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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-3855
Laclede Steel Company
(Exact name of Registrant as specified in its charter)
Delaware 43-0368310
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Metropolitan Square
211 North Broadway
St. Louis, Missouri 63102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 425-1400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
$.01 par value, Common Stock
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months and (2) has been
subject to such filing requirements for the past 90 days. Yes X
No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in any amendment to
this Form 10-K. [X]
At the date of filing of this report there were 4,056,140 shares
of $.01 par value common stock outstanding. At February 10, 1997 the
aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $8,826,000.
Documents Incorporated by Reference
NONE<PAGE>
PART I
Item 1. Business.
(a) General Development of Business
Laclede Steel Company is a manufacturer of a wide
range of carbon and alloy steel products, including pipe and
tubular products, hot rolled products (primarily special quality
bars), wire products, and welded chain. The Company converts its
semi-finished steel into products through its rolling mills and
finishing plants. The Company produces wire products and welded
chain utilizing rods purchased on the open market. Each of the
Company's finishing facilities is located near its end markets
and is specialized by product to optimize efficiency.
The Company is one of three full-line domestic
producers of continuous weld pipe in the United States. In
addition, the Company believes it is a dominant North American
producer of oil tempered wire, which is used for applications
such as mechanical springs and overhead garage door springs. Oil
tempered wire has metallurgical properties that typically command
a price premium over commodity grades of wire, and therefore
produces higher profit margins. The Company's manufactured and
imported chain products give it a significant position in the
truck and automobile tire chain and the hardware and industrial
chain markets. The Company's special quality bars are primarily
sold to forgers for finishing into a variety of products.
Due to favorable energy costs and modernized
facilities, the Company believes it is a low cost producer of
semi-finished steel at the Alton, Illinois Plant. With the
completion of a Ladle Furnace facility in the second quarter of
1996 the Company now produces all of its steel by the more
efficient continuous cast method. Annual steelmaking capacity is
estimated at 780,000 net tons. Through 1995, the Alton Plant had
supplied nearly all of the semi-finished steel used to finish
products at the Company's downstream facilities. The Company
began purchasing rods for its two wire mills and the welded chain
operations in the second quarter of 1996. Over the last twelve
years the Company has acquired or leased five additional
finishing facilities, constructed a new finishing facility and
relocated much of its labor-intensive work to lower cost labor
areas. On February 10, 1997 the Company sold the assets of its
electric weld structural tubing operation located in Benwood,
West Virginia. Sales of structural tubing accounted for
approximately 6% of consolidated net sales in 1996.
At December 31, 1996 Ivaco Inc. of Montreal,
Canada owned 2,018,650 shares of the Company's common stock or
49.8% of the total number of shares outstanding. In July 1996
Ivaco purchased $5.5 million Series A Preferred Stock, which is
convertible at the option of the holder into 1,719,667 shares of
common stock. The Company has been advised that Ivaco would be
prepared to dispose of its interest in Laclede Steel Company at
some time in the future.
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(b) Financial Information
The following table sets forth certain financial
information relating to Registrant's operations:
Year Ended December 31,
(Thousands of Dollars) 1996 1995 1994
Net Sales $335,381 $320,350 $341,289
Net Earnings (Loss) $ (9,985) $(10,137) $ 4,462
Identifiable Assets $331,110 $349,778 $343,251
(c) Description of Business
The following table lists the Company's wide range
of steel products:
Pipe and Tubular Products: Continuous Weld Pipe
- A53 Standard and Extra Heavy
- API 5L Line Pipe
- Coupling Stock
- Fence Pipe
- Rigid Conduit Shells
Hot Rolled Products: Carbon and Alloy SBQ Bars
Forging Billets
Special Shapes
Reinforcing Bars
Wire Products: Cold Drawn Wire
- High Carbon
- Oil Tempered
- Low Carbon
- Annealed Wire and Rod
Chain: Welded Chain
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The following table presents, for the years
indicated, the percentage of the Company's total sales by product
class:
Product 1996 1995 1994
Pipe and tube 41.1% 40.8% 40.1%
Hot Rolled 35.1 34.7 32.5
Wire 13.6 16.4 18.5
Chain 10.2 8.1 8.9
Total 100% 100% 100%
Pipe and Tubular Products. The Company's tubular
products consist primarily of continuous butt weld ("CBW") pipe
which is sold in the U.S. and Canada to distributors and
manufacturers. Pipe products are produced and finished at the
Company's Alton Plant; Fairless Hills, Pennsylvania and Vandalia,
Illinois Facilities. Prior to 1993, the majority of the
Company's CBW pipe was finished at the Alton Plant or at the
Fairless Facility, as discussed below. While semi-finished pipe
continues to be produced at the Alton Plant, in 1993 the Company
moved the majority of the Alton Plant's finishing operations to
the Company's new, lower cost Vandalia Facility. By the end of
1993, the majority of CBW pipe was no longer finished at the
Alton Plant. In February 1997 the Company sold the assets of its
electric resistance weld tubing operation located in Benwood,
West Virginia. This product accounted for approximately 6% of
consolidated net sales in 1996.
The Company is one of only three producers of CBW
pipe in the United States, due in part to the Company's long-term
lease from former competitor USX Corporation of its pipe
manufacturing facilities at the Fairless Facility.
In 1996 the Company completed the final
modifications to the Melt Shop at the Alton Plant by installation
of a Ladle Furnace Facility that allowed the Company to shift the
remaining portion of its steel production used in pipe making
from the ingot process to the more efficient continuous cast
method.
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Hot Rolled Products. The Company's hot rolled
products are produced at the Alton Plant and consist primarily of
special quality ("SBQ") bars sold to manufacturers to be cold
drawn or forged.
Wire Products. The Company is a major
manufacturer of wire products. These products include high and
low carbon wire, oil tempered wire, and annealed wire. The
Company believes it is a dominant participant in the oil tempered
wire market. Wire products are currently manufactured and
finished at the Company's Memphis, Tennessee and Fremont, Indiana
Facilities. The Fremont Facility is the Company's stand-alone
oil tempered wire plant which the Company believes to be a state-of-the-art
facility. The Fremont Plant has begun producing oil
tempered wire for automobile suspension springs and for brake
springs. This is a recently developed new product which is
expected to have a positive effect on profitability.
Chain Products. Laclede Chain, one of the
Company's wholly owned subsidiaries, produces welded chain and
also imports a significant amount of chain for resale. Laclede
Chain generated in excess of $34 million in sales in 1996,
approximately 54% of which was attributable to sales of anti-skid
devices for trucks and automobiles. The balance of the Company's
chain products sales is in the hardware and industrial chain
business.
At December 31, 1996 the Company had a sales
backlog of over $30 million. This backlog does not have
significant seasonal variation. Long-term sales commitments do
not represent a significant portion of the business. For further
information and also for discussion of future capital expenditure
plans, please refer to Management's Discussion and Analysis of
Financial Condition and Results of Operations (MD&A).
Research and development activities of the Company
have not been material.
The Company manufactures steel from steel scrap
generated in the course of its steel production and purchased in
the open market from numerous scrap suppliers. Since it does not
produce its own raw materials, the Company is subject to the
fluctuation in prices and availability of scrap.
The Company's business strategy has been to
modernize its basic steelmaking facilities at the Alton Plant
while growing and modernizing its lower cost, downstream
finishing facilities. The Company believes that the major
elements of this strategy are currently in place.
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The center of the Company's business is the Alton
Plant, which has the advantages of a central location, low
utility costs, and good sources for raw materials. In addition,
the Alton Plant provides the necessary strategic flexibility to
manufacture the grades of steel needed to produce the Company's
various products. Each of the Company's downstream facilities is
located near its end markets and is specialized by product to
optimize efficiency.
The Company began its business expansion with the
acquisition of a chain manufacturer in northwestern Missouri in
1984. Since 1984 the Company has acquired four additional
facilities and constructed one new facility. Most notable among
these new and/or expanded facilities are the Company's lease of
the pipe manufacturing facilities at the Fairless Facility, the
Company's expanded oil tempered wire operations at the Fremont
Facility, and the construction of the Vandalia Facility, a
tubular finishing plant.
The Fremont Facility was expanded in order to
handle the majority of oil tempered wire volume previously
produced at the Alton Plant's wire mill. Relatively minor
amounts of oil tempered wire are produced at the Memphis Plant.
The Vandalia Facility processes semi-finished pipe produced at
the Alton Plant.
In 1996 the Company completed the final phase of
its strategic plan with the restructuring of the steelmaking
facilities at the Alton Plant. The Company's new Ladle Furnace
Facility became operational in the second quarter of 1996 and all
steel is now produced using the more efficient continuous cast
method. In connection with this restructuring, the Company shut
down its Blooming Mill and Rod Mill operations. The shutdown of
these facilities, together with the move to 100% continuous cast
steel, have resulted in more efficient operations at the Alton
Plant. In 1996 the Company began purchasing the rod requirements
for its wire operations on the open market resulting in reduced
costs and improved quality.
In February 1997, the Company sold the assets of
its electric weld structural and mechanical tubing operation,
located in Benwood, West Virginia. Cash proceeds from the sale
of these assets, which consist primarily of equipment and
inventory, totaled approximately $10.0 million. The Company used
the funds from the sale to improve its working capital position.
Sale of these assets will not affect the Company's primary
tubular business, continuous weld pipe.
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Capital Improvements. While the Company has
expanded and improved its downstream finishing facilities, it has
also completed important capital improvements to the steelmaking
operations at the Alton Plant. The primary objective of these
improvements was to substantially reduce production costs and
also provide access to new markets.
Competition
Price sensitivity in markets for the Company's
products is driven by competitive factors and the cost of steel
production.
Domestic. The Company faces competition from
regional mini-mill companies and fully integrated steel mills,
and such competition can be expected to continue. Moreover, the
addition of new sheet capacity in the industry has had and will
continue to have a favorable impact on production costs of the
Company's competitors.
Foreign. The Company also faces competition from
foreign steel producers. Foreign competition may increase in the
future, due to factors such as changes in currency exchange
rates, repeal of duties on foreign-produced steel or the
enactment of restrictive or burdensome regulations or taxes that
affect domestic but not foreign steel manufacturers. Many
foreign steel producers are owned, controlled or subsidized by
their governments and their decisions with respect to production
and sales may be influenced more by political and economic policy
considerations than by prevailing market conditions.
Environmental Matters
In general, the Company is subject to a broad
range of federal, state and local environmental regulations,
including those governing discharges into the air and water, the
handling and disposal of solid and/or hazardous wastes and the
remediation of contamination associated with the release of
hazardous substances. The domestic steel industry, including the
Company, has spent substantial amounts to comply with these
requirements. Although the Company believes it is in substantial
compliance with the various environmental regulations applicable
to its business, there can be no assurance that future changes in
environmental regulations will not require the Company to incur
significant costs in order to comply with such future
regulations.
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Specifically, like all electric arc furnace (EAF)
steel producers, the Company generates EAF dust as part of the
steelmaking process. For some time, the EPA has classified EAF
dust as a designated hazardous waste. Over a period of years,
the Company accumulated approximately 145,000 tons of this
material on-site at the Alton Plant, pending development of
technology for economical treatment.
The Company has received approval of a modified
closure plan for disposition of this existing EAF dust with the
Illinois EPA which provides for the closure of all piles in
place. It appears that the remaining cost of this plan will not
exceed the $3.1 million liability reflected on the Company's
financial statements at December 31, 1996 for the disposal of the
existing EAF dust.
Employees. As of December 31, 1996, the Company
employed approximately 1,600 employees, 315 of whom are
classified as management, administrative and sales personnel.
The Company's 720 hourly employees at the Alton
Plant are covered by a collective bargaining agreement that
expires in September of 1997. None of the Company's other
employees are covered by a collective bargaining agreement. The
Company has never experienced a strike, and it believes that its
relations with its employees are good. The compensation for the
majority of the Company's employees is based partially on
productivity in accordance with various incentive plans.
Item 2. Properties.
The Company's steelmaking facilities are located
on a 400-acre site in Alton, Illinois, and consist of two
electric furnaces with a combined rated production capacity of
over 780,000 net tons per year, a ladle metallurgy facility, a
continuous bloom casting facility, a roughing mill and 14-inch
bar mill, 8-inch bar mill, 22-inch strip mill and facilities for
the manufacture of continuous butt-weld pipe. The Company also
has a pipe finishing plant in Vandalia, Illinois, a chain
manufacturing plant in Maryville, Missouri, a wire mill in
Memphis, Tennessee and a wire oil tempering facility in Fremont,
Indiana. The Company operates a pipe mill in Bucks County,
Pennsylvania which is leased from USX Corporation. The lease
expires September 30, 2001 with an option to renew until
September 30, 2006.
The Company's property is well maintained and
adequate for production of its existing product line. The
majority of the Company's properties are owned in fee. For its
executive offices the Company presently leases space in the
Metropolitan Square Building in downtown St. Louis under a lease
expiring on April 30, 2004.
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Item 3. Legal Proceedings.
There are various claims pending involving the
Company and its subsidiaries with respect to environmental,
hazardous substance, product liability, personal injury, and
other matters arising out of the routine conduct of it business.
The Company believes it has meritorious defenses with respect to
all claims and litigation and the ultimate disposition of such
matters will not materially affect its financial position or
results of operations.
Item 4. Submission of Matters to a Vote of Security
Holders.
A special meeting of the stockholders was held on
October 28, 1996.
Proposals voted upon:
(1) Approving the amendment to the Certificate of
Incorporation of the Company to provide for a reduction
of the par value per share of the Common Stock from
$13.33 per share to $0.01 per share.
For Against Abstention Withheld
3,421,556 101,281 33,381 --
(2) Approving the amendment to the Certificate of
Incorporation of the Company to provide for an increase
in authorized Common Stock from 5,000,000 shares to
25,000,000 shares.
For Against Abstention Withheld
3,321,982 87,750 35,919 110,567
(3) Approving the recapitalization of the Company's Series
A Preferred Stock, no par value per share, such that
the Series A Preferred Stock owned by Ivaco Inc. and
certain members of management of the company is
convertible into Common Stock at the option of the
holder of such Series A Preferred Stock; effective upon
the amendment of the Company's Certificate of
Incorporation provided for in Item 1 and Item 2 and
pursuant to Section 12 of the Company's Certificate of
Designation for Series A Preferred Stock filed with the
Secretary of State of the State of Delaware on July 30,
1996.
For Against Abstention Withheld
2,713,417 97,173 38,721 706,907
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PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters.
Laclede's common stock is traded on the NASDAQ
National Market System and the symbol is LCLD. As of January
1997 there were approximately 580 stockholders of record.
Market
Price Range 1996 1995
Quarter High Low High Low
First $ 8 $ 5-1/2 $12-1/2 $10
Second $ 8-1/4 $ 5-3/8 $12 $10-1/2
Third $ 6-3/8 $ 4 $14-1/2 $10-1/4
Fourth $ 4-1/2 $ 2-3/4 $10-3/4 $ 6-1/4
Dividends Per
Share Paid on
Common Stock 1996 1995
None None
Payment of dividends on common stock is limited by the
Company's Loan and Security Agreement. See Note 4 to the
Company's Consolidated Financial Statements. In addition, the
Certificate of Designation for the Company's outstanding Series A
Preferred Stock provides that the Company shall not declare or
pay any dividends on the Company's common stock unless full
cumulative dividends have been paid or declared on the Series A
Preferred Stock. At this date, full cumulative dividends have
not been paid or declared on the Series A Preferred Stock.
On July 30, 1996, the Company sold 416,667 shares of
Series A Preferred Stock to Ivaco Inc. and the executive officers
of the Company for an aggregate sales price of approximately
$6,250,000. There were no underwriters and no underwriting
discount or commission and the net proceeds to the Company, after
expenses, was $6,090,000. The sale of the Series A Preferred
Stock to Ivaco Inc. and the executive officers of the Company was
exempt from registration under the Securities Act of 1933
pursuant to Section 4(2) as a transaction not involving any
public offering because of the limited number of offerees, each
of whom was a sophisticated investor and fully informed as to the
risks involved. On October 28, 1996, at a special meeting of
stockholders, the Company's stockholders approved a
recapitalization of the Series A Preferred Stock such that each
share of the preferred stock became convertible into the
Company's Common Stock at the option of the holder at a
conversion price of $3.20 into 4.69 shares of common stock.
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<TABLE>
Item 6. Selected Financial Data.
Five-Year Financial Summary
(In Thousands of Dollars Except Per Share Data)
<CAPTION>
1996 1995 1994 1993 1992
<C> <C> <C> <C> <C> <C>
Net Sales $335,381 $320,350 $341,289 $328,766 $274,468
Earnings (Loss) Before Cumulative
Effect of Change in Accounting
Principle $ (9,985)* $(10,137)* $ 4,462 $ 3,107 $ (7,547)**
Net Earnings (Loss) $ (9,985)* $(10,137)* $ 4,462 $(43,436) $ (7,547)**
Net Earnings (Loss) per share $ (2.50)* $ (2.50)* $ 1.10 $ (10.71) $ (1.86)**
Other Financial Data
Total assets $331,110 $349,778 $343,251 $349,814 $312,142
Working capital 62,001 87,759 88,906 88,833 83,403
Capital expenditures 10,726 13,847 14,747 12,782 19,845
Long-term debt 107,889 118,791 100,801 100,926 103,908
Stockholders' equity 17,245 16,518 53,743 42,590 98,013
Stockholders' equity per share $ 4.25 $ 4.07 $ 13.25 $ 10.50 $ 24.16
Cash dividends per share $ -- $ -- $ -- $ -- $ --
* Includes restructuring, asset impairment and other charges which
reduced net earnings in 1996 by $1.0 million or $.24 per share and in
1995 by $11.4 million or $2.81 per share.
** Includes special charges which reduced net earnings by $11.6 million
or $2.86 per share.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Operating Results 1994 to 1996
The net loss for 1996 was $10.0 million which
included a $1.6 million ($1.0 million after tax) charge for an
early retirement incentive in the fourth quarter discussed in
Note 5 to the Consolidated Financial Statements.
Net earnings for 1995 were $1.3 million before the
effect of restructuring, asset impairment and other charges
described in Note 6 to the Consolidated Financial Statements.
The net loss for 1995 was $10.1 million after deducting the $11.4
million after tax effect of the special charges.
Net earnings for 1994 were $4.5 million which
included a $1.1 million ($.7 million after tax) gain on the sale
of equipment.
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The change in net sales for the last three fiscal
years is analyzed as follows:
(In Thousands)
1996 Vs. 1995 1995 Vs. 1994 1994 Vs.1993
Increase (Decrease)
in net sales $ 15,031 $(20,939) $ 12,523
Comprised of:
Increase (Decrease)
in volume $ 32,192 $(24,788) $(14,044)
Increase (Decrease)
in price $(17,161) $ 3,849 $ 26,567
Steel Operations
Net sales increased by $15.0 million in 1996 over
1995 resulting from a 13.5% increase in tons shipped offset by a
5.4% reduction in selling prices.
Cost of products sold increased by $30.3 million
reflecting the higher volume of shipments in 1996 and a change in
the mix of products sold.
In 1995 net sales decreased by $20.9 million as a
result of a 6.4% reduction in steel shipments. While sales
prices declined in the second half of 1995, average prices for
the year were slightly higher than 1994.
Cost of products sold decreased by 6.4% compared
to 1994, reflecting lower volume. As discussed below, production
costs in 1995 include the effects of further increases in the
cost of the Company's basic raw material, ferrous scrap.
Net sales in 1994 increased by $12.5 million or
3.8% from 1993, reflecting a significant increase in average
selling prices partially offset by a lower volume of tons
shipped. Cost of products sold increased by $8.7 million or
2.9%, primarily as a result of higher ferrous scrap costs.
The Company experienced a sharp rise in the price
of scrap in 1994 and 1995. The average scrap usage cost in 1994
represents an increase over the prior year of approximately 19%.
In 1995 scrap prices were 3.4% higher than 1994. In 1996 scrap
prices declined slightly.
In addition to demand for steel, there are other
factors affecting the supply of scrap that could be considered
structural factors, including the growth in electric furnace
production which is almost totally dependent on ferrous scrap as
a raw material.
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In 1994 and the first half of 1995, the Company
was able to recover the increased scrap costs through higher
selling prices for its products. In the second half of 1995 and
for the year 1996, declining sales prices had a negative impact
on product margins.
In December 1995 a decision was made to initiate
the final phase of the Company's strategic plan, leading to a
restructuring of the steelmaking facilities at the Alton Plant.
As a result of this decision, accounting charges
totaling $9.8 million after taxes were recorded in the fourth
quarter of 1995. These charges, which are primarily non-cash in
nature, include recognition of impairment loss for equipment,
retirement costs for affected employees, and adjustments of rod
and wire inventories to market value.
The Company also recognized a charge of $1.6
million, after taxes, related to inventory write-downs in its
tubular product operations. This inventory adjustment, which
reduced the carrying cost to net realizable value, reflected
higher production costs together with significant reductions in
selling prices for tubular products. Pressure on sales prices in
1995 was caused by lower prices for sheet steel, the raw material
for the Company's competitors in the pipe market.
The Company's new Ladle Furnace Facility became
operational in the second quarter of 1996 and all steel is now
produced using the more efficient continuous cast method. The
Company ceased production of rods, and began purchasing
requirements for its wire operations on the open market, at a
significant reduction in costs.
In connection with this restructuring, in 1996 the
Company also shut down its Blooming Mill and Rod Mill operations.
The shutdown of these facilities, together with the move to 100%
continuous cast steel, results in more efficient operations at
the Alton Plant. These actions, however, resulted in production
inefficiencies and higher costs early in the year. These
inefficiencies continued after the start-up of the Ladle Furnace
until August 1996 when the Company began to experience progress
in the form of lower steelmaking costs.
Slight increases in selling, general and
administrative expenses in 1994 and 1995 were primarily a result
of higher salaried employment costs. The increase in interest
expense in 1996 over 1995 reflects an increase in the average
borrowings outstanding and a slightly higher average rate of
interest. In 1995 the $3.2 million increase in interest expense
reflects higher interest rates, as well as an increase in long-term borrowings.
In addition, in the second quarter of 1995 the
Company began expensing interest costs on the Solid Waste
Disposal Revenue Bonds used to finance its High Temperature
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Metals Recovery System at the Alton Plant. These interest costs
had previously been capitalized until modification of the
facility was complete. See Note 9 to the Consolidated Financial
Statements and "Liquidity and Capital Resources" for further
discussion.
In 1994 the Company recorded a gain of $1.1
million related to the sale of various items of steel mill
equipment. In the second quarter of 1995 the Company completed
the sale of approximately 3% of the common stock of its
subsidiary, Laclede Mid America, Inc. Accordingly a non-taxable
gain of $728,000 representing the excess of the sales price over
the net book value of the stock sold, is included in the results
for 1995. Higher depreciation expense in 1995 is a result of
increased capital expenditure levels. Reduced depreciation in
1996 reflects the shutdown of the Blooming Mill and Rod Mill at
the Alton Plant.
General inflation has not had a significant effect
on the Company's sales and revenues, which are more related to
factors such as domestic steel capacity, currency levels, demand
for the Company's products, and the impact of foreign steel
imports. Imported steel typically has the greatest impact on the
Company's tubular products.
Divisions and Subsidiaries
The Company operates a cold drawn wire mill in
Memphis, Tennessee and an oil tempered wire facility in Fremont,
Indiana. In 1997 the Fremont Plant expects to produce certain
higher grades of oil tempered wire, utilizing technology
developed in connection with the project to produce wire for
suspension springs.
The Company's wholly-owned subsidiary, Laclede
Chain Manufacturing Company, operates a manufacturing plant in
Maryville, Missouri and a warehouse and sales operation in
Portland, Oregon. The Laclede Chain operation made a significant
contribution to consolidated earnings in the fourth quarter of
1996 and 1994. Unusually mild weather in the northwest adversely
affected the Chain Company's tire chain business in the fourth
quarter of 1995.
Under an agreement with USX Corporation the
Company leases the Pipe Mill Operations located at the Fairless
Works in Bucks County, Pennsylvania. Shipments of continuous
weld pipe from the Fairless Plant represented 36% of tubular
products sales in 1996.
The Company also operates a tubular finishing
plant in Vandalia, Illinois. The Vandalia facility processes
semi-finished pipe produced at the Alton Pipe Mill. Shipments of
continuous weld pipe from the Vandalia Plant represented 41% of
tubular products sales in 1996.
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Liquidity and Capital Resources
In the year 1996 operating activities provided $11.8 million
in cash. Capital expenditures were $10.7 million, and
contributions to Company pension plans totaled $15.0 million.
Increases in accounts receivable of $1.5 million were more than
offset by decreases in inventory of $17.2 million, while accounts
payable and accrued expenses increased by $10.0 million.
Proceeds from a sale-leaseback transaction increased cash flow by
$4.0 million in the second quarter. Net working capital
decreased by $25.8 million and the ratio of current assets to
current liabilities was 1.9 to 1.0 at December 31, 1996.
In July 1996, the Company issued a total of $6.25 million in
Series A Preferred Stock to its largest stockholder, Ivaco Inc.,
and to executive officers of the Company. On October 28, 1996,
at a special meeting of the stockholders, an amendment was
approved to the Company's Certificate of Incorporation which
reduced the par value of each share of common stock from $13.33
per share to $0.01 per share and increased the number of
authorized common stock shares from 5,000,000 shares to
25,000,000 shares. The stockholders also approved the
recapitalization of the Company's Series A 6% preferred stock to
convertible preferred stock. At such time each share of the
preferred stock became convertible into common stock at the
option of the holder at a conversion price of $3.20 into 4.69
shares of common stock. In connection with the sale of Series A
Preferred Stock to Ivaco Inc. and to executive officers of the
Company, the Company was required to use its best efforts to
obtain stockholder approval of the amendment to the Company's
Certificate of Incorporation. In addition such approval was
necessary in order for the Company to pursue a rights offering to
all of the Company's stockholders, entitling all such
stockholders to subscribe for Series A Preferred Stock (the
"Rights Offering").
The Company, however, has postponed the Rights Offering in
order to allow time to improve recent operating results. In this
regard the Company has implemented a number of cost reduction and
productivity improvement programs that will be effective in 1997.
Cost reductions were accomplished in several areas, including
compensation and work force related issues and issues concerning
employee benefits. The Company does not presently intend to
proceed with the Rights Offering until these programs and
operating results have reached satisfactory levels. There can be
no assurance, however, when or if the Company will proceed with a
Rights Offering.
At December 31, 1996, $76.1 million in borrowings were
outstanding under the Company's revolving credit facility.
Amounts available under this facility were utilized early in the
first quarter of 1997 to cover outstanding short-term
commitments, primarily trade accounts payable.
- 15 -<PAGE>
In February 1997 the Company completed the sale of its
electric weld structural and mechanical tubing operation, located
in Benwood, West Virginia. Cash proceeds from the sale of these
assets, which consist primarily of equipment and inventory, were
approximately $10.0 million. The Company used the funds from the
sale to improve its working capital position.
Under terms of the Company's Loan and Security Agreement,
amounts available based on Company inventory levels will be
reduced by $10.0 million by September 30, 1997. The Company
believes that planned inventory reductions will equal or exceed
the reduction in revolving credit availability and, thus, this
reduction should not affect current availability. During 1997
the Company anticipates capital expenditures of approximately
$3.0 million, and contributions to pension plans of $14.0
million. Taking into account the proceeds from the February 1997
sale of the Benwood facility and assuming that the Company is
able to (i) maintain its existing level of sales, (ii) avoid
sales price decreases and (iii) capture savings from recently
completed productivity improvements, the Company will generate
sufficient cash flow to finance its 1997 liquidity requirements
including the above referenced expenditures. If the Company is
unable to maintain its existing level of sales and current
pricing or if the Company's recently completed productivity
improvements fail to produce positive financial results, the
Company may not generate sufficient cash flow to finance its 1997
liquidity requirements. In such event, the Company would
evaluate other methods of generating cash flow such as the sale
of significant businesses or assets and refinancing transactions.
There can be no assurance, however, that any such alternative
could be successfully completed.
The Company has amended its Loan and Security Agreement,
obtaining waivers of financial covenants relating to operating
losses and net worth for the third quarter of 1996, and modifying
such covenants with regard to the other quarters of 1996 and the
year 1997. In the event further amendment to financial covenants
is necessary because operating losses exceed the limits of the
amended covenants, there can be no assurance that the Company
will be able to obtain such amendment.
The Company is also required to comply with various
covenants regarding limits on liabilities as defined in the
Agreements for the Solid Waste Revenue Bonds and Pollution
Control Revenue Bonds. At December 31, 1996 the Company was in
compliance with these covenants. Furthermore the sale of the
Benwood Operations described above in February 1997 improved the
Company's financial position with regard to continued compliance.
Further operating losses in the future, however, could cause the
Company to violate these covenants. In the event amendment of
the covenants is required in the future, there can be no
assurance that the Company can obtain such amendment.
- 16 -<PAGE>
As more fully discussed in Note 3 to the Consolidated
Financial Statements, at December 31, 1996 the Company has net
deferred tax assets of $47,557,000. Management currently
believes that its long-term profitability should ultimately be
sufficient to enable it to realize full benefit of future tax
deductions. Thus no deferred tax valuation allowance is deemed
necessary.
The Company will continue to monitor and evaluate its
deferred tax assets and the need for a deferred tax valuation
allowance. In the event a deferred tax valuation allowance is
required in the future, amendment of financial covenants in the
Company's Loan and Security Agreement, as well as its Bond
Agreements, may be required. There can be no assurance that the
Company will be able to obtain such amendments.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
The foregoing Management's Discussion and Analysis
and other portions of this report on Form 10-K, contain various
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Sections 21E of the
Securities Exchange Act of 1934, as amended, which represent the
Company's expectations or beliefs concerning future events,
including the following: statements regarding the overall demand
for steel; statements regarding the ability to maintain sales
prices; statements regarding productivity improvement programs;
statements regarding the Company's long-term profitability; and
statements regarding future borrowing capacity. In addition,
statements containing expressions such as "believes,"
"anticipates" or "expects" used in the Company's periodic reports
on Forms 10-K and 10-Q filed with the SEC are intended to
identify forward-looking statements. The Company cautions that
these and similar statements included in this report and in
previously filed periodic reports including reports filed on
Forms 10-K and 10-Q and further qualified by important factors
that could cause actual results to differ materially from those
in the forward-looking statement, including, without limitation,
the following: decline in sales prices for steel products;
increases in the cost of steel scrap; failure to obtain
significant benefits from the Company's recently completed cost
reduction and productivity improvement programs; and increased
domestic or foreign steel competition.
Item 8. Financial Statements and Supplementary Data.
The index to the Financial Statements of the
Company and the independent auditors' report of Deloitte & Touche
LLP appear on pages 27 and 53.
- 17 -<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
NONE
PART III
Item 10. Directors and Executive Officers of the Company.
(a) Certain information with respect to each of the
directors of the Company is set forth below, including
any positions they hold with the Company and their
business experience the past five years:
Name, Age, Other Positions with the Company, Served as
Principal Occupation and Directorships of a Director
Other Companies Since
Donald F. Gunning, 61 . . . . . . . . . . . . . 1981 (1)
Consultant, Steel and Industrial Mineral
Industries (1993 to date); President,
International Marble and Stone Co. Ltd.
(producer of industrial minerals)
(1985 to 1993)
A. William Hager, 72 . . . . . . . . . . . . . 1991
Chairman of the Board, C. Hager & Sons
Hinge Manufacturing Company (manufacturer
of hinges and builders' hardware) (1978
to date); Director of Boatmen's Trust
Company
E. Lawrence Keyes, Jr., 67 . . . . . . . . . . 1988 (1)
Partner, Fortune Group Consulting, Inc.
(1987 to date); Consultant, Emerson
Electric Co. (manufacturer of electrical
products) (October 1986 to September
1993); President of Emerson Electric
Co. (October 1977 through September
1986); Director of Equitable
Resources, Inc.
John B. McKinney, 64 . . . . . . . . . . . . . 1981
President and Chief Executive Officer of
the Company (January 1983 to date);
Director of Boatmen's Trust Company and
The Automobile Club of Missouri
Robert H. Quenon, 68 . . . . . . . . . . . . . 1992
Mining Consultant (1991 to date); Chairman
of the Board, Federal Reserve Bank of
St. Louis (1993 to 1995); Chairman (1990
to 1991) and President and Chief Executive
Officer (1983 to 1990) of Peabody Holding
Company, Inc. (coal mining and sales);
Director of Union Electric Company and
Newmont Gold Co.
- 18 -<PAGE>
Lawrence K. Roos, 79 . . . . . . . . . . . . . 1984 (1)
Interim Chancellor, St. Louis Community
College (December 1990 to December 1991);
President, Federal Reserve Bank
of St. Louis (March 1976 through January
1983); Advisory Director of Boatmen's
Trust Company; Director of Trans World
Airlines, Inc.
Edwin J. Spiegel, Jr., 76 . . . . . . . . . . . 1977
Consultant, Jefferson Smurfit Corporation
(producer of paperboard packaging) (January
1982 to date)
Lester Varn, Jr., 72 . . . . . . . . . . . . . 1984 (1)
President, Varn Investment Company and
Affiliates (management of securities, real
estate, timberland and forest products
manufacturing) (1973 to date); Advisory
Director of First Union National Bank of
Florida, Jacksonville, Florida; and
Director of Production Operations Corp.,
Houston, Texas.
George H. Walker III, 65 . . . . . . . . . . . 1990
Chairman of the Board, Stifel Financial
Corp. (investment banking firm) and its
principal subsidiary, Stifel, Nicolaus &
Company, Incorporated (stock brokerage
firm) (1979 to date); Director of Laidlaw
Corp. and EAC Corporation
(1) Messrs. Gunning, Keyes, Roos and Varn serve on the Board as
designees of Ivaco Inc. pursuant to the provisions of an
agreement reached in 1991, in which the Company and Ivaco
Inc. agreed that the Company would take the necessary action
to cause four designees of Ivaco Inc. to be seated on the
Company's nine-member Board of Directors.
(b) Information with respect to the executive officers of the
Company.
The executive officers of the Company and their
ages are as follows:
Name Age Position
John B. McKinney 64 President, Chief Executive
Officer and Director
Michael H. Lane 54 Vice President-Finance,
Treasurer and Secretary
J. William Hebenstreit 51 Vice President-Operations
Larry J. Schnurbusch 50 Vice President-Administration
H. Bruce Nethington 55 Vice President-Human Resources
- 19 -<PAGE>
John B. McKinney was elected President and Chief
Executive Officer of the Company in January 1983. Mr. McKinney
has been a director of the Company since 1981 and is also a
director of Boatmen's Trust Company and The Automobile Club of
Missouri.
Michael H. Lane was elected Vice President-Finance, Treasurer
and Secretary of the Company in 1983.
J. William Hebenstreit was elected Vice President-Operations of
the Company in 1983.
Larry J. Schnurbusch was elected Vice President-Administration
in 1993. Prior to 1993, he served as Director of
Corporate Administration of the Company.
H. Bruce Nethington was elected Vice President-Human Resources
in 1993. Prior to 1993, he served as Director of
Industrial Relations of the Company.
Item 11. Executive Compensation.
The following table presents summary information
concerning compensation for services rendered to the Company
during each of the last three fiscal years by those persons who
at December 31, 1996 were the Chief Executive Officer and the
other executive officers.
Summary Compensation Table
<TABLE>
<CAPTION> Annual Compensation
Other Annual All Other
Name and Bonus Compensation Compensation
Principal Position Year Salary($) ($)(1) ($)(2) ($)(3)
<C> <C> <C> <C> <C> <C>
John B. McKinney 1996 $364,500 $ -- $288,923 $36,971
President and Chief 1995 364,500 -- 562,528 36,848
Executive Officer 1994 339,372 277,020 168,431 44,076
J. W. Hebenstreit 1996 $243,504 $ -- $156,875 $12,928
Vice President- 1995 243,504 -- 312,005 12,915
Operations 1994 226,629 138,797 66,185 24,125
Michael H. Lane 1996 $243,504 $ -- $190,293 $15,017
Vice President- 1995 243,504 -- 339,222 14,964
Finance, Treasurer 1994 226,629 138,797 129,254 26,293
and Secretary
Larry J. Schnurbusch 1996 $178,008 $ -- $122,503 $ 6,981
Vice President- 1995 178,008 -- 125,771 6,943
Administration 1994 165,813 94,700 48,408 15,044
H. Bruce Nethington 1996 $167,508 $ -- $121,596 $ 9,094
Vice President- 1995 167,508 -- 145,307 8,921
Human Resources 1994 156,024 89,114 45,703 17,347
(1) The amounts represent annual bonuses earned under the
Company's Discretionary Incentive Compensation Plan. No
bonuses were earned for 1996 or 1995.
- 20 -<PAGE>
(2) Amounts reported as Other Annual Compensation consist
primarily of income tax payments related to Company
contributions to the Key Employee Retirement Plan. Such
contributions represent taxable income to Plan participants
and, under the terms of the Plan, the Company is obligated
to reimburse participants for the payment of such taxes.
As a result of a reduction in benefits under the Key
Employee Retirement Plan agreed to in 1996, the Company does
not anticipate Plan contributions and, therefore, income tax
payments in 1997 to Messrs. McKinney, Hebenstreit and Lane.
Certain perquisites which the executive officers received in
1994, 1995 and 1996, the aggregate amount of which did not
exceed the lesser of $50,000 or 10% of any such officer's
salary and bonus, are not included in other Annual
Compensation.
(3) The amounts shown for 1996 represent life insurance premiums
paid by the Company on behalf of the executive officers.
</TABLE>
The Company did not grant any stock appreciation
rights or stock options in 1996. The following table presents
certain information concerning stock appreciation rights
exercised by the Company's executive officers during 1996:
Aggregated SAR Exercises in Last Fiscal Year
and Fiscal Year-End SAR Values
<TABLE>
<CAPTION> Number of Unexercised Value of Unexercised
SARs at Fiscal In-the-Money SARs at
Year-End(#) Fiscal Year-End($)(2)
Number of
Shares Underlying
SARs
Name Exercised(#) Value Realized($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
<C> <C> <C> <C> <C>
John B. McKinney -- -- 7,500/-- --/--
J. W. Hebenstreit -- -- 2,000/-- --/--
Michael H. Lane -- -- 2,000/-- --/--
Larry J. Schnurbusch -- -- 3,000/-- --/--
H. Bruce Nethington -- -- 1,500/-- --/--
(1) Cash payments to be received equal the number of shares
subject to the SAR times the difference between the closing
price of the Company's Common Stock on the last trading day
preceding the date of exercise and the base price. The base
price equals the closing price of the Company's Common Stock
on the last trading day preceding the date of grant.
(2) Based on the closing price of the Company's Common Stock on
December 31, 1996.
</TABLE>
- 21 -<PAGE>
Benefit Plans
The Company maintains the Laclede Salaried
Employees' Pension Plan (the "Pension Plan"), a defined benefit
plan which provides a monthly pension to salaried employees of
the Company (excluding employees covered by a collective
bargaining agreement) who retire or terminate with vested rights
in accordance with the provisions of the Pension Plan. Benefits
are based upon years of credited service and covered
compensation, offset by the participant's Primary Insurance
Amount under the Federal Social Security Act. The Company also
maintains the Key Employee Retirement Plan (the "Supplement
Plan"), the purpose of which is to provide additional retirement
income to certain key employees of the Company, including certain
of the executive officers. Under the Supplement Plan, the
eligible employees were guaranteed that the total amount received
by them each year during retirement from the Pension Plan,
Federal Social Security and the Supplement Plan would be equal to
70% of the average of their highest aggregate three consecutive
calendar year salary and bonus during their last 10 years of
employment with the Company ("Salary Level"), assuming retirement
at age 60. In connection with a Company-wide cost reduction
program initiated in 1996, in October 1996 the executive officers
agreed to a reduction in retirement benefits under the Supplement
Plan by a change in the percentage of Salary Level benefits from
70 to 65%. If the employee retires prior to age 60, the
applicable percentage of the Salary Level will be reduced 2.5%
for each year of retirement age below age 60.
The aggregate annual benefits payable pursuant to
the Pension Plan, the Supplement Plan and Federal Social Security
at various assumed salary levels and retirement ages are
summarized as follows:
<TABLE>
<CAPTION> Estimated Annual Retirement
Benefit at the Respective Ages Listed
Salary Level* 50 53 56 60
<C> <C> <C> <C> <C>
175,000 . . . . . . . . . . . . . . . $ 85,313 $ 93,844 $102,375 $113,750
225,000 . . . . . . . . . . . . . . . 109,688 120,656 131,625 146,250
275,000 . . . . . . . . . . . . . . . 134,063 147,469 160,875 178,750
325,000 . . . . . . . . . . . . . . . 158,438 174,281 190,125 211,250
375,000 . . . . . . . . . . . . . . . 182,813 201,094 219,375 243,750
425,000 . . . . . . . . . . . . . . . 207,188 227,906 248,625 276,250
475,000 . . . . . . . . . . . . . . . 231,563 254,719 277,875 308,750
525,000 . . . . . . . . . . . . . . . 255,938 281,531 307,125 341,250
575,000 . . . . . . . . . . . . . . . 280,313 308,344 336,375 373,750
625,000 . . . . . . . . . . . . . . . 304,688 335,156 365,625 406,250
675,000 . . . . . . . . . . . . . . . 329,063 361,969 394,875 438,750
* Salary level assumes the average of the highest average
aggregate three consecutive calendar year earnings for
eligible executive officers during the last ten years of
their employment.
</TABLE>
- 22 -<PAGE>
Messrs. McKinney, Hebenstreit, Lane, Schnurbusch
and Nethington have accumulated 40, 29, 24, 28 and 29 credited
years of service, respectively. The current salary level for
each of the eligible executive officers in the Supplement Plan
is: Mr. McKinney, $547,243; Mr. Hebenstreit $326,193; Mr. Lane,
$326,193; Mr. Schnurbusch, $221,627; and Mr. Nethington,
$193,919.
The Company also maintains the Laclede Steel
Company Salaried Employees' Profit Sharing Plan (the "Profit
Sharing Plan") for the purposes of encouraging eligible employees
to develop initiative and productivity and providing the
employees with additional retirement benefits. The Profit
Sharing Plan is intended to qualify as a cash deferred
compensation arrangement under Section 401(k) of the Internal
Revenue Code. Salaried employees of the Company are eligible to
participate in the Profit Sharing Plan.
Compensation of Directors
Directors who are not otherwise employed by the
Company receive a $1,125 monthly retainer and a per diem fee of
$1,125, plus expenses, for Board or committee meetings attended.
Employment Contracts
Messrs. McKinney, Hebenstreit, Lane, Schnurbusch
and Nethington each has an employment agreement with the Company
(the "Employment Agreements"). Effective July 30, 1996 Mr.
McKinney's Employment Agreement provides for a minimum salary of
$364,500 for his services as President and Chief Executive
Officer, while the Employment Agreements of Messrs. Hebenstreit
and Lane provide for a minimum salary of $243,500 for their
services, respectively, as Vice President-Operations and Vice
President-Finance, Treasurer and Secretary. Also effective July
30, 1996, Mr. Schnurbusch's Employment Agreement provides for a
minimum salary of $178,000 for his services as Vice President-Administration
and Mr. Nethington's Employment Agreement provides
for a minimum salary of $167,500 for his services as Vice
President-Human Resources. The Employment Agreements continue
through August 2, 1999.
- 23 -<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners
and Management.
The following information is furnished with
respect to each person known by management of the Company to be
the beneficial owner of more than 5% of the outstanding Common
Stock of the Company, each director of the Company, each
executive officer of the Company and all directors and executive
officers as a group. The information is furnished as of February
1, 1997.
<TABLE> Shares of
<CAPTION> Series A
Shares of Preferred
Common Stock Stock
Name and Address of Beneficially Percent of Beneficially Percent of
Beneficial Owner Owned (1) Class Owned (1) Class
<C> <C> <C> <C> <C>
Ivaco Inc. (2) . . . . . . 2,018,650 (3) 49.77% 366,667 88.00%
Place Mercantile
770 rue Sherbrooke ouest
Montreal, Quebec, Canada H3A 1G1
Donald F. Gunning . . . . 150 * -- --
A. William Hager . . . . . 500 * -- --
J. W. Hebenstreit . . . . 10,000 * 21,667 5.20%
E. Lawrence Keyes, Jr. . . 150 * -- --
Michael H. Lane . . . . . 10,600 * 5,000 1.20%
John B. McKinney . . . . . 40,000 * 13,333 3.20%
H. Bruce Nethington . . . 1,000 * 5,000 1.20%
Robert H. Quenon . . . . . 300 * -- --
Lawrence K. Roos . . . . . 3,000 * -- --
Larry J. Schnurbusch . . . 7,730 * 5,000 1.20%
Edwin J. Spiegel, Jr. . . 350 * -- --
Lester Varn, Jr. . . . . . 300 * -- --
George H. Walker III . . . 2,000 (4) * -- --
All Directors and Executive
Officers as a Group
(13 persons) . . . . . . . 76,080 1.88% 50,000 12.00%
* Represents less than one percent of the outstanding
Common Stock of the Company.
(1) Beneficial ownership of shares, as determined in accordance
with applicable Securities and Exchange Commission rules,
includes shares as to which a person directly or indirectly
has or shares voting power and/or investment power. Unless
otherwise indicated, each holder has sole voting and
investment power over the shares reported.
(2) In an agreement dated July 1996, as long as Ivaco Inc. is
the beneficial owner of 40% or greater of the Company's
Common Stock, Ivaco Inc. shall have the right to cause the
Company to use its best efforts to cause four designees of
Ivaco Inc. to be seated on the Company's nine-member Board
of Directors. See Item 13.
- 24 -<PAGE>
(3) Based upon Schedule 13D forms dated January 22, 1993 and
September 28, 1993 filed by Ivaco Inc.
(4) Includes 1,000 shares of Common Stock owned by Mr. Walker's
wife. Mr. Walker disclaims beneficial ownership of such
shares.
</TABLE>
Item 13. Certain Relationships and Related Transactions.
In July 1996, the Company issued a total of 416,667 shares
of Series A 6% Preferred Stock to its largest stockholder, Ivaco
Inc., and to named executive officers of the Company,
("Management Purchasers") for approximately $6,250,000 in cash
pursuant to a Stock Purchase agreement with Ivaco (the "Ivaco
Agreement") and a Management Stock Purchase Agreement with each
of the Management Purchasers. On October 28, 1996, at a special
meeting of the stockholders, an amendment was approved to the
Company's Certificate of Incorporation which reduced the par
value of each share of common stock from $13.33 per share to
$0.01 per share and increased the number of authorized common
stock shares from 5,000,000 shares to 25,000,000 shares. The
stockholders also approved the recapitalization of the Company's
Series A 6% preferred stock to convertible preferred stock. At
such time each share of the preferred stock became convertible
into common stock at the option of the holder at a conversion
price of $3.20 into 4.69 shares of common stock. For complete
terms and conditions of the Series A Preferred Stock, see the
Certificate of Designation for such series filed as Exhibit 4(1)
to the Annual Report on Form 10-K.
In connection with the sale of Series A Preferred Stock to
Ivaco Inc. and to executive officers of the Company, the Company
was required to use its best efforts to obtain stockholder
approval of the amendment to the Company's Certificate of
Incorporation. In addition such approval was necessary in order
for the Company to pursue a rights offering to all of the
Company's stockholders, entitling all such stockholders to
subscribe for Series A Preferred Stock (the "Rights Offering").
The Company, however, has postponed the Rights Offering in order
to allow time to improve recent operating results. See Item 7,
"Management Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources."
Pursuant to the Ivaco Agreement, the Company agreed that as
long as Ivaco, or Ivaco together with any person with which Ivaco
is acting in concert in connection with its investment in the
Company, is/are the beneficial owner(s) of 40% of greater of the
outstanding shares of Common Stock, on a fully diluted basis (the
"Ownership Threshold"), Ivaco has the right to cause the Company
to use its best efforts to cause its Board of Directors to
- 25 -<PAGE>
nominate four persons designated by Ivaco to serve on the
Company's nine person Board of Directors and to use its best
efforts to cause the stockholders of the Company to elect such
Directors, and the Company will not change the number of
Directors on the Board of Directors to a number higher than nine.
This covenant is a confirmation of a letter agreement reached
with Ivaco in 1991 (the "1991 Agreement"), and restates Ivaco's
existing rights in a more formal contractual form.
Pursuant to the Ivaco Agreement, Ivaco agreed to execute a
form of Standby Agreement (the "Standby Agreement") immediately
prior to the effectiveness of the Registration Statement with
respect to the purchase of up to 83,333 shares of Series A
Preferred Stock from the Company for an aggregate purchase price
of $1,249,995, or $15.00 per share, under certain conditions.
Ivaco's obligations to purchase additional Series A Preferred
Stock from the Company under the Standby Agreement are postponed
until the Company determines to proceed with the Rights Offering.
The sale of shares of Series A Preferred Stock to Ivaco and
the Management Purchasers was not registered with the Securities
and Exchange Commission or with any state's securities
commission. Accordingly, to provide Ivaco and the Management
Purchasers with the ability to sell the Series A Preferred Stock
(and any shares of Common Stock issued upon conversion thereof)
owned by them absent an exemption from the registration
requirements under the Securities Act of 1933, as amended, the
Company, Ivaco and the Management Purchasers entered into a
Registration Rights Agreement (the "Registration Rights
Agreement") pursuant to which the company agreed to provide three
demand registration rights to Ivaco for such shares (and any
shares of Common Stock issued upon conversion thereof)
(collectively, the "Registrable Securities") and incidental
registration rights to Ivaco and the Management Purchasers.
In connection with the Registration Rights Agreement, the
Company has agreed to indemnify the holders of Registrable
Securities against all losses, claims, damages, liabilities or
expenses to the extent such losses arise out of, or are based
upon, any untrue statement or alleged untrue statement of any
material fact contained in any registration statement.
In connection with the purchase of shares of Series A
Preferred Stock by Ivaco and the Management Purchasers, as of
July 30, 1996, the Company and each of the Management Purchasers
entered into amendments to existing Employment Agreements (as in
Item 11) to eliminate previously existing provisions regarding
payments to be made to the Management Purchasers upon a change of
control. The other terms of such Employment Agreements were not
changed.
- 26 -<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
(a) Documents Filed as Part of This Report
The following is an index of the financial
statements and schedules included in this Report.
(1) Financial Statements
LACLEDE STEEL COMPANY AND SUBSIDIARIES
Page
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . 31
Consolidated Balance Sheets, December 31, 1996 and 1995 . . 32
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996, 1995 and 1994 . . . . . . . 34
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . 35
Notes to Consolidated Financial Statements . . . . . . . . . 36
Independent Auditors' Report on Financial Statements . . . . 53
(2) Consolidated Financial Statement Schedules
NONE
- 27 -<PAGE>
(3) Exhibits
The following is an index of the exhibits included
in this Report or incorporated herein by reference.
(3)(a) Registrant's Certificate of Incorporation as
restated October 28 1996. (Incorporated by
reference to Exhibit (3) in Registrant's Quarterly
Report on Form 10-Q for September 30, 1996.)
(3)(b) By-laws of Registrant amended May 22, 1987.
(Incorporated by reference to Exhibit (3)(b) in
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.)
(4)(a) Registrant's Loan and Security Agreement dated as
of September 7, 1994. (Incorporated by reference
to Exhibit (4)(a) in Registrant's quarterly report
on Form 10-Q for September 30, 1994.)
(4)(b) First Amendment dated February 15, 1995 to
Registrant's Loan and Security Agreement.
(Incorporated by reference to Exhibit (4)(b) in
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.)
(4)(c) Second Amendment dated May 10, 1995 to
Registrant's Loan and Security Agreement.
(Incorporated by reference to Exhibit (4)(c) in
Registrant's Quarterly Report on Form 10-Q for the
period ended September 30, 1995.)
(4)(d) Third Amendment dated June 1, 1995 to Registrant's
Loan and Security Agreement. (Incorporated by
reference to Exhibit (4)(c) in Registrant's
Quarterly Report on Form 10-Q for the period ended
September 30, 1995.)
(4)(e) Fourth Amendment dated December 7, 1995 to
Registrant's Loan and Security Agreement.
(Incorporated by reference to Exhibit (4)(e) in
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.)
(4)(f) Fifth Amendment dated January 26, 1996 to
Registrant's Loan and Security Agreement.
(Incorporated by reference to Exhibit (4)(f) in
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.)
- 28 -<PAGE>
(4)(g) Sixth amendment dated June 26, 1996 to the
Company's Loan and Security Agreement.
(Incorporated by reference to Exhibit (4)(g) in
Registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1996.)
(4)(h) Seventh Amendment dated July 30, 1996 to the
Company's Loan and Security Agreement.
(Incorporated by reference to Exhibit (4)(h) in
Registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1996.)
(4)(i) Eighth Amendment dated November 14, 1996 to
Registrant's Loan and Security Agreement.
(4)(j) Ninth Amendment dated February 7, 1997 to
Registrant's Loan and Security Agreement.
(4)(k) Tenth Amendment dated February 26, 1997 to
Registrant's Loan and Security Agreement.
(4)(l) Certificate of Designation of Series A Preferred
Stock dated July 30, 1996. (Incorporated by
reference to Exhibit (4)(i) in the Registrant's
Quarterly Report on Form 10-Q for June 30, 1996.)
(10)(a) Discretionary incentive compensation plan for
Executive Officers of the Registrant.
(Incorporated by reference to Exhibit (10)(a) in
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.)
(10)(b) 1989 Stock Appreciation Rights Plan for Officers
of the Registrant. (Incorporated by reference to
Exhibit A of Registrant's Proxy Statement for the
1989 Annual Meeting of the Stockholders).
(10)(c) Stock Purchase Agreement dated July 30, 1996
between Ivaco Inc. and Laclede Steel Company.
(Incorporated by reference to Exhibit (10)(a) of
Registrant's Quarterly Report on Form 10-Q for
June 30, 1996.)
(10)(d) Management Stock Purchase Agreements dated July
30, 1996 between Laclede Steel Company and John B.
McKinney, Michael H. Lane, J. William Hebenstreit,
Larry J. Schnurbusch and H. Bruce Nethington.
(Incorporated by reference to Exhibit (10)(b) of
Registrant's Quarterly Report on Form 10-Q for
June 30, 1996.)
- 29 -<PAGE>
(10)(e) Restated Employment Agreements dated as of July
30, 1996 between Laclede Steel Company and John B.
McKinney, Michael H. Lane, J. William Hebenstreit,
Larry J. Schnurbusch and H. Bruce Nethington.
(Incorporated by reference to Exhibit (10)(c) of
Registrant's Quarterly Report on Form 10-Q dated
June 30, 1996.)
(10)(f) Registration Rights Agreement dated July 30, 1996
between Laclede Steel Company and Ivaco Inc., John
B. McKinney, Michael H. Lane, J. William
Hebenstreit, Larry J. Schnurbusch and H. Bruce
Nethington. (Incorporated by reference to Exhibit
(10)(d) of Registrant's Quarterly Report on Form
10-Q dated June 30, 1996.)
(10)(g) Restated Key Employment Retirement Plan dated
October 16, 1996.
(10)(h) Asset Purchase Agreement dated January 10, 1997
between Excaliber Tubular Corporation and Laclede
Steel Company.
(22) Subsidiaries of Registrant.
Instruments with respect to long-term debt issues
have been omitted where the amount of securities
authorized under such instruments does not exceed
10% of the total consolidated assets of the
Registrant. Registrant hereby agrees to furnish a
copy of any such instrument to the Commission upon
its request.
NOTE
Copies of exhibits will be supplied upon
written request and payment of the
Registrant's fee of $.25 per page requested.
(b) Reports on Form 8-K
During the quarter ended December 31, 1996, no
reports on Form 8-K were filed by Registrant.
- 30 -<PAGE>
LACLEDE STEEL COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations
(In Thousands of Dollars except Per Share Amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
<C> <C> <C> <C>
NET SALES $ 335,381 $ 320,350 $ 341,289
COSTS AND EXPENSES:
Cost of products sold 316,954 286,632 306,351
Selling, general and
administrative expenses 14,201 14,209 14,039
Depreciation 7,743 8,151 7,625
Interest expense, net 11,163 10,125 6,940
Restructuring, asset impairment
and other charges 1,559 18,422 ----
Gain on sale of subsidiary stock ---- (728) ----
Gain on sale of equipment ---- ---- (1,103)
Total costs and expenses 351,620 336,811 333,852
EARNINGS (LOSS) BEFORE INCOME TAXES (16,239) (16,461) 7,437
PROVISION (CREDIT) FOR INCOME TAXES (6,254) (6,324) 2,975
NET EARNINGS (LOSS) $ (9,985) $ (10,137) $ 4,462
NET EARNINGS (LOSS) PER SHARE $ (2.50) $ (2.50) $ 1.10
See Notes to Consolidated Financial Statements.
</TABLE>
- - 31 -
LACLEDE STEEL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
Assets
(In Thousands of Dollars)
<TABLE>
<CAPTION> December 31,
1996 1995
<C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 143 $ 161
Accounts receivable, less allowances
of $2,428 in 1996 and $2,224 in 1995 38,772 37,287
Prepaid expenses 443 744
Income taxes recoverable ---- 1,479
Inventories:
Finished 46,631 56,377
Semi-finished 23,540 28,683
Raw materials 5,218 8,415
Supplies 14,720 13,807
Total inventories 90,109 107,282
Total current assets 129,467 146,953
NON-CURRENT ASSETS:
Intangible pension asset 14,464 17,409
Other intangible assets 2,263 2,407
Bond funds in trust 2,385 2,385
Prepaid pension contributions 5,766 6,586
Deferred income taxes 47,557 44,062
Notes receivable 3,600 ----
Other 4,104 3,785
Total non-current assets 80,139 76,634
PLANT AND EQUIPMENT, AT COST:
Land 1,589 1,615
Buildings 28,591 28,478
Machinery and equipment 215,444 213,480
245,624 243,573
Less - accumulated depreciation 124,120 117,382
Net plant and equipment 121,504 126,191
TOTAL ASSETS $ 331,110 $ 349,778
</TABLE>
- - 32 -
Liabilities and Stockholders' Equity
<TABLE>
<CAPTION>
December 31,
1996 1995
<C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 41,293 $ 31,617
Accrued compensation 6,780 7,667
Current portion of long-term debt 2,484 2,459
Accrued costs of pension plans 14,049 15,449
Other 2,860 2,002
Total current liabilities 67,466 59,194
NON-CURRENT LIABILITIES:
Accrued costs of pension plans 53,181 67,123
Accrued postretirement medical benefits 79,782 81,431
Other 5,547 6,721
LONG-TERM DEBT 107,889 118,791
COMMITMENTS AND CONTINGENCIES - NOTE 9 ---- ----
STOCKHOLDERS' EQUITY:
Preferred stock, no par value, authorized 2,000,000
shares; issued and outstanding 416,667 shares 83 ----
Common stock, $.01 par value at December 31, 1996
and $13.33 par value at December 31, 1995, authorized
25,000,000 shares at December 31, 1996 and
5,000,000 shares at December 31, 1995; issued
and outstanding 4,056,140 shares 41 54,081
Capital in excess of par 60,138 247
Accumulated deficit (12,300) (2,315)
Minimum pension liability adjustment (30,717) (35,495)
Total stockholders' equity 17,245 16,518
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 331,110 $ 349,778
See Notes to Consolidated Financial Statements.
</TABLE>
- - 33 -
<PAGE>
LACLEDE STEEL COMPANY AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
<C> <C> <C> <C>
Preferred stock
(416,667 shares issued)
Beginning balance $ -- $ -- $ --
Sale of convertible preferred stock 83 -- --
Ending balance 83 -- --
Common stock - $0.01 par value
(4,056,140 shares issued)
Beginning balance 54,081 54,081 54,081
Reduction in par value of common stock (54,040) -- --
Ending balance 41 54,081 54,081
Capital in excess of par value
Beginning balance 247 247 247
Sale of convertible preferred stock 6,007 -- --
Reduction in par value of common stock 54,040 -- --
Dividend on convertible preferred stock (156) -- --
Ending balance 60,138 247 247
Retained earnings (deficit)
Beginning balance (2,315) 7,822 3,360
Net earnings (loss) (9,985) (10,137) 4,462
Ending balance (12,300) (2,315) 7,822
Minimum pension liability
Beginning balance (35,495) (8,407) (15,098)
Change 4,778 (27,088) 6,691
Ending balance (30,717) (35,495) (8,407)
Total Stockholders' Equity at End of Year $ 17,245 $ 16,518 $ 53,743
See Notes to Consolidated Financial Statements.
</TABLE>
- - 34 -
<PAGE>
LACLEDE STEEL COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands of Dollars)
<TABLE>
<CAPTION> Year Ended December 31,
1996 1995 1994
<C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (9,985) $ (10,137) $ 4,462
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation 7,743 8,151 7,625
Gain on sale of subsidiary stock ---- (728) ----
Gain on sale of equipment ---- ---- (1,103)
Restructuring, asset impairment and other charges 1,559 18,422 ----
Change in deferred income taxes (6,424) (6,185) 1,708
Changes in assets and liabilities
that provided (used) cash:
Accounts receivable (1,485) 8,300 940
Inventories 17,173 (12,483) (5,040)
Accounts payable and accrued expenses 10,306 (8,861) 11,601
Pension cost less than funding (5,429) (2,526) (2,742)
Accrued postretirement medical benefits (1,649) 1,162 1,379
Net cash provided by (used in) operating activities 11,809 (4,885) 18,830
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (10,726) (13,847) (14,747)
Proceeds from sale of equipment 4,000 ---- 1,000
Net cash used in investing activities (6,726) (13,847) (13,747)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing (repayments) under revolving credit loan (8,415) 18,453 (16,412)
Proceeds from term loan ---- ---- 10,000
Proceeds from long-term debt ---- 2,000 ----
Payments on long-term debt (2,462) (2,488) (9,710)
Proceeds from sale of stock of subsidiary ---- 1,000 ----
Proceeds from issuance of convertible preferred stock 6,090 ---- ----
Proceeds from bond funds in trust ---- ---- 12,789
Payment of financing costs (314) (231) (2,485)
Net cash provided by (used in) financing activities (5,101) 18,734 (5,818)
CASH AND CASH EQUIVALENTS:
Net increase (decrease) during the year (18) 2 (735)
At beginning of year 161 159 894
At end of year $ 143 $ 161 $ 159
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest (net of amount capitalized) $ 10,476 $ 10,209 $ 7,147
Income tax payments (refunds), net $ (1,317) $ 794 $ 1,218
See Notes to Consolidated Financial Statements.
</TABLE>- 35 -
Notes to Consolidated Financial Statements
Note 1
Nature of Operations:
Laclede Steel Company and Subsidiaries (the
Company) is a manufacturer of carbon and alloy steel products,
including pipe products, hot rolled products, wire products and
welded chain. The Company's continuous butt weld pipe and
electric weld tubing is sold in the U.S. and Canada to
distributors and manufacturers. Hot rolled products consist
primarily of special quality bars sold to manufacturers to be
cold drawn or forged. Wire products include high and low carbon
wire, oil tempered wire used for mechanical springs, overhead
door springs and, in the future, automotive suspension and brake
springs, and annealed wire and rod. Laclede Chain Manufacturing
Company, a wholly-owned subsidiary, produces chain products and
also imports a significant amount of chain. Approximately one-half of the
chain business is attributable to sales of anti-skid
devices for trucks and automobiles and the balance is in sales of
hardware and industrial chain.
Note 2
Accounting Policies:
The Company's significant accounting policies are
summarized as follows:
Principles of Consolidation
The consolidated financial statements include the
accounts of Laclede Steel Company and its wholly-owned
subsidiaries. All intercompany accounts and transactions have
been eliminated.
Cash Equivalents
The Company considers all highly liquid debt
instruments with a maturity of three months or less at date of
purchase to be cash equivalents.
Inventories
Inventories of finished and semi-finished
products, raw materials and supplies are stated at the lower of
cost, predominantly moving average, or market. Market
determination is based on the net realizable value of the total
of the components of each major category of inventory.
- 36 -<PAGE>
Plant and Equipment
Plant and equipment, consisting primarily of
steelmaking and related facilities, are carried at cost. Major
renewals and betterments are capitalized, while replacements,
rebuilding costs and repairs are charged to operations. The cost
of normal retirements is charged to accumulated depreciation and
salvage realized, if any, is credited thereto.
Depreciation
The Company follows the policy of providing for
depreciation of plant and equipment by charging operations with
amounts sufficient to amortize the cost over the following
estimated useful lives:
Buildings and improvements 20 to 45 years
Machinery and equipment 4 to 25 years
Office furniture and equipment 6 to 10 years
Depreciation is computed on the straight-line
method for financial reporting purposes. Accelerated
depreciation methods are used for tax purposes.
Long-Lived Assets
In 1995 the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. The general requirements of
this statement are applicable to the properties and intangible
assets of the Company and require impairment to be considered
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. See Note 6
for discussion of asset impairment charges in 1995.
Other Intangible Assets
Other intangible assets include the excess of the
purchase price of acquisitions over the fair value of the net
assets acquired and these amounts are amortized on a straight-line basis over
25 years.
Management periodically reviews the value of its
intangible assets to determine if an impairment has occurred or
whether changes have occurred that would require a revision to
the remaining useful life. In making such determination,
management evaluates the performance, on an undiscounted basis,
of the underlying operations or assets which give rise to such
amount. Based on this review, management does not believe that
any such impairment has occurred.
- 37 -<PAGE>
Income Taxes
Deferred income taxes are provided for the
temporary differences between the tax basis of the Company's
assets and liabilities and their financial reporting amounts at
each year end, utilizing currently enacted tax rates. See Note 3
for details of significant temporary differences.
Per Share Data and Preferred Stock Dividends
Per share amounts for 1996, 1995 and 1994 have
been calculated based on weighted average shares outstanding of
4,056,140. Net loss per share in 1996 was computed by dividing
the net loss, after deducting convertible preferred dividend
requirements of $156,000, by the weighted average shares
outstanding.
Use of Estimates in the Preparation of Financial Statements
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.
Certain Significant Estimates
Amounts reported for pensions and postretirement
medical benefits and their related deferred tax assets are
subject to significant fluctuation due to changes in interest
rates. Estimates of environmental remediation-related
obligations are discussed in Note 9.
Current Vulnerability Due to Certain Concentrations
The Company manufactures steel from steel scrap
generated in the course of its steel production and purchased in
the open market from numerous scrap suppliers. Since it does not
produce its own raw materials, the Company is subject to the
fluctuation in prices and availability of scrap.
Approximately 57% of the Company's production
employees are covered by a collective bargaining agreement, which
expires in September 1997.
- 38 -<PAGE>
Note 3
Income Taxes:
The provision for income taxes represents an effective
combined federal and state tax rate of 39% for 1996, 38% for 1995
and 40% for 1994. See the reconciliation of these tax rates to
the statutory rate below. The provision (credit) for income
taxes consists of the following (thousands of dollars):
1996 1995 1994
Current income taxes $ 170 $ (139) $ 1,268
Deferred income taxes (6,424) (6,185) 1,707
$ (6,254) $ (6,324) $ 2,975
Deferred tax assets were decreased in 1996 by $2,929,000,
increased in 1995 by $16,151,000 and decreased in 1994 by
$3,650,000, as a result of the tax effects of the minimum pension
liability adjustment. These amounts are not reflected in the tax
provision of these years. See Note 5 for further discussion.
Deferred tax assets and liabilities are comprised of the
following at December 31 (thousands of dollars):
1996 1995
Deferred tax liabilities:
Depreciation $ (28,549) $ (26,966)
Accrued costs of pension plans (2,490) (1,138)
Total deferred tax liabilities (31,039) (28,104)
Deferred tax assets:
Minimum pension liability adjustment 18,826 21,756
Postretirement medical benefits 31,361 31,921
Active employee benefit liabilities 2,566 2,733
Environmental costs 1,199 1,456
Allowances on receivables 954 871
Net operating loss and alternative
minimum tax carryovers 21,832 11,536
Other 1,858 1,893
Total deferred tax assets 78,596 72,166
Net deferred tax assets $ 47,557 $ 44,062
Net operating losses expire over various periods through
2011. Deferred tax assets related to pension liability
adjustments and postretirement medical benefits represent amounts
accrued for financial reporting purposes but not yet paid or
deductible for income tax purposes.
- 39 -<PAGE>
Management currently believes that its long-term
profitability should ultimately be sufficient to enable it to
realize full benefit of future tax deductions. The Company
experienced profitable operations in 1993 and 1994, as well as
1995 if the restructuring, asset impairment and other charges are
excluded. Management expects future operations to realize
significant benefits from the productivity improvements and cost
reductions generated in the fourth quarter of 1996.
Consequently, it presently believes that future taxable income
will be adequate to utilize both reversing temporary differences
and operating loss carryforwards prior to their expiration.
Thus, no deferred tax valuation allowance is deemed necessary.
In making this determination the Company is governed by the
provisions of FASB Statement No. 109, which requires that
consideration be given to information about the Company's current
financial position and its results of operations for the current
and preceding years. This historical information is supplemented
by available information about future years.
The Company does not believe that 1996 should be considered
a representative year for purposes of evaluating the likelihood
that net deferred tax assets will ultimately be realized. In
1996 the Company completed its restructuring program resulting in
a major change in its steelmaking process, through the
installation of a ladle furnace facility and movement of the
balance of its steel production to the more efficient continuous
cast method. In the fourth quarter of 1996 the Company completed
a Company-wide cost reduction program, resulting in the
identification of significant cost savings, most of which take
effect in 1997.
The applicable statutory federal income tax rate of 34% for
each of the three years is reconciled to the effective income tax
rate as follows (thousands of dollars):
1996 1995 1994
Federal income tax provision
(credit) computed at statutory
tax rate $ (5,503) $ (5,604) $ 2,529
Non-taxable gain on sale of
subsidiary stock -- (277) --
State income taxes, net (819) (542) 388
Other 68 99 58
Provision (credit) for
Income taxes $ (6,254) $ (6,324) $ 2,975
- 40 -<PAGE>
Note 4
Debt:
Long-term debt consists of the following at
December 31 (thousands of dollars):
1996 1995
Bank Loan and Security Agreement:
Revolving Loan $ 76,126 $ 84,541
Term Loan 6,777 8,209
Note Payable Due December 31, 2001 2,000 2,000
Solid Waste Disposal Revenue Bonds:
8.375% Bonds due from 1996 to 2008 6,615 6,930
8.5% Bonds due from 2015 to 2020 9,430 9,430
8% Pollution Control Revenue Bonds due
October 1, 2001 (annual sinking fund
payments began in 1993) 8,700 9,360
8% Industrial Development Revenue Bonds
due October 1, 2001 (annual sinking fund
payments began in 1992) 725 780
110,373 121,250
Less amounts payable within one year 2,484 2,459
$107,889 $118,791
The Company has a Loan and Security Agreement with
three banks, expiring in September 1999, which has been amended
to include a $90,000,000 Revolving Loan. It also includes a
$10,000,000 Term Loan, payable monthly through September 1999.
Amounts available under the revolving credit facility were
utilized early in the first quarter of 1997 to cover outstanding
short-term commitments, primarily trade accounts payable.
Interest on the Revolving Loan is payable at
either prime plus 1-1/2% or a Eurodollar rate, at the Company's
option. Interest on the Term Loan is payable at either prime
plus 2% or a Eurodollar rate, also at the Company's option. At
December 31, 1996, the interest rates ranged from 9.1% to 10.3%.
- 41 -<PAGE>
Under terms of the Loan and Security Agreement the
Company granted security interests in accounts receivable and
inventory to the participating banks to support the Revolving
Loan. The Term Loan is secured by certain Plant and Equipment.
The Company has amended its Loan and Security
Agreement, obtaining waivers of financial covenants relating to
operating losses and net worth for the third quarter of 1996, and
modifying such covenants with regard to the other quarters of
1996 and the year 1997. As of December 31, 1996 the Company was
in compliance with the provisions of its loan agreement.
The most restrictive provisions of the Company's
loan agreements, as amended, include the following:
A. The Company shall maintain specified net worth levels as
defined in the Loan and Security Agreement. As of December
31, 1996 the Company's consolidated net worth exceeded the
minimum required amount by $538,000.
B. The Company will maintain a Consolidated Fixed Charge
Coverage Ratio, as defined, determined as of the end of each
period listed below.
Period Ratio
Three Months Ended March 31, 1997 1.05 to 1.00
Six Months Ended June 30, 1997 1.05 to 1.00
Nine Months Ended September 30, 1997 1.00 to 1.00
Year Ended December 31, 1997 1.05 to 1.00
Three Months Ended March 31, 1998 1.10 to 1.00
Six Months Ended June 30, 1998 1.10 to 1.00
Nine Months Ended September 30, 1998 1.10 to 1.00
Year Ended December 31, 1998 1.10 to 1.00
Commencing on March 31, 1999
and as of the last day of
each fiscal quarter in each
fiscal year thereafter, for
the twelve-month period
ending on such date 1.10 to 1.00
C. Payment of cash dividends on common stock is limited to 50%
of cumulative net earnings after December 31, 1993. As of
December 31, 1996 no funds are available for dividends on
common stock.
- 42 -<PAGE>
The Company is also required to comply with
various covenants regarding limits on liabilities as defined in
the Agreements for the Solid Waste Revenue Bonds and Pollution
Control Revenue Bonds. At December 31, 1996 the Company was in
compliance with these covenants. Furthermore the sale in
February, 1997 of the Benwood Operations described in Note 11
improved the Company's financial position with regard to
continued compliance. Further operating losses in the future,
however, could cause the Company to violate these covenants. In
the event amendment of the covenants is required in the future,
there can be no assurance that the Company can obtain such
amendment.
The Company has no compensating balance
arrangements. Excluding the Revolving Loan, aggregate maturities
of long-term borrowings at December 31, 1996 for the next five
years are as follows:
1997 2,484,000
1998 2,514,000
1999 5,059,000
2000 1,190,000
2001 8,970,000
The Company estimates that the fair value of its
long-term debt in the aggregate approximates the carrying value
at December 31, 1996 and 1995.
The Company is party to a Paying Agent Agreement
in which the Paying Agent assists the Company in purchasing
certain raw material. The terms of this agreement require the
Company to pay a commission of 1.5% on all purchases plus a fee
on the invoice amount. Amounts purchased under this agreement
are included in accounts payable and amounted to $3,270,000 as of
December 31, 1996.
Note 5
Employee Benefits:
Defined Benefit Pension Plan -
The Company has several non-contributory defined benefit
pension plans providing retirement benefits for substantially all
employees. Benefits under the plans are primarily based on years
of service and employee's compensation prior to retirement.
Annual pension plan funding is based on the range of deductible
contributions permitted by ERISA regulations, taking into account
the Company's current income tax situation.
- 43 -<PAGE>
The components of pension cost are as follows (thousands of
dollars):
1996 1995 1994
Service cost $ 2,111 $ 1,538 $ 2,021
Interest cost on projected
benefit obligation 13,868 14,767 13,340
Actual return on plan assets (19,996) (22,502) 4,322
Net amortization and deferral 13,596 14,921 (14,003)
Net periodic pension cost 9,579 8,724 5,680
Curtailment loss recognized 1,559 2,966 --
Total pension cost $ 11,138 $ 11,690 $ 5,680
In the fourth quarter of 1996 the Company presented an early
retirement incentive offer to certain hourly employees at the
Alton Plant. Approximately 90 employees elected to accept the
offer and retired during the quarter. In accordance with
applicable accounting standards, the Company recorded a non-cash
charge of $1,559,000 representing a pension curtailment loss and
the cost of special termination benefits.
In the fourth quarter of 1995 the Company recorded a special
restructuring charge which included a $2,966,000 curtailment loss
related to planned work force reductions. See Note 6 to the
Consolidated Financial Statements for additional discussion.
The projected benefit obligations at December 31, 1996 and
1995 were determined using assumed discount rates of 6.75% and
7.25%, respectively. The assumed discount rate is based on
market conditions and reflects annuity purchase rates available
to theoretically settle plan obligations. For all plans other
than the Alton Plant Hourly Employees' Plan, the assumed rate of
increase in compensation levels was 2% for all years. Reflecting
the Labor Agreement for Alton hourly employees, a 1% rate of
increase in compensation was assumed for all years. The weighted
average assumed long-term rate of return on the market-related
value of plan assets was 9.8% for 1996, 9.9% for 1995 and 11.7%
for 1994 and 1993.
- 44 -<PAGE>
<TABLE>
<CAPTION>
A summary of the funded status of the plans is as follows (thousands of dollars):
December 31
1996 1995
Assets ExceedAccumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Total Benefits Exceed Assets Total
<C> <C> <C> <C> <C> <C> <C>
Actuarial present value
of accumulated benefit
obligation:
Vested $ (6,658) $(182,949) $(189,607) $ (5,947) $(186,296) $(192,243)
Non-Vested (367) (5,013) (5,380) (258) (7,861) (8,119)
Total $ (7,025) $(187,962) $(194,987) $ (6,205) $(194,157) $(200,362)
Projected benefit
obligation $ (9,386) $(190,657) $(200,043) $ (7,249) $(194,935) $(202,184)
Plan assets at fair value 9,320 121,013 130,333 7,210 113,560 120,770
Projected benefit
obligation (in excess of)
less than plan assets (66) (69,644) (69,710) (39) (81,375) (81,414)
Unrecognized net
obligation at transition
date, January 1, 1987 315 7,599 7,914 379 9,118 9,497
Unrecognized losses,
net 5,426 53,362 58,788 1,219 59,369 60,588
Unrecognized prior
service cost (168) 5,720 5,552 3,087 6,916 10,003
Adjustment required to
recognize minimum
liability -- (64,008) (64,008) -- (74,660) (74,660)
Net pension cost
recorded on balance
sheet $ 5,507 $ (66,971) $ (61,464) $ 4,646 $ (80,632) $ (75,986)
</TABLE>
- - 45 -
In accordance with FASB Statement No. 87, the Company has
recorded an additional minimum pension liability for underfunded
plans of $64,008,000 at December 31, 1996 and $74,660,000 at
December 31, 1995, representing the excess of unfunded
accumulated benefit obligations over previously recorded pension
cost liabilities. A corresponding amount is recognized as an
intangible asset except to the extent that these additional
liabilities exceed related unrecognized prior service cost and
net transition obligation, in which case the increase in
liabilities is charged directly to stockholders' equity. The
principal cause of the reduction in underfunded pension liability
is actual return on plan assets in excess of the assumed rate of
return in 1996. As of December 31, 1996, $49,543,000 of the
excess minimum pension liability resulted in a charge to equity,
net of income taxes, of $30,717,000. As of December 31, 1995,
the excess minimum liability was $57,251,000 and the after-tax
charge to equity was $35,495,000.
Profit Sharing Plan -
The Company maintains a defined contribution profit sharing
thrift plan covering a majority of its salaried employees. In
1996 the Plan was amended to provide for a minimum Company
contribution regardless of the level of Company profitability.
Company contributions for 1996 amounted to $272,000 and for 1994
amounted to $684,000. There was no profit sharing contribution
for 1995.
Postretirement Medical Benefit Plans -
In addition to providing pension benefits, the Company
provides certain health care and life insurance benefits for
active and retired employees. A significant portion of the
Company's employees may become eligible for the retiree benefits
if they reach retirement age while working for the Company.
- 46 -<PAGE>
The components of net periodic postretirement medical
benefit costs are as follows (thousands of dollars):
1996 1995 1994
Service cost $ 698 $ 638 $ 846
Interest cost 4,522 5,708 5,658
Amortization of unrecognized
net gain (1,265) (215) --
Net periodic cost 3,955 6,131 6,504
Curtailment loss recognized -- 1,089 --
Total cost $ 3,955 $ 7,220 $ 6,504
The reduction in cost in 1996 is due to favorable claims
experience over the last several years. The actual
postretirement medical benefits paid amounted to $5,603,000 in
1996, $4,969,000 in 1995 and $5,439,000 in 1994. See Note 6 for
discussion of curtailment loss.
A summary of the status of the plans is as follows
(thousands of dollars):
December 31, December 31,
1996 1995
Accumulated postretirement
benefit obligation (APBO):
Retirees $ (37,100) $ (41,911)
Fully eligible active
employees (9,044) (12,518)
Other active employees (7,692) (10,900)
Total (53,836) (65,329)
Fair value of plan assets -- --
Funded status (53,836) (65,329)
Unrecognized prior service costs (8,805) --
Unrecognized net gain (17,141) (16,102)
Accrued postretirement
benefit cost $ (79,782) $ (81,431)
The reduction in APBO as of December 31, 1996 relates to
favorable claims experience and the effect of alternative
coverages offered by the Company and elected by a portion of
retired employees.
- 47 -<PAGE>
The assumed discount rate used to measure the APBO was 7.25%
at December 31, 1996 and 1995. The assumed future health care
cost trend rate for the December 31, 1996 calculation is 7.9%,
gradually declining to 3.25% after six years and for December 31,
1995 is 8.7% declining to 3.25% after seven years. A one
percentage point increase in the assumed health care cost trend
rates for each future year would have increased the aggregate of
the service and interest cost components of the net periodic
postretirement benefit cost by $480,000 for 1996, $603,000 for
1995 and $607,000 for 1994, and would have increased the APBO by
$4,302,000 as of December 31, 1996 and $6,958,000 as of December
31, 1995.
Stock Appreciation Rights Plans -
In 1989, the Board of Directors adopted the 1989 Stock
Appreciation Rights Plan for Non-Officers and the 1989 Stock
Appreciation Rights Plan for Officers. All rights under the
plans have been granted and as of December 31, 1996, 19,500
rights had not been exercised. There was no expense for the
plans in 1996, 1995 or 1994 as the market price is below grant
prices.
Note 6
Restructuring, Asset Impairment and Other Charges:
In the fourth quarter of 1996 the company
presented an early retirement incentive offer to certain hourly
employees at the Alton Plant. Approximately 90 employees elected
to accept the offer and retired during the quarter. In
accordance with applicable accounting standards, the Company
recorded a non-cash charge of $1,559,000 ($951,000 after taxes),
representing a pension curtailment loss and the cost of special
termination benefits.
In December 1995, the Company recorded a non-cash
charge of $18,422,000 ($11,422,000 after taxes), relating to the
restructuring of its operations, asset impairments and inventory
write-offs. This charge was primarily the result of a decision
to initiate the final phase of the Company's strategic plan,
leading to a restructuring of the steelmaking facilities at the
Alton Plant.
The new Ladle Furnace Facility became operational
in the second quarter of 1996 and all steel is now produced using
the more efficient continuous cast method. The Company also
ceased production of rods, and began purchasing requirements for
its wire operations on the open market, at a significant
reduction in costs. In connection with this restructuring, the
Company also shut down its Blooming Mill and Rod Mill operations.
- 48 -<PAGE>
As a result of this decision, non-cash accounting
charges totaling $15,780,000 were recorded, which are included in
the $18,422,000 charge mentioned above. These charges include
$6,190,000 for recognition of impairment loss for equipment and
$4,565,000 for employee termination benefits and pension and
postretirement benefit curtailment losses. In addition
inventories relating to these operations have been written down
by $5,025,000 to reduce their carrying cost to their net
realizable value.
The Company also recognized a charge of $2,642,000
related to inventory write-downs in its tubular product
operations, which are also part of the $18,422,000 charge. This
inventory adjustment, which reduces the carrying cost to net
realizable value, reflects higher second half production costs
together with significant reductions in selling prices for
tubular products during 1995.
Note 7
Interest Expense, Net:
Interest expense capitalized in 1996, 1995 and
1994 was $323,000, $484,000 and $2,148,000, respectively. The
majority of this interest in 1994 relates to the Solid Waste
Disposal Revenue Bond funds used to finance the construction of
the HTMR facility.
- 49 -<PAGE>
Note 8
Quarterly Results of Operations (Unaudited):
<TABLE>
<CAPTION>
The results of operations by quarter for 1996 and 1995 were as follows (in
thousands of dollars except per share data):
QUARTER ENDED
1996 1995
Mar. 31 Jun. 30 Sep. 30 Dec. 31 Mar. 31 Jun. 30 Sep. 30 Dec. 31
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $80,975 $86,436 $83,630 $84,340 $87,327 $80,858 $76,561 $ 75,604
Cost of products sold 76,039 83,238 80,824 76,800 76,115 70,807 70,569 69,162
Net sales less cost
of products sold $ 4,936 $ 3,198 $ 2,806 $ 7,540 $11,212 $10,051 $ 5,992 $ 6,442
Net earnings (loss) $(2,031) $(3,045) $(3,390) $(1,519) $ 2,094 $ 1,782 $(1,348) $(12,665)
Net earnings (loss)
per share $ (0.50) $ (0.75) $ (0.84) $ (0.41) $ 0.52 $ 0.44 $ (0.34) $ (3.12)
</TABLE>
- 50 -
Note 9
Commitments And Contingencies:
The Company has non-cancelable operating leases
for office space and certain equipment through 2006. Future
minimum lease commitments required under these leases are as
follows:
1997 $4,122,000
1998 3,746,000
1999 3,593,000
2000 3,323,000
2001 2,473,000
Thereafter 4,257,000
TOTAL $21,514,000
Rent expense under all leases in 1996, 1995 and
1994 was $3,528,000, $2,777,000 and $2,578,000, respectively.
On June 26, 1996 the Company entered into a sale
and leaseback transaction with a third party for the Ladle
Metallurgy Facility at Alton. The third party agreed to purchase
the equipment for approximately $4,000,000 cash and a note
receivable for approximately $3,600,000. The lease term is for
five years starting August 1, 1996 and continuing until June 30,
2001 with an option to purchase the equipment at the expiration
date.
There are various claims pending involving the
Company and its subsidiaries with respect to environmental,
hazardous substance and other matters arising out of the routine
conduct of the business. Such claims either have not been
reduced to litigation or, if suit has been filed, are in the
discovery stage. Therefore the total liability on pending claims
at December 31, 1996, if any, cannot be determined.
The Company believes it has meritorious defenses
with respect to all claims and litigation and the ultimate
disposition of such matters will not materially affect its
financial position or results of operations.
In connection with its Melt Shop operations the
Company generates electric furnace dust, which the Environmental
Protection Agency (EPA) has designated as a hazardous waste.
The Company developed a modified closure plan
which has been approved by the IEPA. This plan provides for the
closure of existing electric furnace dust piles in place. Based
on estimates provided by an independent consultant it appears
that the remaining cost of this plan will approximate the
$3,051,000 amount included in non-current liabilities at December
31, 1996 for the disposal of the existing EAF dust.
- 51 -<PAGE>
Note 10
Preferred Stock:
In July 1996 the Company issued 416,667 shares of
Series A 6% preferred stock to Ivaco Inc. and the executive
officers of the Company for $6,090,000, after expenses. This
transaction resulted in an increase in capital in excess of par
value of $6,006,667. On October 28, 1996, at a special meeting
of the stockholders, an amendment was approved to the Company's
Certificate of Incorporation which reduced the par value of each
share of common stock from $13.33 per share to $.01 per share and
increased the number of authorized common stock shares from
5,000,000 shares to 25,000,000 shares. The stockholders also
approved the recapitalization of the Company's Series A 6%
preferred stock. At such time each share of the preferred stock
became convertible into common stock at the option of the holder
at a conversion price of $3.20 into 4.69 shares of common stock.
In the event of voluntary or involuntary liquidation of the
Company, the holders of shares of Series A Preferred Stock are
entitled to receive liquidating distributions in the amount of
$15.00 per share plus accrued and unpaid dividends before payment
is made to holders of common stock.
Note 11
Benwood Sale:
In February 1997, the Company sold the assets of
its electric weld structural and mechanical tubing operation,
located in Benwood, West Virginia. Cash proceeds from the sale
of these assets, which consist primarily of equipment and
inventory, totaled approximately $10,000,000. The Company used
the funds from the sale to improve its working capital position.
Sale of these assets will not affect the Company's primary
tubular business, continuous weld pipe.
Note 12
Related-Party Transactions:
The Company has transactions in the normal course
of business with Ivaco Inc. or affiliated companies. As of
December 31, 1996 Ivaco Inc. owned 49.77% of the Company's
outstanding common stock. In 1996 the Company purchased rods at
market prices totaling $3,458,000 from an affiliate of Ivaco.
The Company participates in an insurance
purchasing arrangement with Ivaco. Under the terms of this
arrangement Ivaco purchases insurance on behalf of the Company
and bills the Company for this insurance. Amounts paid by the
Company for this insurance amounted to $1,521,000, $1,341,000 and
$1,532,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
- 52 -<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board Of Directors
And Stockholders Of
Laclede Steel Company:
We have audited the accompanying consolidated balance sheets
of Laclede Steel Company and subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years
in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the 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, such consolidated financial statements
present fairly, in all material respects, the financial position
of Laclede Steel Company and subsidiaries as of December 31, 1996
and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
January 28, 1997
(February 10, 1997 as to Note 11 and
February 26, 1997 as to Note 4)
St. Louis, Missouri
- 53 -<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly
caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
March 7, 1997 /s/ John B. McKinney
Date John B. McKinney
President
Principal Executive Officer
Director
March 20, 1997 /s/ Michael H. Lane
Date Michael H. Lane
Vice President-Finance
Treasurer and Secretary
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange
Act of 1934, this amendment has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
March 13, 1997 /s/ Donald F. Gunning
Date Donald F. Gunning
Director
March 12, 1997 /s/ A. William Hager
Date A. William Hager
Director
March 12, 1997 /s/ E. Lawrence Keyes, Jr.
Date E. Lawrence Keyes, Jr.
Director
March 12, 1997 /s/ Robert H. Quenon
Date Robert H. Quenon
Director
Date Lawrence K. Roos
Director
March 12, 1997 /s/ Edwin J. Spiegel, Jr.
Date Edwin J. Spiegel, Jr.
Director
March 18, 1997 /s/ Lester Varn, Jr.
Date Lester Varn, Jr.
Director
March 12, 1997 /s/ George H. Walker III
Date George H. Walker III
Director
<PAGE>
AMENDMENT NO. 8
TO
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 7, 1994
THIS AMENDMENT NO. 8 dated as of November 14, 1996 (this
"Amendment") is entered into among BANKAMERICA BUSINESS CREDIT, INC., a
Delaware corporation ("BABC"), THE BANK OF NEW YORK COMMERCIAL CORPORATION, a
New York corporation ("BNYCC"), (BABC and BNYCC being hereinafter referred to
collectively as the "Majority Lenders"), BANKAMERICA BUSINESS CREDIT, INC., a
Delaware corporation, as agent for the "Lenders" (as defined below)(in such
capacity as agent, the "Agent"), LACLEDE STEEL COMPANY, a Delaware corporation
(the "Parent"), LACLEDE CHAIN MANUFACTURING COMPANY, a Delaware corporation
("Laclede Chain"), and LACLEDE MID AMERICA INC., an Indiana corporation
("Laclede Mid America") (the Parent, Laclede Chain and Laclede Mid America
being sometimes hereinafter referred to collectively as the "Borrowers" and
each of the Parent, Laclede Chain and Laclede Mid America being sometimes
hereinafter referred to individually as a "Borrower").
W I T N E S S E T H:
WHEREAS, the Borrowers, the Majority Lenders, The Boatmen's
National Bank of St. Louis, a national banking association ("Boatmen's)(the
Majority Lenders and Boatmen's and their successors and assigns being
hereinafter referred to collectively as the "Lenders") and the Agent are
parties to a certain Loan and Security Agreement dated as of September 7, 1994
(the "Loan Agreement"); and
WHEREAS, the Loan Agreement was amended by (a) Amendment No. 1
dated as of February 15, 1995, (b) Amendment No. 2 dated as of May 10, 1995,
(c) Amendment No. 3 dated as of June 1, 1995, (d) Amendment No. 4 dated as of
December 7, 1995, (e) Amendment No. 5 dated as of January 26, 1996, (f)
Amendment No. 6 dated as of June 26, 1996, and (g) Amendment No. 7 dated as of
July 30, 1996 (the Loan Agreement, as so amended, being hereinafter referred to
as the "Amended Loan Agreement," capitalized terms used herein without
definition having the meanings given such terms in the Amended Loan Agreement);
and
WHEREAS, the Borrowers, the Majority Lenders and the Agent
have agreed to amend the Amended Loan Agreement on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises set forth
above, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers, the Majority
Lenders and the Agent hereby agree as follows:
Section 1. Amendment of the Amended Loan Agreement.
Effective as of November 14, 1996, subject to the fulfillment of the conditions
precedent set forth in Section 3 below, the Amended Loan Agreement is amended
as follows:
(a) The definition of "Redeemable Preferred Stock" contained
in Section 1.1 is amended and restated as follows:
"Redeemable Preferred Stock" means the Parent's six
percent (6.0%) redeemable preferred capital stock, no par
value per share, 416,667 shares of which were issued on August
1, 1996, and which was recapitalized on October 28, 1996.
(b) Section 3.1(c) is amended to delete the last two sentences
thereof, with any interest rate reduction that might have become available to
any Borrower pursuant thereto being unavailable for any period prior to or on
or after the date of this Amendment.
(c) Section 5.10(b) is amended and restated as follows:
(b) Each Borrower will conduct a physical count of its
Inventory constituting pipe not less frequently than once
every four (4) months, and shall promptly supply the Agent, in
sufficient copies for distribution by the Agent to each
Lender, with a copy of such count accompanied by a report of
the value of such inventory (valued at the lower of cost or
market value). Each Borrower will maintain such perpetual
inventory reporting systems as are in place on the Closing
Date.
(d) The second and third sentences of Section 8.10(a) are
amended and restated as follows:
In addition to the foregoing, the Parent may declare and pay
dividends on the Convertible Preferred Stock to the extent
dividends would have been permitted to be paid under that
certain Indenture of Trust dated as of October 1, 1976,
between the City of Alton, Illinois, and St. Louis Union Trust
Company, as Trustee, as in effect on July 30, 1996, with
respect to the Pollution Control Bonds. Nothing contained in
this Section 8.10 or elsewhere in this Agreement shall be
construed to permit the redemption by the Parent of any of the
Redeemable Preferred Stock or Convertible Preferred Stock
during the term of this Agreement.
(e) Section 8.24 is amended to delete "1.00 to 1.00"
appearing in the table contained therein and to substitute "No required ratio"
therefor.
(f) Section 8.25 is amended to delete (1) "minus (c) the
aggregate amount of redemptions of the Redeemable Preferred Stock made in
accordance with Section 8.10(a)" and to substitute "minus (c) for the quarter
ending December 31, 1996 only, the amount of the one-time noncash charge, not
to exceed $3,500,000, as a result of the pension benefit effect of the early
retirement during 1996 of certain of the Parent's union employees employed at
the Parent's Alton steel mill plant located in Alton, Illinois", (2) the amount
"$27,000,000" appearing opposite the date "12/31/96" and to substitute the
amount "$23,000,000" therefor, and (3) "minus (c) the aggregate amount of
redemptions of the Redeemable Preferred Stock made in accordance with Section
8.10(a)," and to reletter clause (d) as clause (c).
(g) Section 8.28 is amended and restated as follows:
8.28 Consolidated Pretax Loss Amount. The Borrowers
shall not permit the Consolidated Pretax Loss, calculated as
of the last day of each period specified below, to exceed for
the period indicated the amount indicated opposite such
period:
Period Amount
01/01/96 - 03/31/96 ($ 4,300,000)
01/01/96 - 06/30/96 ($ 9,000,000)
01/01/96 - 09/30/96 ($12,000,000)
01/01/96 - 12/31/96 ($18,500,000)
For purposes of this Section 8.28, Consolidated Pretax Loss
shall be calculated without regard to the amount of the one-time
noncash charge, not to exceed $3,500,000, as a result of
the pension benefit effect of the early retirement during 1996
of certain of the Parent's union employees employed at the
Parent's Alton steel mill plant located in Alton, Illinois.
(h) Section 10.1(t) is amended and restated as follows:
(t) The Recapitalization shall not have been
consummated on or prior to June 30, 1997, or any of the
Redeemable Preferred Stock shall be redeemed.
Section 2. Waiver. The Agent and the Majority Lenders hereby
waive the Events of Default that have arisen as a result of (a) the Borrowers'
failure to maintain a Consolidated Adjusted Net Worth, determined as of
September 30, 1996, of not less than (i) $6,250,000 (the aggregate amount of
the proceeds received from the sale of the Redeemable Preferred Stock) plus
$26,300,000; (b) the Borrowers' Consolidated Pretax Loss exceeding
($12,000,000) for the period commencing on January 1, 1996 and ending on
September 30, 1996; and (c) the Borrowers' failure to distribute the proxy
statement in connection with the Recapitalization to the Parent's shareholders
on or prior to September 30, 1996.
Section 3. Conditions to Amendment. This Amendment shall
become effective upon the satisfaction of the following conditions precedent:
(a) The Agent shall have received, in immediately available
funds, for the ratable account of the Lenders, an accommodation fee in
the amount of $150,000, which accommodation fee shall be fully earned
on the date on which this Amendment shall become effective.
(b) The Agent shall have received six counterparts of this
Amendment, executed by each Borrower and each of the Majority Lenders,
and the Agent shall have executed this Amendment.
Section 4. Representations and Warranties. Each Borrower
hereby represents and warrants that (i) this Amendment constitutes a legal,
valid and binding obligation of such Borrower, enforceable against such
Borrower in accordance with its terms, (ii) the representations and warranties
contained in the Amended Loan Agreement are correct in all material respects as
though made on and as of the date of this Amendment, and (iii) no Event of
Default has occurred and is continuing.
Section 5. Reference to and Effect on the Amended Loan
Agreement.
(a) Upon the effectiveness of this Amendment, each
reference in the Amended Loan Agreement to "this Agreement", "hereunder",
"hereof", "herein", or words of like import shall mean and be a reference to
the Amended Loan Agreement, as amended hereby, and each reference to the
Amended Loan Agreement in any other document, instrument or agreement executed
and/or delivered in connection with the Amended Loan Agreement shall mean and
be a reference to the Amended Loan Agreement, as amended hereby.
(b) Except as specifically amended above, the Amended Loan
Agreement and all other documents, instruments and agreements executed and/or
delivered in connection therewith shall remain in full force and effect and are
hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of the
Agent or the Lenders under the Amended Loan Agreement, nor constitute a waiver
of any provision of the Amended Loan Agreement, except as specifically set
forth herein.
Section 6. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
Section 7. Governing Law. This Amendment shall be governed
by and construed in accordance with the internal laws (as opposed to the
conflicts of laws provisions) of the State of Illinois.
Section 8. Legal Fees. The Borrowers agree to pay to the
Agent, for its benefit, on demand, all costs and expenses that the Agent pays
or incurs in connection with the negotiation, preparation, consummation,
administration, enforcement and termination of this Amendment, including,
without limitation, the allocated costs of the Agent's in-house counsel fees.
<PAGE>
Section 9. Section Titles. The section titles contained in
this Amendment are and shall be without substance, meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of November 14, 1996.
LACLEDE STEEL COMPANY
By:________________________________
Vice President
LACLEDE CHAIN MANUFACTURING COMPANY
By:________________________________
Vice President
LACLEDE MID AMERICA INC.
By:________________________________
Vice President
BANKAMERICA BUSINESS CREDIT, INC., as the Agent
By:________________________________
Vice President
BANKAMERICA BUSINESS CREDIT,
INC., as a Lender and one of
the Majority Lenders
By:________________________________
Vice President
THE BANK OF NEW YORK
COMMERCIAL CORPORATION, as a
Lender and one of the
Majority Lenders
By:________________________________
Vice President
<PAGE>
AMENDMENT NO. 9
TO
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 7, 1994
THIS AMENDMENT NO. 9 dated as of February 7, 1997 (this
"Amendment") is entered into among BANKAMERICA BUSINESS CREDIT, INC., a
Delaware corporation ("BABC"), THE BANK OF NEW YORK COMMERCIAL CORPORATION, a
New York corporation ("BNYCC"), THE BOATMEN'S NATIONAL BANK OF ST. LOUIS, a
national banking association ("Boatmen's") (BABC, BNYCC and Boatmen's and their
respective successors and assigns being sometimes hereinafter referred to
collectively as the "Lenders" and each of BABC, BNYCC and Boatmen's and its
successors and assigns being sometimes hereinafter referred to individually as
a "Lender"), BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, as
agent for the Lenders (in such capacity as agent, the "Agent"), LACLEDE STEEL
COMPANY, a Delaware corporation (the "Parent"), LACLEDE CHAIN MANUFACTURING
COMPANY, a Delaware corporation ("Laclede Chain"), and LACLEDE MID AMERICA
INC., an Indiana corporation ("Laclede Mid America") (the Parent, Laclede Chain
and Laclede Mid America being sometimes hereinafter referred to collectively as
the "Borrowers" and each of the Parent, Laclede Chain and Laclede Mid America
being sometimes hereinafter referred to individually as a "Borrower").
W I T N E S S E T H:
WHEREAS, the Borrowers, the Lenders and the Agent are parties
to a certain Loan and Security Agreement dated as of September 7, 1994 (the
"Loan Agreement");
WHEREAS, the Loan Agreement was amended by (a) Amendment No. 1
dated as of February 15, 1995, (b) Amendment No. 2 dated as of May 10, 1995,
(c) Amendment No. 3 dated as of June 1, 1995, (d) Amendment No. 4 dated as of
December 7, 1995, (e) Amendment No. 5 dated as of January 26, 1996, (f)
Amendment No. 6 dated as of June 26, 1996, (g) Amendment No. 7 dated as of July
30, 1996, and (h) Amendment No. 8 dated as of November 14, 1996 (the Loan
Agreement, as so amended, being hereinafter referred to as the "Amended Loan
Agreement," capitalized terms used herein without definition having the
meanings given such terms in the Amended Loan Agreement); and
WHEREAS, the Borrowers, the Lenders and the Agent have agreed
to amend the Amended Loan Agreement on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises set forth
above, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and
the Agent hereby agree as follows:
Section 1. Amendment of the Amended Loan Agreement.
Effective as of February 7, 1997, subject to the fulfillment of the conditions
precedent set forth in Section 2 below, the Amended Loan Agreement is amended
as follows:
(a) The definition of "Individual Maximum Revolver Amount" is
amended and restated as set forth on Exhibit A attached hereto.
(b) The definition of "Maximum Revolver Amount" is amended
and restated as set forth on Exhibit B attached hereto.
(c) The definition of "Restricted Investment" contained in
Section 1.1 is amended to add the following immediately following clause (m)
thereof:
, and (n) a promissory note in the principal amount of
$1,653,000 received by the Parent as partial consideration for
the sale on or about February 10, 1996 by the Parent to
Excaliber Tubular Corporation of the Parent's Inventory and
Fixed Assets located at the Parent's Benwood, West Virginia
tube mill facility
(d) The definition of "Revolver Facility" contained in
Section 1.1 is amended to delete the amount of "$100,000,000" contained therein
and to substitute the amount of "$90,000,000" therefor.
(e) Section 2.1 is amended to delete the amount of
$110,000,000" contained therein and to substitute the amount of "$100,000,000"
therefor.
(f) Section 5.1(c)(v) is amended and restated as follows:
(v) Equipment;
(g) Section 8.9(a) is amended to add the following
immediately following clause (viii) thereof:
, and (ix) for a sale by the Parent to Excaliber
Tubular Corporation of the Parent's Inventory and Fixed Assets
located at the Parent's Benwood, West Virginia tube mill
facility
(h) The Commitments of each Lender are revised as set forth
on the signature pages of this Amendment.
Section 2. Conditions to Amendment. This Amendment shall
become effective upon the satisfaction of the following conditions precedent:
(a) The Agent shall have received, in the Agent's account
referred to in Section 13.11 of the Loan Agreement, all of the cash
proceeds of the sale by the Parent to Excaliber Tubular Corporation of
the Parent's Inventory and Fixed Assets located at the Parent's
Benwood, West Virginia tube mill facility, which proceeds shall be in
a minimum amount of $1,000,000 plus the aggregate amount (the
"Inventory Amount") of the outstanding Revolving Loans made on the
basis of the Parent's Inventory located at the Parent's Benwood, West
Virginia tube mill facility, with instructions to apply (i) $1,000,000
to the installments of principal of the Term Loans in the inverse
order of maturity, and (ii) the remainder as a repayment of the
Revolving Loans, in each case based upon the Pro Rata Shares of the
Lenders.
(b) The Agent shall have received a pledge of that certain
promissory note in the principal amount of $1,653,000 executed by
Excaliber Tubular Corporation and payable to the Parent.
(c) The Agent shall have received six counterparts of this
Amendment, executed by each Borrower and each Lender, and the Agent
shall have executed this Amendment.
(d) The Agent shall have received a certificate of the Parent
with respect to the sale to Excaliber Tubular Corporation of the
Parent's Inventory and Fixed Assets located at the Parent's Benwood,
West Virginia tube mill facility (i) setting forth the purchase price
to be paid for such Inventory, with satisfactory detail, and (ii) with
respect to the Inventory Amount, identifying any such Inventory that
provided the basis for outstanding Revolving Loans and the advance
rates applicable thereto.
Section 3. Grant by Laclede Mid America. As security for all
Obligations, Laclede Mid America hereby grants to the Agent, for the ratable
benefit of the Secured Creditors, a continuing security interest in, lien on,
and right of set-off against, all of Laclede Mid America's Equipment, whether
now owned or existing or hereafter acquired or arising, regardless of where
located.
Section 4. Representations and Warranties. Each Borrower
hereby represents and warrants that (i) this Amendment constitutes a legal,
valid and binding obligation of such Borrower, enforceable against such
Borrower in accordance with its terms, (ii) the representations and warranties
contained in the Amended Loan Agreement are correct in all material respects as
though made on and as of the date of this Amendment, and (iii) no Event of
Default has occurred and is continuing.
Section 5. Reference to and Effect on the Amended Loan
Agreement.
(a) Upon the effectiveness of this Amendment, each
reference in the Amended Loan Agreement to "this Agreement", "hereunder",
"hereof", "herein", or words of like import shall mean and be a reference to
the Amended Loan Agreement, as amended hereby, and each reference to the
Amended Loan Agreement in any other document, instrument or agreement executed
and/or delivered in connection with the Amended Loan Agreement shall mean and
be a reference to the Amended Loan Agreement, as amended hereby.
(b) Except as specifically amended above, the Amended Loan
Agreement and all other documents, instruments and agreements executed and/or
delivered in connection therewith shall remain in full force and effect and are
hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of the
Agent or the Lenders under the Amended Loan Agreement, nor constitute a waiver
of any provision of the Amended Loan Agreement, except as specifically set
forth herein.
Section 6. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
Section 7. Governing Law. This Amendment shall be governed
by and construed in accordance with the internal laws (as opposed to the
conflicts of laws provisions) of the State of Illinois.
Section 8. Legal Fees. The Borrowers agree to pay to the
Agent, for its benefit, on demand, all costs and expenses that the Agent pays
or incurs in connection with the negotiation, preparation, consummation,
administration, enforcement and termination of this Amendment, including,
without limitation, the allocated costs of the Agent's in-house counsel fees.
<PAGE>
Section 9. Section Titles. The section titles contained in
this Amendment are and shall be without substance, meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of February 7, 1997.
LACLEDE STEEL COMPANY
By:________________________________
Vice President
LACLEDE CHAIN MANUFACTURING COMPANY
By:________________________________
Vice President
LACLEDE MID AMERICA INC.
By:________________________________
Vice President
<PAGE>
BANKAMERICA BUSINESS CREDIT, INC., as the
Agent
By:________________________________
Vice President
BANKAMERICA BUSINESS CREDIT,
INC., as a Lender
Commitment: $65,449,186.00By:________________________________
Vice President
THE BANK OF NEW YORK
COMMERCIAL CORPORATION, as a
Lender
Commitment: $25,172,984.00By:________________________________
Vice President
THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS, as a Lender
Commitment: $5,034,406.00By:________________________________
Vice President
<PAGE>
EXHIBIT A
TO
AMENDMENT NO. 9
"Individual Maximum Revolver Amount" means
(1) at any time with respect to the Parent
(a) the lesser of
(i) the Revolver Facility; or
(ii) the sum of
(A) eighty-five percent (85.0%) of
the Net Amount of the Eligible Accounts of
the Parent; plus (B) the sum of (x) sixty-five (65.0%)
(as such percentage may be reduced pursuant to Section 5.10)
of the value of Eligible Inventory of the Parent
consisting of raw material or semi-finished
or finished goods plus (y) fifty percent
(50.0%)(as such percentage may be reduced
pursuant to Section 5.10) of the value of
Eligible Inventory of the Parent consisting
of supplies; provided, however, that at no
time shall the sum of the outstanding
Revolving Loans to the Parent based upon the
value of Eligible Inventory exceed the
following amounts during the periods
indicated:
Amount Period
$58,000,000 12/31/96 to and including 2/10/97
$50,000,000 2/10/97 to and including 3/30/97
$49,700,000 3/31/97 to and including 4/29/97
$49,400,000 4/30/97 to and including 5/30/97
$49,100,000 5/31/97 to and including 6/29/97
$48,800,000 6/30/97 to and including 7/30/97
$48,500,000 7/31/97 to and including 8/30/97
$48,200,000 8/31/97 to and including 9/29/97
$48,000,000 9/30/97 and thereafter;
minus
(b) the sum of
(i) reserves for accrued interest on the Obligations
owing by the Parent;
(ii) any Fixed Asset Reserve with respect to the
Parent; and
(iii) all other reserves which the Agent deems
necessary in the exercise of reasonable credit judgment to
maintain with respect to the Parent's account, and which are
reasonably related to the preservation or protection of the
value of the Collateral or the business value of the Parent,
including, without limitation, any Environmental Compliance
Reserve with respect to the Parent and reserves for any
amounts which the Agent or any Lender may be obligated to pay
in the future for the account of the Parent;
(2) at any time with respect to Laclede Chain,
(a) the lesser of
(i) the Revolver Facility; or
(ii) the sum of
(A) eighty-five percent (85.0%) of
the Net Amount of Eligible Accounts of
Laclede Chain, plus (B) the sum of (x) sixty-five percent
(65.0%) (as such percentage may
be reduced pursuant to Section 5.10) of the
value of Eligible Inventory of Laclede Chain
consisting of raw material or semi-finished
or finished goods plus (y) fifty percent
(50.0%) (as such percentage may be reduced
pursuant to Section 5.10) of the value of
Eligible Inventory of Laclede Chain
consisting of supplies; provided, that at no
time shall the sum of outstanding Revolving
Loans to Laclede Chain based upon the value
of Eligible Inventory exceed $48,000,000
minus
(b) the sum of
(i) reserves for accrued interest on the Obligations
owing by Laclede Chain;
(ii) any Fixed Asset Reserve with respect to Laclede
Chain; and
(iii) all other reserves which the Agent deems
necessary in the exercise of reasonable credit judgment to
maintain with respect to Laclede Chain's account, and which
are reasonably related to the preservation or protection of
the value of the Collateral or the business value of Laclede
Chain, including, without limitation, any Environmental
Compliance Reserve with respect to Laclede Chain and reserves
for any amounts which the Agent or any Lender may be obligated
to pay in the future for the account of Laclede Chain; and
(3) at any time with respect to Laclede Mid America,
(a) the lesser of
(i) the Revolver Facility; or
(ii) the sum of
(A) eighty-five percent (85.0%) of
the Net Amount of Eligible Accounts of
Laclede Mid America, plus (B) the sum of
(x) sixty-five percent (65.0%) (as such
percentage may be reduced pursuant to Section
5.10) of the value of Eligible Inventory of
Laclede Mid America consisting of raw
material or semi-finished or finished goods
plus (y) fifty percent (50.0%) (as such
percentage may be reduced pursuant to Section
5.10) of the value of Eligible Inventory of
Laclede Mid America consisting of supplies;
provided, that at no time shall the sum of
outstanding Revolving Loans to Laclede Mid
America based upon the value of Eligible
Inventory exceed $48,000,000
minus
(b) the sum of
(i) reserves for accrued interest on the Obligations
owing by Laclede Mid America;
(ii) any Fixed Asset Reserve with respect to Laclede
Mid America; and
(iii) all other reserves which the Agent deems
necessary in the exercise of reasonable credit judgment to
maintain with respect to Laclede Mid America's account, and
which are reasonably related to the preservation or protection
of the value of the Collateral or the business value of
Laclede Mid America, including, without limitation, any
Environmental Compliance Reserve with respect to Laclede Mid
America and reserves for any amounts which the Agent or any
Lender may be obligated to pay in the future for the account
of Laclede Mid America.
<PAGE>
EXHIBIT B
TO
AMENDMENT NO. 9
"Maximum Revolver Amount" means, at any time,
(a) the lesser of
(i) the Revolver Facility; or
(ii) the sum of
(A) eighty-five percent (85.0%) of
the Net Amount of the Eligible Accounts; plus
(B) the sum of (x) sixty-five (65.0%) (as
such percentage may be reduced pursuant to
Section 5.10) of the value of Eligible
Inventory consisting of raw material or semi-finished or
finished goods plus (y) fifty
percent (50.0%) (as such percentage may be
reduced pursuant to Section 5.10) of the
value of Eligible Inventory consisting of
supplies; provided, at no time shall the sum
of the outstanding Revolving Loans based upon
the value of Eligible Inventory exceed the
following amounts during the periods
indicated:
Amount Period
$58,000,000 12/31/96 to and including 2/10/97
$50,000,000 2/10/97 to and including 3/30/97
$49,700,000 3/31/97 to and including 4/29/97
$49,400,000 4/30/97 to and including 5/30/97
$49,100,000 5/31/97 to and including 6/29/97
$48,800,000 6/30/97 to and including 7/30/97
$48,500,000 7/31/97 to and including 8/30/97
$48,200,000 8/31/97 to and including 9/29/97
$48,000,000 9/30/97 and thereafter;
minus
(b) the sum of
(i) reserves for accrued interest on the Obligations;
(ii) any Fixed Asset Reserve with respect to any
Borrower; and
(ii) all other reserves which the Agent deems
necessary in the exercise of reasonable credit judgment to
maintain with respect to any Borrower's account, and which are
reasonably related to the preservation or protection of the
value of the Collateral or the business value of such
Borrower, including, without limitation, any Environmental
Compliance Reserve and reserves for any amounts which the
Agent or any Lender may be obligated to pay in the future for
the account of such Borrower.
<PAGE>
AMENDMENT NO. 10
TO
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 7, 1994
THIS AMENDMENT NO. 10 dated as of February 26, 1997 (this
"Amendment") is entered into among BANKAMERICA BUSINESS CREDIT, INC., a
Delaware corporation ("BABC"), THE BANK OF NEW YORK COMMERCIAL CORPORATION, a
New York corporation ("BNYCC"), THE BOATMEN'S NATIONAL BANK OF ST. LOUIS, a
national banking association ("Boatmen's") (BABC, BNYCC and Boatmen's and their
respective successors and assigns being sometimes hereinafter referred to
collectively as the "Lenders" and each of BABC, BNYCC and Boatmen's and its
successors and assigns being sometimes hereinafter referred to individually as
a "Lender"), BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, as
agent for the Lenders (in such capacity as agent, the "Agent"), LACLEDE STEEL
COMPANY, a Delaware corporation (the "Parent"), LACLEDE CHAIN MANUFACTURING
COMPANY, a Delaware corporation ("Laclede Chain"), and LACLEDE MID AMERICA
INC., an Indiana corporation ("Laclede Mid America") (the Parent, Laclede Chain
and Laclede Mid America being sometimes hereinafter referred to collectively as
the "Borrowers" and each of the Parent, Laclede Chain and Laclede Mid America
being sometimes hereinafter referred to individually as a "Borrower").
W I T N E S S E T H:
WHEREAS, the Borrowers, the Lenders and the Agent are parties
to a certain Loan and Security Agreement dated as of September 7, 1994 (the
"Loan Agreement");
WHEREAS, the Loan Agreement was amended by (a) Amendment No. 1
dated as of February 15, 1995, (b) Amendment No. 2 dated as of May 10, 1995,
(c) Amendment No. 3 dated as of June 1, 1995, (d) Amendment No. 4 dated as of
December 7, 1995, (e) Amendment No. 5 dated as of January 26, 1996, (f)
Amendment No. 6 dated as of June 26, 1996, (g) Amendment No. 7 dated as of July
30, 1996, (h) Amendment No. 8 dated as of November 14, 1996, and (i) Amendment
No. 9 dated as of February 7, 1997 (the Loan Agreement, as so amended, being
hereinafter referred to as the "Amended Loan Agreement," capitalized terms used
herein without definition having the meanings given such terms in the Amended
Loan Agreement); and
WHEREAS, the Borrowers, the Lenders and the Agent have agreed
to amend the Amended Loan Agreement on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises set forth
above, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and
the Agent hereby agree as follows:
Section 1. Amendment of the Amended Loan Agreement.
Effective as of February ___, 1997, subject to the fulfillment of the
conditions precedent set forth in Section 2 below, the Amended Loan Agreement
is amended as follows:
(a) Section 8.24 of the Loan Agreement is amended and
restated as follows:
8.24 Consolidated Fixed Charge Coverage Ratio. The
Borrowers will maintain a Consolidated Fixed Charge Coverage Ratio,
determined as of the end of each period listed below, for the period
indicated of not less than the ratio indicated opposite such period:
Period Ratio
01/01/97-03/31/97 1.05 to 1.00
01/01/97-06/30/97 1.05 to 1.00
01/01/97-09/30/97 1.00 to 1.00
01/01/97-12/31/97 1.05 to 1.00
01/01/98-03/31/98 1.10 to 1.00
01/01/98-06/30/98 1.10 to 1.00
01/01/98-09/30/98 1.10 to 1.00
01/01/98-12/31/98 1.10 to 1.00
and commencing on
03/31/99 and as of the
last day of each fiscal
quarter in each Fiscal
Year thereafter, for the
twelve-month period
ending on such date 1.10 to 1.00
For purposes of this Section 8.24, the Consolidated Fixed Charge
Coverage Ratio shall be calculated for fiscal periods of 1997 without
giving effect to the $1,000,000 prepayment of principal of the Term
Loans made in connection with the sale on February 10, 1997 by the
Parent of the Parent's Inventory and Fixed Assets located at the
Parent's Benwood, West Virginia tube mill facility.
(b) Section 8.25 of the Loan Agreement is amended and
restated as follows:
8.25 Consolidated Adjusted Net Worth. The Borrowers
will maintain a Consolidated Adjusted Net Worth, determined as of the
last day of each fiscal quarter in each Fiscal Year, in an amount
which is not less than the sum of (a) the aggregate amount of any
contributions to the capital of the Parent made after the date on
which Amendment No. 10 to this Agreement became effective, plus (b)
the amount indicated opposite each of the following dates:
Quarter Ending Date Amount
03/31/97 $31,000,000
06/30/97 $31,000,000
09/30/97 $31,500,000
12/31/97 $32,250,000
Beginning with the fiscal quarter ending March 31, 1998, the Borrowers will
maintain a Consolidated Adjusted Net Worth, calculated as of the last day of
each fiscal quarter in each Fiscal Year, of not less than the sum of (a) the
aggregate amount of any contributions to the capital of the Parent made after
the date on which Amendment No. 10 to this Agreement became effective, plus (b)
$32,250,000, plus (c) an amount (to the extent greater than zero and without
deduction for any losses) equal to fifty percent (50.0%) of Consolidated Net
Earnings for the Fiscal Year ending on December 31, 1997, and fifty percent
(50.0%) of the Consolidated Net Earnings for each Fiscal Year thereafter.
Section 2. Conditions to Amendment. This Amendment shall
become effective upon the Agent's receipt of six counterparts of this
Amendment, executed by each Borrower and each Lender, and the execution thereof
by the Agent.
Section 3. Representations and Warranties. Each Borrower
hereby represents and warrants that (i) this Amendment constitutes a legal,
valid and binding obligation of such Borrower, enforceable against such
Borrower in accordance with its terms, (ii) the representations and warranties
contained in the Amended Loan Agreement are correct in all material respects as
though made on and as of the date of this Amendment, and (iii) no Event of
Default has occurred and is continuing.
Section 4. Reference to and Effect on the Amended Loan
Agreement.
(a) Upon the effectiveness of this Amendment, each
reference in the Amended Loan Agreement to "this Agreement", "hereunder",
"hereof", "herein", or words of like import shall mean and be a reference to
the Amended Loan Agreement, as amended hereby, and each reference to the
Amended Loan Agreement in any other document, instrument or agreement executed
and/or delivered in connection with the Amended Loan Agreement shall mean and
be a reference to the Amended Loan Agreement, as amended hereby.
(b) Except as specifically amended above, the Amended Loan
Agreement and all other documents, instruments and agreements executed and/or
delivered in connection therewith shall remain in full force and effect and are
hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of the
Agent or the Lenders under the Amended Loan Agreement, nor constitute a waiver
of any provision of the Amended Loan Agreement, except as specifically set
forth herein.
Section 5. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
Section 6. Governing Law. This Amendment shall be governed
by and construed in accordance with the internal laws (as opposed to the
conflicts of laws provisions) of the State of Illinois.
Section 7. Legal Fees. The Borrowers agree to pay to the
Agent, for its benefit, on demand, all costs and expenses that the Agent pays
or incurs in connection with the negotiation, preparation, consummation,
administration, enforcement and termination of this Amendment, including,
without limitation, the allocated costs of the Agent's in-house counsel fees.
<PAGE>
Section 8. Section Titles. The section titles contained in
this Amendment are and shall be without substance, meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of February 26, 1997.
LACLEDE STEEL COMPANY
By:________________________________
Vice President
LACLEDE CHAIN MANUFACTURING COMPANY
By:________________________________
Vice President
LACLEDE MID AMERICA INC.
By:________________________________
Vice President
<PAGE>
BANKAMERICA BUSINESS CREDIT, INC., as the Agent
By:________________________________
Vice President
BANKAMERICA BUSINESS CREDIT,
INC., as a Lender
By:________________________________
Vice President
THE BANK OF NEW YORK COMMERCIAL
CORPORATION, as a Lender
By:________________________________
Vice President
THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS, as a Lender
By:________________________________
Vice President
<PAGE>
RESTATEMENT OF THE
LACLEDE STEEL COMPANY
KEY EMPLOYEE RETIREMENT PLAN
WHEREAS, LACLEDE STEEL COMPANY, a corporation organized under
the laws of Delaware ("Company") previously adopted the Laclede Steel Company
Key Employee Retirement Plan ("Plan") which Plan has been amended several times
previously; and
WHEREAS, the Company desires to amend and restate the Plan in
its entirety;
NOW, THEREFORE, effective as of October 16, 1996, the Plan is
amended and restated in its entirety to read as follows:
SECTION I - NATURE AND PURPOSE
The purpose of the Plan is to provide certain key executive
employees ("Key Employees") who are responsible for the management, growth and
viability of the Company with benefits to supplement the retirement and death
benefits to be paid by the Company on behalf of the Key Employee. This Key
Employee Plan is intended to be a non-qualified plan maintained by the Company
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees within the meaning of
Section 201(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
SECTION II - DEFINITIONS
Wherever used herein:
(a) "Actuarial Equivalent" means equality in value of the aggregate
amounts expected to be received under different forms of payment. The
Actuarial Equivalent of any benefit payable shall be determined on the
basis of the Average Rate of Return and mortality according to the
table prescribed from time to time by the Internal Revenue Service
pursuant to Section 417(e)(3)(A)(ii)(I) of the Internal Revenue Code
of 1986, as amended by Section 767 of the Uruguay Round Agreements
Act, P.L. 103-465 (GATT). The Average Rate of Return shall initially
be the Thirty (30) Year U.S. Treasury Rate as of December 31, 1993,
and shall be reset at the end of each calendar year to the Thirty (30)
U.S. Treasury Rate as of the end of such calendar year; provided, that
the Average Rate of Return shall only be reset if the new rate would
be more than one (1) percentage point higher or lower than the rate
then in effect and shall not be increased or decreased by more than
one (1) percentage point. The term "Thirty (30) Year Treasury Rate"
shall mean the rate on thirty (30) year U.S. Treasury Bonds.
(b) "Administrator" means such employee of the Company as the President
may from time to time appoint.
(c) "Beneficiary" means an individual (including a Surviving Spouse),
trust, estate, partnership, company or corporation designated by the
Key Employee as provided in Section IX.
(d) "Board of Directors" means the Board of Directors of Laclede Steel
Company.
(e) "Compensation Base" means the average of the Key Employee's highest
aggregate three (3) consecutive calendar year Eligible Earnings within
the ten (10) calendar years ending on the December 31st coinciding
with or next preceding the date of his termination of employment;
provided, however, that if the Key Employee has fewer than ten (10)
calendar years of Eligible Earnings, all calendar years ending on the
December 31st coinciding with or next preceding the date of his
termination of employment shall be counted.
(f) "Compensation Committee" means that committee of the Board of
Directors as is designated from time to time by the Board of Directors
to assist in the administration of the Plan.
(g) "Key Employee Trust" means a grantor trust within the meaning of
Sections 671 through 679 of the Internal Revenue Code of 1986, as
amended, established by a Key Employee (or his assignee) to accumulate
funds to pay benefits to a Key Employee (or his assignee) under a Key
Employee Retirement Agreement.
(h) "Normal Retirement Date" means the last day of the month in which the
Key Employee reaches age sixty (60).
(i) "Permanently and Totally Disabled" means an individual who is unable
to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to
last for a continuous period of not less than twelve (12) months. An
individual shall not be considered to be permanently and totally
disabled unless he furnishes proof of the existence thereof in such
form and manner, and at such times, as the Company may require.
(j) "Primary Insurance Amount" means the amount determined (i) under the
terms of the Federal Social Security Act as in effect on the Key
Employee's date of retirement or termination of employment, or if
earlier, on the date the Key Employee attains his sixty-fifth (65th)
birthday, (ii) as if the Key Employee had attained his sixty-fifth
(65th) birthday and assuming he was continuously covered under the
Federal Social Security Act until such date, and (iii) as if the total
compensation paid to the Key Employee by the Company had been the only
compensation ever earned by the Key Employee. In determining the Key
Employee's Primary Insurance Amount, the Special Minimum Benefit
provision under the Federal Social Security Act shall be disregarded.
In computing the compensation of a Key Employee who retires on or
after January 31, 1983, such Key Employee's compensation for the 1982,
1983, and 1984 calendar years shall include an amount which would have
been payable to the Key Employee had his earnings not been reduced in
1982, 1983, and 1984 as a result of the general reduction for salaried
employees of the Company which occurred in 1982, 1983, and 1984 and in
the event such Key Employee receives any restoration payment as a
result of such reductions, such restoration payments shall be deducted
from his compensation.
(k) "Retirement Plan" means the Laclede Salaried Employees' Pension Plan,
as it may be amended from time to time.
(l) "Savings Plan" means the Laclede Steel Salaried Employees' Profit
Sharing Plan, as it may be amended from time to time.
(m) "Surviving Spouse" means the spouse, if any, of the Key Employee upon his
death.
The terms "Eligible Earnings" and "Basic Pension" shall have
the same meanings as those defined in the Retirement Plan as of the date
the benefits under this Agreement are determined.
SECTION III - ELIGIBILITY
Agreements may be made with any Key Employee of the Company,
including a member of the Board of Directors of the Company, provided such Key
Employee is a management or highly compensated employee within the meaning of
Section 201(2) of ERISA on the date the agreement is made. If the Key Employee
ceases to be a management or highly compensated employee within the meaning of
Section 201(2) of ERISA, for any reason, no further benefits shall accrue or
vest under the Plan. Subject to the terms and conditions of the Plan, the Board
of Directors shall have exclusive power to select the employees with whom
agreements shall be made.
SECTION IV - SUPPLEMENTAL BENEFIT
4.1 Supplemental Benefit
A Key Employee's Supplemental Benefit, when expressed as an
annual benefit (commencing at Normal Retirement Date in the form of a fifty
percent (50%) Joint and Survivor Annuity with the Surviving Spouse as the
survivor annuitant) to the Key Employee after he has paid his federal, state
and local taxes on the benefit (determined by the Compensation Committee on the
basis of the maximum marginal individual federal, state and local tax rates),
is equal to the excess, if any, of (a) over the sum of (b) and (c) as defined
below:
(a) sixty-five percent (65%) of the Compensation
Base;
(b) the Basic Pension under the Retirement Plan
payable commencing on the Normal Retirement Date; and
(c) the Primary Insurance Amount payable
commencing on the later of the date of the Key Employee's
termination of employment or his attainment of age sixty-two
(62).
4.2 Accrued Benefit
A Key Employee's Accrued Benefit is the lump sum Actuarial
Equivalent of:
(a) On and after a Key Employee's Normal
Retirement Date, his Supplemental Benefit.
(b) On and after a Key Employee's attainment of
age fifty (50) and prior to his Normal Retirement Date, his
Supplemental Benefit reduced by two and one-half percent (2-1/2%) for
each full year and fraction thereof, expressed in
terms of months divided by twelve (12), by which the Key
Employee's Normal Retirement Date exceeds his age.
(c) Prior to a Key Employee's attainment of age
fifty (50), his Supplemental Benefit payable at age fifty
(50).
SECTION V - PAYMENT OF ACCRUED BENEFIT AND TAXES
5.1 Payment of Accrued Benefit
(a) No later than December 31, 1990 (or, if later, the
December 31 after he becomes a participant hereunder), a Key Employee (or his
assignee) must elect to receive his Accrued Benefit directly or, in the
alternative, to have his Accrued Benefit paid to a Key Employee Trust.
(b)(i) As of December 31, 1991 (or, if later, the December 31
after he becomes a participant hereunder), and as of each December 31
thereafter until a Key Employee's termination of employment, a Key Employee (or
his assignee) must elect to receive any increase in his Accrued Benefit since
the previous payment of his Accrued Benefit pursuant to Paragraph (a) or this
Paragraph (b) directly or, in the alternative, to have this increase in his
Accrued Benefit paid to a Key Employee Trust.
(ii) If a Key Employee terminates his employment
other than on December 31, then the increase in such Key Employee's Accrued
Benefit payable to the Key Employee (or his assignee) pursuant to Subparagraph
(i) shall be determined as of the last day of the Key Employee's last full
month of employment with the Company. Such amount shall be paid to the Key
Employee (or his assignee) in accordance with the provisions of Subparagraph
(i) on the first day of the month following the date of termination of
employment.
(c) Notwithstanding the provisions of Paragraph (b), for
employees who become covered under the Plan on or after January 1, 1994 ("New
Key Employees") during the first ten (10) years of his participation, the
Company shall only be obligated to pay to the New Key Employee (or his
assignee) each year the excess of (i) a percentage of his Accrued Benefit, over
(ii) the amount of assets in the Key Employee Trust as of the end of such year
(or the amount of assets which would be in the Trust if the Key Employee (or
his assignee) had elected to have all contributions made to the Trust). Such
percentage shall be ten (10) percent for the first year and shall increase by
ten (10) percent for each year thereafter to a maximum of one hundred (100)
percent. Provided, that if a New Key Employee terminates employment prior to
having completed ten (10) years of participation in the Plan, the Company shall
pay to the New Key Employee (or his assignee) his full Accrued Benefit. In
addition, the Company shall only be obligated to pay to the Key Employee (or
his assignee) the increase in his Accrued Benefit pursuant to Paragraph (b) to
the extent that as of the date payment is required, the fair market value of
the assets of any Key Employee Trust, plus any benefits the Key Employee (or
his assignee) previously elected to be paid directly under Paragraphs (a) and
(b) above, do not exceed the Key Employee's Accrued Benefit determined as of
such date. If the fair market value of the assets of a Key Employee Trust,
plus any benefits the Key Employee (or his assignee) previously elected to be
paid directly under Paragraphs (a) and (b) above, do not exceed the Key
Employee's Accrued Benefit as of such date, then the Company shall pay to the
Key Employee (or his assignee), or a Key Employee Trust, the increase in the
Key Employee's Accrued Benefit described in Paragraph (b) less any excess of
the current fair market value of the assets of any Key Employee Trust, plus any
benefits the Key Employee (or his assignee) previously elected to be paid
directly under Paragraphs (a) and (b) above, over the Key Employee's Accrued
Benefit determined as of the previous December 31 (beginning with
December 31, 1990 or in the case of a New Key Employee the December 31 of such
New Key Employee's tenth (10th) year of participation). For the purposes of
this Section 5.1(c), the fair market value of the assets of a Key Employee
Retirement Trust shall be determined without regard to any diminution in value
of any Company stock in which such Trust invests, after the date of such
investment.
(d) Notwithstanding the provisions of Paragraph (c), the
Company may, from time to time, change the rate of payment of the Accrued
Benefit.
5.2 Reimbursement of Taxes
At the time of each payment made by the Company
pursuant to Section 5.1, the Company shall make an additional payment to the
Key Employee (or his assignee) which reimburses the Key Employee (or his
assignee) for any federal, state, or local taxes which the Key Employee (or his
assignee) shall be required to pay on the receipt of payments made by the
Company pursuant to Section 5.1 to the Key Employee (or his assignee), or to a
Key Employee Trust, but not on the earnings of the Key Employee Trust. Such
additional payment shall be determined by the Compensation Committee on the
basis of the maximum marginal federal, state and local tax rates. The
reimbursement provided for in this Section 5.2 shall be increased to reflect
any federal, state, city or other local taxes as shall be required to be paid
by the Key Employee (or his assignee) on such reimbursement.
5.3 Payment of Supplemental Benefit
(a) Termination on or after Normal Retirement
Date. In the event of termination of employment of a Key Employee on or after
his Normal Retirement Date, the Supplemental Benefit shall be payable, as
elected by the Key Employee, in one of the following methods:
(i) one-twelfth (1/12) of the Supplemental
Benefit payable each month for the remaining
lifetime of the Key Employee commencing on
the first of the month following the date of
termination of employment, with fifty percent
(50%) of one-twelfth (1/12) of the
Supplemental Benefit payable for the
remaining lifetime of his Surviving Spouse,
if any, upon the death of the Key Employee,
or
(ii) the Actuarial Equivalent of the Supplemental
Benefit payable in a lump sum on the first
day of the month following the Key Employee's
termination of employment.
(b) Other Termination of Employment. In the
event of termination of employment of a Key Employee prior to his Normal
Retirement Date, the Supplemental Benefit reduced in accordance with the
provisions set forth below shall be payable in accordance with one of the
methods in Paragraph (a) above elected by the Key Employee commencing on the
first of the month following the later of (a) the date of his termination of
employment or (b) his attainment of age fifty (50). The Supplemental Benefit
thus payable shall be reduced two and one-half percent (2 1/2%) for each full
year and fraction thereof, expressed in terms of months divided by twelve (12),
by which the commencement date of benefit payments precedes the Normal
Retirement Date.
(c) Disability Retirement. In the event a Key
Employee is certified as permanently and totally disabled the Supplemental
Benefit determined as of the date of certification of disability shall be
payable in accordance with one of the methods in Paragraph (a) or (b) above,
whichever is applicable, elected by the Key Employee commencing on the first of
the month following the date of certification of disability.
(d) Death.
(i) In the event of the death of the Key Employee
prior to termination of employment, the Key
Employee's Surviving Spouse or Beneficiary,
as the case may be, shall receive a benefit
described below. If the Beneficiary is the
Surviving Spouse, the Beneficiary may elect
one of the following death benefits payable
upon the death of the Key Employee: (A)
fifty percent (50%) of one-twelfth (1/12) of
the Supplemental Benefit determined as of the
date of death payable each month to the
Surviving Spouse for her remaining lifetime
commencing with the first of the month
following the date of death or (B) the
Actuarial Equivalent (as if the Key Employee
had terminated employment on the date
immediately prior to his death) of the
benefit specified in Paragraph (a) or (b),
above, whichever is applicable, and based
upon the Key Employee's age at death, payable
in a lump sum to the Beneficiary of such Key
Employee on the first of the month following
the date of death. If the Beneficiary is
other than the Surviving Spouse, the
Beneficiary shall receive a death benefit in
the form set forth in Subparagraph (i)(B),
above.
(ii) If the Key Employee elected the option
provided in Paragraph (a)(i) and the Key Employee dies after termination of
employment and after benefit payments have commenced pursuant to Paragraph
(a)(i), payments shall be made to the Surviving Spouse in accordance with
Paragraph (a)(i). If the Key Employee elected the option provided in Paragraph
(a)(i) and the Key Employee's Surviving Spouse predeceases him, no benefit
payments shall be made under this Section as a result of the Key Employee's
death, but the provisions of Section 5.5 shall apply.
5.4 Offset for Accrued Benefit Payments
The Company's obligation to pay benefits pursuant to
Section 5.3 shall be reduced by the benefits previously paid by the Company
pursuant to Section 5.1 to a Key Employee (or his assignee) or to a Key
Employee Trust. This obligation shall be reduced or increased, as the case may
be, by any Trust earnings or losses on the benefits paid by the Company to a
Key Employee Trust pursuant to Section 5.1. In addition, this obligation shall
be further reduced or increased, as the case may be, by any imputed Trust
earnings or losses (as determined by the Compensation Committee) on benefits
previously paid by the Company directly to a Key Employee (or his assignee)
pursuant to Section 5.1. Provided, however, that if a Key Employee elected the
payment option provided in Section 5.3(a)(i), then the reduction in the
Company's obligation to pay benefits shall be the Actuarial Equivalent of the
amount determined above.
5.5 Additional Benefit
To the extent that the benefits previously paid by the
Company pursuant to Section 5.1 to a Key Employee (or his assignee) or to a Key
Employee Trust, and any earnings thereon, exceed the amount of the Company's
obligation pursuant to Section 5.3, then to the extent there is a balance
remaining in the Key Employee Trust after all other benefits have been paid
pursuant to a Key Employee Retirement Agreement, such remaining balance shall
be paid as an additional benefit to the Key Employee, the Key Employee's
Surviving Spouse, the Key Employee's Beneficiary, or their respective estates,
as the case may be, at the time the last benefit payment is made pursuant to
Section 5.3 or as soon as is practical thereafter.
5.6 Withholding
All payments under this Section V shall be reduced by
the amount of any required withholding imposed by applicable federal, state or
local tax withholding requirements.
5.7 Other Benefits
Any benefits payable under the Retirement Plan or the
Savings Plan shall be paid solely in accordance with the terms and provisions
of those Plans, and nothing in this Planshall operate or be construed in any
way to modify, amend, or affect the terms and provisions of the Retirement Plan
or the Savings Plan.
5.8 Joint and Survivor Provisions
Notwithstanding anything else in the Agreement
contained herein, all payments made from the Agreement shall be paid in the
form of a joint and survivor annuity payable to the Key Employee and his spouse
with the amount of annuity to the Surviving Spouse to be fifty percent (50%) of
the amount of the annuity paid to the Key Employee, unless the Key Employee,
with the consent of his spouse, elects a different form of benefit payable
under the Plan within ninety (90) days prior to the date payment is to be made.
The spouse's written consent must acknowledge the effect of such optional form
of benefit and must be witnessed by a notary public. Any benefit payable on
account of the death of the Key Employee shall be payable to the Key Employee's
Surviving Spouse in the form of an annuity for the life of such spouse in the
amount equal to fifty percent (50%) of the benefit which would have been
payable to the Key Employee as a retirement benefit, unless the spouse elects a
different form of payment payable under the Plan. The beneficiary designated
by the Key Employee pursuant to Section IX must be the Key Employee's spouse
unless the Key Employee has no spouse or the Key Employee designates a
different beneficiary with the written consent of the spouse. The spouse's
consent must acknowledge the effect of such designation of a different
beneficiary and must be witnessed by a notary public. If the Key Employee has
no spouse or his spouse cannot be located, he must so certify on a form
provided by the Company.
SECTION VI - ADMINISTRATION
The Administrator shall administer the terms of the Plan. Any
determination or decision of the Administrator shall be conclusive and binding
on all parties at any time having or claiming to have any interest whatsoever
under the Plan or any agreement made pursuant to it.
SECTION VII - MISCELLANEOUS
7.1 No Alienation of Benefits
Except as otherwise required by law, a Key Employee
(or his assignee as required by law) shall not assign, anticipate, or otherwise
encumber, any payment due under this Agreement. In the event a Key Employee
(or his assignee) attempts to do so, the Company shall have no further
liability under the Plan or any agreement made pursuant to it. Payments due
under the Plan shall be exempt from the claims of any creditor.
7.2 No Enlargement of Employment Rights
Nothing contained in the Plan shall be construed as a
contract of employment between the Company and the Key Employee or as a right
of the Key Employee to continue in the employment of the Company, or as a
limitation of the right of the Company to discharge the Key Employee, with or
without cause.
7.3 Legal Obligations
The rights, privileges, benefits and objectives under
the Plan are intended to be legal obligations of the Company and binding upon
the Company, its successors and assignees, including successors by corporate
merger, consolidation, reorganization, or otherwise.
7.4 Assignability
The Company shall have the right to assign its
obligations under the Plan or any agreement made pursuant to it in the event of
a merger in which a successor assumes all obligations of the Company pursuant
to the merger.
SECTION VIII-AMENDMENT
The Board of Directors shall have the full power and authority
to amend, modify, alter or terminate the Plan in whole or in part; provided,
however, that any such amendment, modification, alteration or termination shall
not terminate or diminish any rights or benefits then being received by a
retired Key Employee, nor reduce the vested benefit of any Key Employee as of
the effective date of such amendment, modification alteration or termination.
SECTION IX - BENEFICIARY
The Key Employee, from time to time, may designate or change
the designation of his Beneficiary in writing on such forms as the Company may
require. To be effective, the designation form must be signed by the Key
Employee and acknowledged by the Company. In the event that the Key Employee
fails to designate a Beneficiary or if for any reason the designation shall be
legally ineffective, then the amount which would have been paid to a duly
designated Beneficiary shall be distributed in accordance with the provisions
of Section 5, to the estate of such deceased Key Employee.
IN WITNESS WHEREOF, the Plan was amended and restated
effective as of October 16, 1996.
LACLEDE STEEL COMPANY
By:
<PAGE>
ASSET PURCHASE AGREEMENT
BETWEEN
Excaliber Tubular Corporation
AND
Laclede Steel Company
January 10, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions; interpretation. . . . . 1
2. Basic Transaction. . . . . . . . . .10
3. Representations and Warranties . . .13
4. Representations and Warranties of the Buyer26
5. Pre-Closing Covenants. . . . . . . .27
6. Conditions Precedent to Close. . . .30
7. Post-Closing Covenants . . . . . . .33
8. Remedies for Breaches of This Agreement36
9. Termination. . . . . . . . . . . . .42
10. Miscellaneous. . . . . . . . . . . .43
<PAGE>
EXHIBITS
Exhibit A -- Form of Buyer Note
Exhibit B -- Bill of Sale
Exhibit C -- Conversion Services Agreement
Exhibit D -- Supply Agreement
Exhibit E -- Deed (Real Property)
Exhibit F --Assumption Agreement
Exhibit G -- Operating Statements
Exhibit H -- Price Increases
<PAGE>
SCHEDULES
Real Property Schedule
Contracts Schedule
Excluded Contracts Schedule
Permits and Licenses Schedule
Employees Schedule
Litigation Schedule
Standard Terms Schedule
Employee Benefit Plan Schedule
<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement is made as of January 10, 1997, by and
between Excaliber Tubular Corporation, a Delaware corporation (the
"Buyer"), and Laclede Steel Company, a Delaware corporation (the
"Seller"). (The Buyer and the Seller are referred to collectively as the
"Parties".)
Subject to the terms and conditions set forth in this Agreement
the Buyer will purchase the Acquired Assets (as defined herein) and
assume certain of the liabilities of the Seller at and relating to the
Seller's Benwood, West Virginia facility ("Facility") in return for cash
and the Buyer Note (as defined herein).
In consideration of the premises and the mutual promises herein
made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
I.Definitions; interpretation.
"Accredited Investor" has the meaning set forth in Regulation
D promulgated under the Securities Act.
"Accrued Vacation Pay" means the total dollar amount of
vacation pay and sick pay accrued on the books and records of the
Company with respect to the Employees as of the Closing Date.
"Acquired Assets" means all right, title, and interest in and to
all of the assets constituting the Seller's assets customarily located at
the Facility and all other assets of the Seller (other than the Excluded
Assets or as specified below) used primarily in the operation of the
business as presently conducted at or by the Facility (the "Business"),
including, without limitation, all of the following to the extent they
are not Excluded Assets:
A.real property, leaseholds and subleases therein, used primarily
in the Business, including without limitation, the real property listed in
the Real Property Schedule and all improvements, fixtures, and fittings
thereon, and easements, rights-of-way, and other appurtenants thereto
(such as appurtenant rights in and to public streets) ("Real Property");
B.all inventory of the Business, including, without limitation,
all raw materials, work in process, finished goods and goods in transit
other than Excess Inventory (as defined herein) and reject inventory as
that term is defined by custom and practice in the industry;
C.all tangible personal property used primarily in the Business
(such as leasehold improvements, machinery, equipment, manufactured
and purchased parts, furniture, automobiles, trucks, tractors, trailers,
tools, jigs, dies, spares, parts and store supplies);
D.Intellectual Property (as defined herein), goodwill associated
therewith, licenses and sublicenses granted and obtained with respect
thereto, and rights thereunder, remedies against infringements thereof,
and rights to protection of interests therein under the laws of all
jurisdictions;
E.all contracts, leases, licenses, supply and distribution arrange-
ments, sales and purchase agreements and orders, confidentiality
agreements and other agreements (including dealership, service, mainte-
nance, vendor, customer and service agreements) and business arrange-
ments primarily related to the Business (including all such items listed
in the Contracts Schedule or specifically identified on the other
Schedules attached hereto or not required to be described thereon due
to specific dollar thresholds specified in this Agreement but not
including the Excluded Contracts) (the "Contracts");
F.claims, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of set off, and rights of
recoupment relating primarily to the Business ("Deposits");
G.to the extent transferable to the Buyer, all franchises,
approvals, permits, licenses, orders, registrations, certificates, variances,
and similar rights obtained from governments and governmental
agencies primarily related to the Business including all the foregoing
listed or described in the Permits and Licenses Schedule and the rights
to all data and records held by such bodies and agencies;
H.computer records and files, books, records, ledgers, files,
documents, correspondence, lists, plates, architectural plans, drawings,
and specifications, creative materials, advertising and promotional
materials, studies, reports, and other printed or written materials, in
each case primarily used in the operation of the Business;
I.all other properties, assets, rights and interests owned by the
Seller or in which the Seller has an interest which are used primarily
in the Business as of the Closing Date; and
J.all goodwill as a going concern and all other intangible
property primarily relating to the Business.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including court
costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act provided,
however, for purposes of this Agreement Ivaco, Inc. and its subsidiaries
(other than Seller) shall not be deemed affiliates of Seller.
"Affiliated Group" means any affiliated group within the
meaning of Code Section 1504(a) or any similar group defined under
a similar provision of state, local, or foreign law.
"Applicable Rate" means the corporate base rate of interest
publicly announced from time to time by Nations Bank in St. Louis,
Missouri.
"Assumed Liabilities" means only the obligations of the Seller
under the Contracts (but only to the extent such Contracts are assigned
to the Buyer and excluding any liability or obligation arising out of or
in connection with any breach thereof occurring prior to the Closing)
and the Accrued Vacation Pay.
"Assumption Agreement" means the agreement by the Buyer to
assume the Assumed Liabilities in form and substance as set out in
Exhibit F.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the valid
basis for any specified consequence.
"Bill of Sale" means the bill of sale in form and substance as
set out in Exhibit B.
"Buyer's Note" means the non interest bearing promissory note
substantially in the form set out in Exhibit A and in a form as is
reasonably satisfactory to the Buyer's lender and the Seller.
"Closing Inventory Amount" means the aggregate value of the
Inventory and Finished Goods and Production Supplies located at the
Facility on the Closing Date (other than the Excess Inventory),
determined in accordance with the procedures specified in Section 2(g),
based on the following value for the Inventory and Finished Goods and
Production Supplies:
Type of Inventory &
Finished Goods
Value per Ton
Mater Coil $290
Slit Coil $310
Finished Goods $384
Production Supplies Seller's cost
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information exclusively
related to the businesses and affairs of the Business that is not already
generally available to the public.
"Controlled Group of Corporations" has the meaning set forth
in Code Section 1563.
"Conversion Services Agreement" means the agreement in form
and substance set out in Exhibit C.
"Employees" means all persons employed by the Seller at the
Facility, being those persons listed on the Employees Schedule.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan, (b) qualified defined contribution retirement plan
or arrangement which is an Employee Pension Benefit Plan, (c)
qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan),
or (d) Employee Welfare Benefit Plan or material fringe benefit plan
or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(1).
"Environmental, Health, and Safety Requirements" shall mean
all federal, state, local and foreign statutes, regulations, ordinances and
other provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and
all common law concerning public health and safety, worker health and
safety, and pollution or protection of the environment, including
without limitation all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or
wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, each as
amended.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
"Excess Inventory" means any Inventory and Finished Goods
located at or in transit to the Facility on the Closing Date in excess of
the amounts set out below:
Type of Prime Inventory or
Prime Finished Goods
Amount (in Net Tons)
Master coil 4500
Slit coil 2000
Finished goods 4500
and any secondary inventory determined in accordance with Section
2(g).
"Excluded Assets" means:
A.the corporate charter, qualifications to conduct business as a
foreign corporation, arrangements with registered agents relating to
foreign qualifications, taxpayer and other identification numbers, seals,
minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of
the Seller as a corporation;
B.any of the rights of the Seller under this Agreement (or under
any side agreement between the Seller on the one hand and the Buyer
on the other hand entered into on or after the date of this Agreement);
C.all of the Seller's cash, cash equivalents and marketable
securities;
D.all of the Seller's accounts, notes and other receivables except
to the extent that such accounts relate to work in progress arising from
the Contracts;
E.Excess Inventory;
F.any reject inventory as such terms are defined by industry
custom and practice;
G.any finished goods that were sold by the Seller prior to
Closing but are returned to the Facility or the Buyer at any time after
the Closing Date; and
H.production supplies not primarily related to or used in the
Business including without limitation pipe coupling lubricator and pipe
coating.
"Excluded Contracts" means the contracts identified on the
Excluded Contracts Schedule including, without limitation, any and all
sales representative agreements.
"Excluded Intellectual Property" means any intellectual property
used by Seller in connection with the administrative services provided
by the other locations of Seller to the Facility.
"Excluded Liabilities" means any of Seller's debts, liabilities or
obligations of any nature whatsoever (other than the Assumed
Liabilities and Buyer's other obligations under this Agreement),
whether accrued, absolute or contingent, whether known or unknown,
whether due or to become due and whether related to the Business or
the Acquired Assets, and regardless of when or by whom asserted,
including the following debts, liabilities and obligations:
1.any of Seller's liabilities or obligations under this
Agreement and the Schedules and Exhibits hereto;
2.any of Seller's liabilities or obligations for expenses,
fees or taxes incident to or arising out of the negotiation, preparation,
approval or authorization of this Agreement or the consummation (or
preparation for the consummation) of the transactions contemplated
hereby (including all attorneys' and accountants' fees, brokerage fees
and transfer taxes);
3.any liability or obligation of Seller for Taxes which
are imposed on or measured by the income of Seller for any period
(including interest, penalties and additions to such Taxes, and any
liability or obligation relating to Taxes arising as a result of Seller at
any time being a member of an affiliated group (as defined in Section
1504(a) of the Code));
4.any liability or obligation under or with respect to any
Seller Employee Benefit Plan maintained or contributed to by any
member of the controlled group of companies (as such term is defined
in Section 414 of the Code) of which Seller and/or Parent is or was
a member or with respect to which such controlled group member has
any liability;
5.any liability or obligation (whether absolute, contin-
gent, or otherwise) relating to workers compensation, health care
claims or other similar employee welfare claims which were filed on
or before the Closing Date or relate to claims which arose due to
occurrences or events on or before the Closing Date in relation to the
Employees;
6.any liability or obligation for salary, bonuses or other
payments of any kind to any Employee with respect to periods on or
before the Closing Date;
7.any liabilities or obligations with respect to any
products that were sold or services by the Business that were rendered
by Seller and are subsequently returned to Buyer or otherwise rejected
by the purchaser thereof as a result of a breach of warranty or other
breach of Seller to such purchaser;
8.any of Seller's liabilities or obligations for
indebtedness for borrowed money or indebtedness secured by liens on
the Acquired Asset or Business or guarantees of any of the foregoing;
9.any of Seller's liabilities or obligations relating to,
arising from or in connection with the Business (A) arising by reason
of any violation or alleged violation of any federal, state, local or
foreign law, rule or regulation or any other requirement of any govern-
mental authority, (B) arising from acts, omissions or conditions
occurring or existing prior to the Closing Date under any Environmen-
tal and Safety Requirements or (C) arising by reason of any breach or
alleged breach by Seller of any agreement, contract, lease, license,
commitment, instrument, judgment, order or decree (regardless of when
any such liability or obligation is asserted);
10.any of Seller's liabilities or obligations which Buyer
may become liable for as a result of or in connection with the failure
by Buyer or Seller to comply with any bulk sales or bulk transfers laws
or as a result of any "defacto merger" or "successor-in-interest" theories
of liability;
11.any of Seller's liabilities or obligations for product
liability occurrences (including occurrences relating to the destruction
of property, personal injury or death or any occurrence resulting from
any failure to warn or any deficit in design, engineering or
construction) with respect to products manufactured or services
rendered by the Business on or prior to the Closing Date and any
related claims and litigation arising prior to on or after the Closing
Date whether or not disclosed on the schedules hereto;
12.any of Seller's liabilities or obligations relating to any
other legal action or proceeding arising out of or in connection with
Seller's conduct of the Business or any other conduct of Seller, Seller's
officers, directors, Employees, consultants, agents or advisors on or
prior to the Closing Date, whether or not disclosed on the Schedules
hereto;
13.any of Seller's liabilities or obligations (including,
without limitation, severance or termination pay) relating to the
Employees who are offered employment by Buyer but who decline to
accept such offer except any liability or obligation under the Workers'
Assistance and Retraining Notification Act in connection with the
Business arising from any action by Buyer after the Closing;
14.any liabilities or obligations arising out of or in
connection with any agreements, contracts, purchase orders and other
similar arrangements which are designated on the Excluded Contracts
Schedule;
15.any liabilities or obligations with respect to any of the
Excluded Assets (including, without limitation, under any contracts,
leases, commitments or understandings related thereto).
16.any other liability or obligation of Seller not
expressly within the definition of Assumed Liabilities.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Intellectual Property" means:
A.all patents, patent applications, and patent disclosures and all
inventions (whether patentable or unpatentable and whether or not
reduced to practice) owned by the Seller that are used primarily in the
operation of the Business, if any, and all improvements thereto, and
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof ("Patents and
Inventions");
B.all trademarks, service marks, trade dress, logos, trade names,
and corporate names owned by the Seller that are used primarily in
the operation of the Business, if any, and used together with all
translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith ("Trademarks and
Trade Names") ;
C.all copyrightable works, all copyrights, and all applications,
registrations, and renewals owned by the Seller that are used primarily
in the operation of the Business, if any ("Copyrights");
D.all mask works and all applications, registrations, and
renewals in connection therewith that are used primarily in the
operation of the Business, if any ("Mask Works");
E.all trade secrets and confidential business information
(including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier
lists, pricing and cost information, and business and marketing plans
and proposals) owned by the Seller that are used primarily in the
operation of the Business ("Trade Secrets");
F.all computer software (including data and related
documentation) that is used primarily in the operation of the business
as presently conducted and proposed to be conducted at the Facility;
G.all other proprietary rights owned by the Seller that are used
primarily in the operation of the Business; and
H.all copies and tangible embodiments thereof (in whatever
form or medium).
"Inventory and Finished Goods" means all Master Coil and Slit
Coil inventory and finished goods as determined in accordance with
Section 2(g) located at the Facility on the Closing Date excluding the
Excess Inventory.
"Investment" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any quotes,
obligations, instruments, stock, securities or ownership interest
(including partnership interests and joint venture interests) of any other
Person and (ii) any capital contribution by such Person to any other
Person.
"Knowledge" means actual knowledge of the officers of Seller
and Steve Lavinsky, plant manager at the Facility.
"Labor Agreement" means the agreement, dated February 25,
1996, between Seller and the United Steelworkers of America (AFL-CIO-CLC).
"Liability" means any liability or obligation (whether known or
unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any
liability for Taxes.
"Licensed Intellectual Property" means intellectual property
(other than Excluded Intellectual Property) used by Seller in the
operation of the Facility that would be Intellectual Property except that
such property is not used primarily in the operation of the Business.
"Loan Agreement" means the Loan and Security Agreement
with Bank America Business Credit, Inc. and certain other lenders,
dated September 7, 1994, and as amended thereafter.
"Multiemployer Plan" has the meaning set forth in ERISA
Section 3(37)
"Ordinary Course of Business" means the ordinary course of
business consistent with Seller's past custom and practice (including
with respect to quantity and frequency).
"Operating Statements" has the meaning set forth in Section
3(f).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" means (i) statutory liens for current taxes or
other governmental charges with respect to the Real Property not yet
due and payable or the amount or validity of which is being contested
in good faith by appropriate proceedings by Seller and for which
appropriate reserves have been established in accordance with GAAP;
(ii) mechanics, carriers workers, repairers and similar statutory liens
arising or incurred in the ordinary course of business for amounts
which are not delinquent and which are not, individually or in the
aggregate, material to the Business; (iii) zoning, entitlement, building
and other land use regulations imposed by governmental agencies
having jurisdiction over the Real Property which are not violated by
the current use and operation of the Real Property; and (iv) covenants,
conditions, restrictions, easements, rights of way and other similar
matters of record affecting title to the Real Property which do not
materially impair the occupancy or use of the Real Property for the
purposes for which it is currently used in connection with the Business.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization, or a
governmental entity (or any department, agency, or political sub
Facility thereof).
"Production Supplies" means mill coolants, ERW welding
components, material handling, packaging supplies, storeroom supplies,
cutting oil and pipe stenciling ink.
"Prohibited Transaction" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
"Reportable Event" has the meaning set forth in ERISA Section
4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act
of 1934, as amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total
voting power of shares of stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers, or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a
majority of the partnership or other similar ownership interest thereof
is at the time owned or controlled , directly or indirectly, by any
Person or one or more Subsidiaries of that Person or a combination
thereof. For purposes hereof, a Person or Persons shall be deemed to
have a majority ownership interest in a limited liability company,
partnership, association or other business entity if such Person or
Persons shall be allocated a majority of limited liability company,
partnership, association or other business entity gains or losses or shall
be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Supply Agreement" means the agreement in form and
substance as set out in Exhibit D.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes
under Code Section 59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or
other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment
thereof.
II.Basic Transaction.
A.Purchase and Sale of Assets. On and subject to the terms
and conditions of this Agreement, the Buyer agrees to purchase from
the Seller, and the Seller agrees to sell, transfer, convey, and deliver to
the Buyer, all of the Acquired Assets free and clear of all Security
Interests other than Permitted Liens at the Closing for the consideration
specified below in this Section 2.
B.Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become
responsible for all of the Assumed Liabilities at the Closing. The
Buyer will not assume or have any responsibility, however, with
respect to any of the Excluded Liabilities and nothing contained in this
Agreement will deem the Buyer liable for any obligation or Liability
of the Seller except for the Assumed Liabilities.
C.Purchase Price. The purchase price for the Acquired Assets
(the "Purchase Price") shall be equal to $ 11,373,000 less the amount,
if any, by which the Closing Inventory Amount is less than $3,653,000
and less the amount of Accrued Vacation Pay.
D.Preliminary Purchase Price. At closing the Buyer shall pay
to the Seller an amount (the "Preliminary Purchase Price") equal to the
Purchase Price as estimated in good faith by the Buyer on the basis of
an estimate of the value of the Closing Inventory Amount ("Estimated
Inventory Amount") and the Accrued Vacation Pay ("Estimated
Accrued Vacation Pay") jointly prepared in good faith by the Buyer
and the Seller not less than 3 days before Closing.
E.Payment of Preliminary Purchase Price. At Closing the
Buyer will pay to the Seller the Preliminary Purchase Price by:
1.the Buyer Note with a principal amount of $1,653,000;
and
2.cash in the sum of the remainder of the Preliminary
Purchase Price payable by wire transfer or delivery of other
immediately available funds.
F.Post Closing Adjustment to Purchase Price. Within 30
days after the Closing Date, the Buyer shall deliver to the Seller a
determination of the Closing Inventory Amount and Accrued Vacation
Pay prepared in good faith and, with respect to the Closing Inventory
Amount, in accordance with paragraph (g) below, as of the Closing
Date. During the period immediately following Seller's receipt of the
Buyer's determination of the Closing Inventory Amount and Accrued
Vacation Pay and until they are finally determined pursuant to this
Section 2(f), Seller and its representatives and agents shall be permitted
to review Buyer's books and records and working papers related to
Buyer's determination of the Closing Inventory Amount and Accrued
Vacation Pay. The Buyer's determination of the Closing Inventory
Amount and Accrued Vacation Pay shall become final and binding
upon the parties 30 days after Seller's receipt thereof, unless Seller
gives written notice of its disagreement ("Notice of Disagreement") to
Buyer prior to such date. Any Notice of Disagreement shall specify in
reasonable detail the nature of any disagreement so asserted and shall
only include disagreements based upon the Closing Inventory Amount
and Accrued Vacation Pay not being calculated in accordance with this
Agreement. If a timely Notice of Disagreement is received by Buyer,
then the determination of the Closing Inventory Amount and Accrued
Vacation Pay (as revised in accordance with clause (x) or (y) below)
shall become final and binding upon the parties on the earliest of (x)
the date the parties hereto resolve in writing any differences they have
with respect to the matters specified in the Notice of Disagreement or
(y) the date all matters in dispute are finally resolved in writing by the
Accounting Firm specified below. During the 30 days following
delivery of a Notice of Disagreement, Buyer and Seller shall seek in
good faith to resolve in writing any differences which they may have
with respect to the matters specified in the Notice of Disagreement.
During such period, Buyer shall be permitted to review Seller's books
and records and working papers relating to the Notice of Disagreement.
At the end of such 30-day period, Buyer and Seller shall submit to a
mutually acceptable accounting firm (the "Accounting Firm") for
review and resolution of all matters which remain in dispute which
were properly included in the Notice of Disagreement, and the
Accounting Firm shall make a final determination of the Closing
Inventory Amount and the Purchase Price in accordance with the terms
and conditions set forth in this Agreement. If Buyer and Seller are
unable to mutually agree on an Accounting Firm, Buyer and Seller
shall select a "big-six" Accounting Firm by lot (after excluding one
big-six accounting firm selected by each of Buyer and Seller). The
Closing Inventory Amount and/or the Accrued Vacation Pay as
determined in accordance with this Section 2(h) shall become final and
binding on the parties on the date the Accounting Firm delivers its
final resolution in writing to the parties. The fees and expenses of the
Accounting Firm shall be shared equally by Buyer and Seller.
G.Inventory Count; determination of Inventory and
Finished Goods. For purposes of determining the Inventory and
Finished Goods, preparing the Closing Inventory Amount and
determining the Purchase Price:
1.Buyer shall as soon as reasonably practical after the
Closing Date take a physical count of all Inventory and Finished Goods
included in the Acquired Assets as of the Closing and the Seller shall
be entitled to have representatives observe such physical count;
2.all inventory and finished goods of the type to be
included within the definition of Inventory and Finished Goods that has
been manufactured within 6 months of the Closing Date shall be
deemed Inventory and Finished Goods; and
3.all inventory and finished goods manufactured at any
time prior to 6 months of the Closing Date shall only be treated as
Inventory and Finished Goods upon inspection and the good faith
agreement by both Parties that such inventory or finished goods is
prime inventory or prime finished goods, as such terms are defined by
custom and practice within the industry; and
4.all inventory and finished goods not agreed by the
Parties to be Inventory and Finished Goods pursuant to paragraph (iii)
above shall be deemed secondary inventory or finished goods.
H.Final adjustment. The parties agree that if the Closing
Inventory Amount is less than the Estimated Inventory Amount and/or
the Accrued Vacation Pay is more than the Estimated Accrued
Vacation Pay, within ten business days after both such amounts have
become final and binding on the parties hereunder, the Purchase Price
shall be reduced by the amount of such deficiency or excess, as
applicable, and the Seller shall pay to the Buyer the amount of such
deficiency or excess, as applicable, together with interest thereon at the
Applicable Rate calculated on the basis of the actual number of days
elapsed over 365, from the Closing Date to the date of payment. If the
Closing Inventory Amount exceeds the Estimated Inventory Amount
and/or the Accrued Vacation Pay is less than the Estimated Accrued
Vacation Pay, within 10 business days after both amounts have become
final and binding upon the parties, the Purchase Price shall be
increased (but not to exceed $11,373,000) by the amount of such
excess or deficiency, as applicable, and the Buyer shall pay to the
Seller the amount of such excess or deficiency, as applicable, together
with interest thereon at the Applicable Rate calculated on the basis of
the actual number of days elapsed over 365, from the Closing Date to
the date of payment.
I.The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Bryan
Cave LLP in St. Louis, Missouri, commencing at 9:00 a.m. local time
on the business day following the satisfaction or waiver of all
conditions precedent to closing set out in Section 6 or such other date
as the Parties may mutually determine (the "Closing Date") provided,
however, that the Parties shall use reasonable best efforts to close on
or before January 31, 1997.
J.At Closing the Seller will deliver to the Buyer:
1.the duly executed Supply Agreement and Conversion
Services Agreement;
2.Bill of Sale;
3.an executed Special Warranty Deed for each parcel of
Real Property in form and substance as set out in Exhibit E; and
4.an executed quitclaim deed covering any surveyor's
legal description differing from that set forth in the deed by which
Seller acquired title to the Real Property; and
5.such other instruments of assignment and conveyance
necessary to transfer and convey the Acquired Assets as reasonably
may be requested by the Buyer (together with the items referred to in
(ii), (iii) and (iv) above, the "Transfer Documents").
K.At Closing the Buyer will deliver to the Seller:
1.the consideration specified in Section 2(c) above;
2.the duly executed Supply Agreement and Conversion
Services Agreement; and
3.the duly executed Assumption Agreement.
III.Representations and Warranties.
The Seller represents and warrants to the Buyer that the statements
contained in this Section 3 are correct and complete as of the date of
this Agreement.
A.Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
B.Authorization of Transaction. The Seller has full corporate
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. Without limiting the generality of
the foregoing, the board of directors of the Seller have duly authorized
the execution, delivery, and performance of this Agreement by the
Seller and no other corporate proceedings on its part or its shareholders
or Affiliates is necessary to authorize the execution, delivery or
performance of this Agreement. This Agreement constitutes the valid
and legally binding obligation of the Seller, enforceable in accordance
with its terms and conditions.
C.Noncontravention.
1.Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in
Section 2 above), will:
a.violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Seller,
or any of the Acquired Assets, is subject or any provision of the
charter or bylaws of the Seller; or
b.conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any notice,
or consent, under any agreement, contract, lease, license, instrument,
or other arrangement to which the Seller is a party or by which it is
bound or to which any of the Acquired Assets is subject (or result in
the imposition of any Security Interest upon any of the Acquired
Assets) including, without limitation, the Contracts.
c.subject to execution of Amendment Number 9
to the Loan Agreement (the "Loan Amendment"), require the Seller to
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by
this Agreement (including the assignments and assumptions referred to
in Section 2 above).
2.the Permits and Licenses Schedule lists all approvals,
permits, Licenses, orders, registrations, certificates, variances and
similar rights obtained from governments and government agencies
necessary for the operation of the business presently conducted at the
Facility.
D.Brokers' Fees. The Seller has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
E.Title to Assets. Except for the Permitted Liens and liens
granted pursuant to the Loan Agreement, the Seller has marketable title
to all of the Acquired Assets, free and clear of any Security Interest or
restriction on transfer.
F.Operating Statements. Attached hereto as Exhibit G are the
following financial statements (collectively the "Operating
Statements"):
1.unaudited statements of operation for the fiscal years
ended December 31, 1993, December 31, 1994 and December 31, 1995
(the "Most Recent Fiscal Year End") for the Business; and
2.unaudited statements of operation for the 11 months
ended November 30, 1996 for the Business (the "Most Recent
Operating Statements").
The Operating Statements are consistent with the books
and records of Seller; provided that the Most Recent Operating
Statements are subject to normal year end adjustments.
G.Events Subsequent to Most Recent Fiscal Year End.
Except as set forth in the Most Recent Operating Statements, since the
Most Recent Fiscal Year End, there has not been any material adverse
change in the financial condition, operations, results of operations of
the Business or to the Knowledge of the Seller the future prospects of
the Business. Without limiting the generality of the foregoing, since
that date and to the extent that the matters below relate to this
Agreement, the Facility, the Business or the Acquired Assets:
1.the Seller has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
2.no party (including the Seller) has accelerated,
terminated, modified, or cancelled any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and licenses)
relating to the Business involving more than $25,000 to which the
Seller is a party or bound;
3.the Seller has not imposed any Security Interest upon
any of the Acquired Assets other than pursuant to the Loan Agreement;
4.the Seller has not delayed or postponed the payment
of accounts payable arising from the Contracts outside the Ordinary
Course of Business;
5.the Seller has not made any capital investments in, any
loan to, or any acquisition of the securities or assets of , any other
Person (or series of related capital investments, loans, and acquisitions)
either involving more than $25,000 singly or $50,000 in the aggregate.
6.the Seller has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving more than $25,000 or outside the Ordinary Course of
Business arising from the Contracts;
7.the Seller has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
8.the Facility has not experienced any damage,
destruction, or loss (whether or not covered by insurance) to its
property in excess of $25,000;
9.other than the Labor Agreement, the Seller has not
entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any existing such
contract or agreement;
10.other than the Labor Agreement, the Seller has not
granted any increase in the base compensation of any of the Employees
outside the Ordinary Course of Business;
11.other than the Labor Agreement, the Seller has not
adopted, amended, modified, or terminated any bonus, profit-sharing,
incentive, severance, or other plan, contract, or commitment for the
benefit of any Employee), or taken any such action with respect to any
other Employee Benefit Plan;
12.the Seller has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business;
13.other than payments pursuant to the Loan Agreement
or in the Ordinary Course of Business the Seller has not paid any
amount to any third party with respect to any Liability or obligation
(including any costs and expenses the Seller has incurred or may incur
in connection with this Agreement and the transactions contemplated
hereby) which would not constitute an Assumed Liability if in
existence as of the Closing;
14.other than the Labor Agreement, there has not been
any other material occurrence, event, incident, action, failure to act, or
transaction outside the Ordinary Course of Business involving the
Facility; and
15.the Seller has not committed to any of the foregoing.
H.Undisclosed Liabilities. The Seller does not have any
Liability related to or incurred in connection with the Business (and to
the Knowledge of Seller there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against it giving rise to any Liability), except for
Liabilities which have arisen in the Ordinary Course of Business (none
of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law) or under the Loan Agreement.
I.Legal Compliance. The Facility and the Seller in connection
with the Business are in compliance in all material respects with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal,
state, local, and foreign governments (and all agencies thereof), and no
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
J.Tax Matters.
1.The Seller has timely filed all federal, state, local and
foreign income, information and other Tax returns which are required
to be filed with respect to its business, activities, properties, employees
or ownership where failure to file would have a material adverse effect
on the Acquired Assets.
2.All such returns are true, complete and accurate in all
material respects, and such filings accurately reflect the Tax liabilities
of Seller.
3.All Taxes, assessments and other governmental charges
imposed upon Seller, or upon any of the assets, income or franchises
of Seller, have been timely paid or, if not yet payable, shall be timely
paid and are adequately accrued on Seller's books and records where
failure to pay would have a material adverse effect on the Acquired
Assets.
4.There are no actual or proposed Tax deficiencies,
assessments or adjustments with respect to Seller or any assets or
operations of Seller affecting the Acquired Assets.
5.There are no ongoing or pending Tax audits by any
taxing authority against Seller directly affecting the Acquired Assets.
6.None of the Acquired Assets are subject to any
agreement relating to the allocation or payment of Taxes.
K.Real Property.
1.The Real Property Schedule lists and describes briefly
all real property used primarily in the operation of the Business. With
respect to each such parcel of owned real property:
a.the Seller has good and marketable title to the
parcel of real property, free and clear of any Security Interest,
easement, covenant, or other restriction, except for Permitted Liens;
b.there are no pending or, to the Knowledge of
the Seller, threatened condemnation proceedings, lawsuits, or
administrative actions relating to the property, or other matters
affecting adversely the current use, occupancy, or value thereof;
c.Seller has received all governmental licenses
and permits required to own and operate the real property in
accordance with applicable laws, rules, and regulations subject to
Permitted Liens;
d.there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to any party
or parties the right of use or occupancy of any portion of the parcel of
real property other than such as may be included in the Permitted
Liens;
e.there are no outstanding options or rights of
first refusal to purchase the parcel of real property, or any portion
thereof or interest therein;
f.there are no parties (other than the Seller and
beneficiaries of easement access included in the Permitted Liens) in
possession of the parcel of real property;
g.all facilities located on the parcel of real
property are supplied with utilities and other services necessary for the
continued, current operation of such facilities, including gas, electricity,
water, telephone, sanitary sewer, and storm sewer, as required via
public roads or via permanent, irrevocable, appurtenant easements
benefitting the parcel of real property;
h.the real property (including any noncontiguous
parcels) abuts on and has direct vehicular access to a public road, or
has access to a public road via a permanent, irrevocable, appurtenant
easement benefitting the parcel of real property, and access to the
property is provided by paved public right-of-way with adequate curb
cuts available; and
2.There is no real property leased or subleased to the
Seller which real property is used primarily in the operation of the
Business other than that certain Lease Agreement dated January 1,
1996 between Bipco, Ltd., as Lessor, and Seller, as Lessee.
L.Intellectual Property.
1.Other than the Excluded Intellectual Property, the
Intellectual Property and the Licensed Intellectual Property comprise
all of the intellectual property necessary for the conduct of the Business
as currently conducted and:
2.Other than third party software licensed to Seller, Seller
owns and possesses
all right, title and interest in, to and under the Intellectual Property, and
no claim by any third party contesting the validity, enforceability, use
or ownership of any of the Intellectual Property has been made, is
currently outstanding or is (to Seller's knowledge) threatened;
3.Seller owns or has the valid right to use all Intellectual
Property necessary for
the operation of the Business as currently conducted;
4.Seller has not received any notices of, nor is it aware of
any facts which
indicate a likelihood of, any infringement or misappropriation by, or
conflict with, any third party with respect to the rights set forth in the
attached Intellectual Property Schedule including, without limitation,
any demand or request that Seller license rights from a third party; and
5.Seller is not aware of any infringement, misappropriation or
conflict which
will occur as a result of the continued operation of the Business as
currently conducted or as currently proposed to be conducted.
6.All Intellectual Property to be assigned by Seller are
or shall be properly assigned or licensed to Seller at the time Seller
assigns such rights to Buyer. The transactions contemplated by this
Agreement shall have no material adverse effect on any of the
Intellectual Property. To the Knowledge of Seller, Seller has taken all
necessary and desirable action to protect the Intellectual Property and
shall continue to maintain those rights prior to and as of Closing so as
to not adversely affect the validity or enforcement of such Intellectual
Property.
7.The Intellectual Property does not consist of any
Patents and Inventions, Trademarks and Trade Names, Copyrights or
Mask Works.
M.Tangible Assets. The Seller owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the
conduct of the Business. The tangible assets included in the Acquired
Assets are in all material respects in good operating condition and
repair (subject to normal wear and tear), and are suitable for the
purposes for which it presently is used other than the idle Mechanical
ERW Mill. Other than the administrative services provided by Seller
from locations other than the Facility ("Administrative Services") and
the Licensed Intellectual Property, the Acquired Assets include all of
the assets whether tangible or intangible, real or personal, that are
necessary for the conduct of the Business as currently conducted. The
Seller owns, or leases under valid leases, all buildings, machinery,
equipment and other tangible assets used in the conduct of the Business
in conformity with past practices, and all such assets have been
installed and maintained in all material respects in accordance with all
applicable laws, regulations and ordinances.
N.Inventory. The inventory of the Business included in the
Acquired Assets consists of raw materials and supplies, manufactured
parts, goods in process, and finished goods, all of which is
merchantable and fit for the purpose for which it was procured or
manufactured, and none of which is damaged or defective.
O.Contracts.
1.The Contracts Schedule lists the following contracts
and other agreements to which the Seller is a party and which
primarily relate to, or are used primarily in, the operation of the
Business:
a. any agreement (or group of related agreements)
for the lease of personal property to or from any Person providing for
lease payments in excess of $25,000 per annum and any agreement for
the lease of real property;
b.any agreement (or group of related agreements)
for the purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or receipt of
services, the performance of which will extend over a period of more
than one year, result in a material loss to the Business or the Seller, or
involve consideration in excess of $25,000;
c.any agreement concerning a partnership or joint
venture relating to the Business;
d.any agreement (or group of related agreements)
under which it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation,
in excess of $25,000 or under which it has imposed a Security Interest
on any of the Acquired Assets, tangible or intangible other than the
Loan Agreement;
e.any agreement concerning confidentiality or
noncompetition with respect to the Business;
f. any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance, or
other material plan or arrangement for the benefit of the current or
former Employees of the Seller;
g.any collective bargaining agreement;
h.any agreement for the employment of any
individual with respect to the Business on a full-time, part-time,
consulting, or other basis providing annual compensation in excess of
$50,000 or providing severance benefits;
i.any agreement under which it has advanced or
loaned any amount to any Employees of the Business outside the
Ordinary Course of Business;
j.any agreement under which the consequences
of a default or termination could have a material adverse effect on the
business, financial condition, operations, results of operations, or future
prospects of the Business; or
k.any other agreement (or group of related
agreements) relating to the Business the performance of which involves
consideration in excess of $25,000.
2.The Seller has delivered to the Buyer a correct and
complete copy of each written agreement listed in the Contracts
Schedule amended to date and a written summary setting forth the
terms and conditions of each oral agreement referred to therein. In
respect to each such agreement:
a.the agreement is legal, valid, binding,
enforceable, and in full force and effect;
b.except for the consents disclosed on the
Contracts Schedule which are required and not obtained, the agreement
will continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the
transactions contemplated hereby (including the assignments and
assumptions referred to in Section 2 above);
c.Seller is not and, to the Knowledge of Seller,
the other party to such agreement is not in breach or default, and no
event has occurred which with notice or lapse of time would constitute
a breach or default, or permit termination, modification, or
acceleration, under the agreement; and
d.Seller has not and, to the Knowledge of Seller,
the other party to such agreement has not repudiated any provision of
the agreement.
P.Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Seller with respect to the Business.
Q.Insurance. True, complete and correct copies of each
insurance policy maintained by the Seller with respect to the Business
have been made available to the Buyer. All of the Seller's insurance
policies are in full force and effect, and the Seller is not in default with
respect to its obligations under any of such insurance policies. If
between the date hereof and the Closing Date, the Seller desires to alter
any insurance policy, the Seller shall obtain Buyer's prior written
consent to any such change.
R.Litigation. The Litigation Schedule sets forth each instance
in which the Seller or any of the Acquired Assets:
1.is subject to any outstanding injunction, judgment,
order, decree, ruling, or charge arising from or in relation to the
operation of the Business or Acquired Assets; or
2.is a party or, to the Knowledge of the Seller, is
threatened to be made a party to any action, suit, proceeding, hearing,
or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction
or before any arbitrator. None of the actions, suits, proceedings,
hearings, and investigations set forth in the Litigation Schedule could
result in any material adverse change in the business, financial
condition, operations or results of operations of the Business.
S.Product Warranty. Each product manufactured, sold,
leased, or delivered by the Business has been in conformity with all
applicable contractual commitments and all express and implied
warranties, and the Seller has no Liability (and, to the Knowledge of
Seller, there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
against it giving rise to any Liability) for replacement or repair thereof
or other damages in connection therewith. No product of the Business
manufactured, sold, leased, or delivered by the Seller is subject to any
guaranty, warranty, or other indemnity beyond the applicable standard
terms and conditions of sale or lease. The Standard Terms Schedule
includes copies of the standard terms and conditions of sale or lease by
the Facility and the Seller (containing applicable guaranty, warranty,
and indemnity provisions).
T.Product Liability. The Seller has no Liability (and, to the
Knowledge of Seller, there is no Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against it giving rise to any Liability) arising out of any injury
to individuals or property as a result of the ownership, possession, or
use of any product of the Business manufactured, sold, leased, or
delivered by the Seller.
U.Employees. To the Knowledge of the Seller, no executive,
key employee, or group of Employees has any plans to terminate
employment with the Seller. Except for the Labor Agreement, the
Seller in connection with the Business is not a party to or bound by
any collective bargaining agreement, nor has any of them experienced
any strikes, grievances or other labor disputes. To the Knowledge of
the Seller, it has not, within the prior 2 years of the date of this
Agreement, received any charge or complaint of any unfair labor
practice at the Facility or otherwise in the operation of the Business
other than during the period of the negotiation of the Labor Agreement
(copies of which have been delivered to Buyer). To the Knowledge of
the Seller it is unaware of any pending or threatened charge or
complaint alleging unfair labor practices. The Seller and its
Subsidiaries has no Knowledge of any organizational or decertification
effort presently being made or threatened with respect to the
Employees.
V.Employee Benefits.
1.The Employee Benefit Plan Schedule lists each
Employee Benefit Plan that the Seller maintains or to which the Seller
contributes in relation to the Employees.
2.Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in all material respects in
form and in operation in all respects with the applicable requirements
of ERISA, the Code, and other applicable laws.
3.The requirements of Part 6 of Subtitle B of Title I of
ERISA and of Code Section 4980B have in all material respects been
met with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
4.All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been
paid to each such Employee Benefit Plan which is an Employee
Pension Benefit Plan and all contributions for any period ending on or
before the Closing Date which are not yet due have been paid to each
such Employee Pension Benefit Plan or accrued in accordance with the
past custom and practice of the Seller. All premiums or other payments
for all periods ending on or before the Closing Date have been paid
with respect to each such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
5.Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the requirements of a "qualified
plan" under Code Section 401(a) and has received, within the last two
years, a favorable determination letter from the Internal Revenue
Service.
6.The market value of assets under each such Employee
Benefit Plan which is an Employee Pension Benefit Plan (other than
any Multiemployer Plan and the Laclede Salaried Employees' Pension
Plan) equals or exceeds the present value of all vested and nonvested
Liabilities thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension Benefit
Plan terminating on the date for determination.
7.With respect to each Employee Benefit Plan that the
Seller maintains or ever has maintained or to which it contributes, ever
has contributed, or ever has been required to contribute in relation to
the Employees:
a.No such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer Plan)
has been completely or partially terminated or been the subject of a
Reportable Event as to which notices would be required to be filed
with the PBGC. No proceeding by the PBGC to terminate any such
Employee Pension Benefit Plan (other than any Multiemployer Plan)
has been instituted or, to the Knowledge of the Seller and the directors
and officers (and employees with responsibility for employee benefits
matters) of the Seller and its Subsidiaries, threatened.
b.There have been no Prohibited Transactions
with respect to any such Employee Benefit Plan. No Fiduciary has any
Liability for breach of fiduciary duty or any other failure to act or
comply in connection with the administration or investment of the
assets of any such Employee Benefit Plan. No action, suit, proceeding,
hearing, or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan (other than
routine claims for benefits) is pending or, to the Knowledge of the
Seller and the directors and officers (and employees with responsibility
for employee benefits matters) of the Seller and its Subsidiaries,
threatened. None of the Seller and the directors and officers (and
employees with responsibility for employee benefits matters) of the
Seller and its Subsidiaries has any Knowledge of any Basis for any
such action, suit, proceeding, hearing, or investigation.
c.The Seller has not incurred, and none of the
directors and officers (and employees with responsibility for employee
benefits matters) of the Seller and its Subsidiaries has any reason to
expect that the Seller will incur, any Liability to the PBGC (other than
PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with respect to
any such Employee Benefit Plan which is an Employee Pension Benefit
Plan.
8.With respect to each Employee Benefit Plan that the
Seller maintains or ever has maintained or to which it contributes, ever
has contributed, or ever has been required to contribute in relation to
the Employees:
a.The Seller does not contribute to, ever has
contributed to, or ever has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal
Liability) under any Multiemployer Plan.
b.The Seller does not maintain or ever has
maintained or contributes, ever has contributed, or ever has been
required to contribute to any Employee Welfare Benefit Plan providing
medical, health, or life insurance or other welfare-type benefits for
current or future retired or terminated employees, their spouses, or their
dependents (other than in accordance with Code Section 4980B).
W.Guaranties. The Seller in connection with the Business is
not a guarantor or otherwise is liable for any Liability or obligation
(including indebtedness) of any other Person.
X.Environmental, Health, and Safety Matters.
1.The Seller is in compliance in all material respects
with all Environmental, Health and Safety Requirements with respect
to the operation of the Business.
2.Without limiting the generality of the foregoing, the
Seller has obtained and complied with, and is in compliance with, in
all material respects, all permits, licenses and other authorizations that
are required pursuant to Environmental, Health and Safety
Requirements for the occupation of the Facility and the operation of
the Business: a list of all such permits, licenses and other
authorizations is set forth in the Permits and Licenses Schedule.
3.The Seller has not received any written or oral notice,
report or other information regarding any actual or alleged violation of
Environmental, Health, and Safety Requirements, or any liabilities or
potential liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise), including any investigatory, remedial or corrective
obligations, relating to the operation of the Business arising under
Environmental, Health, and Safety Requirements.
4.None of the following exists at the Facility:
a.underground storage tanks;
b.asbestos-containing material in any form or
condition;
c.materials or equipment containing
polychlorinated biphenyls; or
d.landfills, surface impoundments, or hazardous
waste disposal areas.
5.With respect to the operations of the Business, the
Seller at the Facility has not treated, stored, disposed of, arranged for
or permitted the disposal of, transported, handled, or released any
substance, including without limitation any hazardous substance, or
owned or operated any property or facility (and no such property or
facility is contaminated by any such substance) in a manner that has
given or would give rise to material liabilities, including any liability
for response costs, corrective action costs, personal injury, property
damage, natural resources damages or attorney fees, pursuant to the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), the Solid Waste Disposal Act,
as amended ("SWDA") or any other Environmental, Health, and Safety
Requirements.
6.Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result in any
obligations for site investigation or cleanup, or notification to or
consent of government agencies or third parties, pursuant to any of the
so-called "transaction-triggered" or "responsible property transfer"
Environmental, Health, and Safety Requirements.
7.Neither the Seller nor its predecessors or Affiliates has,
either expressly or by operation of law, assumed or undertaken any
liability, including without limitation any obligation for corrective or
remedial action, of any other Person relating to Environmental, Health,
and Safety Requirements with respect to the operation of the Business.
8.With respect to the Seller's operation of the Business
no facts, events or conditions relating to the facilities, properties or
operations of the Seller, or any of its respective predecessors or
Affiliates will prevent, hinder or limit continued compliance in all
material respects with Environmental, Health, and Safety Requirements,
give rise to any investigatory, remedial or corrective obligations
pursuant to Environmental, Health, and Safety Requirements, or give
rise to any other material liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental,
Health, and Safety Requirements, including without limitation any
relating to onsite or offsite releases or threatened releases of hazardous
materials, substances or wastes, personal injury, property damage or
natural resources damage.
Y.Certain Business Relationships with the Business. Other
than the Administrative Services and the supply of raw materials to the
Business, neither the Seller nor any of its Affiliates or employees
(other than the Employees) has provided services to the Business or
been involved in any business arrangement or relationship with the
Business within the past 12 months.
Z.Disclosure. To the Knowledge of Seller, the representations
and warranties contained in this Section 3 do not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements and information contained in this
Section 3 not misleading.
AA.Investment. The Seller
1.understands that the Buyer Note has not been, and will
not be, registered under the Securities Act, or under any state securities
laws, and is being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering;
2.is acquiring the Buyer Note solely for its own account
for investment purposes, and not with a view to the distribution
thereof;
3.is a sophisticated investor with knowledge and
experience in business and financial matters;
4.has received certain information concerning the Buyer
and has had the opportunity to obtain additional information as desired
in order to evaluate the merits and the risks inherent in holding the
Buyer Note;
5.is able to bear the economic risk and lack of liquidity
inherent in holding the Buyer Note; and
6.is an Accredited Investor for the reasons set forth in
the Buyer's Note.
IV.Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller that the statements contained in
this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for
the date of this Agreement throughout Section 4).
A.Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
B.Authorization of Transaction. The Buyer has full power
and authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of
the Buyer, enforceable in accordance with its terms and conditions.
C.Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby (including the assignments and assumptions
referred to in Section 2 above), will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other restriction of any government, governmental agency, or court to
which the Buyer is subject or any provision of its charter or bylaws or
(ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to
which the Buyer is a party or by which it is bound or to which any of
its assets is subject. The Buyer does not need to give any notice to,
make any filing with, or obtain any authorization, consent, or approval
of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement
(including the assignments and assumptions referred to in Section 2
above).
D.Brokers' Fees. The Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Seller could become liable or obligated.
V.Pre-Closing Covenants. The Parties agree that in the period
between the execution of this Agreement and Closing:
A. General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary in order to
consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the Closing
conditions set forth in Section 6 below).
B.Notices and Consents. The Seller will give any notices to
third parties, and the Seller will use its reasonable best efforts to obtain
any third party consents, that the Buyer reasonably may request in
connection with the matters referred to in Section 3(c) above. Each of
the Parties will give any notices to, make any filings with, and use its
reasonable best efforts to obtain any authorizations, consents, and
approvals of governments and governmental agencies in connection
with the matters referred to in Section 3(c) and Section 4(c) above.
C.Operation of Business. The Seller will:
1.conduct the Business and run the Facility in the
Ordinary Course of Business;
2.maintain the Acquired Assets in good working
condition;
3.pay all accounts payable, purchase inventory, spares,
parts and supplies and collect all accounts receivable arising out of the
business run at the Facility in the Ordinary Course of Business;
4.make capital and maintenance expenditures in the
Ordinary Course of Business;
5.use best endeavors to maintain the Facility's business,
Employees, customers, sales order backlog, assets and operations as
an ongoing business and in the Ordinary Course of Business; and
6.use reasonable efforts to implement the previously
announced October 1, 1996 price increase as set out in Exhibit H
attached hereto.
D.Preservation of Business. The Seller will not:
1.enter into any transaction in respect of the Business or
Acquired Assets other than in the Ordinary Course of Business;
2.sell, transfer or otherwise dispose of any of the
Acquired Assets (other than sales of inventory and finished product in
the Ordinary Course of Business);
3.grant any increase in compensation or benefits of any
Employee;
4.enter into any transaction between the Facility and the
Seller or any of the Seller's Affiliates except in the Ordinary Course
of Business;
5.take any action, engage in any practice or enter into
any transaction which would require disclosure under Section 3(g); or
6.commit or enter into any agreement to do any of the
foregoing.
E.Full Access. The Seller will permit representatives of the
Buyer to have full access at all reasonable times, and in a manner so
as not to interfere with the normal business operations of the Business
to all premises, properties, personnel, books, records (including Tax
records), contracts, and documents of or pertaining to the Business.
F.Exclusivity. The Seller will (and the Seller will cause any
Affiliate, employee, officer, director, shareholder, agent or other Person
acting on its behalf to):
1.cease and cause to be terminated any and all
discussions with any Person regarding the possible sale of all the
Business or any of the Acquired Assets (whether by sale of stock,
assets, merger, reorganization, liquidation, dissolution or similar
transactions) (a "Company Transaction");
2.only provide information concerning the Facility and
the Acquired Assets to Persons in the Ordinary Course of Business if
the Seller has no reason to believe that the information may be utilized
to evaluate a possible Company Transaction;
3.not solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to a Company Transaction;
or
4.not participate in any discussions or negotiations
regarding, or furnish any information with respect to or assist or
participate in or facilitate in any other manner any effort or attempt by
any Person to enter into a Company Transaction.
The Seller will notify the Buyer immediately if any Person
makes any proposal, offer, inquiry, or contact with respect to any of
the foregoing.
G.Notices and Consents. The Seller will give any notices to
third parties, and the Seller will use its reasonable best efforts to obtain
any third party consents, that the Buyer may request in connection with
the Permits and Licenses and Contracts and the Loan Amendment.
Each of the Parties will give any notices to, make any filings with, and
use its reasonable best efforts to obtain any authorizations, consents,
and approvals of governments and governmental agencies in connection
with the Permits and Licenses and third parties in respect of the
Contracts.
H.Notice of Developments. Each Party will give prompt
written notice to the other Party of any breach of any of its own
representations and warranties in Section 3 and Section 4 above or any
material adverse development anticipated to prevent such party from
delivering the certificate contemplated by Section 6(a)(v) or Section
6(b)(iv). No disclosure by any Party pursuant to this Section 5(h),
however, shall be deemed to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
I.Title Insurance. The Buyer will obtain the following title
insurance commitments, policies, and riders in preparation for the
Closing with respect to each parcel of Real Property, an ALTA
Owner's Policy of Title Insurance Form B-1970 (or equivalent policy
reasonably acceptable to the Buyer if the real property is located in a
state in which an ALTA Owner's Policy of Title Insurance Form
B-1970 is not available) issued by a title insurer reasonably satisfactory
to the Buyer (and, if requested by the Buyer, reinsured in whole or in
part by one or more insurance companies and pursuant to a direct
access agreement reasonably acceptable to the Buyer), in such amount
as the Buyer reasonably may determine to be the fair market value of
such real property (including all improvements located thereon),
insuring title to such real property to be in the Buyer as of the Closing.
Each title insurance policy delivered under Section 5(i) above
shall:
a. insure title to the real property and all recorded
easements benefitting such real property;
b.contain an "extended coverage endorsement"
insuring over the general exceptions contained customarily in such
policies;
c.contain an ALTA Zoning Endorsement 3.1 (or
equivalent);
d.contain an endorsement insuring that the real
property described in the title insurance policy is the same real estate
as shown on the Survey delivered with respect to such property;
e.contain an endorsement insuring pedestrian and
vehicular access to the real property via public streets or private streets
benefited by appropriate access easements;
f. if available, contain an inflation endorsement
providing for annual adjustments in the amount of coverage in
accordance with the title insurer's standard endorsement;
g.if the real property consists of adjacent record
parcels, contain a "contiguity" endorsement insuring that all of the
record parcels together form a contiguous whole;
h.contain a "non-imputation" endorsement to the
effect that title defects known to the officers, directors, and
stockholders of the owner prior to the Closing shall not be deemed
"facts known to the insured" for purposes of the policy; and
i.contain such other commercially available
endorsements as Buyer and Buyer's lender, if any, may reasonably
request in order to insure over any exceptions not constituting
Permitted Liens.
J.Surveys. With respect to each parcel of Real Property that
the Seller owns, and as to which a title insurance policy is to be
procured pursuant to Section 5(i) above, the Buyer will procure in
preparation for the Closing a current survey of the real property
certified to the Buyer, prepared by a licensed surveyor and conforming
to current ALTA Minimum Detail Requirements for Land Title
Surveys, disclosing the location of all improvements, easements, party
walls, sidewalks, roadways, utility lines, and other matters shown
customarily on such surveys, and showing access affirmatively to
public streets and roads or to private streets via appropriate easements
(the "Survey"). The Survey shall not disclose any survey defect or
encroachment from or onto the real property which has not been cured
or insured over prior to the Closing. Survey matters constituting
Permitted Liens will not be deemed defects or encroachments for
purposes of this section.
K.Employees. Prior to Closing, Seller shall give all notices
required under any law or collective bargaining agreement and Seller
shall perform all bargaining obligations with respect to any employee
representatives. The Seller shall use reasonable best efforts to obtain
prior to Closing a substitution agreement in form and substance
reasonably satisfactory to Buyer that provides for the substitution of
Buyer in the place of Seller under the Labor Agreement (the
"Substitution Agreement").
VI.Conditions Precedent to Close.
A.Buyer's conditions precedent. The obligation of the Buyer
to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
1.the representations and warranties set forth in Section
3 above shall be true and correct in all material respects at and as of
the Closing Date;
2.the Seller shall have performed and complied with all
of its covenants hereunder in all material respects through the Closing;
3.the Seller shall have procured all of the third party
consents specified in Section 5(g) above;
4.no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) materially affect adversely the right of the Buyer
to own the Acquired Assets, to operate the Business, or (D) materially
affect adversely the right of the Seller to own the Acquired Assets and
to operate the Business (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
5.the Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above in
Section 6(a)(i)-(iv) is satisfied in all respects;
6.the Buyer shall have procured all of the title insurance
commitments, policies, and riders specified in Section 5(i) above, and
all of the surveys specified in Section 5(j) above;
7.the Buyer shall have received all other authorizations,
consents, and approvals of governments and governmental agencies
referred to in Section 5(f);
8.the relevant parties shall have entered into:
a.the Supply Agreement;
b.the Conversion Services Agreement; and
c.the Substitution Agreement.
9.the Buyer shall have received from counsel to the
Seller an opinion in form and substance reasonably satisfactory to
Buyer, addressed to the Buyer, and dated as of the Closing Date;
10.the Buyer shall have obtained on terms and
conditions satisfactory to it all of the financing it needs in order to
consummate the transactions contemplated hereby and fund the
working capital requirements of the Business after the Closing;
11.all actions to be taken by the Seller in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer;
12.there shall have been no material adverse change in
the financial condition, operating results, assets, operations, and
customer, supplier and employee relations of the Business;
13.the Buyer shall have employed all of the salaried
employees listed on the Employees Schedule;
14.the Buyer shall have received the Transfer
Documents; and
15.the Seller shall have delivered to the Buyer a
FIRPTA affidavit of the Seller in accordance with Section 1445 of the
Code.
The Buyer may waive any condition specified in this Section 6(a) by
giving written notice to the Seller at any time prior to Closing.
B.Seller's conditions precedent. The obligation of the Seller
to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
1.the Buyer's representations and warranties in Section
4 above shall be true and correct in all material respects at and as of
the Closing Date;
2.the Buyer shall have performed and complied with all
of its covenants hereunder in all material respects through the Closing;
3.no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
4.the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above in
Sections 6(b)(i)-(iii) is satisfied in all respects;
5.the Buyer shall have received all other authorizations,
consents, and approvals of governments and governmental agencies
referred to in Section 5(g), including, without limitation, the Loan
Amendment;
6.the relevant parties shall have entered into;
a.the Supply Agreement; and
b.the Conversion Services Agreement.
7.the Seller shall have received from counsel to the
Buyer an opinion in form and substance reasonably satisfactory to
Seller, addressed to the Seller, and dated as of the Closing Date; and
8.all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller.
The Seller may waive any condition specified in this Section 6(b) by
giving written notice to the Buyer at any time prior to Closing.
VII.Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing.
A.General. If at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as
the other Party reasonably may request, at the sole cost and expense of
the requesting Party (unless the requesting Party is entitled to
indemnification therefor under Section 8 below). The Seller
acknowledges and agrees that from and after the Closing the Buyer will
be entitled to possession of all documents, books, records (including
Tax records), agreements, and financial data included in the Acquired
Assets.
B.Books and Records. For a period of five years following the
Closing, or for such longer periods as may be required to satisfy
applicable laws, regulations or agreements:
1.Seller shall retain all books and records relating to the
Business and the Acquired Assets that are integrated or non-separable
from the books and records related to any of the businesses of Seller
other than the Business,
2.Buyer shall retain all other books and records of the
Business, including, without limitation, all other such books and
records of the Business (A) relating to Taxes, including, without
limitation, accounting and tax records and information pertaining to
events occurring prior to the Closing Date and (B) required to be
retained pursuant to obligations imposed by any statute, rule or
regulation (such books and records of the Business described in clause
(i) above and this clause (ii), collectively, the "Records");
3.each party hereto shall provide to duly authorized
representatives of the other party who wishes to review any Records
for bona fide business reasons reasonable access, during regular
business hours and without disrupting such other party's normal
business operations, to (A) such Records, (B) employees of such party,
if any, who are familiar with such Records and who can assist such
representatives of such other party, at such other party's own expense,
in locating, explaining or otherwise reviewing such Records and (C)
use of such party's copying facilities, clerical services and telephone in
a reasonable manner at such other party's own expense; and
4.neither Seller, on the one hand, nor Buyer, on the
other hand, shall dispose of or destroy any Records without written
permission of the other party.
If original records are required to respond to legal process in
connection with the conduct by any party of any litigation, arbitration,
audit, settlement proceedings or negotiations with third parties with
respect to the conduct of the Business or Buyer's conduct of its
business after the Closing, such party, subject to applicable laws,
regulations or agreements, shall be permitted to remove the Records
temporarily from another party's premises, provided that such party
shall return such original documents to such other party as promptly as
practicable after such time when such original documents are no longer
required in connection with such legal proceedings.
C.Litigation Support. In the event and for so long as any Party
actively is contesting or defending any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with:
1.any transaction contemplated under this Agreement; or
2.any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to
act, or transaction on or prior to the Closing Date involving the Facility
or the Acquired Assets,
the other Party will cooperate with the contesting or defending Party
and its counsel in the contest or defense, make available its personnel,
and provide such testimony and access to its books and records as shall
be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor
under Section 8 below).
D.Transition. The Seller will not take any action that is
designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate who prior to
Closing had a business relationship with the Seller arising from the
Business from maintaining the same business relationships with the
Buyer after the Closing. The Seller will refer all customer inquiries
relating to the Business to the Buyer from and after the Closing.
E.Confidentiality. The Seller will treat and hold as such all of
the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver
promptly to the Buyer or destroy, at the request and option of the
Buyer, all tangible embodiments (and all copies) of the Confidential
Information which are in its possession. In the event that the Seller is
requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, the Seller will notify the Buyer promptly of the request
or requirement so that the Buyer may seek an appropriate protective
order or waive compliance with the provisions of this Section 7(d). If,
in the absence of a protective order or the receipt of a waiver
hereunder, the Seller is, on the advice of counsel, compelled to disclose
any Confidential Information to any tribunal or else stand liable for
contempt, the Seller may disclose the Confidential Information to the
tribunal; provided, however, that the Seller shall use its reasonable best
efforts to obtain, at the reasonable request of the Buyer, an order or
other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as the
Buyer shall designate.
F.Covenant Not to Compete. For a period of five years from
the Closing Date, neither the Seller nor any of its Subsidiaries or
Affiliates will:
1.manufacture or sell A500 Grade B or Grade C hollow
structural sections or A-513 ERW Mechanical tubing; or
2.engage, or hold or own an interest, directly or
indirectly in any business that manufactures, converts or sells A500
Grade B or Grade C hollow structural sections or A-513 ERW
Mechanical tubing,
in any geographic area in which the Seller conducts the
Business as of the Closing Date or has conducted the Business at any
time within 5 years of the Closing Date.
If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 7(e) is invalid or
unenforceable, the Parties agree that the court making the determination
of invalidity or unenforceability shall have the power to reduce the
scope, duration, or area of the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
G.Allocation. As soon as practicable after Closing the Buyer
shall allocate the Purchase Price (plus the Assumed Liabilities) among
the Acquired Assets and deliver to the Seller a schedule setting forth
such allocation. The Parties shall use their reasonable best efforts to
agree upon the final form and substance of the allocation schedule.
The mutually agreed allocation schedule shall be used by the parties in
preparing (i) Form 8594, Asset Acquisition Statement, for Buyer and
Seller and (ii) all Tax Returns. Buyer and Seller shall each file Form
8594 prepared in accordance with this Section with its federal income
tax return for its tax period which includes the Closing Date. All
allocations made pursuant to this Section shall be binding upon the
parties and upon each of their successors and assigns, and the parties
shall report the transactions contemplated by this Agreement in accor-
dance with such allocations.
VIII.Remedies for Breaches of This Agreement.
A.Survival of Representations and Warranties.
The representations and warranties and covenants in this
Agreement and the Schedules and Exhibits hereto or in any writing
delivered by Buyer or the Seller to any other party in connection with
this Agreement (including the certificate required to be delivered by
Seller pursuant to Section 6(a)(v) above and the certificate required to
be delivered by Buyer pursuant to Section 6(g)(iv) above) shall survive
the Closing as follows:
1.the representations and warranties contained in
Sections 3(g) (Tax) and 3(w) (Employee Benefits) (including such
representations and warranties as they are remade in the certificate
delivered pursuant to Section 6(a)(v)) shall terminate when the
applicable statutes of limitations with respect to the liabilities in
question expire (giving effect to any extensions or waivers thereof),
plus 60 days;
2.the representations and warranties in Sections 3(e)
(Title to Assets), 3(g) (Authorization of Transaction) and 3(d)
(Brokers' Fees) (including such representations and warranties as they
are remade in the certificate delivered pursuant to Section 6(a)(v)) shall
not terminate;
3.the representations and warranties in Section 3(y)
(Environmental, Health and Safety) (including such representations and
warranties as they are remade in the certificate delivered pursuant to
Section 6(a)(v)) shall terminate on the fourth anniversary of the
Closing Date; and
4.all other representations and warranties in this
Agreement and the Schedules and Exhibits hereto or in any writing
delivered by Buyer or the Seller to any other party in connection with
this Agreement including the certificate required to be delivered by
Buyer pursuant to Section 6(a)(v) above) shall terminate 18 months
after the Closing Date;
provided that any representation or warranty in respect of which
indemnity may be sought under Sections 8(b) and 8(c), and the
indemnity with respect thereto, shall survive the time at which it would
otherwise terminate pursuant to this Section 8(a) if notice of the
inaccuracy or breach thereof giving rise to such right of indemnity
shall have been given to the party against whom such indemnity may
be sought prior to such time. The representations and warranties in
this Agreement and the Schedules and Exhibits hereto or in any writing
delivered by Buyer or the Seller to any other party in connection with
this Agreement (including the certificate required to be delivered by
Seller pursuant to Section 6(g)(iv) above and the certificate required to
be delivered by Buyer pursuant to Section 6(a)(v) above) shall survive
for the periods set forth in this Section 8(a) and shall in no event be
affected by any investigation, inquiry or examination made for or on
behalf of Buyer or the Seller or the knowledge of any of Buyer's or
the Sellers' officers, directors, shareholders, employees or agents or the
acceptance by Buyer or the Seller of any certificate or opinion
hereunder.
B.Indemnification of the Buyer.
The Seller shall jointly and severally indemnify Buyer and its
Affiliates, stockholders, officers, directors, employees, agents,
representatives, successors and permitted assigns (collectively, the
"Buyer Parties") and save and hold each of them harmless against and
pay on behalf of or reimburse such Buyer Parties as and when incurred
for any loss (but excluding diminution in value and consequential
damages), liability, demand, claim, action, cause of action, cost,
damage, deficiency, tax, penalty, fine or expense, whether or not
arising out of third party claims (including, without limitation, interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid
in investigation, defense or settlement of any of the foregoing)
(collectively, "Losses") which any such Buyer Party may suffer,
sustain or become subject to, as a result of, in connection with, relating
or incidental to or by virtue of:
1.any misrepresentation or breach of representation or
warranty under Section 3 of this Agreement or in any of the certificates
or other instruments or documents furnished to Buyer by Seller
pursuant to this Agreement (it being understood that the certificate
delivered pursuant to Section 6(a)(v) above shall be deemed to omit
any reference to materiality in such certificate for purposes of
determining breaches thereof);
2.any nonfulfillment or breach of any covenant,
agreement or other provision by Seller under this Agreement or the
Schedules and Exhibits hereto;
3.any liability or obligation of Seller which is an
Excluded Liability;
4.any liability or obligation of Buyer arising by
operation of law under any bulk transfer law which arises out of the
transactions contemplated hereby and which is not an Assumed
Liability;
5.any liability or obligation relating to the Employees
who are offered employment by Buyer but who decline to accept such
offer;
6.any claims of any Employee or former employee of
Seller to whom Buyer has no obligation to offer employment under this
Agreement;
7.any liability or obligation for severance benefits,
termination benefits or other benefits (including pension, savings, profit
sharing, incentive compensation, vacation or welfare benefits) with
respect to those Employees not employed by the Buyer; and
8.the lawsuit captioned "Vernon Glen Knox and Lisa
Liegh Knox v. Laclede Steel Company" filed with the Circuit Court of
Marshall County, West Virginia.
provided that the Seller Entities shall not have any liability under
Section 8(b) above (other than Section 8(b)(viii) and with respect to the
representations and warranties contained in Section 3(d) (Brokerage),
Section 3(b) (Authorization) and Section 3(e) (Title)) unless the
aggregate of all Losses relating thereto for which the Seller would, but
for this proviso, be liable exceeds an amount equal to $150,000 and
only in excess of such amount; provided further, however, the Seller's
aggregate liability under Section 8(b)(i) above (other than with respect
to the representations and warranties contained in Section 3(b), Section
3(d) and of Section 3(e)) shall in no event exceed $11,373,000. This
Section 8(b) shall not govern any claims by the Buyer Parties with
respect to the covenants and indemnifications provided under Section
8(f) (Environmental) or Section 8(g) (Tax). All indemnification
payments under this Section 8 shall be deemed adjustments to the Final
Purchase Price for the Acquired Assets set forth in Section 2.
C.Indemnification of the Seller Entities. The Buyer shall
indemnify the Seller and its respective Affiliates, officers, directors,
employees, agents, representatives, successors and permitted assigns
(collectively, the "Seller Parties") and hold them harmless against any
Losses which the Seller Parties may suffer, sustain or become subject
to, as the result of, in connection with, relating or incidental to or by
virtue of:
1.any misrepresentation or breach of representation or
warranty under Section 4 of this Agreement or in any of the certificates
or other instruments or documents furnished to Seller by Buyer
pursuant to this Agreement;
2.any nonfulfillment or breach of any covenant,
agreement or other provision by Buyer under this Agreement or the
Schedules and Exhibits hereto;
3.any Assumed Liability;
4.any claims made by Employees employed by the
Buyer arising out of any change in the base pay or incentive
compensation or job duties of such Employees occurring after the
Closing Date or the termination by Buyer of their employment after the
Closing Date;
5.any liability or obligation relating to Buyer's violation
of Environmental, Health and Safety Requirements after the Closing
Date to the extent such liability is not an Excluded Liability or Buyer
is not otherwise entitled to indemnification hereunder; or
6.any liability or obligation relating to any injury, to
individuals or property as a result of the ownership, possession or use
of any product of the Business manufactured, sold, leased or delivered
by the Buyer after the Closing Date (other than with respect to
Inventory and Finished Goods included in the Acquired Assets).
D.Manner of Payment. Any indemnification of the Buyer
Parties or the Seller Parties pursuant to this Section 8 shall be effected
by wire transfer of immediately available funds from the Seller or
Buyer, as the case may be, to an account designated by Buyer or
Seller, as the case may be, within 30 days after the determination
thereof.
E.Defense of Third Party Claims. Any party making a claim
for indemnification under this Section 8 (an "Indemnitee") shall notify
the indemnifying party (an "Indemnitor") of the claim in writing
promptly after receiving written notice of any action, lawsuit,
proceeding, investigation or other claim against it (if by a third party)
or discovering the liability, obligation or facts giving rise to such claim
for indemnification, describing the claim, the amount thereof (if known
and quantifiable) and the basis thereof; provided that the failure to so
notify an Indemnitor shall not relieve the Indemnitor of its obligations
hereunder except to the extent that (and only to the extent that) the
Indemnitor is prejudiced by such failure. Any Indemnitor shall be
entitled to participate in the defense of such action, lawsuit, proceeding,
investigation or other claim giving rise to an Indemnitee's claim for
indemnification at such Indemnitor's expense, and at its option (subject
to the limitations set forth below) shall be entitled to appoint a
nationally recognized and reputable counsel reasonably acceptable to
the Indemnitee to be the lead counsel in connection with such defense;
provided further that, prior to the Indemnitor assuming control of such
defense, it shall first verify to the Indemnitee in writing that such
Indemnitor shall be responsible (with no more than a reasonable
reservation of rights under the circumstances) for all liabilities and
obligations relating to such claim for indemnification and that it shall
provide indemnification (whether or not otherwise required hereunder)
to the Indemnitee with respect to such action, lawsuit, proceeding,
investigation or other claim giving rise to such claim for
indemnification hereunder; and provided further that:
1.the Indemnitee shall be entitled to participate in the
defense of such claim and to employ counsel of its choice for such
purpose; provided that the fees and expenses of such separate counsel
shall be borne by the Indemnitee (other than any fees and expenses of
such separate counsel that are incurred prior to the date the Indemnitor
effectively assumes control of such defense which, notwithstanding the
foregoing, shall be borne by the Indemnitor);
2.the Indemnitor shall not be entitled to assume control
of such defense and shall pay the fees and expenses of counsel retained
by the Indemnitee if (i) the claim for indemnification relates to or
arises in connection with any criminal proceeding, action, indictment,
allegation or investigation; (ii) the Indemnitee reasonably believes an
adverse determination with respect to the action, lawsuit, investigation,
proceeding or other claim giving rise to such claim for indemnification
would be detrimental to or injure the Indemnitee's reputation or future
business prospects; (iii) the claim seeks an injunction or equitable relief
against the Indemnitee; or (iv) upon petition by the Indemnitee, the
appropriate court rules that the Indemnitor failed or is failing to
vigorously prosecute or defend such claim; and
3.if the Indemnitor shall control the defense of any such
claim, the Indemnitor shall obtain the prior written consent of the
Indemnitee (which shall not be unreasonably withheld) before (i)
entering into any settlement of a claim or ceasing to defend such claim
if, pursuant to or as a result of such settlement or cessation, injunctive
or other equitable relief shall be imposed against the Indemnitee or if
such settlement does not expressly and unconditionally release the
Indemnitee from all liabilities and obligations with respect to such
claim, without prejudice and (ii) taking any remedial actions with
respect to any environmental matters (including investigations and
cleanups) with respect to the Facility.
F.Certain Environmental Matters.
1.The Seller covenants that it will, at its sole cost and
expense, within six months of the date of this Agreement:
a.remove from the Real Property and the Facility,
and dispose of, the concrete supports, coating residues and the
surrounding soil to the conditions and pursuant to the standards set
forth in Exhibit I under the heading "Coating Area";
b.deliver to the Buyer a confirmation analysis
report containing the analysis set forth in Exhibit I under the heading
"Coating Area" and prepared by Environmental Management Associates
of Wexford, Pennsylvania, Marsh Consulting or such other consulting
engineers as approved by the Buyer (which approval shall not be
unreasonably withheld) which states that the remediation work set out
in paragraph (i) (A) above has been completed; and
c.fill and grade the area surrounding the
remediation work undertaken in accordance with paragraph (i)(A)
above to restore such areas to the grade existing prior to the
commencement of such work.
2.The Seller covenants that it will, at its sole cost and
expense, within six months of the date of this Agreement:
a.remove and dispose of hydrocarbon impacted
soils surrounding the 5 gallon bucket outside the south side of building
No. 1 at the Facility and the shallow pit south of the area to the
conditions and pursuant to the standards set forth in Exhibit I under the
headings "Compressor Area" and "Shallow Pit";
b.deliver to the Buyer a confirmation analysis
report containing the analysis set forth in Exhibit I under the headings
"Compressor Area" and "Shallow Pit" and prepared by Environmental
Management Associates of Wexford, Pennsylvania, Marsh Consulting
or such other consulting engineers as approved by the Buyer (which
approval shall not be unreasonably withheld) which states that the
remediation work set out in paragraph (ii)(A) above has been
completed; and
c.fill and grade the area surrounding the
remediation work undertaken in accordance with paragraph (ii)(A)
above to restore such area to the grade existing prior to the
commencement of such work.
3.The Seller covenants that it will, at its sole cost and
expense, within six months of the date of this Agreement:
a.remove and dispose of all paint chips and soil
around the entire building perimeter at the Facility in accordance with
the conditions and pursuant to the standards set forth in Exhibit I under
the heading "Building Perimeter";
b.deliver to the Buyer a confirmation analysis
report containing the analysis specified in Exhibit I under the heading
"Building Perimeter" and prepared by Environmental Management
Associates of Wexford, Pennsylvania, Marsh Consulting or such other
consulting engineers as approved by the Buyer (which approval shall
not be unreasonably withheld) which states to the reasonable
satisfaction of the Buyer that the remediation work set out in paragraph
(iii)(A) above has been completed; and
c.fill and grade the area surrounding the
remediation work undertaken in accordance with paragraph (iii)(A)
above to restore such area to the grade existing prior to the
commencement of such work.
4.The Seller covenants that it will as soon as reasonably
practical after the date of this Agreement procure, at its sole cost and
expense, all sampling and analysis required to meet the permit
reporting requirements for the West Virginia General Permit for storm
water discharge from the Facility.
G.Tax Indemnification.
1.Seller shall remain liable, and shall indemnify Buyer,
for any liability or obligation in respect of any amount of federal, state,
local or foreign Taxes which are imposed with respect to or measured
by the income of Seller, value of property owned by Seller, or the
conduct of the Business by Seller, for any taxable period up to and
including the Closing Date. Seller shall also indemnify Buyer, and
shall be liable, for any state real estate documentary stamp tax imposed
with respect to the transfer of real property pursuant to this Agreement.
2.Any indemnification payment provided for under this
Section 8(g) shall include reasonable costs and expenses (including
attorneys' fees and expenses and accountants' fees and expenses)
incurred in contesting the amounts against which Buyer is indemnified,
or incurred in satisfying any filing or other procedural requirements
with respect to amounts against which Buyer is indemnified. Any
indemnification payment provided for under this Section 8(g) shall be
paid in the manner provided in Section 8(d) above and shall also
include any amount necessary to indemnify Buyer and hold it harmless
against any Loss which Buyer may suffer, sustain or become subject
to as a result of Seller's failure to pay, or unreasonable delay in
paying, any amounts for which Buyer is indemnified. Any
indemnification payment provided for under this Section 8(g) shall be
grossed up to include any Taxes payable by Buyer because of the
receipt of such indemnification payment (including such gross-up).
H.Other Limitations and Exclusive Remedy. For purposes
of Section 8, "Losses" shall be computed considering the present value
of net Tax benefits or detriments to the indemnified person arising
from the indemnified matter. The provisions of this Section 8 shall
constitute the exclusive remedy of the Parties with respect to any
claims or Losses resulting from or arising out of any other claims or
Losses, whether based on tort, contract, law, investigation by
government, or otherwise, resulting from or arising out of the
transactions contemplated hereby which may be asserted after the
Closing; provided, that the foregoing shall not preclude any claim for
actual fraud, injunctive or other non-monetary equitable relief.
I.Recoupment Under Buyer Note. The Buyer shall have the
option of recouping all or any part of any Loss it may suffer (in lieu
of seeking any indemnification to which it is entitled under this Section
8) by notifying the Seller that the Buyer is reducing the principal
amount outstanding under the Buyer Note. This shall affect the timing
and amount of payments required under the Buyer Note in the same
manner as if the Buyer had made a permitted prepayment (without
premium or penalty) thereunder.
IX.Termination.
A.Termination of Agreement. The Parties may terminate this
Agreement as provided below:
1.the Buyer and the Seller may terminate this Agreement
by mutual written consent at any time prior to the Closing;
2.the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing (A) in the
event the Seller has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the
Buyer has notified the Seller of the breach, and the breach has
continued without cure for a period of 30 days after the notice of
breach or (B) if the Closing shall not have occurred on or before 30
days from the date of this Agreement, by reason of the failure of any
condition precedent under Section 7(a) hereof (unless the failure results
primarily from the Buyer itself breaching any representation, warranty,
or covenant contained in this Agreement); and
3.the Seller may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (A) in the
event the Buyer has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the
Seller has notified the Buyer of the breach, and the breach has
continued without cure for a period of 30 days after the notice of
breach or (B) if the Closing shall not have occurred on or before 30
days from the date of this Agreement, by reason of the failure of any
condition precedent under Section 7(b) hereof (unless the failure results
primarily from the Seller itself breaching any representation, warranty,
or covenant contained in this Agreement).
B.Effect of Termination. If any Party terminates this
Agreement pursuant to Section 9(a) above, all rights and obligations of
the Parties hereunder shall terminate without any Liability of any Party
to the other Party (except for any Losses of any Party then in breach).
X.Miscellaneous.
A.Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to
the subject matter of this Agreement without the prior written approval
of the other Party; provided, however, that any Party may make any
public disclosure it believes in good faith is required by applicable law
or any listing or trading agreement concerning its publicly-traded
securities (in which case the disclosing Party will use its reasonable
best efforts to advise the other Party prior to making the disclosure).
B.No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties
and their respective successors and permitted assigns.
C.Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties
and supersedes any prior understandings, agreements, or representations
by or between the Parties, written or oral, to the extent they have
related in any way to the subject matter hereof.
D.Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and
their respective successors and permitted assigns. No Party may assign
either this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other Party;
provided however, that the Buyer may (i) assign any or all of its rights
and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations
hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations
hereunder). In addition the Buyer may assign its rights pursuant to this
Agreement (including its rights to indemnification) to any of its lenders
as collateral security.
E.Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all
of which together will constitute one and the same instrument.
F.Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed
duly given if (and then two business days after) it is sent by registered
or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to the Seller: Laclede Steel Company
1 Metropolitan Square, Suite 1500
Saint Louis, Missouri 63102-2738
Attn: Mr. Michael H. Lane
If to the Buyer: Excaliber Tubular Corporation
600 Emmerson Road, Suite 105
Saint Louis, Missouri 63141
Attn: Mr. Charles Emmenegger
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set
forth above using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and
until it actually is received by the intended recipient. Any Party may
change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other
Party notice in the manner herein set forth.
G.Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of
Missouri without giving effect to any choice or conflict of law
provision or rule (whether of the State of Missouri or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Missouri.
H.Amendments and Waivers. No amendment of any
provision of this Agreement shall be valid unless the same shall be in
writing and signed by the Buyer and the Seller. No waiver by any
Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach
of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
I.Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term
or provision in any other situation or in any other jurisdiction.
J.Expenses. Each of the Buyer and the Seller will bear his or
its own costs and expenses (including legal fees and expenses) incurred
in connection with this Agreement and the transactions contemplated
hereby. The Seller agrees that the Facility has not borne and will not
bear any of the costs and expenses of the Seller (including any of its
legal fees and expenses) in connection with this Agreement or any of
the transactions contemplated hereby.
K.Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including"
shall mean including without limitation. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of
a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document
or other item itself). The Parties intend that each representation,
warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists
another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that
the Party is in breach of the first representation, warranty, or covenant.
For purposes of Article 3 and 4 hereof, the modification of any
representation or warranty by the use of the words "material", " in all
material respects" or "material adverse effect" or other words of similar
meaning shall mean that such representation or warranty shall be
deemed breached hereunder if the Loss resulting from a breach of such
representation or warranty absent such words or modification exceeds
$25,000. For purposes of the foregoing, any Losses resulting from
facts or circumstances having the same factual or legal basis shall be
aggregated as one Loss.
L.Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
M.Specific Performance. Each of the Parties acknowledges
and agrees that the other Party would be damaged irreparably in the
event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Party shall be
entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over
the Parties and the matter, in addition to any other remedy to which it
may be entitled, at law or in equity.
N.Employee Benefits Matters.
1.Treatment of Employees-General. At the Closing,
Buyer shall, and shall be deemed to, offer immediate or continuing
employment (so that no period of unemployment occurs) to all hourly
and salaried employees of Seller who are actively employed in the
Business immediately prior to Closing with substantially the same
hours, pay and other terms and conditions of employment, as exist as
of the Closing. Buyer will recognize the rights of all members covered
under the Labor Agreement.
2.Welfare Benefits. As of the Closing Date, Buyer shall
sponsor a health plan to provide benefits to employees substantially
similar to those benefits provided under Seller's health plan
immediately prior to the Closing Date. Buyer shall use reasonable
efforts to waive any waiting periods or pre-existing condition or other
benefit restrictions which may be contained in any of Buyer's
applicable welfare benefit plans or programs with respect to employees
of Seller who participated in such plans or programs immediately prior
to the Closing Date. Buyer shall be liable for benefits provided under
its health plan with respect to claims which arise due to occurrences on
or after the Closing Date. Seller shall remain liable for benefits
provided under its welfare benefit plans.
3.Buyer's Assumption of Liability. As of any after
Closing Date, Buyer shall recognize each collective bargaining
representative of the Employees, and shall assume any and all
liabilities, responsibilities and obligations of Seller specifically set forth
in the Labor Agreement arising on or after the Closing Date (excluding
any liability or obligation arising out of or in connection with any
breach thereof occurring prior to Closing).
4.Plant Closing Law. The Seller represents and warrants
that it has not in connection with the Business terminated any
employee during the six-month period prior to the date of this
Agreement. In reliance upon such representation, Buyer shall bear all
responsibility for any liability or obligation under the Workers'
Assistance and Retraining Notification Act ("WARN") in connection
with the Business arising from the transactions contemplated by this
Agreement or any action by Buyer.
O.Bulk Transfer Laws. The Buyer acknowledges that the
Seller will not comply with the provisions of any bulk transfer laws of
any jurisdiction in connection with the transactions contemplated by
this Agreement. Seller shall indemnify the Buyer against any Adverse
Consequences which the Buyer may suffer due to the Seller's failure
to comply.
P.Nonassignable Contracts. To the extent that the assignment
hereunder by the Seller to the Buyer of any Contract is not permitted
without the consent of any other party to such Contract, this Agreement
shall not be deemed to constitute an assignment of such Contract if
such consent is not given or if such assignment otherwise would
constitute a breach of, or cause a loss of contractual benefits under, any
such Contract, the Buyer shall assume no obligations or liabilities under
such Contract. Seller shall use its reasonable best efforts to advise
Buyer promptly in writing with respect to any Contract which Seller
knows or has substantial reason to believe will or may not be subject
to assignment to Buyer hereunder. Without in any way limiting
Seller's obligation to obtain all consents and waivers necessary for the
sale, transfer, assignment and delivery of the Contracts and the
Acquired Assets to Buyer hereunder, if any such consent is not
obtained and the Closing hereunder is consummate, Seller shall
cooperate with Buyer following Closing Date in any reasonable
arrangement designed to provide Buyer with the rights and benefits
(subject to the obligations) under such Contract, including enforcement
for the benefit of Buyer of any and all rights of Seller against any
other party arising out of any breach or cancellation of any such
Contract by such other party and, if requested by Buyer, acting as an
agent of behalf or as Buyer shall otherwise reasonably require, at
Buyer's expense.
XI.Transfer Taxes. Buyer and Seller shall each bear one half of the
expense of any federal, state, local or foreign Taxes imposed with
respect to the transfer of assets pursuant to this Agreement (other than
the West Virginian real estate documentary stamp tax which shall be
borne by Seller).
XII.Licensed Intellectual Property. As of the Closing and in
consideration for the Purchase Price and no other consideration, Seller
hereby grants Buyer a perpetual, non-exclusive, world-wide license to
the Licensed Intellectual Property, if any. As of the Closing and in
consideration for receipt of the Acquired Assets and no other
consideration, Buyer hereby grants Seller a perpetual, non-exclusive,
world-wide license to the Intellectual Property, if any, used by Seller
as of the Closing Date at any location of Seller other than the Facility.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement on and as of the date first above written.
EXCALIBER
TUBULAR
CORPORATION
By:
Title:
LACLEDE STEEL
COMPANY
By:
Title:
EXHIBIT (22)
Subsidiaries of Registrant
Laclede Chain Manufacturing Company - wholly-owned.
Laclede Mid America Inc. - wholly-owned.
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
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<RECEIVABLES> 41,200
<ALLOWANCES> 2,428
<INVENTORY> 90,109
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<BONDS> 107,889
0
83
<COMMON> 41
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<TOTAL-LIABILITY-AND-EQUITY> 331,110
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