cost...................................... $ 1,361 $ 1,879 $ 1,915
======== ======= ========
</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 $1.3 million, $1.1 million, and $1.1 million for the
years ended March 31, 1998, 1997 and 1996, 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, 1998, 1997 and 1996
were approximately $107 thousand, $282 thousand and $0 thousand, respectively.
F-13
<PAGE> 104
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
POST RETIREMENT BENEFITS
The Company currently provides specified health care benefits to retired
employees. Employees who retire after a certain age with specified years of
service become eligible for benefits under this unfunded plan. The Company has
the right to modify or terminate these benefits. The following table summarizes
the accumulated post retirement benefit obligations included in the Company's
consolidated statements of financial position:
<TABLE>
<CAPTION>
MARCH 31,
---------------
1998 1997
------ ------
($ IN
THOUSANDS)
<S> <C> <C>
Retirees.................................................... $4,931 $4,496
Fully eligible active participants.......................... 176 232
Other active plan participants.............................. 3,481 3,015
------ ------
Total............................................. 8,588 7,743
Plan assets at fair value................................... -- --
Unrecognized net gain....................................... 391 1,319
------ ------
Accrued post retirement benefit obligation.................. $8,979 $9,062
====== ======
</TABLE>
The following table summarizes the net post retirement benefit costs:
<TABLE>
<CAPTION>
MARCH 31,
-----------
1998 1997
---- ----
($ IN
THOUSANDS)
<S> <C> <C>
Service cost................................................ $213 $216
Interest cost............................................... 600 558
Gain........................................................ (11) (23)
---- ----
Net post retirement benefit cost............................ $802 $751
==== ====
</TABLE>
The weighted average discount rate used in determining the accrued post
retirement benefit obligation was 7.25% for fiscal 1998 and 7.75% for fiscal
1997. The gross medical trend rate was assumed to be 9.96% in 1997 and dropping
.346% per year to 6.0% in 2008 and beyond for pre-65 retirees that retired
before January 1, 1994, and 8.5% 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 $211,993 and $14,956 to the accrued post
retirement benefit obligation and service cost plus interest cost, respectively,
as of and for the year ended March 31, 1998.
NOTE G -- COMMON STOCK
On October 16, 1997, the Board of Directors approved amendments to the
Company's Articles of Incorporation and were effective on December 8, 1997. The
amendments authorize 100,000,000 shares of $0.01 par value Class A common stock
and 22,000,000 shares of $0.01 par value Class B common stock. 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. Class B common stock can only be issued
or sold to the employees of the Company, a related party and an institutional
investor.
F-14
<PAGE> 105
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In December 1997, the Company declared and paid a special dividend of
approximately $6.1 million to its stockholders at $0.60 per share.
On March 26, 1998 the Company issued 454,545 shares of Class B common stock
for $10 million to an institutional investor. The proceeds were used to redeem
$10 million of Subordinated Intercompany Note.
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 30,444 shares
outstanding as of March 31, 1998. The options were granted at fair value at the
date of the grant, 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, with 180,474
options outstanding as of March 31, 1998. 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.
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 164,100 incentive stock
options and 52,100 shares of common stock under the Equity Ownership Plan
through March 31, 1998, with 147,500 incentive stock options and 52,100 shares
of common stock outstanding at March 31, 1998. All issued options and 49,600
shares of issued common stock 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. The remaining 2,500 shares of
issued common stock become one-quarter vested for each of the four years
following 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 Equity
Ownership Plan and Purchase 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 percent for the Equity Ownership
Plan in fiscal 1998, 1997 and 1996 and risk-free interest rate of 6.3 percent
for the Purchase Plan in fiscal 1996; expected life of 7 years for the Equity
Ownership Plan in fiscal 1998, 1997 and 1996 and expected life of 7 years for
the Purchase Plan for fiscal 1996; and dividend rate of zero percent for the
Equity Ownership Plan in fiscal 1998, 1997 and 1996 and dividend rate of zero
percent for the Purchase Plan for fiscal 1996. Using these assumptions, the fair
value of the stock options granted in
F-15
<PAGE> 106
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
fiscal 1998, 1997 and 1996 is $328,502, $270,363 and $806,282, respectively,
which would be amortized as compensation expense over the vesting period of the
options.
The fair value of the stock issued in fiscal 1996 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
percent, expected life of 7 years and dividend rate of zero percent. Using these
assumptions, the fair value of the issued stock in fiscal 1996 is $75,755. 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 would have been changed to the following pro forma amounts:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ------
<S> <C> <C> <C>
Net Income:
As reported.............................................. $30,282 $8,052 $2,120
Pro forma................................................ 30,101 7,858 2,003
Earnings per common share:
Basic earnings per common share --
As reported........................................... $ 3.00 $ 0.80 $ 0.21
Pro forma............................................. 2.98 0.78 0.20
Earnings per common share:
Diluted earnings per common and common equivalent
share --
As reported........................................... $ 2.98 $ 0.80 $ 0.21
Pro forma............................................. 2.96 0.78 0.20
</TABLE>
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, 1998, 1997 and 1996:
EQUITY OWNERSHIP PLAN
<TABLE>
<CAPTION>
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE
1998 1998 1997 1997 1996 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning
of year............... 78,300 $12.50 12,000 $12.50 -- $ --
Granted................. 72,750 13.50 79,350 12.50 12,000 12.50
Exercised............... -- -- -- -- -- --
Forfeited............... (3,550) 12.65 (13,050) 12.50 -- --
Outstanding, end of
year.................. 147,500 12.99 78,300 12.50 12,000 12.50
======= ======= ======
Options vested at year-
end................... 4,000 $12.50 $ -- $ -- -- $ --
Weighted-average fair
value of options
granted during the
year.................. -- $ 5.26 -- $ 4.61 -- $ 4.46
</TABLE>
F-16
<PAGE> 107
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PURCHASE PLAN
<TABLE>
<CAPTION>
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE
1998 1998 1997 1997 1996 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning
of year............... 194,778 $12.50 221,094 $12.50 -- $ --
Granted................. -- -- -- -- 226,134 12.50
Exercised............... (460) 12.50 -- -- -- --
Forfeited............... (13,844) 12.50 (26,316) 12.50 (5,040) 12.50
Outstanding, end of
year.................. 180,474 12.50 194,778 12.50 221,094 12.50
------- ------- -------
Options vested at year-
end................... 60,158 $12.50 -- $ -- -- $ --
Weighted-average fair
value of options
granted during the
year.................. -- $ -- -- $ -- -- $ 4.45
</TABLE>
The weighted-average remaining contractual life of the options under the
Equity Ownership Plan and the Purchase Plan as of March 31, 1998 is 8.69 years
and 7.50 years, respectively.
The weighted-average fair value of the shares sold under the Purchase Plan
during fiscal 1996 was $12.50.
NOTE H -- INCENTIVE COMPENSATION PLAN
In 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 1998, 1997 and 1996 plans were based on actual
return on capital employed as compared to target return on capital employed. The
award was $4.0 million for fiscal 1998, $1.4 million for fiscal 1997, and $1.2
million for fiscal 1996, which amounts were included in salaries, wages and
employee benefits.
NOTE I -- ENVIRONMENTAL MATTERS
As the Company is involved in the manufacture of steel, it produces and
uses certain substances that may pose environmental hazards. The principal
hazardous waste generated by current and past operations is 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
F-17
<PAGE> 108
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 remaining costs to be approximately $12.7 million with these costs
recorded as a liability as of March 31, 1998, the majority of which is
associated with four sites.
The Tampa mill site contains slag and soil that is contaminated with EC
dust, a principal hazardous waste generated by past operations. The volume and
mass estimates of the contamination is based on analytical data from soil
borings, soil samples and 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 FY 1996 and by the Florida Department of Environmental Protection during
FY 1998 and the Company received a signed Consent Order in FY 1998 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 estimates those costs to be approximately $8
million for this site. The Company expects cleanup at this site to be
substantially completed by 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 for
approval. 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 1999.
The Sogreen site, a third party site, contains EC dust from the Company
that was stored at this recycling location. 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
approximately $4.3 million. The Company currently estimates its remaining
obligation to be approximately $1 million. The estimate includes the cost of
soil remediation and groundwater remediation based on an approach approved by
the Georgia Environmental Protection Division. If the other PRPs were not to
fulfill their obligations, the Company's management believes that the impact of
additional future costs attributable to the Sogreen site on the Company's
results of operations, financial condition and liquidity, would not be
significant. The Company expects cleanup at this site to be substantially
completed during fiscal 1999.
The Stoller site, a third party site, contains metals from other PRPs and
EC dust from the Company that was stored at this recycling location. The Company
has been named as a PRP for this site. 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, on-site
treatment and disposal, is being completed by the State of South Carolina and
construction of the on-site vault base was completed in April 1998.
Stabilization of metals contaminated soil is underway with the vault cap to be
completed in calendar 1998. 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 published by the State
of South Carolina during 1997 that attributes approximately 2% of the remaining
estimated $10 million remediation cost to the Company,
F-18
<PAGE> 109
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
which the Company has already paid. The non-participating PRPs have intervened
in the proceedings for approval of the agreement between the Company and the
State of South Carolina in the federal court in order to contest the agreement.
The Company's management believes that the finalized agreement will be approved
by the court between July and August, 1998. If the Allocation Agreement is not
approved under its present terms, the Company's management believes that its
overall obligation could increase to approximately 50% of the total estimated
remediation cost. The Company expects cleanup at this site to be substantially
completed during fiscal 1999.
The Company paid approximately $2.9 million in remediation costs in fiscal
1998. Of the $12.7 million accrued at March 31, 1998, the Company expects to pay
approximately $4.9 million within one year. 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 should be completed by approximately 2002. The
Company expensed approximately $3.3 million in fiscal 1998, and $2 million in
each of the previous 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
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 the ultimate costs of remediation may not be greater or less than
the estimated remediation costs.
The Company, through a third-party contractor and operator, constructed a
facility at the Company's Jackson mill designed to utilize a technology
developed by the third party to recycle the Company's EC dust which is 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 the 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 as crude zinc oxide. The residual of the dust exits
the furnace in the form of a reduced iron unit that can be fed into an electric
furnace as a scrap substitute. In the second stage of the process, the crude
zinc oxide is fed into a wet chemical process to extract lead and cadmium and
produce a high quality saleable zinc oxide.
The facility began operations in March 1997, however the second stage
operations are undergoing further development given that new technology is
involved in the process. In fiscal 1998, the contractor and third-party operator
of the facility defaulted under its agreements with the Company. As a result,
the Company expects to incur additional costs and capital expenditures in
connection with the development and operation of the facility. The Company's
depreciation policy for the facility, with a net book value of $23.3 million at
March 31, 1998, is to depreciate the facility over its expected remaining useful
life of 14 years and to periodically evaluate the remaining life and
recoverability of the equipment. There can be no assurance, however, that the
technology or the two-stage facility and process will be commercially developed
and operated on a cost efficient basis.
F-19
<PAGE> 110
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE J -- COMMITMENTS
OPERATING LEASES
The Company leases certain equipment and real property under noncancelable
operating leases. Aggregate future minimum payments under these leases are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31, AMOUNT
- --------------------- -----------------
($ IN THOUSANDS)
<S> <C>
1999............................................ $1,843
2000............................................ 1,531
2001............................................ 1,267
2002............................................ 1,082
2003............................................ 899
Thereafter...................................... 1,300
------
$7,922
======
</TABLE>
Total rent expense was approximately $3.7 million, $4.1 million, and $4.2
million, for the years ended March 31, 1998, 1997 and 1996, 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. Net book value of the land and land
improvements was $1.5 million at March 31, 1998.
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.
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 base annual salary of $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 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.
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
In September 1995, the Company closed the Tampa rolling mill. In fiscal
1996, the Company incurred non-cash charges of $12 million representing the
write-down of property, plant and
F-20
<PAGE> 111
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 I to consolidated 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.
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.
NOTE L -- SUBSEQUENT EVENTS
On April 3, 1998 the Company issued the Senior Notes which mature on April
15, 2008. The Senior Notes are senior unsecured obligations of the Company, and
rank pari passu in right of payment with all current and future unsubordinated
indebtedness. Interest on the Senior Notes is payable semiannually on April 15
and October 15 commencing October 15, 1998. The Senior Notes will be redeemable
at the option of the Company, in whole or in part, on or after April 15, 2003 at
the redemption prices set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---- ----------------
<S> <C>
2003.................................................... 104.375%
2004.................................................... 102.917%
2005.................................................... 101.458%
2006 and thereafter..................................... 100.000%
</TABLE>
On or prior to April 15, 2001 the Company may redeem, on one or more
occasions, up to 35% of the principal amount of Senior Notes with the net
proceeds of one or more public equity offerings at a redemption price equal to
108.75% of the principal amount thereof, plus accrued interest, subject to
certain other provisions.
The Senior Notes contain covenants that include, among others, maintenance
of sufficient consolidated net worth and limitations on additional indebtedness,
transactions with affiliates, dispositions of assets, liens, dividends and
distributions.
The net proceeds of approximately $127.0 million were used to redeem the
Company's $100 million, 11.5% First Mortgage Notes on May 11, 1998. Management
intends to use $20 million to repay a portion of the Company's Subordinated
Intercompany Note before June 30, 1998 and the remaining proceeds to repay
amounts owed under the Company's Revolving Credit Agreement and for general
corporate purposes.
In May 1998, the Company will incur an extraordinary pretax charge of
approximately $3.4 million when the First Mortgage Notes are redeemed. The
pretax charge consists of approximately $1.5 million of unamortized deferred
finance costs and a call premium of approximately $1.9 million.
On June 2, 1998, the Company filed with the Securities and Exchange
Commission a registration statement with respect to an offer to exchange the
Senior Notes for a new issue of debt securities (the "New Notes") of the Company
registered under the Securities Act of 1933. The New Notes will have the same
form and terms as the Senior Notes except the New Notes will not bear legends
restricting the transfer thereof.
F-21
<PAGE> 112
[PICTURE OF STEEL-MAKING PROCESS]
------------------------
<PAGE> 113
======================================================
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>
Available Information................. 2
Prospectus Summary.................... 3
The Prior Offering.................... 5
The Exchange Offer.................... 5
The Notes............................. 8
Summary Historical and Unaudited Pro
Forma Financial Data................ 11
Summary Financial and Operating Data.. 13
Risk Factors.......................... 16
Capitalization........................ 21
Unaudited Pro Forma Consolidated
Financial Statements................ 22
Selected Financial Data............... 25
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 27
Business.............................. 34
Management............................ 45
Principal Stockholders................ 51
Description of Certain Other
Indebtedness........................ 51
Description of the New Notes.......... 52
The Exchange Offer.................... 53
Description of the Notes.............. 61
Legal Matters......................... 88
Independent Certified Public
Accountants......................... 88
Additional Information................ 88
Index to Financial Statements......... F-1
Report of Independent Certified Public
Accountants......................... F-2
</TABLE>
======================================================
======================================================
----------------------------
(AMERISTEEL LOGO)
----------------------------
$130,000,000
8 3/4% SENIOR NOTES
DUE 2008
--------------------------
PROSPECTUS
--------------------------
June , 1998
======================================================
<PAGE> 114
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. 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.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Listed below are the exhibits which are filed as part of this registration
statement (according to the number assigned to them in Item 601 of Regulation
S-K).
II-1
<PAGE> 115
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT FILE NUMBER
- ------- ----------------------- -----------
<S> <C> <C> <C>
3.1 -- Articles of Incorporation, as amended to date (incorporated
by reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-1, as amended, Registration Statement
No. 333-37679))
3.2 -- Amended and restated bylaws (incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on Form
S-1, as amended, (Registration Statement No. 333-37679))
4.1 -- Indenture, dated as of April 3, 1998, by and among the
Company, State Street Bank and Trust Company relating to
$130,000,000 of the Company's 8 3/4% Senior Notes Due 2008
4.2 -- Purchase Agreement, dated as of March 30, 1998, by and among
the Company, Holdings, NationsBank Montgomery Securities,
Inc. and UBS Securities LLC
4.3* -- Old Global Note Payable to CEDE & Co.
4.4* -- New Global Note Payable to CEDE & Co.
5* -- Opinion of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill &
Mullis
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 (incorporated by
reference to Exhibit 10.3 to the Company's Registration
Statement on Form S-1, as amended (Registration Statement
No. 333-37679))
11 -- Statement re computation of per share earnings
23.1* -- Consent of Counsel to the Company (included in Exhibit 5)
23.2 -- Consent of Arthur Andersen LLP
</TABLE>
- ---------------
* To be filed by amendment
ITEM 22. UNDERTAKINGS.
(a) 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 foregoing provisions, 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 Act
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 Act and will be governed by the final adjudication of
such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
II-2
<PAGE> 116
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE> 117
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this reregistration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tampa, State of Florida,
on the 2nd day of June, 1998.
AmeriSteel Corporation
By: /s/ PHILLIP E. CASEY
-----------------------------------
Phillip E. Casey
Chairman of the Board
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PHILLIP E. CASEY Chief Executive Officer, June 2, 1998
- ----------------------------------------------------- Chairman of the Board;
Phillip E. Casey Director
/s/ KOICHI TAKASHIMA Director June 2, 1998
- -----------------------------------------------------
Koichi Takashima
/s/ AKIHIKO TAKASHIMA Director June 2, 1998
- -----------------------------------------------------
Akihiko Takashima
/s/ HIDEICHIRO TAKASHIMA Director June 2, 1998
- -----------------------------------------------------
Hideichiro Takashima
/s/ RYUTARO YOSHIOKA Director June 2, 1998
- -----------------------------------------------------
Ryutaro Yoshioka
/s/ SHUZO HIKITA Vice President, Engineering; June 2, 1998
- ----------------------------------------------------- Director
Shuzo Hikita
/s/ J. DONALD HANEY Vice President; Director June 2, 1998
- -----------------------------------------------------
J. Donald Haney
/s/ TOM J. LANDA Vice President; Chief Financial June 2, 1998
- ----------------------------------------------------- Officer and Secretary
Tom J. Landa (Principal Financial Officer
and Principal Accounting
Officer); Director
</TABLE>
<PAGE> 1
Exhibit 4.1
================================================================================
AMERISTEEL CORPORATION
Issuer,
THE SUBSIDIARY GUARANTORS NAMED HEREIN
Subsidiary Guarantors
and
STATE STREET BANK AND TRUST COMPANY
Trustee
____________________
INDENTURE
Dated as of April 3, 1998
_____________________
$130,000,000
8 3/4% Senior Notes Due 2008
================================================================================
<PAGE> 2
AMERISTEEL CORPORATION
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT
OF 1939 AND INDENTURE, DATED AS OF APRIL 3, 1998
<TABLE>
<CAPTION>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
<S> <C>
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 608
Section 312(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1008(a)
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Section 315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
Section 316(a)(last
sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 ("Outstanding")
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105(d)
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1003
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
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PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Acquired Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Additional Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Asset Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Atlas Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Bank Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Board Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Capitalized Lease Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Company Request or Company Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Adjusted Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Consolidated Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
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Note: This table of contents shall not, for any purpose, be deemed to be a
part of this Indenture.
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Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Disinterested Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Disqualified Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Exchange Offer Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Existing Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Federal Bankruptcy Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Fixed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Fixed Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Generally Accepted Accounting Principles or GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Hedging Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Kyoei Steel Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Net Cash Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Non-U.S. Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Non-U.S. Restricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Note Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Permitted Refinancing Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Predecessor Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Public Equity Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Purchase Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
QIB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Qualified Equity Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Qualified Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Register and Note Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Regular Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Regulation S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Restricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Revolving Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Sale and Leaseback Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Shelf Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Significant Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Special Dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Special Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Subordinated Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Subordinated Intercompany Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Subsidiary Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Technical Assistance Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Trade Loan Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Treasury Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Trust Indenture Act or TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Unrestricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Weighted Average Life to Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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Wholly Owned Restricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 102. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 103. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 104. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 105. Acts of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 106. Notices, etc., to Trustee, Company and Subsidiary Guarantors . . . . . . . . . . . . . . . . . 24
SECTION 107. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 108. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 109. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 110. Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 114. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 202. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE THREE
THE NOTES
SECTION 301. Title and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 303. Execution, Authentication, Delivery and Dating . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 304. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 305. Registration, Registration of Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . 32
SECTION 306. Book-Entry Provisions for Global Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 307. Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 308. Mutilated, Destroyed, Lost and Stolen Notes . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 309. Payment of Interest; Interest Rights Preserved . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 310. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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SECTION 311. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 312. Issuance of Additional Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 313. Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 402. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 502. Acceleration of Maturity; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . . . . . . . . 45
SECTION 504. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 505. Trustee May Enforce Claims Without Possession of Notes . . . . . . . . . . . . . . . . . . . . 47
SECTION 506. Application of Money Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest . . . . . . . . . . 48
SECTION 509. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 514. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 602. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 603. Trustee Not Responsible for Recitals or Issuance of Notes . . . . . . . . . . . . . . . . . . 52
SECTION 604. May Hold Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 605. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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SECTION 606. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 607. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 608. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 609. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 610. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . 55
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE, COMPANY
AND SUBSIDIARY GUARANTORS
SECTION 701. Disclosure of Names and Addresses of Holders . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 702. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain Terms . . . . . . . . . . . . . . . . . . . . . 57
SECTION 802. Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE NINE
SUPPLEMENTS AND AMENDMENTS TO INDENTURE
AND NOTE GUARANTEES
SECTION 901. Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 902. With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 903. Execution of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 904. Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 905. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 906. Reference in Notes to Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 907. Notice of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE TEN
COVENANTS
</TABLE>
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SECTION 1001. Payment of Principal, Premium, if any, and Interest . . . . . . . . . . . . . . . . . . . . . 62
SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 1003. Money for Note Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 1004. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 1005. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 1006. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 1007. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 1008. Statement by Officers as to Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 1009. [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 1010. Limitation on Indebtedness of Issuance of Disqualified Stock . . . . . . . . . . . . . . . . 66
SECTION 1011. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 1012. Limitation on Issuances and Sales of Capital Stock and Preferred Stock of Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 1013. Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 1014. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 1015. Purchase of Notes upon a Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 1016. Limitation on Certain Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 1017. Unrestricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 1018. Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 1019. Waiver of Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 1020. Payment for Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 1021. Limitation on Guarantees of Indebtedness by Restricted Subsidiaries . . . . . . . . . . . . . 81
SECTION 1022. Line of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 1023. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 1102. Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 1103. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 1104. Selection by Trustee of Notes to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 1105. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 1106. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 1107. Notes Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 1108. Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
</TABLE>
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ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company Option to Effect Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . 85
SECTION 1202. Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 1203. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 1204. Conditions to Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 1205. Deposited Money and U.S. Government Obligations to Be Held in Trust;
Other Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 1206. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
ARTICLE THIRTEEN
GUARANTEES
SECTION 1301. Note Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
SECTION 1302. Execution and Delivery of Note Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 1303. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 1304. Seniority of Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 1305. Limitation of Subsidiary Guarantor's Liability . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 1306. Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 1307. Release of a Subsidiary Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 1308. Subsidiary Guarantors May Consolidate, etc. on Certain Terms . . . . . . . . . . . . . . . . 93
SECTION 1309. Benefits Acknowledged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 1310. Issuance of Guarantees by Certain New Restricted Subsidiaries . . . . . . . . . . . . . . . . 93
Exhibit A - Form of Note
Exhibit B - Form of Note Guarantee
Exhibit C - Form of Letter to Be Delivered By Institutional Accredited Investors
Exhibit D- Form of Letter to Be Delivered in Connection with Transfers Pursuant to Regulation S
</TABLE>
<PAGE> 11
INDENTURE, dated as of April 3, 1998 among AmeriSteel
Corporation, a corporation duly organized and existing under the laws of the
State of Florida (herein called the "Company"), the Subsidiary Guarantors (as
hereinafter defined) and State Street Bank and Trust Company, a trust company
duly organized and existing under the laws of the Commonwealth of
Massachusetts, trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of and issue of
8 3/4% Senior Notes Due 2008 (herein called the "Initial Notes"), and 8 3/4%
Series B Senior Notes Due 2008 (the "Exchange Notes" and, together with the
Initial Notes, the "Notes") of substantially the tenor and amount hereinafter
set forth, and to provide therefor the Company has duly authorized the
execution and delivery of this Indenture.
Each of the Subsidiary Guarantors has duly authorized its
guarantee of the Notes, and to provide therefor each of them has duly
authorized the execution and delivery of this Indenture.
Upon the issuance of the Exchange Notes, if any, or the
effectiveness of the Shelf Registration Statement (as defined herein), this
Indenture will be subject to the provisions of the Trust Indenture Act of 1939,
as amended, that are required to be part of this Indenture and will, to the
extent applicable, be governed by such provisions.
The Company has also duly authorized the creation of up to
$130,000,000 aggregate principal amount of Additional Notes to be issued from
time to time having identical terms and conditions to the Notes offered hereby.
All things necessary have been done to make the Notes, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of the Company and the Subsidiary Guarantors, each
in accordance with their respective terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Notes, as follows:
<PAGE> 12
2
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as
the singular;
(b) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein, and the terms "cash transaction"
and "self-liquidating paper", as used in TIA Section 311, will have
the meanings assigned to them in the rules of the Commission adopted
under the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally
accepted accounting principles; and
(d) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or other subdivision.
Certain terms, used principally in Article Two, Eight, Ten and
Twelve, are defined in those Articles.
"Acquired Indebtedness" means Indebtedness of a person (a)
existing at the time such person is merged with or into the Company or becomes
a Subsidiary or (b) assumed in connection with the acquisition of assets from
such person.
"Act", when used with respect to any Holder, has the meaning
specified in Section 105.
"Additional Notes" has the meaning set forth in Section 312.
"Affiliate" means, with respect to any specified person, (a)
any other person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified person or (b) any other
person that owns, directly or indirectly, 5% or
<PAGE> 13
3
more of such specified person's Capital Stock or any executive officer or
director of any such specified person or other person or, with respect to any
natural person, any person having a relationship with such person by blood,
marriage or adoption not more remote than first cousin. For the purposes of
this definition, "control", when used with respect to any specified 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; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Asset Sale" means the sale, lease, conveyance or other
disposition of any assets (including, without limitation, by way of merger,
consolidation or similar arrangement) (collectively, a "transfer") by the
Company or any Restricted Subsidiary other than in the ordinary course of
business, whether in a single transaction or a series of related transactions.
For the purposes of this definition, the term "Asset Sale" does not include any
transfer of properties or assets (i) that is governed by Article Eight, (ii)
between or among the Company and its Restricted Subsidiaries pursuant to
transactions that do not violate any other provision of this Indenture, (iii)
representing obsolete or permanently retired equipment and facilities, (iv) to
an Unrestricted Subsidiary, if permitted by Section 1011, (v) that are being
held for sale, as reflected in the Company's financial statements as of
December 31, 1997 or (vi) the gross proceeds of which (exclusive of
indemnities) do not exceed $1 million for any particular item or $3 million in
the aggregate for any fiscal year.
"Atlas Disposition" means the sale or other disposition of all
or substantially all of the assets of the Atlas Steel and Wire division of the
Company.
"Bank Credit Agreement" means a bank credit facility between
the Company and one or more bank lenders, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, which term will include the Revolving Credit Agreement,
as any such facility may be amended, modified, increased, renewed, refunded,
replaced, restated or refinanced from time to time.
"Banks" means the banks and other financial institutions that
from time to time are lenders under the Bank Credit Agreement.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company or a Subsidiary
Guarantor, if the content so requires, to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
<PAGE> 14
4
"Borrowing Base" means, as of any date, an amount equal to the
sum of (a) 80% of the face amount of all accounts receivable owned by the
Company and its Restricted Subsidiaries as of such date that are not more than
90 days past due, and (b) 60% of the book value of all inventory owned by the
Company and its Subsidiaries as of such date, all calculated on a consolidated
basis and in accordance with GAAP.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York are
authorized or obligated by law or executive order to close.
"Capital Stock" of any person means any and all shares,
interests, partnership interests, participations, rights in or other
equivalents (however designated) of such person's equity interest (however
designated), whether now outstanding or issued after the Closing Date.
"Capitalized Lease Obligation" means, with respect to any
person, an obligation incurred or assumed under or in connection with any
capital lease of real or personal property that, in accordance with GAAP, has
been recorded as a capitalized lease.
"Change of Control" means the occurrence of any of the
following events:
(a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) other than Kyoei Steel
Ltd. and its Affiliates is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of more than 35% of the voting power of all classes of Voting Stock of
the Company;
(b) the Company, either individually or in conjunction
with one or more Subsidiaries, sells, assigns, conveys, transfers,
leases or otherwise disposes of, or the Subsidiaries sell, assign,
convey, transfer, lease or otherwise dispose of, all or substantially
all of the properties of the Company and the Subsidiaries, taken as a
whole (either in one transaction or a series of related transactions),
including Capital Stock of the Subsidiaries, to any person (other than
the Company or a Restricted Subsidiary);
(c) during any consecutive two-year period, individuals
who at the beginning of such period constituted the Board of Directors
of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the
stockholders of the Company was approved by a vote of a majority of
the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease
<PAGE> 15
5
for any reason to constitute a majority of the Board of Directors of
the Company then in office; or
(d) the Company is liquidated or dissolved or adopts a
plan of liquidation or dissolution, other than in a transaction that
complies with Article Eight.
"Closing Date" means the date on which the Notes are
originally issued under this Indenture.
"Common Stock" means the Company's shares of Class A Common
Stock, par value $.01 per share, and the Company's shares of Class B Common
Stock, par value $.01 per share.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person will have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" will mean such successor Person.
"Company Request or Company Order" means a written request or
order signed in the name of the Company by its Chairman, its President, any
Vice President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Consolidated Adjusted Net Income" means, for any period, the
net income (or net loss) of the Company and its Restricted Subsidiaries for
such period as determined on a consolidated basis in accordance with GAAP,
adjusted to the extent included in calculating such net income or loss by
excluding
(a) any net after-tax extraordinary gains or losses (less
all fees and expenses relating thereto),
(b) any net after-tax gains or losses (less all fees and
expenses relating thereto) attributable to Asset Sales,
(c) the portion of net income (or loss) of any person
(other than the Company or a Restricted Subsidiary), including
Unrestricted Subsidiaries, in which the Company or any Restricted
Subsidiary has an ownership interest, except to the extent of the
amount of dividends or other distributions actually paid to the
Company or any Restricted Subsidiary in cash during such period,
(d) solely for purposes of Section 1011, the net income
(or loss) of any person combined with the Company or any Restricted
Subsidiary on a "pooling of interests" basis attributable to any
period prior to the date of combination, and
<PAGE> 16
6
(e) the net income (but not the net loss) of any
Restricted Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary is at
the date of determination restricted, directly or indirectly, except
to the extent that such net income is actually paid to the Company or
a Restricted Subsidiary thereof by loans, advances, intercompany
transfers, principal repayments or otherwise;
provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted
Subsidiary, Consolidated Adjusted Net Income will be reduced (to the extent not
otherwise reduced in accordance with GAAP) by an amount equal to (A) the amount
of the Consolidated Adjusted Net Income otherwise attributable to such
Restricted Subsidiary multiplied by (B) the quotient of (1) the number of
shares of outstanding common stock of such Restricted Subsidiary not owned on
the last day of such period by the Company or any of its Restricted
Subsidiaries divided by (2) the total number of shares of outstanding common
stock of such Restricted Subsidiary on the last day of such period.
"Consolidated EBITDA" means, for any period, the sum of,
without duplication, Consolidated Adjusted Net Income for such period, plus
(or, in the case of clause (d) below, plus or minus) the following items to the
extent included in computing Consolidated Adjusted Net Income for such period
(a) Fixed Charges for such period, plus
(b) the provision for federal, state, local and foreign
income taxes of the Company and its Restricted Subsidiaries for such
period, plus
(c) the aggregate depreciation and amortization expense
of the Company and its Restricted Subsidiaries for such period, plus
(d) any other non-cash charges for such period, and minus
non-cash credits for such period, other than non-cash charges or
credits resulting from changes in prepaid assets or accrued
liabilities in the ordinary course of business;
provided that fixed charges, income tax expense, depreciation and amortization
expense and non-cash charges and credits of a Restricted Subsidiary will be
included in Consolidated EBITDA only to the extent (and in the same proportion)
that the net income of such Subsidiary was included in calculating Consolidated
Adjusted Net Income for such period.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity of the Company and its Restricted Subsidiaries as set
forth on the most recently available quarterly or annual consolidated balance
sheet of the Company and its Restricted
<PAGE> 17
7
Subsidiaries, less any amounts attributable to Disqualified Stock or any equity
security convertible into or exchangeable for Indebtedness, the cost of
treasury stock and the principal amount of any promissory notes receivable from
the sale of the Capital Stock of the Company or any of its Restricted
Subsidiaries and less to the extent included in calculating such stockholders'
equity of the Company and its Restricted Subsidiaries, the stockholders' equity
attributable to Unrestricted Subsidiaries, each item to be determined in
conformity with GAAP (excluding the effects of foreign currency adjustments
under Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 52).
"Consolidated Tangible Assets" means, at any date of
determination, the total assets, less goodwill and other intangibles (other
than patents, trademarks, copyrights, licenses and other intellectual
property), shown on the balance sheet of the Company and its Restricted
Subsidiaries as of the most recent date for which such a balance sheet is
available, determined on a consolidated basis in accordance with GAAP less all
write-ups (other than write-ups in connection with acquisitions) subsequent to
the date of this Indenture in the book value of any asset (except any such
intangible assets) owned by the Company or any of its Restricted Subsidiaries.
At December 31, 1997, on a pro forma basis giving effect to the Refinancing,
the Consolidated Tangible Assets of the Company were approximately $453
million.
"Corporate Trust Office" means the principal corporate trust
office of the Trustee, at which at any particular time its corporate trust
business will be administered, which office at the date of execution of this
Indenture is located at Goodwin Square, 225 Asylum Avenue, 23rd floor,
Hartford, CT 06103, except that with respect to presentation of Notes for
payment or for registration of transfer or exchange, such term will mean the
office or agency of the Trustee at which, at any particular time, its corporate
trust and agency business will be conducted.
"Corporation" includes corporations, associations, companies
and business trusts.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 309.
"Depositary" means The Depository Trust Company, its nominees
and successors.
"Disinterested Director" means, with respect to any
transaction or series of transactions in respect of which the Board of
Directors is required to deliver a resolution of the Board of Directors, to
make a finding or otherwise take action under this Indenture, a member
<PAGE> 18
8
of the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"Disqualified Stock" means any class or series of Capital
Stock that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise
(i) is or upon the happening of an event or passage of
time would be, required to be redeemed prior to the final Stated
Maturity of the Notes,
(ii) is redeemable at the option of the Holder thereof, at
any time prior to such final Stated Maturity or
(iii) at the option of the Holder thereof is convertible
into or exchangeable for debt securities at any time prior to such
final Stated Maturity;
provided that any Capital Stock that would not constitute Disqualified Stock
but for provisions therein giving Holders thereof the right to cause the issuer
thereof to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the Stated Maturity of
the Notes will not constitute Disqualified Stock if the "asset sale" or "change
of control" provisions applicable to such Capital Stock are no more favorable
to the Holders of such Capital Stock than the provisions described under
Section 1015 and Section 1016 of this Indenture and such Capital Stock
specifically provides that the issuer will not repurchase or redeem any such
stock pursuant to such provision prior to the Company's repurchase of such
Notes as are required to be repurchased pursuant to the provisions described
under Section 1015 and Section 1016 of this Indenture.
"Equity Investment" means the March 26, 1998 sale of 454,545
shares of the Company's Class B Common Stock to an institutional investor for
$10.0 million.
"Equity Ownership Plan" means the Company's Equity Ownership
Plan, effective as of April 1, 1995, as in effect on the Closing Date.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means the exchange offer that may be effected
pursuant to the Registration Rights Agreement.
<PAGE> 19
9
"Exchange Offer Registration Statement" means the Exchange
Offer Registration Statement as defined in the Registration Rights Agreement.
"Existing Indebtedness" means the Indebtedness of the Company
and its Restricted Subsidiaries (other than Indebtedness under the Bank Credit
Agreement) in existence on the date of this Indenture, until such amounts are
repaid, including but not limited to the Industrial Revenue Bonds.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11
of the United States Code, as amended from time to time.
"First Mortgage Notes" means the Company's 11 1/2% First
Mortgage Notes due December 15, 2000.
"Fixed Assets" means, at any date of determination, property,
plant and equipment, including the property, plant and equipment portion of
assets held for sale (as reflected in the Company's financial statements as of
the most recent date for which such statements are available).
"Fixed Charge Coverage Ratio" means, for any period, the ratio
of Consolidated EBITDA for such period to Fixed Charges for such period.
"Fixed Charges" means, for any period, without duplication,
the sum of (a) the amount that, in conformity with GAAP, would be set forth
opposite the caption "interest expense" (or any like caption) on a consolidated
statement of operations of the Company and its Restricted Subsidiaries for such
period, including, without limitation,
(i) amortization of debt discount,
(ii) the net cost of interest rate contracts (including
amortization of discounts),
(iii) the interest portion of any deferred payment
obligation,
(iv) amortization of debt issuance costs and
(v) the interest component of Capitalized Lease
Obligations,
(b) cash dividends paid on Preferred Stock and Disqualified Stock by the
Company and any Restricted Subsidiary (to any person other than the Company and
its Restricted Subsidiaries), computed on a tax effected basis, and (c) all
interest on any Indebtedness of any person
<PAGE> 20
10
guaranteed by the Company or any of its Restricted Subsidiaries or unsecured by
a lien on the assets of the Company or any of its Restricted Subsidiaries;
provided, however, that Fixed Charges will not include (i) any gain or loss
from extinguishment of debt, including the write-off of debt issuance costs,
and (ii) the fixed charges of a Restricted Subsidiary to the extent (and in the
same proportion) that the net income of such Subsidiary was excluded in
calculating Consolidated Adjusted Net Income pursuant to clause (e) of the
definition thereof for such period.
"FLS" means FLS Holdings Inc., a wholly owned subsidiary of
Kyoei Steel Ltd.
"Generally Accepted Accounting Principles or GAAP" means
generally accepted accounting principles in the United States, consistently
applied, that are in effect on the Closing Date.
"Guarantee" means a guarantee of the Notes on a senior basis.
"Guarantors" means, collectively, all Restricted Subsidiaries;
provided that any Person that becomes an Unrestricted Subsidiary in compliance
with Section 1011 will not be included in "Guarantors" after becoming an
Unrestricted Subsidiary.
"Hedging Obligations" means the obligations of any person
under (i) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements and (ii) other agreements or arrangements
designed to protect such person against fluctuations in interest rates or the
value of foreign currencies.
"Holder" means the person in whose name a Note is, at the time
of determination, registered on the Registrar's books.
"Indebtedness" means (without duplication), with respect to
any person, whether recourse is to all or a portion of the assets of such
person and whether or not contingent,
(a) every obligation of such person for money borrowed,
(b) every obligation of such person evidenced by bonds,
debentures, notes or other similar instruments,
(c) every reimbursement obligation of such person with
respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such person,
<PAGE> 21
11
(d) every obligation of such person issued or assumed as
the deferred purchase price of property or services,
(e) the attributable value of every Capitalized Lease
Obligation of such person,
(f) all Disqualified Stock of such person valued at its
maximum fixed repurchase price, plus accrued and unpaid dividends,
(g) all obligations of such person under or in respect of
Hedging Obligations, and
(h) every obligation of the type referred to in clauses
(a) through (g) of another person and all dividends of another person
the payment of which, in either case, such person has guaranteed.
For purposes of this definition, the "maximum fixed repurchase price" of any
Disqualified Stock that does not have a fixed repurchase price will be
calculated in accordance with the terms of such Disqualified Stock as if such
Disqualified Stock were purchased on any date on which Indebtedness is 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 Stock, such fair
market value will be determined in good faith by the board of directors of the
issuer of such Disqualified Stock. Notwithstanding the foregoing, trade
accounts payable and accrued liabilities arising in the ordinary course of
business and any liability for federal, state or local taxes or other taxes
owed by such person will not be considered Indebtedness for purposes of this
definition.
"Indenture" means this instrument as originally executed and
as it may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof.
"Industrial Revenue Bonds" means the Company's industrial
revenue bonds issued to construct certain of the Company's facilities
outstanding as of the Closing Date.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Notes.
"Investment" in any person means,
(i) directly or indirectly, any advance, loan or other
extension of credit (including, without limitation, by way of
guarantee or similar arrangement) or capital
<PAGE> 22
12
contribution to such person, the purchase or other acquisition of any
stock, bonds, notes, debentures or other securities issued by such
person, the acquisition (by purchase or otherwise) of all or
substantially all of the business or assets of such person, or the
making of any investment in such person,
(ii) the designation of any Restricted Subsidiary as an
Unrestricted Subsidiary and
(iii) the fair market value of the Capital Stock (or any
other Investment), held by the Company or any of its Restricted
Subsidiaries, of (or in) any person that has ceased to be a Restricted
Subsidiary.
Investments exclude extensions of trade credit on commercially reasonable terms
in accordance with normal trade practices.
"Kyoei Steel Ltd." means Kyoei Steel Ltd. and its successors.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation, assignment for
security, claim, or preference or priority or other encumbrance upon, or with
respect to, any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired. A person will be deemed to own subject to a
Lien any property that such person has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement.
"Maturity", when used with respect to any Note, means the date
on which the principal of such Note or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption or otherwise.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations when received in the form of, or stock
or other assets when disposed for, cash or cash equivalents (except to the
extent that such obligations are financed or sold with recourse to the Company
or any Restricted Subsidiary), net of
(a) brokerage commissions and other fees and expenses
(including fees and expenses of legal counsel and investment banks)
related to such Asset Sale,
(b) provisions for all taxes payable as a result of such
Asset Sale,
<PAGE> 23
13
(c) payments made to retire Indebtedness where such
Indebtedness is secured by the assets that are the subject of such
Asset Sale,
(d) amounts required to be paid to any person (other than
the Company or any Restricted Subsidiary) owning a beneficial interest
in the assets that are subject to the Asset Sale, and
(e) appropriate amounts to be provided by the Company or
any Restricted Subsidiary, as the case may be, as a reserve required
in accordance with GAAP against any liabilities associated with such
Asset Sale and retained by the seller after such Asset Sale, including
pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.
"Non-U.S. Person" means a Person that is not a "U.S. Person"
as defined in Regulation S.
"Non-U.S. Restricted Subsidiary" means a Restricted Subsidiary
that is not a U.S. Restricted Subsidiary.
"Note Guarantee" means with respect to each Subsidiary
Guarantor, the unconditional guarantee by such Subsidiary Guarantor, pursuant
to Article Thirteen.
"Notes" has the meaning stated in the first recital of this
Indenture and more particularly means any Notes authenticated and delivered
under this Indenture. For all purposes of this Indenture, the term "Notes"
will include any Exchange Notes to be issued and exchanged for any Notes
pursuant to the Registration Rights Agreement and this Indenture. From and
after the issuance of any Additional Notes pursuant to Section 312 (but, not
for purposes of determining whether such issuance is permitted hereunder),
"Notes" will include such Additional Notes for purposes of this Indenture and
all Initial Notes, Exchange Notes and any such Additional Notes, will vote
together as one series of Notes under this Indenture.
"Offering" means the offering of the 8 3/4% Senior Notes Due
2008 by the Company.
"Officers' Certificate" means a certificate signed by the
Chairman, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company, and
delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel
acceptable to the Trustee, who may be counsel for the Company, including an
employee of the Company.
<PAGE> 24
14
"Outstanding", when used with respect to Notes, means, as of
the date of determination, all Notes theretofore authenticated and delivered
under this Indenture, except:
(a) Notes theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(b) Notes, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the
Company) in trust or set aside and segregated in trust by the Company
(if the Company shall act as its own Paying Agent) for the Holders of
such Notes; provided that, if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or
provision therefor satisfactory to the Trustee has been made;
(c) Notes, except to the extent provided in Sections 1202
and 1203, with respect to which the Company has effected defeasance
and/or covenant defeasance as provided in Article Twelve; and
(d) Notes which have been paid pursuant to Section 308 or
in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture, other than any
such Notes in respect of which there will have been presented to the
Trustee proof satisfactory to it that such Notes are held by a bona
fide purchaser in whose hands the Notes are valid obligations of the
Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the Company
or such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee will be protected in making
such calculation or in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes which an officer in the
Corporate Trust office of the Trustee knows to be so owned will be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Company or any other obligor upon the Notes or any Affiliate
of the Company or such other obligor.
"Paying Agent" means State Street Bank and Trust Company and
any successor (including the Company acting as Paying Agent) authorized by the
Company to pay the principal of (and premium, if any) or interest on any Notes
on behalf of the Company.
<PAGE> 25
15
"Permitted Investments" means any of the following:
(a) Investments in (i) securities with a maturity of one
year or less issued or directly and fully guaranteed or insured by the
United States or any agency or instrumentality thereof (provided that
the full faith and credit of the United States is pledged in support
thereof); (ii) certificates of deposit or acceptances with a maturity
of one year or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus of not
less than $200,000,000; (iii) any shares of money market mutual or
similar funds having assets in excess of $200,000,000; and (iv)
commercial paper with a maturity of one year or less issued by a
corporation that is not an Affiliate of the Company and is organized
under the laws of any state of the United States or the District of
Columbia and having a rating (A) from Moody's Investors Service, Inc.
of at least P-1 or (B) from Standard & Poor's Ratings Group of at
least A-1;
(b) Investments by the Company or any Wholly Owned
Restricted Subsidiary in another person, if as a result of such
Investment (i) such other person becomes a Restricted Subsidiary that
is a Subsidiary Guarantor or (ii) such other person is merged or
consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Company or a Restricted
Subsidiary that is a Subsidiary Guarantor;
(c) Investments by the Company or a Restricted Subsidiary
in the Company or a Subsidiary Guarantor;
(d) Investments in existence on the Closing Date;
(e) promissory notes received as a result of Asset Sales
permitted under Section 1016;
(f) loans or advances to officers, directors and
employees of the Company or any of its Restricted Subsidiaries made in
the ordinary course of business after the date of the initial issuance
of the Notes in an amount not to exceed $1 million in the aggregate at
any one time outstanding; and
(g) other Investments that do not exceed $5 million in
the aggregate at any one time outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Restricted Subsidiaries issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness of the Company or any of its Restricted
Subsidiaries; provided that:
<PAGE> 26
16
(i) the principal amount of such Permitted Refinancing
Indebtedness does not exceed the principal amount of the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded plus
the lesser of the amount of any premium required to be paid in
connection with such refinancings pursuant to the terms of such
indebtedness or the amount of any premium reasonably determined by the
Company as necessary to accomplish such refinancing (plus the amount
of reasonable expenses incurred in connection therewith);
(ii) such Permitted Refinancing Indebtedness has a
Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded;
(iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and is
subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and
(iv) such Indebtedness is incurred either by the Company
or by the Restricted Subsidiary of the Company that is the obligor on
the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded;
and provided further that "Permitted Refinancing Indebtedness" will not be
permitted with respect to Existing Indebtedness comprising (x) the First
Mortgage Notes, (y) the Subordinated Intercompany Note (other than as described
in clause (g) of the second paragraph of Section 1011) or (z) clause (ix) of
the definition of "Permitted Indebtedness."
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Predecessor Note" of any particular Note means every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 308 in exchange for a mutilated
security or in lieu of a lost, destroyed or stolen Note will be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"Preferred Stock" means, with respect to any person, any and
all shares, interests, partnership interests, participation, rights in or other
equivalents (however designated) of such person's preferred or preference
stock, whether now outstanding or issued
<PAGE> 27
17
after the Closing Date, and including, without limitation, all classes and
series of preferred or preference stock of such person.
"Public Equity Offering" means an offer and sale of common
stock (which is Qualified Stock) of the Company pursuant to a registration
statement that has been declared effective by the Commission pursuant to the
Securities Act (other than a registration statement on Form S-8 or otherwise
relating to equity securities issuable under any employee benefit plan of the
Company).
"Purchase Date" means any Change of Control Payment Date.
"QIB" means a "Qualified Institutional Buyer" under Rule 144A.
"Qualified Equity Interest" means any Qualified Stock and all
warrants, options or other rights to acquire Qualified Stock (but excluding any
debt security that is convertible into or exchangeable for Capital Stock).
"Qualified Stock" of any person means any and all Capital
Stock of such person, other than Disqualified Stock.
"Redemption Date", when used with respect to any Note to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Note to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Refinancing" means
(i) the Offering,
(ii) the Equity Investment,
(iii) the redemption of the First Mortgage Notes; and
(iv) the repayment of $30 million of the Subordinated
Intercompany Note.
"Register and Note Registrar" have the respective meanings
specified in Section 305.
"Registrar" means State Street Bank and Trust Company and any
successor authorized by the Company to act as Registrar.
<PAGE> 28
18
"Registration Rights Agreement" means the Registration Rights
Agreement between the Company, the Subsidiary Guarantors and the Initial
Purchaser named therein, dated as of April 3, 1998 relating to the Notes.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the October 1 or April 1 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Restricted Subsidiary" means any Subsidiary other than an
Unrestricted Subsidiary.
"Revolving Credit Agreement" means the $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., as
Issuing Banks and Co-Administrative Agents, and The Bank of Tokyo, Ltd., as
agent, as amended.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any transaction or
series of related transactions pursuant to which a person sells or transfers
any property or asset in connection with the leasing, or the resale against
installment payments, of such property or asset to the seller or transferor.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations thereunder.
"Shares in Success Plan" means the Company's stock
purchase/stock option Shares in Success Plan, dated as of July 1, 1995, as in
effect on the Closing Date.
"Short-Term Incentive Plan" means the Company's 1995
Short-Term Incentive Plan pursuant to which 48,836 shares of Class B Common
Stock were issued.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary of
the Company that, together with its Subsidiaries, (a) for the most recent
fiscal year of the Company, accounted for more than 10% of the consolidated net
sales of the Company and its Subsidiaries, (b) as of the end of such fiscal
year, was the owner of more than 10% of the consolidated assets of the
<PAGE> 29
19
Company and its Restricted Subsidiaries, in the case of either (a) or (b), as
set forth on the most recently available consolidated financial statements of
the Company for such fiscal year or (c) was organized or acquired after the
beginning of such fiscal year and would have been a Significant Subsidiary if
it had been owned during such entire fiscal year.
"Special Dividend" means the $6.1 million dividend paid by the
Company in December 1997.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 309.
"Stated Maturity" means, when used with respect to any Note or
any installment of interest thereon, the date specified in such Note as the
fixed date on which the principal of such Note or such installment of interest
is due and payable and, when used with respect to any other Indebtedness, means
the date specified in the instrument governing such Indebtedness as the fixed
date on which the principal of such Indebtedness or any installment of interest
thereon is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company
or a Subsidiary Guarantor that is subordinated in right of payment to the Notes
or the Subsidiary Guarantees issued by such Subsidiary Guarantor, as the case
may be; provided, however, that, for purposes of Section 1011, "Subordinated
Indebtedness" will not include the Subordinated Intercompany Note.
"Subordinated Intercompany Note" means the $50 million
subordinated note of the Company to FLS due December 31, 2002.
"Subsidiary" means any person a majority of the equity
ownership or Voting Stock of which is at the time owned, directly or
indirectly, by the Company and/or one or more other Subsidiaries of the
Company.
"Subsidiary Guarantor" means any Restricted Subsidiary that is
a party to a Note Guarantee pursuant to the terms of this Indenture.
"Technical Assistance Agreement" means the technical
assistance agreement by and between the Company and Kyoei Steel Ltd. which
became effective on April 1, 1997 and expires on March 31, 1999.
"Trade Loan Agreements" means any obligation for Indebtedness
owed to U.S. affiliates or agents of Japanese trading houses.
<PAGE> 30
20
"Treasury Rate" will be defined as the yield to maturity at
the time of computation of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) which has become publicly available at least two
Business Days prior to the date fixed for prepayment (or, if such Statistical
Release is no longer published, any publicly available source of similar market
data)) most nearly equal to the then remaining Weighted Average Life to
Maturity of the Notes; provided, however, that if the Weighted Average Life to
Maturity of the Notes is not equal to the constant maturity of a United States
Treasury security for which a weekly average yield is given, the Treasury Rate
will be obtained by linear interpolation (calculated to the nearest one-twelfth
of a year) from the weekly average yields of United States Treasury securities
for which such yields are given, except that if the Weighted Average Life to
Maturity of the Notes is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year will be used.
"Trust Indenture Act or TIA" means the Trust Indenture Act of
1939 as in force at the date as of which this Indenture was executed, except as
provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee will have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" will mean such successor Trustee.
"U.S. Government Obligations" means direct obligations of,
obligations fully guaranteed by, or participations in pools consisting of or
obligations guaranteed by, the United States of America for the payment of
which guarantee or obligations the full faith and credit of the United States
of America is pledged and which are not callable or redeemable at the option of
the issuer thereof.
"Unrestricted Subsidiary" means (a) any Subsidiary that is
designated by the Board of Directors of the Company as an Unrestricted
Subsidiary in accordance with Section 1017 and (b) any Subsidiary of an
Unrestricted Subsidiary.
"Voting Stock" means any class or classes of Capital Stock
pursuant to which the Holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers or trustees of any person (irrespective of whether or not, at the
time, stock of any other class or classes has, or might have, voting power by
reason of the happening of any contingency).
"Weighted Average Life to Maturity" means, as of the date of
determination with respect to any Indebtedness or Disqualified Stock, the
quotient obtained by dividing (a) the sum of the products of (i) the number of
years from the date of determination to the date or dates of each successive
scheduled principal or liquidation value payment of such
<PAGE> 31
21
Indebtedness or Disqualified Stock, respectively, multiplied by (ii) the amount
of each such principal or liquidation value payment by (b) the sum of all such
principal or liquidation value payments.
"Wholly Owned Restricted Subsidiary" means any Restricted
Subsidiary, all of the outstanding voting securities (other than directors'
qualifying shares or shares of foreign Restricted Subsidiaries required to be
owned by foreign nationals pursuant to applicable law) of which are owned,
directly or indirectly, by the Company.
SECTION 102. Incorporation by Reference of Trust Indenture
Act.
Whenever this Indenture refers to a provision of the Trust
Indenture Act, the provision is incorporated by reference in and made a part of
this Indenture. The following Trust Indenture Act terms used in this Indenture
have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder;
"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 Notes.
All other Trust Indenture Act terms used in this Indenture
that are defined by the Trust Indenture Act, defined by reference in the Trust
Indenture Act to another statute or defined by a rule of the Commission and not
otherwise defined herein will have the meanings assigned to them therein.
SECTION 103. Compliance Certificates and Opinions.
Upon any application or request by the Company and the
Subsidiary Guarantors to the Trustee to take any action under any provision of
this Indenture, the Company and the Subsidiary Guarantors shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture (including any covenant compliance with which
constitutes a condition precedent) relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by
<PAGE> 32
22
any provision of this Indenture relating to such particular application or
request, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) will include:
(a) a statement that each individual signing such
certificate or opinion has read such covenant or condition and the
definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of each such
individual, 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, in the opinion of each
such individual, such condition or covenant has been complied with.
The Company shall furnish to the Trustee from time to time a
list of the Significant Subsidiaries of the Company. The Trustee may
conclusively rely upon such list until another is provided.
SECTION 104. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company and/or
the Subsidiary Guarantors may be based, insofar as it relates to legal matters,
upon a certificate or opinion of, or representations by, counsel, unless such
officer knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the matters upon
which his certificate or opinion is based are erroneous. Any such certificate
or Opinion of Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or officers
of the Company stating that the information with respect to such factual
matters is in the possession of the Company, unless such counsel
<PAGE> 33
23
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 105. Acts of Holders.
(a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this Indenture to be given
or taken by Holders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Holders in Person or by agents
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the Acts of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for
any purpose of this Indenture and conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of
any such instrument or writing may be proved by the affidavit of a witness of
such execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Where such execution is by a signer acting in a capacity other than
his individual capacity, such certificate or affidavit shall also constitute
sufficient proof of authority. The fact and date of the execution of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Notes held
by any Person, and the date of holding the same, shall be proved by the
Register.
(d) If the Company or any Subsidiary Guarantor shall
solicit from the Holders of Notes any request, demand, authorization,
direction, notice, consent, waiver or other Act, the Company or any such
Subsidiary Guarantor (as the case may be), may, at its option, by or pursuant
to a Board Resolution, fix in advance a record date for the determination of
Holders entitled to give such request, demand, authorization, direction,
notice, consent, waiver or other Act, but the Company or any such Subsidiary
Guarantor (as the case may be) shall have no obligation to do so.
Notwithstanding TIA Section 316(c), such record date shall be the record date
specified in or pursuant to such Board Resolution, which
<PAGE> 34
24
shall be a date not earlier than the date 30 days prior to the first
solicitation of Holders generally in connection therewith and not later than
the date such solicitation is completed. If such a record date is fixed, such
request, demand, authorization, direction, notice, consent, waiver or other Act
may be given before or after such record date, but only the Holders of record
at the close of business on such record date shall be deemed to be Holders for
the purposes of determining whether Holders of the requisite proportion of
Outstanding Notes have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the Outstanding Notes shall be computed as of such record date;
provided that no such authorization, agreement or consent by the Holders on
such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than eleven months after
the record date.
(e) Any request, demand, authorization, direction,
notice, consent, waiver or other Act of the Holder of any Note shall bind every
future Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company and/or the Subsidiary Guarantors in reliance thereon, whether or not
notation of such action is made upon such Note.
SECTION 106. Notices, etc., to Trustee, Company and
Subsidiary Guarantors.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder, the Company or any
Subsidiary Guarantor shall be sufficient for every purpose hereunder
if made, given, furnished or filed in writing to or with the Trustee
at its Corporate Trust Office, Attention: Corporate Trust, or
(b) the Company by the Trustee, any Holder or any
Subsidiary Guarantor shall be sufficient for every purpose hereunder
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to the Company addressed to it at 5100 W.
Lemon Street, Suite 312, Tampa, Florida 33609, or at any other address
previously furnished in writing to the Trustee or such Subsidiary
Guarantor (as the case may be) by the Company.
SECTION 107. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to
Holders by the Company or the Trustee, such notice shall be sufficiently given
(unless otherwise herein
<PAGE> 35
25
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it appears in the
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice mailed to
a Holder in the manner herein prescribed shall be conclusively deemed to have
been received by such Holder, whether or not such Holder actually receives such
notice. Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken
in reliance upon such waiver.
In case by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be impracticable
to mail notice of any event to Holders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company
and the Subsidiary Guarantors shall bind their respective successors and
assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the 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.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied,
shall give to any Person, other than the parties hereto, any Paying Agent, any
Note Registrar and their
<PAGE> 36
26
successors hereunder and the Holders any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Notes shall be governed by the law of
the State of New York. Upon the issuance of the Exchange Notes, if any, or the
effectiveness of the Shelf Registration Statement, this Indenture shall be
subject to the provisions of the Trust Indenture Act of 1939, as amended, that
are required to be part of this Indenture and shall, to the extent applicable,
be governed by such provisions.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date,
Purchase Date established for payment of Defaulted Interest pursuant to Section
309, Stated Maturity or Maturity with respect to any Note shall not be a
Business Day, then (notwithstanding any other provision of this Indenture or of
the Notes) payment of principal (or premium, if any) or interest need not be
made on such date, but may be made on the next succeeding Business Day with the
same force and effect as if made on the Interest Payment Date, Redemption Date,
Purchase Date established for payment of Defaulted Interest pursuant to Section
309, Stated Maturity or Maturity; provided that no interest shall accrue for
the period from and after such Interest Payment Date, Redemption Date, Purchase
Date established for payment of Defaulted Interest pursuant to Section 309,
Stated Maturity or Maturity, as the case may be, to the next succeeding
Business Day.
SECTION 114. No Recourse Against Others. A director,
officer, employee, incorporator or stockholder of the Company, as such, shall
not have any liability for any obligations of the Company under the Notes, this
Indenture or the Note Guarantees or for any claim based on, in respect of, or
by reason of, such obligations of their creation. Each Holder by accepting a
Note waives and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Notes.
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally.
The Initial Notes shall be known as the "8 3/4% Senior Notes
Due 2008" and the Exchange Notes shall be known as the "8 3/4% Series B Senior
Notes Due 2008", in each case,
<PAGE> 37
27
of the Company. The Notes and the Trustee's certificate of authentication
shall be in substantially the form annexed hereto as Exhibit A. The Notes may
have such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture and may have letters, notations
or other marks of identification and such notations, legends or endorsements
required by law, stock exchange agreements to which the Company is subject or
usage. Any portion of the text of any Note may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the Note. The
Company shall approve the form of the Notes and any notation, legend or
endorsement on the Notes. Each Note shall be dated the date of its
authentication.
The definitive Notes shall be printed, lithographed or
engraved on steel-engraved borders or may be produced in any other manner, all
as determined by the officers of the Company executing such Notes, as evidenced
by their execution of such Notes.
The terms and provisions contained in the form of the Notes
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. To the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such
terms and provisions and to be bound thereby.
The Initial Notes offered and sold in reliance on Regulation S
will be represented by a single, permanent Global Note in definitive, fully
registered book-entry form (the "Offshore Global Note"), which will be
registered in the name of the Global Note Holder and deposited on behalf of the
purchasers of the Notes represented thereby with a custodian for the Global
Note Holder for credit to the representative accounts of the purchasers (or to
such other accounts as they may direct) at the Euroclear System ("Euroclear")
or Cedel Bank, societe anonyme ("Cedel Bank"). Prior to the 40th day after the
later of the commencement of the Offering and the Closing Date, interests in
the Offshore Global Note may only be held through Euroclear or Cedel Bank.
The Initial Notes offered and sold to "qualified institutional
buyers" ("QIBs") in reliance on Rule 144A under the Securities Act will be
represented by a single, permanent Global Note in definitive, fully registered
book-entry form, substantially in the form of Exhibit A (the "U.S. Global Note"
and, together with the Offshore Global Note, the "Global Notes"), which will be
registered in the name of the Global Note Holder and deposited on behalf of
purchasers of the Notes represented thereby with a custodian for the Global
Note Holder for credit to the respective accounts of the purchasers (or to such
other accounts as they may direct) at the Global Note Holder.
The Notes that were (i) originally issued to or transferred to
institutional "accredited investors" (as such term is defined in Rule
501(a)(1), (2), (3) and (7)) under the Securities Act who are not QIBs (the
"Non-Global Purchasers") or (ii) issued as described in
<PAGE> 38
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Section 306 of this Indenture will be issued in registered, definitive,
certificated form, substantially in the form of Exhibit A (the "Certificated
Notes"). Upon the transfer to a QIB or in an offshore transaction under Rule
903 or Rule 904 under Regulation S of Certificated Notes initially issued to a
Non-Global Purchaser, such Certificated Notes may, unless the Global Notes have
previously been exchanged in whole for Certificated Notes, be exchanged for an
interest in a Global Note representing the principal amount of the Notes being
transferred upon delivery of appropriate certificates to the Trustee.
<PAGE> 39
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SECTION 202. Restrictive Legends.
Unless and until (i) an Initial Note is sold under an
effective Registration Statement or (ii) an Initial Note is exchanged for an
Exchange Note in connection with an effective Registration Statement, in each
case pursuant to the Registration Rights Agreement, each certificate
representing a Note shall contain a legend substantially to the following
effect (the "Private Placement Legend") on the face thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF
THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH AMERISTEEL
CORPORATION (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF
THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION
TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO
CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY
<PAGE> 40
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OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY
TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT, THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Each Global Note, whether or not an Initial Note, shall also
bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON
IS MADE TO CEDE & CO.), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 306 AND 307 OF THIS INDENTURE.
ARTICLE THREE
THE NOTES
SECTION 301. Title and Terms.
The aggregate principal amount of Notes which may be
authenticated and delivered under this Indenture is limited to $130,000,000,
except for Notes authenticated and
<PAGE> 41
31
delivered upon registration of transfer of, or in exchange for, or in lieu of,
other Notes pursuant to Section 304, 305, 306, 307, 308, 906, 1015, 1016 or
1108, pursuant to an Exchange Offer or pursuant to Section 312.
The Initial Notes shall be known and designated as the "8 3/4%
Senior Notes Due 2008" and the Exchange Notes shall be known and designated as
the "8 3/4% Series B Senior Notes Due 2008" of the Company. The Stated
Maturity of the Notes shall be April 15, 2008, and the Notes shall bear interest
at the rate of 8 3/4 per annum from April 3, 1998, or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
payable semiannually on April 15 and October 15 in each year, commencing October
15, 1998, until the principal thereof is paid or duly provided for, to the
Person in whose name the Note (or any Predecessor Note) is registered at the
close of business on the October 1 or April 1 next preceding such Interest
Payment Date.
The principal of (and premium, if any), and interest on the
Notes shall be payable, and the Notes shall be exchangeable and transferable,
at the office or agency of the Company in The City of New York maintained for
such purposes, (which initially shall be the agency of the Trustee located at
61 Broadway, 15th Floor, New York, New York, 10006) or, at the option of the
Company, interest may be paid by check mailed to the address of the Person
entitled thereto as such address shall appear on the Register; provided that
all payments with respect to the Global Note and the Certificated Notes the
Holder of which have given wire transfer instructions to the Company shall be
required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof.
Notes that remain outstanding after the consummation of the
Exchange Offer and Exchange Notes issued in connection with the Exchange Offer
will be treated as a single class of securities under this Indenture.
The Notes shall be redeemable as provided in Article Eleven.
SECTION 302. Denominations.
The Notes shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Company by its
Chairman, its President or a Vice President. The signature of any of these
officers on the Notes may be manual or facsimile signatures of the present or
any future such authorized officer and may be imprinted or otherwise reproduced
on the Notes.
<PAGE> 42
32
Notes bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such Notes or
did not hold such offices at the date of such Notes.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Initial Notes executed by
the Company to the Trustee for authentication, together with a Company Order
for the authentication and delivery of such Initial Notes directing the Trustee
to authenticate the Notes and certifying that all conditions precedent to the
issuance of Notes contained herein have been fully complied with, and the
Trustee in accordance with such Company Order shall authenticate and deliver
such Initial Notes. On Company Order, the Trustee shall authenticate for
original issue Exchange Notes in an aggregate principal amount not to exceed
the sum of $130,000,000 plus the aggregate principal amount of any Additional
Notes issued; provided that such Exchange Notes shall be issuable only upon the
valid surrender for cancellation of Initial Notes of a like aggregate principal
amount in accordance with an Exchange Offer pursuant to the Registration Rights
Agreement. In each case, the Trustee shall be entitled to receive an Officers'
Certificate and an Opinion of Counsel of the Company that it may reasonably
request in connection with such authentication of Notes. Such order shall
specify the amount of Notes to be authenticated and the date on which the
original issue of Initial Notes or Exchange Notes is to be authenticated.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for in Exhibit
A duly executed by the Trustee by manual signature of an authorized officer,
and such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article Eight, any of the
Notes authenticated or delivered prior to such consolidation, merger,
conveyance, transfer, lease or other disposition may, from time to time, at the
request of the successor Person, be exchanged for other Notes executed in the
name of the successor Person with such changes in phraseology and form as may
be appropriate, but otherwise in substance of like tenor as the Notes
surrendered for such exchange and of like
<PAGE> 43
33
principal amount; and the Trustee, upon Company Request of the successor
Person, shall authenticate and deliver Notes as specified in such request for
the purpose of such exchange. If Notes shall at any time be authenticated and
delivered in any new name of a successor Person pursuant to this Section in
exchange or substitution for or upon registration of transfer of any Notes,
such successor Person, at the option of the Holders but without expense to
them, shall provide for the exchange of all Notes at the time Outstanding for
Notes authenticated and delivered in such new name.
SECTION 304. Temporary Notes.
Pending the preparation of definitive Notes, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Notes which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Notes in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Notes may determine, as conclusively evidenced by their
execution of such Notes.
If temporary Notes are issued, the Company shall cause
definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, the temporary Notes shall be exchangeable for
definitive Notes upon surrender of the temporary Notes at the office or agency
of the Company designated for such purpose pursuant to Section 1002, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Notes, the Company shall execute and the Trustee shall authenticate
and deliver in exchange therefor a like principal amount of definitive Notes of
authorized denominations. Until so exchanged, the temporary Notes shall in all
respects be entitled to the same benefits under this Indenture as definitive
Notes.
SECTION 305. Registration, Registration of Transfer and
Exchange.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 1002 being herein
sometimes referred to as the "Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Notes and of transfers of Notes. The Register shall be in written form or
any other form capable of being converted into written form within a reasonable
time. At all reasonable times, the Register shall be open to inspection by the
Trustee. The Trustee is hereby initially appointed as the Note Registrar
("Note Registrar") for the purpose of registering Notes and transfers of Notes
as herein provided.
<PAGE> 44
34
Upon surrender for registration of transfer of any Note at the
office or agency of the Company designated pursuant to Section 1002, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Notes of any
authorized denomination or denominations of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other
Notes of any authorized denomination and of a like aggregate principal amount,
upon surrender of the Notes to be exchanged at such office or agency. Whenever
any Notes are so surrendered for exchange (including an exchange of Initial
Notes for Exchange Notes), the Company shall execute, and the Trustee shall
authenticate and deliver, the Notes which the Holder making the exchange is
entitled to receive; provided that no exchange of Initial Notes for Exchange
Notes shall occur until an Exchange Offer Registration Statement shall have
been declared effective by the Commission and that the Initial Notes to be
exchanged for the Exchange Notes shall be cancelled by the Trustee.
All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Note
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer, in form satisfactory to the Company and the Note Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange or redemption of Notes, but the Company may require
payment in certain circumstances of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Notes, other than exchanges pursuant to Section 304,
906, 1015, 1016 or 1108 not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before the selection of Notes to be redeemed under Sections
1104, 1015 and 1016 and ending at the close of business on the day of such
mailing of the relevant notice of redemption, or (ii) to register the transfer
of or exchange any Note so selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
<PAGE> 45
35
SECTION 306. Book-Entry Provisions for Global Note.
(a) The Global Note initially shall (i) be registered in
the name of Cede & Co., as nominee of the Depositary (such nominee being
referred to herein as the "Global Note Holder"), (ii) be deposited with, or on
behalf of, the Depositary or with the Trustee, as custodian for such
Depositary, and (iii) bear legends as set forth in Section 202.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depositary, or the Trustee as its custodian,
or under the Global Note, and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or shall impair, as between
the Depositary and its Agent Members, the operation of customary practices
governing the exercise of the rights of a holder of any Note. With respect to
any Global Note deposited with the Trustee as custodian for the Depositary for
credit to the respective accounts of beneficial owners (or to such other
accounts as they may direct) at Euroclear or Cedel, the provisions of the
"Operating Procedures of the Euroclear System" and the "Terms and Conditions
Governing Use of Euroclear", and the "Management Regulations" and "Instructions
to Participants" of Cedel, respectively, shall be applicable to such Global
Note.
(b) Transfers of the Global Note shall be limited to
transfers of such Global Note in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in the
Global Note may be transferred in accordance with the rules and procedures of
the Depositary and the provisions of Section 307. Beneficial owners may obtain
Certificated Notes in exchange for their beneficial interests in the Global
Note upon request in accordance with the Depositary's and the Registrar's
procedures. In addition, if (i) the Company notifies the Trustee in writing
that the Depositary is no longer willing or able to act as a depositary and the
Company is unable to locate a qualified successor within 90 days or (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Notes in the form of Certificated Securities under this
Indenture then, upon surrender by the Global Note Holder of its Global Note,
Certificated Notes will be issued to each person that the Global Note Holder
and the Depositary identify as being the beneficial owner of the related Notes.
(c) In connection with any transfer of a portion of the
beneficial interest in the Global Note to beneficial owners pursuant to
subsection (b) of this Section, the Note Registrar shall reflect on its books
and records the date and a decrease in the principal amount of the Global Note
in an amount equal to the principal amount of the beneficial interest in the
<PAGE> 46
36
Global Note to be transferred, and the Company shall execute, and the Trustee
shall authenticate and deliver, one or more Certificated Notes of like tenor
and amount.
(d) Any Certificated Note delivered in exchange for an
interest in the Global Note pursuant to subsection (b) or subsection (c) of
this Section shall, except as otherwise provided by Section 307, bear the
applicable legend regarding transfer restrictions applicable to the
Certificated Note set forth in Section 202.
(e) The Holder of the Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
SECTION 307. Special Transfer Provisions.
Unless and until (i) an Initial Note is sold under an
effective Registration Statement, or (ii) an Initial Note is exchanged for an
Exchange Note in connection with an effective Registration Statement, in each
case pursuant to the Registration Rights Agreement, the following provisions
shall apply:
(a) Transfers to Non-QIB Institutional Accredited
Investors. The following provisions shall apply with respect to the
registration of any proposed transfer of an Initial Note to any institutional
"accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act) which is not a QIB (excluding Non-U.S.
Persons):
(i) The Registrar shall register the transfer of any
Initial Note, whether or not such Initial Note bears the Private
Placement Legend, if (x) the requested transfer is at least two years
after the original issue date of the Initial Notes or (y) the proposed
transferee has delivered to the Registrar a certificate substantially
in the form of Exhibit C hereto.
(ii) If the proposed transferor is an Agent Member holding
a beneficial interest in the Global Note, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i) and
(y) instructions given in accordance with the Depositary's and the
Registrar's procedures therefor, the Registrar shall reflect on its
books and records the date and a decrease in the principal amount of
the Global Note in an amount equal to the principal amount of the
beneficial interest in the Global Note to be transferred, and the
Company shall execute, and the Trustee shall authenticate and deliver,
one or more Certificated Notes of like tenor and amount.
<PAGE> 47
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(b) Transfers to QIBs. The following provisions
shall apply with respect to the registration of any proposed transfer of an
Initial Note to a QIB (excluding Non-U.S. Persons):
(i) If the Note to be transferred consists of (i)
Certificated Notes, the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the
box provided for on the form of Initial Note stating, or has otherwise
advised the Company and the Registrar in writing, that the sale has
been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form
of Initial Note stating, or has otherwise advised the Company and the
Registrar in writing, that it is purchasing the Initial Note for its
own account or an account with respect to which it exercises sole
investment discretion and that it, or the Person on whose behalf it is
acting with respect to any such account, is a QIB within the meaning
of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule
144A or has determined not to request such information and that it is
aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A or (ii) an interest in the Certificated Notes,
the transfer of such interest may be effected only through the
book-entry system maintained by the Depositary.
(ii) If the proposed transferee is an Agent Member, and
the Initial Note to be transferred consists of Certificated Notes,
upon receipt by the Registrar of instructions given in accordance with
the Depositary's and the Registrar's procedures therefor, the
Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global Note in an amount equal
to the principal amount of the Certificated Notes, as the case may be,
to be transferred, and the Trustee shall cancel the Certificated Note
so transferred.
(c) Transfers of Interests in the Offshore Global Note or
Certificated Notes to U.S. Persons. The following provisions shall apply with
respect to any transfer of interests in the Offshore Global Note or
Certificated Notes to U.S. Persons:
(i) prior to the removal of the Private Placement Legend
from an Offshore Global Note or Certificated Notes pursuant to Section
202, the Note Registrar shall refuse to register such transfer; and
(ii) after such removal pursuant to Section 202, the Note
Registrar shall register the transfer of any such Note without
requiring any additional certification.
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(d) Transfers to Non-U.S. Persons at Any Time.
The following provisions shall apply with respect to any transfer of an Initial
Note to a Non-U.S. Person:
(i) The Note Registrar shall register any proposed
transfer to any Non-U.S. Person if the Note to be transferred is a
Certificated Note or an interest in the U.S. Global Note, only upon
receipt of a certificate substantially in the form of Exhibit D from
the proposed transferor.
(ii) (a) If the proposed transferor in an Agent Member
holding a beneficial interest in the U.S. Global Note, upon receipt
by the Note Registrar of (x) the document required by paragraph (i)
above, and (y) instructions in accordance with the Depositary's and
the Note Registrar's procedures, the Note Registrar shall reflect on
its books and records the date and a decrease in the principal amount
at maturity of the U.S. Global Note in an amount equal to the
principal amount of the beneficial interest in the U.S. Global Note to
be transferred, and (b) if the proposed transferor is an Agent Member,
upon receipt by the Note Registrar of instructions given in accordance
with the Depositary's and the Note Registrar's procedures, the Note
Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Offshore Global Note in an
amount equal to the principal amount of the Certificated Note or the
U.S. Global Note, as the case may be, to be transferred, and the
Trustee shall cancel the Cerficated Note, if any, so transferred or
decrease the amount of the U.S. Global Note.
(e) Private Placement Legend. Upon the transfer,
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Registrar shall deliver only Notes that bear the Private
Placement Legend unless either (i) the circumstances contemplated by paragraph
(a)(i)(x) of this Section 307 exist or (ii) there is delivered to the Registrar
an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to
the effect that neither such legend nor the related restrictions on transfer
are required in order to maintain compliance with the provisions of the
Securities Act.
(f) General. By its acceptance of any Note bearing the
Private Placement Legend, each Holder of such a Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Note only as
provided in this Indenture.
The Registrar shall retain until such time as no Notes remain
Outstanding copies of all letters, notices and other written communications
received pursuant to Section 306 or this Section 307. The Company shall have
the right to inspect and make copies of all such letters,
<PAGE> 49
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notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
Each beneficial owner of an interest in a Senior Note agrees
to indemnify the Company and the trustee against any liability that may result
form the transfer, exchange or assignment by such beneficial owner of such
interest in violation of any provisions of this Indenture and/or applicable
United States federal or state securities law.
The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of
any interest in any Note (including any transfers between or among Agent
Members or beneficial owners of interests in any Global Note) other than to
require delivery of such certificates and other documentation or evidence as
are expressly required by, and to do so if and when expressly required by the
terms of, this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
SECTION 308. Mutilated, Destroyed, Lost and Stolen Notes.
If (i) any mutilated Note is surrendered to the Trustee or the
Registrar, or (ii) the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Note, and there is
delivered to the Company and the Trustee such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Company or the Trustee that such Note has been acquired by a bona fide
purchaser, the Company shall execute and upon Company Order the Trustee shall
authenticate and deliver, in exchange for any such mutilated Note or in lieu of
any such destroyed, lost or stolen Note, a new Note of like tenor and principal
amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time
<PAGE> 50
40
enforceable by anyone, and shall be entitled to all benefits of this Indenture
equally and proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 309. Payment of Interest; Interest Rights Preserved.
Interest on any Note which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the Person
in whose name such Note (or one or more Predecessor Notes) is registered at the
close of business on the Regular Record Date for such interest at the office or
agency of the Company in The City of New York maintained for such purposes
(which initially shall be the agency of the Trustee located at 61 Broadway,
15th Floor, New York, New York, 10006) pursuant to Section 1002 or, at the
option of the Company, interest may be paid by check mailed to the address of
the Person entitled thereto pursuant to Section 310 as such address appears in
the Register; provided that all payments with respect to the Global Note and
Certificated Notes the holders of which have given wire transfer instructions
to the Trustee (or other Paying Agent) by the Regular Record Date shall be
required to be made by wire transfer of immediately available funds to the
accounts specified be the holders thereof.
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date shall
forthwith cease to be payable to the Holder on the Regular Record Date by
virtue of having been such Holder, and such defaulted interest and (to the
extent lawful) interest on such defaulted interest at the rate borne by the
Notes (such defaulted interest and interest thereon herein collectively called
"Defaulted Interest") may be paid by the Company, at its election in each case,
as provided in clause (a) or (b) below:
(a) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Notes (or their
respective Predecessor Notes) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest,
which shall be fixed in the following manner. The Company shall
notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Note and the date of the proposed payment,
and at the same time the Company shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in
this clause provided. Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be
not more
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than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date, and in the
name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record
Date therefor to be given in the manner provided for in Section 107,
not less than 10 days prior to such Special Record Date. Notice of
the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so given, such Defaulted Interest shall be
paid to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following clause (b).
(b) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Notes may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
If the Company shall be required to pay any additional
interest pursuant to the terms of the Registration Rights Agreement, it shall
deliver an Officer's Certificate to the Trustee setting forth the new interest
rate and the period for which such rate is applicable.
SECTION 310. Persons Deemed Owners.
Prior to the due presentment of a Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Note is registered as the owner of such
Note for the purpose of receiving payment of principal of (and premium, if any)
and (subject to Sections 305 and 309) interest on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and none of the
Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
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SECTION 311. Cancellation.
All Notes surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly cancelled by it.
The Company may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee (or to any
other Person for delivery to the Trustee) for cancellation any Notes previously
authenticated hereunder which the Company has not issued and sold, and all
Notes so delivered shall be promptly cancelled by the Trustee. If the Company
shall so acquire any of the Notes, however, such acquisition shall not operate
as a redemption or satisfaction of the indebtedness represented by such Notes
unless and until the same are surrendered to the Trustee for cancellation. No
Notes shall be authenticated in lieu of or in exchange for any Notes cancelled
as provided in this Section, except as expressly permitted by this Indenture.
All cancelled Notes held by the Trustee shall be disposed of by the Trustee in
accordance with its customary procedures and certification of their disposal
delivered to the Company unless by Company Order the Company shall direct that
cancelled Notes be returned to it.
SECTION 312. Issuance of Additional Notes.
The Company may, subject to Article Ten of this Indenture,
issue up to $100,000,000 aggregate principal amount of Additional Notes having
identical terms and conditions to the Notes offered hereby. Any Additional
Notes will be part of the same issue as the Notes offered hereby and will vote
on all matters with the Notes offered hereby.
SECTION 313. Computation of Interest.
Interest on the Notes shall be computed on the basis of a
360-day year of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
Upon the request of the Company, this Indenture will cease to
be of further effect (except as to surviving rights of registration of transfer
or exchange of the Notes, as expressly provided for herein or pursuant hereto),
the Company and the Subsidiary Guarantors will be discharged from their
obligations under the Notes and the Note Guarantees and the
<PAGE> 53
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Trustee, at the expense of the Company, will execute proper instruments
acknowledging satisfaction and discharge of this Indenture when:
(a) either (i) all the Notes theretofore authenticated
and delivered (other than mutilated, destroyed, lost or stolen Notes
that have been replaced or paid and Notes that have been subject to
defeasance under Article Twelve) have been delivered to the Trustee
for cancellation or (ii) all Notes not theretofore delivered to the
Trustee for cancellation (A) have become due and payable, (B) will
become due and payable at maturity within one year or (C) are to be
called for redemption within one year under arrangements satisfactory
to the Trustee for the giving of notice of redemption by the Trustee
in the name, and at the expense, of the Company, and the Company, in
the case of (A), (B) or (C) above, has irrevocably deposited or caused
to be deposited with the Trustee funds in trust for the purpose in an
amount sufficient to pay and discharge, without the need to reinvest
any proceeds thereof, the entire Indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation, for principal
(and premium, if any, on) and interest on the Notes to the date of
such deposit (in the case of Notes that have become due and payable)
or to the Stated Maturity or Redemption Date, as the case may be;
(b) the Company has paid or caused to be paid all sums
payable under this Indenture by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided in this Indenture relating to the
satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 606 and,
if money shall have been deposited with the Trustee pursuant to subclause (ii)
of clause (a) of this Section, the obligations of the Trustee under Section 402
and the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
1003, all money deposited with the Trustee pursuant to Section 401 shall be
held in trust and applied by it, in accordance with the provisions of the Notes
and of this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law. All money deposited pursuant to Section 401 remaining
after all payments to be made pursuant to
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this Article Four having been made, shall be returned to the person(s) which
provided such money or their designee.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) default in the payment of any interest on any Note
when it becomes due and payable, and continuance of such default for a
period of 30 days;
(b) default in the payment of the principal of (or
premium, if any, on) any Note when due;
(c) failure to perform or comply with the provisions of
this Indenture as described in Sections 1010, 1011, 1015 and 1016;
(d) default in the performance, or breach, of any
covenant or agreement of the Company or any Subsidiary Guarantor
contained in this Indenture or in any Subsidiary Guarantee (other than
a default in the performance, or breach, of a covenant or agreement
that is specifically dealt with elsewhere herein), and continuance of
such default or breach for a period of 60 days after written notice
has been given to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in aggregate principal amount
of the Notes then Outstanding;
(e) (i) an event of default has occurred under any
mortgage, bond, indenture, loan agreement or other document evidencing
an issue of Indebtedness of the Company or any Restricted Subsidiary,
which issue has an aggregate outstanding principal amount of not less
than $5 million, and such default has resulted in such Indebtedness
becoming, whether by declaration or otherwise, due and payable prior
to the date on which it would otherwise become due and payable or (ii)
a default in any payment when due at final maturity of any such
Indebtedness;
<PAGE> 55
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(f) failure by the Company or any of its Restricted
Subsidiaries to pay one or more final judgments the uninsured portion
of which exceeds in the aggregate $5 million, which judgment or
judgments are not paid, discharged or stayed for a period of 60 days;
(g) any Subsidiary Guarantee ceases to be in full force
and effect or is declared null and void or any such Subsidiary
Guarantor denies that it has any further liability under any
Subsidiary Guarantee, or gives notice to such effect (other than by
reason of the termination of this Indenture or the release of any such
Subsidiary Guarantee in accordance with this Indenture); or
(h) the occurrence of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant
Subsidiary.
SECTION 502. Acceleration of Maturity; Rescission and
Annulment.
If an Event of Default (other than as specified in clause (h)
above) occurs and is continuing, the Trustee or the Holders of not less than
25% in aggregate principal amount of the Notes then outstanding may, and the
Trustee at the request of such Holders will, declare the principal of, and
accrued interest on, all of the outstanding Notes immediately due and payable
and, upon any such declaration, such principal and such interest will become
due and payable immediately.
If an Event of Default specified in clause (h) above occurs
and is continuing, then the principal of and accrued interest on all of the
outstanding Notes will ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration under this
Indenture, but before a judgment or decree for payment of the money due has
been obtained by the Trustee, the holders of a majority in aggregate principal
amount of the outstanding Notes, by written notice to the Company and the
Trustee, may rescind such declaration and its consequences if: (i) the Company
has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue
interest on all Notes, (B) all unpaid principal of (and premium, if any, on)
any outstanding Notes that has become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Notes, (C) to the
extent that payment of such interest is lawful, interest upon overdue interest
and overdue principal at the rate borne by the Notes, and (D) all sums paid or
advanced by the Trustee under this Indenture and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel;
and (ii) all Events of Default, other than the non-payment of amounts of
principal of (or premium, if any, on) or interest on the Notes that have become
due solely by such declaration of acceleration, have
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been cured or waived. No such rescission will affect any subsequent default or
impair any right consequent thereon.
Notwithstanding the preceding paragraph, in the event of a
declaration of acceleration in respect of the Notes because of an Event of
Default specified in Section 501(e) shall have occurred and be continuing, such
declaration of acceleration shall be automatically annulled if the Indebtedness
that is the subject of such Event of Default has been discharged or the holders
thereof have rescinded their declaration of acceleration in respect of such
Indebtedness, and written notice of such discharge or rescission, as the case
may be, shall have been given to the Trustee by the Company and countersigned
by the holders of such Indebtedness or a trustee, fiduciary or agent for such
holders, within 30 days after such declaration of acceleration in respect of
the Notes, and no other Event of Default has occurred during such 30-day period
which has not been cured or waived during such period.
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company and each of the Subsidiary Guarantors covenants
that if
(a) default is made in the payment of any installment of
interest on any Note when such interest becomes due and payable and
such default continues for a period of 30 days, or
(b) default is made in the payment of the principal of
(or premium, if any, on) any Note at the Maturity thereof,
the Company and each Subsidiary Guarantor will, upon demand of the Trustee, pay
to the Trustee for the benefit of the Holders of such Notes, the whole amount
then due and payable on such Notes for principal (and premium, if any) and
interest, and interest on any overdue principal (and premium, if any) and, to
the extent that payment of such interest shall be legally enforceable, upon any
overdue installment of interest, at the rate borne by the Notes, and, in
addition thereto, 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.
If the Company or any Subsidiary Guarantor, as the case may
be, fails to pay such amounts forthwith upon such demand, the Trustee, in its
own name and as trustee of an express trust, may institute a judicial
proceeding for the collection of the sums so due and unpaid, may prosecute such
proceeding to judgment or final decree and may enforce the same against the
Company, such Subsidiary Guarantor or any other obligor upon the Notes and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the
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property of the Company, such Subsidiary Guarantor or any other obligor upon
the Notes, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition
or other judicial proceeding relative to the Company or any other obligor upon
the Notes (including the Subsidiary Guarantors) or the property of the Company
or of such other obligor or their creditors, the Trustee (irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company for the payment of overdue
principal, premium, if any, or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Notes and to file such 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
of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder 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 Holders, to pay
the Trustee any amount due 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 606.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Notes or the rights of any Holder
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thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
Notes.
All rights of action and claims under this Indenture or the
Notes may be prosecuted and enforced by the Trustee without the possession of
any of the Notes or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name and as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Notes in respect of which such judgment
has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
(or premium, if any) or interest, upon presentation of the Notes and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 606;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Notes in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Notes for principal
(and premium, if any) and interest, respectively; and
THIRD: The balance, if any, to the Company, its successors
and assigns or the Person or Persons legally entitled thereto.
SECTION 507. Limitation on Suits.
No Holder has any right to institute any proceeding with
respect to this Indenture or any remedy thereunder, unless the Holders of at
least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding within 60 days after receipt of such notice and the Trustee,
within such 60-day period, has not received directions inconsistent with such
written request by Holders of a majority in aggregate principal amount of the
outstanding Notes. Such limitations do not apply, however, to a suit
instituted by a Holder for the enforcement of the
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payment of the principal of, premium, if any, or interest on such Note on or
after the respective due dates expressed in such Note.
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any Note shall have the right, which is absolute and unconditional,
to receive payment, as provided herein (including, if applicable, Article
Twelve) and in such Note of the principal of (and premium, if any) and (subject
to Section 309) interest on such Note on the respective Stated Maturities
expressed in such Note (or, in the case of redemption, on the Redemption Date)
and to institute suit for the enforcement of any such payment, and such rights
shall not be impaired without the consent of such Holder.
SECTION 509. 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 such case, subject to any
determination in such proceeding, the Company, the Subsidiary Guarantors, 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.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph
of Section 308, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Note to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised
<PAGE> 60
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from time to time, and as often as may be deemed expedient, by the Trustee or
by the Holders, as the case may be for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, provided that
(a) such direction shall not be in conflict with any rule
of law or with this Indenture,
(b) the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction, and
(c) the Trustee need not take any action which might
involve it in personal liability or be unjustly prejudicial to the
Holders not consenting.
SECTION 512. [INTENTIONALLY OMITTED]
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal
amount of the outstanding Notes may, on behalf of the Holders of all of the
Notes, waive any past defaults under this Indenture, except a default in the
payment of the principal of (and premium, if any) or interest on any Note, or
in respect of a covenant or provision that under this Indenture cannot be
modified or amended without the consent of the holder of each Note outstanding.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 514. Waiver of Stay or Extension Laws.
The Company and each Subsidiary Guarantor covenants (to the
extent that it may lawfully do so) that it will not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture; and
the Company and each Subsidiary Guarantor (to the extent that it may lawfully
do so) hereby expressly waives all benefit or advantage of any such law and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
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ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing
and is known to the Trustee, the Trustee shall mail to each holder of the Notes
notice of the Default or Event of Default within 90 days after the occurrence
thereof. However, except in the case of a Default or an Event of Default in
payment of principal of (and premium, if any, on) or interest on any Notes, the
Trustee may withhold the notice to the holders of the Notes if a committee of
its trust officers in good faith determines that withholding such notice is in
the interests of the holders of the Notes.
SECTION 602. Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through
315(d):
(a) the Trustee may conclusively rely and shall be
protected in acting or refraining from acting, pursuant to the terms
of this Indenture or otherwise, upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or Company
Order with sufficient detail as may be requested by the Trustee and
any resolution of the Board of Directors may be sufficiently evidenced
by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers
Certificate and/or an Opinion of Counsel;
(d) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
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(e) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders pursuant to this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities (including fees and expenses of its agents and counsel)
which might be incurred by it in compliance with such request or
direction;
(f) the Trustee shall not be bound to make any
investigation into, and may conclusively rely upon, 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;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(h) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture; and
(i) except during the continuance of an Event of Default,
the Trustee need perform only those duties as are specifically set
forth in this Indenture and no others. If an Event of Default has
occurred and is continuing, the Trustee shall exercise its rights and
powers and use the same degree of care and skill in its exercise as a
prudent person would exercise or use under the circumstances in the
conduct of such person's own affairs.
The Trustee shall not be required 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 if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
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SECTION 603. Trustee Not Responsible for Recitals or
Issuance of Notes.
The recitals contained herein and in the Notes, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company and the Subsidiary Guarantors, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture, the Notes or any Note
Guarantee, except that the Trustee represents that it is duly authorized to
execute and deliver this Indenture, authenticate the Notes and perform its
obligations hereunder and, upon the effectiveness of the Registration
Statement, that the statements made by it in a Statement of Eligibility on Form
T-1 supplied to the Company are true and accurate, subject to the
qualifications set forth therein. The Trustee shall not be accountable for the
use or application by the Company of the Notes or the proceeds thereof.
SECTION 604. May Hold Notes.
The Trustee, any Paying Agent, any Note Registrar or any other
agent of the Company or of the Trustee, in its individual or any other
capacity, may become the owner or pledgee of Notes and, subject to TIA Sections
310(b) and 311, may otherwise deal with the Company with the same rights it
would have if it were not Trustee, Paying Agent, Note Registrar or such other
agent.
SECTION 605. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Company or any Subsidiary Guarantor, as the
case may be.
SECTION 606. Compensation and Reimbursement.
The Company agrees:
(a) to pay to the Trustee (in its capacity as Trustee,
Paying Agent and Registrar) from time to time such reasonable
compensation for all services rendered by it hereunder as may be
separately agreed in writing (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of
an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
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reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(c) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and
expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
The obligations of the Company under this Section to
compensate the Trustee, to pay or reimburse the Trustee for expenses,
disbursements and advances and to indemnify and hold harmless the Trustee shall
constitute additional indebtedness hereunder and shall survive the satisfaction
and discharge of this Indenture. As security for the performance of such
obligations of the Company, the Trustee shall have a claim prior to the Notes
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for the payment of principal of (and premium, if any) or
interest on particular Notes.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(h), the expenses
(including the reasonable charges and expenses of its counsel) of and the
compensation for such services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination
of this Indenture.
SECTION 607. Corporate Trustee Required; Eligibility.
There shall be at all times a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a
combined capital and surplus of at least $50,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of Federal, State, territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of
Successor.
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(a) No resignation or removal of the Trustee and
no appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 609.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If the instrument of acceptance by a successor
Trustee required by Section 609 shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of not less than a majority in principal amount of the Outstanding
Notes, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions
of TIA Section 310(b) after written request therefor by the Company or
by any Holder who has been a bona fide Holder of a Note for at least
six months, except when the Trustee's duty to resign is stayed in
accordance with the provisions of TIA Section 310(b), or
(2) the Trustee shall cease to be eligible under Section
607 and shall fail to resign after written request therefor by the
Company or by any Holder who has been a bona fide Holder of a Note for
at least six months, or
(3) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee
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shall be appointed by Act of the Holders of a majority in principal amount of
the Outstanding Notes delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner
hereinafter provided subject to TIA Section 315(e), any Holder who has been a
bona fide Holder of a Note for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee to the
Holders of Notes in the manner provided for in Section 107. Each notice shall
include the name of the successor Trustee and the address of its Corporate
Trust Office.
SECTION 609. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Company or the successor Trustee, such retiring Trustee shall, upon payment
of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder subject to the retiring
Trustee's rights as provided under the last sentence of Section 606. Upon
request of any such successor Trustee, the Company shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession
to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be otherwise qualified and eligible
under this Article, without the execution or filing of any paper or any further
act on the part of any of
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the parties hereto. In case any Notes shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion
or consolidation to such authenticating Trustee may adopt such authentication
and deliver the Notes so authenticated with the same effect as if such
successor Trustee had itself authenticated such Notes. In case at that time
any of the Notes shall not have been authenticated, any successor Trustee may
authenticate such Notes either in the name of any predecessor hereunder or in
the name of the successor Trustee. In all such cases such certificates shall
have the full force and effect which this Indenture provides that the
certificate of authentication of the Trustee shall have; provided, however,
that the right to adopt the certificate of authentication of any predecessor
Trustee or to authenticate Notes in the name of any predecessor Trustee shall
apply only to its successor or successors by merger, conversion or
consolidation.
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE, COMPANY
AND SUBSIDIARY GUARANTORS
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Notes, by receiving and holding the same,
agrees with the Company, the Subsidiary Guarantors and the Trustee that none of
the Company, the Subsidiary Guarantors or the Trustee or any agent of either
of them shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders in accordance with TIA
Section 312, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under TIA Section 312(b).
SECTION 702. Reports by Trustee.
To the extent required by the TIA, within 60 days after May 15
of each year commencing with the first May 15 after the first issuance of
Notes, the Trustee shall transmit to the Holders, in the manner and to the
extent provided in TIA Section 313(c), a brief report dated as of such May 15
if required by TIA Section 313(a).
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ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain
Terms.
The Company may not, in a single transaction or series of
related transactions, consolidate or merge with or into (whether or not the
Company is the surviving corporation), or directly and/or indirectly through
its Subsidiaries, sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its properties or assets (determined on a
consolidated basis for the Company and its Subsidiaries taken as a whole) in
one or more related transactions to, another corporation, person or entity
unless:
(a) either (i) the Company is the surviving corporation
or (ii) in the case of a transaction involving the Company, the entity
or the person formed by or surviving any such consolidation or merger
(if other than the Company) or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made
(the "Surviving Entity") is a corporation organized or existing under
the laws of the United States, any state thereof or the District of
Columbia and assumes all the obligations of the Company under the
Notes and this Indenture pursuant to a supplemental indenture in a
form reasonably satisfactory to the Trustee;
(b) immediately after giving effect to such transaction
and treating any obligation of the Company in connection with or as a
result of such transaction as having been incurred as of the time of
such transaction, no Default or Event of Default has occurred and is
continuing;
(c) the Company (or the Surviving Entity if the Company
is not the continuing obligor under this Indenture) could, at the time
of such transaction and after giving pro forma effect thereto as if
such transaction had occurred at the beginning of the applicable
four-quarter period, incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the first paragraph of
Section 1010;
(d) if the Company is not the continuing obligor under
this Indenture, each Subsidiary Guarantor, unless it is the other
party to the transaction described above, has by supplemental
indenture confirmed that its Subsidiary Guarantee applies to the
Surviving Entity's obligations under this Indenture and the Notes;
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(e) if any of the property or assets of the Company or
any of its Restricted Subsidiaries would thereupon become subject to
any Lien, the provisions of Section 1014 are complied with;
(f) immediately after giving effect to such transaction
on a pro forma basis, the Consolidated Net Worth of the Company (or of
the Surviving Entity if the Company is not the continuing obligor
under this Indenture) is equal to or greater than the Consolidated Net
Worth of the Company immediately prior to such transaction; and
(g) the Company delivers, or causes to be delivered, to
the Trustee, in form and substance reasonably satisfactory to the
Trustee, an officers' certificate and an opinion of counsel, each
stating that such transaction complies with the requirements
identified under this Section;
provided, however, that any sale, transfer or disposition of all of the Capital
Stock, or all or substantially all of the assets, of a Subsidiary Guarantor
will not be restricted by the foregoing provisions but will be governed by the
provisions described under "Subsidiary Guarantees."
This Indenture will provide that no Subsidiary Guarantor may
consolidate with or merge with or into any other person or convey, sell,
assign, transfer, lease or otherwise disposed of its properties and assets
substantially as an entirely to any other person (other than the Company or
another Subsidiary Guarantor) unless: (a) subject to the provisions of the
following paragraph, the person formed by or surviving such consolidation or
merger (if other than such Subsidiary Guarantor) or to which such properties
and assets are transferred assumes all of the obligations of such Subsidiary
Guarantor under this Indenture and its Subsidiary Guarantee, pursuant to a
supplemental indenture in form and substance satisfactory to the Trustee and
(b) immediately after giving effect to such transaction, no Default or Event of
Default has occurred and is continuing.
For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted 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.
In the event of any transaction described in and complying
with the conditions listed in the first paragraph of this covenant in which the
Company is not the continuing obligor under this Indenture, the Surviving
Entity will succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture, and thereafter the Company
shall, except in the case of a lease, be discharged from all its obligations
and covenants under this Indenture and the Notes.
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SECTION 802. Successor Substituted.
In the event of any transaction described in and complying
with the conditions listed in the Section 801 in which the Company is not the
continuing obligor under this Indenture, the Surviving Entity will succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Indenture, and thereafter the Company shall, except in the case of a
lease, be discharged from all its obligations and covenants under this
Indenture and Notes.
ARTICLE NINE
SUPPLEMENTS AND AMENDMENTS TO INDENTURE
AND NOTE GUARANTEES
SECTION 901. Without Consent of Holders.
Without the consent of any Holders, the Company and any
affected Subsidiary Guarantor, each when authorized by a Board Resolution, and
the Trustee may amend or supplement this Indenture, the Notes or any Note
Guarantee without the consent of any Holder of a Note:
(a) to evidence the succession of another person to the
Company or any Subsidiary Guarantor and the assumption by any such
successor of the covenants of the Company or any Subsidiary Guarantor
in this Indenture and in the Notes; or
(b) to add to the covenants of the Company for the
benefit of the Holders or to surrender any right or power herein
conferred upon the Company; or
(c) to add any additional Events of Default; or
(d) to provide for uncertificated Notes in addition to or
in place of the certificated Notes; or
(e) to evidence and provide for the acceptance of
appointment under this Indenture by a successor Trustee; or
(f) to secure the Notes or any Subsidiary Guarantee; or
(g) to cure any ambiguity, to correct or supplement any
provision in this Indenture that may be defective or inconsistent with
any other provision in this
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Indenture, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided that such actions
pursuant to this clause do not adversely affect the interests of the
holders; or
(h) to comply with any requirements of the Commission in
order to effect and maintain the qualification of this Indenture under
the Trust Indenture Act; or
(i) to release any Subsidiary Guarantor from its Note
Guarantee in accordance with the provisions of this Indenture
(including in connection with a sale of all of the Capital Stock of
such Subsidiary Guarantor).
Upon the request of the Company accompanied by a Board
Resolution authorizing the execution of any such amended or supplemental
indenture, Note or Note Guarantee, and upon receipt by the Trustee of the
documents described in Section 602(b) hereof, the Trustee shall join with the
Company in the execution of any amended or supplemental indenture or Note
Guarantee authorized or permitted by the terms of this Indenture and to make
any further appropriate agreements and stipulations that may be therein
contained, but the Trustee shall not be obligated to enter into such amended or
supplemental indenture or Note Guarantee that adversely affects its own rights,
duties or immunities under this Indenture or otherwise.
SECTION 902. With Consent of Holders.
With the consent of the Holders of not less than a majority in
aggregate Outstanding principal amount of the Notes, by Act of said Holders
delivered to the Company, any affected Subsidiary Guarantor and the Trustee,
the Company and the Subsidiary Guarantor, each when authorized by a Board
Resolution, and the Trustee may amend or supplement in any manner this
Indenture or any Note Guarantee or modify in any manner the rights of the
Holders under this Indenture or any Note Guarantee; provided, however, that no
such supplement, amendment or modification may, without the consent of the
Holder of each Outstanding Note affected thereby:
(a) change the Stated Maturity of the principal of, or
any installment of interest on, any Note, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable
upon the redemption thereof, or change the coin or currency in which
any Note or any premium or the interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment
after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date);
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(b) reduce the percentage in principal amount of
outstanding Notes, the consent of whose holders is required for any
waiver of compliance with certain provisions of, or certain defaults
and their consequences provided for under, this Indenture;
(c) waive a default in the payment of principal of, or
premium, if any, or interest on the Notes; or
(d) release any Subsidiary Guarantor that is a
Significant Subsidiary from any of its obligations under its Note
Guarantee or this Indenture other than in accordance with the terms of
this Indenture.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act of Holders shall approve the substance
thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustees own
rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to the Article
shall conform to the requirements of the Trust Indenture Act as then in effect.
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SECTION 906. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so
determine, new Notes so modified as to conform, in the opinion of the Trustee
and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Notes.
SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company, any affected
Subsidiary Guarantor and the Trustee of any supplemental indenture or Note
Guarantee pursuant to the provisions of Section 902, the Company shall give
notice thereof to the Holders of each Outstanding Note affected, in the manner
provided for in Section 107, setting forth in general terms the substance of
such supplemental indenture or Note Guarantee. Any failed attempt to effect
such notice, or any defect therein shall not, however, in any way impair or
affect the validity of any such amended or supplemental indenture or Note
Guarantee; provided that the Company has acted reasonably and in good faith.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and
Interest.
The Company covenants and agrees for the benefit of the
Holders that it will duly and punctually pay the principal of (and premium, if
any) and interest on the Notes in accordance with the terms of the Notes and
this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company shall maintain in the City of New York, an office
or agency where Notes may be presented or surrendered for payment, where Notes
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Notes and this Indenture
may be served. The agency of the Trustee, located at 61 Broadway, 15th Floor,
New York, New York, 10006, shall be such office or agency of the Company,
unless the Company shall designate and maintain some other office or agency for
one or more of such purposes. The Company shall give prompt written
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notice to the Trustee of any change in the location of any 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 agency of the Trustee in the City of New York, and the Company hereby
appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside of the City of New York) where the
Notes may be presented or surrendered for any or all such purposes and may from
time to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the City of New York for such
purposes. The Company shall give prompt written notice to the Trustee of any
such designation or rescission and any change in the location of any such other
office or agency.
SECTION 1003. Money for Note Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of (or premium, if any) or
interest on any of the Notes, segregate and hold in trust for the benefit of
the Persons entitled thereto a sum sufficient to pay the principal of (or
premium, if any) or interest so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for
the Notes, it will, on or before each due date of the principal of (or premium,
if any) or interest on any Notes, deposit with a Paying Agent a sum sufficient
to pay the principal (and premium, if any) or interest so becoming due, such
sum to be held in trust for the benefit of the Persons entitled to such
principal, premium or interest, and (unless such Paying Agent is the Trustee)
the Company shall promptly notify the Trustee of such action or any failure so
to act.
The Company shall cause each Paying Agent (other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of the
principal of (and premium, if any) or interest on Notes in trust for
the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided;
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(b) give the Trustee notice of any default by the
Company (or any other obligor upon the Notes) in the making of any
payment of principal (and premium, if any) or interest; and
(c) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (or
premium, if any) or interest on any Note and remaining unclaimed for two years
after such principal (and premium, if any) or interest has become due and
payable shall be paid to the Company on Company Request, or (if then held by
the Company) shall be discharged from such trust; and the Holder of such Note
shall thereafter, as an unsecured general creditor, look only to the Company
for payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the
Company and each Restricted Subsidiary; provided, however, that the Company
shall not be required to preserve any such right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its Restricted Subsidiaries
as a whole and that the loss thereof is not disadvantageous in any material
respect to the Holders.
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SECTION 1005. Payment of Taxes and Other Claims.
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 any Restricted
Subsidiary or upon the income, profits or property of the Company or any
Restricted Subsidiary and (b) all lawful claims for labor, materials and
supplies, which, if unpaid, might by law become a lien upon the property of the
Company or any Restricted Subsidiary; provided, however, that the Company shall
not be 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.
SECTION 1006. Maintenance of Properties.
The Company shall cause all properties owned by the Company or
any Restricted Subsidiary or used or held for use in the conduct of its
business or the business of any Restricted Subsidiary to be maintained and kept
in good condition, repair and working order (ordinary wear and tear excepted)
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all to the extent in the judgment of the
Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section shall prevent the Company from
discontinuing the maintenance of any of such properties if such discontinuance
is, in the judgment of the Company, desirable in the conduct of its business or
the business of any Subsidiary and not disadvantageous in any material respect
to the Holders.
SECTION 1007. Insurance.
The Company shall at all times keep all of its and its
Restricted Subsidiaries' properties which are of an insurable nature insured
with insurers, believed by the Company to be responsible, against loss or
damage to the extent that property of similar character is usually so insured
by corporations similarly situated and owning like properties.
SECTION 1008. Statement by Officers as to Default.
(a) The Company and each Subsidiary Guarantor will
deliver to the Trustee, within 120 days after the end of each fiscal year, a
brief certificate from the principal executive officer, principal financial
officer or principal accounting officer as to his or her knowledge of
compliance by the Company and such Subsidiary Guarantor with all conditions and
covenants under this Indenture. For purposes of this Section 1008(a), such
compliance shall be
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determined without regard to any period of grace or requirement of notice under
this Indenture.
(b) When any Default has occurred and is continuing under
this Indenture, or if the trustee for or the holder of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $2,000,000), the Company
shall deliver to the Trustee by registered or certified mail or by telegram,
telex or facsimile transmission an officers certificate specifying such event,
notice or other action within five Business Days of its occurrence.
SECTION 1009. [INTENTIONALLY OMITTED]
SECTION 1010. Limitation on Indebtedness of Issuance of
Disqualified Stock.
The Company shall not, and will not permit any Restricted
Subsidiary to, create, issue, assume, guarantee or in any manner become
directly or indirectly liable for the payment of, or otherwise incur
(collectively, "incur"), any Indebtedness (including Acquired Indebtedness and
the issuance of Disqualified Stock), except that the Company may incur
Indebtedness if, at the time of such event, the Fixed Charge Coverage Ratio for
the immediately preceding four full fiscal quarters for which internal
financial statements are available, taken as one accounting period, would have
been equal to at least 2.25 to 1.0.
In making the calculation under the preceding paragraph for
any four-quarter period that includes the Closing Date, pro forma effect will
be given to the Refinancing, as if the Refinancing had occurred at the
beginning of such four-quarter period. In addition (but without duplication),
in making the calculation under the preceding paragraph, pro forma effect will
be given to:
(i) the incurrence of such Indebtedness and (if
applicable) the application of the net proceeds therefrom, including
to refinance other Indebtedness, as if such Indebtedness was incurred
and the application of such proceeds occurred at the beginning of such
four-quarter period;
(ii) the incurrence, repayment or retirement of any other
Indebtedness by the Company or its Restricted Subsidiaries since the
first day of such four-quarter period as if such Indebtedness was
incurred, repaid or retired at the beginning of such four-quarter
period; and
(iii) the acquisition (whether by purchase, merger or
otherwise) or disposition (whether by sale, merger or otherwise) of
any company, entity or business acquired or
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disposed of by the Company or its Restricted Subsidiaries, as the case
may be, since the first day of such four-quarter period, as if such
acquisition or disposition occurred at the beginning of such
four-quarter period. In making a computation under the foregoing
clause (i) or (ii), (A) the amount of Indebtedness under a revolving
credit facility will be computed based on the average daily balance of
such Indebtedness during such four-quarter period, (B) if such
Indebtedness bears, at the option of the Company, a fixed or floating
rate of interest, interest thereon will be computed by applying, at
the option of the Company, either the fixed or floating rate, and (C)
the amount of any Indebtedness that bears interest at a floating rate
will be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period
(taking into account any Hedging Obligations applicable to such
Indebtedness if such Hedging Obligations have a remaining term at the
date of determination in excess of 12 months).
Notwithstanding the foregoing, the Company may, and may permit
its Restricted Subsidiaries to, incur the following Indebtedness ("Permitted
Indebtedness"):
(i) Indebtedness of the Company or any Subsidiary
Guarantor under the Bank Credit Agreement (and the incurrence by any
Subsidiary Guarantor of guarantees thereof) in an aggregate principal
amount at any one time outstanding not to exceed the greater of (A)
the Borrowing Base or (B) $140 million, less any amounts applied to
the permanent reduction of such credit facilities pursuant to the
provisions of Section 1016;
(ii) Indebtedness represented by the Notes (other than the
Additional Notes) and the Subsidiary Guarantees;
(iii) Existing Indebtedness;
(iv) the incurrence by the Company of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace, any Indebtedness that is
permitted to be incurred under clause (ii) or (iii) above;
(v) Indebtedness owed by the Company to any Wholly Owned
Restricted Subsidiary or owed by any Restricted Subsidiary to the
Company or a Wholly Owned Restricted Subsidiary (provided that such
Indebtedness is held by the Company or such Restricted Subsidiary);
provided, however, that any Indebtedness of the Company owing to any
such Restricted Subsidiary is unsecured and subordinated in right of
payment from and after such time as the Notes shall become due and
payable (whether at Stated Maturity, acceleration, or otherwise)
to the payment and performance of the Company's obligations under the
Notes;
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(vi) Indebtedness of the Company or any Restricted
Subsidiary under Hedging Obligations incurred in the ordinary course
of business;
(vii) Indebtedness of the Company or any Restricted
Subsidiary consisting of guarantees, indemnities or obligations in
respect of purchase price adjustments in connection with the
acquisition or disposition of assets, including, without limitation,
shares of Capital Stock;
(viii) either (A) Capitalized Lease Obligations of the
Company or any Restricted Subsidiary or (B) Indebtedness under
purchase money mortgages or secured by purchase money security
interests so long as (x) such Indebtedness is not secured by any
property or assets of the Company or any Restricted Subsidiary other
than the property and assets so acquired and (y) such Indebtedness is
created within 60 days of the acquisition of the related property or
any Permitted Refinancing Indebtedness thereof; provided that
the aggregate amount of Indebtedness under clauses (A) and (B) does
not exceed 10% of Consolidated Tangible Assets at any one time
outstanding;
(ix) Indebtedness of the Company or any Restricted
Subsidiary pursuant to Trade Loan Agreements in an aggregate principal
amount not to exceed $5 million at any one time outstanding;
(x) Guarantees by any Restricted Subsidiary made in
accordance with the provisions of Section 1021; and
(xi) Indebtedness of the Company or any Restricted
Subsidiary not permitted by any other clause of this definition, in an
aggregate principal amount not to exceed $25 million at any one time
outstanding.
SECTION 1011. Limitation on Restricted Payments.
The Company shall not, and will not permit any Restricted
Subsidiary to, directly or indirectly, take any of the following actions:
(a) declare or pay any dividend on, or make any
distribution to holders of, any shares of the Capital Stock of the
Company or any Restricted Subsidiary, other than (i) dividends or
distributions payable solely in Qualified Equity Interests, (ii)
dividends or distributions by a Restricted Subsidiary payable to the
Company or another Restricted Subsidiary or (iii) pro rata dividends
or distributions on common stock or equity interests of Restricted
Subsidiaries held by minority shareholders, provided that such
dividends do not in the aggregate exceed the minority shareholders'
pro rata share
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of such Restricted Subsidiaries' net income from the first day of the
Company's fiscal quarter during which the Closing Date occurs;
(b) purchase, redeem or otherwise acquire or retire for
value, directly or indirectly, any shares of Capital Stock, or any
options, warrants or other rights to acquire such shares of Capital
Stock, of the Company, any Restricted Subsidiary or any Affiliate of
the Company (other than, in either case, any such Capital Stock owned
by the Company or any of its Restricted Subsidiaries);
(c) make any principal payment on, or repurchase, redeem,
defease or otherwise acquire or retire for value, prior to any
scheduled principal payment, sinking fund payment or maturity, any
Subordinated Indebtedness; and
(d) make any Investment (other than a Permitted
Investment) in any person (such payments or other actions described in
(but not excluded from) clauses (a) through (d) being referred to as
"Restricted Payments"), unless at the time of, and immediately after
giving effect to, the proposed Restricted Payment:
(i) no Default or Event of Default has occurred
and is continuing,
(ii) the Company could incur at least $1.00 of
additional Indebtedness pursuant to the first paragraph of
Section 1010, and
(iii) the aggregate amount of all Restricted
Payments made after the Closing Date does not exceed the sum
of:
(A) 50% of the aggregate Consolidated
Adjusted Net Income of the Company during the period
(taken as one accounting period) from the first day
of the Company's fiscal quarter during which the
Closing Date occurs to the last day of the Company's
most recently ended fiscal quarter for which internal
financial statements are available at the time of
such proposed Restricted Payment (or, if such
aggregate cumulative Consolidated Adjusted Net Income
is a loss, minus 100% of such amount);
(B) the aggregate net cash proceeds
received by the Company after the Closing Date from
the issuance or sale (other than to a Subsidiary) of
either (1) Qualified Equity Interests of the Company
(excluding from this computation (x) proceeds of the
Equity Investment and (y) proceeds of a Public Equity
Offering received by the Company that are used by it
to redeem Notes as discussed above) or
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(2) debt securities or Disqualified Stock that have
been converted into or exchanged for Qualified Stock
of the Company, together with the aggregate net cash
proceeds received by the Company at the time of such
conversion or exchange; and
(C) $10 million.
Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may take the following actions, so long as no Default or Event of
Default has occurred and is continuing or would occur:
(a) the payment of any dividend in cash or Qualified
Equity Interests of the Company within 60 days after the date of
declaration thereof, if at the declaration date such payment would not
have been prohibited by the foregoing provisions;
(b) the repurchase, redemption or other acquisition or
retirement for value of any shares of Capital Stock of the Company, in
exchange for, or out of the net cash proceeds of a substantially
concurrent issuance and sale (other than to a Subsidiary) of,
Qualified Equity Interests of the Company;
(c) the purchase, redemption, defeasance or other
acquisition or retirement for value of any Subordinated Indebtedness
in exchange for, or out of the net cash proceeds of a substantially
concurrent issuance and sale (other than to a Subsidiary) of, shares
of Qualified Equity Interests of the Company;
(d) the purchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Indebtedness in
exchange for, or out of the net cash proceeds of a substantially
concurrent issuance or sale (other than to a Subsidiary) of,
Subordinated Indebtedness, so long as the Company or a Restricted
Subsidiary would be permitted to refinance such original Subordinated
Indebtedness with such new Subordinated Indebtedness pursuant to
clause (iv) of the definition of Permitted Indebtedness;
(e) the repurchase for value of shares of Capital Stock
of the Company pursuant to and in accordance with the Company's right
to make such repurchase under the terms of the Shares in Success Plan,
the Equity Ownership Plan or the Short-Term Incentive Plan in an
amount not to exceed $500,000 in any fiscal year;
(f) (A) the repayment of up to $10 million principal
amount of the Subordinated Intercompany Note with the proceeds of the
Equity Investment; (B) the repayment of up to $20 million principal
amount of the Subordinated Intercompany
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Note with the proceeds of the Offering; or (C) the refinancing or
other restructuring of up to $20 million principal amount of the
Subordinated Intercompany Note; provided, however, that any
Indebtedness resulting from such refinancing or restructuring (x) is
subordinate to the Notes, under subordination terms substantially
similar to those contained in the Subordinated Intercompany Note, (y)
is in an aggregate principal amount not greater than the amount being
refinanced or restructured and (z) includes scheduled principal
repayments in an amount not to exceed $3.5 million in any fiscal year;
(g) following the first Public Equity Offering, the
payment of any regular quarterly dividends in respect of the Company's
common stock, out of funds legally available therefor, in an amount
not to exceed, in any fiscal year, the lesser of (i) $2.5 million or
(ii) 4% of the Net Cash Proceeds received by the Company in such
Public Equity Offering; and
(h) the repurchase of any Subordinated Indebtedness at a
purchase price not greater than 101% of the principal amount of such
Subordinated Indebtedness in the event of a Change of Control in
accordance with provisions similar to Section 1015; provided that,
prior to or simultaneously with such repurchase, the Company has made
the Change of Control Offer as provided in such section with respect
to the Notes and has repurchased all Notes validly tendered for
payment in connection with such Change of Control Offer.
The actions described in clauses (b), (c), (e), (g), and (h) of
this paragraph will be Restricted Payments that will be permitted to be taken in
accordance with this paragraph but will reduce the amount that would otherwise
be available for Restricted Payments under clause (iii) of the first paragraph
of this covenant and the actions described in clauses (a), (d) and (f) of this
paragraph will be Restricted Payments that will be permitted to be taken in
accordance with this paragraph and will not reduce the amount that would
otherwise be available for Restricted Payments under clause (iii) of the first
paragraph of this covenant.
For the purpose of making any calculations under this Indenture
(i) if a Restricted Subsidiary is designated an Unrestricted Subsidiary, the
Company shall be deemed to have made an Investment in an amount equal to the
greatest of the fair market value or net book value of the net assets of such
Restricted Subsidiary at the time of such designation as determined by the Board
of Directors of the Company, and (ii) any property transferred to or from an
Unrestricted Subsidiary will be valued at fair market value at the time of such
transfer, as determined by the Board of Directors of the Company. The amount of
all Restricted Payments (other than cash) shall be the fair market value on the
date of the Restricted Payment of the asset(s) or securities proposed to be
transferred or issued by the Company or such
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Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors whose resolution with respect thereto shall be delivered
to the Trustee, such determination to be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing if such fair market value exceeds $5 million. Not later than the date
of making any Restricted Payment, the Company shall deliver to the Trustee an
officer's certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required under Section 1011
were computed, together with a copy of any fairness opinion or appraisal
required by this Indenture.
If the aggregate amount of all Restricted Payments calculated
under the foregoing provision includes an Investment in an Unrestricted
Subsidiary or other person that thereafter becomes a Restricted Subsidiary, the
aggregate amount of all Restricted Payments calculated under the foregoing
provision will be reduced by the lesser of (x) the net asset value of such
Subsidiary at the time it becomes a Restricted Subsidiary and (y) the initial
amount of such Investment.
If an Investment resulted in the making of a Restricted
Payment, the aggregate amount of all Restricted Payments calculated under the
foregoing provision will be reduced by the amount of any net reduction in such
Investment (resulting from the payment of interest or dividends, loan
repayment, transfer of assets or otherwise, other than the redesignation of an
Unrestricted Subsidiary or other person as a Restricted Subsidiary), to the
extent such net reduction is not included in the Company's Consolidated
Adjusted Net Income; provided that the total amount by which the aggregate
amount of all Restricted Payments may be reduced may not exceed the lesser of
(x) the cash proceeds received by the Company and its Restricted Subsidiaries
in connection with such net reduction and (y) the initial amount of such
Investment.
In computing the Consolidated Adjusted Net Income of the
Company for purposes of the foregoing clause (iii)(A), (i) the Company may use
audited financial statements for the portions of the relevant period for which
audited financial statements are available on the date of determination and
unaudited financial statements and other current financial data based on the
books and records of the Company for the remaining portion of such period and
(ii) the Company shall be permitted to rely in good faith on the financial
statements and other financial data derived from its books and records that are
available on the date of determination. If the Company makes a Restricted
Payment that, at the time of the making of such Restricted Payment, would in
the good faith determination of the Company be permitted under the requirements
of this Indenture, such Restricted Payment will be deemed to have been made in
compliance with this Indenture notwithstanding any subsequent adjustments made
in good faith to the Company's financial statements affecting Consolidated
Adjusted Net Income of the Company for any period.
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SECTION 1012. Limitation on Issuances and Sales of Capital
Stock and Preferred Stock of Restricted Subsidiaries.
The Company (a) will not permit any Restricted Subsidiary to
issue any Capital Stock (other than to the Company or a Wholly Owned Restricted
Subsidiary) and (b) will not, and will not permit any Restricted Subsidiary to,
transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any
Restricted Subsidiary to any Person (other than the Company or a Wholly Owned
Restricted Subsidiary); provided, however, that this covenant will not prohibit
(i) the sale or other disposition of all, but not less than all, of the issued
and outstanding Capital Stock of a Restricted Subsidiary owned by the Company
and its Restricted Subsidiaries in compliance with the other provisions of this
Indenture or (ii) the ownership by directors of director's qualifying shares or
the ownership by foreign nationals of Capital Stock of any Restricted
Subsidiary, to the extent mandated by applicable law.
The Company shall not permit any Restricted Subsidiary to
issue any Preferred Stock.
SECTION 1013. Limitation on Transactions with Affiliates.
The Company shall not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into or suffer to exist any
transaction with, or for the benefit of, any Affiliate of the Company or any
beneficial owner of 5% or more of any class of the Capital Stock of the Company
at any time outstanding ("Interested Persons"), unless (a) such transaction is
on terms that are no less favorable to the Company or such Restricted
Subsidiary, as the case may be, than those that could have been obtained in an
arm's length transaction with third parties who are not Interested Persons and
(b) the Company delivers to the Trustee (i) with respect to any transaction or
series of related transactions entered into after the Closing Date involving
aggregate payments in excess of $3 million, a resolution of the Board of
Directors of the Company set forth in an officers' certificate certifying that
such transaction or transactions complies with clause (a) above and that such
transaction or transactions have been approved by the Board of Directors
(including a majority of the Disinterested Directors) of the Company and (ii)
with respect to a transaction or series of related transactions involving
aggregate payments equal to or greater than $5 million, a written opinion as to
the fairness to the Company or such Restricted Subsidiary of such transaction
or series of transactions from a financial point of view issued by an
accounting, appraisal or investment banking firm, in each case of national
standing.
The foregoing covenant will not restrict:
(A) transactions among the Company and/or its Restricted
Subsidiaries;
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(B) the Company from paying reasonable and customary
regular compensation and fees to directors of the Company or any
Restricted Subsidiary who are not employees of the Company or any
Restricted Subsidiary;
(C) transactions permitted by the provisions of
Section 1011; and
(D) the performance of the Company's obligations under
the Technical Assistance Agreement, as in effect at the Closing Date,
in an annual amount not to exceed $1 million; provided that any
amendments or modifications to the terms of the Technical
Assistance Agreement are no less favorable to the Company than those
that could have been obtained in an arm's length transaction with
third parties who are not Interested Persons.
SECTION 1014. Limitation on Liens.
The Company shall not, and will not permit any Restricted
Subsidiary to directly or indirectly, create, incur, assume or suffer to exist
any Lien of any kind on or with respect to any of its property or assets,
including any shares of stock or debt of any Restricted Subsidiary whether
owned at the Closing Date or thereafter acquired, or any income, profits or
proceeds therefrom, or assign or otherwise convey any right to receive income
thereon, unless (a) in the case of any Lien securing Subordinated Indebtedness,
the Notes are secured by a Lien on such property, assets or proceeds that is
senior in priority to such Lien and (b) in the case of any other Lien, the
Notes are equally and ratably secured with the obligation or liability secured
by such Lien.
Notwithstanding the foregoing, the Company may, and may permit
any Subsidiary to, incur the following Liens ("Permitted Liens"):
(i) Liens (other than (A) Liens securing Indebtedness
under the Bank Credit Agreement and (B) Liens securing the First
Mortgage Notes more than 60 days after the Closing Date) existing as
of the Closing Date;
(ii) Liens on property or assets of the type specified in
the Bank Credit Agreement as of the Closing Date of the Company or any
Restricted Subsidiary securing Indebtedness under the Bank Credit
Agreement or one or more other credit facilities in a principal amount
not to exceed the principal amount of the outstanding Indebtedness
permitted by clause (i) of the definition of "Permitted Indebtedness";
(iii) Liens on any property or assets of a Restricted
Subsidiary granted in favor of the Company or any Wholly Owned
Restricted Subsidiary;
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(iv) any interest or title of a lessor under any
Capitalized Lease Obligation or Sale and Leaseback Transaction that
was not entered into in violation of Section 1010;
(v) Liens securing Acquired Indebtedness created prior to
(and not in connection with or in contemplation of) the incurrence of
such Indebtedness by the Company or any Restricted Subsidiary;
provided that such Lien does not extend to any property or
assets of the Company other than the property and assets acquired in
connection with the incurrence of such Acquired Indebtedness;
(vi) Liens securing Hedging Obligations permitted to be
incurred pursuant to clause (vi) of the definition of "Permitted
Indebtedness";
(vii) Liens arising from purchase money mortgages and
purchase money security interests incurred in the ordinary course of
the business of the Company; provided that (A) the related
Indebtedness is not secured by any property or assets of the Company
or any Restricted Subsidiary other than the property and assets so
acquired, (B) the Lien securing such Indebtedness is created within 60
days of such acquisition, and (C) the related Indebtedness was not
incurred in violation of Section 1010;
(viii) Liens on Fixed Assets of the Company or a Restricted
Subsidiary; provided that the aggregate net book value of all such
Fixed Assets does not exceed 10% of the Consolidated Tangible Assets
at any one time outstanding;
(ix) statutory Liens or landlords', carriers',
warehouseman's, mechanics', suppliers', materialmen's, repairmen's 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 appropriate proceedings and, if required by GAAP, a reserve or
other appropriate provision has been made therefor;
(x) Liens for taxes, assessments, government charges or
claims that are not yet due or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently
conducted and, if required by GAAP, a reserve or other appropriate
provision has been made therefor;
(xi) Liens incurred or deposits made to secure the
performance of tenders, bids, leases, statutory obligations, surety
and appeal bonds, government contracts, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business (other than contracts for the payment of money);
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(xii) easements, rights-of-way, restrictions and
other similar charges or encumbrances not interfering in any
material respect with the business of the Company or any Restricted
Subsidiary incurred in the ordinary course of business;
(xiii) deposits or pledges to secure obligations under
workmen's compensation, social security or similar laws, or under
unemployment insurance;
(xiv) Liens arising by reason of any judgment, decree or
order of any court, so long as such Lien is adequately bonded or
adequately covered by insurance as to which the insurance company has
not disclaimed or disputed in writing its obligations for coverage and
any appropriate legal proceedings that may have been duly initiated
for the review of such judgment, decree or order have not been finally
terminated or the period within which such proceedings may be
initiated has not expired; and
(xv) any extension, renewal or replacement, in whole or in
part, of any Lien described in the foregoing clauses (i) through
(xiv); provided that any such extension, renewal or replacement is no
more restrictive in any material respect than the Lien so extended,
renewed or replaced and does not extend to any additional property or
assets.
SECTION 1015. Purchase of Notes upon a Change of Control.
(a) If a Change of Control occurs at any time, then,
each Holder shall have the right to require that the Company purchase such
Holder's Notes, in whole or in part in integral multiples of $1,000, at a
purchase price in cash equal to 101% of the principal amount of such Notes or
Additional Notes, plus accrued and unpaid interest, if any, to the date of
purchase, pursuant to the offer described below (the "Change of Control
Offer").
(b) Within 30 days following any Change of Control, the
Company shall notify the Trustee thereof and give written notice of such Change
of Control to each holder of Notes and Additional Notes by first-class mail,
postage prepaid, at its address appearing in the security register, stating:
(i) that a Change of Control has occurred, that the
Change of Control Offer is being made pursuant to this Section 1015
and that all Notes validly tendered will be accepted for payment;
(ii) the purchase price and the Purchase Date, which
shall be a Business Day no earlier than 30 days nor later than 60 days
from the date such notice is mailed or such later date as is necessary
to comply with requirements under the Exchange Act (the "Change of
Control Payment Date");
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(iii) that any Note or Additional Note not tendered shall
continue to accrue interest;
(iv) that, unless the Company defaults in the payment of
the purchase price, any Notes or Additional Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(v) certain other procedures that a holder of Notes or
Additional Notes must follow to accept a Change of Control Offer or to
withdraw such acceptance;
(vi) that Holders electing to have any Note purchased
pursuant to the Change of Control Offer will be required to surrender
such Note, together with the form entitled "Option of the Holder to
Elect Purchase" on the reverse side of such Note completed, to the
Paying Agent at the address specified in the notice prior to the close
of business on the Business Day immediately preceding the Change of
Control Payment Date;
(vii) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of
business on the third Business Day immediately preceding the Change of
Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of such Holder, the principal amount of
Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; and
(viii) that Holders whose Notes are being purchased only in
part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of
$1,000 or integral multiples thereof.
(c) On the Change of Control Payment Date, the Company
shall:
(i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer;
(ii) deposit one day prior to the Change of Control
Purchase Date with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee,
all Notes or portions thereof so accepted together with an Officers'
Certificate specifying the Notes or portions thereof accepted for
payment by the Company.
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The Paying Agent shall promptly mail, to the Holders of Notes
so accepted, payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail to such Holders a new Note or Notes equal
in principal amount to any unpurchased portion of the Notes surrendered;
provided that each Note purchased and each new Note issued shall be in a
principal amount of $1,000 or integral multiples thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Purchase Date. For purposes of this
Section 1015, the Trustee shall act as Paying Agent. All Notes or portions
thereof purchased pursuant to this Section 1015 will be cancelled by the
Trustee.
(d) The Company shall comply with the applicable tender
offer rules including Rule-14e under the Exchange Act, and any other applicable
securities laws and regulations in connection with a Change of Control Offer.
To the extent that provisions of any applicable securities laws or regulations
conflict with provisions of this Section 1015, the Company shall comply with
such securities laws and regulations and shall not be deemed to have breached
its obligations under this Section 1015 by virtue thereof.
SECTION 1016. Limitation on Certain Asset Sales.
(a) The Company shall not, and will not permit any
Restricted Subsidiary to, engage in any Asset Sale unless (i) the consideration
received by the Company or such Restricted Subsidiary for such Asset Sale is
not less than the fair market value of the assets sold (as determined by the
Board of Directors of the Company, whose good faith determination will be
conclusive) and (ii) the consideration received by the Company or the relevant
Restricted Subsidiary in respect of such Asset Sale consists of at least 75%
cash or cash equivalents; provided, however, that the Company may receive up to
$5 million in the form of non-cash consideration in connection with the Atlas
Disposition.
(b) If the Company or any Restricted Subsidiary engages
in an Asset Sale, the Company may, at its option, within 12 months after such
Asset Sale, (i) apply all or a portion of the Net Cash Proceeds to the
permanent reduction of amounts outstanding under the Bank Credit Agreement or
to the repayment of other senior Indebtedness of the Company or a Restricted
Subsidiary or (ii) invest (or enter into a legally binding agreement to invest)
all or a portion of such Net Cash Proceeds in properties and assets to replace
the properties and assets that were the subject of the Asset Sale or in
properties and assets that will be used in businesses of the Company or its
Restricted Subsidiaries, as the case may be, existing on the Closing Date. If
any such legally binding agreement to invest such Net Cash Proceeds is
terminated, the Company may, within 90 days of such termination or within 12
months of such Asset Sale, whichever is later, invest such Net Cash Proceeds as
provided in clause (i) or (ii) (without regard to the parenthetical contained
in such clause (ii)) above. The amount of
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such Net Cash Proceeds not so used as set forth above in this paragraph
constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds
$5 million, the Company shall, within 30 days thereafter, make an offer to
purchase from all Holders of Notes and Additional Notes, if any, on a pro rata
basis, in accordance with the procedures set forth in this Indenture, the
maximum principal amount (expressed as a multiple of $1,000) of Notes and
Additional Notes, if any, that may be purchased with the Excess Proceeds, at a
purchase price in cash equal to 100% of the principal amount thereof, plus
accrued interest, if any, to the date such offer to purchase is consummated.
To the extent that the aggregate principal amount of Notes and Additional
Notes, if any, tendered pursuant to such offer to purchase is less than the
Excess Proceeds, the Company may use such deficiency for general corporate
purposes. If the aggregate principal amount of Notes and Additional Notes, if
any, validly tendered and not withdrawn by holders thereof exceeds the Excess
Proceeds, the Notes and Additional Notes, if any, to be purchased will be
selected on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds will be reset to zero.
The Company shall comply with the applicable tender offer
rules, including Rule-14e under the Exchange Act, and any other applicable
securities laws and regulations, to the extent such laws and regulations are
applicable in the event that the Company is required to repurchase Notes as
described above.
SECTION 1017. Unrestricted Subsidiaries.
(a) The Board of Directors of the Company may designate
any Subsidiary (including any newly acquired or newly formed Subsidiary) to be
an Unrestricted Subsidiary so long as (i) neither the Company nor any
Restricted Subsidiary is directly or indirectly liable for any Indebtedness of
such Subsidiary, (ii) no default with respect to any Indebtedness of such
Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of
any other Indebtedness of the Company or any Restricted Subsidiary to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity, (iii) any Investment in
such Subsidiary made as a result of designating such Subsidiary an Unrestricted
Subsidiary will not violate the provisions of Section 1011, (iv) neither the
Company nor any Restricted Subsidiary has a contract, agreement, arrangement,
understanding or obligation of any kind, whether written or oral, with such
Subsidiary other than those that might be obtained at the time from persons who
are not Affiliates of the Company, (v) neither the Company nor any Restricted
Subsidiary has any obligation to subscribe for additional shares of Capital
Stock or other equity interest in such Subsidiary, or to maintain or preserve
such Subsidiary's financial condition or to cause such Subsidiary to achieve
certain levels of operating results, and (vi) such Unrestricted Subsidiary has
at least one director on its Board of Directors that is not a director or
executive officer of
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the Company or any of its Restricted Subsidiaries. Notwithstanding the
foregoing, the Company may not designate any of its Subsidiaries existing as of
the Closing Date or any successor to any of them as an Unrestricted Subsidiary
and may not sell, transfer or otherwise dispose of any properties or assets of
any such Subsidiary to an Unrestricted Subsidiary, other than in the ordinary
course of business.
(b) The Board of Directors of the Company may designate
any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (i) no
Default or Event of Default has occurred and is continuing following such
designation and (ii) the Company could incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the first
paragraph of Section 1010 (treating any Indebtedness of such Unrestricted
Subsidiary as the incurrence of Indebtedness by a Restricted Subsidiary).
SECTION 1018. Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries.
The Company shall not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to (a) pay dividends, in cash or
otherwise, or make any other distributions on or in respect of its Capital
Stock, (b) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (c) make loans or advances to the Company or any other Restricted
Subsidiary, or (d) transfer any of its properties or assets to the Company or
any other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of:
(i) any agreement in effect on the Closing Date;
(ii) customary non-assignment provisions of any lease
governing a leasehold interest of the Company or any Restricted
Subsidiary;
(iii) the refinancing or successive refinancing of
Indebtedness incurred under the agreements in effect on the Closing
Date, so long as such encumbrances or restrictions are no less
favorable to the Company or any Restricted Subsidiary than those
contained in such original agreement; or
(iv) any agreement or other instrument of a person
acquired by the Company or any Restricted Subsidiary in existence at
the time of such acquisition (but not created in contemplation
thereof), which encumbrance or restriction is not applicable to any
person, or the properties or assets of any person, other than the
person, or the property or assets of the person, so acquired.
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SECTION 1019. Waiver of Certain Covenants.
The Company or any Subsidiary Guarantor may omit in any
particular instance to comply with any term, provision or condition set forth
in Article Eight or Sections 1004 through 1023, inclusive, if before or after
the time for such compliance the Holders of at least a majority in principal
amount of the Outstanding Notes, by Act of such Holders, waive such compliance
in such instance with such term, provision or condition, but no such waiver
shall extend to or affect such term, provision or condition except to the
extent so expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any such
term, provision or condition shall remain in full force and effect.
SECTION 1020. Payment for Consent.
This Indenture will provide that neither the Company nor any
of its Restricted Subsidiaries will, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
Holder for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of this Indenture or the Notes unless such
consideration is offered to be paid or is paid to all Holders that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
SECTION 1021. Limitation on Guarantees of Indebtedness by
Restricted Subsidiaries.
The Company shall provide to the Trustee, on the date that
any Person becomes a Restricted Subsidiary, a supplemental indenture to this
Indenture, executed by such new Restricted Subsidiary, providing for a full and
unconditional guarantee on a senior basis by such new Restricted Subsidiary of
the Company's obligations under the Notes and this Indenture to the same extent
as that set forth in this Indenture, provided that in the case of any new
Restricted Subsidiary that becomes a Restricted Subsidiary through the
acquisition of a majority of its voting Capital Stock by the Company or any
other Restricted Subsidiary, such guarantee may be subordinated to the extent
required by the obligations of such new Restricted Subsidiary existing on the
date of such acquisition that were not incurred in contemplation of such
acquisition.
SECTION 1022. Line of Business.
The Company shall not and shall not cause or permit any of its
Restricted Subsidiaries to engage in any businesses other than the businesses
in which the Company is engaged on the Closing Date and any businesses
reasonably related or complimentary to one or
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more of its businesses on the Closing Date (as determined in good faith by the
Company's Board of Directors).
SECTION 1023. Reports.
At all times from and after the earlier of (i) the date of the
commencement of an Exchange Offer or the effectiveness of the Shelf
Registration Statement (the "Registration") and (ii) the date 120 days after
the Closing Date, in either case, whether or not the Company is then required
to file reports with the Commission, the Company shall file with the Commission
(to the extent accepted by the Commission) all such annual reports, quarterly
reports and other documents that the Company would be required to file if it
were subject to Sections 13(a) or 15(d) under the Exchange Act.
The Company shall also (a) supply to the Trustee and each
holder of Notes, or supply to the Trustee for forwarding to each such holder,
without cost to such holder, copies of such reports and other documents within
15 days after the date on which the Company files such reports and documents
with the Commission or the date on which the Company would be required to file
such reports and documents if the Company were so required and (b) if filing
such reports and documents with the Commission is not accepted by the
Commission or is prohibited under the Exchange Act, to supply at the Company's
cost copies of such reports and documents to any prospective holder of Notes
promptly upon written request. In addition, at all times prior to the earlier
of the date of the Registration and the date 120 days after the Closing Date,
the Company shall, at its cost, deliver to each holder of the Notes quarterly
and annual reports substantially equivalent to those that would be required by
the Exchange Act. Furthermore, at all times prior to the date of Registration,
the Company shall supply at the Company's cost copies of such reports and
documents to any prospective holder of Notes promptly upon written request.
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Right of Redemption.
(a) The Notes may be redeemed at the option of the
Company, as a whole or from time to time in part, at any time on or after April
15, 2003, subject to the conditions and at the Redemption Prices specified in
the form of Note, together with accrued interest, if any, to the Redemption
Date.
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(b) In addition, at any time or from time to time on or
prior to April 15, 2001, the Company may redeem, on one or more occasions, up
to 35% of the sum of (i) the initial aggregate principal amount of the Notes
and (ii) the initial aggregate principal amount of any Additional Notes with
the net proceeds of one or more Public Equity Offerings at a Redemption Price
equal to 108.75% the principal amount thereof, plus accrued interest, if any,
to the Redemption Date (subject to the right of holders of record on the
relevant record date to receive interest due on an interest payment date);
provided that, immediately after giving effect to such redemption, at least 65%
of the initial aggregate principal amount of the Notes (excluding the
Additional Notes) remains outstanding; and provided further that such
redemptions shall occur within 60 days of the date of closing of each Public
Equity Offering.
SECTION 1102. Applicability of Article.
Redemption of Notes at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall
be made in accordance with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Notes pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 45 days
prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date and of the principal amount of Notes to be redeemed and shall deliver to
the Trustee such documentation and records as shall enable the Trustee to
select the Notes to be redeemed pursuant to Section 1104.
SECTION 1104. Selection by Trustee of Notes to Be Redeemed.
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Notes not previously
called for redemption, pro rata or by lot or by such other method as the
Trustee shall deem fair and appropriate and which may provide for the selection
for redemption of portions of the principal of Notes; provided, however, that
no such partial redemption shall reduce the portion of the principal amount of
a Note not redeemed to less than $1,000.
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The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Notes selected for
partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of Notes shall
relate, in the case of any Note redeemed or to be redeemed only in part, to the
portion of the principal amount of such Note which has been or is to be
redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given in the manner provided for
in Section 107 not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Notes to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued
interest to the Redemption Date payable as provided in Section 1107,
if any,
(3) if less than all Outstanding Notes are to be
redeemed, the identification (and, in the case of a partial
redemption, the principal amounts) of the particular Notes to be
redeemed,
(4) in case any Note is to be redeemed in part only, the
notice which relates to such Note shall state that on and after the
Redemption Date, upon surrender of such Note, the holder will receive,
without charge, a new Note or Notes of authorized denominations for
the principal amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and
accrued interest, if any, to the Redemption Date payable as provided
in Section 1107) will become due and payable upon each such Note, or
the portion thereof, to be redeemed, and that interest thereon will
cease to accrue on and after said date,
(6) the place or places where such Notes are to be
surrendered for payment of the Redemption Price and accrued interest,
if any, and
(7) the CUSIP number.
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Notice of redemption of Notes to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an
amount of money sufficient to pay the Redemption Price of, and accrued interest
on, all the Notes which are to be redeemed on that date.
SECTION 1107. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Notes
so to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued interest, if any, to
the Redemption Date), and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such Notes
shall cease to bear interest. Upon surrender of any such Note for redemption
in accordance with said notice, such Note shall be paid by the Company at the
Redemption Price, together with accrued interest, if any, to the Redemption
Date; provided, however, that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Notes, or one or more Predecessor Notes, registered as such at the close of
business on the relevant Record Dates according to their terms and the
provisions of Section 309.
If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Notes.
SECTION 1108. Notes Redeemed in Part.
Any Note which is to be redeemed only in part shall be
surrendered at the office or agency of the Company maintained for such purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Note without
service charge, a new Note or Notes, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Note so
surrendered.
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ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company Option to Effect Defeasance or
Covenant Defeasance.
The Company may, at its option and at any time, with respect
to the Notes, elect to have either Section 1202 or Section 1203 be applied to
all Outstanding Notes upon compliance with the conditions set forth below in
this Article Twelve.
SECTION 1202. Defeasance and Discharge.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1202, the Company and the Subsidiary Guarantors
shall be deemed to have been discharged from its obligations with respect to
all Outstanding Notes and the Note Guarantees on the date the conditions set
forth in Section 1204 are satisfied (hereinafter, "defeasance"). For this
purpose, such defeasance means that the Company shall be deemed to have paid
and discharged the entire indebtedness represented by the Outstanding Notes and
the Note Guarantees, which shall thereafter be deemed to be "Outstanding" only
for the purposes of Section 1205 and the other Sections of this Indenture
referred to in (A) and (B) below, and to have satisfied all its other
obligations under such Notes and the Note Guarantees and this Indenture insofar
as such Notes and Note Guarantees are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (A) the rights of holders of outstanding Notes to
receive payments in respect of the principal of (and premium, if any, on) and
interest on such Notes when such payments are due, (B) the Company's
obligations to issue temporary Notes, register the transfer or exchange of any
Notes, replace mutilated, destroyed, lost or stolen Notes, maintain an office
or agency for payments in respect of the Notes and segregate and hold such
payments in trust, (C) the rights, powers, trusts, duties and immunities of the
Trustee, including, but not limited to, those under Section 606 and (D) this
Article Twelve. Subject to compliance with this Article Twelve, the Company
may exercise its option under this Section 1202 notwithstanding the prior
exercise of its option under Section 1203 with respect to the Notes.
SECTION 1203. Covenant Defeasance.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1203, the Company and any Subsidiary Guarantor shall
be released from its obligations under any covenant contained in Section 801
and Section 802 and in Sections 1007 through 1023 with respect to the
Outstanding Notes on and after the date the conditions set
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forth below are satisfied (hereinafter, "covenant defeasance"), and the Notes
shall thereafter be deemed not to be "Outstanding" for the purposes of any
direction, waiver, consent or declaration or Act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to the Outstanding
Notes, the Company and any Subsidiary Guarantor may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference
in any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Sections 501(c) and 501(d), but, except as specified above, the remainder
of this Indenture and such Notes shall be unaffected thereby.
SECTION 1204. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either
Section 1202 or Section 1203 to the Outstanding Notes:
(a) the Company must irrevocably deposit or cause to be
deposited with the Trustee, as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders, money in an amount, or U.S. Government Obligations (as
defined in this Indenture) that through the scheduled payment of
principal and interest thereon will provide money in an amount, or a
combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay and
discharge the principal of (and premium, if any, on) and interest on
the outstanding Notes at maturity (or upon redemption, if applicable)
of such principal or installment of interest;
(b) no Default or Event of Default has occurred and is
continuing on the date of such deposit or, insofar as an event of
bankruptcy under clause (h) of "Events of Default" above is concerned,
at any time during the period ending on the 91st day after the date of
such deposit;
(c) such legal defeasance or covenant defeasance may not
result in a breach or violation of, or constitute a default under,
this Indenture or any material agreement or instrument to which the
Company or any Subsidiary Guarantor is a party or by which it is
bound;
(d) in the case of legal defeasance, the Company must
deliver to the Trustee an Opinion of Counsel stating that the Company
has received from, or there has been published by, the Internal
Revenue Service a ruling, or since the date hereof, there has
<PAGE> 99
89
been a change in applicable federal income tax law, to the effect, and
based thereon such opinion must confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such legal defeasance and will be
subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such legal
defeasance had not occurred;
(e) in the case of covenant defeasance, the Company must
have delivered to the Trustee an Opinion of Counsel to the effect that
the Holders of the outstanding Notes will not recognize income, gain
or loss for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such covenant defeasance had not occurred; and
(f) the Company must have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the legal
defeasance or the covenant defeasance, as the case may be, have been
complied with.
SECTION 1205. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee, collectively
for purposes of this Section 1205, the "Trustee") pursuant to Section 1204 in
respect of the Outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Notes of all sums due and to become due thereon in respect of principal
(and premium, if any) and interest, but such money need not be segregated from
other funds except to the extent required by law.
The Company shall pay and indemnify and hold harmless the
Trustee against any tax, fee or other charge imposed on or assessed against the
U.S. Governmental Obligations deposited pursuant to Section 1204 or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
Outstanding Notes.
Anything in this Article Twelve to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it
as provided in Section 1204 which, in the opinion of a
<PAGE> 100
90
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect an
equivalent Defeasance or Covenant Defeasance, as applicable, in accordance with
this Article.
SECTION 1206. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any money
in accordance with Section 1205 by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 1202 or 1203, as the case may be, until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with Section
1205; provided, however, that if the Company makes any payment of principal of
(or premium, if any) or interest on any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE THIRTEEN
GUARANTEES
SECTION 1301. Note Guarantees.
Each Subsidiary Guarantor hereby jointly and severally,
absolutely, unconditionally and irrevocably guarantees the Notes and
obligations of the Company hereunder and thereunder, and guarantees to each
Holder of a Note authenticated and delivered by the Trustee and to the Trustee
on behalf of such Holder, that: (a) the principal of (and premium, if any) and
interest on the Notes will be paid in full when due, whether at Stated
Maturity, by acceleration, call for redemption or otherwise (including, without
limitation, the amount that would become due but for the operation of the
automatic stay under Section 362(a) of the Federal Bankruptcy Code to the
extent permitted by law), together with interest on the overdue principal, if
any, and interest on any overdue interest, to the extent lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or
thereunder will be paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or of any such other obligations, the same will be paid in
full when due or performed in accordance with the terms of the extension or
renewal, whether at Stated Maturity, by acceleration or otherwise, subject,
however, in the case of clauses (a) and (b) above, to the limitations set forth
in Section 1306 hereof.
<PAGE> 101
91
Each Subsidiary Guarantor hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
Each Subsidiary Guarantor hereby waives the benefits of
diligence, presentment, demand for payment, filing of claims with a court in
the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company or any other Person, protest, notice and
all demands whatsoever and covenants that the Note Guarantee of such Subsidiary
Guarantor will not be discharged as to any Note except by complete performance
of the obligations contained in such Note and such Note Guarantee. Each of the
Subsidiary Guarantors hereby agrees that, in the event of a default in payment
of principal (or premium, if any) or interest on such Note, whether at its
Stated Maturity, by acceleration, call for redemption, purchase or otherwise,
legal proceedings may be instituted by the Trustee on behalf of, or by, the
Holder of such Note, subject to the terms and conditions set forth in this
Indenture, directly against each of the Subsidiary Guarantors to enforce such
Subsidiary Guarantor's Note Guarantee without first proceeding against the
Company or any other Subsidiary Guarantor. Each Subsidiary Guarantor agrees
that if, after the occurrence and during the continuance of an Event of
Default, the Trustee or any of the Holders are prevented by applicable law from
exercising their respective rights to accelerate the maturity of the Notes, to
collect interest on the Notes, or to enforce or exercise any other right or
remedy with respect to the Notes, such Subsidiary Guarantor will pay to the
Trustee for the account of the Holders, upon demand therefor, the amount that
would otherwise have been due and payable had such rights and remedies been
permitted to be exercised by the Trustee or any of the Holders.
If any Holder or the Trustee is required by any court or
otherwise to return to the Company or any Subsidiary Guarantor, or any
custodian, trustee, liquidator or other similar official acting in relation to
either the Company or any Subsidiary Guarantor, any amount paid by any of them
to the Trustee or such Holder, the Note Guarantee of each of the Subsidiary
Guarantors, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Subsidiary Guarantor further agrees that, as between
each Subsidiary Guarantor, on the one hand, and the Holders and the Trustee, on
the other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Five hereof for the purposes of the Note
Guarantee of such Subsidiary Guarantor, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article Five hereof, such obligations (whether or not due and
payable) shall forthwith become
<PAGE> 102
92
due and payable by each Subsidiary Guarantor for the purpose of the Note
Guarantee of such Subsidiary Guarantor.
SECTION 1302. Execution and Delivery of Note Guarantee.
To further evidence the Note Guarantee set forth in Section
1301, each Subsidiary Guarantor hereby agrees that a notation of such Note
Guarantee, substantially in the form included in Exhibit B of this Indenture,
shall be endorsed on each Note authenticated and delivered by the Trustee.
Such Note Guarantee shall be executed on behalf of each Subsidiary Guarantor by
its Chairman, any Vice Chairman, its President or a Vice President and attested
by its Secretary or Assistant Secretary, and shall have been duly authorized by
all requisite corporate action. Such signature may be in facsimile form. The
validity and enforceability of any Note Guarantee shall not be affected by the
fact that it is not affixed to any particular Note.
Each Subsidiary Guarantor hereby agrees that its respective
Note Guarantee set forth in Section 1301 shall remain in full force and effect
notwithstanding any failure to endorse on each note a notation of such Note
Guarantee.
The delivery of any Note by the Note Trustee, after the
authentication thereof hereunder, shall constitute due delivery of any Note
Guarantee set forth in this Indenture on behalf of the Subsidiary Guarantors.
SECTION 1303. Severability.
In case any provision of any Guarantee 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.
SECTION 1304. Seniority of Guarantees.
The obligations of each Subsidiary Guarantor to the Holders of
Notes and to the Trustee pursuant to such Subsidiary Guarantor's Note Guarantee
and this Indenture are senior unsecured obligations of such Subsidiary
Guarantor ranking pari passu in right of payment with all existing and future
senior obligations of such Subsidiary Guarantor.
SECTION 1305. Limitation of Subsidiary Guarantor's Liability.
Each Subsidiary Guarantor and by its acceptance hereof each
Holder confirms that it is the intention of all such parties that the guarantee
by each Subsidiary Guarantor pursuant to its Note Guarantee not constitute a
fraudulent transfer or conveyance for purposes
<PAGE> 103
93
of the Federal Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law or the
provisions of its local law relating to fraudulent transfer or conveyance. To
effectuate the foregoing intention, the Holders and such Subsidiary Guarantor
hereby irrevocably agree that the obligations of such Subsidiary Guarantor
under its Note Guarantee shall be limited to the maximum amount that will not,
after giving effect to all other contingent and fixed liabilities of such
Subsidiary Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Subsidiary Guarantor in respect of
the obligations of such other Subsidiary Guarantor under its Note Guarantee or
pursuant to this Section 1305 hereof, result in the obligations of such
Subsidiary Guarantor under its Note Guarantee constituting such fraudulent
transfer or conveyance.
SECTION 1306. Contribution.
In order to provide for just and equitable contribution among
the Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in
the event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Subsidiary Guarantor") under a Guarantee, such Funding Subsidiary
Guarantor shall be entitled to a contribution from all other Subsidiary
Guarantors in a pro rata amount based on the Adjusted Net Assets of each
Subsidiary Guarantor (including the Funding Subsidiary Guarantor) for all
payments, damages and expenses incurred by that Funding Subsidiary Guarantor in
discharging the Company's obligations with respect to the Notes or any other
Subsidiary Guarantor's obligations with respect to the Guarantee of such
Subsidiary Guarantor. "Adjusted Net Assets" of such Subsidiary Guarantor at
any date shall mean the lesser of (x) the amount by which the fair value of the
property of such Subsidiary Guarantor exceeds the total amount of liabilities,
including, without limitation, contingent liabilities (after giving effect to
all other fixed and contingent liabilities incurred or assumed on such date),
but excluding liabilities under the Guarantee of such Subsidiary Guarantor at
such date and (y) the amount by which the present fair salable value of the
assets of such Subsidiary Guarantor at such date exceeds the amount that will
be required to pay the probable liability of such Subsidiary Guarantor on its
debts (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), excluding debt in respect of the Guarantee
of such Subsidiary Guarantor, as they become absolute and matured.
SECTION 1307. Release of a Subsidiary Guarantor.
(a) In the event of any sale, exchange or transfer to any
person not an Affiliate of the Company of all of the Company's and the
Restricted Subsidiaries' Capital Stock in, or all or substantially all the
assets of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by Section 801), then such Subsidiary Guarantor will be deemed
automatically and unconditionally released and discharged from all of its
obligations under its
<PAGE> 104
94
Note Guarantee without any further action on the part of the Trustee or any
holder of the Notes; provided that the Net Proceeds of such sale, transfer or
other disposition are applied in accordance with Section 1016 to the extent
required thereby.
(b) Any Subsidiary Guarantor that is designated by the
Board of Directors of the Company as an Unrestricted Subsidiary in accordance
with the terms of this Indenture may, at such time, at the option of the Board
of Directors, be released and relieved of its obligations under its Note
Guarantee. The Trustee shall deliver an appropriate instrument evidencing such
release upon receipt of a Company Request accompanied by an Officers'
Certificate certifying as to the compliance with this Section 1307. Any
Subsidiary Guarantor not so released shall remain liable for the full amount of
principal of and interest on the Notes as provided in its Note Guarantee.
(c) Any Non-U.S. Restricted Subsidiary that is or becomes
a Subsidiary Guarantor shall be released and relieved of its obligations under
its Note Guarantee at the time such Subsidiary no longer guarantees any
Indebtedness (other than the Notes) of the Company or any U.S. Restricted
Subsidiary (other than as a result of payment thereof). The Trustee shall
deliver an appropriate instrument evidencing such release upon receipt of a
Company Request accompanied by an Officers' Certificate certifying as to the
compliance with this Section 1308.
(d) Concurrently with the defeasance of the Notes under
Section 1202 hereof, or the covenant defeasance of the Notes under Section 1203
hereof, the Subsidiary Guarantors shall be released from all their obligations
under their Note Guarantees under this Article Thirteen.
SECTION 1308. Subsidiary Guarantors May Consolidate, etc. on
Certain Terms.
No Subsidiary Guarantor may consolidate with or merge with or
into any other person or convey, sell, assign, transfer, lease or otherwise
dispose of its properties and assets substantially as an entirety to any other
person (other than the Company or another Subsidiary Guarantor) unless: (a)
such Subsidiary Guarantor is released from its Note Guarantee pursuant to
Section 1307 or (b)(i) the person formed by or surviving such consolidation or
merger (if other than such Subsidiary Guarantor) or to which such properties
and assets are transferred assumes all of the obligations of such Subsidiary
Guarantor under this Indenture and its Note Guarantee, pursuant to a
supplemental indenture in form and substance satisfactory to the Trustee and
(ii) immediately after giving effect to such transaction, no Default or Event
of Default has occurred and is continuing.
<PAGE> 105
95
SECTION 1309. Benefits Acknowledged.
Each Subsidiary Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated by
this Indenture and that its guarantee and waivers pursuant to its Guarantee are
knowingly made in contemplation of such benefits.
SECTION 1310. Issuance of Guarantees by Certain New
Restricted Subsidiaries.
The Company shall provide to the Trustee, on the date that any
Person becomes a Restricted Subsidiary, a supplemental indenture to this
Indenture, executed by such new Restricted Subsidiary, providing for a full and
unconditional guarantee on a senior basis by such new Restricted Subsidiary of
the Company's obligations under the Notes and this Indenture to the same extent
as that set forth in this Indenture, provided that any such Restricted
Subsidiary that is organized outside the United states shall not be required to
provide a Note Guarantee so long as such Restricted Subsidiary has not
guaranteed any other Indebtedness of the Company or any other Restricted
Subsidiary.
* * * *
This Indenture may be signed in any number of counterparts
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Indenture.
<PAGE> 106
96
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals, if any, to
be hereunto affixed and attested, all as of the day and year first above
written.
AMERISTEEL CORPORATION
By
------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
By
------------------------------------
Authorized Signatory
AMERISTEEL FINANCE, INC.
As Subsidiary Guarantor
By
------------------------------------
Name:
Title:
<PAGE> 107
Exhibit A
[FACE OF NOTE]
AmeriSteel Corporation
8 3/4% [Series B]** Senior Note Due 2008
CUSIP _________
No. _______ $_________________
AmeriSteel Corporation, a Florida corporation (the "Company",
which term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to ___________, or its registered assigns,
the principal sum of ____________________________________ ($___________) on
April 15, 2008.
[Initial Interest Rate: ___% per annum.]*
[Interest Rate: ___% per annum.]**
Interest Payment Dates: April 15 and October 15 of each
year commencing October 15, 1998.
Regular Record Dates: October 1 and April 1 of each
year.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
__________________________________
* Include only for Initial Notes.
** Include only for Exchange Notes.
<PAGE> 108
2
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Date: ________, 1998 AMERISTEEL CORPORATION
By: _____________________________
Title:
<PAGE> 109
(Form of Trustee's Certificate of Authentication)
This is one of the 8 3/4% [Series B] Senior Notes Due 2008 described in the
within-mentioned Indenture.
STATE STREET BANK AND
TRUST COMPANY, as Trustee
By: _____________________________
Authorized Signatory
<PAGE> 110
[REVERSE SIDE OF NOTE]
AmeriSteel Corporation
8 3/4% [Series B] Senior Note Due 2008
1. Principal and Interest.
The Company shall pay the principal of this Note on April 15,
2008.
The Company promises to pay interest on the principal amount
of this Note on each Interest Payment Date, as set forth below, at the rate of
8 3/4% per annum.
Interest will be payable semiannually (to the holders of
record of the Notes (or any Predecessor Notes) at the close of business on the
October 1 or April 1 immediately preceding the Interest Payment Date) on each
Interest Payment Date, commencing October 15, 1998.
[If (a) the Company fails to file the Exchange Registration
Statement required by the Registration Rights Agreement on or prior to the 60th
calendar day following the Closing Date or (b) the Exchange Offer is not
consummated or a Shelf Registration Statement is not declared effective on or
prior to the 150th calendar day following the Closing Date, the interest rate
borne by the Notes will be increased by 0.5 percent per annum for the first 30
days following the 45-day period referred to in clause (a) above or the first
90-day period following the 150-day period referred to in the case of clause
(b) above. Such interest will increase by an additional 0.5 percent per annum
at the beginning of each subsequent 30-day period in the case of clause (a)
above or 90-day period in the case of clause (b) above; provided, however, that
in no event will the interest rate borne by the Notes be increased by more than
1.5 percent. Upon the filing of the Exchange Offer Registration Statement, the
consummation of the Exchange Offer or the effectiveness of a Shelf Registration
Statement, as the case may be, the interest rate borne by the Notes from the
date of such filing, consummation or effectiveness, as the case may be, will be
reduced to the original interest rate; provided, however, that, if after any
such reduction in interest rate, a different event specified in clause (a) or
(b) above occurs, the interest rate may again be increased pursuant to the
foregoing provisions.]*
__________________________________
* Include only for Initial Notes.
<PAGE> 111
2
Interest on this Note will accrue from the most recent date to
which interest has been paid or duly provided for or, if no interest has been
paid, from April 3, 1998. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Company shall pay interest on overdue principal and
premium, if any, and interest on overdue installments of interest, to the extent
lawful, at a rate per annum equal to the rate of interest applicable to the
Notes.
2. Method of Payment.
The Company shall pay interest (except defaulted interest) on
the principal amount of the Notes on each Interest Payment Date to the persons
who are Holders (as reflected in the Register at the close of business on the
Regular Record Date immediately preceding the Interest Payment Date), in each
case, even if the Note is cancelled on registration of transfer or registration
of exchange after such record date; provided that, with respect to the payment
of principal, the Company shall make payment to the Holder that surrenders this
Note to any Paying Agent on or after April 15, 2008.
The principal of (and premium, if any), and interest on the
Notes shall be payable, and the Notes shall be exchangeable and transferable, at
the office or agency of the Company in The City of New York maintained for such
purposes (which initially shall be the agency of the Trustee located at 61
Broadway, 15th Floor, New York, New York 10006) or, at the option of the
Company, interest may be paid by check mailed to the address of the Person
entitled thereto as such address shall appear on the Register; provided that all
payments with respect to the Global Note and the Certificated Notes the Holder
of which have given wire transfer instructions to the Company shall be required
to be made by wire transfer of immediately available funds to the accounts
specified by the Holders thereof.
3. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar.
The Company may change any Paying Agent or Registrar upon written notice thereto
and without notice to any Holder. The Company, any Subsidiary or any Affiliate
of any of them may act as Paying Agent, Registrar or co-registrar.
<PAGE> 112
3
4. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of
April 15, 1998 (the "Indenture"), among the Company, the Subsidiary Guarantors
and State Street Bank and Trust Company, as trustee (the "Trustee"). Capitalized
terms herein are used as defined in the Indenture unless otherwise indicated.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act. The Notes are subject
to all such terms, and Holders are referred to the Indenture and the Trust
Indenture Act for a statement of all such terms. To the extent permitted by
applicable law, in the event of any inconsistency between the terms of this Note
and the terms of the Indenture, the terms of the Indenture shall control.
The Notes are general unsecured obligations of the Company.
5. Redemption.
Optional Redemption. The Notes may be redeemed on not less
than 30 nor more than 60 days' prior notice to the Holders at the option of the
Company, in whole or in part, at any time and from time to time on or after
April 15, 2003, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date to receive interest due on an Interest Payment Date that is on or prior to
the Redemption Date), if redeemed during the 12-month period beginning April 15
of each of the years set forth below:
<TABLE>
<S> <C>
Redemption
Year Price
---- -----
2003 . . . . . . . . . . . . . . . . . . . . . . . . . 104.375%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . 102.917%
2005 . . . . . . . . . . . . . . . . . . . . . . . . 101.458%
2006 and thereafter . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
and thereafter at 100% of the principal amount, together with accrued interest,
if any, to the Redemption Date.
In addition, at any time or from time to time on or prior to
April 15, 2001, the Company may redeem, on one or more occasions, up to 35% of
the sum of (i) the initial aggregate principal amount of the Notes and (ii) the
initial aggregate principal amount of any Additional Notes with the net proceeds
of one or more Public Equity Offerings at a
<PAGE> 113
4
Redemption Price equal to 108.75% of the principal amount thereof, plus accrued
interest, if any, to the Redemption Date (subject to the right of holders of
record on the relevant record date to receive interest due on an interest
payment date); provided that, immediately after giving effect to such
redemption, at least 65% of the initial aggregate principal amount of the Notes
excluding the Additional Notes remains outstanding; and provided further that
such redemptions shall occur within 60 days of the date of closing of each
Public Equity Offering.
Notice of a redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder to be redeemed at
such Holder's last address as it appears in the Register. Notes in original
denominations larger than $1,000 may be redeemed in part in integral multiples
of $1,000. On and after the Redemption Date, interest ceases to accrue on
Notes or portions of Notes called for redemption, unless the Company defaults
in the payment of the Redemption Price.
If less than all the Notes or Additional Notes, if any, are to
be redeemed, the particular Notes or Additional Notes to be redeemed will be
selected not more than 60 days prior to the redemption date by the Trustee by
such method as the Trustee deems fair and appropriate.
6. Repurchase upon a Change in Control and Asset Sales.
(a) If a Change of Control occurs at any time, then,
unless irrevocable notice of redemption for all of the Notes is given
within 30 days after the occurrence of such Change of Control in
accordance with the provisions of Section 1015 of the Indenture, each
holder of Notes shall have the right to require that the Company
purchase such holder's Notes or Additional Notes, as applicable, in
whole or in part in integral multiples of $1,000, at a purchase price
in cash equal to 101% of the principal amount of such Notes or
Additional Notes, plus accrued and unpaid interest, if any, to the
date of purchase, pursuant to the offer described below (the "Change
of Control Offer"); and
(b) Upon Asset Sales, the Company may be obligated to
make offers to purchase Notes with a portion of the Net Cash Proceeds
of such Asset Sales at a Redemption Price of 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date
of purchase.
<PAGE> 114
5
7. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons, in
denominations of $1,000 and multiples of $1,000 in excess thereof. A Holder may
register the transfer or exchange of 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 any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
or exchange of any Notes selected for redemption (except the unredeemed portion
of any Note being redeemed in part). Also, it need not register the transfer or
exchange of any Notes for a period of 15 days before a selection of Notes to be
redeemed is made.
8. Persons Deemed Owners.
A Holder may be treated as the owner of a Note for all
purposes.
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the 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, unless an abandoned property
law designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company irrevocably deposits, or causes to be deposited,
with the Trustee money or U.S. Government Obligations sufficient to pay the
then outstanding principal of, premium, if any, and accrued interest on the
Notes (a) to redemption or maturity, the Company shall be discharged from the
Indenture, the Notes and the Note Guarantees, except in certain circumstances
for certain sections thereof, and (b) to the Stated Maturity, the Company shall
be discharged from certain covenants set forth in the Indenture.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in aggregate principal amount of the Notes then outstanding, and any
existing default or compliance with any provision may be waived with the consent
of the Holders of a majority in aggregate principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the
<PAGE> 115
6
parties thereto may amend or supplement the Indenture or the Notes to, among
other things, cure any ambiguity, defect or inconsistency.
12. Restrictive Covenants.
The Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i) Indebtedness;
(ii) Restricted Payments; (iii) issuances and sales of preferred stock of
Restricted Subsidiaries; (iv) transactions with Affiliates; (v) Liens; (vi)
certain Asset Sales; (vii) dividends and other payment restrictions affecting
Restricted Subsidiaries; (viii) mergers, consolidations or sales of assets.
Within 120 days after the end of each fiscal year, the Company must report to
the Trustee on compliance with such limitations.
13. Successor Persons.
When a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
14. Remedies for Events of Default.
If an Event of Default, as defined in the Indenture, occurs and
is continuing, the Trustee or the Holders of not less than 25% in principal
amount of the Notes then outstanding may declare all the Notes to be immediately
due and payable. If a bankruptcy or insolvency default with respect to the
Company or any of its Significant Subsidiaries occurs and is continuing, the
Notes automatically become immediately due and payable. Holders may not enforce
the Indenture or the Notes except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the Indenture or the
Notes. Subject to certain limitations, Holders of at least a majority in
principal amount of the Notes then outstanding may direct the Trustee in its
exercise of any trust or power.
15. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Notes and may make loans to, accept
deposits from, perform services for, and otherwise deal with, the Company and
its Affiliates as if it were not the Trustee.
<PAGE> 116
7
16. Authentication.
This Note shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Note.
17. Governing Law.
The Notes shall be governed by the law of the State of New
York.
18. Abbreviations.
Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= 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).
19. No Recourse Against Others.
A director, officer, employee, incorporator or stockholder of
the Company, as such, shall not have any liability for any obligations of the
Company under the Notes, the Indenture or the Note Guarantees or for any claim
based on, in respect of, or by reason of, such obligations of their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
The Company shall furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to AmeriSteel
Corporation, 5100 W. Lemon Street, Suite 312, Tampa, Florida 33609, Attention:
Chief Executive Officer.
<PAGE> 117
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
(Please print or typewrite name and address including zip code of assignee)
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
attorney to transfer such Note on the books of the Company with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES]
In connection with any transfer of this Note occurring prior to
the date which is the earlier of the date of an effective Registration Statement
or April 3, 2000, the undersigned confirms that, without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Note is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended, provided by Rule
144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 307 of the Indenture shall have
been satisfied.
<PAGE> 118
2
Date: NOTICE: The signature to
this assignment must
correspond with the name as
written upon the face of the
within-mentioned instrument
in every particular, without
alteration or any change
whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
NOTICE: To be executed by an
executive officer
<PAGE> 119
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant
to Section 1015 or Section 1016 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 1015 or Section 1016 of the Indenture, state the
amount (in original principal amount) below:
$_____________________.
Date:
Your Signature:
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
Tax ID #: __________________
<PAGE> 120
Exhibit B
FORM OF SUBSIDIARY GUARANTEE
Each Subsidiary Guarantor hereby jointly and severally,
absolutely, unconditionally and irrevocably guarantees the Notes and
obligations of the Company hereunder and thereunder, and guarantees to each
Holder of a Note authenticated and delivered by the Trustee and to the Trustee
on behalf of such Holder, that: (a) the principal of (and premium, if any) and
interest on the Notes will be paid in full when due, whether at Stated
Maturity, by acceleration, call for redemption or otherwise (including, without
limitation, the amount that would become due but for the operation of the
automatic stay under Section 362(a) of the Federal Bankruptcy Code), together
with interest on the overdue principal, if any, and interest on any overdue
interest, to the extent lawful, and all other obligations of the Company to the
Holders or the Trustee hereunder or thereunder will be paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Notes or of any such
other obligations, the same will be paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at Stated
Maturity, by acceleration or otherwise, subject, however, in the case of
clauses (a) and (b) above, to the limitations set forth in Section 1306 of the
Indenture.
The obligations of the Subsidiary Guarantors to the Holders of
the Notes and to the Trustee pursuant to this Note Guarantee and the Indenture
are expressly set forth in Article 13 of the Indenture, and reference is hereby
made to such Indenture for the precise terms of this Note Guarantee. The terms
of Article 13 of the Indenture are incorporated herein by reference.
This is a continuing Note Guarantee and shall remain in full
force and effect and shall be binding upon each Subsidiary Guarantor and its
respective successors and assigns to the extent set forth in the Indenture
until full and final payment of all of the Company's obligations under the
Notes and the Indenture and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders of Notes and, in the event of any
transfer or assignment of rights by any Holder of Notes or the Trustee, the
rights and privileges herein conferred upon that party shall automatically
extend to and be vested in such transferee or assignee, all subject to the
terms and conditions hereof. This is a Note Guarantee of payment and not a
guarantee of collection.
In certain circumstances more fully described in the
Indenture, any Subsidiary Guarantor may be released from its liability under
this Subsidiary Guarantee, and any such release will be effective whether or
not noted herein.
<PAGE> 121
B-2
This Subsidiary Guarantee shall not be valid or obligatory for
any purpose until the certificate of authentication on the Senior Subordinated
Note upon which this Subsidiary Guarantee is noted shall have been executed by
the Trustee under the Indenture by the manual signature of one of its authorized
officers.
Capitalized terms used herein have the same meanings given in
the Indenture unless otherwise indicated.
AMERSTEEL FINANCE, INC.
Subsidiary Guarantor
By: ______________________________
Name:
Title:
<PAGE> 122
Exhibit C
FORM OF LETTER TO BE DELIVERED BY ACCREDITED INVESTORS
, 1998
NationsBanc Montgomery Securities LLC
NationsBank Corporate Center
100 North Tryon Street, NCI-007-01
Charlotte, North Carolina 28255
AmeriSteel Corporation
5100 W. Lemon Street, Suite 312
Tampa, Florida 33609
Re: Purchase of $130,000,000 principal amount of 8 3/4% Senior
Notes Due 2008 (the "Notes") of AmeriSteel Corporation, a
Florida corporation (the "Company")
Ladies and Gentlemen:
In connection with our purchase of the Notes we confirm that:
1. We understand that the Notes are not being and will not be
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and are being sold to us in a transaction that is exempt from the registration
requirements of the Securities Act.
2. We acknowledge that (a) neither the Company, nor the
Initial Purchaser (as defined in the Offering Memorandum dated March 30, 1998
relating to the Notes (the "Final Memorandum")) nor any persons acting on
behalf of the Company or the Initial Purchaser has made any representation to
us with respect to the Company or the offer or sale of any Notes and (b) any
information we desire concerning the Company and the Notes or any other matter
relevant to our decision to purchase the Notes (including a copy of the Final
Memorandum) is or has been made available to us.
3. We have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Notes, and we are (or any account for which we are purchasing
under paragraph 5 below is) an Institutional
<PAGE> 123
C-2
"accredited investor" (within the meaning of Rule 501(a)(1), (2), (3), or (7)
of Regulation D under the Securities Act) (an "IAI") able to bear the economic
risk of investment in the Notes.
4. We understand that the minimum principal amount of Notes
that may be purchased by an IAI is $100,000.
5. We are acquiring the Notes for our own account (or for
accounts as to which we exercise sole investment discretion and have authority
to make, and do make, the statements contained in this letter) and not with a
view to any distribution of the Notes, subject, nevertheless, to the
understanding that the disposition of our property will at all times be and
remain within our control.
6. We understand that the Notes will be in registered form
only and that any certificates delivered to us in respect of the Notes will
bear a legend substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY
ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH AMERISTEEL
CORPORATION (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE
"RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, (B)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE
THE UNITED STATES WITHIN THE MEANING OF REGULATION S
<PAGE> 124
C-3
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7)
OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO,
OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S
AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES,
TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRANSFER AGENT, THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
7. We agree that in the event that at some future time
we wish to dispose of any of the Notes, we will not do so unless such
disposition is made in accordance with any applicable securities laws of any
state of the United States and:
(a) the Notes are sold in compliance with Rule 144(k)
under the Securities Act or
(b) the Notes are sold in compliance with Rule 144A under
the Securities Act or
(c) the Notes are sold in compliance with Regulation S
under the Securities Act or
(d) the Notes are sold pursuant to an effective
registration statement under the Securities Act or
(e) the Notes are sold to the Company or an affiliate (as
defined in Rule 501(b) of Regulation D) of the Company or
(f) the Notes are disposed of in any other transaction
that does not require registration under the Securities Act, and prior
to such disposition we have furnished to the Company or its designee
an Opinion of Counsel experienced in securities law
<PAGE> 125
C-4
matters to such effect or such other documentation as the Company or
its designee may reasonably request.
8. We understand that NationsBanc Montgomery Securities
LLC, as the Initial Purchaser, the Company and other persons will rely upon the
truth and accuracy of the statements set forth herein, and we agree that if any
such statements are no longer true or accurate we will promptly so notify the
Company and the Initial Purchaser in writing.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
________________________________________
(Name of Purchaser)
By: ___________________________________
Name:
Title:
Address:
Upon transfer, the Notes should be registered in the name of the new beneficial
owner as follows:
Name:
Address:
Taxpayer ID Number:
<PAGE> 126
Exhibit D
FORM OF LETTER TO BE DELIVERED
IN CONNECTION WITH TRANSFERS
PURSUANT TO REGULATION S
__________ __, 1998
State Street Bank and Trust Company
61 Broadway, 15th Floor
New York, NY 10006
AmeriSteel Corporation
5100 W. Lemon Street, Suite 312
Tampa, Florida 33609
Purchase of $130,000,000 principal amount of 8 3/4%
Senior Notes Due 2008 (the "Notes") of
AmeriSteel Corporation, a Florida corporation (the "Company")
Ladies and Gentlemen:
In connection with our proposed sale of $130,000,000 aggregate
principal amount at maturity of the Senior Notes, we confirm that such sale has
been effected pursuant to and in accordance with Regulation S under the
Securities Act of 1933, as amended ("Regulation S"), and, accordingly, we
represent that:
(1) the offer of the Senior Note was not made to a person
in the United States or to a U.S. Person as defined in Regulation S;
(2) either (a) at the time the buy order was originated,
the transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee was
outside the United States or (b) the transaction was executed in, on
or through the facilities of a designated offshore securities market
and neither we nor any person acting on our behalf knows that the
transaction has been pre-arranged with a buyer in the Untied States;
(3) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S, as applicable; and
<PAGE> 127
D-2
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the U.S. Securities Act of
1933, as amended.
In addition, if the sale is made during a restricted period
and the provisions of Rule 903(c)(2) or Rule 904(c)(1) of Regulation S are
applicable thereto, we confirm that such sale has been made in accordance with
the applicable provisions of Rule 903(c)(2) or Rule 904(c)(1), as the case may
be.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: ___________________________
Authorized Signature
<PAGE> 1
EXHIBIT 4.2
AMERISTEEL CORPORATION
$130,000,000
8 3/4% SENIOR NOTES DUE 2008
PURCHASE AGREEMENT
March 30, 1998
NationsBanc Montgomery Securities LLC
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Ladies and Gentlemen:
AmeriSteel Corporation, a Florida corporation (the "Company"), proposes
to issue and sell (the "Initial Placement") to NationsBanc Montgomery
Securities, LLC (the "Initial Purchaser") $130,000,000 aggregate principal
amount of its 8 3/4% Senior Notes Due 2008 (the "Notes"). The Notes are to be
fully and unconditionally guaranteed, jointly and severally, on a senior
unsecured basis (the "Subsidiary Guarantees") by all existing and future United
States subsidiaries of the Company (each such existing guarantor, a "Subsidiary
Guarantor" and collectively, the "Subsidiary Guarantors"). The Notes are to be
issued under an indenture (the "Indenture"), dated as of April 3, 1998, among
the Company, the Subsidiary Guarantors and State Street Bank and Trust Company,
as trustee (the "Trustee").
This Purchase Agreement (this "Agreement"), the Notes, the Subsidiary
Guarantees, the Indenture and the Registration Rights Agreement, dated as of
March 30, 1998, among the Company, the Subsidiary Guarantors and the Initial
Purchaser (the "Registration Rights Agreement") are herein collectively referred
to as the "Offering Documents." The Company intends to implement a refinancing
plan (the "Refinancing"), which contemplates (i) the offering of the Notes, (ii)
the sale of 454,545 shares of the Company's Class B Common Stock to one investor
for $10 million (the "Equity Investment"), (iii) the repayment of $30 million of
the Company's $50 million Subordinated Intercompany Note, (iv) the redemption of
the Company's $100,000,000 11 1/2% First Mortgage Notes due December 15, 2000
(the "First Mortgage Notes"). The Offering Documents are herein collectively
referred to as the "Refinancing Documents."
<PAGE> 2
The sale of the Notes to the Initial Purchaser will be made without
registration of the Notes under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon exemptions from the registration
requirements of the Securities Act. You have advised the Company that you will
offer and sell the Notes purchased by you hereunder in accordance with Section 4
hereof as soon as you deem advisable. The Notes will have the benefit of the
Registration Rights Agreement.
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum, dated March 20, 1998 (the "Preliminary
Memorandum"), and a final offering memorandum, dated March 30, 1998 (the "Final
Memorandum"). Each of the Preliminary Memorandum and the Final Memorandum sets
forth certain information concerning the Company, the Subsidiary Guarantors and
the Notes. The Company hereby confirms that it has authorized the use of the
Preliminary Memorandum and the Final Memorandum, and any amendment or supplement
thereto, in connection with the offer and sale of the Notes by the Initial
Purchaser. Unless stated to the contrary, all references herein to the Final
Memorandum are to the Final Memorandum at the Execution Time (as defined below)
and are not meant to include any amendment or supplement subsequent to the
Execution Time.
Representations and Warranties. The Company represents and
warrants to the Initial Purchaser that:
(a) The Preliminary Memorandum, at the date thereof, did not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Final Memorandum, at the
date hereof, does not, and at the Closing Date (as defined below) will not
(or, if amended or supplemented, the Final Memorandum, as amended or
supplemented at the date of any such amendment or supplement and at the
Closing Date, will not), contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representation or
warranty as to the information contained in or omitted from the Preliminary
Memorandum or the Final Memorandum, or any amendment or supplement thereto,
in reliance upon and in conformity with information furnished in writing to
the Company by or on behalf of the Initial Purchaser specifically for
inclusion therein.
(b) Neither the Company nor any "Affiliate" (as defined in Rule 501(b)
of Regulation D under the Securities Act ("Regulation D")) of the Company
or any person acting on its or their behalf (other than the Initial
Purchaser, as to which no representation is made) has, directly or
indirectly, made offers or sales of any security, or solicited offers to
buy any security, under circumstances that would require the registration
of the Notes under the Securities Act.
<PAGE> 3
3
(c) Neither the Company nor any of its Affiliates, nor any person
acting on its or their behalf (other than the Initial Purchaser, as to
which no representation is made), has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with any offer or sale of the Notes in the United States.
(d) The Notes satisfy the eligibility requirements of Rule 144A(d)(3)
under the Securities Act.
(e) The Company is not and, after giving effect to the Refinancing,
will not be an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act"), without
taking account of any exemption arising out of the number of holders of the
securities of the Company.
(f) Neither the Company nor any of its Affiliates has paid or agreed
to pay to any person any compensation for soliciting another to purchase
any securities of the Company (except as contemplated by this Agreement).
(g) It is not necessary in connection with the offer, sale and
delivery of the Notes in the manner contemplated by this Agreement and the
Final Memorandum to register any of such securities under the Securities
Act or to qualify the Indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
(h) The Company has been advised by the National Association of
Securities Dealers, Inc. (the "NASD") Private Offerings, Resales and
Trading through Automated Linkages market ("PORTAL") that the Notes have
been designated PORTAL eligible securities in accordance with the rules and
regulations of the NASD.
(i) The consolidated financial statements (including the notes
thereto) and schedules of the Company and AmeriSteel Finance, Inc. ("AFI")
set forth in the Final Memorandum fairly present in all material respects
the financial position, results of operations and cash flows of the Company
and AFI as of the dates and for the periods specified therein; since the
date of the latest of such financial statements, there has been no change
nor any development or event involving a prospective change which has had a
material adverse effect on (i) the business, operations, properties,
assets, liabilities, net worth, condition (financial or otherwise) or
prospects of the Company and its subsidiaries taken as a whole or (ii) the
ability of the Company to perform any of its obligations under this
Agreement, the Registration Rights Agreement, the Indenture or the Notes (a
"Material Adverse Effect"); such financial statements and schedules have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise
expressly noted in the Final Memorandum); the other financial and
statistical
<PAGE> 4
4
information and data set forth in the Final Memorandum (and any amendment
or supplement thereto) are, in all material respects, accurately presented
and prepared on a basis consistent with such financial statements, except
as otherwise stated therein; and the statistical and market-related data
included in the Final Memorandum are based on or derived from sources which
the Company believes to be reliable and accurate and are based upon
assumptions and qualifications which the Company considers reasonable and
appropriate in all material respects.
(j) The pro forma financial statements (including the notes thereto)
and the other pro forma financial information included in the Final
Memorandum have been properly computed on the bases described therein; and
the assumptions used in the preparation of the pro forma financial data and
other pro forma financial information included in the Final Memorandum are
reasonable in all material respects and the adjustments used therein are
appropriate in all material respects to give effect to the transactions or
circumstances referred to therein.
(k) Subsequent to the respective dates as of which information is
given in the Preliminary Memorandum and the Final Memorandum, (i) neither
the Company nor AFI has incurred any material liability or obligation,
direct or contingent, nor entered into any material transaction not in the
ordinary course of business; (ii) neither the Company nor AFI have
purchased any of the Company's outstanding capital stock, nor declared,
paid or otherwise made any dividend or distribution of any kind on its
capital stock (except as part of the Refinancing); and (iii) there has not
been any material change in the capital stock, short-term debt or long-term
debt of the Company or AFI except in each case as described in or
contemplated by the Preliminary Memorandum or the Final Memorandum, as the
case may be.
(l) The only subsidiary of the Company is AFI.
(m) Each of the Company and AFI has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized with full power
(corporate and other) to own or lease its properties, conduct its business
as described in the Final Memorandum and enter into each Transaction
Document to which it is a party and carry out all the terms and provisions
of each such Transaction Document to be carried out by it; and each of the
Company and AFI is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each jurisdiction which requires
such qualification wherein it owns or leases properties or conducts
business, except in such jurisdictions in which the failure to so qualify,
singly or in the aggregate, would not have a Material Adverse Effect.
<PAGE> 5
5
(n) The Company has the authorized, issued and outstanding
capitalization as set forth in the Final Memorandum under the caption
"Capitalization." All of the issued shares of capital stock of the Company
have been duly authorized, validly issued, fully paid and nonassessable and
were not issued in violation of any preemptive or similar rights.
(o) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens related to or
entitling any person to purchase or otherwise to acquire any shares of
capital stock of, or other ownership interest in, the Company or AFI except
as otherwise disclosed in the Final Memorandum.
(p) The issued shares of capital stock of AFI have been duly
authorized and validly issued, are fully paid and nonassessable and, except
for directors' qualifying shares and except as otherwise set forth in the
Final Memorandum are owned of record and beneficially by the Company,
either directly or through wholly owned subsidiaries, free and clear of any
pledge, lien, encumbrance, security interest, restriction on voting or
transfer, preemptive rights or claim of any third party. AFI is not
prohibited, directly or indirectly, from paying any dividends to the
Company, from making any other distribution on its capital stock, from
repaying to the Company any loans or advances to AFI from the Company or
from transferring any of AFI's property or assets to the Company, except as
described in or contemplated by the Final Memorandum.
(q) Neither the Company nor AFI is (i) in violation of its corporate
charter or bylaws, (ii) in breach or violation of any law, ordinance,
governmental or administrative rule or regulation or court decree or (iii)
in default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a party or by
which its properties may be bound and which, in the case of (ii) or (iii),
would have a Material Adverse Effect.
(r) The issuance, offering and sale of the Notes to the Initial
Purchaser pursuant to this Agreement, the delivery of the Notes under this
Agreement, the compliance by the Company and the Subsidiary Guarantors, the
consummation of the other transactions herein and therein contemplated and
the consummation of the other transactions contemplated hereby and in the
Final Memorandum, including the Refinancing, do not (i) require the
consent, approval, authorization, order, registration or qualification of
or with any governmental authority or court, except (A) such as may be
required under state securities or blue sky laws, (B) the Company's
Registration Statement (No. 333-37679) on Form S-1, or (C) such as may be
contemplated by the Registration Rights Agreement or (ii) conflict with,
result in a breach or violation of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or AFI pursuant to,
<PAGE> 6
6
any material contract, loan agreement, note, indenture, mortgage, deed of
trust, lease or other agreement or instrument to which the Company or AFI
is a party, or by which the Company, AFI or any of its respective
properties is bound, or the charter or by-laws of the Company or AFI or any
statute, rule or regulation or any judgment, order or decree of any
governmental authority or court or arbitrator applicable to the Company or
AFI, except as rights to indemnity and contribution may be limited by
federal or state securities laws or public policy.
(s) No legal or governmental proceedings or investigations are pending
to which the Company or AFI is a party or to which the property of the
Company or AFI is subject that are not described in the Final Memorandum,
and no such proceedings or investigations, to the best knowledge of the
Company, have been threatened against the Company or AFI, or with respect
to any of their properties, except in each case for such proceedings or
investigations that, singly or in the aggregate, are not reasonably likely
to result in a Material Adverse Effect.
(t) Each of the Company and AFI has valid title in fee simple to all
items of real property and title to all personal property owned by each of
them, in each case free and clear of any pledge, lien, encumbrance,
security interest or other defect or claim of any third party, except (i)
such as do not materially and adversely affect the value of such property
and do not interfere with the use made or proposed to be made of such
property by the Company or such subsidiary to an extent that such
interference would have a Material Adverse Effect, and (ii) liens securing
Indebtedness referred to in the Final Memorandum. Any real property and
buildings held under lease by the Company or AFI are held under valid,
subsisting and enforceable leases, with such exceptions as do not
materially interfere with the use made or proposed to be made of such
property and buildings by the Company or AFI.
(u) This Agreement has been duly authorized, executed and delivered by
the Company.
(v) The Registration Rights Agreement, the Indenture and each of the
Refinancing Documents have been duly authorized by all necessary corporate
actions of the Company and, when duly executed and delivered by the Company
(and AFI, as applicable) and the other parties thereto, constitute legal,
valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as the same may be limited
by (i) applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally, including without
limitation the effect of statutory or other laws regarding fraudulent
conveyances or transfers or preferential transfers, or (ii) general
principles of equity, whether considered at law or at equity, and except as
rights to indemnity and contribution in the Registration Rights Agreement
may be limited by federal or state securities laws or public policy.
<PAGE> 7
7
(w) The Notes have been duly authorized by all necessary corporate
action for issuance and sale pursuant to this Agreement and, when executed,
authenticated, issued and delivered in the manner provided for in the
Indenture and sold and paid for as provided in this Agreement, the Notes
will constitute legal, valid and binding obligations of the Company and the
Subsidiary Guarantors entitled to the benefits of the Indenture and
enforceable against the Company and the Subsidiary Guarantors in accordance
with their terms, except as the same may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally, including without limitation the effect of
statutory or other laws regarding fraudulent conveyances or transfers or
preferential transfers or (ii) general principles of equity, whether
considered at law or at equity.
(x) Arthur Andersen LLP ("Arthur Andersen"), who has audited certain
financial statements of the Company and AFI and delivered their reports
with respect to the audited financial statements of the Company in the
Final Memorandum, are independent certified public accountants within the
meaning of the American Institute of Certified Public Accountants Code of
Professional Conduct (the "AICPA") and the applicable rules and regulations
thereunder.
(y) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(z) Neither the Company nor AFI is now or, after giving effect to the
issuance of the Notes and the consummation of the transactions contemplated
by the Final Memorandum, including the Refinancing, will be (i) insolvent,
(ii) left with unreasonably small capital with which to engage in its
anticipated businesses or (iii) incurring debts beyond its ability to pay
such debts as they become due.
(aa) The Company and AFI own or otherwise possess the right to use all
patents, trademarks, service marks, trade names and copyrights, all
applications and registrations for each of the foregoing, and all other
proprietary rights and confidential information used in the conduct of
their respective businesses as currently conducted, except to the extent
the absence thereof would not have a Material Adverse Effect; and neither
the Company nor AFI has received any notice, or is otherwise aware, of any
infringement of or conflict with the rights
<PAGE> 8
8
of any third party with respect to any of the foregoing which, singly or in
the aggregate, is reasonably likely to result in a Material Adverse Effect.
(bb) The Company and AFI are insured by insurers of recognized
financial responsibility (or by appropriate self-insurance) against such
losses and risks and in such amounts as are prudent and customary in the
businesses and in the locations in or at which they are engaged; and
neither the Company nor AFI has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a Material
Adverse Effect.
(cc) ERISA:
(i) Definitions:
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"ERISA Affiliate" means any trade or business (whether or
not incorporated) that for purposes of Title IV of ERISA is a
member of the controlled group of the Company, or under common
control with the Company, within the meaning of Section 414 of
the Internal Revenue Code.
"ERISA Event" means (a)(i) the occurrence of a reportable
event, within the meaning of Section 4043 of ERISA, with respect
to any Plan unless the 30-day notice requirement with respect to
such event has been waived by the PBGC, or (ii) the requirements
of subsection (1) of Section 4043(b) of ERISA are met with
respect to a contributing sponsor, as defined in Section
4001(a)(13) of ERISA, of a Plan, and an event described in
paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of
ERISA is reasonably expected to occur with respect to such Plan
within the following 30 days; (b) the application for a minimum
funding waiver with respect to a Plan; (c) the provision by the
administrator of any Plan of a notice of intent to terminate such
Plan, pursuant to Section 4041(a)(2) of ERISA (including any such
notice with respect to a plan amendment referred to in Section
4041(e) of ERISA); (d) the cessation of operations at a facility
of the Company or any ERISA Affiliate in the circumstances
described in Section 4062(e) of ERISA; (e) the withdrawal by the
Company or any ERISA Affiliate from a Multiple Employer Plan
during a plan year for which it was a substantial employer, as
defined in Section 4001(a)(2) of ERISA; (f) the conditions for
imposition of a lien under
<PAGE> 9
9
Section 302(f) of ERISA shall have been met with respect to any
Plan; (g) the adoption of an amendment to a Plan requiring the
provision of security to such Plan pursuant to Section 307 of
ERISA; or (h) the institution by the PBGC of proceedings to
terminate a Plan pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of
ERISA that constitutes grounds for the termination of, or the
appointment of a trustee to administer, such Plan.
"Multiemployer Plan" means a multiemployer plan, as defined
in Section 4001(a)(3) of ERISA, to which the Company or any ERISA
Affiliate is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years
made or accrued an obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained
for employees of the Company or any ERISA Affiliate and at least
one trade or business (whether or not incorporated) other than
the Company and the ERISA Affiliates or (b) was so maintained and
in respect of which the Company or any ERISA Affiliate could have
liability under Section 4064 or 4069 of ERISA in the event such
plan has been or were to be terminated.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Plan" means a Single Employer Plan or a Multiple Employer
Plan. "Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained
for employees of the Company or any ERISA Affiliate and no trade
or business (whether or not incorporated) other than the Company
and the ERISA Affiliates or (b) was so maintained and in respect
of which the Company or any ERISA Affiliate could have liability
under Section 4069 of ERISA in the event such plan has been or
were to be terminated.
"Underfunding" means, with respect to any Plan, the excess,
if any, of the "projected benefit obligations" (within the
meaning of Statement of Financial Accounting Standards 87) under
such Plan (determined using the actuarial assumptions used for
purposes of calculating funding requirements in the most recent
actuarial report for such plan) over the fair market value of the
assets held under the Plan.
"Withdrawal Liability" has the meaning specified in Part I
of Subtitle E of Title IV of ERISA.
<PAGE> 10
10
(ii) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Plan.
(iii) The aggregate Underfunding with respect to all Plans which
have any Underfunding does not exceed $100,000.
(iv) Neither the Company nor any ERISA Affiliate has incurred
or is reasonably expected to incur any Withdrawal Liability.
(v) Neither the Company nor any ERISA Affiliate has been
notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or has been terminated, within
the meaning of Title IV of ERISA, and no such Multiemployer Plan is
reasonably expected to be in reorganization or to be terminated,
within the meaning of Title IV of ERISA.
(dd) There is (i) no unfair labor practice complaint pending against
the Company or AFI or, to the best knowledge of the Company, threatened
against either of them, before the National Labor Relations Board or any
state or local labor relations board, and no significant grievance or more
significant arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against the Company or AFI or, to the
best knowledge of the Company, threatened against either of them and (ii)
no significant strike, labor dispute, slowdown or stoppage pending against
the Company or AFI or, to the best knowledge of the Company, threatened
against it or AFI which is likely to result in a Material Adverse Effect.
(ee) The Company and AFI have filed all foreign, federal, state and
local tax returns that are required to be filed, except insofar as the
failure to file such returns, singly or in the aggregate, would not have a
Material Adverse Effect, or have requested extensions thereof and in each
case have paid all taxes required to be paid by it and any other
assessment, fine or penalty levied against it, to the extent that any of
the foregoing is due and payable, other than those being contested in good
faith and for which adequate reserves have been provided or those currently
payable without penalty or interest.
(ff) Neither of the Company nor any Affiliate of the Company has
taken, directly or indirectly, any action designed to cause or result in,
or which has constituted or which might reasonably be expected to cause or
result in, stabilization or manipulation (as such terms are defined under
the Exchange Act) of the price of any security of the Company to facilitate
the sale or resale of the Notes.
<PAGE> 11
11
(gg) Except as disclosed in the Final Memorandum, and except as would
not individually or in the aggregate have a Material Adverse Effect (i) the
Company and AFI are in compliance with all applicable Environmental Laws
(as defined below), (ii) the Company and AFI have all permits,
authorizations and approvals required under any applicable Environmental
Laws and are in compliance with their requirements, (iii) there are no
pending or, to the best knowledge of the Company, threatened Environmental
Claims (as defined below) against the Company or AFI and (iv) the Company
and AFI do not have knowledge of any circumstances with respect to any of
their properties or operations that could reasonably be anticipated to form
the basis of an Environmental Claim against the Company or AFI or any of
their properties or operations and the business operations relating thereto
that would have a Material Adverse Effect. For purposes of this Agreement,
the following terms shall have the following meanings: "Environmental Law"
means, with respect to any person, any federal, state, local or municipal
statute, law, rule, regulation, ordinance, code, policy or rule of common
law and any published judicial or administrative interpretation thereof
including any judicial or administrative order, consent decree or judgment
binding on such person or any of its subsidiaries, relating to the
environment, health, safety or any chemical, material or substance,
exposure to which is prohibited, limited or regulated by any such
governmental authority. "Environmental Claims" means any and all
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigations or proceedings relating in any way to any Environmental Law.
(hh) The Company has reasonably concluded that any and all costs and
liabilities incurred or reasonably expected to be incurred pursuant to any
Environmental Law (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and potential liabilities to third
parties) would not, singly or in the aggregate, have a Material Adverse
Effect.
(ii) Each certificate signed by any officer of the Company and
delivered to the Initial Purchaser or its counsel shall be deemed to be a
representation and warranty by the Company to the Initial Purchaser as to
the matters covered thereby.
(jj) Except as stated in the Final Memorandum, neither the Company nor
AFI knows of any outstanding claims against it for services, either in the
nature of a finder's fee, financial advisory fee, origination fee or
similar fee, with respect to the transactions contemplated by the
Refinancing Documents.
(kk) The Note Guarantees by the subsidiaries have been duly authorized
by each of the Subsidiary Guarantors, and, when executed and authenticated
in accordance with the provisions of the Indenture, will conform in all
material respects to the description thereof in the Final Memorandum, will
be valid and binding obligations of each of the Subsidiary
<PAGE> 12
12
Guarantors, will be entitled to the benefits of the Indenture and will be
enforceable in accordance with their terms, except as the same may be
limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally, including
without limitation the effect of statutory or other laws regarding
fraudulent conveyances or transfers or preferential transfers or (ii)
general principles of equity, whether considered at law or at equity.
(ll) The sale of the Notes to the Initial Purchaser does not
constitute a "prohibited transaction" (as defined in the Employee
Retirement Income Security Act of 1974, as amended).
2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company at a purchase price of 97.875% of the principal amount
thereof, plus accrued interest, if any, from March 30, 1998 to the Closing Date,
the principal amount of Notes set forth opposite the Initial Purchaser's name in
Schedule I attached here.
3. Delivery and Payment. Delivery of and payment for the Notes
shall be made at 10:00 a.m. New York City time, on April 3, 1998, or such later
date as the Initial Purchaser shall designate, which date and time may be
postponed by agreement between the Initial Purchaser and the Company (such date
and time of delivery and payment for the Notes being herein called the "Closing
Date"). Delivery of the Notes shall be made to the Initial Purchaser against
payment by the Initial Purchaser of the purchase price thereof to or upon the
order of the Company in immediately available funds or such other manner of
payment as may be agreed by the Company and the Initial Purchaser. Delivery of
the Notes shall be made at such location as the Initial Purchaser shall
reasonably designate at least one business day in advance of the Closing Date
and payment for the Notes shall be made at the offices of Shearman & Sterling
("Counsel for the Initial Purchaser"), 599 Lexington Avenue, New York, New York,
with any transfer taxes payable in connection with the transfer of the Notes
fully paid, against payment of the purchase price therefor. Certificates for the
Notes shall be registered in such names and in such denominations as the Initial
Purchaser may request not less than two full business days in advance of the
Closing Date.
The Company agrees to have the Notes available for inspection,
checking and packaging by the Initial Purchaser in New York, New York, not later
than 1:00 p.m. on the business day prior to the Closing Date.
4. Offering of Notes by The Initial Purchaser. The Initial
Purchaser represents and warrants to and agrees with the Company that:
<PAGE> 13
13
(a) It has not offered or sold, and will not offer or sell, any Notes
except to those it reasonably believes to be (i) "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act) and that, in
connection with each such sale, it has taken or will take reasonable steps to
ensure that the purchaser of such Notes is aware that such sale is being made in
reliance on Rule 144A, (ii) other institutional "accredited investors" (as
defined in Rule 501(a) (1), (2), (3) or (7) of Regulation D) that, prior to
their purchase of the Notes, deliver to the Initial Purchaser a letter
containing the representations and agreements set forth in the form of Annex A
to the Final Memorandum or (iii) non-U.S. persons outside the United States to
whom offers and sales of the Notes may be made in reliance on Regulation S under
the Securities Act.
(b) Neither it nor any person acting on its behalf has made or will make
offers or sales of the Notes in the United States by means of any form of
general solicitation or general advertising (within the meaning of Regulation D)
in the United States.
(c) The Notes offered and sold by the Initial Purchaser hereto in reliance
on Regulation S have been and will be offered and sold only in offshore
transactions, and the sale of such Notes in reliance on Regulation S is not part
of a plan or scheme to avoid the registration provisions of the Act.
(d) The Initial Purchaser's acquisition of the Notes does not constitute a
"prohibited transaction" (as defined in the Employee Retirement Income Security
Act of 1974, as amended).
5. Agreements. The Company agrees with the Initial Purchaser that:
(a) The Company will furnish to the Initial Purchaser and to Counsel for
the Initial Purchaser, without charge, during the period referred to in
paragraph (c) below, as many copies of the Final Memorandum and any amendments
and supplements thereto as they may reasonably request. The Company will pay the
expenses of printing of all documents relating to the Offering and will
reimburse the Initial Purchaser for payment of the required PORTAL filing fee.
(b) The Company will not amend or supplement the Final Memorandum unless
the Initial Purchaser shall previously have been advised thereof and shall not
have objected thereto in writing within ten business days after being furnished
a copy thereof.
(c) Prior to the consummation of the exchange offer made pursuant to the
Registration Rights Agreement or the effectiveness of an applicable shelf
registration statement if, in the reasonable judgment of the Initial Purchaser,
the Initial Purchaser or any of its Affiliates are
<PAGE> 14
14
required to deliver an offering memorandum in connection with sales of, or
market-making activities with respect to, the Notes, (A) the Company will
periodically amend or supplement the Final Memorandum so that the information
contained in the Final Memorandum complies with the requirements of Rule 144A of
the Securities Act, (B) the Company will amend or supplement the Final
Memorandum when necessary to reflect any material changes in the information
provided therein so that the Final Memorandum will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances existing as
of the date the Final Memorandum is so delivered, not misleading and (C) the
Company will provide the Initial Purchaser with copies of each such amended or
supplemented Final Memorandum as the Initial Purchaser may reasonably request.
The Company hereby expressly acknowledges that the indemnification and
contribution provisions of Section 8 hereof are specifically applicable and
relate to each offering memorandum, registration statement, prospectus,
amendment or supplement referred to in this Section 5(c).
(d) The Company will arrange for the qualification of the Notes for sale by
the Initial Purchaser under the laws of such jurisdictions as the Initial
Purchaser may reasonably designate and will maintain such qualifications in
effect as long as required for the sale of the Notes; provided, however, that
the Company shall not be obligated to qualify as a foreign corporation in any
jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process in any jurisdiction in
which it is not now so subject or to subject itself to taxation in any such
jurisdiction. The Company will promptly advise the Initial Purchaser of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Notes for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose.
(e) Whenever the Company publishes or makes available to the public (by
filing with any regulatory authority or securities exchange or by publishing a
press release or otherwise) any information that could reasonably be expected to
be material in the context of the offer and sale of Notes under this Agreement,
the same shall immediately notify the Initial Purchaser as to the nature of such
information or event. Until the third anniversary of the Closing Date, the
Company will notify the Initial Purchaser of (i) any decrease in the rating of
the Notes or any other debt securities of the Company by any nationally
recognized statistical rating organization (as defined in Rule 436(g) under the
Securities Act) or (ii) any notice given of any intended or potential decrease
in any such rating or of a possible change in any such rating which does not
indicate the direction of the possible change, as soon as the Company becomes
aware of any such decrease or notice. For a period of two years after the
Closing Time, the Company will also deliver to the Initial Purchaser, as soon as
available and to the extent individually prepared, and without request, copies
of its latest annual report and quarterly statement and any reports of its
auditors thereon.
<PAGE> 15
15
(f) Neither the Company, any of its Affiliates, nor any person acting on
its or their behalf other than the Initial Purchaser, as to which no agreement
is made, will, directly or indirectly, make offers or sales of any security, or
solicit offers to buy any security, under circumstances that would require the
registration of the Notes under the Securities Act (other than pursuant to the
Registration Rights Agreement).
(g) Neither the Company, any of its Affiliates, nor any person acting on
its or their behalf other than the Initial Purchaser, as to which no agreement
is made, will engage, in connection with the offering of the Notes, (i) in any
form of general solicitation or general advertising (within the meaning of
Regulation D) or (ii) in any public offering within the meaning of Section 4(2)
of the Securities Act.
(h) So long as any of the Notes are "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act, the Company will, during any
period in which it is not subject to and in compliance with Section 13 or 15(d)
of the Exchange Act, provide to each holder of such restricted securities and to
each prospective purchaser (as designated by such holder) of such restricted
securities, upon the request of such holder or prospective purchaser, any
information required to be provided by Rule 144A(d)(4) under the Securities Act.
Such information, at the date of its provision by the Company to such holders or
prospective purchasers, will not contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. This
covenant is intended to be for the benefit of the holders and the prospective
purchasers designated by such holders from time to time of such restricted
securities.
(i) The Company will cooperate with the Initial Purchaser and use its best
efforts to (i) permit the Notes to be eligible for clearance and settlement
through The Depository Trust Company and (ii) permit the Notes to be designated
PORTAL-eligible securities in accordance with the rules and regulations of the
NASD.
(j) The Company will not, until 180 days following the Closing Date,
without the prior written consent of the Initial Purchaser, offer, sell or
contract to sell, or otherwise dispose of, directly or indirectly, or announce
the offering of, any debt securities issued or guaranteed by the Company (other
than the Notes and the shares of Class A Common Stock registered on the
Company's Registration Statement (No. 333-37679) on Form S-1).
(k) The Company will apply the net proceeds from the sale of the Notes as
set forth in the Final Memorandum under the caption "Use of Proceeds."
<PAGE> 16
16
6. Conditions to the Obligations of the Initial Purchaser. The
obligations of the Initial Purchaser to purchase the Notes shall be subject to
the accuracy in all material respects of the representations and warranties on
the part of the Company contained herein at the date and time that this
Agreement is executed and delivered by the parties hereto (the "Execution
Time"), and at the Closing Date as specified in Section 6(e), to the accuracy in
all material respects of the statements of the Company made in any certificates
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder at or prior to the Closing Date and to the following
additional conditions:
(a) Notice of redemption shall have been delivered to the Trustee with
respect to the First Mortgage Notes.
(b) The Company and AFI shall have entered into a Registration Rights
Agreement with the Initial Purchaser substantially in the form attached hereto
as Exhibit A.
(c) The Company shall have furnished to the Initial Purchaser the opinion
of Trenam, Kemker, Scharf, Barkin, Frye, O'Neil & Mullis Counsel for the
Company, dated the Closing Date, substantially to the effect that:
(i) the Company is a corporation validly existing and in good
standing under the laws of Florida and is duly qualified to do
business as a foreign corporation and is in good standing under the
laws of each jurisdiction which requires such qualification wherein it
owns or leases properties or conducts business, except in such
jurisdictions in which the failure to so qualify, singly or in the
aggregate, would not have a Material Adverse Effect;
(ii) AFI is a corporation validly existing and in good standing
under the laws of Delaware and is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification wherein it owns or
leases properties or conducts business, except in such jurisdictions
in which the failure to so qualify, singly or in the aggregate, would
not have a Material Adverse Effect;
(iii) the Company has the authorized, issued and outstanding
capitalization as set forth in the Final Memorandum under the caption
"Capitalization." All of the issued shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid and nonassessable and were not, to the best of such counsel's
knowledge, issued in violation of any preemptive or similar rights;
<PAGE> 17
17
(iv) the issued shares of capital stock of AFI have been duly
authorized and validly issued, are fully paid and nonassessable and,
except for directors' qualifying shares and except as otherwise set
forth in the Final Memorandum are owned of record and beneficially by
the Company, either directly or through wholly owned subsidiaries,
free and clear, to the best of such counsel's knowledge, of any
pledge, lien, encumbrance, security interest, restriction on voting or
transfer, preemptive rights or other defect or claim of any third
party;
(v) this Agreement has been duly authorized, executed and
delivered by the Company;
(vi) each of the Registration Rights Agreement and the Indenture
has been duly authorized, executed and delivered by the Company and
the Subsidiary Guarantors and constitute legal, valid and binding
obligations of the Company and AFI, enforceable against the Company in
accordance with their terms, except as the same may be limited by (A)
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights generally, including without
limitation the effect of statutory or other laws regarding fraudulent
conveyances or transfers, preferential transfers or distributions by
corporations to shareholders, (B) general principles of equity,
whether considered at law or at equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing,
or (C) other customary exceptions specified by such counsel in their
opinion and reasonably satisfactory to Counsel for the Initial
Purchaser;
(vii) the Notes have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Initial Purchaser pursuant to this
Agreement, will constitute legal, valid and binding obligations of the
Company and the Subsidiary Guarantors entitled to the benefits of the
Indenture and enforceable against the Company and the Subsidiary
Guarantors in accordance with their terms, except as may be limited by
(A) applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally, including without
limitation the effect of statutory or other laws regarding fraudulent
conveyances or transfers, preferential transfers or distributions by
corporations to shareholders, (B) general principles of equity,
whether considered at law or at equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing,
or (C) other customary exceptions specified by such counsel in their
opinion and reasonably satisfactory to Counsel for the Initial
Purchaser;
<PAGE> 18
18
(viii) the statements set forth under the headings "Risk Factors
-- Fraudulent Conveyance Considerations," "Description of the Notes,"
and "Plan of Distribution" in the Final Memorandum, insofar as such
statements constitute summaries of the legal matters, documents and
proceedings referred to therein, fairly summarize the matters referred
to therein;
(ix) the issuance, offering and sale and delivery of the Notes
to the Initial Purchaser pursuant to this Agreement, the delivery of
the Notes under this Agreement, the compliance by the Company and the
Subsidiary Guarantors with the other provisions of this Agreement and
the provisions of the Registration Rights Agreement, the Indenture and
the Notes, the consummation of the other transactions herein and
therein contemplated, including the Refinancing, and the consummation
of the other transactions contemplated hereby and in the Final
Memorandum do not (i) require the consent, approval, authorization,
order, registration or qualification of or with any governmental
authority or court, except such as may be required under state
securities or blue sky laws or except as may be contemplated by the
Registration Rights Agreement or (ii) (a) conflict with, result in a
breach or violation of, or constitute a default under the charter or
by-laws of the Company or AFI or (b) result in a breach or violation
of, or constitute a default under or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company or AFI pursuant to (1) any material contract,
loan agreement, note, indenture, mortgage, deed of trust, lease or
other agreement or instrument to which the Company or AFI is a party,
or by which the Company or AFI or any of their respective properties
is bound that has been identified to such Counsel as being the only
such documents that are material to the Company or AFI, as applicable,
by officers of such entity pursuant to an officers' certificate
attached to such opinion, or (2) to the best of such Counsel's
knowledge, (x) any statute, rule or regulation that in such Counsel's
experience is generally applicable to transactions of the type
contemplated by the Final Memorandum or (y) any judgment, order or
decree of any governmental authority or court or arbitrator applicable
to the Company or AFI, except as rights to indemnity and contribution
may be limited by federal or state securities laws or public policy;
(x) to the best knowledge of such counsel, there are no
pending or threatened legal or governmental proceedings to which the
Company is a party that would be required under the Securities Act to
be described in a registration statement or a prospectus delivered at
the time of the confirmation of the sale of an offering of securities
registered under the Securities Act that are not described in the
Final Memorandum, or, to such counsel's best knowledge after due
inquiry, that seek to restrain, enjoin, prevent the consummation of or
otherwise challenge (i) the Acquisition or (ii) the issuance or sale
of the Notes to the Initial Purchaser;
<PAGE> 19
19
(xi) assuming the accuracy of the representations and warranties
of the Initial Purchaser and compliance by them with their agreements
contained herein, no registration of the Notes under the Securities
Act is required, and no qualification of the Indenture under the Trust
Indenture Act of 1939 is necessary, for the offer and sale by the
Initial Purchaser of the Notes in the manner contemplated by this
Agreement; and
(xii) the Company is not and, after giving effect to the
Refinancing, will not be an "investment company" within the meaning of
the Investment Company Act without taking account of any exemption
arising out of the number of holders of securities of the Company.
In addition, such Counsel shall also state that such counsel has
participated in conferences with officers and representatives of the Company,
representatives of the independent public accountants for the Company and the
Initial Purchaser at which the contents of the Final Memorandum and related
matters were discussed, and no facts have come to the attention of such Counsel
that lead such Counsel to believe that the Final Memorandum, as of its date or
as of the Closing Date, contained or contains an untrue statement of a material
fact or omitted or omits to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading (it being understood that such Counsel need express no belief or
opinion with respect to the financial statements and other financial data
included therein).
All references in this Section 6(b) to the Final Memorandum shall be deemed
to include any amendment or supplement thereto at the Closing Date.
(d) (i) The Initial Purchaser shall have received from the General Counsel
of the Company, an opinion, dated the Closing Date, substantially to the effect
that the Company and AFI have such permits, licenses, franchises and
authorizations (collectively, "Authorizations") from all regulatory or
governmental officials, bodies or tribunals as are necessary to own, lease and
operate its respective properties and to conduct its business in the manner
described in the Offering Memorandum and that, to such counsel's knowledge, the
Company and AFI have fulfilled and performed all of its material obligations
with respect to such Authorizations, certifications, accreditation or
eligibility and no event has occurred which allows, or after notice or lapse of
time would allow, revocation or termination thereof except where such revocation
or termination would not have a Material Adverse Effect.
(e) The Initial Purchaser shall have received from Shearman & Sterling,
Counsel for the Initial Purchaser, such opinion or opinions, dated the Closing
Date, with respect to the
<PAGE> 20
20
issuance and sale of the Notes and other related matters as the Initial
Purchaser may reasonably require, and the Company shall have furnished to such
counsel such documents as they reasonably request for the purpose of enabling
them to pass upon such matters;
(f) (i) the representations and warranties on the part of the Company in
this Agreement shall be true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date, and the
Company shall have complied with all the agreements and satisfied all the
conditions on their part to be performed or satisfied hereunder at or prior to
the Closing Date;
(ii) since the date of the most recent financial statements included in
the Final Memorandum, there shall have been no change nor any development or
event involving a prospective change constituting a Material Adverse Effect; and
(iii) the Company shall have furnished to the Initial Purchaser a
certificate of the Company signed by the chief executive officer and the
principal financial or accounting officer of the Company dated the Closing Date,
to the effect that the signers of such certificate have carefully examined the
Final Memorandum, any amendment or supplement to the Final Memorandum and this
Agreement and to the effect set forth in clauses (i) and (ii) above.
(g) At the Execution Time and at the Closing Date, Arthur Andersen LLP
shall have furnished to the Initial Purchaser a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, in form and
substance satisfactory to the Initial Purchaser, confirming that they are
independent accountants within the meaning of Rule 101 of the AICPA and the
applicable rules and regulations thereunder and substantially to the effect
that:
(i) in their opinion the audited financial statements of the Company
included in the Final Memorandum and reported on by them comply in form in
all material respects with the generally accepted accounting principles
("GAAP"); and
(ii) on the basis of a reading of the latest unaudited financial
statements made available by the Company and AFI, as applicable; their
limited review of the unaudited interim financial information; carrying out
certain specified procedures (but not an examination in accordance with
generally accepted auditing standards) which would not necessarily reveal
matters of significance with respect to the comments set forth in such
letter; a reading of the minutes of the meetings of the stockholders,
directors and audit and compensation committees of the Company and AFI; and
inquiries of certain officials of the Company who have responsibility for
financial and accounting matters of the Company and AFI as to transactions
and events subsequent
<PAGE> 21
21
to February 28, 1998, nothing came to their attention which caused them to
believe that:
(A) any unaudited financial statements included in the Final
Memorandum are not, in all material respects, in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements
included in the Final Memorandum; or
(B) with respect to the period subsequent to December 31, 1997,
there were any changes, at a specified date not more than three
business days prior to the date of the letter, in the long-term debt
or other long-term liabilities of the Company or AFI, or decreases in
total current assets or increases in total current liabilities of the
Company and AFI as compared with the amounts shown on the December 31,
1997 consolidated balance sheet included in the Final Memorandum, or
for the period from January 1, 1998 to such specified date there were,
as compared with the corresponding period in the preceding year, any
decreases in net sales, gross profit, operating income or net income
or any increases in interest expense of the Company and AFI, except in
all instances for changes, decreases or increases set forth in such
letter, in which case the letter shall be accompanied by an
explanation by the Company as to the significance thereof unless said
explanation is not deemed necessary by the Initial Purchaser; or
(iii) they have performed certain other specified procedures as a result of
which they determined that certain information of an accounting, financial or
statistical nature (which is limited to accounting, financial or statistical
information derived from the general accounting records of the Company and AFI),
as it relates to the Company, set forth in the Final Memorandum, including
without limitation the information set forth under the captions "Offering
Memorandum Summary," "Risk Factors," "Use of Proceeds," "Capitalization,"
"Unaudited Pro Forma Condensed Consolidated Financial Statements," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business," "Management" and "Description of the Notes" in the Final Memorandum,
agrees with the accounting records of the Company and AFI, excluding any
questions of legal interpretation; and
(iv) on the basis of a reading of the unaudited pro forma financial
statements (the "pro forma financial statements") included in the Final
Memorandum; carrying out certain specified procedures; inquiries of certain
officials of the Company who have responsibility for financial and accounting
matters; and proving the arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts in
<PAGE> 22
22
the pro forma financial statements, nothing came to their attention which
caused them to believe that pro forma adjustments have not been properly
applied to the historical amounts in the computation of such statements.
All references in this Section 6(g) to the Final Memorandum shall be deemed
to include any amendment or supplement thereto at the date of the letter.
(h) The Notes shall have been designated as PORTAL-eligible securities in
accordance with the rules and regulations of the NASD.
(i) (i) Neither the Company nor AFI shall have sustained since the date of
the latest audited financial statements included in the Final Memorandum losses
or interferences with their businesses, taken as a whole, 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 Final Memorandum or (ii) since such date, there
shall not have been any change in the capital stock or long-term debt of the
Company or AFI or any change, or any development involving a prospective change,
in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company or AFI, taken as a
whole, otherwise than as set forth or contemplated in the Final Memorandum, the
effect of which, in any such case described in clause (i) or (ii), is, in the
reasonable judgment of the Initial Purchaser, so material and adverse as to make
it impracticable or inadvisable to proceed with the offering or the delivery of
the Notes being delivered on the Closing Date on the terms and in the manner
contemplated herein and in the Final Memorandum.
(j) Subsequent to the execution and delivery of this Agreement, there shall
not have occurred any of the following: (i) trading in securities generally on
the New York Stock Exchange or The NASDAQ National Market, or in the
over-the-counter market shall have been suspended or materially limited, or
minimum prices shall have been established on such exchange; (ii) a banking
moratorium shall have been declared by federal or New York State authorities;
(iii) the United States shall have become engaged in hostilities, there shall
have been an escalation in hostilities involving the United States or there
shall have been a declaration of a national emergency or war by the United
States; or (iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States shall be
such) as to make it, in the reasonable judgment of the Initial Purchaser,
impracticable or inadvisable to proceed with the offering or delivery of the
Notes being delivered on the Closing Date on the terms and in the manner
contemplated herein and in the Final Memorandum.
<PAGE> 23
23
(k) None of the issuance and sale of the Notes pursuant to this Agreement,
the Refinancing or any of the other transactions contemplated by any of the
Refinancing Documents or the Final Memorandum shall be enjoined (temporarily or
permanently) and no restraining order or other injunctive order shall have been
issued or any action, suit or proceeding shall have been commenced with respect
to this Agreement or any of the other transactions contemplated by the Final
Memorandum, before any court or governmental authority.
(l) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Securities Act) or any notice given of any intended or
potential decrease in any such rating or of a possible change in any such rating
that does not indicate the direction of the possible change.
(m) Prior to the Closing Date, the Company shall have furnished to the
Initial Purchaser such further information, certificates and documents as the
Initial Purchaser may reasonably request.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Initial Purchaser and Counsel for the
Initial Purchaser, this Agreement and all obligations of the Initial Purchaser
hereunder may be canceled at the Closing Date by the Initial Purchaser. Notice
of such cancellation shall be given to the Company in writing or by telephone or
telegraph confirmed in writing.
The documents required to be delivered by this Section 6 will be
delivered at the office of Counsel for the Initial Purchaser, at 599 Lexington
Avenue, New York, New York, on the Closing Date.
7. Payment of Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, the Company will pay all
expenses incident to the performance of its obligations under this Agreement,
including the fees and disbursements of its accountants and counsel, the cost of
printing and delivery of the Preliminary Memorandum, the Final Memorandum, all
amendments thereof and supplements thereto, this Agreement and all other
documents relating to the offering, the cost of preparing, printing, packaging
and delivering the Notes, the fees and disbursements, including fees of counsel
incurred in compliance with Section 5(d), the fees and disbursements of the
Trustee, the fees of any agency that rates the Notes and the fees and expenses
incurred in connection with the admission of the Notes for trading in the PORTAL
system. If the sale of the Notes provided for herein is not consummated because
any
<PAGE> 24
24
condition to the obligations of the Initial Purchaser set forth in Section 5
hereof is not satisfied or because of any refusal, inability or failure on the
part of the Company to perform any agreement herein or comply with any provision
hereof other than by reason of default by the Initial Purchaser in payment for
the Notes on the Closing Date, the Company will reimburse the Initial Purchaser
upon demand for all out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by them in connection
with the proposed purchase and sale of the Notes.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless the Initial Purchaser, the directors, officers,
employees and agents of the Initial Purchaser and each person who controls the
Initial Purchaser within the meaning of either the Securities Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Securities
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Memorandum, the Final Memorandum or any information provided by the
Company or any of its Affiliates 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, in the light of the
circumstances under which they were made, not misleading, and agree to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company will 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 any such untrue
statement or alleged untrue statement or omission or alleged omission (i) made
in the Preliminary Memorandum or the Final Memorandum, or in any amendment
thereof or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Initial Purchaser
specifically for inclusion therein or (ii) made in the Preliminary Memorandum if
a copy of the Final Memorandum was not delivered by or on behalf of the Initial
Purchaser to the person asserting any claim against the Initial Purchaser, the
Final Memorandum was required by law to have been so delivered by the Initial
Purchaser and the untrue statement contained in or omission from such
Preliminary Memorandum was corrected in the Final Memorandum. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have.
(b) The Initial Purchaser agrees to indemnify and hold harmless
the Company, its directors, its officers, its employees, its agents and each
person who controls the Company within the meaning of either the Securities Act
or the Exchange Act, to the same extent as the foregoing indemnity from the
Company to the Initial Purchaser, but only with reference to written information
relating to the Initial Purchaser furnished to the Company by or on behalf of
<PAGE> 25
25
the Initial Purchaser specifically for inclusion in the Preliminary Memorandum
or the Final Memorandum (or in any amendment or supplement thereto). This
indemnity agreement will be in addition to any liability that the Initial
Purchaser may otherwise have. The Company acknowledges that the name of the
Initial Purchaser set forth on the front and back covers, the statements set
forth in the last paragraph of the cover page, the last paragraph of the inside
cover page and certain information under the heading "Plan of Distribution" in
the Preliminary Memorandum and the Final Memorandum constitute the only
information furnished in writing by or on behalf of the Initial Purchaser for
inclusion in the Preliminary Memorandum or the Final Memorandum (or any
amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. It is understood that the indemnifying party shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all such indemnified parties and that all
such fees and expenses shall be reimbursed as they are incurred. Such firm shall
be designated in
<PAGE> 26
26
writing by the Initial Purchaser in the case of parties indemnified pursuant to
paragraph (a) above and by the Company in the case of parties indemnified
pursuant to paragraph (b) above. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent (not to be
unreasonably withheld), but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment to the extent required by paragraph (a) or (b) above, as
applicable. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the third
and fourth sentences of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 20 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least five days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. An indemnifying party
will not, without the prior written consent of the indemnified parties, settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company, on the one hand, and the Initial
Purchaser severally and not jointly, on the other, agree to contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending same)
(collectively, "Losses") to which the Company, on the one hand, and the Initial
Purchaser, on the other, may be subject in such proportion as is appropriate to
reflect the relative benefits received by the Company, on the one hand and by
the Initial Purchaser, on the other, from the offering of the Notes; provided,
however, that in no case shall the Initial Purchaser be responsible for any
amount in excess of the purchase discount or commission applicable to the Notes
purchased by the Initial Purchaser hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Company, on
the one hand and the Initial Purchaser on the other, shall contribute 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 of the Initial Purchaser,
on the other, in connection with the statements or omissions which resulted in
such Losses as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the total net proceeds
from the offering (before deducting expenses), and
<PAGE> 27
27
benefits received by the Initial Purchaser shall be deemed to be equal to the
total purchase discounts and commissions received by the Initial Purchaser from
the Company in connection with the purchase of the Notes hereunder. Relative
fault shall be determined by reference to whether any alleged untrue statement
or omission relates to information provided by the Company or the Initial
Purchaser. The Company and the Initial Purchaser agree that it would not be just
and equitable if contribution were determined by pro rata allocation or any
other method of allocation which does not take into account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who controls the
Initial Purchaser within the meaning of either the Securities Act or the
Exchange Act and each director, officer, employee and agent of the Initial
Purchaser shall have the same rights to contribution as the Initial Purchaser,
and each person who controls the Company within the meaning of either the
Securities Act or Exchange Act and each officer and director employee and agent
of the Company shall have the same rights to contribution as the Company,
subject in each case to the applicable terms and conditions of this paragraph
(d).
9. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Initial Purchaser, by notice given to the Company
prior to delivery of and payment for the Notes, if prior to such time any of the
events described in Section 6(i) or 6(j) shall have occurred or if the Initial
Purchaser shall decline to purchase the Notes for any reason permitted under
this Agreement.
10. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company, or their officers and of the Initial Purchaser set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of the Initial Purchaser or the Company
or any of the officers, directors or controlling persons referred to in Section
8 hereof, and will survive delivery of and payment for the Notes. The provisions
of Sections 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
11. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Initial Purchaser, will be
mailed, delivered or telecopied and confirmed to it at 100 North Tryon Street,
Charlotte, North Carolina 28255, Attention: James Rose, or, if sent to the
Company, will be mailed, delivered or telecopied and confirmed to the Company at
5100 W. Lemon Street, Suite 312, Tampa, Florida 33609, Attention: Tom J. Landa.
12. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and the
officers and directors and
<PAGE> 28
28
controlling persons referred to in Section 8 hereof, and no other person will
have any right or obligation hereunder.
13. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York.
14. Business Day. For purposes of this Agreement, "business day"
means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on
which banking institutions in The City of New York are authorized or obligated
by law, executive order or regulation to close.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
<PAGE> 29
29
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this Agreement and your acceptance shall represent a binding agreement between
the Company and the Initial Purchaser.
Very truly yours,
AMERISTEEL CORPORATION
By:
--------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
NATIONSBANC MONTGOMERY SECURITIES LLC
By:
-----------------------------------
Name:
Title:
<PAGE> 30
30
Schedule I
<TABLE>
<CAPTION>
Principal Amount of
Name of the Initial Purchaser Notes to Be Purchased
- --------------------------------------- ---------------------
<S> <C>
NationsBanc Montgomery Securities LLC $130,000,000
-----------------
Total $130,000,000
</TABLE>
<PAGE> 31
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
<PAGE> 1
EXHIBIT 11
Statement re: Computation of Per Share Earnings
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net Income ($000s) $30,282 $ 8,052 $ 2,120 $10,501 $(22,711)
Basic weighted average
number of common shares (000s) 10,103 10,087 10,062 10,000 10,000
Diluted weighted average
number of common and
common equivalent shares (000s) 10,174 10,087 10,062 10,000 10,000
Basic earnings per common share $ 3.00 $ .80 $ .21 $ 1.05 $ (2.27)
Diluted earnings per common share $ 2.98 $ .80 $ .21 $ 1.05 $ (2.27)
</TABLE>
<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 dated April 24, 1998, except with respect to the matters discussed
in Note L, as to which the date is June 2, 1998, (and to all references to our
firm) included in and made a part of this registration statement.
ARTHUR ANDERSEN LLP
Tampa, Florida,
June 2, 1998
