<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 1998
REGISTRATION NO. 333-55857
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AMERISTEEL CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
FLORIDA 3312 59-0792436
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification) Identification No.)
</TABLE>
5100 W. LEMON STREET
TAMPA, FLORIDA 33609
(813) 286-8383
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
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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)
AMERISTEEL FINANCE, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8930 52-2017595
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification) Identification No.)
</TABLE>
DELAWARE TRUST BUILDING
900 MARKET STREET
SUITE 200
WILMINGTON, DELAWARE 19801
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
TOM ROSE
DELAWARE TRUST BUILDING
900 MARKET STREET
SUITE 200
WILMINGTON, DELAWARE 19801
(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. [ ]
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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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<PAGE> 2
SUBJECT TO COMPLETION, DATED JULY 28, 1998
OFFER TO EXCHANGE
ALL OUTSTANDING
8 3/4% SENIOR NOTES DUE 2008
($130,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
8 3/4% SERIES B 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% Series B 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.
---------------------
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.
<PAGE> 3
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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<PAGE> 4
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, Inc., 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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<PAGE> 5
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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<PAGE> 6
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 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% Series B
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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<PAGE> 7
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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<PAGE> 8
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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<PAGE> 9
THE NOTES
Securities Offered......... $130,000,000 aggregate principal amount of 8 3/4%
Series B 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 inventories 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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<PAGE> 10
"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 of $127 million 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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<PAGE> 11
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 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 following unaudited pro forma consolidated balance sheet data of the
Company at March 31, 1998 gives effect to the Prior Offering and the application
of the proceeds therefrom, as if the Prior Offering had occurred on March 31,
1998. 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> 13
<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
======== ======= ========
Basic earnings (loss) per common share:
Income before extraordinary item......................... $ 3.00 $ 0.10 $ 3.10
Extraordinary item....................................... $ -- $ (0.24) $ (0.24)
Net income............................................... $ 3.00 $ (0.14) $ 2.86
Diluted earnings (loss) per common share:
Income before extraordinary item......................... $ 2.98 $ 0.10 $ 3.08
Extraordinary item....................................... $ -- $ (0.24) $ (0.24)
Net income............................................... $ 2.98 $ (0.14) $ 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 (excluding the
extraordinary item). See "Capitalization."
(3) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes and extraordinary item plus fixed charges. Fixed
charges consist of interest incurred (which includes amortization of
deferred financing costs (excluding the extraordinary item)) whether
expensed or
12
<PAGE> 14
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 (long term plus short term) 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.
NOTES TO UNAUDITED PRO FORMA FINANCIAL DATA
The Unaudited Pro Forma Financial Data as of March 31, 1998 and for the
year ended March 31, 1998 give effect to the following unaudited pro forma
adjustments.
<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 approximately 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 benefit................................................. $(2,440)
=======
</TABLE>
13
<PAGE> 15
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
======== ======== ======== ======== ========
Basic earnings (loss) per common share:
Income (loss) before extraordinary item................... $ (2.20) $ 1.05 $ 0.21 $ 0.80 $ 3.00
Extraordinary item........................................ $ (0.07) $ -- $ -- $ -- $ --
Net income (loss)......................................... $ (2.27) $ 1.05 $ 0.21 $ 0.80 $ 3.00
Diluted earnings (loss) per common share:
Income (loss) before extraordinary item................... $ (2.20) $ 1.05 $ 0.21 $ 0.80 $ 2.98
Extraordinary item........................................ $ (0.07) $ -- $ -- $ -- $ --
Net income (loss)......................................... $ (2.27) $ 1.05 $ 0.21 $ 0.80 $ 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> 16
<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) In calculating the ratio of EBITDA to interest expense, interest expense
includes amortization of deferred financing costs (excluding the
extraordinary item).
(5) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes 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> 17
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> 18
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> 19
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> 20
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> 21
(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> 22
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 Prior Offering of $5.1 million,
approximately $1.2 million of cash on hand has been applied to reduce prior
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> 23
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
======== ======= ========
Basic earnings (loss) per common share:
Income before extraordinary item................... $ 3.00 $ 0.10 $ 3.10
Extraordinary item................................. $ -- $ (0.24) $ (0.24)
Net income......................................... $ 3.00 $ (0.14) $ 2.86
Diluted earnings (loss) per common share:
Income before extraordinary item................... $ 2.98 $ 0.10 $ 3.08
Extraordinary item................................. $ -- $ (0.24) $ (0.24)
Net income......................................... $ 2.98 $ (0.14) $ 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> 24
<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>
- ---------------
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Consolidated Financial Statements as of March 31,
1998 and for the year ended March 31, 1998 give effect to the following pro
forma adjustments:
<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)
=======
</TABLE>
23
<PAGE> 25
<TABLE>
<S> <C> <C>
(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 approximately 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 benefit................................................. $(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> 26
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
======== ======== ======== ======== ========
Basic earnings (loss) per common share:
Income (loss) before extraordinary item.................. $ (2.20) $ 1.05 $ 0.21 $ 0.80 $ 3.00
Extraordinary item....................................... $ (0.07) $ -- $ -- $ -- $ --
Net income (loss)........................................ $ (2.27) $ 1.05 $ 0.21 $ 0.80 $ 3.00
Diluted earnings (loss) per common share:
Income (loss) before extraordinary item.................. $ (2.20) $ 1.05 $ 0.21 $ 0.80 $ 2.98
Extraordinary item....................................... $ (0.07) $ -- $ -- $ -- $ --
Net income (loss)........................................ $ (2.27) $ 1.05 $ 0.21 $ 0.80 $ 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> 27
<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) In calculating the ratio of EBITDA to interest expense, interest expense
includes amortization of deferred financing costs (excluding the
extraordinary item).
(5) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes 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> 28
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> 29
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> 30
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> 31
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>
30
<PAGE> 32
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 (subject to a borrowing base), and a $40
million aggregate principal amount Subordinated Intercompany Note with maturity
dates through February 25, 2004 and owed to the Holding Company.
On July 14, 1998, the Company amended and restated its revolving credit
agreement (the "Revolving Credit Agreement") increasing the facility to $150
million. The Revolving Credit Agreement no longer contains a "borrowing base"
provision and expires on July 13, 2003. The Revolving Credit Agreement provides
for a substantial portion of the Company's liquidity by making available up to
$150 million in borrowings. The Revolving Credit Agreement continues to be
secured by the Company's inventory and receivables and the Subsidiary Guarantors
continue to guarantee the obligations of the Company under the Revolving Credit
Agreement. The Indenture imposes a "borrowing base" test to the extent that the
Company seeks to borrow more than $140 million under the Revolving Credit
Agreement.
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 14, 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.
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.
31
<PAGE> 33
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.
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
32
<PAGE> 34
technologies and remediation methods by third parties, evaluation of those
technologies and methods by the Company's consultants, and quotations and
third-party estimates of costs of remediation-related services provided to the
Company, or of which the Company and its consultants are aware, the Company and
its consultants believe that the Company's cost estimates are reasonable. In
light of the uncertainties inherent in determining the costs associated with the
clean-up of such contamination, including the time periods over which such costs
must be paid, the extent of contribution by parties which are jointly and
severally liable, and the nature and timing of payments to be made under cost
sharing arrangements, there can be no assurance that the ultimate costs of
remediation may not be more or less than the estimated remediation costs that
the Company has recorded.
The Company also incurs significant ongoing costs to comply with current
standards promulgated by Environmental Regulatory Laws which costs are being
expensed and paid from current operations. Although it is the Company's policy
to comply with all Environmental Regulatory Laws and the Company believes that
it is currently in material compliance with all Environmental Regulatory Laws.
Environmental 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> 35
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.
34
<PAGE> 36
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
35
<PAGE> 37
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.
36
<PAGE> 38
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.
37
<PAGE> 39
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.
38
<PAGE> 40
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.
39
<PAGE> 41
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> 42
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> 43
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> 44
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.
43
<PAGE> 45
LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than routine
litigation incidental to the Company's business, to which the Company is a party
or in which any of its property is the subject, and no such proceedings are
known to be contemplated by governmental authorities. However, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Compliance with Environmental Laws and Regulations" and "Note 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> 46
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........................ 58 Vice President, Steel Mill Operations
J. Neal McCullohs.................... 41 Vice President, Mill Product Sales
Robert P. Muhlhan.................... 48 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> 47
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> 48
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 1998, the aggregate restricted stock holdings and value
of such holdings were for Mr. Casey 300,000 shares and $6,000,000,
respectively, and for Mr. Landa 10,500 shares and $210,000, 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 $100,000 signing bonus pursuant to Mr. Landa's employment offer
in March 1995.
(4) Mr. Andrew was promoted to an Executive Officer position in October 1997. He
was not employed by the Company in the 1996 fiscal year.
(5) Mr. Rogers was hired as an Executive Officer in fiscal 1998.
47
<PAGE> 49
Options Grants Table
The following table shows information concerning stock options granted
during fiscal 1998 for each Named Executive Officer.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED
-------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------
NAME GRANTED(#) FISCAL YEAR ($/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 3,420/50,640
Tom J. Landa.......................... 4,320/11,140 32,400/81,050
Dennie Andrew......................... 0/5,500 0/38,750
James S. Rogers, II................... 0/2,000 0/13,000
</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.
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> 50
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.
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<PAGE> 51
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.
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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 Prospectus 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 (the
"Revolving Credit Agreement"), which provided up to $140 million in borrowings
subject to a "borrowing base." On July 14, 1998, the Company amended and
restated its Revolving Credit Agreement increasing the facility to $150 million.
The Revolving Credit Agreement does not contain a "borrowing base" provision and
now expires on July 13, 2003. The Revolving Credit Agreement continues to be
secured by the Company's inventory and receivables and the Subsidiary Guarantors
continue to guarantee the obligations of the Company under the Revolving Credit
Agreement. The Indenture imposes a
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<PAGE> 53
"borrowing base" test to the extent that the Company seeks to borrow more than
$140 million under the Revolving Credit Agreement.
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> 54
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
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<PAGE> 55
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
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<PAGE> 56
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> 57
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> 58
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> 59
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
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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:
State Street Bank & Trust Company State Street Bank & Trust Company
P.O. Box 778 Corporate Trust Department
Boston, MA 02102-0078 Two International Place
Attention: Kellie Mullen Fourth Floor
Boston, MA 02102-0078
Attention: Kellie Mullen
</TABLE>
By Facsimile for Eligible Institutions:
(617) 664-5290
Attention: Kellie Mullen
Confirm by Telephone:
(617) 664-5314
For information or confirmation by telephone: (617) 664-5314
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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.
APPRAISAL RIGHTS
Holders of the Old Notes will not have dissenters' rights or appraisal
rights in connection with the Exchange Offer.
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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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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.
83
<PAGE> 85
"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> 86
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> 87
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> 88
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> 89
"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> 90
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> 91
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 July 14, 1998)
F-2
<PAGE> 92
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 $535,685
======== ========
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE> 93
AMERISTEEL CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------
1998 1997 1996
--------- --------- ---------
($ 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> 94
AMERISTEEL CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
[CAPTION]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
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) $185,715
========== ==== ======== ======== ======= ========
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE> 95
AMERISTEEL CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------
1998 1997 1996
-------- -------- --------
($ 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> 96
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> 97
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> 98
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> 99
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 $5.3 million as of March 31, 1998, under the Trade
Loan Agreements. The loan bears interest at 7.3% and matures on June 30, 1998.
Proceeds were used for the purchase of steel mill equipment.
F-10
<PAGE> 100
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The maturities of long-term borrowings for the fiscal years subsequent to
March 31, 1998 are as follows:
<TABLE>
<CAPTION>
FISCAL AMOUNT
- ------ ----------------
($ 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 $3,996
======= ====== ======
</TABLE>
F-11
<PAGE> 101
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the deferred tax assets and liabilities consisted of the
following at March 31:
<TABLE>
<CAPTION>
1998 1997
-------- --------
($ 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 $1.6 million each year.
NOTE F -- BENEFIT PLANS
The Company maintains a defined benefit pension plan covering substantially
all employees. The benefits are based on years of service and compensation
during the period of employment. Annual contributions are made in conformity
with minimum funding requirements and maximum deductible limitations.
F-12
<PAGE> 102
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The plan's funded status and the amounts recognized in the accompanying
consolidated statements of financial position are as follows:
<TABLE>
<CAPTION>
MARCH 31,
---------------------
1998 1997
--------- ---------
($ 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 $0 thousand, respectively.
F-13
<PAGE> 103
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
POST RETIREMENT BENEFITS
The Company currently provides specified health care benefits to retired
employees. Employees who retire after a certain age with specified years of
service become eligible for benefits under this unfunded plan. The Company has
the right to modify or terminate these benefits. The following table summarizes
the accumulated post retirement benefit obligations included in the Company's
consolidated statements of financial position:
<TABLE>
<CAPTION>
MARCH 31,
---------------
1998 1997
------ ------
($ 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> 104
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> 105
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> 106
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> 107
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> 108
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 $23.3 million at
March 31, 1998, is to depreciate the facility over its expected remaining useful
life of 14 years and to periodically evaluate the remaining life and
recoverability of the equipment. There can be no assurance, however, that the
technology or the two-stage facility and process will be commercially developed
and operated on a cost efficient basis.
F-19
<PAGE> 109
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE J -- COMMITMENTS
OPERATING LEASES
The Company leases certain equipment and real property under noncancelable
operating leases. Aggregate future minimum payments under these leases are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31, AMOUNT
- --------------------- -----------------
($ 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> 110
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 14, 1998. Management
also used $20 million to repay a portion of the Company's Subordinated
Intercompany Note in June 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 incurred an extraordinary charge of approximately
$2.1 million when the First Mortgage Notes were redeemed. The extraordinary
charge consisted of the writeoff of approximately $1.5 million of unamortized
deferred finance costs and a call premium of approximately $1.9 million, net of
a tax benefit of approximately $1.3 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
which 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> 111
AMERISTEEL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On July 14, 1998, the Company amended and restated the Revolving Credit
Agreement increasing the facility to $150 million. The Amended and Restated
Credit Agreement is no longer subject to a "borrowing base" provision and now
expires on July 13, 2003. The indenture with respect to the Senior Notes imposes
a "borrowing base" test to the extent that the Company seeks to borrow more than
$140 million under the Revolving Credit Agreement.
F-22
<PAGE> 112
------------------------------------------------------
------------------------------------------------------
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.. 14
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% SERIES B SENIOR NOTES
DUE 2008
--------------------------
PROSPECTUS
--------------------------
July , 1998
------------------------------------------------------
------------------------------------------------------
<PAGE> 113
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> 114
<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))
10.4 -- $150,000,000 Amended and Restated Credit Agreement dated
July 14, 1998 by and among the Company, NationsBank,
National Association, The Bank of Tokyo-Mitsubishi, Ltd.,
First Union National Bank and certain other lenders.
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>
- ---------------
* Previously filed
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.
II-2
<PAGE> 115
(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.
(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> 116
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Knoxville,
State of Tennessee, on the 27 day of July, 1998.
AmeriSteel Finance, Inc.
By: /s/ TOM ROSE
-----------------------------------
Tom Rose
President
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/ TOM ROSE President (Principal Executive July 27, 1998
- ----------------------------------------------------- Officer); Director
Tom Rose
/s/ GREG MOTES Vice President (Principal July 27, 1998
- ----------------------------------------------------- Financial Officer and
Greg Motes Principal Accounting Officer);
Director
</TABLE>
<PAGE> 117
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Tampa,
State of Florida, on the 27 day of July, 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, July 27, 1998
- ----------------------------------------------------- Chairman of the Board;
Phillip E. Casey Director (Principal Executive
Officer)
/s/ KOICHI TAKASHIMA Director July 27, 1998
- -----------------------------------------------------
Koichi Takashima
/s/ AKIHIKO TAKASHIMA Director July 27, 1998
- -----------------------------------------------------
Akihiko Takashima
/s/ HIDEICHIRO TAKASHIMA Director July 27, 1998
- -----------------------------------------------------
Hideichiro Takashima
/s/ RYUTARO YOSHIOKA Director July 27, 1998
- -----------------------------------------------------
Ryutaro Yoshioka
/s/ SHUZO HIKITA Vice President, Engineering; July 27, 1998
- ----------------------------------------------------- Director
Shuzo Hikita
/s/ J. DONALD HANEY Vice President; Director July 27, 1998
- -----------------------------------------------------
J. Donald Haney
/s/ TOM J. LANDA Vice President; Chief Financial July 27, 1998
- ----------------------------------------------------- Officer and Secretary
Tom J. Landa (Principal Financial Officer
and Principal Accounting
Officer); Director
</TABLE>
<PAGE> 1
Exhibit 4.3
[FACE OF NOTE]
AmeriSteel Corporation
8 3/4% 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 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.
<PAGE> 2
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> 3
(Form of Trustee's Certificate of Authentication)
This is one of the 8 3/4% Senior Notes Due 2008 described in the
within-mentioned Indenture.
STATE STREET BANK AND
TRUST COMPANY, as Trustee
By: _____________________________
Authorized Signatory
<PAGE> 4
[REVERSE SIDE OF NOTE]
AmeriSteel Corporation
8 3/4% 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.
<PAGE> 5
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> 6
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> 7
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> 8
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> 9
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> 10
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> 11
[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> 12
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> 13
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> 1
Exhibit 4.4
[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.
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.
<PAGE> 2
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> 3
(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> 4
[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.
<PAGE> 5
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> 6
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> 7
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> 8
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> 9
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> 10
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> 11
[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.
<PAGE> 12
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
Your signature whatsoever.
Signature Guarantee:
<PAGE> 13
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> 1
Exhibit 5
TRENAM, KEMKER, SCHARF, BARKIN, FRYE, O'NEILL & MULLIS
PROFESSIONAL ASSOCIATION
ATTORNEYS AT LAW
<TABLE>
<S> <C> <C>
TAMPA OFFICE ST. PETERSBURG OFFICE
2700 BARNETT PLAZA 2100 BARNETT TOWER
101 EAST KENNEDY BOULEVARD ONE PROGRESS PLAZA
POST OFFICE BOX 1102 POST OFFICE BOX 2245
TAMPA, FLORIDA 33601-1102 PLEASE REPLY TO ST. PETERSBURG, FLORIDA 33731-2245
TELEPHONE (813) 223-7474 TAMPA TELEPHONE (813) 898-7474
TELEFAX (813) 229-6553 TELEFAX (813) 229-6553
</TABLE>
July 24, 1998
Securities and Exchange Commission
450 5th Street, N.W.
Judiciary Plaza
Washington, DC 20549
Re: AmeriSteel Corporation
Registration Statement on Form S-4
File No. 333-55857
----------------------------------
Ladies and Gentlemen:
We have represented AmeriSteel Corporation (the "Company") in
connection with the Company's Registration Statement on Form S-4, (File No.
333-55857), as amended (the "Registration Statement"), as filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "Act"), to register the exchange of an aggregate principal of
$130,000,000 of its 8 3/4% Series B Senior Notes Due 2008 (the "New Notes") for
an equal principal amount of its outstanding 8 3/4% Senior Notes Due 2008 (the
"Original Notes," and with the New Notes collectively, the "Notes"). The
Original Notes have been issued pursuant to an indenture between the Company and
State Street Bank and Trust Company, as Trustee, dated as of March 30, 1998 (the
"Indenture").
This opinion is being provided as Exhibit 5 to the Registration
Statement. In this connection, you have requested our opinion as to certain
matters with respect to the New Notes. Capitalized terms defined in the
Registration Statement and not otherwise defined herein are used herein with the
meanings as so defined.
We have reviewed the Registration Statement, the Indenture and such
other documents, records and certificates of officers of the Corporation and its
subsidiaries and other instruments relating to the authorization and issuance of
New Notes as we deemed relevant or necessary for the opinions herein expressed.
With respect to various factual matters material to the opinions
expressed below, we have relied upon certain certificates and information
furnished by public officials and representatives of the Company. We have
assumed without inquiry or other investigation (a) the legal capacity of each
natural person executing the agreements described herein, (b) that there have
been no undisclosed
<PAGE> 2
SECURITIES AND EXCHANGE COMMISSION JULY 24, 1998
AMERISTEEL CORPORATION PAGE 2
FILE NO. 333-55857
- --------------------------------------------------------------------------------
modifications of any provision of any document reviewed by us in connection with
the rendering of the opinion and no undisclosed prior waiver of any right or
remedy contained in any of the documents, (c) the genuineness of each signature,
(d) the completeness of each document submitted to us, (e) the authenticity of
each document reviewed by us as an original, (f) the conformity to the original
of each document reviewed by us as a copy and the authenticity of the original
of each document received by us a copy, (g) that each transaction complies with
all tests of good faith, fairness, and conscionability required by law, and (h)
that each certificate or copy of a public record furnished by public officials
is accurate, complete, and authentic.
Based on the above, it is our opinion that the $130,000,000 principal
amount of New Notes proposed to be issued in exchange for an equal principal
amount of Original Notes have been duly authorized and when issued for exchange
in accordance with the Registration Statement, the Indenture and the Letter of
Transmittal, will be validly issued. The New Notes, upon due acceptance by the
Corporation of the Original Notes being tendered in exchange therefor as
provided in the Registration Statement, the Indenture and the Letter of
Transmittal will constitute valid and binding obligations of the Corporation,
enforceable against the Corporation in accordance with the terms of such
documents.
The opinion expressed in the second sentence of the preceding paragraph
is subject to the effect of bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting the rights and remedies of creditors generally.
This opinion letter speaks only as of its date. We undertake no obligation to
advise the addressees (or any other third party) of changes in law or fact that
occur after the date hereof, even though the change may affect the legal
analysis, a legal conclusion, or an informational confirmation in the opinion.
This firm hereby consents to the filing of this opinion as an Exhibit
to the S-4 Registration Statement and to the reference to it under the heading
"Legal Matters."
Sincerely,
TRENAM, KEMKER, SCHARF,
BARKIN, FRYE, O'NEILL & MULLIS
Professional Association
By:
Albert C. O'Neill, Jr.
<PAGE> 1
EXHIBIT 10.4
================================================================================
AMENDED AND RESTATED
CREDIT AGREEMENT
by and among
AMERISTEEL CORPORATION
as Borrower,
NATIONSBANK, NATIONAL ASSOCIATION,
as Administrative Agent and as Lender,
THE BANK OF TOKYO-MITSUBISHI, LTD
as Collateral Agent and Documentation Agent and as Lender,
FIRST UNION NATIONAL BANK,
as Co-Agent and as Lender,
and
THE LENDERS PARTY HERETO FROM TIME TO TIME
July 14, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
Definitions and Terms
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1.1. Amendment and Restatement.......................................3
1.2. Definitions.....................................................3
1.3. Rules of Interpretation........................................28
ARTICLE II
The Revolving Credit Facility
2.1. Revolving Loans................................................30
2.2. Payment of Interest............................................32
2.3. Payment of Principal...........................................33
2.4. Manner of Payment..............................................33
2.5. Revolving Notes................................................34
2.6. Pro Rata Payments..............................................34
2.7. Reductions.....................................................34
2.8. Conversions and Elections of Subsequent Interest Periods.......35
2.9. Increase and Decrease in Amounts...............................35
2.10. Unused Fee.....................................................35
2.11. Deficiency Advances; Failure to Purchase Participations........36
2.12. Use of Proceeds................................................36
2.13. Swing Line.....................................................37
ARTICLE III
Letters of Credit
3.1. Letters of Credit..............................................39
3.2. Reimbursement..................................................39
3.3. Letter of Credit Facility Fees.................................42
3.4. Administrative Fees............................................43
</TABLE>
i
<PAGE> 3
ARTICLE IV
Security
<TABLE>
<S> <C> <C>
4.1. Security........................................................44
4.3. Stock Pledge. ..................................................44
4.4. Security Interests. ............................................44
4.5. Further Assurances..............................................44
4.6. Information Regarding Collateral................................45
ARTICLE V
Change in Circumstances
5.1. Increased Cost and Reduced Return...............................46
5.2. Limitation on Types of Loans....................................47
5.3. Illegality......................................................48
5.4. Treatment of Affected Loans.....................................48
5.5. Compensation....................................................48
5.6. Taxes...........................................................49
ARTICLE VI
Conditions to Making Loans and Issuing Letters of Credit
6.1. Conditions of Initial Advance...................................51
6.2. Conditions of Revolving Loans and Letter of Credit..............53
ARTICLE VII
Representations and Warranties
7.1. Organization and Authority......................................55
7.2. Loan Documents..................................................55
7.3. Solvency........................................................56
7.4. Subsidiaries and Stockholders...................................56
7.5. Ownership Interests.............................................56
7.6. Financial Condition.............................................56
7.7. Title to Properties.............................................57
7.8. Taxes...........................................................57
7.9. Other Agreements................................................57
7.10. Litigation......................................................57
7.11. Margin Stock....................................................58
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
7.12. Investment Company..............................................58
7.13. Patents, Etc....................................................58
7.14. No Untrue Statement.............................................58
7.15. No Consents, Etc................................................58
7.16. Employee Benefit Plans..........................................59
7.17. No Default......................................................60
7.18. Environmental Laws..............................................60
7.19. Employment Matters..............................................60
7.20. RICO............................................................61
ARTICLE VIII
Affirmative Covenants
8.1. Financial Reports, Etc..........................................62
8.2. Maintain Properties.............................................63
8.3. Existence, Qualification, Etc...................................64
8.4. Regulations and Taxes...........................................64
8.5. Insurance.......................................................64
8.6. True Books......................................................64
8.7. Right of Inspection.............................................64
8.8. Observe all Laws................................................65
8.9. Governmental Licenses...........................................65
8.10. Covenants Extending to Other Persons............................65
8.11. Officer's Knowledge of Default..................................65
8.12. Suits or Other Proceedings......................................65
8.13. Notice of Environmental Complaint or Condition..................65
8.14. Environmental Compliance........................................65
8.15. Indemnification.................................................66
8.16. Further Assurances..............................................66
8.17. Employee Benefit Plans..........................................66
8.18. Continued Operations............................................67
8.19. New Subsidiaries................................................67
ARTICLE IX
Negative Covenants
9.1. Financial Covenants.............................................70
9.2. Acquisitions....................................................70
9.3 Capital Expenditures............................................70
9.4. Liens...........................................................71
9.5. Indebtedness....................................................72
9.6. Transfer of Assets..............................................73
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
9.7. Investments.....................................................73
9.8. Merger or Consolidation.........................................74
9.9. Restricted Payments.............................................74
9.10. Transactions with Affiliates....................................75
9.11. Compliance with ERISA...........................................75
9.12. Fiscal Year.....................................................76
9.13. Dissolution, etc................................................76
9.14. Limitations on Sales and Leasebacks.............................76
9.15. Change in Control...............................................77
9.16. Rate Hedging Obligations........................................77
9.17. Negative Pledge Clauses.........................................77
9.18. Prepayments, Etc. of Indebtedness...............................77
ARTICLE X
Events of Default and Acceleration
10.1. Events of Default...............................................78
10.2. Agents to Act...................................................81
10.3. Cumulative Rights...............................................81
10.4. No Waiver.......................................................81
10.5. Allocation of Proceeds..........................................81
ARTICLE XI
The Agents
11.1. Appointment, Powers, and Immunities.............................83
11.2. Reliance by Agents..............................................84
11.3. Defaults........................................................84
11.4. Rights as Lender................................................84
11.5. Indemnification.................................................85
11.6. Non-Reliance on Agents and Other Lenders........................85
11.7. Resignation of Agent............................................85
11.8. Sharing of Payments, etc........................................86
11.9. Fees............................................................86
ARTICLE XII
Miscellaneous
12.1. Assignments and Participations..................................87
12.2. Notices.........................................................88
12.3. Right of Set-off; Adjustments...................................90
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C>
12.4. Survival........................................................90
12.5. Expenses........................................................91
12.6. Amendments and Waivers..........................................91
12.7. Counterparts....................................................92
12.8. Termination.....................................................92
12.9. Indemnification; Limitation of Liability........................92
12.10. Severability....................................................93
12.11. Entire Agreement................................................93
12.12. Agreement Controls..............................................93
12.13. Usury Savings Clause............................................93
12.14. Payments........................................................94
12.15. Governing Law; Waiver of Jury Trial.............................94
EXHIBIT A Applicable Commitment Percentages..........................A-1
EXHIBIT B Form of Assignment and Acceptance..........................B-1
EXHIBIT C Notice of Appointment (or Revocation) of Authorized
Representative.............................................C-1
EXHIBIT D-1 Form of Borrowing Notice...................................D-1
EXHIBIT D-2 Form of Borrowing Notice--Swing Line Loans...............D-2-1
EXHIBIT E Form of Interest Rate Selection Notice.....................E-1
EXHIBIT F-1 Form of Revolving Note...................................F-1-1
EXHIBIT G Form of Opinion of Borrower's Counsel......................G-1
EXHIBIT H Compliance Certificate.....................................H-1
EXHIBIT I Form of Facility Guaranty..................................I-1
EXHIBIT J Form of Security Agreement ................................J-1
Schedule 4.6 Information Regarding Collateral...........................S-2
Schedule 7.4 Subsidiaries and Investments in Other Persons..............S-3
Schedule 7.6 Indebtedness...............................................S-4
Schedule 7.7 Liens......................................................S-5
Schedule 7.8 Tax Matters................................................S-6
Schedule 7.10 Litigation.................................................S-7
Schedule 7.18 Environmental..............................................S-9
Schedule 8.5 Insurance.................................................S-10
</TABLE>
v
<PAGE> 7
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of July 14, 1998
(the "Agreement"), is made by and among AMERISTEEL CORPORATION, a Florida
corporation having its principal place of business in Tampa, Florida (the
"Borrower"), NATIONSBANK, NATIONAL ASSOCIATION, a national banking association
organized and existing under the laws of the United States, in its capacity as a
Lender ("NationsBank"), and each other financial institution executing and
delivering a signature page hereto and each other financial institution which
may hereafter execute and deliver an instrument of assignment with respect to
this Agreement pursuant to Section 12.1 (hereinafter such financial institutions
may be referred to individually as a "Lender" or collectively as the "Lenders"),
and NATIONSBANK, NATIONAL ASSOCIATION, a national banking association organized
and existing under the laws of the United States, in its capacity as
administrative agent for the Lenders (in such capacity, and together with any
successor administrative agent appointed in accordance with the terms of Section
11.7, the "Administrative Agent"), FIRST UNION NATIONAL BANK, a national banking
association organized and existing under the laws of the United States, in its
capacity as a co-agent (the "Co-Agent"), and THE BANK OF TOKYO-MITSUBISHI, LTD
in its capacity as collateral agent and documentation agent for the Lenders (in
such capacity, the "Collateral Agent" and, together with the Administrative
Agent, the "Agents");
WITNESSETH:
WHEREAS, the Borrower, certain lenders (the "Original Lenders") and The
Bank of Tokyo, Ltd., New York Agency, as agent (the "Original Agent") have
entered into a Credit Agreement dated June 9, 1995 (as amended, the "Original
Agreement") pursuant to which the Original Lenders have made available to the
Borrower a revolving credit facility of up to $140,000,000, which revolving
credit facility is evidenced by revolving notes dated June 9, 1995 (the
"Original Notes"); and
WHEREAS, the obligations of the Borrower under the Original Agreement
are secured by certain assets of the Borrower as described in the Security
Agreement (as defined in the Original Agreement) between the Borrower and the
Original Agent; and
WHEREAS, the obligations of the Borrower under the Original Agreement
are guaranteed by AmeriSteel Finance, Inc. ("AFI") pursuant to the terms of the
Guaranty dated December 30, 1996 (the "AFI Guaranty"); and
WHEREAS, the obligations of AFI under the AFI Guaranty are secured by
certain assets of AFI as described in the security agreement between AFI and the
Original Agent dated December 30, 1996; and
1
<PAGE> 8
WHEREAS, the Borrower has issued its 8 3/4% Senior Notes Due 2008 in
the aggregate principal amount of $130,000,000 (the "Senior Notes"); and
WHEREAS, the Borrower has requested that the Lenders party hereto amend
and restate the Original Agreement in its entirety in the manner set forth
herein and that the Administrative Agent perform certain of the duties of the
Original Agent as described herein; and
WHEREAS, the Lenders and the Agents are willing to amend and restate
the Original Agreement and make available to the Borrower a revolving credit
facility of up to $150,000,000, the proceeds of which are to be used for general
corporate purposes and which shall include a letter of credit facility of up to
$50,000,000 for the issuance of standby and commercial letters of credit and a
swing line sublimit of up to $15,000,000, upon the terms and conditions set
forth herein;
NOW, THEREFORE, the Borrower, the Lenders and the Agents hereby agree
as follows:
2
<PAGE> 9
ARTICLE I
Definitions and Terms
1.1. Amendment and Restatement. The Borrower, the Agents and the
Lenders hereby agree that upon the effectiveness of this Agreement, the terms
and provisions of the Original Agreement shall be and hereby are amended and
restated in their entirety by the terms and conditions of this Agreement and the
terms and provisions of the Original Agreement, except as otherwise provided in
the next paragraph, shall be superseded by this Agreement.
Notwithstanding the amendment and restatement of the Original Agreement
by this Agreement, the Borrower shall continue to be liable to the Original
Agent and the Original Lenders with respect to agreements on the part of the
Borrower under the Original Agreement to indemnify and hold harmless the
Original Agent and the Original Lenders from and against all claims, demands,
liabilities, damages, losses, costs, charges and expenses to which the Original
Agent and the Original Lenders may be subject arising in connection with the
Original Agreement. All security interests heretofore created in favor of the
Collateral Agent for the benefit of the Original Lenders shall continue in full
force and effect and shall continue to secure payment of all of the Obligations.
This Agreement is given as a substitution of, and not as a payment of, the
obligations of Borrower under the Original Agreement and is not intended to
constitute a novation of the Original Agreement. Except as otherwise selected by
the Borrower by delivery of a Borrowing Notice or Interest Rate Selection Notice
prior to the Closing Date in accordance with the terms hereof, upon the
effectiveness of this Agreement all amounts outstanding and owing by Borrower
under the Original Agreement as of the Closing Date, shall constitute Advances
hereunder accruing interest with respect to the Base Rate Loans under the
Original Agreement, at the Base Rate hereunder. The parties hereto agree that
the Interest Periods for all Eurodollar Loans outstanding under the Original
Agreement on the Closing Date shall be terminated, the Original Lenders shall
grant a one-time waiver of any payments required under Section 2.6.3 of the
Original Agreement to the Lenders and the Borrower shall furnish to the
Administrative Agent Interest Rate Selection Notices for existing Loans and
Borrowing Notices for additional Loans as may be required in connection with the
allocation of Loans among Lenders in accordance with their Applicable Commitment
Percentages.
1.2. Definitions. For the purposes of this Agreement, in addition
to the definitions set forth above, the following terms shall have the
respective meanings set forth below:
"Acquisition" means the acquisition of (i) a controlling
equity interest in another Person (including the purchase of an option,
warrant or convertible or similar type security to acquire such a
controlling interest at the time it becomes exercisable by the holder
thereof), whether by purchase of such equity interest or upon exercise
of an option or warrant for, or conversion of securities into, such
equity interest, or (ii) assets of another Person which constitute all
or any material part of the assets of such Person or of a line
3
<PAGE> 10
or lines of business conducted by such Person. Neither the merger of
FLS into the Borrower nor the acquisition of receivables from AFI shall
be deemed an Acquisition.
"Adjusted Federal Funds Rate" means, for any day, the rate per
annum equal to the sum of (a) the Federal Funds Rate for such day plus
one-quarter of one percent (0.25%) plus (b) the Applicable Margin used
to determine the Base Rate.
"Advance" means a borrowing under the Revolving Credit
Facility consisting of a Base Rate Loan or a Eurodollar Rate Loan.
"Affiliate" means any Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is
under common control with the Borrower; or (ii) which beneficially owns
or holds 5% or more of any class of the outstanding voting stock (or in
the case of a Person which is not a corporation, 10% or more of the
equity interest) of the Borrower; or 5% or more of any class of the
outstanding voting stock (or in the case of a Person which is not a
corporation, 10% or more of the equity interest) of which is
beneficially owned or held by the Borrower. The term "control" means
the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether
through ownership of voting stock, by contract or otherwise.
"AFI" means AmeriSteel Finance, Inc., a Delaware corporation,
a Subsidiary of the Borrower.
"AFI Guaranty" means the Guaranty dated December 30, 1996
executed by AFI in favor of the Lenders and the Collateral Agent, as
amended, modified or supplemented from time to time.
"AFI Security Agreement" means the Security Agreement dated
December 30, 1996 executed by AFI in favor of the Collateral Agent for
the benefit of the Lenders, as amended, modified or supplemented from
time to time.
"Applicable Commitment Percentage" means, with respect to each
Lender at any time, a fraction, the numerator of which shall be such
Lender's Revolving Credit Commitment and the denominator of which shall
be the Total Revolving Credit Commitment, which Applicable Commitment
Percentage for each Lender as of the Closing Date is as set forth in
Exhibit A; provided that the Applicable Commitment Percentage of each
Lender shall be increased or decreased to reflect any assignments to or
by such Lender effected in accordance with Section 12.1.
"Applicable Lending Office" means, for each Lender and for
each Type of Loan, the "Lending Office" of such Lender (or of an
affiliate of such Lender) designated for such Type of Loan on the
signature pages hereof or such other office of such Lender (or an
affiliate of such Lender) as such Lender may from time to time specify
to the
4
<PAGE> 11
Administrative Agent and the Borrower by written notice in accordance
with the terms hereof as the office by which its Loans of such Type are
to be made and maintained.
"Applicable Margin" means that percent per annum set forth
below, which shall be based upon the Consolidated Leverage Ratio for
the Four-Quarter Period most recently ended as specified below:
<TABLE>
<CAPTION>
Applicable
Margin
--------------------
Consolidated Leverage Base Eurodollar
Ratio Rate Rate
---------------------- ---- -----------
<S> <C> <C> <C>
(a) Greater than 3.5 to 1.0 .50% 1.500%
(b) Equal to or less than 3.5 to 1.0
and greater than 3.0 to 1.0 .25% 1.250%
(c) Equal to or less than 3.0 to 1.0
and greater than 2.5 to 1.0 0% 1.00%
(d) Equal to or less than 2.50 to 1.0
and greater than 2.0 to 1.0 0% .750%
(e) Equal to or less than 2.0 to 1.0
and greater than 1.5 to 1.0 0% .625%
(f) Equal to or less than 1.5 to 1.0 0% .500%
</TABLE>
The Applicable Margin shall be established at the end of each fiscal
quarter of the Borrower (each, a "Determination Date"). Any change in
the Applicable Margin following each Determination Date shall be
determined based upon the computations set forth in the certificate
furnished to the Administrative Agent pursuant to Section 8.1(a)(ii)
and Section 8.1(b)(ii), subject to review and approval of such
computations by the Administrative Agent, and shall be effective
commencing on the first Business Day following the date such
certificate is received until the first Business Day following the date
on which a new certificate is delivered or is required to be delivered,
whichever shall first occur; provided however, if the Borrower shall
fail to deliver any such certificate within the time period required by
Section 8.1, then the Applicable Margin shall be .50% for Base Rate
Loans and 1.50% for Eurodollar Rate Loans from the date such
certificate was due until the appropriate certificate is so delivered.
Notwithstanding the foregoing, from the Closing Date through and
including the day following the date of delivery of the certificate
5
<PAGE> 12
delivered pursuant to Section 8.1(b)(ii) for the period ending
September 30, 1998, the Applicable Margin shall be 0% for Base Rate
Loans and .750% for Eurodollar Rate Loans.
"Applicable Unused Fee" means that percent per annum set forth
below, which shall be based upon the Consolidated Leverage Ratio for
the Four-Quarter Period most recently ended as specified below:
<TABLE>
<CAPTION>
Applicable
Consolidated Leverage Unused
Ratio Fee
---------------------- ----------
<S> <C> <C>
(a) Greater than 3.5 to 1.0 .375%
(b) Equal to or less than 3.5 to 1.0
and greater than 3.0 to 1.0 .250%
(c) Equal to or less than 3.0 to 1.0
and greater than 2.5 to 1.0 .225%
(d) Equal to or less than 2.50 to 1.0
and greater than 2.0 to 1.0 .200%
(e) Equal to or less than 2.0 to 1.0
and greater than 1.5 to 1.0 .175%
(f) Equal to or less than 1.5 to 1.0 .175%
</TABLE>
The Applicable Unused Fee shall be established at the end of each
fiscal quarter of the Borrower (the "Determination Date"). Any change
in the Applicable Unused Fee following each Determination Date shall be
determined based upon the computations set forth in the certificate
furnished to the Administrative Agent pursuant to Section 8.1(a)(ii)
and Section 8.1(b)(ii), subject to review and approval of such
computations by the Administrative Agent and shall be effective
commencing on the first Business Day following the date such
certificate is received until the first Business Day following the date
on which a new certificate is delivered or is required to be delivered,
whichever shall first occur; provided however, if the Borrower shall
fail to deliver any such certificate within the time period required by
Section 8.1, then the Applicable Unused Fee shall be .375% from the
date such certificate was due until the appropriate certificate is so
delivered. Notwithstanding the foregoing, from the Closing Date through
and including the day following the date of delivery of the certificate
delivered pursuant to Section
6
<PAGE> 13
8.1(b)(ii) for the period ending September 30, 1998, the Applicable
Unused Fee shall be .200%.
"Applications and Agreements for Letters of Credit" means,
collectively, the Applications and Agreements for Letters of Credit, or
similar documentation, executed by the Borrower from time to time and
delivered to the Issuing Bank to support the issuance of Letters of
Credit.
"Asset Disposition" means any voluntary disposition, whether
by sale, lease or transfer, other than as permitted under Section 9.6
hereof, of (a) any of the assets, excluding cash and cash equivalents,
of the Borrower or its Subsidiaries where the Net Proceeds of such
disposition exceed $50,000, and (b) any of the capital stock, or
securities or investments exchangeable, exercisable or convertible for
or into, or otherwise entitling the holder to receive any of the
capital stock, of any Subsidiary (other than a disposition to a
Guarantor).
"Assignment and Acceptance" shall mean an Assignment and
Acceptance in the form of Exhibit B (with blanks appropriately filled
in) delivered to the Administrative Agent in connection with an
assignment of a Lender's interest under this Agreement pursuant to
Section 12.1.
"Authorized Representative" means any of the Chief Executive
Officer, the President or any Vice President of the Borrower or, with
respect to financial matters, the Chief Financial Officer or Assistant
Treasurer of the Borrower, or any other Person expressly designated by
the Board of Directors of the Borrower (or the appropriate committee
thereof) as an Authorized Representative of the Borrower, as set forth
from time to time in a certificate in the form of Exhibit C.
"Base Rate" means, for any day, the rate per annum equal to
the sum of (a) the higher of (i) the Federal Funds Rate for such day
plus one-half of one percent (0.5%) and (ii) the Prime Rate for such
day plus (b) the Applicable Margin. Any change in the Base Rate due to
a change in the Prime Rate or the Federal Funds Rate shall be effective
on the effective date of such change in the Prime Rate or Federal Funds
Rate.
"Base Rate Loan" means a Loan for which the rate of interest
is determined by reference to the Base Rate.
"Base Rate Refunding Loan" means a Base Rate Loan or Swing
Line Loan made either to (i) satisfy Reimbursement Obligations arising
from a drawing under a Letter of Credit or (ii) pay NationsBank in
respect of Swing Line Outstandings.
"Board" means the Board of Governors of the Federal Reserve
System (or any successor body).
7
<PAGE> 14
"Board of Directors" means either the board of directors of
the Borrower or any duly authorized committee of that board.
"Borrower's Account" means a demand deposit account number
3750656390 or any successor account with the Administrative Agent,
which may be maintained at one or more offices of the Administrative
Agent or an agent of the Administrative Agent.
"Borrowing Notice" means the notice delivered by an Authorized
Representative in connection with an Advance under the Revolving Credit
Facility or a Swing Line Loan, in the forms of Exhibits D-1 and D-2,
respectively.
"BOT" means The Bank of Tokyo, Ltd., New York Agency, and any
successor thereto by merger or consolidation.
"Business Day" means, (i) with respect to any Base Rate Loan
or Floating Rate Loan, any day which is not a Saturday, Sunday or a day
on which banks in the States of New York and North Carolina are
authorized or obligated by law, executive order or governmental decree
to be closed and, (ii) with respect to any Eurodollar Rate Loan, any
day which is a Business Day, as described above, and on which the
relevant international financial markets are open for the transaction
of business contemplated by this Agreement in London, England, New
York, New York and Charlotte, North Carolina.
"Capital Expenditures" means, with respect to the Borrower and
its Subsidiaries, for any period the sum of (without duplication) (i)
all expenditures (whether paid in cash or accrued as liabilities) by
the Borrower or any Subsidiary during such period for items that would
be classified as "property, plant or equipment" or comparable items on
the consolidated balance sheet of the Borrower and its Subsidiaries,
including without limitation all transactional costs incurred in
connection with such expenditures provided the same have been
capitalized, excluding, however, the amount of any Capital Expenditures
paid for with proceeds of casualty insurance as evidenced in writing
and submitted to the Administrative Agent together with any compliance
certificate delivered pursuant to Section 8.1(a) or (b), and (ii) with
respect to any Capital Lease entered into by the Borrower or its
Subsidiaries during such period, the present value of the lease
payments due under such Capital Lease over the term of such Capital
Lease applying a discount rate equal to the interest rate provided in
such lease (or in the absence of a stated interest rate, that rate used
in the preparation of the financial statements described in Section
8.1(a)), all the foregoing in accordance with GAAP applied on a
Consistent Basis.
"Capital Leases" means all leases which have been or should be
capitalized in accordance with GAAP as in effect from time to time
including Statement No. 13 of the Financial Accounting Standards Board
and any successor thereof.
"Capital Stock" of any Person means any and all shares,
interests, partnership interests, participations, rights in or other
equivalents (however designated) of such
8
<PAGE> 15
Person's equity interest (however designated), whether now outstanding
or issued after the Closing Date.
"Change of Control" means, at any time:
(i) any "person" or "group" (each as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) other than
Kyoei Steel Ltd. and its Affiliates becomes the "beneficial
owner" (as defined in Rule 13d-3 of the Exchange Act ),
directly or indirectly, of more than 35% of the voting power
of all classes of Voting Stock of the Borrower;
(ii) the Borrower, either individually or in
conjunction with one or more of its Subsidiaries, sells,
assigns, conveys, transfers, leases or otherwise disposes of,
all or substantially all of the properties of the Borrower and
its Subsidiaries, taken as a whole (either in one transaction
or a series of related transactions), including Capital Stock
of such Subsidiaries, to any Person (other than the Borrower
or a Subsidiary);
(iii) during any consecutive two-year period,
individuals who at the beginning of such period constituted
the Board of Directors of the Borrower (together with any new
directors whose election by such Board of Directors or whose
nomination for election by the stockholders of the Borrower
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 approved) cease for any reason to constitute a
majority of the Board of Directors of the Borrower then in
office; or
(iv) the Borrower is liquidated or dissolved or
adopts a plan of liquidation or dissolution, other than in a
transaction that complies with Article Eight of the Indenture.
"Closing Date" means the date as of which this Agreement is
executed by the Borrower, the Lenders and the Agents and on which the
conditions set forth in Section 6.1 have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder.
"Collateral" means, collectively, all property of the
Borrower, any Subsidiary or any other Person in which the Collateral
Agent or any Lender is granted a Lien as security for all or any
portion of the Obligations under any Security Instrument.
"Consistent Basis" in reference to the application of GAAP
means the accounting principles observed in the period referred to are
comparable in all material respects to
9
<PAGE> 16
those applied in the preparation of the audited financial statements of
the Borrower referred to in Section 7.6(a).
"Consolidated Amendment" means the Consolidated Amendment to
Collateral Documents, substantially in the form of Exhibit K attached
hereto, to be executed and delivered by the parties thereto on or
before the Closing Date.
"Consolidated EBITDA" means, with respect to the Borrower and
its Subsidiaries for any Four-Quarter Period ending on the date of
computation thereof, the sum of, without duplication, (i) Consolidated
Net Income, (ii) Consolidated Interest Expense, (iii) taxes on income,
(iv) amortization, (v) depreciation, (vi) any other non-cash charges,
net of non-cash credits, for such period, all determined on a
consolidated basis in accordance with GAAP applied on a Consistent
Basis, and (vii) solely for the Four-Quarter Period ending on September
30, 1998, a one-time gain on the sale of securities in the amount of
$2,451,000.
"Consolidated Indebtedness" means the sum of (without
duplication) all Indebtedness for Money Borrowed of the Borrower and
its Subsidiaries, all determined on a consolidated basis.
"Consolidated Interest Coverage Ratio" means, with respect to
the Borrower and its Subsidiaries for any Four-Quarter Period ending on
the date of computation thereof, the ratio of (i) Consolidated EBITDA
for such period, to (ii) the cash portion of Consolidated Interest
Expense for such period.
"Consolidated Interest Expense" means, with respect to any
period of computation thereof, the gross interest expense of the
Borrower and its Subsidiaries, including without limitation (i) the
current amortized portion of debt discounts to the extent included in
gross interest expense, (ii) the current amortized portion of all fees
(including fees payable in respect of any Swap Agreement) payable in
connection with the incurrence of Indebtedness to the extent included
in gross interest expense and (iii) the portion of any payments made in
connection with Capital Leases allocable to interest expense, all
determined on a consolidated basis in accordance with GAAP applied on a
Consistent Basis.
"Consolidated Leverage Ratio" means, as of the date of
computation thereof, the ratio of (i) Consolidated Indebtedness less
cash and cash equivalents in excess of $10,000,000, as determined in
accordance with GAAP (in each case, determined as at such date) to (ii)
Consolidated EBITDA (for the Four-Quarter Period ending on (or most
recently ended prior to) such date).
"Consolidated Net Income" means, with respect to the Borrower
and its Subsidiaries for any period, the net income (or net loss) 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 (i) any net after-tax extraordinary gains or losses
10
<PAGE> 17
(less all fees and expenses relating thereto), (ii) any net after-tax
gains or losses (less all fees and expenses relating thereto)
attributable to asset dispositions other than (x) in the ordinary
course of business, and (y) as permitted in Section 9.6(b) hereof,
(iii) the portion of any net income (or loss) of any Person that is not
a Subsidiary, in which the Borrower has an ownership interest, or that
is accounted for by the equity method of accounting, except to the
extent of the amount of dividends or distributions actually paid to the
Borrower in cash, and (iv) the net income or loss of any Person
combined with the Borrower on a "pooling of interests" basis
attributable to any period prior to the date of computation.
"Consolidated Net Worth" means, as of any date on which the
amount thereof is to be determined, Consolidated Shareholders' Equity,
as determined on a consolidated basis in accordance with GAAP applied
on a Consistent Basis.
"Consolidated Shareholders' Equity" means, as of any date on
which the amount thereof is to be determined, the sum of the following
in respect of the Borrower and its Subsidiaries (determined on a
consolidated basis and excluding any upward adjustment after the
Closing Date due to revaluation of assets): (i) the amount of issued
and outstanding share capital, plus (ii) the amount of additional
paid-in capital and retained earnings (or, in the case of a deficit,
minus the amount of such deficit), plus (iii) the amount of any foreign
currency translation adjustment (if positive, or, if negative, minus
the amount of such translation adjustment), minus (iv) the amount of
any treasury stock, all as determined in accordance with GAAP applied
on a Consistent Basis.
"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 Borrower and
its 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 Closing Date in the book value of any
asset (except any such intangible assets ) owned by the Borrower or any
of its Subsidiaries.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 2.8 hereof of a Eurodollar Rate Loan
of one Type as a Eurodollar Rate Loan of the same Type from one
Interest Period to the next Interest Period.
"Convert", "Conversion", and "Converted" shall refer to a
conversion pursuant to Sections 2.8 or Article III of one Type of Loan
into another Type of Loan.
"Cost of Acquisition" means, with respect to any Acquisition,
as at the date of entering into any agreement therefor, the sum of the
following (without duplication): (i) the value of the capital stock,
warrants or options to acquire capital stock of Borrower or any
Subsidiary to be transferred in connection therewith, (ii) the amount
of any cash and
11
<PAGE> 18
fair market value of other property (excluding property described in
clause (i) and the unpaid principal amount of any debt instrument)
given as consideration, (iii) the amount (determined by using the face
amount or the amount payable at maturity, whichever is greater) of any
Indebtedness incurred, assumed or acquired by the Borrower or any
Subsidiary in connection with such Acquisition, (iv) all additional
purchase price amounts in the form of earnouts and other contingent
obligations that should be recorded on the financial statements of the
Borrower and its Subsidiaries in accordance with GAAP, (v) all amounts
paid in respect of covenants not to compete, consulting agreements that
should be recorded on financial statements of the Borrower and its
Subsidiaries in accordance with GAAP, and other affiliated contracts in
connection with such Acquisition, (vi) the aggregate fair market value
of all other consideration given by the Borrower or any Subsidiary in
connection with such Acquisition, and (vii) out of pocket transaction
costs for the services and expenses of attorneys, accountants and other
consultants incurred in effecting such transaction, and other similar
transaction costs so incurred. For purposes of determining the Cost of
Acquisition for any transaction, (A) the capital stock of the Borrower
shall be valued (I) in the case of capital stock that is then
designated as a national market system security by the National
Association of Securities Dealers, Inc. ("NASDAQ") or is listed on a
national securities exchange, the average of the last reported bid and
ask quotations or the last prices reported thereon, and (II) with
respect to shares that are not freely tradeable, as determined by a
committee composed of the disinterested members of the Board of
Directors of the Borrower and, if requested by the Administrative
Agent, determined to be a reasonable valuation by the independent
public accountants referred to in Section 8.1(a), (B) the capital stock
of any Subsidiary shall be valued as determined by a committee composed
of the disinterested members of the Board of Directors of such
Subsidiary and, if requested by the Administrative Agent, determined to
be a reasonable valuation by the independent public accountants
referred to in Section 8.1(a), and (C) with respect to any Acquisition
accomplished pursuant to the exercise of options or warrants or the
conversion of securities, the Cost of Acquisition shall include both
the cost of acquiring such option, warrant or convertible security as
well as the cost of exercise or conversion.
"Credit Party" means, collectively, the Borrower, each
Guarantor and each other Person providing Collateral pursuant to any
Security Instrument.
"Debt Offering" means the incurrence of any Indebtedness for
Money Borrowed permitted hereunder in connection with a public offering
or private placement of debt securities of the Borrower or any
Subsidiary or otherwise, except to the extent permitted under Section
9.5.
"Default" means any event or condition which, with the giving
or receipt of notice or lapse of time or both, would constitute an
Event of Default hereunder.
"Default Rate" means (i) with respect to each Eurodollar Rate
Loan, until the end of the Interest Period applicable thereto, a rate
of two percent (2%) above the Eurodollar
12
<PAGE> 19
Rate applicable to such Loan, and thereafter at a rate of interest per
annum which shall be two percent (2%) above the Base Rate, (ii) with
respect to Floating Rate Loans and Reimbursement Obligations, at a rate
of interest per annum which shall be two percent (2%) above the Base
Rate and (iii) in any case, the maximum rate permitted by applicable
law, if lower.
"Dollars" and the symbol "$" means dollars constituting legal
tender for the payment of public and private debts in the United States
of America.
"Domestic Subsidiary" means a Subsidiary which is organized
under the laws of one of the states or territories comprising the
United States of America.
"Eligible Assignee" means (i) a Lender, (ii) an affiliate of a
Lender, and (iii) any other Person approved by the Administrative Agent
and, unless an Event of Default has occurred and is continuing at the
time any assignment is effected in accordance with Section 12.1, the
Borrower, such approval not to be unreasonably withheld or delayed by
the Borrower or the Administrative Agent and such approval to be deemed
given by the Borrower within five Business Days after notice of such
proposed assignment has been provided by the assigning Lender to the
Borrower if the Borrower has not otherwise responded; provided,
however, that neither the Borrower nor an Affiliate of the Borrower
shall qualify as an Eligible Assignee.
"Eligible Securities" means the following obligations and any
other obligations previously approved in writing by the Administrative
Agent:
(a) Government Securities;
(b) obligations of any corporation organized
under the laws of any state of the United States of America or
under the laws of any other nation, payable in the United
States of America, expressed to mature not later than 180 days
following the date of issuance thereof and rated in an
investment grade rating category by S&P and Moody's;
(c) interest bearing demand or time deposits
issued by any Lender or certificates of deposit maturing
within one year from the date of issuance thereof and issued
by a bank or trust company organized under the laws of the
United States or of any state thereof having capital surplus
and undivided profits aggregating at least $400,000,000 and
being rated "A-" or better by S&P or "A-3" or better by
Moody's;
(d) Repurchase Agreements;
(e) Municipal Obligations;
13
<PAGE> 20
(f) Pre-Refunded Municipal Obligations;
(g) shares of mutual funds which invest in
obligations described in paragraphs (a) through (f) above, the
shares of which mutual funds are at all times rated "AAA" by
S&P;
(h) tax-exempt or taxable adjustable rate
preferred stock issued by a Person having a rating of its long
term unsecured debt of "A-" or better by S&P or "A-3" or
better by Moody's; and
(i) asset-backed remarketed certificates of
participation representing a fractional undivided interest in
the assets of a trust, which certificates are rated at least
"A-1" by S&P and "P-1" by Moody's.
"Employee Benefit Plan" means any employee benefit plan within
the meaning of Section 3(3) of ERISA which (i) is maintained for
employees of the Borrower or any of its ERISA Affiliates or is assumed
by the Borrower or any of its ERISA Affiliates in connection with any
Acquisition or (ii) has at any time been maintained for the employees
of the Borrower or any current or former ERISA Affiliate.
"Environmental Laws" means any federal, state or local
statute, law, ordinance, code, rule, regulation, order, decree, permit
or license regulating, relating to, or imposing liability or standards
of conduct concerning, any environmental matters or conditions,
environmental protection or conservation, including without limitation,
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended; the Superfund Amendments and Reauthorization
Act of 1986, as amended; the Resource Conservation and Recovery Act, as
amended; the Toxic Substances Control Act, as amended; the Clean Air
Act, as amended; the Clean Water Act, as amended; together with all
regulations promulgated thereunder, and any other "Superfund" or
"Superlien" law.
"Equity Offering" means a public or private offering of equity
securities (including, without limitation, any security or investment
exchangeable, exercisable or convertible for or into, or otherwise
entitling the holder to receive, equity securities) of the Borrower or
any Subsidiary.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute and all
rules and regulations promulgated thereunder.
"ERISA Affiliate", as applied to the Borrower, means any
Person or trade or business which is a member of a group which is under
common control with the Borrower, who together with the Borrower, is
treated as a single employer within the meaning of Section 414(b) and
(c) of the Code.
14
<PAGE> 21
"Eurodollar Rate Loan" means a Loan for which the rate of
interest is determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means the interest rate per annum calculated
according to the following formula:
Eurodollar = Interbank Offered Rate + Applicable
----------------------
Rate 1- Reserve Requirement Margin
"Event of Default" means any of the occurrences set forth as
such in Section 10.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the regulations promulgated thereunder.
"Existing Letters of Credit" means those Letters of Credit
issued by NationsBank and BOT and described on Schedule 1.1 attached
hereto.
"Facility Guaranty" means the AFI Guaranty and each Guaranty
Agreement between one or more Guarantors and the Administrative Agent
for the benefit of the Lenders, delivered as of the Closing Date and
otherwise pursuant to Section 8.19, as the same may be amended,
modified or supplemented.
"Facility Termination Date" means such date as all of the
following shall have occurred: (a) the Borrower shall have permanently
terminated the Revolving Credit Facility by payment in full of all
Revolving Credit Outstandings and Letter of Credit Outstandings,
together with all accrued and unpaid interest thereon, except for such
issued and undrawn Letters of Credit as have been fully cash
collateralized in a manner consistent with the terms of Section
10.1(B), (b) all Swap Agreements shall have been terminated, expired or
cash collateralized, (c) all Revolving Credit Commitments and Letter of
Credit Commitments shall have terminated or expired and (d) the
Borrower shall have fully, finally and irrevocably paid and satisfied
in full all Obligations (other than Obligations consisting of
continuing indemnities and other contingent Obligations of the Borrower
or any Guarantor that may be owing to the Lenders pursuant to the Loan
Documents and expressly survive termination of this Agreement);
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day; provided
that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and
(b) if no such rate is so published on such next succeeding Business
15
<PAGE> 22
Day, the Federal Funds Rate for such day shall be the average rate
charged to the Administrative Agent (in its individual capacity) on
such day on such transactions as determined by the Administrative
Agent.
"Fiscal Year" means the twelve month fiscal period of the
Borrower and its Subsidiaries commencing on April 1 of each calendar
year and ending on March 31 of each calendar year.
"Floating Rate" means, for any day, the rate per annum equal
to either the Base Rate or the Adjusted Federal Funds Rate, as selected
by an Authorized Representative in a Borrowing Notice delivered to the
Administrative Agent pursuant to Section 2.13(a) with respect to a
Swing Line Loan; provided, however, in the event such Borrowing Notice
delivered to the Administrative Agent fails to designate the selection
of either the Base Rate or the Adjusted Federal Funds Rate, the rate
per annum for such Swing Line Loan shall be deemed to be the Base Rate.
"Floating Rate Loan" means a Loan for which the rate of
interest is determined by reference to the Floating Rate.
"FLS" means FLS Holdings Inc., a Delaware corporation.
"Foreign Benefit Law" means any applicable statute, law,
ordinance, code, rule, regulation, order or decree of any foreign
nation or any province, state, territory, protectorate or other
political subdivision thereof regulating, relating to, or imposing
liability or standards of conduct concerning, any Employee Benefit
Plan.
"Foreign Subsidiary" means any Subsidiary organized under the
laws of any jurisdiction other than one of the states comprising the
United States of America, any territory thereof or the District of
Columbia.
"Four-Quarter Period" means a period of four full consecutive
fiscal quarters of the Borrower and its Subsidiaries, taken together as
one accounting period.
"GAAP" or "Generally Accepted Accounting Principles" means
generally accepted accounting principles, being those principles of
accounting set forth in pronouncements of the Financial Accounting
Standards Board, the American Institute of Certified Public Accountants
or which have other substantial authoritative support and are
applicable in the circumstances as of the date of a report.
"Government Securities" means direct obligations of, or
obligations the timely payment of principal and interest on which are
fully and unconditionally guaranteed by, the United States of America.
16
<PAGE> 23
"Governmental Authority" shall mean any Federal, state,
municipal, national or other governmental department, commission,
board, bureau, court, agency or instrumentality or political
subdivision thereof or any entity or officer exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to any government or any court, in each case whether
associated with a state of the United States, the United States, or a
foreign entity or government.
"Guaranties" means, with respect to any Person any obligation
(except the endorsement in the ordinary course of business of
negotiable instruments for deposit or collection) of such Person
guaranteeing any Indebtedness of any other Person (the "Primary
Obligor") in any manner, whether directly or indirectly, including
(without limitation) obligations incurred through an agreement,
contingent or otherwise, by such Person: (a) to purchase such
Indebtedness or any property or assets constituting security therefor;
(b) to advance or supply funds (i) for the purpose of payment of such
Indebtedness, or (ii) to maintain working capital or other balance
sheet condition or any income statement condition of the Primary
Obligor or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness; (c) to lease property or to
purchase securitiies or other property or services primarily for the
purpose of assuring the owner of such Indebtedness of the ability of
the Primary Obligor to make payment of the Indebtedness; or (d)
otherwise to assure the owner of the Indebtedness of the Primary
Obligor against loss in respect thereof. For purposes of computing the
amount of any Guaranty, in connection with any computation of
Indebtedness, it shall be assumed that the Indebtedness that is the
subject of such Guaranty is, to the extent guaranteed under such
Guaranty, a direct obligation of the issuer of such Guaranty.
"Guarantors" means, at any date, the Subsidiaries who are
required to be parties to a Facility Guaranty at such date.
"Hazardous Material" means and includes any pollutant,
contaminant, or hazardous, toxic or dangerous waste, substance or
material (including without limitation petroleum products,
asbestos-containing materials and lead), the generation, handling,
storage, transportation, disposal, treatment, release, discharge or
emission of which is subject to any Environmental Law.
"Indebtedness" means with respect to any Person, without
duplication, all Indebtedness for Money Borrowed, all indebtedness of
such Person for the acquisition of property or arising under Rate
Hedging Obligations, all indebtedness secured by any Lien on the
property of such Person whether or not such indebtedness is assumed,
all liability of such Person by way of endorsements (other than for
collection or deposit in the ordinary course of business), all
Guaranties and other items which in accordance with GAAP is required to
be classified as a liability on a balance sheet; but excluding all
accounts payable in the ordinary course of business so long as payment
therefor is due within one year; provided that in no event shall the
term Indebtedness include surplus and retained earnings,
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<PAGE> 24
lease obligations (other than pursuant to Capital Leases), reserves for
deferred income taxes and investment credits, other deferred credits or
reserves.
"Indebtedness for Money Borrowed" means with respect to any
Person, without duplication, all indebtedness in respect of money
borrowed, including without limitation Letters of Credit, all Capital
Leases and the deferred purchase price of any property or asset,
evidenced by a promissory note, bond, debenture or similar written
obligation for the payment of money (including conditional sales or
similar title retention agreements), other than trade payables incurred
in the ordinary course of business.
"Indenture" means the Indenture dated as of April 3, 1998 by
and among the Borrower, as issuer, the subsidiary guarantors named
therein and State Street Bank and Trust Company, as Trustee, with
regard to the issuance of the Senior Notes.
"Interbank Offered Rate" means, with respect to any Eurodollar
Rate Loan for the Interest Period applicable thereto, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately 11:00
A.M. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period. If for
any reason such rate is not available, the term "Interbank Offered
Rate" shall mean, with respect to any Eurodollar Rate Loan for the
Interest Period applicable thereto, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 A.M. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable to
such Interest Period; provided, however, if more than one rate is
specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates (rounded upwards, if necessary, to
the nearest 1/100 of 1%).
"Interest Period" means, for each Eurodollar Rate Loan, a
period commencing on the date such Eurodollar Rate Loan is made or
Converted and ending, at the Borrower's option, on the date one, two,
three or six months thereafter as notified to the Administrative Agent
by the Authorized Representative three (3) Business Days prior to the
beginning of such Interest Period; provided, that,
(i) if the Authorized Representative fails to
notify the Administrative Agent of the length of an Interest
Period three (3) Business Days prior to the first day of such
Interest Period, the Eurodollar Rate Loan for which such
Interest Period was to be determined shall be deemed to be a
Base Rate Loan as of the first day thereof;
(ii) if an Interest Period for a Eurodollar Rate
Loan would end on a day which is not a Business Day, such
Interest Period shall be extended to the next Business Day
(unless such extension would cause the applicable Interest
Period to
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<PAGE> 25
end in the succeeding calendar month, in which case such
Interest Period shall end on the next preceding Business Day);
(iii) any Interest Period which begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of a calendar month;
(iv) no Interest Period shall extend past the
Stated Termination Date; and
(v) there shall not be more than six (6)
Interest Periods in effect on any day.
"Interest Rate Selection Notice" means the written notice
delivered by an Authorized Representative in connection with the
election of a subsequent Interest Period for any Eurodollar Rate Loan
or the Conversion of any Eurodollar Rate Loan into a Base Rate Loan or
the Conversion of any Base Rate Loan into a Eurodollar Rate Loan, in
the form of Exhibit E.
"Issuing Bank" means initially NationsBank as issuer of
Letters of Credit under Article III, and, with respect to the Existing
Letters of Credit, NationsBank and BOT.
"LC Account Agreement" means the LC Account Agreement dated as
of the date hereof between the Borrower and the Administrative Agent,
as amended, modified or supplemented from time to time.
"Letter of Credit" means (i) a standby or commercial letter of
credit issued by the Issuing Bank pursuant to Article III hereof for
the account of the Borrower in favor of a Person advancing credit or
securing an obligation on behalf of the Borrower and (ii) the Existing
Letters of Credit.
"Letter of Credit Commitment" means, with respect to each
Lender, the obligation of such Lender to acquire Participations in
respect of Letters of Credit and Reimbursement Obligations up to an
aggregate amount at any one time outstanding equal to such Lender's
Applicable Commitment Percentage of the Total Letter of Credit
Commitment as the same may be increased or decreased from time to time
pursuant to this Agreement.
"Letter of Credit Facility" means the facility described in
Article III hereof providing for the issuance by the Issuing Bank for
the account of the Borrower of Letters of Credit in an aggregate stated
amount at any time outstanding not exceeding the Total Letter of Credit
Commitment.
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<PAGE> 26
"Letter of Credit Outstandings" means, as of any date of
determination, the aggregate amount available to be drawn under all
Letters of Credit plus Reimbursement Obligations then outstanding.
"Lien" means any interest in property securing any obligation
owed to, or a claim by, a Person other than the owner of the property,
whether such interest is based on the common law, statute or contract,
and including but not limited to the lien or security interest arising
from a mortgage, encumbrance, pledge, security agreement, conditional
sale or trust receipt or a lease, consignment or bailment for security
purposes. For the purposes of this Agreement, the Borrower and any
Subsidiary shall be deemed to be the owner of any property which it has
acquired or holds subject to a conditional sale agreement, financing
lease, or other arrangement pursuant to which title to the property has
been retained by or vested in some other Person for security purposes.
"Loan" or "Loans" means any borrowing pursuant to an Advance
under the Revolving Credit Facility, including the Swing Line Facility.
"Loan Documents" means this Agreement, the Notes, the Security
Instruments, the Facility Guaranties, the LC Account Agreement, the
Applications and Agreements for Letter of Credit, and all other
instruments and documents heretofore or hereafter executed or delivered
to or in favor of any Lender, the Agents, or either of them in
connection with the Loans made and transactions contemplated under this
Agreement, as the same may be amended, supplemented or replaced from
the time to time.
"Loan Parties" means the Borrower and the Guarantor(s).
"Material Adverse Effect" means a material adverse effect on
(i) the business, properties, operations or condition, financial or
otherwise, of the Borrower or any of its Subsidiaries, taken as a
whole, (ii) the ability of any Credit Party to pay or perform its
respective obligations, liabilities and indebtedness under the Loan
Documents as such payment or performance becomes due in accordance with
the terms thereof, or (iii) the rights, powers and remedies of the
Agents or any Lender under any Loan Document or the validity, legality
or enforceability thereof.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA
Affiliate is making, or is accruing an obligation to make,
contributions or has made, or been obligated to make, contributions
within the preceding six (6) Fiscal Years.
"Municipal Obligations" means general obligations issued by,
and supported by the full taxing authority of, any state of the United
States of America or of any municipal
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<PAGE> 27
corporation or other public body organized under the laws of any such
state which are rated in the highest investment rating category by both
S&P and Moody's.
"NationsBank" means NationsBank, National Association.
"Net Proceeds" (a) from any Equity Offering or Debt Offering
means cash payments received by the Borrower therefrom as and when
received, net of all legal, accounting, banking and underwriting fees
and expenses, commissions, discounts and other issuance expenses
incurred in connection therewith and all taxes required to be paid or
accrued as a consequence of such issuance; and (b) from any Asset
Disposition means cash payments received by the Borrower therefrom
(including any cash payments received pursuant to any note or other
debt security received in connection with any Asset Disposition) as and
when received, net of (i) all legal fees and expenses and other fees
and expenses paid to third parties and incurred in connection
therewith, (ii) all taxes required to be paid or accrued as a
consequence of such sale, (iii) all amounts applied to repayment of
Indebtedness (other than the Obligations) secured by a Lien on the
asset or property disposed and (iv) all amounts reinvested by the
Borrower or a Subsidiary substantially contemporaneously with such
disposition (or to be invested within 90 days) in replacement assets of
substantially equal or greater value and utility.
"NMS" means NationsBanc Montgomery Securities LLC and its
successors.
"Notes" means, collectively, the Revolving Notes of the
Borrower and the promissory note of the Borrower evidencing Swing Line
Loans, executed and delivered to NationsBank pursuant to Section
2.13(b) substantially in the form of Exhibit F-2.
"Obligations" means the obligations, liabilities and
Indebtedness of the Borrower with respect to (i) the principal and
interest on the Loans as evidenced by the Notes, (ii) the Reimbursement
Obligations and otherwise in respect of the Letters of Credit, (iii)
all liabilities of Borrower to any Lender which arise under a Swap
Agreement, and (iv) the payment and performance of all other
obligations, liabilities and Indebtedness of the Borrower to the
Lenders, the Agents or NMS hereunder, under any one or more of the
other Loan Documents or with respect to the Loans.
"Operating Documents" means with respect to any corporation,
limited liability company, partnership, limited partnership, limited
liability partnership or other legally authorized incorporated or
unincorporated entity, the bylaws, operating agreement, partnership
agreement, limited partnership agreement or other applicable documents
relating to the operation, governance or management of such entity.
"Organizational Action" means with respect to any corporation,
limited liability company, partnership, limited partnership, limited
liability partnership or other legally authorized incorporated or
unincorporated entity, any corporate, organizational or
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<PAGE> 28
partnership action (including any required shareholder, member or
partner action), or other similar official action, as applicable, taken
by such entity.
"Organizational Documents" means with respect to any
corporation, limited liability company, partnership, limited
partnership, limited liability partnership or other legally authorized
incorporated or unincorporated entity, the articles of incorporation,
certificate of incorporation, articles of organization, certificate of
limited partnership or other applicable organizational or charter
documents relating to the creation of such entity.
"Outstandings" means, collectively, at any date, the Letter of
Credit Outstandings, Swing Line Outstandings and Revolving Credit
Outstandings on such date.
"Participation" means, (i) with respect to any Lender (other
than the Issuing Bank) and a Letter of Credit, the extension of credit
represented by the participation of such Lender hereunder in the
liability of the Issuing Bank in respect of a Letter of Credit issued
by the Issuing Bank in accordance with the terms hereof and (ii) with
respect to any Lender (other than NationsBank) and a Swing Line Loan,
the extension of credit represented by the participation of such Lender
hereunder in the liability of NationsBank in respect of a Swing Line
Loan made by NationsBank in accordance with the terms hereof.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor thereto.
"Pension Plan" means any employee pension benefit plan within
the meaning of Section 3(2) of ERISA, other than a Multiemployer Plan,
which is subject to the provisions of Title IV of ERISA or Section 412
of the Code and which (i) is maintained for employees of the Borrower
or any of its ERISA Affiliates or is assumed by the Borrower or any of
its ERISA Affiliates in connection with any Acquisition or (ii) has at
any time been maintained for the employees of the Borrower or any
current or former ERISA Affiliate.
"Person" means an individual, partnership, corporation,
limited liability company, limited liability partnership, trust,
unincorporated organization, association, joint venture or a government
or agency or political subdivision thereof.
"Pledge Agreement" means, collectively (or individually as the
context may indicate), (i) that certain Stock Pledge Agreement dated as
of the date hereof between the Borrower and the Collateral Agent for
the benefit of the Collateral Agent and the Lenders, and (ii) any
additional Stock Pledge Agreement delivered to the Collateral Agent
pursuant to Section 8.19, as hereafter amended, supplemented or
replaced from time to time.
"Pledged Stock" has the meaning given to such term in the
Pledge Agreement.
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<PAGE> 29
"Pre-Refunded Municipal Obligations" means obligations of any
state of the United States of America or of any municipal corporation
or other public body organized under the laws of any such state which
are rated, based on the escrow, in the highest investment rating
category by both S&P and Moody's and which have been irrevocably called
for redemption and advance refunded through the deposit in escrow of
Government Securities or other debt securities which are (i) not
callable at the option of the issuer thereof prior to maturity, (ii)
irrevocably pledged solely to the payment of all principal and interest
on such obligations as the same becomes due and (iii) in a principal
amount and bear such rate or rates of interest as shall be sufficient
to pay in full all principal of, interest, and premium, if any, on such
obligations as the same becomes due as verified by a nationally
recognized firm of certified public accountants.
"Prime Rate" means the per annum rate of interest established
from time to time by NationsBank as its prime rate, which rate may not
be the lowest rate of interest charged by NationsBank to its customers.
"Principal Office" means the principal office of NationsBank,
presently located at 101 North Tryon Street, 15th Floor, NC1 001-15-04,
Charlotte, North Carolina 28255, Attention: Agency Services, or such
other office and address as the Administrative Agent may from time to
time designate.
"Rate Hedging Obligations" means any and all obligations of
the Borrower or any Subsidiary, whether absolute or contingent and
howsoever and whensoever created, arising, evidenced or acquired
(including all renewals, extensions and modifications thereof and
substitutions therefor), under (i) any and all agreements, devices or
arrangements designed to protect at least one of the parties thereto
from the fluctuations of interest rates, exchange rates or forward
rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, Dollar-denominated or
cross-currency interest rate exchange agreements, forward currency
exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts, warrants and
those commonly known as interest rate "swap" agreements; and (ii) any
and all cancellations, buybacks, reversals, terminations or assignments
of any of the foregoing.
"Regulation D" means Regulation D of the Board as the same may
be amended or supplemented from time to time.
"Regulatory Change" means any change effective after the
Closing Date in United States federal or state laws or regulations
(including Regulation D and capital adequacy regulations) or foreign
laws or regulations or the adoption or making after such date of any
interpretations, directives or requests applying to a class of banks,
which includes any of the Lenders, under any United States federal or
state or foreign laws or regulations (whether or not having the force
of law) by any court or governmental or monetary authority charged with
the interpretation or administration thereof or compliance by any
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<PAGE> 30
Lender with any request or directive regarding capital adequacy,
including those relating to "highly leveraged transactions," whether or
not having the force of law, and whether or not failure to comply
therewith would be unlawful and whether or not published or proposed
prior to the date hereof.
"Reimbursement Obligation" shall mean at any time, the
obligation of the Borrower with respect to any Letter of Credit to
reimburse the Issuing Bank and the Lenders to the extent of their
respective Participations (including by the receipt by the Issuing Bank
of proceeds of Loans pursuant to Section 3.2) for amounts theretofore
paid by the Issuing Bank pursuant to a drawing under such Letter of
Credit.
"Repurchase Agreement" means a repurchase agreement entered
into with any financial institution whose debt obligations or
commercial paper are rated "A" by either of S&P or Moody's or "A-1" by
S&P or "P-1" by Moody's.
"Required Lenders" means, as of any date, Lenders on such date
having Credit Exposures (as defined below) aggregating at least 51% of
the aggregate Credit Exposures of all the Lenders on such date. For
purposes of the preceding sentence, the amount of the "Credit Exposure"
of each Lender shall be equal at all times (a) other than following the
occurrence and during the continuance of an Event of Default, its
Revolving Credit Commitment, and (b) following the occurrence and
during the continuance of an Event of Default, to the sum of (i) the
amount of such Lender's Applicable Commitment Percentage plus (ii) the
aggregate principal amount of such Lender's Applicable Commitment
Percentage of Revolving Credit Outstandings plus (iii) the amount of
such Lender's Applicable Commitment Percentage of Letter of Credit
Outstandings; provided that, for the purpose of this definition only,
(A) if any Lender shall have failed to fund its Applicable Commitment
Percentage of any Advance when required to fund hereunder, the
Revolving Credit Commitment of such Lender shall be deemed reduced by
the amount it so failed to fund for so long as such failure shall
continue and such Lender's Credit Exposure attributable to such failure
shall be deemed held by any Lender making more than its Applicable
Commitment Percentage of such Advance to the extent it covers such
failure, (B) if any Lender shall have failed to pay to the Issuing Bank
upon demand its Applicable Commitment Percentage of any drawing under
any Letter of Credit resulting in an outstanding Reimbursement
Obligation, such Lender's Credit Exposure attributable to such Letter
of Credit Outstandings shall be deemed to be held by Issuing Bank and
(C) if any Lender shall have failed to pay to NationsBank its
Applicable Commitment Percentage of any Swing Line Loan, such Lender's
Credit Exposure attributable to all Swing Line Outstandings shall be
deemed to be held by NationsBank for purposes of this definition;
"Reserve Requirement" means, at any time, the maximum rate at
which reserves (including, without limitation, any marginal, special,
supplemental, or emergency reserves) are required to be maintained
under regulations issued from time to time by the Board of Governors of
the Federal Reserve System (or any successor) by member banks
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<PAGE> 31
of the Federal Reserve System against "Eurocurrency liabilities" (as
such term is used in Regulation D). Without limiting the effect of the
foregoing, the Reserve Requirement shall reflect any other reserves
required to be maintained by such member banks with respect to (i) any
category of liabilities which includes deposits by reference to which
the Eurodollar Rate is to be determined, or (ii) any category of
extensions of credit or other assets which include Eurodollar Rate
Loans. The Eurodollar Rate shall be adjusted automatically on and as of
the effective date of any change in the Reserve Requirement.
"Restricted Payment" means (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of stock of Borrower or any of its Subsidiaries (other than those
payable or distributable solely to the Borrower) now or hereafter
outstanding, except a dividend payable solely in shares of a class of
stock to the holders of that class; (b) any redemption, conversion,
exchange, retirement or similar payment, purchase or other acquisition
for value, direct or indirect, of any shares of any class of stock of
Borrower or any of its Subsidiaries (other than those payable or
distributable solely to the Borrower) now or hereafter outstanding; (c)
any payment made to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire shares of any
class of stock of Borrower or any of its Subsidiaries now or hereafter
outstanding; and (d) any issuance and sale of capital stock of any
Subsidiary of the Borrower (or any option, warrant or right to acquire
such stock) other than to the Borrower.
"Revolving Credit Commitment" means, with respect to each
Lender, the obligation of such Lender to make Revolving Loans to the
Borrower up to an aggregate principal amount at any one time
outstanding equal to such Lender's Applicable Commitment Percentage of
the Total Revolving Credit Commitment.
"Revolving Credit Facility" means the facility described in
Article II hereof providing for Loans to the Borrower by the Lenders in
the aggregate principal amount of the Total Revolving Credit
Commitment.
"Revolving Credit Outstandings" means, as of any date of
determination, the aggregate principal amount of all Revolving Loans
then outstanding.
"Revolving Credit Termination Date" means (i) the Stated
Termination Date or (ii) such earlier date of termination of Lenders'
obligations pursuant to Section 10.1 upon the occurrence of an Event of
Default, or (iii) such date as the Borrower may voluntarily and
permanently terminate the Revolving Credit Facility by payment in full
of all Revolving Credit Outstandings, Swing Line Outstandings and
Letter of Credit Outstandings and cancellation of all Letters of
Credit, together with all accrued and unpaid interest thereon.
"Revolving Loan" means any borrowing pursuant to an Advance
under the Revolving Credit Facility in accordance with Article II.
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<PAGE> 32
"Revolving Notes" means, collectively, the promissory notes of
the Borrower evidencing Revolving Loans executed and delivered to the
Lenders as provided in Section 2.4 substantially in the form of Exhibit
F-1, with appropriate insertions as to amounts, dates and names of
Lenders.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill.
"Security Agreement" means (i) the Security Agreement dated
June 9, 1995, as amended by the Security Agreement Amendment by the
Borrower to the Collateral Agent, as hereafter modified, amended or
supplemented from time to time and (ii) any Security Agreement of any
Subsidiary required to be delivered pursuant to Section 8.19.
"Security Agreement Amendment" means the Amendment to Security
Agreement, substantially in the form of Exhibit L attached hereto, to
be executed and delivered by the parties thereto on or before the
Closing Date.
"Security Instruments" means, collectively, the Pledge
Agreement, the Security Agreement, the AFI Security Agreement and all
other agreements, instruments and other documents, whether now existing
or hereafter in effect, pursuant to which the Borrower or any
Subsidiary shall grant or convey to the Collateral Agent or the Lenders
a Lien in property as security for all or any portion of the
Obligations, as any of them may be amended, modified or supplemented
from time to time.
"Senior Note" has the meaning set forth in the preamble to
this Agreement.
"Single Employer Plan" means any employee pension benefit plan
covered by Title IV of ERISA in respect of which the Borrower or any
Subsidiary is an "employer" as described in Section 4001(b) of ERISA
and which is not a Multiemployer Plan.
"Solvent" means, when used with respect to any Person, that at
the time of determination:
(i) the fair value of its assets (both at fair
valuation and at present fair saleable value on an orderly
basis) is in excess of the total amount of its liabilities,
including Guaranties; and
(ii) it is then able and expects to be able to
pay its debts as they mature; and
(iii) it has capital sufficient to carry on its
business as conducted and as proposed to be conducted.
"Stated Termination Date" means July 13, 2003.
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<PAGE> 33
"Subordinated Intercompany Note" means the subordinated note
due December 21, 2002 in the original principal amount of $50,000,000
issued by the Borrower to FLS, with an outstanding principal balance as
of the Closing Date of $20,000,000.
"Subsidiary" means any corporation or other entity in which
more than 50% of its outstanding voting stock or more than 50% of all
equity interests is owned directly or indirectly by the Borrower and/or
by one or more of the Borrower's Subsidiaries.
"Swap Agreement" means one or more agreements between the
Borrower and any Lender, or an affiliate of a Lender with respect to
Indebtedness evidenced by any or all of the Notes, which agreements
create Rate Hedging Obligations.
"Swing Line" means the revolving line of credit established by
NationsBank in favor of the Borrower pursuant to Section 2.13.
"Swing Line Facility" means the facility described in Section
2.13 hereof providing for Swing Line Loans to the Borrower by
NationsBank.
"Swing Line Loans" means loans made by NationsBank to the
Borrower pursuant to Section 2.13.
"Swing Line Outstandings" means, as of any date of
determination, the aggregate principal amount of all Swing Line Loans
then outstanding.
"Termination Event" means: (i) a "Reportable Event" described
in Section 4043 of ERISA and the regulations issued thereunder (unless
the notice requirement has been waived by applicable regulation); or
(ii) the withdrawal of the Borrower or any ERISA Affiliate from a
Pension Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA or was deemed such
under Section 4062(e) of ERISA; or (iii) the termination of a Pension
Plan, the filing of a notice of intent to terminate a Pension Plan or
the treatment of a Pension Plan amendment as a termination under
Section 4041 of ERISA; or (iv) the institution of proceedings to
terminate a Pension Plan by the PBGC; or (v) any other event or
condition which would constitute grounds under Section 4042(a) of ERISA
for the termination of, or the appointment of a trustee to administer,
any Pension Plan; or (vi) the partial or complete withdrawal of the
Borrower or any ERISA Affiliate from a Multiemployer Plan; or (vii) the
imposition of a Lien pursuant to Section 412 of the Code or Section 302
of ERISA; or (viii) any event or condition which results in the
reorganization or insolvency of a Multiemployer Plan under Section 4241
or Section 4245 of ERISA, respectively; or (ix) any event or condition
which results in the termination of a Multiemployer Plan under Section
4041A of ERISA or the institution by the PBGC of proceedings to
terminate a Multiemployer Plan under Section 4042 of ERISA.
"Total Letter of Credit Commitment" means an amount not to
exceed $50,000,000.
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<PAGE> 34
"Total Revolving Credit Commitment" means a principal amount
equal to $150,000,000, as reduced from time to time in accordance with
Section 2.7.
"Type" shall mean any type of Loan (i.e., a Base Rate Loan or
a Eurodollar Rate Loan).
"Voting Stock" means shares of capital stock issued by a
corporation, or equivalent interests in any other Person, the holders
of which are ordinarily, in the absence of contingencies, entitled to
vote for the election of directors (or persons performing similar
functions) of such Person, even if the right so to vote has been
suspended by the happening of such a contingency.
"Year 2000 Compliant" means all computer applications
(including those affected by information received from its suppliers
and vendors) that are material to the Borrower's or any of its
Subsidiaries' business and operations will on a timely basis be able to
perform properly data-sensitive functions involving all dates on and
after January 1, 2000.
"Year 2000 Problem" means the risk that computer applications
used by the Borrower and any of its Subsidiaries (including those
affected by information received from its suppliers and vendors) may be
unable to recognize and perform properly data-sensitive functions
involving certain dates on and after January 1, 2000.
1.3. Rules of Interpretation.
(a) All accounting terms not specifically defined herein
shall have the meanings assigned to such terms and shall be interpreted
in accordance with GAAP applied on a Consistent Basis.
(b) Each term defined in Article 1 or 9 of the Florida
Uniform Commercial Code shall have the meaning given therein unless
otherwise defined herein, except to the extent that the Uniform
Commercial Code of another jurisdiction is controlling, in which case
such terms shall have the meaning given in the Uniform Commercial Code
of the applicable jurisdiction.
(c) The headings, subheadings and table of contents used
herein or in any other Loan Document are solely for convenience of
reference and shall not constitute a part of any such document or
affect the meaning, construction or effect of any provision thereof.
(d) Except as otherwise expressly provided, references
herein to articles, sections, paragraphs, clauses, annexes, appendices,
exhibits and schedules are references to articles, sections,
paragraphs, clauses, annexes, appendices, exhibits and schedules in or
to this Agreement.
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(e) All definitions set forth herein or in any other Loan
Document shall apply to the singular as well as the plural form of such
defined term, and all references to the masculine gender shall include
reference to the feminine or neuter gender, and vice versa, as the
context may require.
(f) When used herein or in any other Loan Document, words
such as "hereunder", "hereto", "hereof" and "herein" and other words of
like import shall, unless the context clearly indicates to the
contrary, refer to the whole of the applicable document and not to any
particular article, section, subsection, paragraph or clause thereof.
(g) References to "including" means including without
limiting the generality of any description preceding such term, and for
purposes hereof the rule of ejusdem generis shall not be applicable to
limit a general statement, followed by or referable to an enumeration
of specific matters, to matters similar to those specifically
mentioned.
(h) All dates and times of day specified herein shall
refer to such dates and times at Charlotte, North Carolina.
(i) Each of the parties to the Loan Documents and their
counsel have reviewed and revised, or requested (or had the opportunity
to request) revisions to, the Loan Documents, and any rule of
construction that ambiguities are to be resolved against the drafting
party shall be inapplicable in the construing and interpretation of the
Loan Documents and all exhibits, schedules and appendices thereto.
(j) Any reference to an officer of the Borrower or any
other Person by reference to the title of such officer shall be deemed
to refer to each other officer of such Person, however titled,
exercising the same or substantially similar functions.
(k) All references to any agreement or document as
amended, modified or supplemented, or words of similar effect, shall
mean such document or agreement, as the case may be, as amended,
modified or supplemented from time to time only as and to the extent
permitted therein and in the Loan Documents.
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ARTICLE II
The Revolving Credit Facility
2.1. Revolving Loans.
(a) Commitment. Subject to the terms and conditions of
this Agreement, each Lender severally agrees to make Advances to the Borrower
under the Revolving Credit Facility from time to time from the Closing Date
until the Revolving Credit Termination Date on a pro rata basis as to the total
borrowing requested by the Borrower on any day determined by such Lender's
Applicable Commitment Percentage up to but not exceeding the Revolving Credit
Commitment of such Lender, provided, however, that the Lenders will not be
required and shall have no obligation to make any such Advance (i) so long as a
Default or an Event of Default has occurred and is continuing or (ii) if the
Administrative Agent has accelerated the maturity of any of the Notes as a
result of an Event of Default; provided further, however, that immediately after
giving effect to each such Advance, the amount of Revolving Credit Outstandings
plus Letter of Credit Outstandings plus Swing Line Outstandings shall not exceed
the Total Revolving Credit Commitment. Within such limits, the Borrower may
borrow, repay and reborrow under the Revolving Credit Facility on a Business Day
from the Closing Date until, but (as to borrowings and reborrowings) not
including, the Revolving Credit Termination Date; provided, however, that (y) no
Revolving Loan that is a Eurodollar Rate Loan shall be made which has an
Interest Period that extends beyond the Stated Termination Date and (z) each
Revolving Loan that is a Eurodollar Rate Loan may, subject to the provisions of
Section 2.7, be repaid only on the last day of the Interest Period with respect
thereto unless such payment is accompanied by the additional payment, if any,
required by Section 5.5.
(b) Amounts. Except as otherwise permitted by all the
Lenders from time to time, the amount of Revolving Credit Outstandings plus
Letter of Credit Outstandings plus Swing Line Outstandings shall not exceed at
any time the Total Revolving Credit Commitment, and, in the event there shall be
outstanding any such excess, the Borrower shall immediately make such payments
and prepayments as shall be necessary to comply with this restriction. Each
Revolving Loan hereunder, other than Base Rate Refunding Loans, and each
Conversion under Section 2.8, shall be in an amount of at least $2,000,000, and,
if greater than $2,000,000, an integral multiple of $500,000.
(c) Advances. (i) An Authorized Representative shall give
the Administrative Agent (1) at least three (3) Business Days' irrevocable
written notice by telefacsimile transmission of a Borrowing Notice or Interest
Rate Selection Notice (as applicable) with appropriate insertions, effective
upon receipt, of each Revolving Loan that is a Eurodollar Rate Loan (whether
representing an additional borrowing hereunder or the Conversion of a borrowing
hereunder from Base Rate Loans to Eurodollar Rate Loans) prior to 1:00 P.M. and
(2) irrevocable written notice by telefacsimile transmission of a Borrowing
Notice or Interest Rate Selection Notice (as applicable) with appropriate
insertions, effective upon receipt, of each Revolving Loan (other than
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Base Rate Refunding Loans to the extent the same are effected without notice
pursuant to Section 2.1(c)(iv)) that is a Base Rate Loan (whether representing
an additional borrowing hereunder or the Conversion of borrowing hereunder from
Eurodollar Rate Loans to Base Rate Loans) prior to 11:00 A.M. on the day of such
proposed Revolving Loan. Each such notice shall specify the amount of the
borrowing, the type of Revolving Loan (Base Rate or Eurodollar Rate), the date
of borrowing and, if a Eurodollar Rate Loan, the Interest Period to be used in
the computation of interest. Notice of receipt of such Borrowing Notice or
Interest Rate Selection Notice, as the case may be, together with the amount of
each Lender's portion of an Advance requested thereunder, shall be provided by
the Administrative Agent to each Lender by telefacsimile transmission with
reasonable promptness, but (provided the Administrative Agent shall have
received such notice by 1:00 P.M. in the case of a Eurodollar Rate Loan and
11:00 A.M. in the case of a Base Rate Loan) not later than 3:00 P.M. in the case
of a Eurodollar Rate Loan and not later than 1:00 P.M. in the case of a Base
Rate Loan on the same day as the Administrative Agent's receipt of such notice.
(ii) Not later than 3:00 P.M. on the date specified for each
borrowing under this Section 2.1, each Lender shall, pursuant to the terms and
subject to the conditions of this Agreement, make the amount of the Advance or
Advances to be made by it on such day available by wire transfer to the
Administrative Agent in the amount of its pro rata share, determined according
to such Lender's Applicable Commitment Percentage of the Revolving Loan or
Revolving Loans to be made on such day. Such wire transfer shall be directed to
the Administrative Agent at the Principal Office and shall be in the form of
Dollars constituting immediately available funds. The amount so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Borrower on the borrowing date by delivery
of the proceeds thereof to the Borrower's Account or otherwise as shall be
directed in the applicable Borrowing Notice by the Authorized Representative and
reasonably acceptable to the Administrative Agent.
(iii) The Borrower shall have the option to elect the duration of
the initial and any subsequent Interest Periods and to Convert the Revolving
Loans in accordance with Section 2.8. Eurodollar Rate Loans and Base Rate Loans
may be outstanding at the same time, provided, however, there shall not be
outstanding at any one time Eurodollar Rate Loans having more than six (6)
different Interest Periods. If the Administrative Agent does not receive a
Borrowing Notice or an Interest Rate Selection Notice giving notice of election
of the duration of an Interest Period or of Conversion of any Loan to or
Continuation of a Loan as a Eurodollar Rate Loan by the time prescribed by
Section 2.1(c) or 2.8, the Borrower shall be deemed to have elected to Convert
such Loan to (or Continue such Loan as) a Base Rate Loan until the Borrower
notifies the Administrative Agent in accordance with Section 2.8.
(iv) Notwithstanding the foregoing, if a drawing is made under any
Letter of Credit, such drawing is honored by the Issuing Bank prior to the
Stated Termination Date, and the Borrower shall not immediately fully reimburse
the Issuing Bank in respect of such drawing, (A) provided that the conditions to
making a Revolving Loan as herein provided shall then be satisfied, the
Reimbursement Obligation arising from such drawing shall be paid to the Issuing
Bank by the
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Administrative Agent without the requirement of notice to or from the Borrower
from immediately available funds which shall be advanced as a Base Rate
Refunding Loan by each Lender under the Revolving Credit Facility in an amount
equal to such Lender's Applicable Commitment Percentage of such Reimbursement
Obligation, and (B) if the conditions to making a Revolving Loan as herein
provided shall not then be satisfied, each of the Lenders shall fund by payment
to the Administrative Agent (for the benefit of the Issuing Bank) in immediately
available funds the purchase from the Issuing Bank of their respective
Participations in the related Reimbursement Obligation based on their respective
Applicable Commitment Percentages of the Total Letter of Credit Commitment. If a
drawing is presented under any Letter of Credit in accordance with the terms
thereof and the Borrower shall not immediately reimburse the Issuing Bank in
respect thereof, then notice of such drawing or payment shall be provided
promptly by the Issuing Bank to the Administrative Agent and the Administrative
Agent shall provide notice to each Lender by telephone or telefacsimile
transmission. If notice to the Lenders of a drawing under any Letter of Credit
is given by the Administrative Agent at or before 12:00 noon on any Business
Day, each Lender shall, pursuant to the conditions specified in this Section
2.1(c)(iv), either make a Base Rate Refunding Loan or fund the purchase of its
Participation in the amount of such Lender's Applicable Commitment Percentage of
such drawing or payment and shall pay such amount to the Administrative Agent
for the account of the Issuing Bank at the Principal Office in Dollars and in
immediately available funds before 2:30 P.M. on the same Business Day. If notice
to the Lenders of a drawing under a Letter of Credit is given by the
Administrative Agent after 12:00 noon on any Business Day, each Lender shall,
pursuant to the conditions specified in this Section 2.1(c)(iv), either make a
Base Rate Refunding Loan or fund the purchase of its Participation in the amount
of such Lender's Applicable Commitment Percentage of such drawing or payment and
shall pay such amount to the Administrative Agent for the account of the Issuing
Bank at the Principal Office in Dollars and in immediately available funds
before 12:00 noon on the next following Business Day. Any such Base Rate
Refunding Loan shall be advanced as, and shall Continue as, a Base Rate Loan
unless and until the Borrower Converts such Base Rate Loan in accordance with
the terms of Section 2.8.
2.2. Payment of Interest. (a) The Borrower shall pay interest to
the Administrative Agent for the account of each Lender on the outstanding and
unpaid principal amount of each Revolving Loan made by such Lender for the
period commencing on the date of such Revolving Loan until such Revolving Loan
shall be due at the then applicable Base Rate for Base Rate Loans or applicable
Eurodollar Rate for Eurodollar Rate Loans, as designated by the Authorized
Representative pursuant to Section 2.1; provided, however, that if any Event of
Default shall occur and be continuing, all amounts outstanding hereunder shall
bear interest thereafter at the Default Rate.
(b) Interest on each Revolving Loan shall be computed on
the basis of a year of 360 days and calculated in each case for the actual
number of days elapsed. Interest on each Revolving Loan shall be paid (i)
quarterly in arrears on the last Business Day of each March, June, September and
December, commencing September 30, 1998 for each Floating Rate Loan, (ii) on the
last day of the applicable Interest Period for each Eurodollar Rate Loan and, if
such Interest Period extends for more than three (3) months, at intervals of
three (3) months after the
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first day of such Interest Period, and (iii) upon payment in full of the
principal amount of such Revolving Loan.
2.3. (a) Payment of Principal. The principal amount of each
Revolving Loan shall be due and payable to the Administrative Agent for the
benefit of each Lender in full on the Revolving Credit Termination Date, or
earlier as specifically provided herein. The principal amount of any Base Rate
Loan may be prepaid in whole or in part at any time. The principal amount of any
Eurodollar Rate Loan may be prepaid only at the end of the applicable Interest
Period unless the Borrower shall pay to the Administrative Agent for the account
of the Lenders the additional amount, if any, required under Section 5.5. All
prepayments of Revolving Loans made by the Borrower shall be in the amount of
$1,000,000 or such greater amount which is an integral multiple of $100,000, or
the amount equal to all Revolving Credit Outstandings, or such other amount as
necessary to comply with Section 2.1(b) or Section 2.8.
(b) Mandatory Prepayments. The Borrower shall make the
following required prepayments, each such payment to be made to the
Administrative Agent for the benefit of the Lenders within the time period
specified below:
(i) Debt Offerings. The Borrower shall make, or shall
cause each applicable Subsidiary to make, a prepayment from
the Net Proceeds of any Debt Offering in an amount equal to
one hundred percent (100%) of such Net Proceeds. Each such
prepayment shall be made within five (5) Business Days of
receipt of such Net Proceeds and upon not less than three (3)
Business' Days written notice to the Administrative Agent, and
shall include within one (1) Business Day of repayment a
certificate of an Authorized Representative setting forth in
reasonable detail the calculations utilized in computing the
amount of the Net Proceeds.
(ii) Asset Dispositions. The Borrower shall make, or shall
cause each applicable Subsidiary to make, a prepayment from
the Net Proceeds of any Asset Disposition in an amount equal
to one hundred percent (100%) of such Net Proceeds. Each such
prepayment shall be made within five (5) Business Days of
receipt of such Net Proceeds and upon not less than three (3)
Business' Days written notice to the Administrative Agent,
which notice shall include a certificate of Authorized
Representative setting forth in reasonable detail the
calculations utilized in computing the amount of the Net
Proceeds.
All mandatory prepayments made pursuant to this Section 2.3(b) shall
permanently reduce the Total Revolving Credit Commitment. Any prepayment of an
Eurodollar Rate Loan pursuant to this Section 2.3(b) other than on the last day
of an Interest Period shall be accompanied by the additional payment, if any,
required by Section 5.5 hereof.
2.4. Manner of Payment. (a) Each payment of principal (including
any prepayment) and payment of interest and fees, and any other amount required
to be paid to the Lenders with respect to the Revolving Loans, shall be made to
the Administrative Agent at the Principal Office,
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for the account of each Lender, in Dollars and in immediately available funds
without setoff, deduction or counterclaim before 3:00 P.M. on the date such
payment is due. The Administrative Agent may, but shall not be obligated to,
debit the amount of any such payment which is not made by such time to any
ordinary deposit account, if any, of the Borrower with the Administrative Agent.
(b) The Administrative Agent shall deem any payment made by or on
behalf of the Borrower hereunder that is not made both in Dollars and in
immediately available funds and prior to 3:00 P.M. to be a non-conforming
payment. Any such payment shall not be deemed to be received by the
Administrative Agent until the later of (i) the time such funds become available
funds and (ii) the next Business Day. Any non-conforming payment may constitute
or become a Default or Event of Default. Interest shall continue to accrue on
any principal as to which a non-conforming payment is made until the later of
(x) the date such funds become available funds or (y) the next Business Day at
the Default Rate from the date such amount was due and payable.
(c) In the event that any payment hereunder or under the Revolving
Notes becomes due and payable on a day other than a Business Day, then such due
date shall be extended to the next succeeding Business Day unless provided
otherwise under clause (ii) of the definition of "Interest Period"; provided
that interest shall continue to accrue during the period of any such extension
and provided further, that in no event shall any such due date be extended
beyond the Revolving Credit Termination Date.
2.5. Revolving Notes. Revolving Loans made by each Lender shall be
evidenced by the Revolving Note payable to the order of such Lender in the
respective amount of its Applicable Commitment Percentage of the Revolving
Credit Commitment, which Revolving Note shall be dated the Closing Date or a
later date pursuant to an Assignment and Acceptance and shall be duly completed,
executed and delivered by the Borrower.
2.6. Pro Rata Payments. Except as otherwise provided herein, (a)
each payment on account of the principal of and interest on the Revolving Loans
and the fees described in Section 2.10 shall be made to the Administrative Agent
for the account of the Lenders pro rata based on their Applicable Commitment
Percentages, (b) all payments to be made by the Borrower for the account of each
of the Lenders on account of principal, interest and fees, shall be made without
diminution, setoff, recoupment or counterclaim, and (c) the Administrative Agent
will promptly distribute to the Lenders in immediately available funds payments
received in fully collected, immediately available funds from the Borrower.
2.7. Reductions. The Borrower shall, by notice from an Authorized
Representative, have the right from time to time but not more frequently than
once each calendar month, upon not less than three (3) Business Days' written
notice to the Administrative Agent, effective upon receipt, to reduce the Total
Revolving Credit Commitment. The Administrative Agent shall give each Lender,
within one (1) Business Day of receipt of such notice, telefacsimile notice, or
telephonic notice (confirmed in writing), of such reduction. Each such reduction
shall be in the aggregate amount of $5,000,000 or such greater amount which is
in an integral multiple of
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$500,000, or the entire remaining Total Revolving Credit Commitment, and shall
permanently reduce the Total Revolving Credit Commitment. Each reduction of the
Total Revolving Credit Commitment shall be accompanied by payment of the
Revolving Loans to the extent that the principal amount of Revolving Credit
Outstandings plus Letter of Credit Outstandings plus Swing Line Outstandings
exceeds the Total Revolving Credit Commitment after giving effect to such
reduction, together with accrued and unpaid interest on the amounts prepaid. No
such reduction shall result in the payment of any Eurodollar Rate Loan other
than on the last day of the Interest Period of such Eurodollar Rate Loan unless
such prepayment is accompanied by amounts due, if any, under Section 5.5.
2.8. Conversions and Elections of Subsequent Interest Periods.
Subject to the limitations set forth below and in Article III, the Borrower may:
(a) upon delivery, effective upon receipt, of a properly
completed Interest Rate Selection Notice to the Administrative Agent on or
before 11:00 A.M. on any Business Day, Convert all or a part of Eurodollar Rate
Loans under the Revolving Credit Facility to Base Rate Loans on the last day of
the Interest Period for such Eurodollar Rate Loans; and
(b) provided that no Default or Event of Default shall
have occurred and be continuing upon delivery, effective upon receipt, of a
properly completed Interest Rate Selection Notice to the Administrative Agent on
or before 2:00 P.M. three (3) Business Days' prior to the date of such election
or Conversion:
(i) elect a subsequent Interest Period for all
or a portion of Eurodollar Rate Loans under the Revolving
Credit Facility to begin on the last day of the then current
Interest Period for such Eurodollar Rate Loans; and
(ii) Convert Base Rate Loans under the Revolving
Credit Facility to Eurodollar Rate Loans on any Business Day.
Each election and Conversion pursuant to this Section 2.8 shall be
subject to the limitations on Eurodollar Rate Loans set forth in the definition
of "Interest Period" herein and in Sections 2.1, 2.3 and Article III. The
Administrative Agent shall give written notice to each Lender of such notice of
election or Conversion prior to 3:00 P.M. on the day such notice of election or
Conversion is received. All such Continuations or Conversions of Loans shall be
effected pro rata based on the Applicable Commitment Percentages of the Lenders.
2.9. Increase and Decrease in Amounts. The amount of the Total
Revolving Credit Commitment which shall be available to the Borrower as Advances
shall be reduced by the aggregate amount of Revolving Credit Outstandings,
Letters of Credit Outstandings and Swing Line Outstandings.
2.10. Unused Fee. For the period beginning on the Closing Date and
ending on the Revolving Credit Termination Date, the Borrower agrees to pay to
the Administrative Agent, for
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the pro rata benefit of the Lenders based on their Applicable Commitment
Percentages, an unused fee equal to the Applicable Unused Fee multiplied by the
average daily amount by which the Total Revolving Credit Commitment exceeds the
sum of (i) Revolving Credit Outstandings (without giving effect to Swing Line
Outstandings except in the case of NationsBank) plus (ii) Letter of Credit
Outstandings. Such fees shall be due in arrears on the last Business Day of each
March, June, September and December commencing September 30, 1998 to and on the
Revolving Credit Termination Date. Notwithstanding the foregoing, so long as any
Lender fails to make available any portion of its Revolving Credit Commitment
when requested, such Lender shall not be entitled to receive payment of its pro
rata share of such fee until such Lender shall make available such portion. Such
fee shall be calculated on the basis of a year of 360 days for the actual number
of days elapsed.
2.11. Deficiency Advances; Failure to Purchase Participations. No
Lender shall be responsible for any default of any other Lender in respect to
such other Lender's obligation to make any Loan hereunder or fund its purchase
of any Participation hereunder nor shall the Revolving Credit Commitment of any
Lender hereunder be increased as a result of such default of any other Lender.
Without limiting the generality of the foregoing, in the event any Lender shall
fail to advance funds to the Borrower as herein provided, the Administrative
Agent may in its discretion, but shall not be obligated to, advance under the
applicable Note in its favor as a Lender all or any portion of such amount or
amounts (each, a "deficiency advance") and shall thereafter be entitled to
payments of principal of and interest on such deficiency advance in the same
manner and at the same interest rate or rates to which such other Lender would
have been entitled had it made such Advance under its Note; provided that, (i)
such defaulting Lender shall not be entitled to receive payments of principal,
interest or fees with respect to such deficiency advance until such deficiency
advance shall be paid by such Lender and (ii) upon payment to the Administrative
Agent from such other Lender of the entire outstanding amount of each such
deficiency advance, together with accrued and unpaid interest thereon, from the
most recent date or dates interest was paid to the Administrative Agent by a
Borrower on each Loan comprising the deficiency advance at the interest rate per
annum for overnight borrowing by the Administrative Agent from the Federal
Reserve Bank, then such payment shall be credited against the applicable Note of
the Administrative Agent in full payment of such deficiency advance and such
Borrower shall be deemed to have borrowed the amount of such deficiency advance
from such other Lender as of the most recent date or dates, as the case may be,
upon which any payments of interest were made by such Borrower thereon. In the
event any Lender shall fail to fund its purchase of a Participation after notice
from the Issuing Bank or NationsBank, as the Swing Line lender, as applicable,
such Lender shall pay to the Issuing Bank or NationsBank, as the Swing Line
lender, as applicable, interest on the amount so due from the date of such
notice at the interest rate per annum for overnight borrowing by the
Administrative Agent from the Federal Reserve Bank to the date such purchase
price is received by the Issuing Bank or NationsBank, as the Swing Line lender,
as applicable.
2.12. Use of Proceeds. The proceeds of the Loans made pursuant to
the Revolving Credit Facility hereunder shall be used by the Borrower for
general working capital needs and other corporate purposes.
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2.13. Swing Line. (a) Notwithstanding any other provision of this
Agreement to the contrary, in order to administer the Revolving Credit Facility
in an efficient manner and to minimize the transfer of funds between the
Administrative Agent and the Lenders, NationsBank shall make available Swing
Line Loans to the Borrower prior to the Revolving Credit Termination Date.
NationsBank shall not be obligated to make any Swing Line Loan pursuant hereto
(i) if to the actual knowledge of NationsBank the Borrower is not in compliance
with all the conditions to the making of Revolving Loans set forth in this
Agreement, (ii) if after giving effect to such Swing Line Loan, the Swing Line
Outstandings exceed $15,000,000, or (iii) if after giving effect to such Swing
Line Loan, the sum of the Swing Line Outstandings, Revolving Credit Outstandings
and Letter of Credit Outstandings exceeds the Total Revolving Credit Commitment.
The Company may borrow, repay and reborrow under this Section 2.13. Unless
notified to the contrary by NationsBank, borrowings under the Swing Line shall
be made in the minimum amount of $100,000 or, if greater, in amounts which are
integral multiples of $10,000, or in the amount necessary to effect a Base Rate
Refunding Loan, upon written request by telefacsimile transmission, effective
upon receipt, by an Authorized Representative of the Borrower made to
NationsBank not later than 3:00 P.M. on the Business Day of the requested
borrowing. Each such Borrowing Notice shall specify the amount of the borrowing,
the date of borrowing, and the election of either the Base Rate or the Adjusted
Federal Funds Rate with respect to such borrowing, and shall be in the form of
Exhibit D-2, with appropriate insertions. Unless notified to the contrary by
NationsBank, each repayment of a Swing Line Loan shall be in an amount which is
an integral multiple of $10,000 or the aggregate amount of all Swing Line
Outstandings. If the Borrower instructs NationsBank to debit any demand deposit
account of the Borrower in the amount of any payment with respect to a Swing
Line Loan, or NationsBank otherwise receives repayment, after 3:00 P.M. on a
Business Day, such payment shall be deemed received on the next Business Day.
(b) Swing Line Loans shall bear interest, at the Borrower's
option, at either (i) the Base Rate, or (ii) the Adjusted Federal Funds Rate;
provided, however, that if the Borrowing Notice received by the Administrative
Agent with respect to a Swing Line Loan fails to designate either the Base Rate
or the Adjusted Federal Funds Rate for such Swing Line Loan, such Swing Line
Loan shall bear interest at the Base Rate. The interest payable on Swing Line
Loans is solely for the account of NationsBank, and all accrued and unpaid
interest on Swing Line Loans shall be payable on the dates and in the manner
provided in Sections 2.2(b) and 2.4 with respect to interest on Base Rate Loans.
The Swing Line Outstandings shall be evidenced by a Note delivered to
NationsBank pursuant to this Section 2.13(b) on the Closing Date in the original
principal amount of $15,000,000 and substantially in the form of Exhibit F-2.
(c) Upon the making of a Swing Line Loan, each Lender shall be
deemed to have purchased from NationsBank a Participation therein in an amount
equal to that Lender's Applicable Commitment Percentage of such Swing Line Loan.
Upon demand made by NationsBank, each Lender shall, according to its Applicable
Commitment Percentage of such Swing Line Loan, promptly provide to NationsBank
its purchase price therefor in an amount equal to its Participation therein. Any
Advance made by a Lender pursuant to demand of NationsBank of the purchase price
of its Participation shall be deemed (i) provided that the conditions to making
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Revolving Loans shall be satisfied, a Base Rate Refunding Loan under Section 2.1
until the Borrower Converts such Base Rate Loan in accordance with the terms of
Section 2.8, and (ii) in all other cases, the funding by each Lender of the
purchase price of its Participation in such Swing Line Loan. The obligation of
each Lender to so provide its purchase price to NationsBank shall be absolute
and unconditional and shall not be affected by the occurrence of an Event of
Default or any other occurrence or event.
The Borrower, at its option and subject to the terms hereof, may
request an Advance pursuant to Section 2.1 in an amount sufficient to repay
Swing Line Outstandings on any date and the Administrative Agent shall provide
from the proceeds of such Advance to NationsBank the amount necessary to repay
such Swing Line Outstandings (which NationsBank shall then apply to such
repayment) and credit any balance of the Advance in immediately available funds
in the manner directed by the Borrower pursuant to Section 2.1(c)(ii). The
proceeds of such Advances shall be paid to NationsBank for application to the
Swing Line Outstandings and the Lenders shall then be deemed to have made Loans
in the amount of such Advances. The Swing Line shall continue in effect until
the Revolving Credit Termination Date, at which time all Swing Line Outstandings
and accrued interest thereon shall be due and payable in full.
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ARTICLE III
Letters of Credit
3.1. Letters of Credit. The Issuing Bank agrees, subject to the
terms and conditions of this Agreement, upon request of the Borrower to issue
from time to time for the account of the Borrower Letters of Credit upon
delivery to the Issuing Bank of an Application and Agreement for Letter of
Credit relating thereto in form and content acceptable to the Issuing Bank;
provided, that (i) the Letter of Credit Outstandings shall not exceed the Total
Letter of Credit Commitment and (ii) no Letter of Credit shall be issued if,
after giving effect thereto, Letter of Credit Outstandings plus Revolving Credit
Outstandings plus Swing Line Outstandings shall exceed the Total Revolving
Credit Commitment. No Letter of Credit shall have an expiry date (including all
rights of the Borrower or any beneficiary named in such Letter of Credit to
require renewal) or payment date occurring later than the earlier to occur of
one year after the date of its issuance or the fifth Business Day prior to the
Stated Termination Date.
3.2. Reimbursement.
(a) The Borrower hereby unconditionally agrees to pay to
the Issuing Bank immediately on demand at the Principal Office all amounts
required to pay all drafts drawn or purporting to be drawn under the Letters of
Credit and all reasonable expenses incurred by the Issuing Bank in connection
with the Letters of Credit, and in any event and without demand to place in
possession of the Issuing Bank (which shall include Advances under the Revolving
Credit Facility if permitted by Section 2.1 and Swing Line Loans if permitted by
Section 2.13) sufficient funds to pay all debts and liabilities arising under
any Letter of Credit. The Issuing Bank agrees to give the Borrower prompt notice
of any request for a draw under a Letter of Credit. The Issuing Bank may charge
any account the Borrower may have with it for any and all amounts the Issuing
Bank pays under a Letter of Credit, plus charges and reasonable expenses as from
time to time agreed to by the Issuing Bank and the Borrower; provided that to
the extent permitted by Section 2.1(c)(iv) and Section 2.13, amounts shall be
paid pursuant to Advances under the Revolving Credit Facility or, if the
Borrower shall elect, by Swing Line Loans. The Borrower agrees to pay the
Issuing Bank interest on any Reimbursement Obligations not paid when due
hereunder at the Default Rate, such rate to be calculated on the basis of a year
of 360 days for actual days elapsed.
(b) In accordance with the provisions of Section 2.1(c),
the Issuing Bank shall notify the Administrative Agent of any drawing under any
Letter of Credit promptly following the receipt by the Issuing Bank of such
drawing.
(c) Each Lender (other than the Issuing Bank) shall
automatically acquire on the date of issuance thereof, a Participation in the
liability of the Issuing Bank in respect of each Letter of Credit in an amount
equal to such Lender's Applicable Commitment Percentage of such liability, and
to the extent that the Borrower is obligated to pay the Issuing Bank under
Section 3.2(a), each Lender (other than the Issuing Bank) thereby shall
absolutely, unconditionally and
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irrevocably assume, and shall be unconditionally obligated to pay to the Issuing
Bank as hereinafter described, its Applicable Commitment Percentage of the
liability of the Issuing Bank under such Letter of Credit.
(i) Each Lender (including the Issuing Bank in
its capacity as a Lender) shall, subject to the terms and
conditions of Article II, pay to the Administrative Agent for
the account of the Issuing Bank at the Principal Office in
Dollars and in immediately available funds, an amount equal to
its Applicable Commitment Percentage of any drawing under a
Letter of Credit, such funds to be provided in the manner
described in Section 2.1(c)(iv).
(ii) Simultaneously with the making of each
payment by a Lender to the Issuing Bank pursuant to Section
2.1(c)(iv)(B), such Lender shall, automatically and without
any further action on the part of the Issuing Bank or such
Lender, acquire a Participation in an amount equal to such
payment (excluding the portion thereof constituting interest
accrued prior to the date the Lender made its payment) in the
related Reimbursement Obligation of the Borrower. The
Reimbursement Obligations of the Borrower shall be immediately
due and payable whether by Advances made in accordance with
Section 2.1(c)(iv), Swing Line Loans made in accordance with
Section 2.13, or otherwise.
(iii) Each Lender's obligation to make payment to
the Administrative Agent for the account of the Issuing Bank
pursuant to Section 2.1(c)(iv) and this Section 3.2(c), and
the right of the Issuing Bank to receive the same, shall be
absolute and unconditional, shall not be affected by any
circumstance whatsoever and shall be made without any offset,
abatement, withholding or reduction whatsoever. If any Lender
is obligated to pay but does not pay amounts to the
Administrative Agent for the account of the Issuing Bank in
full upon such request as required by Section 2.1(c)(iv) or
this Section 3.2(c), such Lender shall, on demand, pay to the
Administrative Agent for the account of the Issuing Bank
interest on the unpaid amount for each day during the period
commencing on the date of notice given to such Lender pursuant
to Section 2.1(c) until such Lender pays such amount to the
Administrative Agent for the account of the Issuing Bank in
full at the interest rate per annum for overnight borrowing by
the Administrative Agent from the Federal Reserve Bank.
(iv) In the event the Lenders have purchased
Participations in any Reimbursement Obligation as set forth in
clause (ii) above, then at any time payment (in fully
collected, immediately available funds) of such Reimbursement
Obligation, in whole or in part, is received by Issuing Bank
from the Borrower, Issuing Bank shall promptly pay to each
Lender an amount equal to its Applicable Commitment Percentage
of such payment from the Borrower.
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(d) Promptly following the end of each calendar quarter,
the Issuing Bank shall deliver to the Administrative Agent a notice describing
the aggregate undrawn amount of all Letters of Credit at the end of such
quarter. Upon the request of any Lender from time to time, the Issuing Bank
shall deliver to the Administrative Agent, and the Administrative Agent shall
deliver to such Lender, any other information reasonably requested by such
Lender with respect to each Letter of Credit outstanding.
(e) The issuance by the Issuing Bank of each Letter of
Credit shall, in addition to the conditions precedent set forth in Article VI,
be subject to the conditions that such Letter of Credit be in such form and
contain such terms as shall be reasonably satisfactory to the Issuing Bank
consistent with the then current practices and procedures of the Issuing Bank
with respect to similar letters of credit, and the Borrower shall have executed
and delivered such other instruments and agreements relating to such Letters of
Credit as the Issuing Bank shall have reasonably requested consistent with such
practices and procedures and shall not be in conflict with any of the express
terms herein contained. All Letters of Credit shall be issued pursuant to and
subject to the Uniform Customs and Practice for Documentary Credits, 1993
revision, International Chamber of Commerce Publication No. 500 and all
subsequent amendments and revisions thereto.
(f) The Borrower agrees that Issuing Bank may, in its
sole discretion, accept or pay, as complying with the terms of any Letter of
Credit, any drafts or other documents otherwise in order which may be signed or
issued by an administrator, executor, trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, liquidator, receiver,
attorney in fact or other legal representative of a party who is authorized
under such Letter of Credit to draw or issue any drafts or other documents.
(g) Without limiting the generality of the provisions of
Section 12.9, the Borrower hereby agrees to indemnify and hold harmless the
Issuing Bank, each other Lender and the Administrative Agent from and against
any and all claims and damages, losses, liabilities, reasonable costs and
expenses which the Issuing Bank, such other Lender or the Administrative Agent
may incur (or which may be claimed against the Issuing Bank, such other Lender
or the Administrative Agent) by any Person by reason of or in connection with
the issuance or transfer of or payment or failure to pay under any Letter of
Credit; provided that the Borrower shall not be required to indemnify the
Issuing Bank, any other Lender or the Administrative Agent for any claims,
damages, losses, liabilities, costs or expenses to the extent, but only to the
extent, (i) caused by the willful misconduct or gross negligence of the party to
be indemnified or (ii) caused by the failure of the Issuing Bank to pay under
any Letter of Credit after the presentation to it of a request for payment
strictly complying with the terms and conditions of such Letter of Credit,
unless such payment is prohibited by any law, regulation, court order or decree.
The indemnification and hold harmless provisions of this Section 3.2(g) shall
survive repayment of the Obligations, occurrence of the Revolving Credit
Termination Date and expiration or termination of this Agreement.
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(h) Without limiting Borrower's rights as set forth in
Section 3.2(g), the obligation of the Borrower to immediately reimburse the
Issuing Bank for drawings made under Letters of Credit and the Issuing Bank's
right to receive such payment shall be absolute, unconditional and irrevocable,
and that such obligations of the Borrower shall be performed strictly in
accordance with the terms of this Agreement and such Letters of Credit and the
related Applications and Agreement for any Letter of Credit, under all
circumstances whatsoever, including the following circumstances:
(i) any lack of validity or enforceability of
the Letter of Credit, the obligation supported by the Letter
of Credit or any other agreement or instrument relating
thereto (collectively, the "Related LC Documents");
(ii) any amendment or waiver of or any consent to
or departure from all or any of the Related LC Documents;
(iii) the existence of any claim, setoff, defense
(other than the defense of payment in accordance with the
terms of this Agreement) or other rights which the Borrower
may have at any time against any beneficiary or any transferee
of a Letter of Credit (or any persons or entities for whom any
such beneficiary or any such transferee may be acting), the
Administrative Agent, the Lenders or any other Person, whether
in connection with the Loan Documents, the Related LC
Documents or any unrelated transaction;
(iv) any breach of contract or other dispute
between the Borrower and any beneficiary or any transferee of
a Letter of Credit (or any persons or entities for whom such
beneficiary or any such transferee may be acting), the
Administrative Agent, the Lenders or any other Person;
(v) any draft, statement or any other document
presented under the Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect
whatsoever;
(vi) any delay, extension of time, renewal,
compromise or other indulgence or modification granted or
agreed to by the Administrative Agent, with or without notice
to or approval by the Borrower in respect of any of Borrower's
Obligations under this Agreement; or
(vii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing.
3.3. Letter of Credit Facility Fees. The Borrower shall pay to the
Administrative Agent, for the pro rata benefit of the Lenders based on their
Applicable Commitment Percentages, a fee on the aggregate amount available to be
drawn on each outstanding Letter of Credit at a rate equal
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to the Applicable Margin for Eurodollar Rate Loans, and (ii) for the Issuing
Bank, 0.125% based on the aggregate amount available to be drawn on each
outstanding Letter of Credit. Such fees shall be due with respect to each Letter
of Credit quarterly in arrears on the last day of each March, June, September,
and December, the first such payment to be made on the first such date occurring
after the date of issuance of a Letter of Credit. The fees described in this
Section 3.3 shall be calculated on the basis of a year of 360 days for the
actual number of days elapsed.
3.4. Administrative Fees. The Borrower shall pay to the Issuing
Bank such administrative fee and other fees, if any, in connection with the
Letters of Credit in such amounts and at such times as the Issuing Bank and the
Borrower shall agree from time to time.
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ARTICLE IV
Security
4.1. Security. As security for the full and timely payment and
performance of all Obligations, the Credit Parties shall on or before the
Closing Date do or cause to be done all things necessary in the opinion of the
Administrative Agent and its counsel to grant to the Collateral Agent for the
benefit of the Lenders a duly perfected first priority security interest in all
Collateral subject to no prior Lien or other encumbrance or restriction on
transfer.
4.2. Guaranty. The Borrower shall cause AFI to amend and restate
the AFI Guaranty pursuant to the Consolidated Amendment to be delivered by AFI
on or before the Closing Date. The Borrower hereby agrees to cause a Facility
Guaranty to be delivered by any Domestic Subsidiary acquired or created after
the Closing Date pursuant to the terms of Section 8.19 hereof.
4.3. Stock Pledge. As security for the full and timely payment and
performance of (i) all Obligations now existing or hereafter arising and (ii) if
applicable, its obligations as a Guarantor under the Facility Guaranty, the
Borrower and each Subsidiary owning any Pledged Stock shall on or before the
Closing Date deliver to the Collateral Agent a Pledge Agreement together with
certificates representing Pledged Stock with stock powers duly executed in blank
which Pledge Agreements shall pledge to the Collateral Agent for the benefit of
the Lenders (w) 100% of the capital stock and related interests and rights of
any Domestic Subsidiary and (x) not less than 65% of the Voting Stock of any
Foreign Subsidiary in accordance with the terms hereof and thereof. The Borrower
hereby agrees to, and to cause each Subsidiary to, deliver to the Collateral
Agent for the benefit of the Lenders (y) 100% of the capital stock and related
interests and rights of any Domestic Subsidiary acquired or created after the
Closing Date and (z) not less than 65% of the Voting Stock and 100% of the
non-voting common stock and related interests and rights of any Foreign
Subsidiary acquired or created after the Closing Date in accordance with the
terms hereof and thereof.
4.4. Security Interests. The Borrower shall on or before the
Closing Date deliver or cause to be delivered to the Collateral Agent, the
Security Agreement Amendment, the Consolidated Amendment, the Uniform Commercial
Code financing statements, and each other Security Instrument sufficient to
grant to the Collateral Agent a valid, duly perfected security interest in the
Collateral described therein, subject to no prior Liens other than Permitted
Liens.
4.5. Further Assurances. At the request of the Administrative
Agent, the Borrower will or will cause its Subsidiaries, as the case may be to
execute, by its duly authorized officers, alone or with the Collateral Agent,
any certificate, instrument, statement or document, or to procure any such
certificate, instrument, statement or document, or to take such other action
(and pay all connected costs) which the Administrative Agent or Collateral Agent
reasonably deems necessary from time to time to create, continue or preserve the
liens and security interests in Collateral (and the perfection and priority
thereof) of the Collateral Agent contemplated hereby and by the other
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Loan Documents and specifically including all Collateral acquired by the
Borrower or any Guarantor after the Closing Date.
4.6. Information Regarding Collateral. The Borrower represents,
warrants and covenants that (i) the chief executive office of the Borrower and
each other Person providing Collateral pursuant to a Security Instrument (each,
a "Grantor") at the Closing Date is located at the address or addresses
specified on Schedule 4.6 and (ii) Schedule 4.6 contains a true and complete
list of (a) the name and address of each Grantor and of each other Person that
has effected any merger or consolidation with a Grantor or contributed or
transferred to a Grantor any property constituting Collateral at any time since
January 1, 1993 (excluding Persons making sales in the ordinary course of their
businesses to a Grantor of property constituting inventory in the hands of such
seller), (b) each location of the chief executive office of each Grantor at any
time since January 1, 1993, (c) each location in which goods constituting
Collateral are or have been located since January 1, 1993 (together with the
name of each owner of the property located at such address if not the applicable
Grantor, and a summary description of the relationship between the applicable
Grantor and such Person), and (d) each trade style used by any Grantor since
January 1, 1993 and the purposes for which it was used. Borrower shall not
change, and shall not permit any other Grantor to change, the location of its
chief executive office or any location specified in clause (c) of the
immediately preceding sentence, or use or permit any other Grantor to use, any
additional trade style, except upon giving not less than thirty (30) days' prior
written notice to the Administrative Agent and taking or causing to be taken all
such action at Borrower's or such other Grantor's expense as may be reasonably
requested by the Administrative Agent or the Collateral Agent to perfect or
maintain the perfection of the Lien of the Collateral Agent in the Collateral.
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ARTICLE V
Change in Circumstances
5.1. Increased Cost and Reduced Return.
(a) If, after the date hereof, the adoption of any applicable law,
rule, or regulation, or any change in any applicable law, rule, or regulation,
or any change in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such governmental authority, central bank, or
comparable agency:
(i) shall subject such Lender (or its Applicable
Lending Office) to any tax, duty, or other charge with respect to any
Eurodollar Rate Loans, its Note, or its obligation to make Eurodollar
Rate Loans, or change the basis of taxation of any amounts payable to
such Lender (or its Applicable Lending Office) under this Agreement or
its Note in respect of any Eurodollar Rate Loans (other than taxes
imposed on the overall net income of such Lender by the jurisdiction in
which such Lender has its principal office or such Applicable Lending
Office);
(ii) shall impose, modify, or deem applicable any
reserve, special deposit, assessment or similar requirement (other than
the Reserve Requirement utilized in the determination of the Eurodollar
Rate) relating to any extensions of credit or other assets of, or any
deposits with or other liabilities or commitments of, such Lender (or
its Applicable Lending Office), including the Revolving Credit
Commitment of such Lender hereunder; or
(iii) shall impose on such Lender (or its
Applicable Lending Office) or on the London interbank market any other
condition affecting this Agreement or its Note or any of such
extensions of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making, Converting into, Continuing, or
maintaining any Loans or to reduce any sum received or receivable by such Lender
(or its Applicable Lending Office) under this Agreement or its Note with respect
to any Eurodollar Rate Loans, then the Borrower shall pay to such Lender on
demand such amount or amounts as will compensate such Lender for such increased
cost or reduction. If any Lender requests compensation by the Borrower under
this Section 5.1(a), the Borrower may, by notice to such Lender (with a copy to
the Administrative Agent), suspend the obligation of such Lender to make or
Continue Loans of the Type with respect to which such compensation is requested,
or to Convert Loans of any other Type into Loans of such Type, until the event
or condition giving rise to such request ceases to be in effect (in which case
the provisions of Section 5.4 shall be applicable); provided that such
suspension shall not affect the right of such Lender to receive the compensation
so requested.
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(b) If, after the date hereof, any Lender shall have determined
that the adoption of any applicable law, rule, or regulation regarding capital
adequacy or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender as a consequence of such
Lender's obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change, request, or
directive (taking into consideration its policies with respect to capital
adequacy), then from time to time upon demand the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction.
(c) Each Lender shall promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring after the
date hereof, which will entitle such Lender to compensation pursuant to this
Section 5.1 and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to it. Any Lender claiming compensation under this Section 5.1
shall furnish to the Borrower and the Administrative Agent a statement setting
forth the additional amount or amounts to be paid to it hereunder which shall be
conclusive in the absence of manifest error. In determining such amount, such
Lender may use any reasonable averaging and attribution methods.
5.2. Limitation on Types of Loans. If on or prior to the first day
of any Interest Period for any Eurodollar Rate Loan:
(a) the Administrative Agent determines (which
determination shall be conclusive) that by reason of circumstances
affecting the relevant market, adequate and reasonable means do not
exist for ascertaining the Eurodollar Rate for such Interest Period; or
(b) the Required Lenders determine (which determination
shall be conclusive) and notify the Administrative Agent that the
Eurodollar Rate will not adequately and fairly reflect the cost to the
Lenders of funding Eurodollar Rate Loans for such Interest Period;
then the Administrative Agent shall give the Borrower prompt notice thereof
specifying the relevant Type of Loans and the relevant amounts or periods, and
so long as such condition remains in effect, the Lenders shall be under no
obligation to make additional Loans of such Type, Continue Loans of such Type,
or to Convert Loans of any other Type into Loans of such Type and the Borrower
shall, on the last day(s) of the then current Interest Period(s) for the
outstanding Loans of the affected Type, either prepay such Loans or Convert such
Loans into another Type of Loan in accordance with the terms of this Agreement.
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5.3. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to make, maintain, or fund Eurodollar Rate Loans
hereunder, then such Lender shall promptly notify the Borrower thereof and such
Lender's obligation to make or Continue Eurodollar Rate Loans and to Convert
other Types of Loans into Eurodollar Rate Loans shall be suspended until such
time as such Lender may again make, maintain, and fund Eurodollar Rate Loans (in
which case the provisions of Section 5.4 shall be applicable).
5.4. Treatment of Affected Loans. If the obligation of any Lender
to make a Eurodollar Rate Loan or to Continue, or to Convert Loans of any other
Type into, Loans of a particular Type shall be suspended pursuant to Section 5.1
or 5.3 hereof (Loans of such Type being herein called "Affected Loans" and such
Type being herein called the "Affected Type"), such Lender's Affected Loans
shall be automatically Converted into Base Rate Loans on the last day(s) of the
then current Interest Period(s) for Affected Loans (or, in the case of a
Conversion required by Section 5.3 hereof, on such earlier date as such Lender
may specify to the Borrower with a copy to the Administrative Agent) and, unless
and until such Lender gives notice as provided below that the circumstances
specified in Section 5.1 or 5.3 hereof that gave rise to such Conversion no
longer exist:
(a) to the extent that such Lender's Affected Loans have
been so Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Affected Loans shall be applied
instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued
by such Lender as Loans of the Affected Type shall be made or Continued
instead as Base Rate Loans, and all Loans of such Lender that would
otherwise be Converted into Loans of the Affected Type shall be
Converted instead into (or shall remain as) Base Rate Loans.
If such Lender gives notice to the Borrower (with a copy to the Administrative
Agent) that the circumstances specified in Section 5.1 or 5.3 hereof that gave
rise to the Conversion of such Lender's Affected Loans pursuant to this Section
5.4 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Loans of the Affected Type made
by other Lenders are outstanding, such Lender's Base Rate Loans shall be
automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Loans of the Affected Type, to the extent
necessary so that, after giving effect thereto, all Loans held by the Lenders
holding Loans of the Affected Type and by such Lender are held pro rata (as to
principal amounts, Types, and Interest Periods) in accordance with their
respective Revolving Credit Commitments.
5.5. Compensation. Upon the request of any Lender, the Borrower
shall pay to such Lender such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost, or
expense (including loss of anticipated profits) incurred by it as a result of:
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(a) any payment, prepayment, or Conversion of a
Eurodollar Rate Loan for any reason (including, without limitation, the
acceleration of the Loans pursuant to Section 10.1) on a date other
than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason
(including, without limitation, the failure of any condition precedent
specified in Article VI to be satisfied) to borrow, Convert, Continue,
or prepay a Eurodollar Rate Loan on the date for such borrowing,
Conversion, Continuation, or prepayment specified in the relevant
notice of borrowing, prepayment, Continuation, or Conversion under this
Agreement.
5.6. Taxes. (a) Any and all payments by the Borrower to or for the
account of any Lender or the Administrative Agent hereunder or under any other
Loan Document shall be made free and clear of and without deduction for any and
all present or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Lender and the Administrative Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which such
Lender (or its Applicable Lending Office) or the Administrative Agent (as the
case may be) is organized or any political subdivision thereof (all such
non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings,
and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable
under this Agreement or any other Loan Document to any Lender or the
Administrative Agent, (i) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section 5.6) such Lender or the
Administrative Agent receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions,
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law, and (iv) the
Borrower shall furnish to the Administrative Agent, at its address referred to
in Section 12.2, the original or a certified copy of a receipt evidencing
payment thereof.
(b) In addition, the Borrower agrees to pay any and all present or
future stamp or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made under this Agreement
or any other Loan Document or from the execution or delivery of, or otherwise
with respect to, this Agreement or any other Loan Document (hereinafter referred
to as "Other Taxes").
(c) The Borrower agrees to indemnify each Lender and the
Administrative Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this Section 5.6) paid by such Lender or
the Administrative Agent (as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or with respect thereto.
(d) Each Lender organized under the laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender
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listed on the signature pages hereof and on or prior to the date on which it
becomes a Lender in the case of each other Lender, and from time to time
thereafter if requested in writing by the Borrower or the Administrative Agent
(but only so long as such Lender remains lawfully able to do so), shall provide
the Borrower and the Administrative Agent with (i) Internal Revenue Service Form
1001 or 4224, as appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Lender is entitled to benefits under an
income tax treaty to which the United States is a party which reduces the rate
of withholding tax on payments of interest or certifying that the income
receivable pursuant to this Agreement is effectively connected with the conduct
of a trade or business in the United States, (ii) Internal Revenue Service Form
W-8 or W- 9, as appropriate, or any successor form prescribed by the Internal
Revenue Service, and (iii) any other form or certificate required by any taxing
authority (including any certificate required by Sections 871(h) and 881(c) of
the Internal Revenue Code), certifying that such Lender is entitled to an
exemption from or a reduced rate of tax on payments pursuant to this Agreement
or any of the other Loan Documents.
(e) For any period with respect to which a Lender has failed to
provide the Borrower and the Administrative Agent with the appropriate form
pursuant to Section 5.6(d) (unless such failure is due to a change in treaty,
law, or regulation occurring subsequent to the date on which a form originally
was required to be provided), such Lender shall not be entitled to
indemnification under Section 5.6(a) or 5.6(b) with respect to Taxes imposed by
the United States; provided, however, that should a Lender, which is otherwise
exempt from or subject to a reduced rate of withholding tax, become subject to
Taxes because of its failure to deliver a form required hereunder, the Borrower
shall take such steps as such Lender shall reasonably request to assist such
Lender to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or
for the account of any Lender pursuant to this Section 5.6, then such Lender
will agree to use reasonable efforts to change the jurisdiction of its
Applicable Lending Office so as to eliminate or reduce any such additional
payment which may thereafter accrue if such change, in the judgment of such
Lender, is not otherwise disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of
Taxes, the Borrower shall furnish to the Administrative Agent the original or a
certified copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 5.6 shall survive the termination of the Revolving Credit
Commitments and the payment in full of the Notes.
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ARTICLE VI
Conditions to Making Loans and Issuing Letters of Credit
6.1. Conditions of Initial Advance. The obligation of the Lenders
to make the initial Advance under the Revolving Credit Facility, and of the
Issuing Bank to issue any Letter of Credit, and of NationsBank to make any Swing
Line Loan, is subject to the conditions precedent that:
(a) the Administrative Agent, or with respect to the
Security Instruments, the Collateral Agent, shall have received on the
Closing Date, in form and substance satisfactory to the Administrative
Agent and Lenders, the following:
(i) executed originals of each of this
Agreement, the Notes, the Security Agreement Amendment, the
Consolidated Amendment, the Pledge Agreement, the LC Account
Agreement and the other Loan Documents, together with all
schedules and exhibits thereto;
(ii) the favorable written opinion or opinions
with respect to the Loan Documents and the transactions
contemplated thereby of counsel to the Credit Parties dated
the Closing Date, addressed to the Administrative Agent and
the Lenders and satisfactory to Smith Helms Mulliss & Moore,
L.L.P., special counsel to the Administrative Agent,
substantially in the form of Exhibit G;
(iii) resolutions of the boards of directors or
other appropriate governing body (or of the appropriate
committee thereof) of each Credit Party certified by its
secretary or assistant secretary as of the Closing Date,
approving and adopting the Loan Documents to be executed by
such Person, and authorizing the execution and delivery
thereof;
(iv) specimen signatures of officers of each of
the Loan Parties executing the Loan Documents on behalf of
such Credit Party, certified by the secretary or assistant
secretary of such Credit Party;
(v) the Organizational Documents of each of the
Loan Parties certified as of a recent date by the Secretary of
State of its state of organization;
(vi) Operating Documents of each of the Loan Parties
certified as of the Closing Date as true and correct by its
secretary or assistant secretary;
(vii) certificates issued as of a recent date by
the Secretaries of State of the respective jurisdictions of
formation of each of the Loan Parties as to the due existence
and good standing of such Person;
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(viii) appropriate certificates of qualification to
do business, good standing and, where appropriate, authority
to conduct business under assumed name, issued in respect of
each of the Loan Parties as of a recent date by the Secretary
of State or comparable official of each jurisdiction in which
the failure to be qualified to do business or authorized so to
conduct business could have a Material Adverse Effect;
(ix) notice of appointment of the initial
Authorized Representative(s);
(x) evidence of all insurance required by the
Loan Documents;
(xi) an initial Borrowing Notice, if any, and, if
elected by the Borrower, Interest Rate Selection Notice;
(xii) evidence of the filing of Uniform Commercial
Code financing statements reflecting the filing in all places
required by applicable law to perfect the Liens of the
Collateral Agent under the Security Instruments as a first
priority Lien as to items of Collateral in which a security
interest may be perfected by the filing of financing
statements, and such other documents and/or evidence of other
actions as may be necessary under applicable law to perfect
the Liens of the Collateral Agent under the Security
Instruments as a first priority Lien in and to such other
Collateral as the Collateral Agent may require, including
without limitation the delivery by the Borrower of all stock
certificates evidencing Pledged Stock accompanied in each case
by duly executed stock powers (or other appropriate transfer
documents) in blank affixed thereto;
(xiii) evidence that all fees payable by the
Borrower on the Closing Date to the Administrative Agent, NMS
and the Lenders have been paid in full;
(xiv) Uniform Commercial Code search results
showing only those Liens as are acceptable to the Lenders;
(xv) receipt of any consents to the transactions
contemplated in this Agreement or any other Loan Document
required under the Indenture; and
(xvi) such other documents, instruments,
certificates and opinions as the Administrative Agent or any
Lender may reasonably request on or prior to the Closing Date
in connection with the consummation of the transactions
contemplated hereby; and
(b) In the good faith judgment of the Administrative
Agent and the Lenders:
(i) there shall not have occurred or become
known to the Administrative Agent or the Lenders any event,
condition, situation or status since
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the date of the information contained in the financial and
business projections, budgets, pro forma data and forecasts
concerning the Borrower and its Subsidiaries the Credit
Parties delivered to the Administrative Agent prior to the
Closing Date that has had or could reasonably be expected to
result in a Material Adverse Effect;
(ii) no litigation, action, suit, investigation
or other arbitral, administrative or judicial proceeding shall
be pending or threatened which is reasonably likely to result
in a Material Adverse Effect; and
(iii) the Loan Parties shall have received all
approvals, consents and waivers, and shall have made or given
all necessary filings and notices as shall be required to
consummate the transactions contemplated hereby without the
occurrence of any default under, conflict with or violation of
(A) any applicable law, rule, regulation, order or decree of
any Governmental Authority or arbitral authority or (B) any
agreement, document or instrument to which any of the Loan
Parties is a party or by which any of them or their properties
is bound, including without limitation, the Indenture.
6.2. Conditions of Revolving Loans and Letter of Credit. The
obligations of the Lenders to make any Revolving Loans, and the Issuing Bank to
issue Letters of Credit and NationsBank to make Swing Line Loans, hereunder on
or subsequent to the Closing Date are subject to the satisfaction of the
following conditions:
(a) the Administrative Agent or, in the case of Swing
Line Loans, NationsBank shall have received a Borrowing Notice if
required by Article II;
(b) the representations and warranties of the Loan
Parties set forth in Article VII and in each of the other Loan
Documents shall be true and correct in all material respects on and as
of the date of such Advance, Swing Line Loan or Letter of Credit
issuance or renewal, with the same effect as though such
representations and warranties had been made on and as of such date,
except to the extent that such representations and warranties expressly
relate to an earlier date and except that the financial statements
referred to in Section 7.6(a)(i) shall be deemed to be those financial
statements most recently delivered to the Administrative Agent and the
Lenders pursuant to Section 8.1 from the date financial statements are
delivered to the Administrative Agent and the Lenders in accordance
with such Section;
(c) in the case of the issuance of a Letter of Credit,
the Borrower shall have executed and delivered to the Issuing Bank an
Application and Agreement for Letter of Credit in form and content
acceptable to the Issuing Bank together with such other instruments and
documents as it shall request;
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(d) at the time of (and after giving effect to) each
Advance, Swing Line Loan or the issuance of a Letter of Credit, no
Default or Event of Default specified in Article X shall have occurred
and be continuing; and
(e) immediately after giving effect to:
(i) a Revolving Loan, the aggregate principal
balance of all outstanding Revolving Loans for each Lender
shall not exceed such Lender's Revolving Credit Commitment;
(ii) a Letter of Credit or renewal thereof, the
aggregate principal balance of all outstanding Participations
in Letters of Credit and Reimbursement Obligations (or in the
case of the Issuing Bank, its remaining interest after
deduction of all Participations in Letters of Credit and
Reimbursement Obligations of other Lenders) for each Lender
and in the aggregate shall not exceed, respectively, (X) such
Lender's Letter of Credit Commitment or (Y) the Total Letter
of Credit Commitment;
(iii) a Swing Line Loan, the Swing Line
Outstandings shall not exceed $15,000,000; and
(iv) a Revolving Loan, Swing Line Loan or a
Letter of Credit or renewal thereof, the sum of Letter of
Credit Outstandings plus Revolving Credit Outstandings plus
Swing Line Outstandings shall not exceed the Total Revolving
Credit Commitment.
6.3. Supplements to Schedules. The Borrower may, from time to time
but in no event less than five (5) Business Days prior to delivery of any
Borrowing Notice hereunder, amend or supplement Schedules 7.10 and 7.18 to this
Agreement by delivering (effective upon receipt) to the Administrative Agent and
each Lender a copy of such revised Schedule or Schedules which shall (i) be
dated the date of delivery, (ii) be certified by an Authorized Representative as
true, complete and correct as of such date and as delivered in replacement for
the corresponding Schedule or Schedules previously in effect, and (iii) show in
reasonable detail (by blacklining or other graphic means) the material changes
from each such corresponding predecessor Schedule. In the event the Required
Lenders determine based upon such revised Schedules (whether individually or in
the aggregate) that there has been a material change which would have a Material
Adverse Effect since the Closing Date, or such later date as the Borrower shall
have most recently furnished supplements to Schedules under this Section 6.3 or
financial statements under Section 8.1 (a) or (b), the Lenders, upon
notification to the Borrower, shall have no further obligation to make Advances
or Continue or Convert any Loan previously made or renew or extend existing
Letters of Credit.
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ARTICLE VII
Representations and Warranties
The Borrower represents and warrants with respect to itself and to its
Subsidiaries (which representations and warranties shall survive the delivery of
the documents mentioned herein and the making of Loans), that:
7.1. Organization and Authority.
(a) The Borrower and each Subsidiary is a corporation
duly organized and validly existing under the laws of the jurisdiction
of its formation;
(b) The Borrower and each Subsidiary (x) has the
requisite power and authority to own its properties and assets and to
carry on its business as now being conducted and as contemplated in the
Loan Documents, and (y) is qualified to do business in every
jurisdiction in which failure so to qualify would have a Material
Adverse Effect;
(c) The Borrower has the power and authority to execute,
deliver and perform this Agreement and the Notes, and to borrow
hereunder, and to execute, deliver and perform each of the other Loan
Documents to which it is a party;
(d) Each Credit Party (other than the Borrower) has the
power and authority to execute, deliver and perform the Facility
Guaranty and each of the other Loan Documents to which it is a party;
and
(e) When executed and delivered, each of the Loan
Documents to which any Credit Party is a party will be the legal, valid
and binding obligation or agreement, as the case may be, of such Credit
Party, enforceable against such Credit Party in accordance with its
terms, subject to the effect of any applicable bankruptcy, moratorium,
insolvency, reorganization or other similar law affecting the
enforceability of creditors' rights generally and to the effect of
general principles of equity (whether considered in a proceeding at law
or in equity);
7.2. Loan Documents. The execution, delivery and performance by
each Credit Party of each of the Loan Documents to which it is a party:
(a) have been duly authorized by all requisite
Organizational Action of such Credit Party required for the lawful
execution, delivery and performance thereof;
(b) do not violate any provisions of (i) applicable law,
rule or regulation, (ii) any judgment, writ, order, determination,
decree or arbitral award of any Governmental Authority or arbitral
authority binding on such Credit Party or its properties, or (iii) the
Organizational Documents or Operating Documents of such Credit Party;
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(c) does not and will not be in conflict with, result in
a breach of or constitute an event of default, or an event which, with
notice or lapse of time or both, would constitute an event of default,
under any contract, indenture, agreement or other instrument or
document to which such Credit Party is a party, or by which the
properties or assets of such Credit Party are bound; and
(d) does not and will not result in the creation or
imposition of any Lien upon any of the properties or assets of such
Credit Party or any Subsidiary except any Liens in favor of the
Collateral Agent and the Lenders created by the Security Instruments;
7.3. Solvency. Each Credit Party is Solvent after giving effect to
the transactions contemplated by the Loan Documents;
7.4. Subsidiaries and Stockholders. The Borrower has no
Subsidiaries other than those Persons listed as Subsidiaries in Schedule 7.4 and
additional Subsidiaries created or acquired after the Closing Date in compliance
with Section 8.19; Schedule 7.4 states as of the date hereof the organizational
form of each entity, the authorized and issued capitalization of each Subsidiary
listed thereon, the number of shares or other equity interests of each class of
capital stock or interest issued and outstanding of each such Subsidiary and the
number and/or percentage of outstanding shares or other equity interest
(including options, warrants and other rights to acquire any interest) of each
such class of capital stock or other equity interest owned by Borrower or by any
such Subsidiary; the outstanding shares or other equity interests of each such
Subsidiary have been duly authorized and validly issued and are fully paid and
nonassessable; and Borrower and each such Subsidiary owns beneficially and of
record all the shares and other interests it is listed as owning in Schedule
7.4, free and clear of any Lien;
7.5. Ownership Interests. Borrower owns no interest in any Person
other than the Persons listed in Schedule 7.4, equity investments in Persons not
constituting Subsidiaries permitted under Section 9.7 and additional
Subsidiaries created or acquired after the Closing Date in compliance with
Section 8.19;
7.6. Financial Condition.
(a) The Borrower has heretofore furnished to each Lender
an audited balance sheet of the Borrower and its Subsidiaries as at
March 31, 1998 and the notes thereto and the related statements of
operations, stockholders' equity and cash flows for the Fiscal Year
then ended as examined and certified by Arthur Andersen LLP. Except as
set forth therein, such financial statements (including the notes
thereto) present fairly the financial condition of the Borrower as of
the end of such Fiscal Year and results of their operations and the
changes in its stockholders' equity for the Fiscal Year then ended, all
in conformity with GAAP applied on a Consistent Basis;
(b) since the later of (i) the date of the audited
financial statements delivered pursuant to Section 7.6(a) hereof or
(ii) the date of the audited financial statements most
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recently delivered pursuant to Section 8.1(a) hereof, there has been no
material adverse change in the condition, financial or otherwise, of
the Borrower or any of its Subsidiaries or in the businesses,
properties, performance, prospects or operations of the Borrower or its
Subsidiaries, nor have such businesses or properties been materially
adversely affected as a result of any fire, explosion, earthquake,
accident, strike, lockout, combination of workers, flood, embargo or
act of God; and
(c) except as set forth in the financial statements
referred to in Section 7.6(a) or in Schedule 7.6 or permitted by
Section 9.5, neither Borrower nor any Subsidiary has incurred, other
than in the ordinary course of business, any material Indebtedness,
Guaranties or other commitment or liability which remains outstanding
or unsatisfied;
7.7. Title to Properties. The Borrower and each of its Subsidiaries
and each other Credit Party has good and marketable title to all its real and
personal properties, subject to no transfer restrictions or Liens of any kind,
except for the transfer restrictions and Liens described in Schedule 7.7 and
Liens permitted by Section 9.4;
7.8. Taxes. Except as set forth in Schedule 7.8, the Borrower and
each of its Subsidiaries has filed or caused to be filed all federal, state and
local tax returns which are required to be filed by it and, except for taxes and
assessments being contested in good faith by appropriate proceedings diligently
conducted and against which reserves reflected in the financial statements
described in Section 7.6(a) and satisfactory to the Borrower's independent
certified public accountants have been established, have paid or caused to be
paid all taxes as shown on said returns or on any assessment received by it, to
the extent that such taxes have become due;
7.9. Other Agreements. No Credit Party nor any Subsidiary is
(a) a party to or subject to any judgment, order, decree,
agreement, lease or instrument, or subject to other restrictions, which
individually or in the aggregate would reasonably be expected to have a
Material Adverse Effect; or
(b) in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which such Credit Party or
any Subsidiary is a party, which default has, or if not remedied within
any applicable grace period would reasonably be likely to have, a
Material Adverse Effect;
7.10. Litigation. Except as set forth in Schedule 7.10, there is no
action, suit, investigation or proceeding at law or in equity or by or before
any governmental instrumentality or agency or arbitral body pending, or, to the
knowledge of the Borrower, threatened by or against the Borrower or any
Subsidiary or other Credit Party or affecting the Borrower or any Subsidiary or
other Credit Party or any properties or rights of the Borrower or any Subsidiary
or other Credit Party, which would reasonably be likely to have a Material
Adverse Effect;
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7.11. Margin Stock. The proceeds of the borrowings made hereunder
will be used by the Borrower only for the purposes expressly authorized herein.
None of such proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin stock or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
margin stock or for any other purpose which might constitute any of the Loans
under this Agreement a "purpose credit" within the meaning of said Regulation U
or Regulation X (12 C.F.R. Part 224) of the Board. Neither the Borrower nor any
agent acting in its behalf has taken or will take any action which might cause
this Agreement or any of the documents or instruments delivered pursuant hereto
to violate any regulation of the Board or to violate the Securities Exchange Act
of 1934, as amended, or the Securities Act of 1933, as amended, or any state
securities laws, in each case as in effect on the date hereof;
7.12. Investment Company. No Credit Party is an "investment
company," or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company", as such terms are defined in the Investment
Company Act of 1940, as amended (15 U.S.C. ss. 80a-1, et seq.). The application
of the proceeds of the Loans and repayment thereof by the Borrower and the
performance by the Borrower and the other Loan Parties of the transactions
contemplated by the Loan Documents will not violate any provision of said Act,
or any rule, regulation or order issued by the Securities and Exchange
Commission thereunder, in each case as in effect on the date hereof;
7.13. Patents, Etc. The Borrower and each other Credit Party owns or
has the right to use, under valid license agreements or otherwise, all material
patents, licenses, franchises, trademarks, trademark rights, trade names, trade
name rights, trade secrets and copyrights necessary to or used in the conduct of
its businesses as now conducted and as contemplated by the Loan Documents,
without known conflict with any patent, license, franchise, trademark, trade
secret, trade name, copyright, other proprietary right of any other Person,
except in each case where the use or conflict would not reasonably be likely to
have a Material Adverse Effect;
7.14. No Untrue Statement. Neither (a) this Agreement nor any other
Loan Document or certificate or document executed and delivered by or on behalf
of the Borrower or any other Credit Party in accordance with or pursuant to any
Loan Document nor (b) any statement, representation, or warranty provided to the
Administrative Agent in connection with the negotiation or preparation of the
Loan Documents contains any misrepresentation or untrue statement of material
fact or omits to state a material fact necessary, in light of the circumstance
under which it was made, in order to make any such warranty, representation or
statement contained therein not misleading;
7.15. No Consents, Etc. Neither the respective businesses or
properties of the Loan Parties or any Subsidiary, nor any relationship among the
Loan Parties or any Subsidiary and any other Person, nor any circumstance in
connection with the execution, delivery and performance of the Loan Documents
and the transactions contemplated thereby, is such as to require a consent,
approval or authorization of, or filing, registration or qualification with, any
Governmental Authority or any other Person on the part of any Credit Party as a
condition to the execution,
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delivery and performance of, or consummation of the transactions contemplated by
the Loan Documents, which, if not obtained or effected, would be reasonably
likely to have a Material Adverse Effect, or if so, such consent, approval,
authorization, filing, registration or qualification has been duly obtained or
effected, as the case may be;
7.16. Employee Benefit Plans.
(a) Except where noncompliance would not have a Material
Adverse Effect or result in a liability or potential liability
exceeding $1,000,000, the Borrower and each ERISA Affiliate is in
compliance with all applicable provisions of ERISA and the regulations
and published interpretations thereunder and in compliance with all
Foreign Benefit Laws with respect to all Employee Benefit Plans except
for any required amendments for which the remedial amendment period as
defined in Section 401(b) of the Code has not yet expired. Each
Employee Benefit Plan that is intended to be qualified under Section
401(a) of the Code has been determined by the Internal Revenue Service
to be so qualified, and each trust related to such plan has been
determined to be exempt under Section 501(a) of the Code. No material
liability has been incurred by the Borrower or any ERISA Affiliate
which remains unsatisfied for any taxes or penalties with respect to
any Employee Benefit Plan or any Multiemployer Plan;
(b) Neither the Borrower nor any ERISA Affiliate has (i)
engaged in a nonexempt prohibited transaction described in Section 4975
of the Code or Section 406 of ERISA affecting any of the Employee
Benefit Plans or the trusts created thereunder which could subject any
such Employee Benefit Plan or trust to a material tax or penalty on
prohibited transactions imposed under Internal Revenue Code Section
4975 or ERISA, (ii) incurred any accumulated funding deficiency with
respect to any Employee Benefit Plan, whether or not waived, or any
other liability to the PBGC which remains outstanding other than the
payment of premiums and there are no premium payments which are due and
unpaid, (iii) failed to make a required contribution or payment to a
Multiemployer Plan, or (iv) failed to make a required installment or
other required payment under Section 412 of the Code, Section 302 of
ERISA or the terms of such Employee Benefit Plan;
(c) No Termination Event has occurred or is reasonably
expected to occur with respect to any Pension Plan or Multiemployer
Plan, and neither the Borrower nor any ERISA Affiliate has incurred any
unpaid withdrawal liability with respect to any Multiemployer Plan;
(d) Except to the extent permitted by ERISA, the present
value of all vested accrued benefits under each Employee Benefit Plan
which is subject to Title IV of ERISA, did not, as of the most recent
valuation date for each such plan, exceed the then current value of the
assets of such Employee Benefit Plan allocable to such benefits;
(e) To the best of the Borrower's knowledge, each
Employee Benefit Plan subject to Title IV of ERISA, maintained by the
Borrower or any ERISA Affiliate, has
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been administered in accordance with its terms in all material respects
and is in compliance in all material respects with all applicable
requirements of ERISA and other applicable laws, regulations and rules;
(f) The consummation of the Loans and the issuance of the
Letters of Credit provided for herein will not involve any prohibited
transaction under ERISA which is not subject to a statutory or
administrative exemption; and
(g) No material proceeding, claim, lawsuit and/or
investigation exists or, to the best knowledge of the Borrower after
due inquiry, is threatened concerning or involving any Employee Benefit
Plan;
7.17. No Default. As of the date hereof, there does not exist any
Default or Event of Default hereunder;
7.18. Environmental Laws. Except as listed on Schedule 7.18, the
Borrower and each Subsidiary is in material compliance with all applicable
Environmental Laws and has been issued and currently maintains all required
federal, state and local permits, licenses, certificates and approvals. Except
as listed on Schedule 7.18, neither the Borrower nor any Subsidiary has been
notified of any pending or threatened action, suit, proceeding or investigation,
and neither the Borrower nor any Subsidiary is aware of any facts, which (a)
calls into question, or could reasonably be expected to call into question,
material compliance by the Borrower or any Subsidiary with any Environmental
Laws, (b) seeks, or could reasonably be expected to form the basis of a
meritorious proceeding, to suspend, revoke or terminate any material license,
permit or approval necessary for the operation of the Borrower's or any
Subsidiary's business or facilities or for the generation, handling, storage,
treatment or disposal of any Hazardous Materials, or (c) seeks to cause, or
could reasonably be expected to form the basis of a meritorious proceeding to
cause, any property of the Borrower or any Subsidiary or other Credit Party to
be subject to any material restrictions on ownership, use, occupancy or
transferability under any Environmental Law;
7.19. Employment Matters. (a) None of the employees of the Borrower
or any Subsidiary is subject to any collective bargaining agreement and there
are no strikes, work stoppages, election or decertification petitions or
proceedings, unfair labor charges, equal opportunity proceedings, or other
material labor/employee related controversies or proceedings pending or, to the
best knowledge of the Borrower, threatened against the Borrower or any
Subsidiary or between the Borrower or any Subsidiary and any of its employees,
other than employee grievances arising in the ordinary course of business which
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect; and
(b) Except to the extent a failure to maintain compliance would
not reasonably be expected to have a Material Adverse Effect, the Borrower and
each Subsidiary is in compliance in all respects with all applicable laws, rules
and regulations pertaining to labor or employment matters, including without
limitation those pertaining to wages, hours, occupational safety and
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taxation and there is neither pending or threatened any litigation,
administrative proceeding nor, to the knowledge of the Borrower, any
investigation, in respect of such matters which, if decided adversely, would
reasonably be likely, individually or in the aggregate, to have a Material
Adverse Effect; and
7.20. RICO. Neither the Borrower nor any Subsidiary is engaged in or
has engaged in any course of conduct that could subject any of their respective
properties to any Lien, seizure or other forfeiture under any criminal law,
racketeer influenced and corrupt organizations law, civil or criminal, or other
similar laws.
7.21. Year 2000 Compliance. The Borrower and its Subsidiaries have
(i) initiated a review and assessment of all areas within its and each of its
Subsidiaries' business and operations (including those affected by information
received from suppliers and vendors) that could reasonably be expected to be
adversely affected by the Year 2000 Problem, (ii) developed a plan and timeline
for addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan substantially in accordance with that timetable. The
Borrower reasonably believes that all computer applications (including those
affected by information received from its suppliers and vendors) that are
material to its or any of its Subsidiaries' business and operations will on a
timely basis be Year 2000 Compliant, except to the extent that a failure to do
so could not reasonably be expected to have Material Adverse Effect.
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ARTICLE VIII
Affirmative Covenants
Until the Facility Termination Date, unless the Required Lenders shall
otherwise consent in writing, the Borrower will, and where applicable will
cause each Subsidiary to:
8.1. Financial Reports, Etc. (a) As soon as practical and in any
event within 90 days after the end of each Fiscal Year of the Borrower, deliver
or cause to be delivered to the Administrative Agent and each Lender (i)
balance sheets of the Borrower and its Subsidiaries as at the end of such
Fiscal Year, and the notes thereto, and the related statements of operations,
stockholders' equity and cash flows, and the respective notes thereto, for such
Fiscal Year, setting forth comparative financial statements for the preceding
Fiscal Year with a narrative discussion of the comparative financial results
and financial condition of the two periods, all prepared in accordance with
GAAP applied on a Consistent Basis and containing, with respect to the
consolidated financial statements, opinions of Arthur Andersen LLP, or other
such independent certified public accountants selected by the Borrower and
approved by the Administrative Agent, which are unqualified as to the scope of
the audit performed and as to the "going concern" status of the Borrower and
without any exception not acceptable to the Required Lenders, and (ii) a
certificate of an Authorized Representative demonstrating compliance with
Sections 9.1(a) through 9.1(c), 9.3 and 9.5(h), which certificate shall be in
the form of Exhibit H. To the extent that the Borrower's annual report on Form
10-K contains any of the foregoing items, the Administrative Agent and the
Lenders will accept the Borrower's Form 10-K in lieu of such items;
(b) as soon as practical and in any event within 45 days after the
end of each fiscal quarter (except the last fiscal quarter of the Fiscal Year),
beginning with the fiscal quarter ending on June 30, 1998, deliver to the
Administrative Agent and each Lender (i) balance sheets of the Borrower and its
Subsidiaries as at the end of such fiscal quarter and most recent Fiscal Year,
and the related statements of operations and cash flows for such fiscal quarter
and for the comparable fiscal quarter in the prior Fiscal Year with a narrative
discussion of the comparative financial results and financial condition of the
two periods, and accompanied by a certificate of an Authorized Representative
to the effect that such financial statements present fairly the financial
position of the Borrower and its Subsidiaries as of the end of such fiscal
period and the results of their operations and the changes in their financial
position for such fiscal period, subject to year end audit and other customary
adjustments to interim financial statements and (ii) a certificate of an
Authorized Representative containing computations for such quarter comparable
to that required pursuant to Section 8.1(a)(ii); to the extent that the
Borrowers' quarterly report on Form 10-Q contains any of the foregoing items,
the Administrative Agent and the Lenders will accept the Borrower's Form 10-Q
in lieu of such items;
(c) together with each delivery of the financial statements required
by Section 8.1(a)(i), deliver to the Administrative Agent and each Lender a
letter from the Borrower's accountants specified in Section 8.1(a)(i) stating
that in performing the audit necessary to render an opinion on the financial
statements delivered under Section 8.1(a)(i), they obtained no knowledge of any
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Default or Event of Default by the Borrower in the fulfillment of the terms and
provisions of this Agreement insofar as they relate to financial matters (which
at the date of such statement remains uncured); or if the accountants have
obtained knowledge of such Default or Event of Default, a statement specifying
the nature and period of existence thereof;
(d) promptly upon their becoming available to the Borrower, the
Borrower shall deliver to the Administrative Agent and each Lender a copy of
(i) all regular or special reports or effective registration statements which
Borrower or any Subsidiary shall file with the Securities and Exchange
Commission (or any successor thereto) or any securities exchange, (ii) any
proxy statement distributed by the Borrower or any Subsidiary to its
shareholders, bondholders or the financial community in general, and (iii) any
management letter or other report submitted to the Borrower or any Subsidiary
by independent accountants in connection with any annual, interim or special
audit of the Borrower or any Subsidiary;
(e) not later than thirty (30) days after the last Business Day of
each Fiscal Year, deliver to the Administrative Agent and each Lender a
projection of the expected financial condition and results of operations of the
Borrower and its Subsidiaries on a consolidated basis for the upcoming Fiscal
Year (including, but not limited to, a projected consolidated balance sheet,
statement of operations, statement of cash flows and statement of changes in
stockholder's equity, and including a detailed breakdown of proposed Capital
Expenditures, with a narrative discussion of the assumptions behind the
projections); and
(f) promptly, from time to time, deliver or cause to be delivered to
the Administrative Agent and each Lender such other information regarding
Borrower's and any Subsidiary's operations, business affairs and financial
condition as the Administrative Agent or such Lender may reasonably request;
The Administrative Agent and the Lenders are hereby authorized to
deliver a copy of any such financial or other information delivered hereunder
to the Lenders (or any affiliate of any Lender) or to the Administrative Agent,
to any Governmental Authority having jurisdiction over the Administrative Agent
or any of the Lenders pursuant to any written request therefor or in the
ordinary course of examination of loan files, or to any other Person who shall
acquire or consider the assignment of, or acquisition of any participation
interest in, any Obligation permitted by this Agreement;
8.2. Maintain Properties. Maintain all properties necessary to its
operations in good working order and condition, make all needed repairs,
replacements and renewals to such properties, and maintain free from Liens all
trademarks, trade names, patents, copyrights, trade secrets, know-how, and
other intellectual property and proprietary information (or adequate licenses
thereto), in each case as are reasonably necessary to conduct its business as
currently conducted or as contemplated hereby, all in accordance with customary
and prudent business practices;
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8.3. Existence, Qualification, Etc. Except as otherwise expressly
permitted under Section 9.8, or except to the extent the failure would not
reasonably be expected to have a Material Adverse Effect, do or cause to be
done all things necessary to preserve and keep in full force and effect its
existence and all material rights and franchises, and maintain its license or
qualification to do business as a foreign corporation and good standing in each
jurisdiction in which its ownership or lease of property or the nature of its
business makes such license or qualification necessary;
8.4. Regulations and Taxes. Comply in all material respects with or
contest in good faith all statutes and governmental regulations and pay all
taxes, assessments, governmental charges, claims for labor, supplies, rent and
any other obligation which, if unpaid, would become a Lien against any of its
properties except liabilities being contested in good faith by appropriate
proceedings diligently conducted and against which adequate reserves acceptable
to the Borrower's independent certified public accountants have been
established unless and until any Lien resulting therefrom attaches to any of
its property and becomes enforceable against its creditors;
8.5. Insurance. (a) Keep all of its insurable properties adequately
insured at all times with responsible insurance carriers against loss or damage
by fire and other hazards to the extent and in the manner as are customarily
insured against by similar businesses owning such properties similarly situated
and otherwise as required by the Security Instruments, (b) maintain general
public liability insurance at all times with responsible insurance carriers
against liability on account of damage to persons and property and (c) maintain
insurance under all applicable workers' compensation laws (or in the
alternative, maintain required reserves if self-insured for workers'
compensation purposes) and against loss by reason by business interruption,
such policies of insurance to have such limits, deductibles, exclusions,
co-insurance and other provisions providing no less coverages than that
specified in Schedule 8.5, such insurance policies which insure the Collateral
to be in form reasonably satisfactory to the Collateral Agent. Each of the
policies of insurance described in this Section 8.5 insuring any of the
Collateral shall provide that the insurer shall give the Collateral Agent not
less than thirty (30) days' prior written notice before any such policy shall
be terminated, lapse or be altered in any manner;
8.6. True Books. Keep true books of record and account in which full,
true and correct entries will be made of all of its dealings and transactions,
and set up on its books such reserves as may be required by GAAP with respect
to doubtful accounts and all taxes, assessments, charges, levies and claims and
with respect to its business in general, and include such reserves in interim
as well as year-end financial statements;
8.7. Right of Inspection. Permit any Person designated by any Lender
or the Administrative Agent to visit and inspect any of the properties,
corporate books and financial reports of the Borrower or any Subsidiary and to
discuss its affairs, finances and accounts with its principal officers and
independent certified public accountants, all at reasonable times, at
reasonable intervals and with reasonable prior notice;
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8.8. Observe all Laws. Conform to and duly observe in all material
respects all laws, rules and regulations and all other valid requirements of
any Governmental Authority with respect to the conduct of its business;
8.9. Governmental Licenses. Obtain and maintain all licenses,
permits, certifications and approvals of all applicable Governmental
Authorities as are required for the conduct of its business as currently
conducted and as contemplated by the Loan Documents, except where the failure
would not reasonably be expected to have a Material Adverse Effect;
8.10. Covenants Extending to Other Persons. Cause each of its
Subsidiaries to do with respect to itself, its business and its assets, each of
the things required of the Borrower in Sections 8.2 through 8.9, and 8.18
inclusive;
8.11. Officer's Knowledge of Default. Upon either the Chief Executive
Officer, the Chief Financial Officer or Assistant Treasurer of the Borrower
obtaining knowledge of any Default or Event of Default hereunder or under any
other obligation of the Borrower or any Subsidiary or other Credit Party to any
Lender, or any event, development or occurrence which would reasonably be
expected to have a Material Adverse Effect, cause such officer or an Authorized
Representative to promptly notify the Administrative Agent of the nature
thereof, the period of existence thereof, and what action the Borrower or such
Subsidiary or other Credit Party proposes to take with respect thereto;
8.12. Suits or Other Proceedings. Upon either the Chief Executive
Officer, the Chief Financial Officer or Assistant Treasurer of the Borrower
obtaining knowledge of any litigation or other proceedings being instituted
against the Borrower or any Subsidiary or other Credit Party, or any
attachment, levy, execution or other process being instituted against any
assets of the Borrower or any Subsidiary or other Credit Party, making a claim
or claims in an aggregate amount greater than $10,000,000 not otherwise covered
by insurance, promptly deliver to the Administrative Agent written notice
thereof stating the nature and status of such litigation, dispute, proceeding,
levy, execution or other process;
8.13. Notice of Environmental Complaint or Condition. Promptly provide
to the Administrative Agent true, accurate and complete copies of any and all
notices, complaints, orders, directives, claims or citations received by the
Borrower or any Subsidiary relating to any (a) violation or alleged violation
by the Borrower or any Subsidiary of any applicable Environmental Law; (b)
release or threatened release by the Borrower or any Subsidiary, or by any
Person handling, transporting or disposing of any Hazardous Material on behalf
of the Borrower or any Subsidiary, or at any facility or property owned or
leased or operated by the Borrower or any Subsidiary, of any Hazardous
Material, except where occurring legally pursuant to a permit or license; or
(c) liability or alleged liability of the Borrower or any Subsidiary for the
costs of cleaning up, removing, remediating or responding to a release of
Hazardous Materials;
8.14. Environmental Compliance. If the Borrower or any Subsidiary
shall receive any letter, notice, complaint, order, directive, claim or
citation alleging that the Borrower or any
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Subsidiary has violated any Environmental Law, has released any Hazardous
Material, or is liable for the costs of cleaning up, removing, remediating or
responding to a release of Hazardous Materials, the Borrower and any Subsidiary
shall, within the time period permitted and to the extent required by the
applicable Environmental Law or the Governmental Authority responsible for
enforcing such Environmental Law, remove or remedy, or cause the applicable
Subsidiary to remove or remedy, such violation or release or satisfy such
liability;
8.15. Indemnification. Without limiting the generality of Section
12.9, the Borrower hereby agrees to indemnify and hold the Agents and the
Lenders, and their respective officers, directors, employees and agents,
harmless from and against any and all claims, losses, penalties, liabilities,
damages and expenses (including assessment and cleanup costs and reasonable
attorneys', consultants' or other expert fees, expenses and disbursements)
arising directly or indirectly from, out of or by reason of (a) the violation
of any Environmental Law by the Borrower or any Subsidiary or with respect to
any property owned, operated or leased by the Borrower or any Subsidiary or (b)
the handling, storage, transportation, treatment, emission, release, discharge
or disposal of any Hazardous Materials by or on behalf of the Borrower or any
Subsidiary, or on or with respect to property owned or leased or operated by
the Borrower or any Subsidiary. The provisions of this Section 8.15 shall
survive repayment of the Obligations or the Facility Termination Date and
expiration or termination of this Agreement;
8.16. Further Assurances. At the Borrower's cost and expense, upon
request of the Administrative Agent or the Collateral Agent, duly execute and
deliver or cause to be duly executed and delivered, to the Administrative Agent
or the Collateral Agent, as the circumstances may dictate, such further
instruments, documents, certificates, financing and continuation statements,
and do and cause to be done such further acts that may be reasonably necessary
or advisable in the reasonable opinion of the Administrative Agent or the
Collateral Agent to carry out more effectively the provisions and purposes of
this Agreement, the Security Instruments and the other Loan Documents;
8.17. Employee Benefit Plans.
(a) With reasonable promptness, and in any event within
thirty (30) days thereof, give notice to the Administrative Agent of
(a) the establishment of any new Pension Plan (which notice shall
include a copy of such plan), (b) the commencement of contributions to
any Employee Benefit Plan to which the Borrower or any of its ERISA
Affiliates was not previously contributing, (c) any material increase
in the benefits of any existing Employee Benefit Plan, (d) each
funding waiver request filed with respect to any Employee Benefit Plan
and all communications received or sent by the Borrower or any ERISA
Affiliate with respect to such request and (e) the failure of the
Borrower or any ERISA Affiliate to make a required installment or
payment under Section 302 of ERISA or Section 412 of the Code
exceeding in the aggregate $750,000 by the due date;
(b) Promptly and in any event within fifteen (15) days of
becoming aware of the occurrence or forthcoming occurrence of any (a)
Termination Event or (b) nonexempt
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"prohibited transaction," as such term is defined in Section 406 of
ERISA or Section 4975 of the Code, in connection with any Pension Plan
or any trust created thereunder, deliver to the Administrative Agent a
notice specifying the nature thereof, what action the Borrower or any
ERISA Affiliate has taken, is taking or proposes to take with respect
thereto and, when known, any action taken or threatened by the
Internal Revenue Service, the Department of Labor or the PBGC with
respect thereto; and
(c) With reasonable promptness but in any event within fifteen
(15) days for purposes of clauses (a), (b) and (c), deliver to the
Administrative Agent copies of (a) any unfavorable determination
letter from the Internal Revenue Service regarding the qualification
of an Employee Benefit Plan under Section 401(a) of the Code, (b) all
notices received by the Borrower or any ERISA Affiliate of the PBGC's
intent to terminate any Pension Plan or to have a trustee appointed to
administer any Pension Plan, (c) each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) filed by the
Borrower or any ERISA Affiliate with the Internal Revenue Service with
respect to each Pension Plan and (d) all notices received by the
Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor
concerning the imposition or amount of withdrawal liability pursuant
to Section 4202 of ERISA. The Borrower will notify the Administrative
Agent in writing within five (5) Business Days of the Borrower or any
ERISA Affiliate obtaining knowledge or reason to know that the
Borrower or any ERISA Affiliate has filed or intends to file a notice
of intent to terminate any Pension Plan under a distress termination
within the meaning of Section 4041(c) of ERISA;
8.18. Continued Operations. Continue at all times to conduct its
business and engage principally in the same line or lines of business
substantially as heretofore conducted;
8.19. New Subsidiaries. Simultaneously with the acquisition or
creation of any Subsidiary, cause to be delivered to the Administrative Agent
or, with respect to the items described in Section 8.19(b) and 8.19(c) hereof,
the Collateral Agent, for the benefit of the Lenders each of the following:
(a) if such Subsidiary is a Domestic Subsidiary, a Facility
Guaranty executed by such Subsidiary substantially in the form of
Exhibit I and a Security Agreement substantially in the form of
Exhibit J;
(b) if such Subsidiary is a corporation or is a non-corporate
entity that has issued certificates evidencing ownership of interests
therein, (A) the Pledged Stock or, if applicable, certificates of
ownership of such interests, together with duly executed stock powers
or powers of assignment in blank affixed thereto, and (B) if such
Collateral shall be owned by a Subsidiary who has not then executed
and delivered to the Collateral Agent a Security Instrument from the
owner of such Collateral granting a Lien to the Collateral Agent in
such Collateral, a Pledge Agreement substantially similar in form and
content to that executed and delivered by the Borrower as of the
Closing Date, with appropriate
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revisions as to the identity of the pledgor and securing the
obligations of such pledgor under its Facility Guaranty;
(c) if such Subsidiary is a non-corporate entity not described
in clause (b) immediately above, (A) the certificate of the registrar
of such entity with respect to the registration of the Lien on
ownership interests, and (B) if such Collateral shall be owned by a
Subsidiary who has not then executed and delivered to the Collateral
Agent a Security Instrument from the owner of such Collateral granting
a Lien to the Collateral Agent in such Collateral, a Pledge Agreement
substantially similar in form and content to that executed and
delivered by the Borrower as of the Closing Date, with appropriate
revisions as to the identity of the pledgor and securing the
obligations of such pledgor under its Facility Guaranty;
(d) an opinion of counsel to the Subsidiary dated as of the
date of delivery of the Facility Guaranty and other Loan Documents
provided for in this Section 8.19 and addressed to the Administrative
Agent and the Lenders, in form and substance reasonably acceptable to
the Administrative Agent (which opinion may include assumptions and
qualifications of similar effect to those contained in the opinions of
counsel delivered pursuant to Section 6.1(a)), to the effect that:
(A) such Subsidiary is duly organized, validly existing
and in good standing in the jurisdiction of its formation, has
the requisite power and authority to own its properties and
conduct its business as then owned and then conducted and
proposed to be conducted, and is duly qualified to transact
business and is in good standing as a foreign corporation or
partnership in each other jurisdiction in which the character of
the properties owned or leased, or the business carried on by
it, requires such qualification and the failure to be so
qualified would reasonably be likely to result in a Material
Adverse Effect; and
(B) the execution, delivery and performance of the
Facility Guaranty and other Loan Documents described in this
Section 8.19 to which such Subsidiary is a signatory have been
duly authorized by all requisite corporate or partnership action
(including any required shareholder or partner approval), each
of such agreements has been duly executed and delivered and
constitutes the valid and binding agreement of such Subsidiary,
enforceable against such Subsidiary in accordance with its
terms, subject to the effect of any applicable bankruptcy,
moratorium, insolvency, reorganization or other similar law
affecting the enforceability of creditors' rights generally and
to the effect of general principles of equity (whether
considered in a proceeding at law or in equity);
(e) current copies of the charter documents, including
partnership agreements and certificate of limited partnership, if
applicable, and bylaws of such Subsidiary, minutes of duly called and
conducted meetings (or duly effected consent actions) of the board of
directors, partners, or appropriate committees thereof (and, if
required by such charter
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documents, bylaws or by applicable law, of the shareholders) of such
Subsidiary authorizing the actions and the execution and delivery of
documents described in this Section 8.19.
8.20. Year 2000 Compliance. The Borrower will promptly notify the
Administrative Agent and the Lenders in the event the Borrower discovers or
determines that any computer application (including those affected by
information received from its suppliers and vendors) that is material to its or
any of its Subsidiaries' business and operations will not be Year 2000
Compliant on a timely basis, except to the extent that such failure could not
reasonably be expected to have a Material Adverse Effect.
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ARTICLE IX
Negative Covenants
Until the Obligations have been paid and satisfied in full, no Letters
of Credit remain outstanding and this Agreement has been terminated in
accordance with the terms hereof, unless the Required Lenders shall otherwise
consent in writing, the Borrower will not, nor will it permit any Subsidiary
to:
9.1. Financial Covenants.
(a) Consolidated Leverage Ratio. Permit the Consolidated Leverage
Ratio as of the end of any Four-Quarter Period to be greater than 3.75 to 1.00.
(b) Consolidated Net Worth. Permit Consolidated Net Worth to be less
than the sum of (i) $155,000,000, plus (ii) for each fiscal quarter of the
Borrower since the Closing Date to the most recent fiscal quarter of the
Borrower being reported, 50% of Consolidated Net Income greater than -0-, plus
(iii) (for purposes of this Section 9.1(b) only, without duplication) 50% of
any after tax extraordinary gain, plus (iv) 75% of the Net Proceeds of any
Equity Offering.
(c) Consolidated Interest Coverage Ratio. Permit the Consolidated
Interest Coverage Ratio to be less than 2.75 to 1.00.
9.2. Acquisitions. Enter into any agreement, contract, binding
commitment or other arrangement providing for any Acquisition, or take any
action to solicit the tender of securities or proxies in respect thereof in
order to effect any Acquisition, unless (i) the Person to be (or whose assets
are to be) acquired does not oppose such Acquisition and the line or lines of
business of the Person to be acquired are substantially the same as one or more
line or lines of business conducted by the Borrower and its Subsidiaries, (ii)
no Default or Event of Default shall have occurred and be continuing either
immediately prior to or immediately after giving effect to such Acquisition
and, if the Cost of Acquisition is in excess of $25,000,000, the Borrower shall
have furnished to the Administrative Agent (A) pro forma historical financial
statements as of the end of the most recently completed Fiscal Year of the
Borrower and most recent interim fiscal quarter, if applicable giving effect to
such Acquisition and (B) a certificate in the form of Exhibit H prepared on a
historical pro forma basis giving effect to such Acquisition, which certificate
shall demonstrate that no Default or Event of Default would exist immediately
after giving effect thereto, (iii) the Person acquired shall be a wholly-owned
Subsidiary, or be merged into the Borrower or a wholly-owned Subsidiary,
immediately upon consummation of the Acquisition (or if assets are being
acquired, the acquiror shall be the Borrower or a wholly-owned Subsidiary), and
(iv) if the Cost of Acquisition shall exceed $50,000,000, the Required Lenders
shall consent to such Acquisition in their discretion;
9.3. Capital Expenditures. Make or become committed to make Capital
Expenditures, which exceed in the aggregate in any Fiscal Year of the Borrower
$35,000,000 (on a limited
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cumulative basis, with the effect that amounts up to $7,500,000 not expended in
any Fiscal Year may be carried forward to subsequent Fiscal Years, provided
however, Capital Expenditures in any Fiscal Year, inclusive of amounts carried
forward from previous Fiscal Years, shall in no event exceed $50,000,000).
9.4. Liens. Incur, create or permit to exist any Lien, charge or
other encumbrance of any nature whatsoever with respect to any property or
assets now owned or hereafter acquired by the Borrower or any Subsidiary, other
than
(a) Liens created under the Security Instruments in favor of
the Collateral Agent and the Lenders, and Liens otherwise existing as
of the date hereof and as set forth in Schedule 7.7;
(b) Liens imposed by law for taxes, assessments or charges of
any Governmental Authority for claims not yet due or which are being
contested in good faith by appropriate proceedings diligently
conducted, and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with GAAP
and which Liens are not yet enforceable against other creditors;
(c) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law or
created in the ordinary course of business and in existence less than
90 days from the date of creation thereof for amounts not yet due or
which are being contested in good faith by appropriate proceedings
diligently conducted, and with respect to which adequate reserves or
other appropriate provisions are being maintained in accordance with
GAAP and which Liens are not yet enforceable against other creditors;
(d) Liens incurred or deposits made in the ordinary course of
business (including, without limitation, surety bonds and appeal
bonds) in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance of tenders, bids, leases, contracts (other than for the
repayment of Indebtedness), statutory obligations and other similar
obligations or arising as a result of progress payments under
government contracts;
(e) easements (including reciprocal easement agreements and
utility agreements), rights-of-way, covenants, consents, reservations,
encroachments, variations and zoning and other restrictions, charges
or encumbrances (whether or not recorded), which do not interfere
materially with the ordinary conduct of the business of the Borrower
or any Subsidiary;
(f) Liens on fixed assets of the Borrower and its Subsidiaries
securing Indebtedness permitted under Section 9.5(h), provided the
amount of such Indebtedness so secured does not exceed at any time ten
percent (10%) of Consolidated Tangible Assets, and provided further
that, with respect to purchase money Indebtedness and Capital
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Leases, the amount of such Indebtedness represents not less than 75%
of the aggregate book value of the fixed assets securing such
Indebtedness and no property other than the assets purchased secures
such Indebtedness;
(g) Subject to Section 10.1(i), Liens arising by reason of any
judgment, decree or order of any court, to the extent that such
judgment, decree or order is adequately bonded, or such judgment,
decree or order is covered by insurance as to which the insurance
company has not disclaimed or disputed in writing its obligations for
coverage, or appropriate legal proceedings have been duly initiated
for the review of such judgment, decree or order and such proceedings
have not been formally terminated, or the period within which such
proceedings may be initiated has not expired; or
(h) Liens securing refinancing, extensions or renewals of
Indebtedness or obligations secured by Liens permitted in clauses (a)
through (f) above; provided that (x) the amount of any such extended,
renewed or refinancing Indebtedness or obligation is not increased,
(y) such extended, renewed or refinancing Indebtedness or obligation
is on terms and conditions no more restrictive than the terms and
conditions of the Indebtedness or obligations being extended or
renewed and (z) such Liens cover only property or assets theretofore
subject thereto (and for purposes of this clause (i) "refinancing"
Indebtedness shall have the meaning provided in Section 9.5(a));
9.5. Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, howsoever evidenced, except:
(a) Indebtedness existing as of the Closing Date as set forth
in Schedule 7.6 and any refinancing of such Indebtedness; provided,
that the aggregate principal amount of such refinancing Indebtedness
is not increased and such refinancing is on terms and conditions no
more restrictive than the terms and conditions of the Indebtedness
being refinanced (and for purposes hereof a "refinancing" Indebtedness
shall include Indebtedness incurred within 90 days after the
refinanced Indebtedness is repaid);
(b) Indebtedness owing to the Administrative Agent or any
Lender in connection with this Agreement, any Note or other Loan
Document;
(c) Indebtedness under the Senior Notes and the Indenture;
(d) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(e) Indebtedness arising from Rate Hedging Obligations
permitted under Section 9.16;
(f) Guaranties of the Borrower or any Guarantor in respect of
Indebtedness permitted to be incurred under this Section 9.5;
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(g) Without limitation on the provisions of Section 9.5(a),
the Borrower may refinance or otherwise restructure the $20,000,000
outstanding balance of the Subordinated Intercompany Note (including
without limitation by assuming another obligation as a result of the
merger of FLS into the Borrower or by directly entering into a new
obligation in replacement of the Subordinated Intercompany Note),
provided that the Indebtedness resulting from such refinancing or
restructuring is subordinate to the Notes and includes scheduled
principal payments not exceeding $3,500,000 in any Fiscal Year; and
(h) additional Indebtedness not otherwise covered by clauses
(a) through (g) above, provided that the aggregate outstanding
principal amount of all such other Indebtedness permitted under this
clause (h) shall in no event exceed twenty percent (20%) of
Consolidated Tangible Assets at any time;
9.6. Transfer of Assets. Sell, lease, transfer or otherwise dispose
of any assets of Borrower or any Subsidiary other than (a) dispositions of
inventory in the ordinary course of business, (b) dispositions of property that
is substantially worn, damaged, obsolete or, in the judgment of the Borrower,
no longer best used or useful in its business or that of any Subsidiary
(including, but not limited to up to $14,000,000 identified as assets held for
sale on the Borrower's consolidated balance sheet as of March 31, 1998), (c)
transfers of assets necessary to give effect to merger or consolidation
transactions permitted by Section 9.8, (d) the disposition of Eligible
Securities in the ordinary course of management of the investment portfolio of
the Borrower and its Subsidiaries, (e) sales and other transfers of assets from
the Borrower to a Guarantor and vice versa (including without limitation the
sale or other transfer of receivables between the Borrower and AFI); (f) the
sale or other disposition of all or any substantial part of the Atlas division
of the Borrower; (g) the sale or other disposition of assets up to $10,000,000
in any Fiscal Year to the extent that the net proceeds thereof are reinvested
in the business of the Borrower or any Guarantor within twelve months
thereafter; and (h) other dispositions in any one Fiscal Year at fair market
value of assets that do not constitute Collateral having a book or market value
(whichever is higher) not exceeding $5,000,000;
9.7. Investments. Purchase, own, invest in or otherwise acquire,
directly or indirectly, any stock or other securities, or make or permit to
exist any interest whatsoever in any other Person or permit to exist any loans
or advances to any Person, except that Borrower may maintain investments or
invest in:
(a) securities of any Person acquired in an Acquisition
permitted hereunder;
(b) Eligible Securities;
(c) investments existing as of the date hereof and as set forth
in Schedule 7.4;
(d) accounts receivable arising and trade credit granted in the
ordinary course of business and any securities received in
satisfaction or partial satisfaction thereof in
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connection with accounts of financially troubled Persons to the extent
reasonably necessary in order to prevent or limit loss;
(e) investments in Subsidiaries which are Guarantors;
(f) other loans, advances and investments made in the ordinary
course of business in an aggregate principal amount at any time
outstanding not to exceed $5,000,000;
(g) loans to officers, directors and employees of the Borrower
or any Subsidiary not exceeding in an aggregate principal amount at
any time outstanding not to exceed $1,000,000;
(h) promissory notes received as a result of a sale or other
disposition of an asset permitted under Section 9.6; and
(i) additional Investments not otherwise covered by clauses
(a) through (h) above, provided that the aggregate amount of such
Investments permitted under this clause (i) shall not exceed ten
percent (10%) of Consolidated Net Worth.
9.8. Merger or Consolidation. (a) Consolidate with or merge into any
other Person, or (b) permit any other Person to merge into it, or (c)
liquidate, wind-up or dissolve or sell, transfer or lease or otherwise dispose
of all or a substantial part of its assets (other than sales and other
transfers permitted under Section 9.6); provided, however, (i) any Subsidiary
of the Borrower may merge or transfer all or substantially all of its assets
into or consolidate with the Borrower or any wholly-owned Subsidiary of the
Borrower, (ii) the Borrower may merge FLS into the Borrower, and (iii) any
other Person may merge into or consolidate with the Borrower or any
wholly-owned Subsidiary and any Subsidiary may merge into or consolidate with
any other Person in order to consummate an Acquisition permitted by Section
9.2, provided further, that any resulting or surviving entity shall execute and
deliver such agreements and other documents, including a Facility Guaranty, and
take such other action as the Administrative Agent may require to evidence or
confirm its express assumption of the obligations and liabilities of its
predecessor entities under the Loan Documents;
9.9. Restricted Payments. Make any Restricted Payment or apply or set
apart any of their assets therefor or agree to do any of the foregoing;
provided, however, the Borrower may make the following Restricted Payments in
any Fiscal Year (on a non-cumulative basis, with the effect that amounts not
paid in any Fiscal Year may not be carried over for payment in a subsequent
period) if immediately prior to and immediately after giving effect thereto no
Default or Event of Default shall exist or occur and be continuing:
(a) cash payments or dividends to or on behalf of FLS for (i)
reimbursement of tax obligations not otherwise paid by the Borrower,
and (ii) holding company expenses not to exceed $100,000;
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(b) the refinancing or other restructuring of up to $20,000,000
of the principal amount of the Subordinated Intercompany Note;
provided, however, that any Indebtedness resulting from such
refinancing or restructuring (i) is subordinate to the Obligations
under subordination terms substantially similar to those contained in
the Subordinated Intercompany Note, (ii) is in an aggregate principal
amount not greater than the amount being refinanced or restructured,
and (iii) includes scheduled principal payments in an amount not to
exceed $3,500,000 in any Fiscal Year; and
(c) sales and other transfers of assets from the Borrower or a
Guarantor to the Borrower or a Guarantor (including without limitation
the sale or other transfer of receivables between the Borrower and
AFI); and
(d) other Restricted Payments not otherwise covered by clauses
(a) through (c) above made after the Closing Date not in excess of the
sum of (i) fifty percent (50%) of the Consolidated Net Income during
the period (taken as one accounting period) from the first day of the
Borrower's fiscal quarter ending on June 30, 1998 to the last day of
the Borrower'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 Consolidated Net Income is a
loss, minus 100% of such amount); (ii) twenty-five percent (25%) of
the aggregate Net Proceeds received by the Borrower after the Closing
Date from any Equity Offering; and (iii) $10,000,000.
9.10. Transactions with Affiliates. Other than transactions permitted
under Sections 9.7, 9.8 and 9.9, enter into any transaction after the Closing
Date, including, without limitation, the purchase, sale, lease or exchange of
property, real or personal, or the rendering of any service, with any Affiliate
of the Borrower, except (a) that such Persons may render services to the
Borrower or its Subsidiaries for compensation at the same rates generally paid
by Persons engaged in the same or similar businesses for the same or similar
services, (b) that the Borrower or any Subsidiary may render services to such
Persons for compensation at the same rates generally charged by the Borrower or
such Subsidiary and (c) that the Borrower may purchase, sell, exchange or lease
property to or from an Affiliate upon fair and reasonable terms no less
favorable to the Borrower (or any Subsidiary) than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate;
9.11. Compliance with ERISA. With respect to any Pension Plan,
Employee Benefit Plan or Multiemployer Plan:
(a) permit the occurrence of any Termination Event which would
result in a liability on the part of the Borrower or any ERISA
Affiliate to the PBGC exceeding $1,000,000; or
(b) except to the extent permitted under ERISA, permit the
present value of all benefit liabilities under all Pension Plans to
exceed the current value of the assets of such Pension Plans allocable
to such benefit liabilities; or
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(c) permit any accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code) with respect to any
Pension Plan, whether or not waived; or
(d) fail to make any contribution or payment to any
Multiemployer Plan which the Borrower or any ERISA Affiliate may be
required to make under any agreement relating to such Multiemployer
Plan, or any law pertaining thereto; or
(e) engage, or permit any Borrower or any ERISA Affiliate to
engage, in any prohibited transaction under Section 406 of ERISA or
Sections 4975 of the Code for which a civil penalty pursuant to
Section 502(I) of ERISA or a tax pursuant to Section 4975 of the Code
is reasonably likely to be imposed exceeding in the aggregate
$1,000,000 for which a statutory or class exemption is not available
or a private exemption has not been obtained; or
(f) permit the establishment of any Employee Benefit Plan
providing post-retirement welfare benefits or establish or amend any
Employee Benefit Plan which establishment or amendment could result in
material additional liability to the Borrower or any ERISA Affiliate
or materially increase the obligation of the Borrower or any ERISA
Affiliate to a Multiemployer Plan; or
(g) fail, or permit the Borrower or any ERISA Affiliate to
fail, to establish, maintain and operate each Employee Benefit Plan in
compliance in all material respects with the provisions of ERISA, the
Code, all applicable Foreign Benefit Laws and all other applicable
laws and the regulations and interpretations thereof;
9.12. Fiscal Year. Change its Fiscal Year;
9.13. Dissolution, etc. Wind up, liquidate or dissolve (voluntarily or
involuntarily) or commence or suffer any proceedings seeking any such winding
up, liquidation or dissolution, except in connection with a merger or
consolidation permitted pursuant to Section 9.8;
9.14. Limitations on Sales and Leasebacks. Enter into any arrangement
with any Person providing for the leasing by the Borrower or any Subsidiary of
real or personal property, whether now owned or hereafter acquired in a related
transaction or series of related transactions, which has been or is to be sold
or transferred by the Borrower or any Subsidiary to such Person or to any other
Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of the Borrower or any
Subsidiary if, after giving effect thereto, the aggregate outstanding amount of
all such transactions then in effect would exceed $25,000,000;
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9.15. Change in Control. Cause, suffer or permit to exist or occur any
Change of Control;
9.16. Rate Hedging Obligations. Incur any Rate Hedging Obligations or
enter into any agreements, arrangements, devices or instruments relating to
Rate Hedging Obligations, except pursuant to Swap Agreements in an aggregate
notional amount not to exceed at any time 10% of the Total Revolving Credit
Commitment;
9.17. Negative Pledge Clauses. Except with respect to the Indenture,
enter into or cause, suffer or permit to exist any agreement with any Person
other than the Agents and the Lenders pursuant to this Agreement or any other
Loan Documents which prohibits or limits the ability of any of the Borrower or
any Subsidiary to create, incur, assume or suffer to exist any Lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired,
provided that the Borrower and any Subsidiary may enter into such an agreement
in connection with property acquired with the proceeds of purchase money
Indebtedness and Capital Leases to the extent permitted hereunder when such
prohibition or limitation is by its terms effective only against the assets
subject to such Lien;
9.18. Prepayments, Etc. of Indebtedness.
(a) Other than the refinancing or restructuring permitted under
Section 9.5, prepay, redeem, purchase, defease or otherwise satisfy
prior to the scheduled maturity thereof in any manner, or make any
payment in violation of any subordination terms of, any Indebtedness
subordinate to the Obligations; or
(b) amend, modify or change in any manner any term or condition
of any Indebtedness described in Section 9.5(a) so that the terms and
conditions thereof are less favorable to the Agents and the Lenders
than the terms of such Indebtedness as of the Closing Date.
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ARTICLE X
Events of Default and Acceleration
10.1. Events of Default. If any one or more of the following events
(herein called "Events of Default") shall occur for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
Governmental Authority), that is to say:
(a) if default shall be made in the due and punctual payment of
the principal of any Loan, Reimbursement Obligation or other
Obligation, when and as the same shall be due and payable whether
pursuant to any provision of Article II or Article III, at maturity,
by acceleration or otherwise; or
(b) if default shall be made in the due and punctual payment of
any amount of interest on any Loan, Reimbursement Obligation or other
Obligation or of any fees or other amounts payable to any of the
Lenders or the Administrative Agent on the date within three (3)
Business Days on which the same shall be due and payable; or
(c) if default shall be made in the performance or observance
of any covenant set forth in Section 8.7, 8.11, 8.19 or Article IX;
(d) if a default shall be made in the performance or observance
of, or shall occur under, any covenant, agreement or provision
contained in this Agreement or the Notes (other than as described in
clauses (a), (b) or (c) above) and such default shall continue for 30
or more days after the earlier of receipt of notice of such default by
the Authorized Representative from the Administrative Agent or an
officer of the Borrower becomes aware of such default, or if a default
shall be made in the performance or observance of, or shall occur
under, any covenant, agreement or provision contained in any of the
other Loan Documents (beyond any applicable grace period, if any,
contained therein) or in any instrument or document evidencing or
creating any obligation, guaranty, or Lien in favor of the
Administrative Agent or any of the Lenders or delivered to the
Administrative Agent or any of the Lenders in connection with or
pursuant to this Agreement or any of the Obligations, or if any Loan
Document ceases to be in full force and effect (other than by reason
of any action by the Agents), or if without the written consent of the
Lenders, this Agreement or any other Loan Document shall be
disaffirmed or shall terminate, be terminable or be terminated or
become void or unenforceable for any reason whatsoever (other than in
accordance with its terms in the absence of default or by reason of
any action by the Lenders or the Agents); or
(e) if there shall occur (i) a default, which is not waived, in
the payment of any principal, interest, premium or other amount with
respect to any Indebtedness or Rate Hedging Obligation (other than the
Loans and other Obligations) of the Borrower or any
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Subsidiary in an amount not less than $1,000,000 in the aggregate
outstanding, or (ii) a default, which is not waived, in the
performance, observance or fulfillment of any term or covenant
contained in any agreement or instrument under or pursuant to which
any such Indebtedness or Rate Hedging Obligation may have been issued,
created, assumed, guaranteed or secured by the Borrower or any
Subsidiary, or (iii) any other event of default as specified in any
agreement or instrument under or pursuant to which any such
Indebtedness or Rate Hedging Obligation may have been issued, created,
assumed, guaranteed or secured by the Borrower or any Subsidiary, and
such default or event of default shall continue for more than the
period of grace, if any, therein specified, or such default or event
of default shall permit the holder of any such Indebtedness (or any
agent or trustee acting on behalf of one or more holders) to
accelerate the maturity thereof; or
(f) if any representation, warranty or other statement of fact
contained in any Loan Document or in any writing, certificate, report
or statement at any time furnished to the Administrative Agent or any
Lender by or on behalf of the Borrower or any other Credit Party
pursuant to or in connection with any Loan Document, or otherwise,
shall be false or misleading in any material respect when given; or
(g) if the Borrower or any Subsidiary or other Credit Party
shall be unable to pay its debts generally as they become due; file a
petition to take advantage of any insolvency statute; make an
assignment for the benefit of its creditors; commence a proceeding for
the appointment of a receiver, trustee, liquidator or conservator of
itself or of the whole or any substantial part of its property; file a
petition or answer seeking liquidation, reorganization or arrangement
or similar relief under the federal bankruptcy laws or any other
applicable law or statute; or
(h) if a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee,
liquidator or conservator of the Borrower or any Subsidiary or other
Credit Party or of the whole or any substantial part of its properties
and such order, judgment or decree continues unstayed and in effect
for a period of sixty (60) days; or if, under the provisions of any
other law for the relief or aid of debtors, a court of competent
jurisdiction shall assume custody or control of the Borrower or any
Subsidiary or other Credit Party or of the whole or any substantial
part of its properties, which control is not relinquished within sixty
(60) days; or if there is commenced against the Borrower or any
Subsidiary or other Credit Party any proceeding or petition seeking
reorganization, arrangement, liquidation or similar relief under the
federal bankruptcy laws or any other applicable law or statute of the
United States of America or any state which proceeding or petition
remains undismissed for a period of sixty (60) days; or if the
Borrower or any Subsidiary or other Credit Party takes any action to
indicate its consent to or approval of any such proceeding or
petition; or
(i) if (i) one or more judgments or orders where the amount not
covered by insurance (or the amount as to which the insurer denies
liability) is in excess of $1,000,000 is rendered against the Borrower
or any Subsidiary, or (ii) there is any attachment,
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injunction or execution against any of the Borrower's or Subsidiaries'
properties for any amount in excess of $1,000,000 in the aggregate;
and such judgment, attachment, injunc tion or execution remains
unpaid, unstayed, undischarged, unbonded or undismissed for a period
of thirty (30) days; or
(j) if the Borrower or any Subsidiary shall, other than in the
ordinary course of business (as determined by past practices), suspend
all or any part of its operations material to the conduct of the
business of the Borrower or such Subsidiary for a period of more than
60 days; or
(k) if there shall occur and not be waived an Event of Default
as defined in any of the other Loan Documents;
then, and in any such event and at any time thereafter, if such Event of
Default or any other Event of Default shall have not been waived,
(A) either or both of the following actions may be taken:
(i) the Administrative Agent, with the consent of the Required
Lenders, may, and at the direction of the Required Lenders
shall, declare any obligation of the Lenders and the Issuing
Bank to make further Revolving Loans and Swing Line Loans or to
issue additional Letters of Credit terminated, whereupon the
obligation of each Lender to make further Revolving Loans, of
NationsBank to make further Swing Line Loans, and of the Issuing
Bank to issue additional Letters of Credit, hereunder shall
terminate immediately, and (ii) the Administrative Agent shall
at the direction of the Required Lenders, at their option,
declare by notice to the Borrower any or all of the Obligations
to be immediately due and payable, and the same, including all
interest accrued thereon and all other obligations of the
Borrower to the Administrative Agent and the Lenders, shall
forthwith become immediately due and payable without
presentment, demand, protest, notice or other formality of any
kind, all of which are hereby expressly waived, anything
contained herein or in any instrument evidencing the Obligations
to the contrary notwithstanding; provided, however, that
notwithstanding the above, if there shall occur an Event of
Default under clause (g) or (h) above, then the obligation of
the Lenders to make Revolving Loans, of NationsBank to make
Swing Line Loans, and of the Issuing Bank to issue Letters of
Credit hereunder shall automatically terminate and any and all
of the Obligations shall be immediately due and payable without
the necessity of any action by the Administrative Agent or the
Required Lenders or notice to the Administrative Agent or the
Lenders;
(B) the Borrower shall, upon demand of the Administrative
Agent or the Required Lenders, deposit cash with the
Administrative Agent in an amount equal to the amount of any
Letter of Credit Outstandings, as collateral security for the
repayment of any future drawings or payments under such Letters
of Credit, and
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such amounts shall be held by the Administrative Agent pursuant
to the terms of the LC Account Agreement; and
(C) the Agents and each of the Lenders shall have all of
the rights and remedies available under the Loan Documents or
under any applicable law.
10.2. Agents to Act. In case any one or more Events of Default shall
occur and not have been waived, the Agents may, with the consent of the
Required Lenders, and at the direction of the Required Lenders shall, proceed
to protect and enforce their rights or remedies either by suit in equity or by
action at law, or both, whether for the specific performance of any covenant,
agreement or other provision contained herein or in any other Loan Document, or
to enforce the payment of the Obligations or any other legal or equitable right
or remedy.
10.3. Cumulative Rights. No right or remedy herein conferred upon the
Lenders or the Agents is intended to be exclusive of any other rights or
remedies contained herein or in any other Loan Document, and every such right
or remedy shall be cumulative and shall be in addition to every other such
right or remedy contained herein and therein or now or hereafter existing at
law or in equity or by statute, or otherwise.
10.4. No Waiver. No course of dealing between the Borrower and any
Lender or the Agents or any failure or delay on the part of any Lender or the
Agents in exercising any rights or remedies under any Loan Document or
otherwise available to it shall operate as a waiver of any rights or remedies
and no single or partial exercise of any rights or remedies shall operate as a
waiver or preclude the exercise of any other rights or remedies hereunder or of
the same right or remedy on a future occasion.
10.5. Allocation of Proceeds. If an Event of Default has occurred and
not been waived, and the maturity of the Notes has been accelerated pursuant to
Article X hereof, all payments received by the Administrative Agent hereunder,
in respect of any principal of or interest on the Obligations or any other
amounts payable by the Borrower hereunder, shall be applied by the
Administrative Agent in the following order:
(a) amounts due to the Lenders pursuant to Sections 2.10, 3.3,
3.4 and 12.5;
(b) amounts due to the Administrative Agent pursuant to Section
11.9;
(c) payments of interest on Loans, Swing Line Loans and
Reimbursement Obligations, to be applied for the ratable benefit of
the Lenders (with amounts payable in respect of Swing Line
Outstandings being included in such calculation and paid to
NationsBank);
(d) payments of principal of Loans, Swing Line Loans and
Reimbursement Obligations, to be applied for the ratable benefit of
the Lenders (with amounts payable in
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respect of Swing Line Outstandings being included in such calculation
and paid to NationsBank);
(e) payments of cash amounts to the Administrative Agent in
respect of outstanding Letters of Credit pursuant to Section 10.1(B);
(f) amounts due to the Lenders pursuant to Sections 3.2(g),
8.15 and 12.9;
(g) payments of all other amounts due under any of the Loan
Documents, if any, to be applied for the ratable benefit of the
Lenders;
(h) amounts due to any of the Lenders in respect of Obligations
consisting of liabilities under any Swap Agreement with any of the
Lenders on a pro rata basis according to the amounts owed; and
(i) any surplus remaining after application as provided for
herein, to the Borrower or otherwise as may be required by applicable
law.
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ARTICLE XI
The Agents
11.1. Appointment, Powers, and Immunities. Each Lender hereby
irrevocably appoints and authorizes the Administrative Agent to act as its
administrative agent under this Agreement and the other Loan Documents with
such powers and discretion as are specifically delegated to the Administrative
Agent by the terms of this Agreement and the other Loan Documents, together
with such other powers as are reasonably incidental thereto. Each Lender hereby
irrevocably appoints and authorizes the Collateral Agent to act as its
collateral agent under the Security Instruments with such powers and discretion
as are specifically delegated to the Collateral Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. The Administrative Agent and the Collateral
Agent (which terms as used in this sentence and in Section 11.5 and the first
sentence of Section 11.6 hereof shall include the Administrative Agent's and
the Collateral Agent's affiliates and their own and their affiliates' officers,
directors, employees, and agents):
(a) shall not have any duties or responsibilities except those
expressly set forth in this Agreement and shall not be a trustee or
fiduciary for any Lender;
(b) shall not be responsible to the Lenders for any recital,
statement, representation, or warranty (whether written or oral) made
in or in connection with any Loan Document or any certificate or other
document referred to or provided for in, or received by any of them
under, any Loan Document, or for the value, validity, effectiveness,
genuineness, enforceability, or sufficiency of any Loan Document, or
any other document referred to or provided for therein or for any
failure by any Credit Party or any other Person to perform any of its
obligations thereunder;
(c) shall not be responsible for or have any duty to ascertain,
inquire into, or verify the performance or observance of any covenants
or agreements by any Credit Party or the satisfaction of any condition
or to inspect the property (including the books and records) of any
Credit Party or any of its Subsidiaries or affiliates;
(d) shall not be required to initiate or conduct any litigation
or collection proceedings under any Loan Document; and
(e) shall not be responsible for any action taken or omitted to
be taken by it under or in connection with any Loan Document, except
for its own gross negligence or willful misconduct.
The Agents may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by them with reasonable care.
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11.2. Reliance by Agents. The Agents shall be entitled to rely upon
any certification, notice, instrument, writing, or other communication
(including, without limitation, any thereof by telephone or telefacsimile)
believed by them to be genuine and correct and to have been signed, sent or
made by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel (including counsel for any Credit Party),
independent accountants, and other experts selected by them. The Administrative
Agent may deem and treat the payee of any Note as the holder thereof for all
purposes hereof unless and until the Administrative Agent receives and accepts
an Assignment and Acceptance executed in accordance with Section 12.1 hereof.
As to any matters not expressly provided for by this Agreement, the Agents
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in
so acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions shall be binding on all of the Lenders;
provided, however, that neither the Administrative Agent nor the Collateral
Agent shall be required to take any action that exposes it to personal
liability or that is contrary to any Loan Document or applicable law or unless
it shall first be indemnified to its satisfaction by the Lenders against any
and all liability and expense which may be incurred by it by reason of taking
any such action.
11.3. Defaults. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default or Event of Default unless
the Administrative Agent has received written notice from a Lender or the
Borrower specifying such Default or Event of Default and stating that such
notice is a "Notice of Default". In the event that the Administrative Agent
receives such a notice of the occurrence of a Default or Event of Default, the
Administrative Agent shall give prompt notice thereof to the Lenders. The
Agents shall (subject to Section 11.2 hereof) take such action with respect to
such Default or Event of Default as shall reasonably be directed by the
Required Lenders, provided that, unless and until the Agents shall have
received such directions, the Agents may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
or Event of Default as the Agents shall deem advisable in the best interest of
the Lenders.
11.4. Rights as Lender. With respect to its Revolving Credit
Commitment and the Loans made by it, the Agents (and any successor acting as
Administrative Agent or Collateral Agent) and the Co-Agent, in their respective
capacities as a Lender hereunder shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though they were not
acting as the Administrative Agent, Collateral Agent or Co-Agent, as the case
may be, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include the Administrative Agent, the Collateral Agent and the
Co-Agent in their respective individual capacities. Each of the Agents (and any
successor acting as Administrative Agent or Collateral Agent) and the Co-
Agent, and their respective affiliates may (without having to account therefor
to any Lender) accept deposits from, lend money to, make investments in,
provide services to, and generally engage in any kind of lending, trust, or
other business with any Credit Party or any of its Subsidiaries or affiliates
as if it were not acting as Administrative Agent, Collateral Agent or Co-
Agent, as the case may be, and the Agents (and any successor acting as
Administrative Agent or Collateral Agent), the Co-Agent and their respective
affiliates may accept fees and other consideration from any Credit Party or any
of its Subsidiaries or affiliates for services in
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connection with this Agreement or otherwise without having to account for the
same to the Lenders.
11.5. Indemnification. The Lenders agree to indemnify the Agents and
each of them (to the extent not reimbursed under Section 12.9 hereof, but
without limiting the obligations of the Borrower under such Section) ratably in
accordance with their respective Revolving Credit Commitments, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including attorneys' fees), or disbursements of any
kind and nature whatsoever that may be imposed on, incurred by or asserted
against the Agents or either of them (including by any Lender) in any way
relating to or arising out of any Loan Document or the transactions
contemplated thereby or any action taken or omitted by the Agents under any
Loan Document; provided that no Lender shall be liable for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of the
Person to be indemnified. Without limitation of the foregoing, each Lender
agrees to reimburse the Agents promptly upon demand for its ratable share of
any costs or expenses payable by the Borrower under Section 12.5, to the extent
that the Agents are not promptly reimbursed for such costs and expenses by the
Borrower. The agreements contained in this Section 11.5 shall survive payment
in full of the Loans and all other amounts payable under this Agreement.
11.6. Non-Reliance on Agents and Other Lenders. Each Lender agrees
that it has, independently and without reliance on the Agents, NMS or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Loan Parties and their
Subsidiaries and decision to enter into this Agreement and that it will,
independently and without reliance upon the Agents, NMS or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under the Loan Documents. Except for notices, reports, and other
documents and information expressly required to be furnished to the Lenders by
the Agents hereunder, the Agents shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the affairs,
financial condition, or business of any Credit Party or any of its Subsidiaries
or affiliates that may come into the possession of the Agents or any of their
affiliates.
11.7. Resignation of Agent. The Administrative Agent or the Collateral
Agent may resign at any time by giving notice thereof to the Lenders and the
Borrower. Upon any such resignation, the Required Lenders shall have the right
to appoint a successor Administrative Agent or the Collateral Agent, as the
case may be, with the consent of the Borrower (provided that there is not then
a Default or Event of Default), which consent will not be unreasonably
withheld. If no successor Administrative Agent or Collateral Agent, as the case
may be, shall have been so appointed by the Required Lenders and shall have
accepted such appointment within thirty (30) days after the retiring
Administrative Agent's or Collateral Agent's giving of notice of resignation,
then the retiring Administrative Agent or Collateral Agent, as the case may be,
may, on behalf of the Lenders, appoint a successor Administrative Agent or
Collateral Agent, as the case may be, which shall be a commercial bank
organized under the laws of the United States of America having combined
capital and surplus of at least $500,000,000. Upon the acceptance of any
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appointment as Administrative Agent or Collateral Agent, as the case may be,
hereunder by a successor, such successor shall thereupon succeed to and become
vested with all the rights, powers, discretion, privileges, and duties of the
retiring Administrative Agent or Collateral Agent, as the case may be, and the
retiring Administrative Agent or Collateral Agent, as the case may be, shall be
discharged from its duties and obligations hereunder. After any retiring
Administrative Agent's or Collateral Agent's resignation hereunder as
Administrative Agent or Collateral Agent, as the case may be, the provisions of
this Article XI shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as
Administrative Agent or Collateral Agent.
11.8. Sharing of Payments, etc. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, set-off, counterclaim or
otherwise, obtain payment with respect to its Obligations (other than pursuant
to Article V) which results in its receiving more than its pro rata share of
the aggregate payments with respect to all of the Obligations (other than any
payment expressly provided hereunder to be distributed on other than a pro rata
basis and payments pursuant to Article V), then (a) such Lender shall be deemed
to have simultaneously purchased from the other Lenders a share in their
Obligations so that the amount of the Obligations held by each of the Lenders
shall be pro rata and (b) such other adjustments shall be made from time to
time as shall be equitable to insure that the Lenders share such payments
ratably; provided, however, that for purposes of this Section 11.8 the term
"pro rata" shall be determined with respect to the Revolving Credit Commitment
of each Lender and to the Total Revolving Credit Commitments after subtraction
in each case of amounts, if any, by which any such Lender has not funded its
share of the outstanding Loans and Obligations. If all or any portion of any
such excess payment is thereafter recovered from the Lender which received the
same, the purchase provided in this Section 11.8 shall be rescinded to the
extent of such recovery, without interest. The Borrower expressly consents to
the foregoing arrangements and agrees that each Lender so purchasing a portion
of the other Lenders' Obligations may exercise all rights of payment
(including, without limitation, all rights of set-off, banker's lien or
counterclaim) with respect to such portion as fully as if such Lender were the
direct holder of such portion.
11.9. Fees. The Borrower agrees to pay to the Administrative Agent,
for its individual account, an annual Administrative Agent's fee as from time
to time agreed to by the Borrower and Administrative Agent in writing.
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ARTICLE XII
Miscellaneous
12.1. Assignments and Participations. (a) Each Lender may assign to
one or more Eligible Assignees all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Loans, its Note, and its Revolving Credit Commitment); provided, however, that
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Lender or
an assignment of all of a Lender's rights and obligations under this Agreement,
any such partial assignment shall be in an amount at least equal to $5,000,000
or an integral multiple of $1,000,000 in excess thereof;
(iii) each such assignment by a Lender shall be of a constant,
and not varying, percentage of all of its rights and obligations under this
Agreement and the Note; and
(iv) the parties to such assignment shall execute and deliver
to the Administrative Agent for its acceptance an Assignment and Acceptance in
the form of Exhibit B hereto, together with any Note subject to such assignment
and a processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Lender hereunder
and the assigning Lender shall, to the extent of such assignment, relinquish
its rights and be released from its obligations under this Agreement. Upon the
consummation of any assignment pursuant to this Section, the assignor, the
Administrative Agent and the Borrower shall make appropriate arrangements so
that, if required, new Notes are issued to the assignor and the assignee. If
the assignee is not incorporated under the laws of the United States of America
or a state thereof, it shall deliver to the Borrower and the Administrative
Agent certification as to exemption from deduction or withholding of Taxes in
accordance with Section 5.6.
(b) The Administrative Agent shall maintain at its address referred
to in Section 12.2 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Revolving Credit Commitment of, and principal amount of the
Loans owing to, each Lender from time to time (the "Register"). The entries in
the Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower, the Administrative Agent and the Lenders may treat
each Person whose name is recorded in the Register as a Lender hereunder for
all purposes of this Agreement. The Register shall be available for inspection
by the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
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<PAGE> 94
(c) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Note subject to such assignment and payment
of the processing fee, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit B
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
parties thereto.
(d) Each Lender may sell participations to one or more Persons in
all or a portion of its rights, obligations or rights and obligations under
this Agreement (including all or a portion of its Revolving Credit Commitment
or its Loans); provided, however, that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) the participant shall be entitled to the benefit of the
yield protection provisions contained in Article V and the right of set-off
contained in Section 12.3, and (iv) the Borrower shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and such Lender shall retain the sole right
to enforce the obligations of the Borrower relating to its Loans and its Note
and to approve any amendment, modification, or waiver of any provision of this
Agreement (other than amendments, modifications, or waivers decreasing the
amount of principal of or the rate at which interest is payable on such Loans
or Note, extending any scheduled principal payment date or date fixed for the
payment of interest on such Loans or Note, or extending its Revolving Credit
Commitment).
(e) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time assign and pledge all or any portion of its Loans
and its Note to any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal Reserve Bank. No
such assignment shall release the assigning Lender from its obligations
hereunder.
(f) Any Lender may furnish any information concerning the Borrower
or any of its Subsidiaries in the possession of such Lender from time to time
to assignees and participants (including prospective assignees and
participants).
12.2. Notices. Any notice shall be conclusively deemed to have been
received by any party hereto and be effective (i) on the day on which delivered
(including hand delivery by commercial courier service) to such party (against
receipt therefor), (ii) on the date of receipt at such address, telefacsimile
number or telex number as may from time to time be specified by such party in
written notice to the other parties hereto or otherwise received), in the case
of notice by telegram, telefacsimile or telex, respectively (where the receipt
of such message is verified by return), or (iii) on the fifth Business Day
after the day on which mailed, if sent prepaid by certified or registered mail,
return receipt requested, in each case delivered, transmitted or mailed, as the
case may be, to the address, telex number or telefacsimile number, as
appropriate, set forth below or such other address or number as such party
shall specify by notice hereunder:
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<PAGE> 95
(a) if to the Borrower:
AMERISTEEL CORPORATION
5100 West Lemon Street, Suite 312
Tampa, Florida 33609
Attn: Chief Financial Officer
Telephone: (813) 207-2300
Telefacsimile: (813) 207-2328
(b) if to the Administrative Agent:
NationsBank, National Association
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telephone: (704) 386-9371
Telefacsimile: (704) 386-9923
with a copy to:
NationsBank, National Association
400 North Ashley Drive,2nd Floor
Tampa, Florida 33602
Attention: Corporate Finance
Telephone: (813) 224-5194
Telefacsimile: (813) 224-5948
(c) if to the Collateral Agent:
The Bank of Tokyo-Mitsubishi, Ltd
1251 Avenue of the Americas
New York, New York 10116-3138
Attention: Akihiko Hagura
Telephone: (212) ___-____
Telefacsimile: (212) ___-____
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<PAGE> 96
(d) if to the Lenders:
At the addresses set forth on the signature pages
hereof and on the signature page of each Assignment and
Acceptance;
(e) if to any other Credit Party, at the address set forth
on the signature page of the Facility Guaranty or
Security Instrument executed by such Credit Party, as
the case may be.
12.3. Right of Set-off; Adjustments. (a) Upon the occurrence and
during the continuance of any Event of Default, each Lender (and each of its
affiliates) is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender (or any of its affiliates)
to or for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement and
the Note held by such Lender, irrespective of whether such Lender shall have
made any demand under this Agreement or such Note and although such obligations
may be unmatured. Each Lender agrees promptly to notify the Borrower after any
such set-off and application made by such Lender; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section 12.3 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Lender may have.
(b) If any Lender (a "benefitted Lender") shall at any time receive
any payment of all or part of the Loans owing to it, or interest thereon, or
receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, or otherwise), in a greater proportion than any such
payment to or collateral received by any other Lender, if any, in respect of
such other Lender's Loans owing to it, or interest thereon, such benefitted
Lender shall purchase for cash from the other Lenders a participating interest
in such portion of each such other Lender's Loans owing to it, or shall provide
such other Lenders with the benefits of any such collateral, or the proceeds
thereof, as shall be necessary to cause such benefitted Lender to share the
excess payment or benefits of such collateral or proceeds ratably with each of
the Lenders; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such benefitted Lender or
thereafter is repaid in good faith settlement of a pending or threatened
avoidance claim, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. The
Borrower agrees that any Lender so purchasing a participation from a Lender
pursuant to this Section 12.3 may, to the fullest extent permitted by law,
exercise all of its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Person were the direct
creditor of the Borrower in the amount of such participation.
12.4. Survival. All covenants, agreements, representations and
warranties made herein shall survive the making by the Lenders of the Loans and
the issuance of the Letters of Credit and the execution and delivery to the
Lenders of this Agreement and the Notes and shall continue in
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full force and effect so long as any of Obligations remain outstanding or any
Lender has any Eurodollar Rate Loan hereunder or the Borrower has continuing
obligations hereunder unless otherwise provided herein. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and permitted assigns of such party and all
covenants, provisions and agreements by or on behalf of the Borrower which are
contained in the Loan Documents shall inure to the benefit of the successors
and permitted assigns of the Lenders or any of them.
12.5. Expenses. The Borrower agrees to pay on demand all costs and
expenses of the Agents in connection with the syndication, preparation,
execution, delivery, administration, modification, and amendment of this
Agreement, the other Loan Documents, and the other documents to be delivered
hereunder, including, without limitation, the reasonable fees and expenses of
counsel for the Agents (excluding the cost of internal counsel) with respect
thereto and with respect to advising the Agents as to their respective rights
and responsibilities under the Loan Documents. The Borrower further agrees to
pay on demand all costs and expenses of the Agents and the Lenders, if any
(including, without limitation, reasonable attorneys' fees and expenses but
excluding the cost of internal counsel), in connection with the restructuring,
workout or enforcement (whether through negotiations, legal proceedings, or
otherwise) of the Loan Documents and the other documents to be delivered
hereunder.
12.6. Amendments and Waivers. Any provision of this Agreement or any
other Loan Document may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Borrower and the Required Lenders
(and, if Article XI or the rights or duties of the Agents are affected thereby,
by the Agents); provided that no such amendment or waiver shall, unless signed
by all the Lenders, (i) increase the Total Revolving Credit Commitment of the
Lenders, (ii) reduce the principal of or rate of interest on any Loan or any
fees or other amounts payable hereunder, (iii) postpone any date fixed for the
payment of any principal of or interest on any Loan or any fees or other
amounts payable hereunder or for termination of any Revolving Credit
Commitment, or (iv) change the percentage of the Revolving Credit Commitment or
of the unpaid principal amount of the Notes, or the number of Lenders, which
shall be required for the Lenders or any of them to take any action under this
Section 12.6 or any other provision of this Agreement or (v) release any
Guarantor or, other than in connection with a transaction permitted under
Section 9.6, all or a material part of the Collateral or (vi) change any
provision of this Agreement or the other Loan Documents relating to the pro
rata treatment of Lenders; and provided, further, that no such amendment or
waiver that affects the rights, privileges or obligations of NationsBank as
provider of Swing Line Loans, shall be effective unless signed in writing by
NationsBank or that affects the rights, privileges or obligations of the
Issuing Bank as issuer of Letters of Credit, shall be effective unless signed
in writing by the Issuing Bank;
No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances, except as otherwise expressly provided herein. No delay or
omission on any Lender's or the Agents' part in exercising any
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right, remedy or option shall operate as a waiver of such or any other right,
remedy or option or of any Default or Event of Default.
12.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such fully- executed counterpart.
12.8. Termination. The termination of this Agreement shall not affect
any rights of the Borrower, the Lenders or the Agents or any obligation of the
Borrower, the Lenders or the Agents, arising prior to the effective date of
such termination, and the provisions hereof shall continue to be fully
operative until all transactions entered into or rights created or obligations
incurred prior to such termination have been fully disposed of, concluded or
liquidated and the Obligations arising prior to or after such termination have
been irrevocably paid in full. The rights granted to the Agents for the benefit
of the Lenders under the Loan Documents shall continue in full force and
effect, notwithstanding the termination of this Agreement, until all of the
Obligations have been paid in full after the termination hereof (other than
Obligations in the nature of continuing indemnities or expense reimbursement
obligations not yet due and payable, which shall continue) or the Borrower has
furnished the Lenders and the Agents with an indemnification satisfactory to
the Agents and each Lender with respect thereto. All representations,
warranties, covenants, waivers and agreements contained herein shall survive
termination hereof until payment in full of the Obligations unless otherwise
provided herein. Notwithstanding the foregoing, if after receipt of any payment
of all or any part of the Obligations, any Lender is for any reason compelled
to surrender or in good faith settlement of a pending or threatened avoidance
claim voluntarily surrenders, such payment to any Person because such payment
is determined to be void or voidable as a preference, impermissible setoff, a
diversion of trust funds or for any other reason, this Agreement shall continue
in full force and the Borrower shall be liable to, and shall indemnify and hold
the Agents or such Lender harmless for, the amount of such payment surrendered
until the Agents or such Lender shall have been finally and irrevocably paid in
full. The provisions of the foregoing sentence shall be and remain effective
notwithstanding any contrary action which may have been taken by the Agents or
the Lenders in reliance upon such payment, and any such contrary action so
taken shall be without prejudice to the Agents' or the Lenders' rights under
this Agreement and shall be deemed to have been conditioned upon such payment
having become final and irrevocable.
12.9. Indemnification; Limitation of Liability. (a) The Borrower
agrees to indemnify and hold harmless the Agents, NMS, and each Lender and each
of their affiliates and their respective officers, directors, employees,
agents, and advisors (each, an "Indemnified Party") from and against any and
all claims, damages, losses, liabilities, costs, and expenses (including,
without limitation, reasonable attorneys' fees) that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of (including, without limitation, in
connection with any investigation, litigation, or proceeding or preparation of
defense in connection therewith) the Loan Documents, any of the transactions
contemplated herein or the actual or proposed use of the proceeds of the Loans,
except to the
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extent such claim, damage, loss, liability, cost, or expense is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct.
In the case of an investigation, litigation or other proceeding to which the
indemnity in this Section 12.9 applies, such indemnity shall be effective
whether or not such investigation, litigation or proceeding is brought by the
Borrower, its directors, shareholders or creditors or an Indemnified Party or
any other Person or any Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby are consummated. The
Borrower agrees that no Indemnified Party shall have any liability (whether
direct or indirect, in contract or tort or otherwise) to it, any of its
Subsidiaries, any Guarantor, or any security holders or creditors thereof
arising out of, related to or in connection with the transactions contemplated
herein, except to the extent that such liability is found in a final
non-appealable judgment by a court of competent jurisdiction to have directly
resulted from such Indemnified Party's gross negligence or willful misconduct.
The Borrower agrees not to assert any claim against the Agents, any Lender, any
of their affiliates, or any of their respective directors, officers, employees,
attorneys, agents, and advisers, on any theory of liability, for special,
indirect, consequential, or punitive damages arising out of or otherwise
relating to the Loan Documents, any of the transactions contemplated herein or
the actual or proposed use of the proceeds of the Loans.
(b) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 12.9 shall survive the payment in full of the Loans and all other
amounts payable under this Agreement.
12.10. Severability. If any provision of this Agreement or the other
Loan Documents shall be determined to be illegal or invalid as to one or more
of the parties hereto, then such provision shall remain in effect with respect
to all parties, if any, as to whom such provision is neither illegal nor
invalid, and in any event all other provisions hereof shall remain effective
and binding on the parties hereto.
12.11. Entire Agreement. This Agreement, together with the other Loan
Documents, constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all previous proposals, negotiations,
representations, Eurodollar Rate Loans and other communications between or
among the parties, both oral and written, with respect thereto.
12.12. Agreement Controls. In the event that any term of any of the
Loan Documents other than this Agreement conflicts with any express term of
this Agreement, the terms and provisions of this Agreement shall control to the
extent of such conflict.
12.13. Usury Savings Clause. Notwithstanding any other provision
herein, the aggregate interest rate charged under any of the Notes, including
all charges or fees in connection therewith deemed in the nature of interest
under applicable law shall not exceed the Highest Lawful Rate (as such term is
defined below). If the rate of interest (determined without regard to the
preceding sentence) under this Agreement at any time exceeds the Highest Lawful
Rate (as defined below), the outstanding amount of the Loans made hereunder
shall bear interest at the Highest Lawful Rate
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<PAGE> 100
until the total amount of interest due hereunder equals the amount of interest
which would have been due hereunder if the stated rates of interest set forth
in this Agreement had at all times been in effect. In addition, if when the
Loans made hereunder are repaid in full the total interest due hereunder
(taking into account the increase provided for above) is less than the total
amount of interest which would have been due hereunder if the stated rates of
interest set forth in this Agreement had at all times been in effect, then to
the extent permitted by law, the Borrower shall pay to the Administrative Agent
an amount equal to the difference between the amount of interest paid and the
amount of interest which would have been paid if the Highest Lawful Rate had at
all times been in effect. Notwithstanding the foregoing, it is the intention of
the Lenders and the Borrower to conform strictly to any applicable usury laws.
Accordingly, if any Lender contracts for, charges, or receives any
consideration which constitutes interest in excess of the Highest Lawful Rate,
then any such excess shall be canceled automatically and, if previously paid,
shall at such Lender's option be applied to the outstanding amount of the Loans
made hereunder or be refunded to the Borrower. As used in this paragraph, the
term "Highest Lawful Rate" means the maximum lawful interest rate, if any, that
at any time or from time to time may be contracted for, charged, or received
under the laws applicable to such Lender which are presently in effect or, to
the extent allowed by law, under such applicable laws which may hereafter be in
effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.
12.14. Payments. All principal, interest, and other amounts to be paid
by the Borrower under this Agreement and the other Loan Documents shall be paid
to the Administrative Agent at the Principal Office in Dollars and in
immediately available funds, without setoff, deduction or counterclaim. Subject
to the definition of "Interest Period" herein, whenever any payment under this
Agreement or any other Loan Document shall be stated to be due on a day that is
not a Business Day, such payment may be made on the next succeeding Business
Day, and such extension of time in such case shall be included in the
computation of interest and fees, as applicable, and as the case may be.
12.15. Governing Law; Waiver of Jury Trial.
(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN
THOSE SECURITY INSTRUMENTS WHICH EXPRESSLY PROVIDE THAT THEY SHALL BE
GOVERNED BY THE LAWS OF ANOTHER JURISDICTION) SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA
APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH
STATE.
(b) THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND
CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN
MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY
OF HILLSBOROUGH, STATE OF FLORIDA, UNITED STATES OF AMERICA AND,
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<PAGE> 101
BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER
EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND
ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR
PROCEEDING, AND THE BORROWER HEREBY IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH
SUIT, ACTION OR PROCEEDING.
(c) THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE
BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER
LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED
OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE BORROWER
PROVIDED IN SECTION 12.2, OR BY ANY OTHER METHOD OF SERVICE PROVIDED
FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF FLORIDA.
(d) NOTHING CONTAINED IN SUBSECTIONS (a) OR (b) HEREOF SHALL
PRECLUDE THE ADMINISTRATIVE AGENT OR ANY LENDER FROM BRINGING ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN
DOCUMENT IN THE COURTS OF ANY JURISDICTION WHERE THE BORROWER OR ANY
OF THE BORROWER'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS OR REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN
THE FUTURE BE DELIVERED IN CONNECTION THEREWITH, THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY AGREE, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY
WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH
PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING.
[Signatures on following pages]
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be made, executed and delivered by their duly authorized officers as of the day
and year first above written.
AMERISTEEL CORPORATION
WITNESS:
/s/ Charles N. Anderson, Jr. By: /s/ George D. Beck
- -------------------------------- ---------------------------------------
Name: George D. Beck
/s/ Nelson Castellano Title: Assistant Treasurer
- --------------------------------
<PAGE> 103
NATIONSBANK, NATIONAL ASSOCIATION,
as Administrative Agent for the Lenders
By:/s/ Miles C. Dearden III
-------------------------------------------
Name: Miles C. Dearden III
Title: Senior Vice President
NATIONSBANK, NATIONAL ASSOCIATION
By:/s/ Miles C. Dearden III
-------------------------------------------
Name: Miles C. Dearden III
Title: Senior Vice President
Lending Office for Base Rate Loans:
NationsBank, National Association
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telephone: (704) 386-4220
Telefacsimile: (704) 386-9923
Wire Transfer Instructions:
NationsBank, National Association
ABA#053000196
Account No.:_________________________
Reference: AmeriSteel Corporation
Attention: Agency Services
Lending Office for Eurodollar Rate Loans:
NationsBank, National Association
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telephone: (704) 386-4220
Telefacsimile: (704) 386-9923
Wire Transfer Instructions:
NationsBank, National Association
ABA#053000196
Account No.: ________________________
Reference: AmeriSteel Corporation
Attention: Agency Services
<PAGE> 104
THE BANK OF TOKYO-MITSUBISHI, LTD.
NEW YORK BRANCH,
as Collateral Agent and Documentation Agent for the Lenders
By:/s/ M. Shimada
-------------------------------------------------------
Name: M. Shimada
-----------------------------------------------------
Title: SVP & Manager
----------------------------------------------------
THE BANK OF TOKYO-MITSUBISHI, LTD.
NEW YORK BRANCH
By:/s/ M. Shimada
-------------------------------------------------------
Name: M. Shimada
-----------------------------------------------------
Title: SVP & Manager
----------------------------------------------------
Lending Office:
1251 Avenue of the Americas, 12th Floor
New York, New York 10020-1104
Wire Transfer Instructions:
The Bank of Tokyo-Mitsubishi, Ltd.
New York, New York
ABA #0260-0963-2
Account #97770191
Attention: Rolando LOD
Reference: AmeriSteel Corporation
<PAGE> 105
FIRST UNION NATIONAL BANK,
as Co-Agent
By: /s/ William R. Goley
-----------------------------------------------
Name: William R. Goley
---------------------------------------------
Title: Vice President
--------------------------------------------
FIRST UNION NATIONAL BANK
By: /s/ William R. Goley
-----------------------------------------------
Name: William R. Goley
---------------------------------------------
Title: Vice President
--------------------------------------------
Lending Office:
301 S. College Street
Charlotte, North Carolina 28288
Wire Transfer Instructions:
First Union National Bank
Charlotte, North Carolina
ABA #053000219
Account #465906-0000172
Attention: Diversified Industries
Reference: AmeriSteel Corporation
<PAGE> 106
SUNTRUST BANK, TAMPA BAY
By: /s/ Janet P. Sammons
----------------------------------------------
Name: Janet P. Sammons
--------------------------------------------
Title: Vice President
-------------------------------------------
Lending Office:
401 E. Jackson Street, 20th Floor
Tampa, Florida 33602
Wire Transfer Instructions:
SunTrust Bank, Tampa Bay
Tampa, Florida
ABA #063106569
Account #9656004210
Attention: Commercial Loan Operations
For Further Credit to: AmeriSteel Corporation
<PAGE> 107
AMSOUTH BANK
By: s/ Ronald L. Ciganek
--------------------------------------------------------
Name: Ronald L. Ciganek
------------------------------------------------------
Title: Vice President
-----------------------------------------------------
Lending Office:
100 N. Tampa Street
Tampa, Florida 33602
Wire Transfer Instructions:
AmSouth Bank
Tampa, Florida
ABA #062000019
Reference: Commercial Loan - AmeriSteel Corporation
Upon receipt, call Estela Blanco, Commercial Banking/Tampa
(813) 226-1236
<PAGE> 108
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Matthew D. Tevis
-----------------------------------------------
Name: Matthew D. Tevis
---------------------------------------------
Title: Vice President
--------------------------------------------
Lending Office:
One PNC Plaza, 3rd Floor
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222
Wire Transfer Instructions:
PNC Bank, N.A.
Pittsburgh, Pennsylvania
ABA #043000096
Account #196030890
Attention: Commercial Loans
Reference: AmeriSteel Corporation
<PAGE> 109
SOUTHTRUST BANK, NATIONAL ASSOCIATION
By: /s/ Timothy M. Mann
-----------------------------------------------
Name: Timothy M. Mann
---------------------------------------------
Title: Group Vice President
--------------------------------------------
Lending Office:
150 2nd Avenue, North
Suite 470
St. Petersburg, Florida 33701
Wire Transfer Instructions:
SouthTrust Bank, National Association
Birmingham, Alabama
ABA #062000080
Account #131009
Reference: AmeriSteel Corporation
Attention: Joanne Gundling
(727) 825-2733 (upon receipt)
<PAGE> 110
THE SUMITOMO TRUST & BANKING CO., LTD.,
NEW YORK BRANCH
By: /s/ Hirokazu Mizukami
-----------------------------------------------
Name: Hirokazu Mizukami
---------------------------------------------
Title: General Manager
--------------------------------------------
Lending Office:
527 Madison Avenue
New York, New York 10022
Wire Transfer Instructions:
Chase Manhattan Bank
New York, New York
ABA #021000021
Account of: The Sumitomo Trust & Banking Co., Ltd.
New York Branch A/C #920-1-061497
Reference: AmeriSteel Corporation
<PAGE> 111
COMERICA BANK
By: /s/ Harold A. LaCount
--------------------------------------------
Name: Harold A. LaCount
------------------------------------------
Title: Vice President
-----------------------------------------
Lending Office:
500 Woodward Avenue, 23rd Floor
Detroit, Michigan 48226
Wire Transfer Instructions:
Comerica Bank
Detroit, Michigan
ABA #072000096
Account #02 21585 90010
Attention: Jackie Moore
Reference: AmeriSteel Corporation
<PAGE> 112
EXHIBIT A
Applicable Commitment Percentages
<TABLE>
<CAPTION>
Applicable
Revolving Credit Commitment
Lender Commitment Percentage
- ------ ---------------- -----------
<S> <C> <C>
NationsBank, National
Association $ 25,000,000.00 16.66666667%
The Bank of Tokyo-Mitsubishi, 22,500,000.00 15.00000000%
Ltd.
First Union National Bank 22,500,000.00 15.00000000%
SunTrust Bank, Tampa Bay 20,000,000.00 13.33333333%
AmSouth Bank 12,500,000.00 8.33333333%
PNC Bank, National Association 12,500,000.00 8.33333333%
SouthTrust Bank, National
Association 12,500,000.00 8.33333333%
The Sumitomo Trust & Banking
Co., Ltd., New York Branch 12,500,000.00 8.33333333%
Comerica Bank 10,000,000.00 6.66666667%
--------------- -----------
$150,000,000.00 100%
</TABLE>
A-1
<PAGE> 113
EXHIBIT B
Form of Assignment and Acceptance
Reference is made to the Amended and Restated Credit Agreement dated as of July
14, 1998 (the "Credit Agreement") among AmeriSteel Corporation, a Florida
corporation (the "Borrower"), the Lenders (as defined in the Credit Agreement)
and NationsBank , National Association, as administrative agent for the Lenders
(the "Administrative Agent"). Terms defined in the Credit Agreement are used
herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, WITHOUT
RECOURSE and without representation or warranty except as expressly set forth
herein, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement and the other Loan Documents as of the date hereof equal to the
percentage interest specified on Schedule 1 of all outstanding rights and
obligations under the Credit Agreement and the other Loan Documents. After
giving effect to such sale and assignment, the Assignee's Revolving Credit
Eurodollar Rate Loan and the amount of the Loans owing to the Assignee will be
as set forth on Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Documents or any other instrument
or document furnished pursuant thereto; (iii) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Credit Party or the performance or observance by any Credit Party of any
of its obligations under the Loan Documents or any other instrument or document
furnished pursuant thereto; and (iv) attaches the Note held by the Assignor and
requests that the Administrative Agent exchange such Note for new Notes payable
to the order of the Assignee in an amount equal to the Revolving Credit
Commitment assumed by the Assignee pursuant hereto and to the Assignor in an
amount equal to the Revolving Credit Commitment retained by the Assignor, if
any, as specified on Schedule 1.
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 8.1 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agents, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agents to take such action as agent on its behalf
and
B-1
<PAGE> 114
to exercise such powers and discretion under the Credit Agreement as are
delegated to the Agents by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (v) agrees that it will
perform in accordance with their terms all of the obligations that by the terms
of the Credit Agreement are required to be performed by it as a Lender; and
(vi) attaches any U.S. Internal Revenue Service or other forms required under
Section 5.6.
4. Following the execution of this Assignment and Acceptance, it
will be delivered to the Administrative Agent for acceptance and recording by
the Administrative Agent. The effective date for this Assignment and Acceptance
(the "Effective Date") shall be the date of acceptance hereof by the
Administrative Agent, unless otherwise specified on Schedule 1.
5. Upon such acceptance and recording by the Administrative Agent,
as of the Effective Date, (i) the Assignee shall be a party to the Credit
Agreement and, to the extent provided in this Assignment and Acceptance, have
the rights and obligations of a Lender thereunder and (ii) the Assignor shall,
to the extent provided in this Assignment and Acceptance, relinquish its rights
and be released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Administrative Agent,
from and after the Effective Date, the Administrative Agent shall make all
payments under the Credit Agreement and the Notes in respect of the interest
assigned hereby (including, without limitation, all payments of principal,
interest and commitment fees with respect thereto) to the Assignee. The
Assignor and Assignee shall make all appropriate adjustments in payments under
the Credit Agreement and the Notes for periods prior to the Effective Date
directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of Florida .
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telefacsimile
shall be effective as delivery of a manually executed counterpart of this
Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule
1 to this Assignment and Acceptance to be executed by their officers thereunto
duly authorized as of the date specified thereon.
B-2
<PAGE> 115
Schedule 1
<TABLE>
<S> <C>
Percentage interest assigned: ________%
Assignee's Commitment: $_______
Aggregate outstanding principal amount
of Loans assigned: $_______
Principal amount of Note payable to Assignee: $_______
Principal amount of Note payable to Assignor: $_______
Effective Date (if other than date
of acceptance by Administrative Agent): *_______, 19__
</TABLE>
[NAME OF ASSIGNOR], as Assignor
By:
-------------------------------------
Title:
Dated: , 19
-------------------- ---
[NAME OF ASSIGNEE], as Assignee
By:
-------------------------------------
Title:
Domestic Lending Office:
Eurodollar Lending Office:
* This date should be no earlier than five Business Days after the delivery
of this Assignment and Acceptance to the Administrative Agent.
B-3
<PAGE> 116
Accepted [and Approved] **
this ___ day of ___________, 19 _
NATIONSBANK, NATIONAL ASSOCIATION
By:
-----------------------------------
Title:
[Approved this ____ day
of ____________, 19__
AMERISTEEL CORPORATION
By: ]**
-----------------------------------
Title:
** Required if the Assignee is an Eligible Assignee solely by reason of
clause (iii) of the definition of "Eligible Assignee".
B-4
<PAGE> 117
EXHIBIT C
Notice of Appointment (or Revocation) of Authorized Representative
Reference is hereby made to the Amended and Restated Credit
Agreement dated as of July 14, 1998 (the "Agreement") among AmeriSteel
Corporation, a Florida corporation (the "Borrower"), the Lenders (as defined in
the Agreement), and NationsBank, National Association, as Administrative Agent
for the Lenders ("Administrative Agent"). Capitalized terms used but not
defined herein shall have the respective meanings therefor set forth in the
Agreement.
The Borrower hereby nominates, constitutes and appoints each
individual named below as an Authorized Representative under the Loan
Documents, and hereby represents and warrants that (i) set forth opposite each
such individual's name is a true and correct statement of such individual's
office (to which such individual has been duly elected or appointed), a genuine
specimen signature of such individual and an address for the giving of notice,
and (ii) each such individual has been duly authorized by the Borrower to act
as Authorized Representative under the Loan Documents:
<TABLE>
<CAPTION>
Name and Address Office Specimen Signature
<S> <C> <C>
- ------------------------ ------------------------ -----------------------------
- ------------------------
- ------------------------
- ------------------------ ------------------------ -----------------------------
- ------------------------
- ------------------------
</TABLE>
Borrower hereby revokes (effective upon receipt hereof by the Administrative
Agent) the prior appointment of ______________ as an Authorized Representative.
This the ___ day of __________________, 19__.
AMERISTEEL CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
C-1
<PAGE> 118
EXHIBIT D-1
Form of Borrowing Notice
To: NationsBank, National Association,
as Administrative Agent
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telefacsimile: (704)386-9923
Reference is hereby made to the Amended and Restated Credit
Agreement dated as of July 14, 1998 (the "Agreement") among AmeriSteel
Corporation (the "Borrower"), the Lenders (as defined in the Agreement), and
NationsBank, National Association, as Administrative Agent for the Lenders
("Administrative Agent"). Capitalized terms used but not defined herein shall
have the respective meanings therefor set forth in the Agreement.
The Borrower through its Authorized Representative hereby gives
notice to the Administrative Agent that Loans of the type and amount set forth
below be made on the date indicated:
<TABLE>
<CAPTION>
Type of Loan Interest Aggregate
(check one) Period(1) Amount(2) Date of Loan(3)
--------- ------ ------ ------------
<S> <C> <C> <C>
Base Rate Loan ______ _________ ____________
Eurodollar Rate Loan ______ _________ ____________
</TABLE>
- -----------------------
(1) For any Eurodollar Rate Loan, one, two, three or six months.
(2) Must be $2,000,000 or if greater an integral multiple of $500,000,
unless a Base Rate Refunding Loan.
(3) At least three (3) Business Days later if a Eurodollar Rate Loan;
The Borrower hereby requests that the proceeds of Loans described
in this Borrowing Notice be made available to the Borrower as follows: [insert
transmittal instructions] .
The undersigned hereby certifies that:
D-1
<PAGE> 119
1. No Default or Event of Default exists either now or after
giving effect to the borrowing described herein; and
2. All the representations and warranties set forth in Article
VII of the Agreement and in the Loan Documents (other than those expressly
stated to refer to a particular date) are true and correct as of the date
hereof except that the reference to the financial statements in Section 7.6(a)
of the Agreement are to those financial statements most recently delivered to
you pursuant to Section 8.1 of the Agreement (it being understood that any
financial statements delivered pursuant to Section 8.1(b) have not been
certified by independent public accountants) and attached hereto are any
changes to the Schedules referred to in connection with such representations
and warranties.
3. All conditions contained in the Agreement to the making of
any Loan requested hereby have been met or satisfied in full .
AMERISTEEL CORPORATION
BY:
----------------------------------------
Authorized Representative
DATE:
--------------------------------------
D-2
<PAGE> 120
EXHIBIT D-2
Form of Borrowing Notice--Swing Line Loans
To: NationsBank, National Association,
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telefacsimile: (704)386-9923
Reference is hereby made to the Amended and Restated Credit
Agreement dated as of July 14, 1998 (the "Agreement") among AmeriSteel
Corporation (the "Borrower"), the Lenders (as defined in the Agreement), and
NationsBank, National Association, as Administrative Agent for the Lenders
("Administrative Agent"). Capitalized terms used but not defined herein shall
have the respective meanings therefor set forth in the Agreement.
The Borrower through its Authorized Representative hereby gives
notice to NationsBank that a Swing Line Loan of the amount set forth below be
made on the date indicated:
<TABLE>
<CAPTION>
Interest Rate (check one) Amount(1) Date of Loan
- ------------------------- --------- ------------
<S> <C> <C>
Base Rate _________ __________, ____
Adjusted Federal
Funds Rate _________ __________, ____
</TABLE>
- -----------------------
(1) Must be $100,000 or if greater an integral multiple of $10,000, unless
a Base Rate Refunding Loan.
The Borrower hereby requests that the proceeds of Swing Line Loans
described in this Borrowing Notice be made available to the Borrower as
follows: [insert transmittal instructions].
The undersigned hereby certifies that:
1. No Default or Event of Default exists either now or after giving
effect to the borrowing described herein; and
2. All the representations and warranties set forth in Article VII
of the Agreement and in the Loan Documents (other than those expressly stated
to refer to a particular date) are true and correct as of the date hereof
except that the reference to the financial statements in Section 7.6(a) of the
Agreement are to those financial statements most recently delivered to you
pursuant to Section 8.1 of the Agreement (it being understood that any
financial statements delivered pursuant
D-2-1
<PAGE> 121
to Section 8.1(b) have not been certified by independent public accountants)
and attached hereto are any changes to the Schedules referred to in connection
with such representations and warranties.
3. All conditions contained in the Agreement to the making of any
Loan requested hereby have been met or satisfied in full.
AMERISTEEL CORPORATION
BY:
------------------------------------------
Authorized Representative
DATE:
---------------------------------------
D-2-2
<PAGE> 122
EXHIBIT E
Form of Interest Rate Selection Notice
To: NationsBank, National Association,
as Administrative Agent
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telefacsimile: (704) 386-9923
Reference is hereby made to the Amended and Restated Credit Agreement
dated as of July 14, 1998 (the "Agreement") among AmeriSteel Corporation (the
"Borrower"), the Lenders (as defined in the Agreement), and NationsBank,
National Association, as Administrative Agent for the Lenders ("Administrative
Agent"). Capitalized terms used but not defined herein shall have the
respective meanings therefor set forth in the Agreement.
The Borrower through its Authorized Representative hereby gives notice
to the Administrative Agent of the following selection of a type of Loan and
Interest Period:
<TABLE>
<CAPTION>
Type of Loan Interest Aggregate
(check one) Period(1) Amount(2) Date of Loan(3)
--------- ------ ------ ------------
<S> <C> <C> <C>
Base Rate Loan ______ _________ ____________
Eurodollar Rate Loan ______ _________ ____________
</TABLE>
- ------------------------
(1) For any Eurodollar Rate Loan, one, two, three or six months.
(2) Must be $2,000,000 or if greater an integral multiple of $500,000,
unless a Base Rate Refunding Loan.
(3) At least three (3) Business Days later if a Eurodollar Rate Loan;
AMERISTEEL CORPORATION
BY:
-------------------------------------
Authorized Representative
DATE:
-----------------------------------
E-1
<PAGE> 123
EXHIBIT F-1
Form of Revolving Note
Promissory Note
(Revolving Loan)
$______________ Charlotte, North Carolina
______ __, 1998
FOR VALUE RECEIVED, AMERISTEEL CORPORATION, a Florida corporation
having its principal place of business located in Tampa, Florida (the
"Borrower"), hereby promises to pay to the order of
_______________________________________________ (the "Lender"), in its
individual capacity, at the office of NATIONSBANK, NATIONAL ASSOCIATION, as
administrative agent for the Lenders (the "Administrative Agent"), located at
One Independence Center, 101 North Tryon Street, NC1-001-15-04, Charlotte,
North Carolina 28255 (or at such other place or places as the Administrative
Agent may designate in writing) at the times set forth in the Amended and
Restated Credit Agreement dated as of July 14, 1998 among the Borrower, the
financial institutions party thereto (collectively, the "Lenders") and the
Agents (the "Agreement" -- all capitalized terms not otherwise defined herein
shall have the respective meanings set forth in the Agreement), in lawful money
of the United States of America, in immediately available funds, the principal
amount of ___________ DOLLARS ($__________) or, if less than such principal
amount, the aggregate unpaid principal amount of all Revolving Loans made by
the Lender to the Borrower pursuant to the Agreement on the Revolving Credit
Termination Date or such earlier date as may be required pursuant to the terms
of the Agreement, and to pay interest from the date hereof on the unpaid
principal amount hereof, in like money, at said office, on the dates and at the
rates provided in Article II of the Agreement. All or any portion of the
principal amount of Loans may be prepaid or required to be prepaid as provided
in the Agreement.
If payment of all sums due hereunder is accelerated under the terms of
the Agreement or under the terms of the other Loan Documents executed in
connection with the Agreement, the then remaining principal amount and accrued
but unpaid interest shall bear interest which shall be payable on demand at the
rates per annum set forth in the proviso to Section 2.2 (a) of the Agreement.
Further, in the event of such acceleration, this Revolving Note shall become
immediately due and payable, without presentation, demand, protest or notice of
any kind, all of which are hereby waived by the Borrower.
In the event this Revolving Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees,
and interest due hereunder thereon at the rates set forth above.
F-1-1
<PAGE> 124
Interest hereunder shall be computed as provided in the Agreement.
This Revolving Note is one of the Revolving Notes referred to in the
Agreement and is issued pursuant to and entitled to the benefits and security
of the Agreement to which reference is hereby made for a more complete
statement of the terms and conditions upon which the Revolving Loans evidenced
hereby were or are made and are to be repaid. This Revolving Note is subject to
certain restrictions on transfer or assignment as provided in the Agreement.
All Persons bound on this obligation, whether primarily or secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby
waive to the full extent permitted by law the benefits of all provisions of law
for stay or delay of execution or sale of property or other satisfaction of
judgment against any of them on account of liability hereon until judgment be
obtained and execution issues against any other of them and returned satisfied
or until it can be shown that the maker or any other party hereto had no
property available for the satisfaction of the debt evidenced by this
instrument, or until any other proceedings can be had against any of them, also
their right, if any, to require the holder hereof to hold as security for this
Revolving Note any collateral deposited by any of said Persons as security.
Protest, notice of protest, notice of dishonor, diligence or any other
formality are hereby waived by all parties bound hereon.
THIS REVOLVING NOTE AND OTHER REVOLVING NOTES OF EVEN DATE ARE GIVEN
IN SUBSTITUTION AND NOT PAYMENT OF REVOLVING NOTES OF THE BORROWER DATED JUNE
9, 1995 ISSUED PURSUANT TO A CREDIT AGREEMENT DATED JUNE 9, 1995, AS AMENDED.
IN WITNESS WHEREOF, the Borrower has caused this Revolving Note to be
made, executed and delivered by its duly authorized representative as of the
date and year first above written, all pursuant to authority duly granted.
AMERISTEEL CORPORATION
WITNESS:
By:
- -------------------------------- ------------------------------------
Name:
---------------------------------
Title:
- ------------------------------- --------------------------------
F-1-2
<PAGE> 125
EXHIBIT F-2
Form of Swing Line Note
Swing Line Note
$15,000,000 ______,_______________
______ ___, 199_
FOR VALUE RECEIVED, AMERISTEEL CORPORATION (the "Borrower") hereby
promises to pay to NATIONSBANK, NATIONAL ASSOCIATION or its assigns (the
"Lender"), in its individual capacity, at the office of NATIONSBANK, NATIONAL
ASSOCIATION, as administrative agent for the Lenders (the "Administrative
Agent"), located at One Independence Center, 101 North Tryon Street,
NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or
places as the Administrative Agent may designate in writing) at the times set
forth in the Amended and Restated Credit Agreement dated as of July 14, 1998
among the Borrower, the financial institutions party thereto (collectively, the
"Lenders") and the Administrative Agent (as amended and supplemented and in
effect from time to time, the "Agreement" -- all capitalized terms not
otherwise defined herein shall have the respective meanings set forth in the
Agreement), in lawful money of the United States of America, in immediately
available funds, the lesser of (i) the principal amount of FIFTEEN MILLION
DOLLARS ($15,000,000) or (ii) if less than such principal amount, the aggregate
unpaid principal amount of all Swing Line Loans made by the Lender to the
Borrower pursuant to the Agreement on the Revolving Credit Termination Date or
such earlier date as may be required pursuant to the terms of the Agreement,
and to pay interest from the date hereof on the unpaid principal amount hereof,
in like money, at said office, on the dates and at the rates provided in
Article II of the Agreement. All or any portion of the principal amount of
Loans may be prepaid or may be required to be prepaid as provided in the
Agreement.
If payments of all sums due hereunder is accelerated under the terms
of the Agreement or under the terms of the other Loan Documents executed in
connection with the Agreement, the then remaining principal amount and accrued
but unpaid interest shall bear interest which shall be payable on demand at the
rates per annum set forth in the proviso to Section 2.2(a) of the Agreement.
Further, in the event of such acceleration, this Note shall become immediately
due and payable, without presentation, demand, protest or notice of any kind,
all of which are hereby waived by the Borrower.
In the event this Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees,
and interest due hereunder thereon at the rates set forth above.
Interest hereunder shall be computed as provided in the Agreement.
F-2-1
<PAGE> 126
This Note is the Swing Line Note in the aggregate principal amount of
$15,000,000 referred to in the Agreement and is issued pursuant to and entitled
to the benefits and security of the Agreement to which reference is hereby made
for a more complete statement of the terms and conditions upon which the Swing
Line Loans evidence hereby were or are made and are to be repaid. This Note is
subject to certain restrictions on transfer or assignment as provided in the
Agreement.
All Persons bound on this obligation, whether primarily or secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby
waive to the full extent permitted by law the benefits of all provisions of law
for stay or delay of execution or sale of property or other satisfaction of
judgment against any other of them on account of liability hereon until
judgment be obtained and execution issues against any other of them and
returned satisfied or until it can be shown that the maker or any other party
hereto had no property available for the satisfaction of the debt evidenced by
this instrument, or until any other proceedings can be had against any of them,
also their right, if any, to require the holder hereof to hold as security for
this Note any collateral deposited by any of said Persons as security. Protest,
notice of protest, notice of dishonor, diligence or any other formality are
hereby waived by all parties bound hereon.
IN WITNESS WHEREOF, the Borrower has caused this Swing Line Note to be
made, executed and delivered by its duly authorized representative as of the
date and year first above written, pursuant to authority duly granted.
AMERISTEEL CORPORATION
By:____________________________________
Name:__________________________________
Title:_________________________________
F-2-2
<PAGE> 127
EXHIBIT G
Form of Opinion of Borrower's Counsel
See attached.
G-1
<PAGE> 128
EXHIBIT H
Compliance Certificate
NationsBank, National Association,
as Administrative Agent
101 North Tryon Street, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telefacsimile: (704) 386-9923
NationsBank, National Association,
as Agent
400 North Ashley Drive
Tampa, Florida 33603
Attention: Corporate Finance Department
Telefacsimile: (813) 224-5948
Reference is hereby made to the Amended and Restated Credit Agreement
dated as of July 14, 1998 (the "Agreement") among AmeriSteel Corporation, (the
"Borrower"), the Lenders (as defined in the Agreement) and NationsBank,
National Association, as Administrative Agent for the respective meanings
therefore set forth in the Agreement. The undersigned, a duly authorized and
acting Authorized Representative, hereby certifies to you as of _______ (the
"Determination Date") as follows:
I. COMPLIANCE WITH CERTAIN FINANCIAL COVENANTS
Computations showing compliance with Sections 9.1(a), (b), (c), 9.3,
9.5(h) and 9.9 are set forth on Schedule I hereto and incorporated herein by
this reference.
II. NO DEFAULT OR EVENT OF DEFAULT
A. Since _____________ (the date of the similar
certification), (a) the Borrower has not defaulted
in the keeping, observance, performance or
fulfillment of its obligations pursuant to any of
the Loan Documents; and (b) no Default or Event of
Default specified in Article X of the Agreement has
occurred and is continuing.
B. If a Default or Event of Default has occurred since
______________ (the date of the last similar
certification), the Borrower proposes to take the
H-1
<PAGE> 129
following action with respect to such Default of
Event of Default:_____________________.
(Note if no Default or Event of Default occurred, insert "Not Applicable").
The Determination Date is the Date of the last required financial
statement submitted to the Lenders in accordance with Section 8.1 of the
Agreement.
IN WITNESS WHEREOF, I have executed this Certificate this ____ day of ____,
199_.
By:
----------------------------------------
Authorized Representative
Name:
--------------------------------------
Title:
-------------------------------------
H-2
<PAGE> 130
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
AmeriSteel Corporation Compliance Certificate
Financial Statement Dated: 6/30/98
Schedule 1:
Financial Covenant Analyses
(Dollar amounts in thousands) QTR ENDING QTR ENDING QTR ENDING QTR 4 QUARTERS
9/30/97 12/31/97 3/31/98 ENDING ENDING 6/30/98
6/30/98
- ---------------------------------------------------------------------------------------------------------------------------------
SECTION 9.1(a)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED EBITDA
CONSOLIDATED NET INCOME X X X X X
NET INCOME (PER FINANCIAL STMNTS) X X X X X
PLUS: AFTER-TAX LOSS ON SALE OF ASSETS X X X X X
LESS: AFTER-TAX GAIN ON SALE OF ASSETS X X X X X
OTHER ADJUSTMENTS X X X X X
------------ ------------ ------------ ----------- ------------
CONSOLIDATED NET INCOME (LOSS) X X X X X
CONSOLIDATED INTEREST EXPENSE X X X X X
TAXES X X X X X
AMORTIZATION X X X X X
DEPRECIATION X X X X X
PLUS: OTHER NON-CASH CHARGES X X X X X
LESS: OTHER NON-CASH CREDITS X X X X X
------------ ------------ ------------ ---------- ------------
CONSOLIDATED EBITDA X X X X X
CONSOLIDATED EBITDA ROLLING 4 QUARTERS X
CONSOLIDATED INDEBTEDNESS X
REVOLVER OUTSTANDINGS X
LETTERS OF CREDIT OUTSTANDING X
IRBs X
SENIOR NOTES DUE 2008 X
SUBORDINATED INTERCOMPANY NOTES X
OTHER INDEBTEDNESS X
X
------------ ------------ ----------- ---------- -----------
CONSOLIDATED INDEBTEDNESS X
RATIO: CONSOLIDATED INDEBTEDNESS/ CONSOLIDATED
EBITDA X
COVENANT 3.75
VARIANCE FAVORABLE (UNFAVORABLE) X
COMPLIANCE STATUS ____X___YES _________NO
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
H-3
<PAGE> 131
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
AmeriSteel Corporation Compliance Certificate
Financial Statement Dated: 6/30/98
Schedule 1:
Financial Covenant Analyses
(Dollar amounts in thousands) QTR ENDING QTR ENDING QTR ENDING QTR 4 QUARTERS
9/30/97 12/31/97 3/31/98 ENDING ENDING 6/30/98
6/30/98
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SECTION 9.1 (b)
CONSOLIDATED NET WORTH
COVENANT
$155,000 $155,000
PLUS: 50% OF CONSOLIDATED NET INCOME X
PLUS: 75% OF NET PROCEEDS OF EQUITY OFFERINGS X
----------------
COVENANT X
ACTUAL CONSOLIDATED NET WORTH (PER FINANCIAL
STMTS.) X
VARIANCE FAVORABLE (UNFAVORABLE) X
COMPLIANCE STATUS ___X___ YES ________NO
SECTION 9.1 (c)
CASH INTEREST EXPENSE
INTEREST EXPENSE (SEE FINANCIAL STATEMENTS) X X X X
LESS NON CASH EXPENSE X X X X
CASH INTEREST EXPENSE X X X X X
CASH INTEREST EXPENSE ROLLING FOUR QUARTERS X
RATIO: CONSOLIDATED EBITDA/CASH INTEREST EXPENSE X
COVENANT 2.75
VARIANCE FAVORABLE (UNFAVORABLE) X
__X____YES _______NO
COMPLIANCE STATUS
SECTION 9.3
CAPITAL EXPENDITURES
COVENANT
$35,000 $35,000
PLUS: ALLOWABLE CARRY-OVER (NOT TO EXCEED
$7,500 IN ANY CASE NOT TO EXCEED $50,000 IN ANY FISCAL
YEAR) X
----------------
COVENANT X
ACTUAL CAPITAL EXPENDITURES X
VARIANCE FAVORABLE (UNFAVORABLE) X
__X___ YES ________NO
COMPLIANCE STATUS
SECTION 9.5(h)
OTHER INDEBTEDNESS
COVENANT
20% OF CONSOLIDATED TANGIBLE ASSETS X
OTHER INDEBTEDNESS X
VARIANCE FAVORABLE (UNFAVORABLE) X
__X____YES _______NO
COMPLIANCE STATUS
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
H-4
<PAGE> 132
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
AmeriSteel Corporation Compliance Certificate
Financial Statement Dated: 6/30/98
Schedule 1:
Financial Covenant Analyses
(Dollar amounts in thousands) QTR ENDING QTR ENDING QTR ENDING QTR 4QUARTERS
9/30/97 12/31/97 3/31/98 ENDING ENDING 6/30/98
6/30/98
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SECTION 9.9
- ---------------------------------------------------------------------------------------------------------------------------------
RESTRICTED PAYMENTS
a) AMOUNT OF CASH DIVIDENDS PAID TO FLS FOR TAX
PURPOSES X
COVENANT $500
COMPLIANCE STATUS __X__ YES ________NO
b) AMOUNT OF CASH DIVIDENDS PAID ON BORROWERS
COMMON STOCK X
COVENANT
$5,000 $5,000
PLUS: 50% OF CUMULATIVE CONSOLIDATED NET
INCOME X
---------------
COVENANT X
COMPLIANCE STATUS __X____YES _________NO
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
AmeriSteel Corporation Compliance Certificate
Financial Statement Dated: 6/30/98
Schedule 2:
Tier Leverage Ratio LIBOR + Alternate Base Rate + Commitment Fee
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VI >3.5 1.50% 0.50% 0.38%
- ---------------------------------------------------------------------------------------------------------
VI >3.0 1.25% 0.25% 0.25%
- ---------------------------------------------------------------------------------------------------------
IV >2.5 1.00% 0.00% 0.23%
- ---------------------------------------------------------------------------------------------------------
III >2.0 0.75% 0.00% 0.20%
- ---------------------------------------------------------------------------------------------------------
II >1.5 0.63% 0.00% 0.18%
- ---------------------------------------------------------------------------------------------------------
I >1.0 0.50% 0.00% 0.18%
- ---------------------------------------------------------------------------------------------------------
ACTUAL X X X X
- ---------------------------------------------------------------------------------------------------------
RATE CHANGE
STATUS (RATE CHANGE) TIER 3
- ---------------------------------------------------------------------------------------------------------
</TABLE>
H-5
<PAGE> 133
EXHIBIT I
Form of Facility Guaranty
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "Guaranty Agreement" or this
"Guaranty"), dated as of __________, ____, is made by THE UNDERSIGNED (the
"Guarantor") to NATIONSBANK, NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States, as
Administrative Agent (the "Administrative Agent") for each of the lenders (the
"Lenders" and collectively with the Administrative Agent the "Secured Parties")
now or hereafter party to the Credit Agreement (as defined below). All
capitalized terms used but not otherwise defined herein shall have the meaning
ascribed to such terms in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Secured Parties have provided to AMERISTEEL CORPORATION
(the "Borrower") a revolving credit facility pursuant to the Amended and
Restated Credit Agreement dated as of July 14, 1998 among the Borrower, the
Administrative Agent, The Bank of Tokyo-mitsubishi, Ltd., as Collateral Agent,
and the Lenders (as from time to time amended, revised, modified, supplemented
or amended and restated, the "Credit Agreement"); and
WHEREAS, the Guarantor is a new Subsidiary of the Borrower and is
therefore required to enter into this Guaranty pursuant to Section 8.19 of the
Credit Agreement; and
WHEREAS, as a condition to entering into the Credit Agreement and
making and continuing to make any loans or advances thereunder, the Guarantor
is required to guarantee to the Secured Parties payment of the Borrower's
Obligations in accordance with the terms of this Agreement; and
WHEREAS, the Guarantor will materially benefit from the loans and
advances made under the Credit Agreement, and the Guarantor is willing to enter
into this Guaranty to provide an inducement for the Secured Parties to continue
to make loans and advances under the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Guarantor hereby agrees as follows:
1. GUARANTY. The Guarantor hereby unconditionally, absolutely,
continually and irrevocably guarantees to the Secured Parties the payment and
performance in full of the Borrower's Liabilities (as defined below). For all
purposes of this Guaranty Agreement, "Borrower's Liabilities" means: (a) the
Borrower's prompt payment in full, when due or declared due and at all such
times, of all Obligations and all other amounts pursuant to the terms of the
Credit Agreement, the Notes, and all other Loan Documents executed in
connection with the Credit Agreement and all Rate
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Hedging Obligations heretofore, now or at any time or times hereafter owing,
arising, due or payable from the Borrower to the Lenders, including without
limitation principal, interest, premium or fee (including, but not limited to,
loan fees and attorneys' fees and expenses); and (b) the Borrower's prompt,
full and faithful performance, observance and discharge of each and every
agreement, undertaking, covenant and provision to be performed, observed or
discharged by the Borrower under the Credit Agreement and all other Loan
Documents executed in connection therewith and all Swap Agreements. The
Guarantor's obligations to the Secured Parties under this Guaranty Agreement
are hereinafter collectively referred to as the "Guarantors' Obligations";
provided, however, that the liability of the Guarantor individually with
respect to the Guarantors' Obligations shall be limited to an aggregate amount
equal to the largest amount that would not render its obligations hereunder
subject to avoidance under Section 548 of the United States Bankruptcy Code or
any comparable provisions of any applicable state law.
The Guarantor agrees that it is directly and primarily liable for the
Borrower's Liabilities.
2. PAYMENT. If the Borrower shall default in payment or performance of
any Borrower's Liabilities, whether principal, interest, premium, fee
(including, but not limited to, loan fees and attorneys' fees and expenses), or
otherwise, when and as the same shall become due, whether according to the
terms of the Credit Agreement, by acceleration, or otherwise, or upon the
occurrence of any Event of Default under the Credit Agreement that has not been
cured or waived, then the Guarantor will, upon demand thereof by the
Administrative Agent or its successors or assigns AS OF THE DATE OF SUCH
DEMAND, fully pay to the Administrative Agent, for the benefit of the Secured
Parties, subject to any restriction set forth in Section 1 hereof, an amount
equal to all of Guarantors' Obligations then due and owing.
3. UNCONDITIONAL OBLIGATIONS. This is a guaranty of payment and not of
collection. The Guarantors' Obligations under this Guaranty Agreement shall be
joint and several, absolute and unconditional irrespective of the validity,
legality or enforceability of the Credit Agreement, the Notes or any other Loan
Document or any other guaranty of the Borrower's Liabilities, and shall not be
affected by any action taken under the Credit Agreement, the Notes or any other
Loan Document, any other guaranty of the Borrower's Liabilities, or any other
agreement between the Secured Parties and the Borrower or any other Person, in
the exercise of any right or power therein conferred, or by any failure or
omission to enforce any right conferred thereby, or by any waiver of any
covenant or condition therein provided, or by any acceleration of the maturity
of any of the Borrower's Liabilities, or by the release or other disposal of
any security for any of the Borrower's Liabilities, or by the dissolution of
the Borrower or the combination or consolidation of the Borrower into or with
another entity or any transfer or disposition of any assets of the Borrower or
by any extension or renewal of the Credit Agreement, any of the Notes or any
other Loan Document, in whole or in part, or by any modification, alteration,
amendment or addition of or to the Credit Agreement, any of the Notes or any
other Loan Document, any other guaranty of the Borrower's Liabilities, or any
other agreement between the Secured Parties and the Borrower or any other
Person, or by any other circumstance whatsoever (with or without notice to or
knowledge of any Guarantor) which may or might in any manner or to any extent
vary the risks of the Guarantor, or might otherwise constitute a legal or
equitable discharge of a surety or a guarantor; it being the purpose and intent
of the parties hereto that this Guaranty Agreement and the Guarantors,
Obligations hereunder shall be absolute and
I-2
<PAGE> 135
unconditional under any and all circumstances and shall not be discharged
except by payment as herein provided.
4. CURRENCY AND FUNDS OF PAYMENT. The Guarantor hereby guarantees that
the Guarantors' Obligations will be paid in lawful currency of the United
States of America and in immediately available funds, regardless of any law,
regulation or decree now or hereafter in effect that might in any manner affect
the Borrower's Liabilities, or the rights of the Secured Parties with respect
thereto as against the Borrower, or cause or permit to be invoked any
alteration in the time, amount or manner of payment by the Borrower of any or
all of the Borrower's Liabilities.
5. SUITS. The Guarantor from time to time shall pay to the
Administrative Agent for the benefit of the Secured Parties, on demand, at the
Administrative Agent's place of business set forth in the Credit Agreement or
such other address as the Administrative Agent shall give notice of to the
Guarantor, the Guarantors' Obligations as they become or are declared due, and
in the event such payment is not made forthwith, the Administrative Agent or
the Lenders or any of them may proceed to suit against any one or more or all
of the Guarantors. At the Administrative Agent's election, one or more and
successive or concurrent suits may be brought hereon by the Administrative
Agent against any one or more or all of the Guarantors, whether or not suit has
been commenced against the Borrower, any other guarantor of the Borrower's
Liabilities, or any other Person and whether or not the Secured Parties have
taken or failed to take any other action to collect all or any portion of the
Borrower's Liabilities or have taken or failed to take any actions against any
collateral securing payment or performance of all or any portion of the
Borrower's Liabilities.
6. SET-OFF AND WAIVER. The Guarantor waives any right to assert
against the Secured Parties as a defense, counterclaim, set-off or cross claim,
any defense (legal or equitable) or other claim which the Guarantor may now or
at any time hereafter have against the Borrower or the Secured Parties without
waiving any additional defenses, set-offs, counterclaims or other claims
otherwise available to the Guarantor. If at any time hereafter the Secured
Party employs counsel for advice or other representation to enforce the
Guarantors' Obligations that arise out of an Event of Default, then, in any of
the foregoing events, all of the reasonable attorneys' fees arising from such
services and all expenses, costs and charges in any way or respect arising in
connection therewith or relating thereto shall be paid by the Guarantor to the
Administrative Agent, for the benefit of the Secured Parties, on demand.
7. WAIVER; SUBROGATION.
(a) The Guarantor hereby waives notice of the following
events or occurrences: (i) the Administrative Agent's acceptance of
this Guaranty Agreement; (ii) the Lenders' heretofore, now or from
time to time hereafter making Loans and otherwise loaning monies or
giving or extending credit to or for the benefit of the Borrower,
whether pursuant to the Credit Agreement or the Notes or any other
Loan Document or any amendments, modifications, or supplements
thereto, or replacements or extensions thereof; (iii) the Secured
Parties or the Borrower heretofore, now or at any time hereafter,
obtaining, amending, sub stituting for, releasing, waiving or
modifying the Credit Agreement, the Notes or any other Loan Documents;
(iv) presentment, demand, default, non-payment, partial payment and
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<PAGE> 136
protest; (v) any Secured Party heretofore, now or at any time
hereafter granting to the Borrower (or any other party liable to the
Lenders on account of the Borrower's Liabilities) or to any certain
Guarantor any indulgence or extensions of time of payment of the
Borrower's Liabilities or Guarantors' Obligations, respectively; and
(vi) any Secured Party heretofore, now or at any time hereafter
accepting from the Borrower, any other Guarantor, any other guarantor
of the Borrower's Liabilities or any other Person, any partial payment
or payments on account of the Borrower's Liabilities or any collateral
securing the payment thereof or the Administrative Agent settling,
subordinating, compromising, discharging or releasing the same. The
Guarantor agrees that each Secured Party may heretofore, now or at any
time hereafter do any or all of the foregoing in such manner, upon
such terms and at such times as each Secured Party, in its sole and
absolute discretion, deems advisable, without in any way or respect
impairing, affecting, reducing or releasing the Guarantor from the
Guarantors' Obligations, and the Guarantor hereby consents to each and
all of the foregoing events or occurrences.
(b) The Guarantor hereby agrees that payment or performance
by the Guarantor of the Guarantors' Obligations under this Guaranty
Agreement may be enforced by the Administrative Agent on behalf of the
Lenders upon demand by the Administrative Agent to the Guarantor
without the Administrative Agent being required, the Guarantor
expressly waiving any right it may have to require the Administrative
Agent, to (i) prosecute collection or seek to enforce or resort to any
remedies against the Borrower or any other Guarantor or any other
guarantor of the Borrower's Liabilities, or (ii) seek to enforce or
resort to any remedies with respect to any security interests, Liens
or encumbrances granted to the Administrative Agent by the Borrower,
any other Guarantor or any other Person on account of the Borrower's
Liabilities or any guaranty thereof, IT BEING EXPRESSLY UNDERSTOOD,
ACKNOWLEDGED AND AGREED TO BY THE GUARANTOR THAT DEMAND UNDER THIS
GUARANTY AGREEMENT MAY BE MADE BY THE ADMINISTRATIVE AGENT, AND THE
PROVISIONS HEREOF ENFORCED BY THE ADMINISTRATIVE AGENT, EFFECTIVE AS
OF THE FIRST DATE ANY EVENT OF DEFAULT OCCURS AND IS CONTINUING UNDER
THE CREDIT AGREEMENT. Neither the Administrative Agent nor any Lender
shall have any obligation to protect, secure or insure any of the
foregoing security interests, Liens or encumbrances on the properties
or interests in properties subject thereto. The Guarantors'
Obligations shall in no way be impaired, affected, reduced, or
released by reason of any Secured Party's failure or delay to do or
take any of the acts, actions or things described in this Guaranty
including, without limiting the generality of the foregoing, those
acts, actions and things described in this Section 7.
(c) The Guarantor further agrees with respect to this
Guaranty that such Guarantor shall have no right of subrogation,
reimbursement or indemnity, nor any right of recourse to security for
the Borrower's Liabilities until the Facility Termination Date.
8. EFFECTIVENESS; ENFORCEABILITY. This Guaranty Agreement shall be
effective as of the date hereof and shall continue in full force and effect
until the Facility Termination Date. This Guaranty Agreement shall be binding
upon and inure to the benefit of the Guarantor, the
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<PAGE> 137
Administrative Agent and the Lenders and their respective successors and
assigns. Notwithstanding the foregoing, no Guarantor may, except as provided in
the Credit Agreement, without the prior written consent of the Administrative
Agent, assign any rights, powers, duties or obligations hereunder. Any claim or
claims that the Secured Parties may at any time hereafter have against a
Guarantor under this Guaranty Agreement may be asserted by any Secured Party by
written notice directed to the Guarantor.
9. REPRESENTATIONS AND WARRANTIES. The Guarantor warrants and
represents to the Administrative Agent for the benefit of the Lenders that it
is duly authorized to execute, deliver and perform this Guaranty Agreement,
that this Guaranty Agreement is legal, valid, binding and enforceable against
the Guarantor in accordance with its terms except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles; and that the Guarantor's execution, delivery and
performance of this Guaranty Agreement do not violate or constitute a breach of
its certificate of incorporation or other documents of corporate governance or
any material agreement to which the Guarantor is a party, or any applicable
laws, orders, regulations, decrees or awards of any applicable governmental
authority or arbitral body.
10. EXPENSES. The Guarantor agrees to be liable for the payment of all
reasonable fees and expenses, including attorney's fees, incurred by the
Administrative Agent in connection with the enforcement of this Guaranty
Agreement.
11. REINSTATEMENT. The Guarantor agrees that this Guaranty Agreement
shall continue to be effective or be reinstated, as the case may be, at any
time payment received by the Administrative Agent under the Credit Agreement or
this Guaranty Agreement is rescinded or must be restored for any reason or as
repaid in good faith settlement of a pending or threatened avoidance claim.
12. ATTORNEY-IN-FACT. The Guarantor hereby appoints the Administrative
Agent as the Guarantor's attorney-in-fact for the purposes of carrying out the
provisions of this Agreement and taking any action and executing any instrument
which the Administrative Agent may deem necessary or advisable to accomplish
the purposes hereof, which appointment is coupled with an interest and is
irrevocable; provided, that the Administrative Agent shall have and may
exercise rights under this power of attorney only upon the occurrence and
during the continuance of an Event of Default.
13. ABSOLUTE RIGHTS AND OBLIGATIONS. All rights of the Secured
Parties, and all obligations of the Guarantor hereunder, shall be absolute and
unconditional irrespective of:
(1) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document or any other agreement or instrument
relating to any of the Guarantors' Obligations;
(2) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Guarantors' Obligations, or any
other amendment or waiver of or any
I-5
<PAGE> 138
consent to any departure from the Credit Agreement, any other Loan
Document or any other agreement or instrument relating to any of the
Guarantors' Obligations;
(3) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Guarantors'
Obligations; or
(4) any other circumstances which might otherwise constitute
a defense available to, or a discharge of, the Guarantor in respect of
the Guarantors' Obligations or of this Agreement.
14. RELIANCE. The Guarantor represents and warrants to the
Administrative Agent, for the benefit of the Secured Parties, that: (a) the
Guarantor has adequate means to obtain from Borrower, on a continuing basis,
information concerning Borrower and Borrower's financial condition and affairs
and has full and complete access to Borrower's books and records; (b) the
Guarantor is not relying on any Secured Party, its or their employees, agents
or other representatives, to provide such information, now or in the future;
(c) the Guarantor is executing this Guaranty Agreement freely and deliberately,
and understands the obligations and financial risk undertaken by providing this
Guaranty; (d) the Guarantor has relied solely on the Guarantor's own
independent investigation, appraisal and analysis of Borrower and Borrower's
financial condition and affairs in deciding to provide this Guaranty and is
fully aware of the same; and (e) the Guarantor has not depended or relied on
any Secured Party, its or their employees, agents or representatives, for any
information whatsoever concerning Borrower or Borrower's financial condition
and affairs or other matters material to the Guarantor's decision to provide
this Guaranty or for any counseling, guidance, or special consideration or any
promise therefor with respect to such decision. The Guarantor agrees that
neither the Administrative Agent nor any Lender has any duty or responsibility
whatsoever, now or in the future, to provide to the Guarantor any information
concerning Borrower or Borrower's financial condition and affairs, other than
as expressly provided herein, and that, if the Guarantor receives any such
information from the Administrative Agent or any Lender, its or their
employees, agents or other representatives, the Guarantor will independently
verify the information and will not rely on the Administrative Agent or any
Lender, its or their employees, agents or other representatives, with respect
to such information.
15. DEFINITIONS. All terms used herein shall be defined in accordance
with the appropriate definitions appearing in the Uniform Commercial Code as in
effect in Florida, and such definitions are hereby incorporated herein by
reference and made a part hereof.
16. ENTIRE AGREEMENT. This Guaranty Agreement, together with the
Credit Agreement and other Loan Documents, constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings, inducements,
commitments or conditions, express or implied, oral or written, except as
herein contained. The express terms hereof control and supersede any course of
performance or usage of the trade inconsistent with any of the terms hereof.
Neither this Guaranty Agreement nor any portion or provision hereof may be
changed, altered, modified, supplemented, discharged,
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<PAGE> 139
canceled, terminated, or amended orally or in any manner other than by an
agreement, in writing signed by the parties hereto.
17. BINDING AGREEMENT; ASSIGNMENT. This Guaranty Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto, and to their respective successors and assigns,
except that no Guarantor shall be permitted to assign this Agreement or any
interest herein, except as permitted in the Credit Agreement. All references
herein to the Administrative Agent shall include any successor thereof, each
Lender and any other obligees from time to time of the Guarantors' Obligations.
18. SWAP AGREEMENTS. All obligations of the Borrower under Swap
Agreements shall be deemed to be Secured Obligations secured hereby, and each
Lender or affiliate of a Lender party to any such Swap Agreement shall be
deemed to be a Secured Party hereunder.
19. SEVERABILITY. In case any Lien, security interest or other right
of any Secured Party or any provision hereof shall be held to be invalid,
illegal or unenforceable, such invalidity, illegality or unenforceability shall
not affect any other Lien, security interest or other right granted hereby or
provision hereof.
20. COUNTERPARTS. This Guaranty Agreement may be executed in any
number of counterparts and all the counterparts taken together shall be deemed
to constitute one and the same instrument.
21. INDEMNIFICATION. Without limitation of Section 12.9 of the Credit
Agreement or any other indemnification provision in any Loan Document, the
Guarantor hereby covenants and agrees to pay, indemnify, and hold the Secured
Parties harmless from and against any and all other reasonable out-of-pocket
liabilities, costs, expenses or disbursements of any kind or nature whatsoever
arising in connection with any claim or litigation by any Person resulting from
the execution, delivery, enforcement, performance and administration of this
Guaranty Agreement or the Loan Documents, or the transactions contemplated
hereby or thereby, or in any respect relating to the Collateral or any
transaction pursuant to which the Guarantor has incurred any Guarantors'
Obligations (all the foregoing, collectively, the "indemnified liabilities");
provided, however, that the Guarantor shall have no obligation hereunder with
respect to indemnified liabilities directly or primarily arising from the
willful misconduct or gross negligence of the Administrative Agent or any
Lender. The agreements in this subsection shall survive repayment of all
Secured Obligations, termination or expiration of this Guaranty Agreement and
occurrence of the Facility Termination Date.
22. TERMINATION. This Guaranty Agreement and all Guarantors'
Obligations hereunder shall terminate on the Facility Termination Date.
23. REMEDIES CUMULATIVE. All remedies hereunder are cumulative and are
not exclusive of any other rights and remedies of the Administrative Agent
provided by law or under the Credit Agreement, the other Loan Documents, or
other applicable agreements or instruments. The making of the Loans to the
Borrower pursuant to the Credit Agreement and the extension of the Revolving
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<PAGE> 140
Credit Facility and the Term Loan Facility to the Borrower pursuant to the
Credit Agreement shall be conclusively presumed to have been made or extended,
respectively, in reliance upon the Guarantor's guaranty of the Guarantors'
Obligations pursuant to the terms hereof.
24. NOTICES. Any notice required or permitted hereunder shall be
given, (a) with respect to the Guarantor, at the address of the Borrower
indicated in Section 12.2 of the Credit Agreement and (b) with respect to the
Administrative Agent or a Lender, at the Administrative Agent's address
indicated in Section 12.2 of the Credit Agreement. All such notices shall be
given and shall be effective as provided in Section 12.2 of the Credit
Agreement.
25. GOVERNING LAW.
(A) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE
NOTWITHSTANDING ITS EXECUTION AND DELIVERY OUTSIDE SUCH STATE.
(B) THE GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND
CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN
MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY
OF HILLSBOROUGH STATE OF FLORIDA, UNITED STATES OF AMERICA AND, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY WAIVES ANY
OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE
OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND
IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION
OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.
(C) THE GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE
BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER
LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED
OR CERTIFIED MAIL (POSTAGE PREPAID) AND IN ACCORDANCE WITH SECTION
12.2 OF THE CREDIT AGREEMENT, OR BY ANY OTHER METHOD OF SERVICE
PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF
FLORIDA.
(D) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF SHALL
PRECLUDE THE ADMINISTRATIVE AGENT OR ANY LENDER FROM BRINGING ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE
THE GUARANTOR OR ANY OF THE GUARANTOR'S PROPERTY OR ASSETS MAY BE
FOUND OR LOCATED.
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<PAGE> 141
(E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN
THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, THE
GUARANTOR HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL
BY JURY IN SUCH ACTION OR PROCEEDING.
[SIGNATURE PAGE FOLLOWS.]
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<PAGE> 142
IN WITNESS WHEREOF, the parties have duly executed this Guaranty
Agreement on the day and year first written above.
[ [INSERT NAME OF GUARANTOR ]
WITNESS:
- --------------------- By:
----------------------------------
Name:
- --------------------- --------------------------------
Title:
-------------------------------
ADMINISTRATIVE AGENT:
WITNESS: NATIONSBANK, NATIONAL ASSOCIATION, as
Administrative Agent for the Lenders
- ---------------------
By:
----------------------------------
Name:
- --------------------- --------------------------------
Title:
-------------------------------
<PAGE> 143
EXHIBIT J
Form of Security Agreement
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is made and
entered into as of _______________, ____ by THE UNDERSIGNED (the "Grantor") in
favor of (i) the Lenders and the Issuing Banks (as defined in the Credit
Agreement referred to below), (ii) NATIONSBANK, NATIONAL ASSOCIATION, a
national banking association organized and existing under the laws of the
United States, in its capacity as administrative agent (the "Administrative
Agent") and (iii) THE BANK OF TOKYO-MITSUBISHI, LTD., in its capacity as
collateral agent and documentation agent for the Lenders (in such capacity the
"Collateral Agent" and collectively with the Administrative Agent, the
"Agents") (the Agents, the Lenders and the Issuing Banks hereinafter each a
"Secured Party" and collectively the "Secured Parties"). Terms used herein and
not otherwise defined shall have the meanings given to them in the Credit
Agreement.
W I T N E S S E T H :
WHEREAS, the Secured Parties have provided AMERISTEEL CORPORATION (the
"Borrower") a revolving credit facility pursuant to the Amended and Restated
Credit Agreement dated as of July 14, 1998 (as from time to time amended,
modified, supplemented or restated, the "Credit Agreement") among the Borrower,
the Agents and the Lenders;
WHEREAS, the Grantor is a new Subsidiary of the Borrower and as
required by Section 8.19 of the Credit Agreement has guaranteed the full
payment and performance of the Borrower's Obligations under the Credit
Agreement pursuant to the Guaranty Agreement dated as of the date hereof
between the Grantor and the Administrative Agent (the "Guaranty"); and
WHEREAS, the Grantor is also required to enter into this Security
Agreement pursuant to Section 8.19 of the Credit Agreement; and
WHEREAS, the Grantor will materially benefit from the Loans and
Advances to be made under the Credit Agreement and the Grantor is a party to
that certain Guaranty Agreement (the "Guaranty") dated as of the date hereof
pursuant to which the Grantor guaranteed the Obligations of the Borrower; and
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WHEREAS, as collateral security for payment and performance of its
obligations under the Guaranty, the Grantor is willing to grant to the
Collateral Agent for the benefit of the Secured Parties a security interest in
certain of its personal property and assets;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lenders to extend credit and the Issuing Banks to issue Letters of
Credit under the Credit Agreement, the Grantor hereby agrees with the Secured
Parties and with the Collateral Agent for its benefit and the benefit of the
other Secured Parties as follows:
SECTION 1. CREATION OF SECURITY INTEREST. The Grantor hereby sells,
assigns and transfers unto the Collateral Agent, and does hereby grant to the
Secured Parties and to the Collateral Agent, as Collateral Agent for, and for
the benefit of, itself and the other Secured Parties, a continuing security
interest of first priority in, to and under all of the Grantor's right, title
and interest in and to the collateral described in section 2 hereof (the
"Collateral") in order to secure the payment and performance when due of all
Obligations (as hereinafter defined).
SECTION 2. COLLATERAL. The Collateral is:
(a) Accounts. All of the Grantor's accounts, whether now existing
or existing in the future, including, without limitation, (i) all accounts
receivable (whether or not specifically listed on schedules furnished to the
Collateral Agent), including, without limitation, all accounts created by or
arising from all of the Grantor's sales of goods or rendition of services made
under any of the Grantor's trade names, or through any of its divisions, (ii)
all unpaid seller's rights (including rescission, replevin, reclamation and
stopping in transit) relating to the foregoing or arising therefrom, (iii) all
rights to any goods represented by any of the foregoing, including returned or
repossessed goods, (iv) all reserves and credit balances held by the Grantor
with respect to any such accounts receivable or account debtors and (v) all
guarantees or collateral for any of the foregoing (all of the foregoing
property and similar property included as Collateral under Section 2(d) below
being hereinafter referred to as "Accounts");
(b) Inventory. All of the Grantor's inventory including, without
limitation, (i) all raw materials, work-in-process, parts, components,
assemblies, supplies and materials used or consumed in the Grantor's business,
wherever located and whether in the possession of the Grantor or any other
Person; (ii) all goods, wares and merchandise, finished or unfinished, held for
sale or lease or leased or furnished or to be furnished under contracts of
service, wherever located and whether in the possession of the Grantor or any
other Person and (iii) all goods returned to or repossessed by the Grantor (all
of the foregoing property and similar property included as Collateral under
Section 2(d) below being hereinafter referred to as "Inventory");
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(c) Bank Accounts. All of the Grantor's rights, title and
interest in all bank accounts in which the Grantor has or may have an interest;
and
(d) After-acquired Collateral and Proceeds. The Collateral
includes all items described in this Section 2, whether now owned or hereafter
at any time acquired by the Grantor and wherever located, and includes all
replacements, additions, accessions, substitutions, repairs, proceeds and
products relating thereto or therefrom, and all documents, ledger sheets and
files of the Grantor relating thereto. Proceeds hereunder include (i) whatever
is now or hereafter received by the Grantor upon the sale, exchange, collection
or other disposition of any item of Collateral, whether such proceeds
constitute inventory, accounts, accounts receivable, general intangibles,
instruments, securities (including, without limitation, United States of
America Treasury Bills), credits, claims, demands, documents, letters of credit
and letter of credit proceeds, chattel paper, documents of title, certificates
of title, certificates of deposit, warehouse receipts, bills of lading, leases,
deposit accounts, money, tax refund claims, contract rights, goods or equipment
and (ii) any such items which are now or hereafter acquired by the Grantor with
any proceeds of Collateral hereunder.
SECTION 2A. OBLIGATIONS SECURED. The Collateral and the security
interest created hereunder shall secure payment in full when due of (a) all
obligations of the Grantor under the Guaranty and (b) the unpaid principal of
and interest on (including interest accruing on or after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization
or like proceeding, relating to the Grantor, the Borrower or any Subsidiary,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding) the Loans, any reimbursement obligation or indemnity of the
Borrower on account of Letters of Credit or any accommodation extended with
respect to applications for Letters of Credit, including all Reimbursement
Obligations, and (c) all other obligations and liabilities of the Grantor and
the Borrower to the Secured Parties, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with this Security Agreement, the
Credit Agreement, the Notes, the Letters of Credit, any other Loan Document and
any other document made, delivered or given in connection herewith or
therewith, and each other obligation and liability, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, whether on account of principal, interest, fees, indemnities, costs
or expenses (including, without limitation, all fees and disbursements of
counsel to the Collateral Agent or the other Secured Parties), of the Grantor
or any Subsidiary to the Secured Parties, pursuant to the terms of the Credit
Agreement, this Security Agreement or any of the other Loan Documents
(collectively, the "Obligations").
SECTION 3. REPRESENTATIONS AND WARRANTIES. The Grantor represents,
warrants and covenants, which representations, warranties and covenants shall
survive execution and delivery of this Security Agreement, as follows:
(a) The Grantor is a corporation duly organized and validly
existing and in good standing under the laws of the state of its incorporation
and has full power and authority to execute,
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deliver and perform this Security Agreement, to carry on its business as now
being or proposed to be conducted and to own all of its property.
(b) The Chief Executive office of the Grantor is located at the
address specified in Annex A hereto. The Grantor has no places of business
other than its chief executive office and those set forth in Annex A. All
Inventory, if any (except for Inventory in transit), held on the date hereof by
the Grantor is located at one or more of the locations shown on Annex A. The
originals of all documents evidencing all Accounts of the Grantor and the only
original books of account and records of the Grantor relating thereto are, and
will continue to be, kept at such chief executive office or at the locations
shown on Annex A, or at such new locations as the Grantor may establish in
accordance with Section 4(b). The Grantor's business is being conducted solely
under the name "_________________________", and its business is being conducted
solely under that name.
(c) All filings, registrations and recordings necessary or
appropriate to create, preserve, protect and perfect the security interest
granted by the Grantor to the Collateral Agent hereby in respect of the
Collateral have been accomplished and the security interest granted to the
Collateral Agent pursuant to this Security Agreement in and to the Collateral
constitutes a valid and enforceable perfected security interest therein
superior and prior to the rights of all other Persons therein and subject to no
other Liens (except that the Collateral may be subject to Liens permitted under
Section 9.4 of the Credit Agreement) and is entitled to all the rights,
priorities and benefits afforded by the Uniform Commercial Code or other
relevant law as enacted in any relevant jurisdiction to perfected security
interests.
(d) There is no financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) covering or
purporting to cover any interest of any kind in the Collateral which names the
Grantor as the debtor thereunder, and so long as the Revolving Credit Facility
has not been terminated or any of the Obligations remain unpaid, the Grantor
will not execute or authorize to be filed in any public office any financing
statement (or similar statement or instrument of registration under the law of
any jurisdiction) or statements relating to the Collateral, except financing
statements filed or to be filed in respect of and covering the security
interests granted hereby by the Grantor.
(e) This Security Agreement is made with full recourse to the
Grantor and pursuant to and upon all the warranties, representations, covenants
and agreements on the part of the Grantor contained herein, in the Credit
Agreement and otherwise in writing in connection herewith or therewith.
(f) The Grantor is, and as to Collateral acquired by it from time
to time after the date hereof will be, the owner of all Collateral free from
any Lien or other right, title or interest of any Person (other than Liens
created hereby and other Permitted Liens).
(g) Except as permitted in the Credit Agreement, none of the
Collateral is subject to contractual obligations or other restrictions that may
restrict or inhibit the Agent's rights or
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abilities to sell or dispose of the Collateral or any part thereof after the
occurrence of an Event of Default.
(h) The execution, delivery and performance by the Grantor of
this Security Agreement (i) have been duly authorized by all requisite
corporate action of the Grantor, (ii) do not require the approval of the
stockholder(s) of the Grantor and (iii) will not (1) violate any law or
regulation applicable to the Grantor or the certificate or articles of
incorporation or by-laws of the Grantor, (2) violate or constitute (with due
notice or lapse of time or both) a default under any contract or agreement to
which the Grantor is a party or by which it or any of its properties are bound
or affected, (3) violate any order of any court, tribunal or governmental
agency binding upon the Grantor or its properties or (4) result in the creation
or imposition of any Lien of any nature whatsoever upon any properties or asset
of the Grantor (other than the security interest created by the Grantor in
favor of the Lenders and the Agent hereunder).
(i) No approval or consent of, or filing or registration with,
any federal, state or local regulatory authority is required in connection with
the Grantor's execution, delivery and performance of this Security Agreement.
(j) This Security Agreement constitutes the Grantor's legal,
valid and binding obligation, enforceable against the Grantor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
enforceability of creditors' rights generally or equitable principles at the
time in effect.
SECTION 4. COVENANTS OF THE GRANTOR. (a) The Grantor will defend the
Collateral against all claims and demands of all persons at any time claiming
the same or any interest therein (other than Permitted Liens and the security
interest created hereby) unless the Collateral Agent agrees otherwise in
writing. The Grantor will not permit any Lien notices with respect to the
Collateral or any portion thereof to exist or be on file in any public office,
except with respect to Liens created hereunder or Permitted Liens.
(b) The Grantor will not (i) change the location of its chief
executive office or establish any place of business other than those set forth
in Annex A, (ii) move or permit movement of the Collateral from the locations
specified in Annex A or (iii) voluntarily or involuntarily change its identity
or corporate structure, unless in each case the Grantor shall have given the
Collateral Agent 30 days' prior written notice thereof and shall have in
advance executed and caused to be filed and/or delivered to the Collateral
Agent any financing statements or other documents reasonably requested by the
Collateral Agent to maintain the security interest of the Collateral Agent in
the Collateral intended to be granted hereby at all times fully perfected and
in full force and effect in accordance with Section 4(c) hereof all in form and
substance satisfactory to the Collateral Agent.
(c) The Grantor will, promptly upon request by the Collateral
Agent, execute and deliver or use its best efforts to procure any document
(including, without limitation, warehouseman or processor disclaimers, landlord
waivers, disclaimers or subordination agreements with respect to
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any and all inventory that is a part of the Collateral), give any notices,
execute and file any financing statements, mortgages or other documents, all in
form and substance satisfactory to the Collateral Agent, mark any chattel
paper, deliver any chattel paper or instruments to the Collateral Agent and
take any other actions that are necessary or, in the opinion of the Collateral
Agent, desirable to perfect or continue the perfection and (except to the
extent provided in the Credit Agreement with respect to certain Permitted
Liens) the first priority of the Collateral Agent's security interest in the
Collateral, to protect the Collateral against the rights, claims, or interests
of third persons other than holders of Permitted Liens or to effect the
purposes of this Security Agreement. To the extent required in the Credit
Agreement, the Grantor will pay all costs incurred in connection with any of
the foregoing. The Grantor authorizes the Collateral Agent to file any such
financing statements without the signature of the Grantor.
(d) Without the prior written consent of the Collateral Agent,
the Grantor will not in any way hypothecate or create or permit to exist any
Lien, security interest, charge or encumbrance on or other interest in the
Collateral, except for Permitted Liens and the Lien created by this Security
Agreement, and the Grantor will not sell, transfer, assign, pledge,
collaterally assign, exchange or otherwise dispose of the Collateral, except as
permitted in the Credit Agreement. If the proceeds of any such sale are notes,
instruments, documents of title, letters of credit or chattel paper, such
proceeds shall be promptly delivered to the Collateral Agent to be held as
Collateral hereunder. If the Collateral, or any part thereof, is sold,
transferred, assigned, exchanged, or otherwise disposed of in violation of
these provisions, the security interest of the Collateral Agent shall continue
in such Collateral or part thereof notwithstanding such sale, transfer,
assignment, exchange or other disposition, and the Grantor will hold the
proceeds thereof in a separate account for the benefit of the Collateral Agent
and the other Secured Parties. Following such a sale, the Grantor will transfer
such proceeds to the Collateral Agent in kind.
(e) The Grantor will not enter into any agreement or
understanding which may restrict or inhibit the Collateral Agent's rights or
ability to sell or otherwise dispose of the Collateral or any part thereof
after the occurrence of an Event of Default.
(f) Upon the occurrence and during the continuance of an Event of
Default, the Collateral Agent shall have the right at any time to make any
payments and do any other acts the Collateral Agent may deem necessary to
protect its security interests in the Collateral, including, without
limitation, the rights to pay, purchase, contest or compromise any encumbrance,
charge or Lien which, in the reasonable judgment of the Collateral Agent,
appears to be prior to or superior to the security interests granted hereunder,
and appear in and defend any action or proceeding purporting to affect its
security interests in, and/or the value of, the Collateral.
(g) The Grantor shall promptly (but in no event later than one
(1) Business Day) after its receipt thereof, deliver to the Collateral Agent
any documents or certificates of title issued with respect to any property
included in the Collateral, and any promissory notes, letters of credit or
instruments related to or otherwise in connection with any property included in
the Collateral, which in any such case came into the possession of the Grantor,
or shall cause the issuer thereof to deliver
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any of the same directly to the Collateral Agent, in each case with any
necessary endorsements in favor of the Collateral Agent. Such documents,
certificates of title, promissory notes, letters of credit or instruments shall
in each case be delivered in suitable form for transfer by delivery, or shall
be accompanied by duly executed instruments of transfer or assignment in blank,
all in form and substance satisfactory to the Collateral Agent.
(h) In furtherance of the continuing assignment and security
interest in the Accounts of the Grantor granted pursuant to this Security
Agreement, upon the creation of Accounts, the Grantor will keep and maintain,
at its own cost and expense, satisfactory and complete records of its Accounts,
including, but not limited to, the originals of all documentation with respect
thereto, records of all payments received, all credits granted thereon, all
merchandise returned and all other dealings therewith, and will execute and
deliver to the Collateral Agent in such form and manner as the Collateral Agent
may require, solely for its convenience in maintaining records of Collateral,
such confirmatory schedules of Accounts, and other appropriate reports
designating, identifying and describing the Accounts as the Collateral Agent
may require. In addition, upon the Collateral Agent's request, the Grantor
shall provide the Collateral Agent with copies of agreements with, or purchase
orders from, the customers of the Grantor and copies of invoices to customers,
proof of shipment or delivery and such other documentation and information
relating to said Accounts and other Collateral as the Collateral Agent may
require, at the Grantor's own cost and expense. Failure to provide the
Collateral Agent with any of the foregoing shall in no way affect, diminish,
modify or otherwise limit the security interests granted herein. The Grantor
hereby authorizes the Collateral Agent to regard the Grantor's printed name or
rubber stamp signature on assignment schedules or invoices as the equivalent of
a manual signature by the Grantor's authorized officers or agents.
(i) Unless an Event of Default has occurred, and is continuing,
the Grantor may and will enforce, collect and receive all amounts owing on the
Accounts, for the benefit of and on behalf of the Secured Parties such
privilege shall terminate automatically, however, upon the occurrence of an
Event of Default, or which has not otherwise been waived by the Collateral
Agent. Any checks, cash, notes or other instruments or property received by the
Grantor with respect to any Accounts shall be held by the Grantor in trust for
the benefit of the Secured Parties, separate from the Grantor's own property
and funds, and immediately turned over to the Collateral Agent with proper
assignments or endorsements. No checks, drafts or other instruments received by
the Collateral Agent shall constitute-final payment unless and until such
instruments have actually been collected.
(j) The Grantor agrees to notify the Collateral Agent promptly of
any matters materially affecting the value, enforceability or collectability of
any Account, and of all material customer disputes, offsets, defenses,
counterclaims, returns and rejections, and all reclaimed or repossessed
merchandise or goods; provided, however, that such notice shall only be
required as to any such matter that affects Accounts outstanding at one time
from any account debtor having a value greater than $100,000. The Grantor
agrees to issue credit memos promptly (with duplicates to the Collateral Agent
upon its request for same) upon accepting returns or granting allowances, and
may continue to do so until the occurrence of an Event of Default that has not
been waived by the
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Collateral Agent. After the occurrence and during the continuance of an Event
of Default, the Grantor agrees that all returned, reclaimed or repossessed
merchandise or goods shall be set aside by the Grantor, marked with the Secured
Parties' names and (i) held by the Grantor for the Secured Parties' account as
owners and assignees or (ii) if the Collateral Agent directs, sold by the
Grantor in the ordinary course of business.
(k) The Grantor will do nothing to impair the rights of the
Secured Parties and the Collateral Agent in the Collateral. The Grantor assumes
all liability and responsibility in connection with the Collateral acquired by
it and the liability of the Grantor to pay its obligations shall in no way be
affected or diminished by reason of the fact that such Collateral may be lost,
destroyed, stolen, damaged or for any reason whatsoever unavailable to the
Grantor.
(l) The Grantor agrees that if any warehouse receipt or receipt
in the nature of a warehouse receipt is issued with respect to any of its
Inventory, such warehouse receipt or receipt in the nature thereof shall not be
"negotiable" (as such term is used in Section 7-104 of the Uniform Commercial
Code as in effect in any relevant jurisdiction or under other relevant law).
SECTION 5. REMEDIES; WAIVER OF CLAIMS; APPLICATION OF PROCEEDS.
(a) Upon the occurrence and during the continuance of any Event
of Default which has not been waived by the Agents at the direction of the
Required Lenders, the Collateral Agent may exercise, at the cost and expense of
the Grantor, all rights of a secured party under the applicable Uniform
Commercial Code with respect to the Collateral and may take any action
permitted under the Credit Agreement. Without limiting the generality of the
foregoing the Collateral Agent may, personally or by agents or attorneys: (i)
remove from any premises where same may be located any and all documents,
instruments, files and records (including the copying of any computer records),
and any receptacles or cabinets containing same, relating to the Accounts, or
the Collateral Agent may use (at the expense of the Grantor) such of the
supplies or space of the Grantor at the Grantor's place of business or
otherwise, as may be necessary to properly administer and control the Accounts
or the handling of collections and realizations thereon; (ii) bring suit, in
the name of the Grantor, the Collateral Agent or the Lenders, to enforce the
Accounts and generally exercise all other rights of an owner of the Accounts,
including, without limitation, the right to: accelerate or extend the time of
payment, settle, compromise, release in whole or in part any amounts owing on
any Accounts and issue credits in the name of the Grantor or the Lenders; (iii)
sell, assign and deliver the Accounts and any returned, reclaimed or
repossessed merchandise, with or without advertisement, at public or private
sale, for cash, on credit or otherwise, at the Collateral Agent's sole option
and discretion, and any Lender may bid or become a purchaser at any such sale,
free from any right of redemption, which right is hereby expressly waived by
the Grantor; (iv) foreclose the security interests in the Accounts created
pursuant to the Loan Documents by any available judicial procedure; (v) take
possession of any or all of the Inventory without judicial process and enter
any premises where any Inventory maybe located for the purpose of taking
possession of or removing the same; (vi) without notice of advertisement, sell,
lease, or otherwise dispose of all or any part of the Inventory, whether in its
then condition or after further, preparation or processing, in the name of the
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Grantor or the Lenders, or in the name of such other party as the Collateral
Agent may designate, either at public or private sale or at any broker's board,
in lots or in bulk, for cash or for credit, with or without warranties or
representations, and upon such other terms and conditions as the Collateral
Agent in its sole discretion may deem advisable, and the Collateral Agent or
any other Lender shall have the right to purchase at any such sale; and/or
(vii) instruct the obligor or obligors on any agreement, instrument or other
obligation (including, without limitation, the Accounts) constituting the
Collateral to make any payment required by the terms of such agreement or
instrument directly to the Collateral Agent. Unless expressly prohibited by the
licensor thereof, if any, the Collateral Agent is hereby granted a license to
use all computer software programs, data bases, processes and materials used by
the Grantor in connection with its businesses or in connection with the
Collateral.
(b) If any Inventory shall require rebuilding, repairing,
maintenance or preparation, the Collateral Agent shall have the right, at its
option, to do such of the aforesaid as is necessary, for the purpose of putting
the Inventory in such saleable form as the Collateral Agent shall deem
appropriate. The Grantor agrees, at the request of the Collateral Agent, to
assemble the Inventory and to make it available to the Collateral Agent at
places which the Collateral Agent shall select, whether at the premises of the
Grantor or elsewhere, and to make available to the Collateral Agent the
premises and facilities of the Grantor for the purpose of the Collateral
Agent's taking possession of, removing or putting the Inventory in saleable
form and to deliver possession of the Inventory or any part thereof to the
Collateral Agent.
(c) If notice of intended disposition of any Collateral is
required by law, the Grantor agrees that five (5) Business Days notice shall
constitute reasonable notification.
(d) The net cash proceeds resulting from the Collateral Agent's
exercise of any of the foregoing rights (after deducting all charges, costs and
expenses, including reasonable attorneys fees) shall be applied by the
Collateral Agent to the payment of the Grantor's Obligations to the Collateral
Agent and the other Secured Parties, whether due or to become due, in
accordance with Section 5(i). The Grantor shall remain liable to the Collateral
Agent and the other Secured Parties for any deficiencies, and the Collateral
Agent and the other Secured Parties in turn agree to remit to the Grantor or
its successors or assigns, any surplus resulting therefrom.
(e) The enumeration of the foregoing rights is not intended to be
exhaustive and the exercise of any right shall not preclude the exercise of any
other rights, all of which shall be cumulative, and any repossession or
retaking or sale of the Collateral pursuant to the terms hereof shall not
operate to release the Grantor from the obligations or its obligations
hereunder or under the other Credit Documents.
(f) In no event shall prior recourse to any Accounts or other
Collateral be a prerequisite to the Collateral Agent's or any other Secured
Party's right to demand payment of any obligation upon its maturity or upon the
occurrence of an Event of Default.
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(g) The Grantor's obligation to deliver the Collateral to the
Collateral Agent pursuant to this Section 5 is of the essence of this Security
Agreement and, accordingly, upon application to a court of equity having
jurisdiction, the Collateral Agent shall be entitled to a decree requiring
specific performance by the Grantor of such obligation.
(h) Except as otherwise provided in this Security Agreement, THE
GRANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND
JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR
THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT
LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR
REMEDIES AND ANY SUCH RIGHT WHICH THE GRANTOR WOULD OTHERWISE HAVE UNDER THE
CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and the
Grantor hereby further waives, to the extent permitted by law:
(i) all damages occasioned by such taking of possession except
any damages which are the direct result of the Collateral Agent's
gross negligence or willful misconduct;
(ii) all other requirements as to the time, place and terms of
sale or other requirements with respect to the enforcement of the
Collateral Agent's rights hereunder; and
(iii) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable
law in order to prevent or delay the enforcement of this Security
Agreement or the absolute sale of the Collateral or any portion
thereof, and the Grantor, for itself and all who may claim under it,
insofar as it or they now or hereafter lawfully may, hereby waives the
benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization
upon, any Collateral shall operate to divest all right, title, interest, claim
and demand, either at law or in equity, of the Grantor therein and thereto, and
shall be a perpetual bar both at law and in equity against the Grantor and
against any and all Persons claiming or attempting to claim the Collateral so
sold, optioned or realized upon, or any part thereof, from, through and under
the Grantor.
The proceeds of any Collateral obtained or disposed of pursuant to
this Section 5 shall be applied as follows:
(i) to the payment of any and all expenses and fees
(including reasonable attorneys' fees) incurred by the Collateral
Agent in obtaining, taking possession of removing, insuring,
repairing, storing and disposing of Collateral and any and all amounts
incurred by the Collateral Agent in connection therewith;
(ii) next, any surplus then remaining to the payment of the
obligations in such order and priority as the Collateral Agent shall
determine;
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(iii) if the Revolving Credit Facility is then terminated and
no other Obligation is outstanding, any surplus then remaining shall
be paid to the Grantor, subject, however, to the rights of the holder
of any then existing Lien of which the Collateral Agent has actual
notice (without investigation);
it being understood that the Grantor shall remain liable to the extent of any
deficiency between the amount of the proceeds of the Collateral and the
aggregate amount of the sums referred to in clauses (i) and (ii) of this
section 5(i) with respect to the Grantor.
(j) In case the Collateral Agent shall have instituted any
proceeding to enforce any right, power or remedy under this Security Agreement
by foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined
adversely to the Collateral Agent, then and in every such case the Grantor, the
Collateral Agent and each holder of any of the obligations shall be restored to
their former positions and rights hereunder with respect to the Collateral
subject to the security interest created under this Security Agreement, and all
rights, remedies and powers of the Collateral Agent shall continue as if no
such proceeding had been instituted.
SECTION 6. MISCELLANEOUS PROVISIONS.
SECTION 6.1. Notices. All notices, approvals, consents or other
communications required or desired to be given hereunder shall be in the form
and manner set forth in Section 12.2 of the Credit Agreement, and delivered (a)
with respect to the Grantor, at the Grantor's address indicated in Section 12.2
of the Credit Agreement, and (b) with respect to the Agents or a Lender, at the
Agents' addresses indicated in Section 12.2 of the Credit Agreement.
SECTION 6.2. Headings. The headings in this Security Agreement are for
purposes of reference only and shall not affect the meaning or construction of
any provision of this Security Agreement.
SECTION 6.3. Severability. The provisions of this Security Agreement
are severable, and if any clause or provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect, in that jurisdiction only, such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
security Agreement in any jurisdiction.
SECTION 6.4. Amendments, Waivers and Consents. Any amendment or waiver
of any provision of this security Agreement and any consent to any departure by
the Grantor from any provision of this Security Agreement shall be effective
only if made or given in compliance with Section 12.6 of the Credit Agreement.
SECTION 6.5. Interpretation of Agreement. Time is of the essence in
each provision of this Security Agreement of which time is an element. All
terms not defined herein or in the Credit
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Agreement shall have the meaning set forth in the applicable Uniform Commercial
Code, except where the context otherwise requires. To the extent a term or
provision of this Security Agreement conflicts with the Credit Agreement and is
not dealt with herein with more specificity, the Credit Agreement shall control
with respect to the subject matter of such term or provision. Acceptance of or
acquiescence in a course of performance rendered under this Security Agreement
shall not be relevant in determining the meaning of this Security Agreement
even though the accepting or acquiescing party had knowledge of the nature of
the performance and opportunity for objection.
SECTION 6.6. Continuing Security Interest; Transfer of Notes. This
Security Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect (notwithstanding the
occurrence of the Stated Termination Date) until payment in full (including
after the Stated Termination Date) of the Obligations and termination of the
Credit Agreement and the other Loan Documents, (ii) be binding upon the
Grantor, its successors and assigns and (iii) inure, together with the rights
and remedies of the Collateral Agent hereunder, for the benefit of the
Collateral Agent, the other Secured Parties and their respective successors,
transferees and assigns. Without limiting the generality of clause (iii) above,
any Lender may, except as limited by the express terms of the Credit Agreement,
assign or otherwise transfer any Note held by it to any other Person, and such
other Person shall thereupon become vested with all the rights, benefits and
security interests hereunder existing in respect thereof.
SECTION 6.7. Reinstatement. To the extent permitted by law, this
Security Agreement shall continue to be effective or be reinstated if at any
time any amount received by the Collateral Agent or any other Secured Party in
respect of the Obligations is rescinded or must otherwise be restored or
returned by the Collateral Agent or any other Secured Party or as repaid in
good faith settlement of a pending or threatened avoidance claim upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Grantor or upon the appointment of any receiver, intervenor, conservator,
trustee or similar official for the Grantor or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
SECTION 6.8. Survival of Provisions. All representations, warranties
and covenants of the Grantor contained herein shall survive the execution and
delivery of this Security Agreement, and shall terminate only upon the full and
final payment and performance by the Grantor of the obligations secured hereby
and termination of the Credit Agreement and the other Loan Documents.
SECTION 6.9. Setoff. The Secured Parties shall have the rights of
setoff set forth in Section 12.3 of the Credit Agreement.
SECTION 6.10. Power of Attorney. (a) The Grantor hereby irrevocably
authorizes and appoints the Collateral Agent, or any Person or agent the
Collateral Agent may designate, as the Grantor's attorney-in-fact, at the
Grantor's cost and expense, to exercise, subject to the limitations set forth
below, all of the following powers in addition to the powers granted by law or
otherwise set
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forth in this Security Agreement, which being coupled with an interest, shall
be irrevocable until all of the Obligations have been paid and satisfied in
full and the Credit Agreement is terminated:
(1) To receive, take, endorse, sign, assign and deliver, all
in the name of the Collateral Agent or any other Secured Party any and
all checks, notes, drafts, and other documents or instruments relating
to the Collateral;
(2) To request, at any time from customers indebted on
Accounts verification of information concerning the Accounts and the
amounts owing thereon;
(3) Upon the occurrence and during the continuance of a
Default, to receive, open and dispose of all mail addressed to the
Grantor and to notify postal authorities to change the address for
delivery thereof to such address as the Collateral Agent may
designate;
(4) Upon the occurrence and during the continuance of a
Default, to give customers indebted on Accounts notice of the Secured
Parties' interest therein, and/or to instruct such customers to make
payment directly to the Collateral Agent for the Grantor's account;
and
(5) Upon the occurrence and during the continuance of a
Default, to take or bring, in the name of the Collateral Agent, any
other Secured Party or the' Grantor, all steps, actions, suits or
proceedings deemed by the Collateral Agent necessary or desirable to
enforce or effect collection of the Accounts.
(b) In addition to all of the powers granted to the Collateral
Agent pursuant to (a) above, the Grantor hereby appoints and constitutes the
Collateral Agent and its designee as the Grantor's attorney-in-fact to exercise
all of the following powers upon and at any time after the occurrence and
during the continuance of an Event of Default (i) collection of Accounts or
proceeds of any Collateral, (ii) conveyance of any item of Collateral to any
purchaser thereof, (iii) giving of any notices or recording any Liens under
Section 4(c) hereof, and (iv) making of any payments or taking any acts under
Section 4(d) hereof. The Collateral Agent's authority hereunder shall include,
without limitation, the authority to endorse and negotiate, for the Collateral
Agent's own account, any checks or instruments in the name of the Grantor,
execute and give receipt for any certificate of ownership or any document,
transfer title to any item of Collateral, send verifications of Accounts to any
customer, sign the Grantor's name on all financing statements or any other
documents deemed necessary or appropriate to preserve, protect or perfect ' the
security interest in the Collateral and to file the same, prepare, file and
sign the Grantor's name on any notice of Lien, assignment or satisfaction of
Lien or similar document in connection with any Account and prepare, file and
sign the Grantor's name on a proof of claim in bankruptcy or similar document
against any customer of the Grantor, and to take any other actions arising from
or incident to the powers granted to the Collateral Agent in this Security
Agreement. This power of attorney is coupled with an interest and is
irrevocable by the Grantor.
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SECTION 6.11. Authority of the Collateral Agent. The Collateral Agent
shall have and be entitled to exercise all powers hereunder which are
specifically granted to the Collateral Agent by the terms hereof, together with
such powers as are reasonably incident thereto. The Collateral Agent may
perform any of its duties hereunder or in connection with the Collateral by or
through agents or employees and shall be entitled to retain counsel and to act
in reliance upon the advice of counsel concerning all such matters. Neither the
Collateral Agent nor any director, officer, employee, attorney or agent of the
Collateral Agent shall be liable to the Grantor for any action taken or omitted
to be taken by it or them hereunder, except for its or their own gross
negligence or willful misconduct, nor shall the Collateral Agent be responsible
for the validity, effectiveness or sufficiency of this Security Agreement or of
any document or security furnished pursuant hereto. The Collateral Agent and
its directors, officers, employees, attorneys and agents shall be entitled-to
rely on any communication, instrument or document reasonably believed by it or
them to be genuine and correct and to have been signed or sent by the proper
person or persons.
SECTION 6.12. Release; Termination of Agreement. Subject to the
provisions of Section 6.7 hereof, this Security Agreement shall terminate upon
full and final payment and performance of all the Obligations and termination
of the Revolving Credit Facility. At such time, the Collateral Agent shall, at
the request of the Grantor, reassign and redeliver to the Grantor all of the
Collateral hereunder which has not been sold, disposed of, retained or applied
by the Collateral Agent in accordance with the terms hereof. Such reassignment
and redelivery shall be without warranty by or recourse to the Collateral
Agent, except as to the absence of any prior assignments by the Collateral
Agent of its interest in the Collateral, and shall be at the expense of the
Grantor.
SECTION 6.13. Counterparts. This Security Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which shall together constitute one and the same agreement.
SECTION 6.14. Governing Law; Venue; Waiver of Jury Trial.
(A) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO CONTRACTS
EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE NOTWITHSTANDING ITS
EXECUTION AND DELIVERY OUTSIDE SUCH STATE.
(B) THE GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND
CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY
STATE OR FEDERAL COURT SITTING IN THE COUNTY OF HILLSBOROUGH, STATE OF FLORIDA,
UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT,
THE GRANTOR EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS
PROPERTY BY, ANY SUCH COURT
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IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND THE GRANTOR HEREBY IRREVOCABLY
SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN
ANY SUCH SUIT, ACTION OR PROCEEDING.
(C) THE GRANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS
IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL
(POSTAGE PREPAID) TO THE ADDRESS OF THE BORROWER PROVIDED IN SECTION 12.2 OF
THE CREDIT AGREEMENT, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE
APPLICABLE LAWS IN EFFECT IN THE STATE OF FLORIDA.
(D) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF SHALL
PRECLUDE ANY SECURED PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION WHERE
THE GRANTOR OR ANY OF THE GRANTOR' PROPERTY OR ASSETS MAY BE FOUND OR LOCATED.
(E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION THEREWITH, THE GRANTOR HEREBY AGREES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN
ANY SUCH ACTION OR PROCEEDING.
SECTION 6.15. LEFT BLANK INTENTIONALLY.
SECTION 6.16. LEFT BLANK INTENTIONALLY.
SECTION 6.17. DELAYS; PARTIAL EXERCISE OF REMEDIES. NO DELAY OR
OMISSION OF THE COLLATERAL AGENT OR ANY OTHER SECURED PARTY TO EXERCISE ANY
RIGHT OR REMEDY HEREUNDER, WHETHER BEFORE OR AFTER THE HAPPENING OF ANY EVENT
OF DEFAULT, SHALL IMPAIR ANY SUCH RIGHT OR SHALL OPERATE AS A WAIVER THEREOF OR
AS A WAIVER OF ANY SUCH EVENT OF DEFAULT. NO SINGLE OR PARTIAL EXERCISE BY THE
COLLATERAL AGENT OR ANY OTHER SECURED PARTY OF ANY RIGHT OR REMEDY SHALL
PRECLUDE ANY OTHER OR FURTHER EXERCISE THEREOF, OR PRECLUDE ANY OTHER RIGHT OR
REMEDY.
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SECTION 6.18. Indemnity. (a) The Grantor shall and hereby agrees to
indemnify, defend and hold harmless the Collateral Agent and-its directors,
officers, agents, employees and counsel (each herein called an "Indemnitee")
from and against (i) any and all losses, claims, damages, liabilities,
deficiencies, judgments or expenses (collectively, "Losses") incurred by any of
them (except, in the case of any Indemnitee, to the extent that any such Loss
is finally judicially determined to have resulted from such Indemnitee's own
gross negligence or willful misconduct) arising out of or by reason of any
litigations, investigations, claims or proceedings which arise out of or are in
any way related to (A) this Security Agreement, any other Loan Document or the
transactions contemplated hereby or thereby, (B) the Collateral Agent entering
into this Security Agreement, the other Loan Documents or any other agreements
and documents relating hereto, including, without limitation, amounts paid in
settlement, court costs and the reasonable fees and disbursements of counsel
incurred in connection with any such litigation, investigation, claim or
proceeding or any advice rendered in connection with any of the foregoing and
(ii) any Losses, claims, damages, liabilities or deficiencies incurred in
connection with any remedial or other action taken by the Grantor or any
Secured Party in connection with compliance by the Grantor or any of its
properties, with any Environmental Laws. if and to the extent that the
obligations of the Grantor hereunder are unenforceable for any reason, the
Grantor hereby agrees to make the maximum contribution to the payment and
satisfaction of such obligations which is permissible under applicable law. The
Grantor's obligations hereunder shall survive any termination of this Security
Agreement and the other Loan Documents and the payment in full of the
Obligations, and are in addition to, and not in substitution of, any other of
their obligations set forth in this Security Agreement.
(b) The Grantor shall also, upon demand, (i) pay to the
Collateral Agent all costs or expenses (including reasonable fees and
disbursements of counsel) incurred by the Collateral Agent in connection with
the preparation of this Security Agreement and the other Loan Documents and
(ii) pay to the Collateral Agent and each Lender all costs and expenses
(including the reasonable fees and disbursements of counsel and other
professionals) paid or incurred by the Collateral Agent or such Lender in (A)
enforcing or-defending its rights under or in respect of this Security
Agreement, the other Loan Documents or any other document or instrument now or
hereafter executed and delivered in connection herewith, (B) in collecting the
Loans, (C) in foreclosing or otherwise collecting upon the Collateral or any
part thereof and (D) obtaining any legal, accounting or other advice in
connection with any of the foregoing.
(c) Any amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement shall constitute Obligations secured
by the Collateral. The indemnity obligations of the Grantor contained in this
Section 6.18 shall continue in full force and effect notwithstanding the full
payment of all the Notes issued under the Credit Agreement and all of the other
Obligations and notwithstanding the discharge thereof.
SECTION 6.19. Obligations Absolute. The obligations of the Grantor
under this Security Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (i) any renewal,
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extension, amendment or modification of, or addition or supplement to or
deletion from, any of the Loan Documents or any other instrument or agreement
referred to therein, or any assignment or transfer of any thereof; (ii) any
waiver, consent, extension, indulgence or other action or inaction under or in
respect of any such instrument or agreement or this Security Agreement or any
exercise or non-exercise of any right, remedy, power or privilege under or in
respect of this Security Agreement or any other Loan Document; (iii) any
furnishing of any additional security to the Collateral Agent or any acceptance
thereof or any sale, exchange, release, surrender or realization of or upon any
security by the Collateral Agent; or (iv) any invalidity, irregularity or
unenforceability of all or any part of the obligations or of any security
therefor.
SECTION 6.20. Grantor's Duties. It is expressly agreed, anything
herein contained to the contrary notwithstanding, that the Grantor shall remain
liable to perform all of the obligations, if any, assumed by it with respect to
the Collateral and the Collateral Agent shall not have any obligations or
liabilities with respect to any Collateral by reason of or arising out of or in
connection with this Security Agreement, nor shall the Collateral Agent be
required or obligated in any manner to perform or fulfill any of the
obligations of the Grantor under or with respect to any Collateral.
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IN WITNESS WHEREOF, the undersigned has caused this Security Agreement
to be duly executed and delivered as of the day and year first above written.
GRANTOR:
[ INSERT NAME OF GRANTOR ]
WITNESS:
By:
- --------------------- -----------------------------------
Name:
---------------------------------
Title:
- --------------------- --------------------------------
AGENTS:
NATIONSBANK, NATIONAL ASSOCIATION, as
Administrative Agent for the Lenders
WITNESS:
By:
- ---------------------- ----------------------------------
Name:
--------------------------------
Title:
-------------------------------
- ----------------------
THE BANK OF TOKYO-MITSUBISHI, LTD., as
Collateral Agent for the Lenders
WITNESS:
By:
- ---------------------- ----------------------------------
Name:
--------------------------------
Title:
- ---------------------- -------------------------------
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EXHIBIT K
Form of Consolidated Amendment
THIS CONSOLIDATED AMENDMENT TO COLLATERAL DOCUMENTS (the
"Amendment Agreement") is made and entered into as of this 14th day of July,
1998 by and among:
AMERISTEEL FINANCE, INC., a Delaware corporation having its principal
place of business in Wilmington, Delaware ("AFI");
NATIONSBANK, NATIONAL ASSOCIATION, a national banking association
("NationsBank"), in its capacity as administrative agent (the "Administrative
Agent") for each of the lenders (the "Lenders") now or hereafter party to the
Amended and Restated Credit Agreement (as defined below); and
THE BANK OF TOKYO-MITSUBISHI, LTD in its capacity as collateral agent
and documentation agent for the Lenders (in such capacity, the "Collateral
Agent" and, together with the Administrative Agent, the "Agents").
W I T N E S S E T H:
WHEREAS, AmeriSteel Corporation, formerly known as Florida Steel
Corporation (the "Borrower"), certain lenders (the "Original Lenders") and The
Bank of Tokyo, Ltd., New York Agency, as agent (the "Original Agent") have
entered into a Credit Agreement dated June 9, 1995 (as amended, the "Original
Agreement") pursuant to which the Original Lenders have made available to the
Borrower a revolving credit facility of up to $140,000,000, which revolving
credit facility is evidenced by revolving notes dated June 9, 1995 (the
"Original Notes"); and
WHEREAS, the obligations of the Borrower under the Original Agreement
are guaranteed by AFI pursuant to the Guaranty from AFI to the Original Agent
and the Lenders dated December 30, 1996 (the "AFI Guaranty"); and
WHEREAS, the obligations of AFI under the AFI Guaranty are secured by
certain assets of AFI as described in a Security Agreement from AFI to the
Original Agent for the benefit of the Lenders dated December 30, 1996 (the "AFI
Security Agreement"); and
WHEREAS, the Borrower has requested that the Agents and the Lenders
amend the Original Agreement in order, among other things, to (i) substitute
NationsBank, National Association as the Administrative Agent in lieu of the
Original Agent, (ii) increase the amount available under the revolving credit
facility from $140,000,000 to $150,000,000, (iii) extend the maturity of the
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indebtedness arising under the Original Agreement and (iv) provide for the
performance by the Administrative Agent of certain duties of the Original
Agent; and
WHEREAS, by that Amended and Restated Revolving Credit Agreement of
even date herewith (the "Amended and Restated Credit Agreement"), the Borrower,
the Agents and the Lenders have amended and restated the Original Agreement;
and
WHEREAS, pursuant to the terms and requirements of the Amended and
Restated Credit Agreement, the AFI Guaranty and AFI Security Agreement shall be
amended as herein provided.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, subject to the conditions hereof, it is hereby
agreed as follows:
26. Definitions. All defined terms used herein and in the Original
Agreement shall have the same meanings as set forth in the Original Agreement,
except as amended by the Amended and Restated Credit Agreement, and except as
further amended and modified hereby.
27. Amendment of AFI Security Agreement. The AFI Security Agreement
shall be and hereby is amended, effective as of the date hereof, as follows:
(a) The first paragraph of the Recitals of the Security
Agreement is hereby amended by deleting said first paragraph in its
entirety and inserting in lieu thereof the following two (2)
paragraphs:
WHEREAS, AmeriSteel Corporation (formerly called
Florida Steel Corporation), a Florida corporation (the
"Borrower"), the Secured Parties, BTM and NationsBank, N.A.
(formerly known as NationsBank of Florida, N.A.), as Issuing Banks
and Co-Administrative Agents, and BTM, as Agent, are parties to a
Credit Agreement dated as of June 9, 1995 (as from time to time
amended, modified, supplemented or restated, the "Original
Agreement"), pursuant to which the Lenders established a
$140,000,000 credit facility for the Borrower, available on the
terms and conditions set forth therein; and
WHEREAS, the Borrower, NationsBank, National
Association, as Lender and as Administrative Agent (the
"Administrative Agent"), The Bank of Tokyo-Mitsubishi, Ltd, as
Lender and as Collateral Agent and Documentation Agent (the
"Collateral Agent" and, together with the Administrative Agent,
the "Agents"), and the lenders party thereto (the "Lenders") have
entered into that certain Amended and Restated Revolving Credit
Agreement (collectively with the schedules and exhibits thereto,
as the same may be amended, modified, restated or supplemented in
accordance with the terms thereof, the "Credit Agreement") dated
as of July 14, 1998 pursuant
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to which the Lenders have agreed, upon the terms and conditions
set forth therein, to amend and restate the Original Agreement and
to make available to the Borrower revolving credit loans in the
maximum principal amount of up to $150,000,000 (the "Loans"); and
(b) The term "Obligations" appearing in the AFI Security
Agreement shall be and hereby is amended to also include as part of
its meaning when used therein all obligations and liabilities of AFI
under the AFI Guaranty, as amended hereby.
(c) The term "Agent" appearing in the AFI Security Agreement
shall be and hereby is amended to mean when used therein The Bank of
Tokyo-Mitsubishi, Ltd., as Collateral Agent.
(d) Section 2(c) of the AFI Security Agreement is hereby
amended by deleting from such Section 2(c) the phrase
"Lockbox Account."
(e) Sections 6.14, 6.15 and 6.16 of the AFI Security
Agreement are hereby amended by deleting said Sections in their
entirety and inserting in lieu thereof the following:
SECTION 6.14. GOVERNING LAW; VENUE; WAIVER OF TRIAL BY JURY.
(A) THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH
CAROLINA APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY
PERFORMED, IN SUCH STATE NOTWITHSTANDING ITS EXECUTION AND
DELIVERY OUTSIDE SUCH STATE.
(B) DEBTOR HEREBY EXPRESSLY AND IRREVOCABLY
AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL
COURT SITTING IN THE COUNTY OF MECKLENBURG, STATE OF NORTH
CAROLINA AND UNITED STATES OF AMERICA AND, BY THE EXECUTION AND
DELIVERY OF THIS AGREEMENT, DEBTOR EXPRESSLY WAIVES ANY
OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF
THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR
PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY
SUCH SUIT, ACTION OR PROCEEDING.
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(C) DEBTOR AGREES THAT SERVICE OF PROCESS MAY
BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND
COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE
PREPAID) TO THE ADDRESS OF THE BORROWER PROVIDED BY SECTION
12.2 OF THE CREDIT AGREEMENT, OR BY ANY OTHER METHOD OF SERVICE
PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE
OF NORTH CAROLINA.
(D) NOTHING CONTAINED IN SUBSECTIONS (B) OR
(C) HEREOF SHALL PRECLUDE THE AGENTS OR ANY LENDER FROM
BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE
COURTS OF ANY PLACE WHERE DEBTOR OR ANY OF DEBTOR'S PROPERTY OR
ASSETS MAY BE FOUND OR LOCATED.
(E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS
AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION
WITH THE FOREGOING, DEBTOR AND THE AGENTS ON BEHALF OF THE
LENDERS HEREBY AGREE, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON
MAY HAVE TO TRIAL BY JURY IN SUCH ACTION OR PROCEEDING.
SECTION 6.15. LEFT BLANK INTENTIONALLY
SECTION 6.16. LEFT BLANK INTENTIONALLY
3. Amendment of AFI Guaranty. The AFI Guaranty shall be and hereby is
amended, effective as of the date hereof, as follows:
(a) The first paragraph of the Recitals of the AFI Guaranty
is hereby amended by deleting said first paragraph in its entirety and
inserting in lieu thereof the following two (2) paragraphs:
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WHEREAS, AmeriSteel Corporation (formerly called Florida Steel
Corporation), a Florida corporation (the "Borrower"), the Secured
Parties, BTM and NationsBank, N.A. (formerly known as NationsBank of
Florida, N.A.), as Issuing Banks and Co-Administrative Agents, and BTM,
as Agent, are parties to a Credit Agreement dated as of June 9, 1995
(as from time to time amended, modified, supplemented or restated, the
"Original Agreement"), pursuant to which the Lenders established a
$140,000,000 credit facility for the Borrower, available on the terms
set forth therein; and
WHEREAS, the Borrower, NationsBank, National Association, as
Lender and as Administrative Agent (the "Administrative Agent"), The
Bank of Tokyo-Mitsubishi, Ltd, as Lender and as Collateral Agent and
Documentation Agent (the "Collateral Agent" and, together with the
Administrative Agent, the "Agents"), and the lenders party thereto (the
"Lenders") have entered into that certain Amended and Restated
Revolving Credit Agreement (collectively with the schedules and
exhibits thereto, as the same may be amended, modified, restated or
supplemented in accordance with the terms thereof, the "Credit
Agreement") dated as of July __, 1998 pursuant to which the Lenders
have agreed, upon the terms and conditions set forth therein, to amend
and restate the Original Agreement and to make available to the
Borrower revolving credit loans in the maximum principal amount of up
to $150,000,000 (the "Loans"); and
(b) The term "Guaranteed Obligations" appearing in the AFI Guaranty
shall be and hereby is amended to also include as part of its meaning when used
therein all obligations and liabilities of the Borrower under the Amended and
Restated Credit Agreement and the Loan Documents described therein.
(c) Paragraphs 17, 18 and 19 of the AFI Guaranty are hereby amended by
deleting said Paragraphs in their entirety and inserting in lieu thereof the
following:
17. GOVERNING LAW; VENUE; WAIVER OF TRIAL BY JURY.
(A) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA
APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN
SUCH STATE NOTWITHSTANDING ITS EXECUTION AND DELIVERY OUTSIDE SUCH
STATE.
(B) GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES
AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO
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<PAGE> 166
THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE
INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF
MECKLENBURG, STATE OF NORTH CAROLINA AND UNITED STATES OF AMERICA
AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, GUARANTOR
EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO
THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT,
ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH
SUIT, ACTION OR PROCEEDING.
(C) GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE
MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR
OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY
REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF
THE BORROWER PROVIDED BY SECTION 12.2 OF THE CREDIT AGREEMENT, OR
BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE
LAWS IN EFFECT IN THE STATE OF FLORIDA.
(D) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF
SHALL PRECLUDE THE AGENTS OR ANY LENDER FROM BRINGING ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE
GUARANTOR OR ANY OF GUARANTOR'S PROPERTY OR ASSETS MAY BE FOUND OR
LOCATED.
(E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY
IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING,
GUARANTOR AND THE AGENTS ON BEHALF OF THE LENDERS HEREBY AGREE, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND
HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN SUCH ACTION
OR PROCEEDING.
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18. LEFT BLANK INTENTIONALLY
19. LEFT BLANK INTENTIONALLY
28. Representations and Warranties. In order to induce the Agents and
each of the other Lenders signatories hereto to enter into this Amendment
Agreement, AFI hereby represents and warrants that the AFI Guaranty and AFI
Security Agreement have been re-examined by AFI and that as of the date hereof:
(a) The representations and warranties made by AFI in the AFI
Guaranty and AFI Security Agreement are true on and as of the date
hereof;
(b) There has been no material adverse change in the condition,
financial or otherwise, of AFI since the date of the most recent
financial reports of the Borrower delivered to the Administrative
Agent, other than changes in the ordinary course of business;
(c) The business and properties of AFI are not, and since the date
of their most recent financial reports delivered to the Administrative
Agent, have not been, adversely affected in any substantial way as the
result of any fire, explosion, earthquake, accident, strike, lockout,
combination of workers, flood, embargo, riot, activities of armed
forces, war or acts of God or the public enemy, or cancellation or loss
of any major contracts; and
(d) After giving effect to this Amendment Agreement no condition
exists which, upon the effectiveness of the amendment contemplated
hereby, would constitute a Default or an Event of Default on the part
of the Borrower under the Original Agreement or the Amended and
Restated Credit Agreement, either immediately or with the lapse of time
or the giving of notice, or both.
29. Conditions Precedent. The effectiveness of this Amendment Agreement
is subject to the receipt by the Agent of the following:
(a) eight counterparts of this Amendment Agreement duly executed by
all signatories hereto;
(b) opinion of counsel for AFI as to the authorization, execution
and delivery of this Amendment Agreement and the enforceability of the
same against AFI in accordance with its terms;
(c) resolutions of the Board of Directors of AFI approving this
Amendment Agreement certified by the Secretary of AFI;
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(d) an amount equal to the aggregate legal fees incurred by
the Agents in connection with the negotiation, review and execution of
this Amendment Agreement and the other documents related hereto; and
(e) copies of all additional agreements, instruments and
documents which the Agents may reasonably request, such documents, when
appropriate, to be certified by appropriate governmental authorities.
All proceedings of AFI relating to the matters provided for herein shall be
satisfactory to the Administrative Agent and its counsel.
30. Entire Agreement. This Amendment Agreement sets forth the entire
understanding and Agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter. No promise, condition, representation
or warranty, express or implied, not herein set forth shall bind any party
hereto, and no one of them has relied on any such promise, condition,
representation or warranty. Each of the parties hereto acknowledges that,
except as in this Amendment Agreement otherwise expressly stated, no
representations, warranties or commitments, express or implied, have been made
by any party to the other. None of the terms or conditions of this Amendment
Agreement may be changed, modified, waived or canceled orally or otherwise,
except by writing, signed by all the parties hereto, specifying such change,
modification, waiver or cancellation of such terms or conditions, or of any
proceeding or succeeding breach thereof.
31. No Novation. Each of the parties hereto acknowledges that the
provisions of this Amendment Agreement and the Amended and Restated Credit
Agreement constitute amendments to, and not a novation of, the indebtedness of
the Borrower and AFI to the Lenders, and a modification of the terms of
repayment and security for such indebtedness. This Amendment Agreement and the
Amended and Restated Credit Agreement do not constitute or effect either (i) a
cancellation or repayment of any indebtedness, or (ii) the transfer of property
to secure any indebtedness in addition to property previously transferred.
32. Full Force and Effect of Agreement. Except as hereby specifically
amended, modified or supplemented, the AFI Guaranty, the AFI Security Agreement
and all other Loan Documents are hereby confirmed and ratified in all respects
and shall remain in full force and effect according to their respective terms.
33. Counterparts. This Amendment Agreement may be executed in any
number of counterparts, each of which shall be deemed an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument.
34. GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY THE LAW OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO ANY
OTHERWISE APPLICABLE PRINCIPLES OF CONFLICT OF
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<PAGE> 169
LAWS. AFI HEREBY (i) SUBMITS TO THE JURISDICTION AND VENUE OF THE STATE AND
FEDERAL COURTS OF NORTH CAROLINA FOR THE PURPOSES OF RESOLVING DISPUTES
HEREUNDER OR UNDER ANY OF THE OTHER LOAN DOCUMENTS TO WHICH EACH IS A PARTY OR
FOR PURPOSES OF COLLECTION AND (ii) WAIVE TRIAL BY JURY IN CONNECTION WITH ANY
SUCH LITIGATION.
35. Enforceability. Should any one or more of the provisions of this
Amendment Agreement be determined to be illegal or unenforceable as to one or
more of the parties hereto, all other provisions nevertheless shall remain
effective and binding on the parties hereto.
36. Successors and Assigns. This Amendment Agreement shall be binding
upon and inure to the benefit of AFI, the Lenders signatories hereto, the
Agents and their respective successors, assigns and legal representatives;
provided, however, that AFI, without the prior consent of the Lenders, may not
assign any rights, powers, duties or obligations hereunder.
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<PAGE> 170
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be duly executed by their duly authorized officers, all as of the
day and year first above written.
AMERISTEEL FINANCE, INC.
WITNESS:
- ------------------------- By:
----------------------------------------
Name:
--------------------------------------
- ------------------------- Title:
-------------------------------------
Signature Page 1 of 2
<PAGE> 171
NATIONSBANK, NATIONAL ASSOCIATION,
as Administrative Agent for the Lenders
By:
---------------------------------------
Name: Miles C. Dearden III
Title: Senior Vice President
THE BANK OF TOKYO-MITSUBISHI, LTD
as Collateral Agent and Documentation Agent
for the Lenders
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Signature Page 2 of 2
<PAGE> 172
EXHIBIT L
Form of Security Agreement Amendment
THIS AMENDMENT TO SECURITY AGREEMENT (the "Amendment Agreement") is
made and entered into as of this 14th day of July, 1998 by and among:
AMERISTEEL CORPORATION, a Florida corporation having its principal
place of business in Tampa, Florida (the "Borrower");
NATIONSBANK, NATIONAL ASSOCIATION, a national banking association
("NationsBank"), in its capacity as administrative agent (the "Administrative
Agent") for each of the lenders (the "Lenders") now or hereafter party to the
Amended and Restated Credit Agreement (as defined below); and
THE BANK OF TOKYO-MITSUBISHI, LTD in its capacity as collateral agent
and documentation agent for the Lenders (in such capacity, the "Collateral
Agent" and, together with the Administrative Agent, the "Agents").
W I T N E S S E T H:
WHEREAS, the Borrower (formerly called Florida Steel Corporation),
certain lenders (the "Original Lenders") and The Bank of Tokyo, Ltd., New York
Agency, as agent (the "Original Agent") have entered into a Credit Agreement
dated June 9, 1995 (as amended, the "Original Agreement") pursuant to which the
Original Lenders have made available to the Borrower a revolving credit
facility of up to $140,000,000, which revolving credit facility is evidenced by
revolving notes dated June 9, 1995 (the "Original Notes"); and
WHEREAS, the obligations of the Borrower under the Original Agreement
are secured by certain assets of the Borrower as described in the Security
Agreement between the Borrower and the Original Agent dated June 9, 1995 (the
"Security Agreement"); and
WHEREAS, the Borrower has requested that the Agents and the Lenders
amend the Original Agreement in order, among other things, to (i) substitute
NationsBank, National Association as the Administrative Agent in lieu of the
Original Agent, (ii) increase the amount available under the revolving credit
facility from $140,000,000 to $150,000,000, (iii) extend the maturity of the
indebtedness arising under the Original Agreement and (iv) provide for the
performance by the Administrative Agent of certain duties of the Original
Agent; and
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WHEREAS, by that Amended and Restated Revolving Credit Agreement of
even date herewith (the "Amended and Restated Credit Agreement"), the Borrower,
the Agents and the Lenders have amended and restated the Original Agreement;
and
WHEREAS, pursuant to the terms and requirements of the Amended and
Restated Credit Agreement, the Security Agreement shall be amended as herein
provided.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, subject to the conditions hereof, it is hereby
agreed as follows:
37. Definitions. All defined terms used herein and in the Original
Agreement shall have the same meanings as set forth in the Original Agreement,
except as amended by the Amended and Restated Credit Agreement, and except as
further amended and modified hereby.
38. Amendment of Security Agreement. The Security Agreement shall be
and hereby is amended, effective as of the date hereof, as follows:
(a) The first paragraph of the Recitals of the Security
Agreement is hereby amended by deleting said first paragraph in its
entirety and inserting in lieu thereof the following two (2)
paragraphs:
WHEREAS, the Borrower, the Secured Parties and BOT and
NationsBank, N.A. (formerly known as NationsBank of Florida, N.A.),
as Co-Administrative Agents, are parties to a Credit Agreement
dated as of June 9, 1995 (as from time to time amended, modified,
supplemented or restated, the "Original Agreement"), pursuant to
which the Lenders established a $140,000,000 credit facility for
the Borrower, available on the terms and conditions set forth
therein; and
WHEREAS, the Borrower, NationsBank, National Association, as
Lender and as Administrative Agent (the "Administrative Agent"),
The Bank of Tokyo-Mitsubishi, Ltd, as Lender and as Collateral
Agent and as Documentation Agent (the "Collateral Agent" and,
together with the Administrative Agent, the "Agents"), and the
lenders party thereto (the "Lenders") have entered into that
certain Amended and Restated Revolving Credit Agreement
(collectively with the schedules and exhibits thereto, as the same
may be amended, modified, restated or supplemented in accordance
with the terms thereof, the "Credit Agreement") dated as of July
14, 1998 pursuant to which the Lenders have agreed, upon the terms
and conditions set forth therein, to amend and restate the Original
Agreement and to make available to the Borrower revolving credit
loans in the maximum principal amount of up to $150,000,000 (the
"Loans"); and
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<PAGE> 174
(b) The term "Obligations" appearing in the Security
Agreement shall be and hereby is amended to also include as part of
its meaning when used therein all obligations and liabilities of the
Borrower under the Amended and Restated Credit Agreement and the Loan
Documents described therein.
(c) The term "Agent" appearing in the Security Agreement
shall be and hereby is amended to mean when used therein The Bank of
Tokyo-Mitsubishi, Ltd., as Collateral Agent.
(d) Section 2(c) of the Security Agreement is hereby amended
by deleting from such Section 2(c) the phrase "the Lockbox Account,
the Borrower's Corporate Account, the Disbursements and the LOC Cash
Collateral Accounts" and inserting in lieu thereof the following
phrase: "all bank accounts in which the Borrower has or may have an
interest."
(e) Sections 6.14, 6.15 and 6.16 of the Security Agreement
are hereby amended by deleting said Sections in their entirety and
inserting in lieu thereof the following:
6.14. GOVERNING LAW; VENUE; WAIVER OF TRIAL BY JURY.
(A) THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
FLORIDA APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY
PERFORMED, IN SUCH STATE NOTWITHSTANDING ITS EXECUTION AND
DELIVERY OUTSIDE SUCH STATE.
(B) BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY
STATE OR FEDERAL COURT SITTING IN THE COUNTY OF
HILLSBOROUGH, STATE OF FLORIDA AND UNITED STATES OF
AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS
AGREEMENT, BORROWER EXPRESSLY WAIVES ANY OBJECTION THAT IT
MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO
THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING,
AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO
THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
(C) BORROWER AGREES THAT SERVICE OF PROCESS
MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE
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<PAGE> 175
SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH
SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED
MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE BORROWER
PROVIDED BY SECTION 12.2 OF THE CREDIT AGREEMENT, OR BY
ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE
APPLICABLE LAWS IN EFFECT IN THE STATE OF FLORIDA.
(D) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C)
HEREOF SHALL PRECLUDE THE AGENTS OR ANY LENDER FROM
BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN
THE COURTS OF ANY PLACE WHERE BORROWER OR ANY OF
BORROWER'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED.
(E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS
AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED
IN CONNECTION WITH THE FOREGOING, BORROWER AND THE AGENTS
ON BEHALF OF THE LENDERS HEREBY AGREE, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL
BY JURY IN SUCH ACTION OR PROCEEDING.
6.15. LEFT BLANK INTENTIONALLY
6.16. LEFT BLANK INTENTIONALLY
39. Representations and Warranties. In order to induce the Agents and
each of the other Lenders signatories hereto to enter into this Amendment
Agreement, the Borrower hereby represents and warrants that the Original
Agreement has been re-examined by the Borrower and that as of the date hereof:
(a) The representations and warranties made by the Borrower in the
Original Agreement (except that the financial statements of the
Borrower shall be those most recently furnished to the Administrative
Agent) are true on and as of the date hereof;
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<PAGE> 176
(b) There has been no material adverse change in the condition,
financial or otherwise, of the Borrower or any of its Subsidiaries
since the date of the most recent financial reports of the Borrower
delivered to the Administrative Agent, other than changes in the
ordinary course of business;
(c) The business and properties of the Borrower and each of its
Subsidiaries are not, and since the date of their most recent financial
reports delivered to the Administrative Agent, have not been, adversely
affected in any substantial way as the result of any fire, explosion,
earthquake, accident, strike, lockout, combination of workers, flood,
embargo, riot, activities of armed forces, war or acts of God or the
public enemy, or cancellation or loss of any major contracts; and
(d) After giving effect to this Amendment Agreement no condition
exists which, upon the effectiveness of the amendment contemplated
hereby, would constitute a Default or an Event of Default on the part
of the Borrower under the Original Agreement or the Amended and
Restated Credit Agreement, either immediately or with the lapse of time
or the giving of notice, or both.
40. Conditions Precedent. The effectiveness of this Amendment Agreement
is subject to the receipt by the Administrative Agent of the following:
(a) eight counterparts of this Amendment Agreement duly executed by
all signatories hereto;
(b) opinion of counsel for the Borrower as to the authorization,
execution and delivery of this Amendment Agreement and the
enforceability of the same against the Borrower in accordance with its
terms;
(c) resolutions of the Board of Directors of the Borrower approving
this Amendment Agreement certified by the Secretary of the Borrower;
(d) an amount equal to the aggregate legal fees incurred by the
Agents in connection with the negotiation, review and execution of this
Amendment Agreement and the other documents related hereto; and
(e) copies of all additional agreements, instruments and documents
which the Agents may reasonably request, such documents, when
appropriate, to be certified by appropriate governmental authorities.
All proceedings of the Borrower relating to the matters provided for herein
shall be satisfactory to the Administrative Agent and its counsel.
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<PAGE> 177
41. Entire Agreement. This Amendment Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter. No promise, condition, representation
or warranty, express or implied, not herein set forth shall bind any party
hereto, and no one of them has relied on any such promise, condition,
representation or warranty. Each of the parties hereto acknowledges that,
except as in this Amendment Agreement otherwise expressly stated, no
representations, warranties or commitments, express or implied, have been made
by any party to the other. None of the terms or conditions of this Amendment
Agreement may be changed, modified, waived or canceled orally or otherwise,
except by writing, signed by all the parties hereto, specifying such change,
modification, waiver or cancellation of such terms or conditions, or of any
proceeding or succeeding breach thereof.
42. No Novation. Each of the parties hereto acknowledges that the
provisions of this Amendment Agreement and the Amended and Restated Credit
Agreement constitute amendments to, and not a novation of, the indebtedness of
the Borrower to the Lenders, and a modification of the terms of repayment and
security for such indebtedness. This Amendment Agreement and the Amended and
Restated Credit Agreement do not constitute or effect either (i) a cancellation
or repayment of any indebtedness, or (ii) the transfer of property to secure
any indebtedness in addition to property previously transferred.
43. Full Force and Effect of Agreement. Except as hereby specifically
amended, modified or supplemented, the Security Instruments and all other Loan
Documents are hereby confirmed and ratified in all respects and shall remain in
full force and effect according to their respective terms.
44. Counterparts. This Amendment Agreement may be executed in any
number of counterparts, each of which shall be deemed an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument.
45. GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY THE LAW OF THE STATE OF FLORIDA, WITHOUT REGARD TO ANY OTHERWISE
APPLICABLE PRINCIPLES OF CONFLICT OF LAWS. BORROWER HEREBY (i) SUBMITS TO THE
JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS OF FLORIDA FOR THE
PURPOSES OF RESOLVING DISPUTES HEREUNDER OR UNDER ANY OF THE OTHER LOAN
DOCUMENTS TO WHICH EACH IS A PARTY OR FOR PURPOSES OF COLLECTION AND (ii) WAIVE
TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION.
46. Enforceability. Should any one or more of the provisions of this
Amendment Agreement be determined to be illegal or unenforceable as to one or
more of the parties hereto, all other provisions nevertheless shall remain
effective and binding on the parties hereto.
47. Successors and Assigns. This Amendment Agreement shall be binding
upon and inure to the benefit of Borrower, the Lenders signatories hereto, the
Agents and their respective successors,
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<PAGE> 178
assigns and legal representatives; provided, however, that the Borrower,
without the prior consent of the Lenders, may not assign any rights, powers,
duties or obligations hereunder.
[Remainder of page intentionally left blank.]
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<PAGE> 179
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be duly executed by their duly authorized officers, all as of the
day and year first above written.
AMERISTEEL CORPORATION
WITNESS:
By:
- ----------------------------- ------------------------------
Name: George D. Beck
- ----------------------------- Title: Assistant Treasurer
Signature Page 1 of 2
<PAGE> 180
NATIONSBANK, NATIONAL ASSOCIATION,
as Administrative Agent for the
Lenders
By:
--------------------------------
Name: Miles C. Dearden III
Title: Senior Vice President
THE BANK OF TOKYO-MITSUBISHI, LTD
as Collateral Agent and
Documentation Agent for the Lenders
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Signature Page 2 of 2
<PAGE> 181
Schedule 1.1
Existing Letters of Credit
S-1
<PAGE> 182
Schedule 4.6
Information Regarding Collateral
S-2
<PAGE> 183
Schedule 7.4
Subsidiaries and Investments in Other Persons
S-3
<PAGE> 184
Schedule 7.6
Indebtedness
S-4
<PAGE> 185
Schedule 7.7
Liens
S-5
<PAGE> 186
Schedule 7.8
Tax Matters
S-6
<PAGE> 187
Schedule 7.10
Litigation
S-7
<PAGE> 188
S-8
<PAGE> 189
Schedule 7.18
Environmental
S-9
<PAGE> 190
Schedule 8.5
Insurance
<PAGE> 1
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 July 14, 1998, (and to all references to our
firm) included in and made a part of this Registration Statement No. 333-55857.
ARTHUR ANDERSEN LLP
Tampa, Florida
July 28, 1998
