<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1998
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
METAL MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5090 94-2835068
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (L.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION NUMBER) IDENTIFICATION NO.)
</TABLE>
500 NORTH DEARBORN STREET, SUITE 405
CHICAGO, ILLINOIS 60610
(312) 645-0700
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
DAVID A. CARPENTER
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
METAL MANAGEMENT, INC.
500 NORTH DEARBORN STREET, SUITE 405
CHICAGO, ILLINOIS 60610
(312) 645-0700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
Copies to:
PAUL W. THEISS
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603-3441
(312) 782-0600
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effectiveness of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
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- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING AGGREGATE AMOUNT OF
REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------
10% Senior Subordinated
Notes due 2008 of Metal
Management, Inc........... $180,000,000 100% $180,000,000 $53,100
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Guarantees of 10% Senior
Subordinated Notes due
2008 by the Guarantors.... $180,000,000 (2) (2) None
</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as amended.
(2) Pursuant to Rule 457(n), no filing fee is required.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION
8(A), MAY DETERMINE.
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This Prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction.
PROSPECTUS
SUBJECT TO COMPLETION, DATED JULY 10, 1998
METAL MANAGEMENT, INC.
OFFER TO EXCHANGE
ALL 10% SENIOR SUBORDINATED NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 FOR ALL OUTSTANDING
10% SENIOR SUBORDINATED NOTES DUE 2008
($180,000,000 PRINCIPAL AMOUNT OUTSTANDING)
The Exchange Offer (as defined) and withdrawal rights will expire at 5:00
p.m., New York City time, on , 1998 (as such date may be
extended (but not beyond , 1998), the "Expiration Date"). See "The
Exchange Offer -- Expiration Date; Extensions; Amendments."
Metal Management, Inc., a Delaware corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus, as it may be amended and supplemented from time to time (the
"Prospectus"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal," and together with the Prospectus, the "Exchange Offer"), to
exchange an aggregate of up to $180,000,000 principal amount of 10% Senior
Subordinated Notes due 2008 (the "New Notes"), which have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
registration statement of which this Prospectus forms a part, for an identical
face amount of its issued and outstanding 10% Senior Subordinated Notes due 2008
(the "Old Notes") (the Old Notes and the New Notes are collectively referred to
herein as the "Notes") of the Company from the holders thereof in integral
multiples of $1,000. See "The Exchange Offer."
The Company will accept for exchange any and all Old Notes that are validly
tendered prior to 5:00 p.m., New York City time, on the Expiration Date. Tenders
of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the Expiration Date, otherwise such tenders are irrevocable. The
Exchange Offer is not conditioned upon any minimum principal amount of the Old
Notes being tendered for exchange. However, the Exchange Offer is subject to
certain customary conditions and to the terms and provisions of the Exchange and
Registration Rights Agreement, dated as of May 13, 1998 (the "Registration
Rights Agreement"), among the Company, the Guarantors (as defined herein) and
Goldman, Sachs & Co., BT Alex. Brown Incorporated and Salomon Brothers Inc
(collectively, the "Initial Purchasers"). See "The Exchange Offer."
(continued on next page)
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN RISKS THAT
SHOULD BE CONSIDERED BY HOLDERS IN EVALUATING THE EXCHANGE OFFER.
------------------
THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------
The date of this Prospectus is , 1998.
<PAGE> 3
An aggregate of $180 million principal amount of Old Notes were sold by the
Company to the Initial Purchasers on May 13, 1998 (the "Closing Date") without
registration under the Securities Act, in reliance upon exemptions therefrom,
pursuant to a Purchase Agreement, dated May 8, 1998 (the "Purchase Agreement"),
among the Company, the Guarantors and the Initial Purchasers. The Company has
been advised that the Initial Purchasers subsequently resold the Old Notes in
reliance on Rule 144A under the Securities Act ("Rule 144A") and Regulation S
under the Securities Act ("Regulation S"). The Company and the Initial
Purchasers also entered into the Registration Rights Agreement, pursuant to
which the Company granted certain registration rights for the benefit of the
holders of the Old Notes (the "Holders").
The Old Notes were, and the New Notes will be, issued under the Indenture,
dated as of May 13, 1998 (the "Indenture"), among the Company, the Guarantors
and LaSalle National Bank, as trustee (in such capacity, the "Trustee"). As of
the date of this Prospectus, there are $180,000,000 aggregate principal amount
of Old Notes outstanding. The form and terms of the New Notes will be identical
in all material respects to the form and terms of the Old Notes, except that (i)
the New Notes have been registered under the Securities Act and, therefore, will
not bear legends restricting the transfer thereof, (ii) holders of New Notes
will not be entitled to receive any liquidated damages ("Liquidated Damages")
thereon pursuant to certain circumstances under the Registration Rights
Agreement and (iii) holders of New Notes will no longer be entitled to certain
other rights under the Registration Rights Agreement.
Interest on the Notes is payable semi-annually in arrears on each May 15
and November 15, commencing on November 15, 1998. Holders whose Old Notes are
accepted for exchange will have the right to receive interest accrued thereon
from the date of their original issuance or the last interest payment date, as
applicable, to, but not including, the date of issuance of the New Notes, such
interest to be payable with the first interest payment on the New Notes.
Interest on the Old Notes accepted for exchange will cease to accrue on the day
prior to the issuance of the New Notes. The New Notes will mature on May 15,
2008. See "Description of the New Notes--Principal, Maturity and Interest."
The New Notes will be redeemable at the option of the Company, in whole or
in part, at any time on or after May 15, 2003, at the redemption prices set
forth herein, plus accrued and unpaid interest thereon, if any, to the date of
redemption. In addition, on or prior to May 15, 2001, the Company may redeem up
to 35% of the originally issued aggregate principal amount of the Notes, at a
redemption price of 110% of the principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the redemption date, with the net proceeds
of an Equity Offering (as defined herein); provided, that not less than $117.0
million in aggregate principal amount of New Notes is outstanding immediately
after giving effect to such redemption. Following the occurrence of a Change of
Control (as defined herein), the Company will be required to make an offer to
repurchase the New Notes at a price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the date of
purchase. See "Description of the New Notes--Optional Redemption" and
"--Repurchase at the Option of Holders--Change of Control."
The New Notes will represent unsecured senior subordinated obligations of
the Company and will be subordinated in right of payment to all existing and
future Senior Debt (as defined herein) of the Company. The New Notes will be
fully and unconditionally guaranteed (the "Guarantee") on an unsecured senior
subordinated basis by the Guarantors, each a wholly-owned subsidiary of the
Company. As of March 31, 1998, on a pro forma basis after giving effect to the
offering of the Old Notes (the "Offering"), the application of the net proceeds
therefrom and certain other transactions described in the notes to the Pro Forma
Financial Data included herein, the Company would have had approximately $49.8
million of Senior Debt outstanding.
The New Notes are being offered hereby in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement. The
Company is making the Exchange Offer in reliance on the position of the staff of
the Securities and Exchange Commission (the "Commission") as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, the Company has not sought its own interpretive letter and there can be
no assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as it has in such interpretive letters to
third parties. Based on these interpretations by the staff of the Commission,
the Company believes that New Notes issued pursuant to the Exchange Offer to a
holder in exchange for Old Notes may be offered for resale, resold and
i
<PAGE> 4
otherwise transferred by a holder (other than (i) a broker-dealer who purchased
Old Notes directly from the Company for resale pursuant to Rule 144A or any
other available exemption under the Securities Act, (ii) an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act, or (iii) a
broker-dealer who acquired the Old Notes as a result of market-making or other
trading activities), without further compliance with the registration and
prospectus delivery provisions of the Securities Act, provided, that such holder
is acquiring the New Notes in the ordinary course of business and is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of the
New Notes. Holders wishing to accept the Exchange Offer must represent to the
Company, as required by the Registration Rights Agreement, that such conditions
have been met. Any holder of Old Notes who is not able to rely on the
interpretations of the staff of the Commission set forth in the above-mentioned
interpretive letters must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Old Notes unless such sale is made pursuant to an exemption from such
requirements. See "The Exchange Offer--Resales of New Notes."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it acquired the Old Notes for its own
account as a result of market-making activities or other trading activities and
must agree that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Based on the position taken by the staff of the
Commission in the interpretive letters referred to above, the Company believes
that broker-dealers who acquired Old Notes for their own accounts as a result of
market-making or other trading activities ("Restricted Broker-Dealers") may
fulfill their prospectus delivery requirements with respect to the New Notes
received upon exchange of such Old Notes (other than Old Notes which represent
an unsold allotment from the original sale of the Old Notes) with a prospectus
meeting the requirements of the Securities Act, which may be the prospectus
prepared for an exchange offer so long as it contains a description of the plan
of distribution with respect to the resale of such New Notes. Accordingly, the
Company believes that this Prospectus, as it may be amended or supplemented from
time to time, may be used by a Restricted Broker-Dealer in connection with
resales of New Notes received in exchange for Old Notes where such Old Notes
were acquired by such Restricted Broker-Dealer for its own account as a result
of market-making or other trading activities. Subject to certain provisions set
forth in the Registration Rights Agreement, the Company has agreed that this
Prospectus may be used by a Restricted Broker-Dealer in connection with resales
of such New Notes. See "Plan of Distribution." However, a Restricted
Broker-Dealer who intends to use this Prospectus in connection with the resale
of New Notes received in exchange for Old Notes pursuant to the Exchange Offer
must notify the Company, or cause the Company to be notified, on or prior to the
Expiration Date, that it is a Restricted Broker-Dealer. Such notice may be given
in the space provided for that purpose in the Letter of Transmittal or may be
delivered to the Exchange Agent at one of the addresses set forth herein under
"The Exchange Offer--Exchange Agent; Assistance." Any Restricted Broker-Dealer
who is an "affiliate" of the Company may not rely on such interpretive letters
and must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. See "The Exchange
Offer--Resales of New Notes."
In that regard, each Restricted Broker-Dealer who surrenders Old Notes
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that, upon receipt of notice from the Company of the
occurrence of any event or the discovery of any fact which makes any statement
contained in this Prospectus untrue in any material respect or which causes this
Prospectus to omit to state a material fact necessary in order to make the
statements contained herein, in light of the circumstances under which they were
made, not misleading or of the occurrence of certain other events specified in
the Registration Rights Agreement, such Restricted Broker-Dealer will suspend
the sale of New Notes pursuant to this Prospectus until the Company has amended
or supplemented this Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to such Restricted
Broker-Dealer or the Company has given notice that the sale of the New Notes may
be resumed, as the case may be.
ii
<PAGE> 5
The New Notes issued pursuant to this Exchange Offer will be issued in the
form of a Global New Note (as defined herein), which will be deposited with, or
on behalf of, The Depository Trust Company ("DTC") and registered in its name or
in the name of Cede & Co., its nominee. Beneficial interests in the Global New
Note representing the New Notes will be shown on, and transfers thereof will be
effected through, records maintained by DTC and its participants.
Notwithstanding the foregoing, Old Notes held in certificated form, if any, will
be exchanged solely for Certificated New Notes (as defined herein). After the
initial issuance of the Global New Note, Certificated New Notes will be issued
in exchange for interests in the Global New Note only on the terms set forth in
the Indenture. See "Description of the New Notes."
The Company will not receive any proceeds from this offering, but, pursuant
to the Registration Rights Agreement, the Company will bear certain registration
expenses. No underwriter is being utilized in connection with the Exchange
Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
iii
<PAGE> 6
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder, and, in accordance therewith, files reports,
proxy and information statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy and information
statements and other information concerning the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and Seven World Trade Center, Suite 1300,
New York, New York 10048. Copies of such material can also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates, and from the Commission's worldwide
web site at http://www.sec.gov. The Company's common stock, par value $.01 per
share ("Common Stock"), is currently traded on NASDAQ. Information filed by the
Company with NASDAQ may be inspected through EDGAR, the Commission's on-line
filing service.
This Prospectus constitutes a part of a registration statement on Form S-4
(together with all amendments and exhibits, the "Registration Statement") filed
by the Company with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. The information so
omitted may be obtained from the Commission's principal office in Washington,
D.C. upon payment of the fees prescribed by the Commission and from the
Commission's worldwide web site. Statements contained herein concerning the
provisions of any document provide a description of the material terms of the
copy of such document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. Each such statement is subject to and
qualified in its entirety by such reference. Reference is made to such
Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the securities offered hereby.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference (Commission File No. 0-14836):
1. The Company's Annual Report on Form 10-K for the year ended March 31,
1998.
2. The Company's Proxy Statement dated November 20, 1997 (relating to the
acquisition of Cozzi Iron & Metal, Inc. and including historical and pro
forma financial statements).
3. The Company's Current Report on Form 8-K dated May 1, 1998 (relating
to the acquisition of Aerospace Metals, Inc. and its consolidated
subsidiaries and including historical and pro forma financial
statements).
4. The Company's Current Report on Form 8-K dated July 1, 1998 (providing
supplementary consolidated financial statements of the Company that give
effect to the Company's acquisition of R&P Holdings, Inc. as a pooling
of interests).
5. The Company's Current Reports on Form 8-K (and amendment thereto on
Form 8-K/A) dated July 1, 1998 (relating to the acquisition of Naporano
Iron & Metal Co. and including historical and pro forma financial
statements).
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the Expiration Date shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
herein by reference shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein of in any other
subsequently filed document which also is or is deemed to be incorporated by
reference
iv
<PAGE> 7
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified and superseded, to
constitute a part of this Prospectus.
The making of a modifying or superseding statement shall not be deemed an
admission that the modified or superseded statement, when made, constituted a
misrepresentation, as untrue statement of material fact or an omission to state
a material fact that is required to be stated or that is necessary to make a
statement not misleading in light of the circumstances in which it was made.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, on the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated by
reference in this Prospectus, other than exhibits to such documents. Written or
telephonic requests for such documents should be directed to Metal Management,
Inc., 500 North Dearborn Street, Suite 405, Chicago, Illinois 60610, Attention:
David A. Carpenter, Vice President, General Counsel and Secretary (telephone
number: 312-645-0700). In order to assure timely delivery of the documents, any
request should be made not later than five business days prior to the Expiration
Date.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus under "Prospectus Summary,"
in addition to certain statements contained elsewhere in this Prospectus,
including statements qualified by the words "believes", "intends",
"anticipates", "expects" and words of similar import, are "forward-looking
statements" made in reliance upon the Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995, and are thus prospective. As such,
they involve risks and uncertainties and are subject to change at any time.
These statements reflect the Company's current expectations regarding the future
profitability of the Company and its subsidiaries and the benefits to be derived
from the Company's execution of its industry consolidation strategy. As
discussed in the Company's Annual Report on Form 10-K, filed June 23, 1998, some
of the factors which could affect the Company's performance include, among other
things; the effects of leverage on the Company, immediate and future capital
requirements, risk of dilution to existing shareholders, potential inability to
control growth or to successfully integrate acquired businesses, limited
operating history, cyclicality of the metals recycling industry, potential
inability to complete pending acquisitions, commodity price fluctuations,
compliance with environmental, health and safety and other regulatory
requirements applicable to the Company, potential environmental liability, risk
of deterioration in relations with labor unions, control by principal
stockholders and dependence on key management, dependence on suppliers of scrap
metals, concentration of customer risk, competition in the scrap metals
industry, availability of scrap alternatives, stock market volatility and year
2000 compliance. All such forward-looking statements are subject to such risks,
uncertainties and other factors that could cause actual results to differ
materially from future results expressed or implied by such forward-looking
statements. These and other risks, uncertainties and other factors are discussed
under the heading "Risk Factors." Holders of Notes are urged to carefully
consider such factors.
v
<PAGE> 8
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information, including the historical and
pro forma financial statements and the notes thereto, appearing elsewhere in
this Prospectus. Unless otherwise indicated, all references in this Prospectus
to "Metal Management" or the "Company" refer to Metal Management, Inc., a
Delaware corporation, and its direct and indirect consolidated subsidiaries.
Except where stated otherwise, references to the "Company" assume that the
Pending Acquisition (as defined herein) has not been consummated. See "--Pending
Acquisitions."
THE COMPANY
INTRODUCTION
Metal Management is one of the largest and fastest-growing full-service
metals recyclers in the United States, with 59 recycling facilities in 14
states. The Company is a leading consolidator in the metals recycling industry
and has achieved this position primarily through the implementation of its
national strategy of completing and integrating regional acquisitions. The
Company believes that its consolidation strategy will enhance the competitive
position and profitability of the operations that it acquires through improved
managerial and financial resources and increased economies of scale. Since
entering the recycling industry in April 1996, the Company has increased its
revenues from $65.2 million for the year ended March 31, 1997 to $479.7 million
for the year ended March 31, 1998. Pre-tax income from continuing operations
plus interest expense (including amortization of debt issuance costs),
depreciation and amortization, and excluding non-recurring expenses and other
non-operating income and expenses ("Adjusted EBITDA") has also increased from
$0.7 million for the year ended March 31, 1997 to $23.5 million for the year
ended March 31, 1998. On a pro forma basis, after giving effect to the Pro Forma
Operating Statement Acquisitions (as defined herein) and the merger with R&P
Holdings, Inc., the Company's revenues and Pro Forma Adjusted EBITDA (as defined
herein) for the year ended March 31, 1998 would have been $1.02 billion and
$43.0 million, respectively.
Metal Management is primarily engaged in the collection and processing of
ferrous and non-ferrous metals for resale to metals brokers, steel producers,
and producers and processors of other metals. The Company collects industrial
scrap and obsolete scrap, processes it into reusable forms and supplies the
recycled metals to its more than 800 customers, including mini-mills, integrated
steel mills, foundries and metals brokers. The Company believes that it provides
one of the most comprehensive offerings of both ferrous and non-ferrous scrap
metals in the industry. The Company's ferrous products primarily include
shredded, sheared, hot briquetted, cold briquetted and bundled scrap and broken
furnace iron. The Company also processes non-ferrous metals, including aluminum,
copper, stainless steel, brass, titanium and high-temperature alloys, using
similar techniques and through application of the Company's proprietary
technologies. For the year ended March 31, 1998, the Company sold approximately
3.1 million tons of ferrous scrap and approximately 178.1 million pounds of
non-ferrous scrap.
According to government sources, the total revenues generated in the metals
recycling industry in 1995 were approximately $19.3 billion. The Company
believes that the metals recycling industry has grown in recent years due in
part to the increased use of ferrous metals by mini-mill steel producers who
utilize electric arc furnace ("EAF") technology. The increase in domestic steel
EAF production from 14.9 million net tons (11.1% of total domestic steel
production) in 1966 to 46.4 million net tons (43.2% of total domestic steel
production) in 1997 has resulted in strong demand for processed ferrous scrap,
the primary raw material used in EAF production. The Company believes that
continued increases in EAF production will result in continued strong demand for
its ferrous metals. In addition, the Company believes that demand for processed
non-ferrous scrap will increase due to, among other things, the
industrialization of lesser developed countries and increased utilization of
aluminum and copper in the automotive industry.
The Company believes that there are over 3,000 independent metals recyclers
in North America. Because of the highly fragmented nature of the industry, the
Company believes that no single metals recycler has
1
<PAGE> 9
a significant share of the national processed scrap market, even though certain
recyclers may have a significant share of their local or regional market. The
metals recycling industry has recently begun to experience local market
consolidation similar to the consolidation that has occurred and continues to
occur within the municipal solid waste industry. This consolidation is due in
large part to increasing capital requirements resulting from more stringent
environmental and governmental regulations and the desire by owners of family-
operated recyclers to gain liquidity by selling their closely held businesses to
a publicly traded company.
The Company's objective is to continue to grow through targeted
acquisitions of scrap metals recyclers. The Company plans to continue to follow
its national strategy of regional-based acquisitions by acquiring larger "hub"
companies in major metropolitan or regional markets and complementing such
companies' operations and management with smaller "tuck-in" acquisitions. See
"--Business Strategy--Continue Regional-Based Acquisitions."
COMPANY STRENGTHS
Market Leadership in Major Metropolitan and Regional Markets. In executing
its acquisition strategy, the Company has focused on establishing a significant
presence in major metropolitan or regional markets, where sources of prime
industrial and obsolete scrap (i.e., automobiles and industrial equipment) are
more readily available and from where the Company believes it can better serve
its customers. As a result, the Company has become one of the leading metals
recyclers in the Chicago, Phoenix, Cleveland, Houston, Pittsburgh and Los
Angeles metropolitan markets.
Strong Operational Management. The Company believes that the scrap metals
recycling business is, and will continue to be, locally and regionally based. As
a result, Metal Management has adopted a philosophy of decentralized operational
management, which it believes promotes the continued successful management of
its acquired companies. In considering its core regional acquisitions, the
Company has targeted regional leaders in the scrap metals industry with proven
operational management capabilities. Following these acquisitions, the Company
has generally retained the services of the acquired companies' senior management
teams through the use of multi-year employment agreements and also provided
incentives for such managers to contribute to the growth and profitability of
the Company through the use of stock options and warrants.
Proven Integration Synergies. The Company believes that the operations of
its acquired companies have benefitted, and will continue to benefit, from
joining the Metal Management group of companies. The Company believes that the
metals recycling industry is becoming more capital-intensive and that production
efficiencies are best realized by, among other things, the purchase and
maintenance of sophisticated equipment (such as automobile shredders) and the
sharing of information concerning sources of raw scrap, production technologies
and customer needs. Accordingly, the Company believes that its regional "hub and
spoke" acquisition strategy has benefitted, and will continue to benefit, the
operations of its acquired companies by making available to such companies,
often for the first time, access to greater financial resources, complementary
regional management, purchasing strength in raw scrap and increased distribution
channels. As a further effort to identify synergies, the Company has created the
Office of the President, in which its senior management and regional managers
participate to provide a forum for the sharing of "best practices" and the
exchange of other ideas among the Company's regional operations.
Favorable Distribution Channels. The Company believes that many of its
facilities are situated in locations that afford the Company competitive
advantages in distribution efficiency, both in terms of cost and reliability.
The Company believes that water transportation is the most cost-effective manner
to ship scrap metals over long distances. A significant portion of the Company's
revenues are generated by operations that have direct or convenient access to
water or rail transportation. Such water or rail access significantly expands
the markets for the Company's products, particularly the markets for ferrous
scrap.
Broad Product Offering. The Company has a broad product offering in both
ferrous and non-ferrous metals. The Company's ferrous products include shredded,
sheared and hot briquetted, cold briquetted and bundled scrap and broken furnace
iron. The Company's non-ferrous products include aluminum, copper, stainless
steel and high temperature alloys. The Company believes it currently offers one
of the most comprehensive lines of products available within its markets. By
offering a broad range of products, the
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<PAGE> 10
Company's customers are able to purchase all of their scrap metal needs from one
supplier, thus reducing the administrative and logistical burden associated with
supporting multiple supplier relationships. In addition, the Company's size and
processing capabilities allow it to offer pre-packaged blends of scrap metals
that are immediately available for melting upon delivery to customers, thereby
eliminating the time and space required for customers to purchase and blend
various metals themselves to meet particular chemistry requirements. The Company
also continually seeks to develop and introduce new products. For example, the
Company has invested in sophisticated processing equipment capable of producing
the type of "clean" ferrous scrap that is increasingly demanded by companies
using EAF technology. This "clean" ferrous scrap, which contains fewer
contaminants such as lead, copper and other non-ferrous metals, commands a
premium over the prices charged for other ferrous products. The Company is
currently a significant supplier to companies such as Nucor Corporation, United
States Steel International, Inc., Inland Steel Industries Inc., North Star Steel
Co. and General Motors Corporation. By working with its major customers to
provide a reliable and broad product mix and applying the knowledge gained to
the rest of its business, the Company believes that it can better develop
mutually beneficial partnerships with all of its customers.
BUSINESS STRATEGY
Continue Regional-Based Acquisitions. The Company intends to continue to
grow by implementing its national strategy of completing and integrating
regional acquisitions. The Company's acquisition strategy is to acquire scrap
metals processors in large metropolitan or regional markets that will serve as
platform companies for subsequent "tuck-in" acquisitions of smaller metals
processors. The Company believes that the highly fragmented nature of the scrap
metals recycling industry offers significant opportunities for acquisitions that
meet these criteria and allows for the execution of its acquisition strategy. By
aggressively pursuing this consolidation strategy within the highly fragmented
and growing metals recycling industry, the Company believes that it can enhance
the competitive position and profitability of the operations that it acquires
through improved managerial and financial resources and increased economies of
scale. The Company also believes that the geographic diversity resulting from
the implementation of its acquisition strategy will reduce its vulnerability to
the dynamics of any particular local or regional market. Furthermore, the
Company believes that multi-regional and national steel manufacturers and other
customers for the Company's ferrous and non-ferrous scrap will increasingly
prefer to do business with processed scrap suppliers, such as Metal Management,
that can provide a dependable quantity and quality of processed scrap, as well
as a high degree of service.
Develop and Foster Mutually Beneficial Customer Relationships. The Company
believes that scrap metals recyclers have historically competed primarily on the
basis of price, seeking the highest possible price for processed scrap through
negotiation and attempting to sell more processed scrap when the market prices
for scrap are highest. The Company believes, however, that competing in such a
manner focuses on short-term gain at the expense of long-term profitability. The
Company's strategy, instead, focuses on establishing long-term customer
relationships. The Company believes that it can develop better relationships
with its customers by using its numerous processing facilities to provide them
with a consistent supply of high-quality processed scrap, thereby building
"partnership-type" relationships that the Company believes will be
longer-lasting, more stable and profit enhancing.
Maximize Inventory Turnover. In order to improve the efficiency and
profitability of its processing operations, the Company's business strategy is
to maximize the turnover of its scrap metals inventory, as opposed to collecting
scrap and holding it in speculation of higher unit prices. The Company believes
that this strategy of reducing cycle time serves to reduce exposure to price
fluctuations in the markets for scrap metals. The Company also believes that
this strategy is beneficial to customer relationships, because it allows
customers to depend on a reliable and steady supply of scrap metals that is not
subject to volume limitations during periods of changing prices.
Decentralized Management and Incentives. An important element of the
Company's acquisition strategy is to identify companies with strong, stable and
well-respected management. Metal Management recognizes that business practices
and strategies in the scrap metals industry differ, sometimes significantly,
among metropolitan and regional markets. As a result, the Company manages its
recycling operations on a
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<PAGE> 11
decentralized basis. To secure the continuity of strong local management, the
Company generally seeks to execute multi-year employment agreements with the
senior management of the "hub" acquisitions for each particular metropolitan or
regional market. In addition, the Company often pays a significant portion of
the purchase price for its acquisitions in restricted Common Stock and also
makes use of warrants and options to acquire Common Stock, resulting in the
Company's management having significant incentive to maximize the operating
performance of the Company's subsidiaries.
ACQUISITION STRATEGY
Since entering the scrap metals recycling business in April 1996, the
Company has consummated 23 acquisitions (hereinafter, the "Completed
Acquisitions") and now operates recycling facilities at 59 locations in 14
states. In pursuing its acquisition strategy, the Company seeks to identify
companies that meet certain acquisition criteria which the Company believes
suggest a strong potential for future growth.
The Company seeks to identify companies that (i) have a successful
operating history; (ii) are located in major metropolitan or regional markets
(population of 1,000,000 or more) and present synergies with existing or planned
acquisition candidates in a particular region; (iii) offer strong management
which can be retained following an acquisition; (iv) complement the Company's
regional and national customer base; (v) have a history of high integrity in
their management and operations; (vi) have convenient access to water or rail
transportation facilities; (vii) do not present serious environmental or
regulatory issues; and (viii) either have existing shredder operations or the
ability to support the installation of such equipment. While a target company
does not have to meet all of the acquisition criteria, it is important that a
metropolitan or regional "hub" company meet most of the criteria and that other
acquisition candidates that can complement the operations of the "hub" company
are identified within a region.
Once an acquisition candidate has been identified, the Company conducts
financial, legal and operational due diligence investigations of the target
company. This due diligence investigation will generally include an
environmental site assessment and a review of the target company's environmental
compliance procedures and practices, a review of the legal and regulatory
affairs of the target and a review of the target company's financial books and
records, including an independent audit of its financial statements, in certain
cases.
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<PAGE> 12
Set forth below is a table identifying the recycling operations acquired by
the Company since April 1996:
<TABLE>
<CAPTION>
LOCATION OF
PRINCIPAL PROCESSING DATE OF
NAME FACILITIES ACQUISITION
---- ------------------------------ -------------
<S> <C> <C>
EMCO Recycling Corp. ("EMCO Recycling")(1) Phoenix, Arizona April 1996
California Metals Recycling, Inc., Firma, Inc., Firma Los Angeles County, California January 1997
Plastic Co., Inc., MacLeod Metals Co. and Trojan
Trading Co. (collectively, the "MacLeod Companies")
HouTex Metals Company, Inc. ("HouTex") Houston, Texas January 1997
Reserve Iron & Metal Limited Partnership ("Reserve Iron Cleveland, Ohio May 1997
& Metal")(2) Chicago, Illinois
Attalla, Alabama
Briquetting Corporation of America, Ferrex Trading Bryan, Ohio June 1997
Corporation, The Isaac Corporation and Paulding Cleveland, Ohio
Recycling, Inc. (collectively, the "Isaac Group") Dayton, Ohio
Defiance, Ohio
Proler Southwest Inc. and Proler Steelworks L.L.C. Houston, Texas August 1997
(collectively, "Proler Southwest") Jackson, Mississippi
Cozzi Iron & Metal, Inc. ("Cozzi Iron & Metal")(3) Chicago, Illinois December 1997
East Chicago, Indiana
Pittsburgh, Pennsylvania
Memphis, Tennessee
Kankakee Scrap Corporation ("Kankakee Scrap") Kankakee, Illinois December 1997
Houston Compressed Steel Corp. ("Houston Compressed") Houston, Texas January 1998
Aerospace Metals, Inc. ("Aerospace") Hartford, Connecticut January 1998
Salt River Recycling, L.L.C. ("Salt River")(4) Phoenix, Arizona January 1998
Accurate Iron & Metal Co. ("Accurate Iron & Metal")(5) Franklin Park, Illinois February 1998
Superior Forge, Inc. ("Superior Forge") Huntington Beach, California March 1998
Ellis Metals, Inc. ("Ellis Metals") Tucson, Arizona March 1998
Midwest Industrial Metals Corp. ("Midwest Chicago, Illinois April 1998
Industrial")(5)
138 Scrap, Inc. and Katrick, Inc. ("138 Scrap") Riverdale, Illinois May 1998
R&P Holdings, Inc., Charles Bluestone Company and R&P Elizabeth, Pennsylvania May 1998
Real Estate, Inc. (collectively, "Bluestone")(6) Sharon, Pennsylvania
Goldin Industries, Inc., Goldin Industries Louisiana, Gulfport, Mississippi June 1998
Inc. and Goldin of Alabama, Inc. (collectively, the Mobile, Alabama
"Goldin Companies")(7) Harvey, Louisiana
Newell Recycling of Denver, Inc. and Newell Recycling of Denver, Colorado June 1998
Utah, L.L.C. (collectively, "Newell Recycling")(8) Colorado Springs, Colorado
Naporano Iron & Metal, Co. and Nimco Shredding Co. Newark, New Jersey July 1998
(collectively, "Naporano")
Michael Schiavone & Sons, Inc. and related entities North Haven, Connecticut July 1998
(collectively, "Schiavone") Torrington, Connecticut
M. Kimerling & Sons, Inc. ("Kimerling") Birmingham, Alabama July 1988
Nicroloy Company ("Nicroloy") Heidelberg, Pennsylvania July 1998
</TABLE>
- ---------------
(1) On March 12, 1998, EMCO Recycling changed its legal name to Metal Management
Arizona, Inc. ("Metal Management Arizona").
(2) The Attalla, Alabama recycling facility is operated through a joint venture
in which the Company's subsidiary, Reserve Iron & Metal, holds a 50%
interest.
(3) The Memphis, Tennessee recycling facility is operated through a joint
venture in which the Company's subsidiary, Cozzi Iron & Metal, holds a 50%
interest.
(4) At the time it was acquired by the Company, Cozzi Iron & Metal held a 50%
joint venture interest in Salt River.
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<PAGE> 13
(5) The Company purchased substantially all of the assets of Accurate Iron &
Metal and certain of the assets of Midwest Industrial, both of which have
been integrated into the Company's Cozzi Iron & Metal operations.
(6) The Sharon, Pennsylvania recycling facility is operated through a joint
venture in which the Company's subsidiary, Bluestone, holds a 50% interest.
(7) A new subsidiary, Metal Management Gulf Coast, Inc. ("Metal Management Gulf
Coast"), was formed with which the Company purchased substantially all of
the scrap metal assets of the Goldin Companies.
(8) A new subsidiary, Newell Recycling West, Inc. ("Newell Recycling West") was
formed and merged with Newell Recycling of Denver, Inc. (with Newell
Recycling West surviving the merger). Concurrently therewith, Newell
Recycling West purchased substantially all of the scrap metal assets of
Newell Recycling of Utah, L.L.C.
PENDING ACQUISITIONS
In addition to the Completed Acquisitions, the Company is in various stages
of negotiation to acquire a number of additional scrap metals recycling and
related operations. As of the date of this Prospectus, the Company has publicly
announced a binding letter of intent to acquire the recycling operations of
Universal Scrap Metal, Inc. ("Universal"), a Chicago-based metals recycler (the
"Pending Acquisition").
The purchase price for the Pending Acquisition is expected to be satisfied
through the issuance of 830,000 shares of Common Stock. There can be no
assurance, however, that the Pending Acquisition will be successfully completed
by the Company.
6
<PAGE> 14
THE EXCHANGE OFFER
Securities Offered......... Up to $180,000,000 principal amount of 10% Senior
Subordinated Notes due 2008, which have been
registered under the Securities Act. The terms of
the New Notes and the Old Notes are identical in
all material respects, except for certain transfer
restrictions, additional interest provisions and
certain other registration rights relating to the
Old Notes described below under "Description of the
New Notes."
The Exchange Offer......... The Company is offering, upon the terms and subject
to the conditions set forth herein and in the
accompanying Letter of Transmittal, to exchange
$1,000 in principal amount of the New Notes for
each $1,000 in principal amount of the outstanding
Old Notes. The issuance of the New Notes is
intended to satisfy obligations of the Company
contained in the Registration Rights Agreement. As
of the date of this Prospectus, $180 million in
aggregate principal amount of the Old Notes is
outstanding. The Company will issue the New Notes
to holders that validly tender Old Notes on or
promptly after the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer."
Expiration Date............ 5:00 p.m., New York City time, on , 1998,
as the same may be extended. See "The Exchange
Offer--Expiration Date; Extensions; Amendments."
Conditions of the Exchange
Offer; Extensions;
Amendments................. The Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being
tendered for exchange. However, the Exchange Offer
is subject to certain customary conditions and to
the terms and provisions of the Registration Rights
Agreement. The Company expressly reserves the
right, in its sole and absolute discretion, (i) to
delay accepting any Old Notes, (ii) to extend the
Exchange Offer, (iii) if any of the conditions set
forth under "The Exchange Offer --Conditions of the
Exchange Offer" shall not have been satisfied, to
terminate the Exchange Offer, by giving oral or
written notice of such delay, extension, or
termination to the Exchange Agent and (iv) to waive
any condition or otherwise amend the terms of the
Exchange Offer in any manner. If the Exchange Offer
is amended in a manner determined by the Company to
constitute a material change, the Company will
promptly disclose such amendments by means of a
prospectus supplement that will be distributed to
the registered holders of the Old Notes. See "The
Exchange Offer--Expiration Date; Extensions;
Amendments" and "The Exchange Offer--Conditions of
the Exchange Offer."
Accrued Interest on the Old
Notes...................... Holders whose Old Notes are accepted for exchange
will have the right to receive interest accrued
thereon from the date of their original issuance or
the last interest payment date, as applicable, to,
but not including, the date of issuance of the New
Notes, such interest to be payable with the first
interest payment on the New Notes. Interest on the
Old Notes accepted for exchange will cease to
accrue on the day prior to the issuance of the New
Notes.
7
<PAGE> 15
Procedures for Tendering
Old Notes; Special
Procedures for Beneficial
Owners..................... Except as otherwise provided below, each holder
desiring to accept the Exchange Offer must transmit
a properly completed and duly executed Letter of
Transmittal, including all other documents required
by the Letter of Transmittal, to the Exchange Agent
(as defined herein) at the address set forth in
"The Exchange Offer--The Exchange Agent;
Assistance" prior to 5:00 p.m., New York City time,
on the Expiration Date. In addition, either (i)
certificates of such Old Notes must be received by
the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of
book-entry transfer of such Old Notes, if such
procedure is available, into the Exchange Agent's
account at DTC pursuant to the procedure for
book-entry transfer described below, must be
received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply
with the guaranteed delivery procedures described
below. Any Beneficial Owner (as defined herein) of
the Old Notes whose Old Notes are registered in the
name of a nominee, such as a broker, dealer,
commercial bank or trust company, and who wishes to
tender Old Notes in the Exchange Offer, should
instruct such entity or person to promptly tender
on such Beneficial Owner's behalf. If such
Beneficial Owner wishes to tender on such
Beneficial Owner's own behalf, such Beneficial
Owner must, prior to completing and executing the
Letter of Transmittal and delivering the Old Notes,
make appropriate arrangement to either register
ownership of the Old Notes in such Beneficial
Owner's name or obtain a properly completed bond
power from the registered holder. By executing the
Letter of Transmittal, each holder will represent
to the Company that, among other things, (i) the
holder is not an "affiliate" of the Company as
defined in Rule 405 of the Securities Act, (ii) the
holder is not a broker-dealer that acquired Old
Notes directly from the Company in order to resell
them pursuant to Rule 144A of the Securities Act or
any other available exemption under the Securities
Act, (iii) the holder will acquire the New Notes in
the ordinary course of business and (iv) the holder
is not participating, and does not intend to
participate, and has no arrangement or
understanding with any person to participate, in
the distribution of the New Notes. Any Old Notes
not accepted for exchange for any reason will be
returned, without expense to the tendering holder
thereof, as promptly as practicable after the
Expiration Date. See "The Exchange
Offer --Procedures for Tendering Old Notes."
Guaranteed Delivery
Procedures................. Holders of Old Notes who wish to tender their Old
Notes and (i) whose Old Notes are not immediately
available or (ii) who cannot deliver their Old
Notes, the Letter of Transmittal or any other
documents required by the Letter of Transmittal to
the Exchange Agent on or prior to the Expiration
Date or (iii) who cannot complete the procedures
for delivery by book-entry transfer on a timely
basis, may tender their Old Notes according to the
guaranteed delivery procedures set forth in the
Letter of Transmittal. See "The Exchange
Offer--Guaranteed Delivery Procedures."
Acceptance of Old Notes and
Delivery of New Notes...... Upon satisfaction or waiver of all conditions of
the Exchange Offer, the Company will accept any and
all Old Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the
8
<PAGE> 16
Expiration Date. The New Notes issued pursuant to
the Exchange Offer will be delivered promptly after
acceptance of the Old Notes. See "The Exchange
Offer--Acceptance of Old Notes for Exchange;
Delivery of New Notes."
Withdrawal Rights.......... Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
Expiration Date. See "The Exchange
Offer--Withdrawal Rights."
The Exchange Agent......... [ ] is the exchange agent (in
such capacity, the "Exchange Agent"). The address
and telephone number of the Exchange Agent are set
forth in "The Exchange Offer--The Exchange Agent;
Assistance."
Fees and Expenses.......... All expenses incident to the Company's consummation
of the Exchange Offer and compliance with the
Registration Rights Agreement will be borne by the
Company. The Company will also pay certain transfer
taxes, if applicable, to the Exchange Offer. See
"The Exchange Offer --Fees and Expenses."
Resales of New Notes....... The Company is making the Exchange Offer in
reliance on the position of the staff of the
Commission as set forth in certain interpretive
letters addressed to third parties in other
transactions. However, the Company has not sought
its own interpretive letter and there can be no
assurance that the staff of the Commission would
make a similar determination with respect to the
Exchange Offer as it has in such interpretive
letters to third parties. Based on these
interpretations by the staff of the Commission, the
Company believes that New Notes issued pursuant to
the Exchange Offer to a holder in exchange for Old
Notes may be offered for resale, resold and
otherwise transferred by a holder (other than (i) a
broker-dealer who purchased Old Notes directly from
the Company for resale pursuant to Rule 144A or any
other available exemption under the Securities Act,
(ii) an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act, or
(iii) a broker-dealer who acquired the Old Notes as
a result of market-making or other trading
activities) without further compliance with the
registration and prospectus delivery provisions of
the Securities Act; provided, that such holder is
acquiring the New Notes in the ordinary course of
business and is not participating, and has no
arrangement or understanding with any person to
participate, in a distribution (within the meaning
of the Securities Act) of the New Notes. Holders
wishing to accept the Exchange Offer must represent
to the Company, as required by the Registration
Rights Agreement, that such conditions have been
met. Any holder of Old Notes who is not able to
rely on the interpretations of the staff of the
Commission set forth in the above-mentioned
interpretive letters must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any sale
or other transfer of such Old Notes unless such
sale is made pursuant to an exemption from such
requirements. See "The Exchange Offer--Resales of
New Notes."
Federal Income Tax
Consequences............... The issuance of the New Notes to holders pursuant
to the terms set forth in this Prospectus will not
constitute an exchange for federal income tax
purposes. Consequently, no gain or loss would be
recognized by holders
9
<PAGE> 17
upon receipt of the New Notes. See "Certain United
States Federal Tax Consequences."
Use of Proceeds............ There will be no proceeds to the Company from the
Exchange Offer. See "Use of Proceeds."
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes described in the legend thereon. In general, the
Old Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. See "Risk Factors--Restrictions on Resale" and "The Exchange
Offer--Consequences of Failure to Exchange."
10
<PAGE> 18
DESCRIPTION OF THE NEW NOTES
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that (i) the New Notes
have been registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof, (ii) holders of New Notes will not be
entitled to any Liquidated Damages pursuant to certain circumstances under the
terms of the Registration Rights Agreement and (iii) holders of New Notes will
not be entitled to certain other rights under the Registration Rights Agreement.
The New Notes will evidence the same debt as the Old Notes and will be entitled
to the benefits of the Indenture. See "The Exchange Offer--Termination of
Certain Rights," "The Exchange Offer --Procedures for Tendering Old Notes" and
"Description of the New Notes."
Securities Offered......... Up to $180,000,000 principal amount of the
Company's 10% Senior Subordinated Notes due 2008,
which have been registered under the Securities
Act.
Maturity Date.............. May 15, 2008.
Interest................... 10% calculated on the basis of a 360-day year
consisting of twelve 30-day months.
Interest Payment Dates..... Interest on the New Notes will be payable
semi-annually in arrears on May 15 and November 15
of each year, commencing November 15, 1998.
Ranking.................... The New Notes will be general, unsecured
obligations of the Company, will be subordinated in
right of payment to all Senior Debt of the Company,
will rank pari passu with all senior subordinated
debt of the Company, and will be senior in right of
payment to all existing and future Subordinated
Indebtedness of the Company, if any. As of March
31, 1998, on a pro forma basis after giving effect
to the Offering, the application of the net
proceeds therefrom and certain other transactions
described in the notes to the Pro Forma Financial
Data included herein, the Company would have had
$49.8 million of Senior Debt outstanding. The
Company has the ability to incur up to $250 million
of Senior Debt under the Senior Credit Facility,
subject to certain borrowing base limitations, with
such capacity under the Indenture being subject to
increase to up to $300 million as the Company's
borrowing base expands. See "Description of the
Senior Credit Facility," "Description of the New
Notes--Subordination" and "--Certain
Covenants--Incurrence of Indebtedness and Issuance
of Disqualified Stock."
Optional Redemption........ Except as described below, the New Notes are not
redeemable at the Company's option prior to May 15,
2003. From and after May 15, 2003, the New Notes
will be subject to redemption at the option of the
Company, in whole or in part, at the redemption
prices set forth herein, plus accrued and unpaid
interest and Liquidated Damages, if any, to the
date of redemption.
In addition, prior to May 15, 2001, up to 35% of
the aggregate principal amount of Notes will be
redeemable at the option of the Company from any
net proceeds of one or more sales of Common Stock,
at a price of 110% of the principal amount of the
Notes, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of
redemption; provided that at least 65% of the
original aggregate principal amount of Notes
remains outstanding immediately after each such
redemption; and provided, further, that any such
redemption shall occur within 60 days of
11
<PAGE> 19
the date of the closing of the corresponding sale
of Common Stock. See "Description of the New
Notes--Optional Redemption".
Change of Control.......... In the event of a Change of Control, Holders (as
defined herein) of the New Notes will have the
right to require the Company to repurchase their
New Notes, in whole or in part, at a price equal to
101% of the aggregate principal amount thereof,
plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of repurchase.
New Note Guarantees........ The Company's payment obligations under the New
Notes will be jointly and severally guaranteed on
an unsecured, senior subordinated basis (the
"Guarantees") by each of the Company's current and
certain future Restricted Subsidiaries. The
Guarantees will be subordinated to the obligations
of the Guarantors under the Senior Credit Facility
(as defined herein). See "Description of the New
Notes--Subsidiary Guarantees".
Certain Covenants.......... The Indenture governing the Notes (the "Indenture")
contains certain covenants that will, among other
things, limit the ability of the Company and its
Restricted Subsidiaries to incur additional
Indebtedness (as defined herein) and issue
Disqualified Stock (as defined herein), pay
dividends or distributions or make investments or
make certain other Restricted Payments (as defined
herein), enter into certain transactions with
affiliates, dispose of certain assets, incur liens
securing pari passu and Subordinated Indebtedness
of the Company, and engage in mergers and
consolidations. See "Description of the New Notes."
Registration Rights........ In the event that applicable law or Commission
policy does not permit the Company to effect the
Exchange Offer, or if certain holders of the Old
Notes are not permitted to participate in, or do
not receive the benefit of the Exchange Offer, the
Registration Rights Agreement provides that the
Company will use its best efforts to cause to
become effective a shelf registration statement
(the "Shelf Registration Statement") with respect
to the resale of the Old Notes and to keep such
Shelf Registration Statement effective until two
years after the Closing Date or such shorter period
ending when all the Old Notes have been sold
thereunder or cease to be outstanding. Liquidated
Damages with respect to the Old Notes are payable
under certain circumstances if the Company is not
in compliance with its obligations under the
Registration Rights Agreement. See "Description of
the New Notes--Registration Rights; Liquidated
Damages."
Absence of a Public
Market for the Notes....... The New Notes are new securities for which there is
currently no established trading market. Although
the Initial Purchasers have informed the Company
that they currently intend to make a market in the
New Notes, they are not obligated to do so and any
such market making may be discontinued at any time
without notice. Accordingly, there can be no
assurance as to the development or liquidity of any
market for the New Notes. The New Notes are
expected to be designated for trading in the PORTAL
market. The Company does not intend to apply for
listing of the New Notes on any securities exchange
or for quotation through the National Association
of Securities Dealers Automated Quotation System.
12
<PAGE> 20
For more detailed information regarding the terms of the New Notes and for
definitions of capitalized terms not otherwise defined, see "Description of the
New Notes."
RISK FACTORS
Holders of Old Notes should carefully consider all of the information set
forth in this Prospectus and, in particular, should evaluate the specific
factors set forth under "Risk Factors" for a discussion of certain risks
involved with an investment in the New Notes.
13
<PAGE> 21
RISK FACTORS
Holders of Old Notes should carefully consider, among other matters, the
following in connection with a decision to tender their Old Notes in the
Exchange Offer. The risk factors set forth below are generally applicable to the
Old Notes as well as the New Notes.
LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
The Company is highly leveraged. As of March 31, 1998, on a pro forma basis
after giving effect to the Offering, the application of the net proceeds
therefrom and certain other transactions described in the notes to the Pro Forma
Financial Data included herein, the Company would have had $49.8 million of
Senior Debt outstanding. Subject to certain restrictions, exceptions and
financial tests set forth in the Indenture and the Senior Credit Facility,
however, the Company may incur additional indebtedness in the future, including
up to $250 million of Senior Debt under the Senior Credit Facility, subject to
certain borrowing base limitations pursuant to which the Company's borrowing
base as of July 8, 1998 permitted aggregate borrowings under the Senior Credit
Facility of approximately $205 million. The degree to which the Company is
leveraged could have important consequences to the holders of the Notes,
including, but not limited to, the following: (i) a substantial portion of the
Company's cash flow from operations will be required to be dedicated to debt
service and will not be available to the Company for its operations; (ii) the
Company's ability to obtain additional financing in the future for acquisitions,
capital expenditures, working capital or general corporate purposes could be
limited; (iii) the Company will have increased vulnerability to adverse general
economic and scrap metals industry conditions; and (iv) the Company may be
vulnerable to higher interest rates because borrowings under certain of its
credit arrangements are at variable rates of interest. The Company's ability to
make scheduled payments of principal, to pay interest on or to refinance its
indebtedness (including the Notes) depends on its future performance and
financial results, which, to a certain extent, are subject to general economic,
financial, competitive, legislative, regulatory and other factors beyond the
Company's control. There can be no assurance that the Company's business will
generate sufficient cash flow from operations or that future working capital
borrowings will be available in an amount sufficient to enable the Company to
service its indebtedness, including the Notes, or make necessary capital
expenditures. See "Description of the Senior Credit Facility" and "Description
of the New Notes".
SUBORDINATION
The payment of principal, premium, if any, and interest on the Notes will
be subordinated in right of payment to the prior payment in full of all existing
and future Senior Debt of the Company, including indebtedness incurred under the
Senior Credit Facility. As of March 31, 1998, on a pro forma basis after giving
effect to the Offering, the application of the net proceeds therefrom and
certain other transactions described in the notes to the Pro Forma Financial
Data included herein, the Company would have had $49.8 million of Senior Debt
outstanding. The Company has the ability to incur up to $250 million of Senior
Debt under the Senior Credit Facility, subject to certain borrowing base
limitations pursuant to which the Company's borrowing base as of July 8, 1998
permitted aggregate borrowings under the Senior Credit Facility of approximately
$205 million. Subject to certain restrictions, exceptions and financial tests
set forth in the Indenture and the Senior Credit Facility, the Company also may
incur additional indebtedness in the future that ranks prior to claims of
holders of the Notes. See "Description of the Senior Credit Facility" and
"Description of the New Notes--Certain Covenants--Incurrence of Indebtedness and
Issuance of Disqualified Stock".
The subordination provisions of the Indenture provide that, upon any
payment or distribution of the Company's assets to creditors upon any
dissolution, winding-up, insolvency, bankruptcy, receivership, liquidation,
reorganization or other proceedings relating to the Company, whether voluntary
or involuntary, holders of the Senior Debt are entitled to receive payment in
full of all amounts due thereon before the holders of Notes are entitled to
receive any payment with respect to the Notes. In the event of any default in
the payment of certain Senior Debt, no payment with respect to the Notes may be
made by the Company unless and until such default has been cured or waived. See
"Description of the New Notes--Subordination".
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RESTRICTIONS IMPOSED BY INDEBTEDNESS
The Senior Credit Facility and the Indenture contain covenants that, among
other things and subject to certain exceptions, restrict the ability of the
Company to incur additional indebtedness, pay dividends, prepay subordinated
indebtedness, dispose of certain assets, create liens and make certain
investments or acquisitions, and otherwise restrict corporate activities. In
addition, under the Senior Credit Facility, the Company is required to satisfy
specified financial covenants, including an interest coverage ratio and ratio of
capital expenditures to consolidated revenues. The ability of the Company to
comply with such provisions may be affected by general economic conditions and
other events beyond the Company's control. The breach of any of these covenants
could result in a default under the Senior Credit Facility. In the event of any
such default, depending on the actions taken by the lenders under the Senior
Credit Facility, such lenders could elect to declare all amounts borrowed under
the Senior Credit Facility, together with accrued interest, to be due and
payable. A default under the Senior Credit Facility or the instruments governing
the Company's other indebtedness could constitute a cross-default under the
Indenture and any instruments governing the Company's other indebtedness, and a
default under the Indenture could constitute a cross-default under the Senior
Credit Facility and any instruments governing the Company's other indebtedness.
See "Description of the Senior Credit Facility" and "Description of the New
Notes".
POTENTIAL INABILITY TO CONTROL OR MANAGE GROWTH OR TO SUCCESSFULLY INTEGRATE
ACQUIRED BUSINESSES
The Company intends to continue to actively pursue mergers and acquisitions
in the scrap metals recycling industry. There can be no assurance that the
Company will be successful in acquiring other entities or that it will be able
to effectively manage these acquired entities. The Company's ability to achieve
its expansion objectives and to manage its growth effectively depends on a
variety of factors, including the ability to identify appropriate acquisition
targets and to negotiate acceptable terms for their acquisition, the integration
of new businesses into the Company's operations, the achievement of cost savings
and the availability of capital. The inability to control or manage growth
effectively or to successfully integrate new businesses into the Company's
operations would have a material adverse effect on the Company's results of
operations and financial condition. Depending on the nature and size of these
transactions, if any, the Company may experience working capital and liquidity
shortages. There can be no assurance that additional financing will be available
on terms and conditions acceptable to the Company, if at all.
LIMITED OPERATING HISTORY; HISTORY OF OPERATING LOSSES
The Company has only recently entered the scrap metals recycling industry.
Accordingly, past financial performance should not be considered as a reliable
indicator of future performance, and historical trends should not be used to
anticipate results or trends in future periods. Due to the limited experience of
management in effecting a consolidation strategy on the scale being pursued by
the Company, there can be no assurance that the Company will be able to
successfully effect its consolidation strategy, even if the Company is able to
acquire other entities on acceptable terms and conditions. In addition, none of
the Company's existing subsidiaries has, and none of the Pending Acquisitions
have, experience operating as a subsidiary of a public holding company subject
to formal accounting and reporting requirements. The Company will be required to
continue to devote significant management time and capital to enhance
information systems and to improve and monitor internal controls, as well as to
recruit managers with appropriate skills to insure the timeliness and accuracy
of financial reports. The success of the consolidation strategy depends in part
on the ability of the Company's management to oversee diverse operations and to
successfully integrate processing, marketing and other resources.
In addition, the Company's EMCO Recycling (now Metal Management Arizona)
subsidiary has incurred operating losses and required capital infusions since
its acquisition in April 1996. There can be no assurance that the Company will
not be required to provide additional funding to Metal Management Arizona.
Further, there can be no assurance that existing or future subsidiaries will not
require similar infusions or that the Company will be able to provide such
fundings if needed. The need to provide this funding or its inability to do so
could have a material adverse effect on the Company's results of operations or
financial condition.
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CYCLICALITY OF THE METALS RECYCLING INDUSTRY
The operating results of the scrap metals recycling industry in general,
and the Company's operations specifically, are highly cyclical in nature as they
tend to reflect and be amplified by general economic conditions. Historically,
in periods of national recession or periods of minimal economic growth, the
operations of scrap metals recycling companies have been materially and
adversely affected. For example, during recessions or periods of minimal
economic growth, the automobile and the construction industries typically
experience major cutbacks in production, resulting in decreased demand for
steel, copper and aluminum and significant fluctuations in demand and pricing
for the Company's products. Future economic downturns in the national economy
would likely materially and adversely affect the Company's results of operations
and financial condition. The ability of the Company to withstand significant
economic downturns in the future will depend in part on the level of the
Company's capital and liquidity.
POTENTIAL INABILITY TO COMPLETE ACQUISITIONS
The Company engages in discussions with third parties regarding potential
acquisitions of companies or businesses in the metals recycling industry. If the
parties are able to agree generally on the nature, terms and conditions of a
transaction, a letter of intent is typically prepared to reflect this
understanding. In many cases, these letters of intent are structured as "binding
letters of intent" to purchase the business, although each such letter of intent
is still generally subject to a number of terms and conditions, including but
not limited to negotiation and execution of definitive purchase agreements. In
addition, each potential acquisition may be subject to additional contingencies
specific to that acquisition. There can be no assurance that any such potential
acquisition will result in the execution of a definitive agreement or that such
acquisition will be completed on terms and conditions acceptable to the Company.
COMMODITY PRICE RISK
Although the Company has a policy of turning over its inventory of raw or
processed scrap metals as rapidly as possible, the Company is exposed to
commodity price risk during the period that it has title to products that are
held in inventory for processing and/or resale. Prices of commodities can be
volatile due to numerous factors beyond the Company's control, including general
economic conditions, labor costs, competition, availability of scrap metal
substitutes, import duties, tariffs and currency exchange rates. In an
increasing price environment, competitive conditions may limit the Company's
ability to pass on price increases to its customers. In a decreasing price
environment, the Company may not have the ability to fully recoup the cost of
raw scrap it processes and sells to its customers. The lack of long-term
purchase agreements with the Company's significant customers also may exacerbate
this risk.
COMPREHENSIVE REGULATORY REQUIREMENTS
The Company is subject to significant government regulation, including
stringent environmental laws and regulations. Among other things, these laws and
regulations impose comprehensive local, state, federal, foreign and
supranational statutory and regulatory requirements concerning, among other
matters, the treatment, acceptance, identification, storage, handling,
transportation and disposal of industrial by-products, hazardous and solid waste
materials, waste water, stormwater effluent, air emissions, soil contamination,
surface and groundwater pollution, employee health and safety, operating permit
standards, monitoring and spill containment requirements, zoning, and land use,
among others. Various laws and regulations set prohibitions or limits on the
release of contaminants into the environment. Such laws and regulations also
require permits to be obtained and manifests to be completed and delivered in
connection with any shipment of prescribed materials so that the movement and
disposal of such material can be traced and the persons responsible for any
mishandling of such material can be identified. This regulatory framework
imposes significant compliance burdens, costs and risks on the Company.
Violation of such laws and regulations may give rise to significant liability to
the Company, including fines, damages, fees and expenses.
Releases of certain industrial by-products and waste materials are subject
to particular laws and regulations. Although the specific provisions of laws and
regulations related to such releases vary among
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jurisdictions, such laws and regulations typically require that the relevant
authorities be notified promptly, that the release be cleaned up promptly, and
that remedial action be taken by the responsible party and/or owner of the site
to restore the environment to levels protective of human health and the
environment. Generally, the governmental authorities are empowered to act to
clean up and remediate releases and environmental damage and to charge the costs
of such cleanup to one or more of the owners of the property, the person
responsible for the spill, the generator of the contaminant and certain other
parties or to direct the responsible party to take such action. These
authorities may also impose a tax or other liens to secure such parties'
reimbursement obligations. Environmental laws and regulations impose strict
operational requirements on the performance of certain aspects of hazardous or
toxic substance remediation. These requirements specify complex methods for
identification, monitoring, storage, treatment and disposal of waste materials
managed during a project. Failure to meet these requirements could result in
substantial fines and other penalties.
Environmental legislation and regulations have changed rapidly in recent
years, and it is likely that the Company will be subject to even more stringent
environmental standards in the future. For example, the ultimate effect of the
regulations to be implemented under the Clean Air Act Amendments of 1990 (the
"Clean Air Act"), and the actual amount of any capital expenditures required
thereby, will depend on how the Clean Air Act is interpreted and implemented
pursuant to regulations that are currently being developed and on additional
factors such as the evolution of environmental control technologies and the
economic viability of these technologies. For these reasons, future capital
expenditures for environmental control facilities cannot be predicted with
accuracy; however, one may expect that environmental control standards will
become increasingly stringent and that the expenditures necessary to comply with
them could increase substantially.
Local, state, federal, foreign and supranational governments and agencies
have also from time to time proposed or adopted other types of laws, regulations
or initiatives with respect to the scrap metals recycling industry, including
laws, regulations and initiatives intended to ban or restrict the intrastate,
interstate or international shipment of wastes, to impose higher taxes or fees
on certain shipments of waste, or to classify or reclassify certain categories
of non-hazardous wastes as hazardous. Certain local, state, federal, foreign and
international governments and agencies have promulgated "flow control" or other
regulations, which attempt to require that all waste (or certain types of waste)
generated within the jurisdiction in question must go to certain disposal sites.
Due to the complexity of regulation of the industry and to public and political
pressure, implementation of existing or future laws, regulations or initiatives
by different levels of governments may be inconsistent and difficult to foresee.
The Company requires, and must comply with, various permits and licenses to
conduct its operations. Government agencies continually monitor compliance with
permits and licenses and the Company's facilities are subject to periodic
unannounced inspection by local, state and federal authorities. Violations of
any permit or license, if not remedied, could result in the Company incurring
substantial fines, suspension of operations or closure of a site.
Governmental authorities have a wide variety of powerful administrative
enforcement actions and remedial orders available to them to cause compliance
with environmental laws or to remedy or punish violations of such laws. Such
orders may be directed to various parties, including present or former owners or
operators of the concerned sites, or parties that have or had control over the
sites. In certain instances, fines and treble damages may be imposed. In the
event that administrative actions fail to cure a perceived problem or where the
relevant regulatory agency so desires, an injunction or temporary restraining
order or damages may be sought in a court proceeding.
Some laws also give private parties the right, in addition to existing
common laws claims, to file claims for injunctive relief or damages against the
owners or operators of the site. Public interest groups, local citizens, local
municipalities and other persons or organizations may have a right to seek
judicial relief for purported violations of law or releases of pollutants into
the environment. In some jurisdictions, recourse to the courts by individuals
under common law principles such as trespass or nuisance have been or may be
enhanced by legislation providing members of the public with statutory rights of
action to protect the environment. In such cases, even if a scrap metals
recycling facility is operated in full compliance with applicable laws and
regulations, local citizens and other persons and organizations may seek
compensation for damages allegedly
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caused by the operation of the facility. In some cases, the operation of scrap
metals recycling facilities is subjected to heightened public scrutiny because
of residential or other non-industrial property uses that have developed around
such facilities. So-called "Not In My Backyard" ("NIMBY") grass roots community
opposition to such facilities can materially interfere with such facilities'
on-going operations and growth.
The Company believes that, with heightened legal, political and citizen
awareness and concerns, all companies in the scrap metals recycling industry may
be faced, in the normal course of operating their businesses, with fines and
penalties and the need to expend substantial funds for capital projects,
remedial work and operating activities, such as environmental contamination
monitoring, soil removal, groundwater treatment, creation of engineered
barriers, establishing institutional controls and related activities. Regulatory
or technological developments relating to the environment may require companies
engaged in the scrap metals recycling industry to modify, supplement or replace
equipment and facilities at costs which may be substantial. Because the scrap
metals recycling industry has the potential for discharge of materials into the
environment, a material portion of the capital expenditures by the Company is
expected to relate, directly or indirectly, to such equipment and facilities.
Moreover, it is possible that future developments, such as increasingly strict
requirements of environmental laws and regulations, and enforcement policies
will require even more significant capital investments in this regard.
POTENTIAL ENVIRONMENTAL LIABILITY
General. The Company is subject to potential liability and may also be
required from time to time to clean up or take certain remedial action with
regard to sites currently or formerly used in connection with its operations.
Furthermore, the Company may be required to pay for all or a portion of the
costs to clean up or remediate sites the Company never owned or on which it
never operated if it is found to have arranged for transportation, treatment or
disposal of pollutants or hazardous or toxic substances on or to such sites. The
Company also is subject to potential liability for environmental damage that its
assets or operations may cause nearby landowners, particularly as a result of
any contamination of drinking water sources or soil, including damage resulting
from conditions existing prior to the acquisition of such assets or operations.
Any substantial liability for environmental damage could materially adversely
affect the operating results and financial condition of the Company, and could
materially adversely affect the marketability and price of the Company's stock.
Incompleteness of Site Investigations. As part of its pre-transaction "due
diligence" investigations, the Company typically hires an environmental
consulting firm to conduct transaction screen reviews, or Phase I and/or Phase
II site assessments of the sites owned or leased by particular acquisition or
merger candidates (the "Pre-Transaction Site Assessments"). However, such
Pre-Transaction Site Assessments have not covered (and will not in the future
cover) all of the sites owned or leased by the companies which are acquired by
or merge with the Company. Moreover, such Pre-Transaction Site Assessments which
have occurred have not been designed or expected (and will not in the future be
designed or expected) to disclose all material contamination or liability that
may be present. For example, the Company does not include soil sampling or core
borings as a standard part of the Phase I portion of its Pre-Transaction Site
Assessments, even though such sampling and core borings might increase the
chances of finding contamination on a particular site. Failure to conduct soil
sampling and core borings on a particular site could result in the Company
failing to identify a seriously contaminated site prior to an acquisition or
merger, and could materially adversely affect the Company.
Likelihood of Contamination at Some Sites. Pre-Transaction Site
Assessments of the Company's current sites conducted by independent
environmental consulting firms have revealed that some soil, surface water
and/or groundwater contamination is likely at certain of these sites, and have
recommended that certain additional investigations and remediation be conducted.
Based upon its review of these reports, the Company believes that it is likely
that contamination exists at certain of its sites and that it is likely that
additional investigation, monitoring and remediation will be required at some of
the sites. Also based upon its review of these reports, the Company believes
that such contamination is likely to include, but not be limited to:
polychlorinated biphenyls (PCBs); total petroleum hydrocarbons; volatile organic
compounds (VOCs); antimony; arsenic; cadmium; copper, lead; mercury; silver;
zinc; waste oil; toluene; meta-and para-xylenes;
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baghouse dust; and/or aluminum dross. The ultimate extent of such contamination
cannot be stated with any certainty at this point, and there can be no assurance
that the cost of remediation will be immaterial, and it is not unlikely that the
Company will establish one or more reserves relating to environmental
remediation in the future. The existence of such contamination could result in
federal, state, local or private enforcement or cost recovery actions against
the Company, possibly resulting in disruption of Company operations, the need
for proactive remedial measures, and substantial fines, penalties, damages,
costs and expenses being imposed against the Company.
The Company expects to require future cash outlays as it incurs the actual
costs relating to the remediation of environmental liabilities. The incurrence
of the costs may have a material adverse effect on the Company's results of
operation and financial condition.
In connection with the acquisition of the assets of Aerospace, the Company
has identified certain on-site contamination which will require remediation in
accordance with a remediation plan prepared by an independent engineering firm.
The costs of such remediation will be paid by the seller of the assets of
Aerospace from an escrow fund established for such purpose out of the purchase
consideration paid by the Company for such assets.
Uncertain Costs of Environmental Compliance and Remediation. Many factors
affect the level of expenditures the Company will be required to make in the
future to comply with environmental requirements, including: (i) new local,
state and federal laws and regulations; (ii) the developing nature of
administrative standards promulgated under Superfund and other environmental
laws, and changing interpretations of such laws; (iii) uncertainty regarding
adequate control levels, testing and sampling procedures, new pollution control
technology and cost benefit analyses based on market conditions; (iv) the
incompleteness of information regarding the condition of certain sites; (v) the
lack of standards and information for use in the apportionment of remedial
responsibilities; (vi) the numerous choices and costs associated with diverse
technologies that may be used in remedial actions at such sites; (vii) the
possible ability to recover indemnification or contribution from third parties;
and (viii) the time periods over which eventual remediation may occur.
Therefore, the estimated costs, and the timing of such costs, for future
environmental compliance (capital expenditures or increases in operating costs
or other expenditures) and remediation cannot be accurately predicted and are
necessarily imprecise; however, such costs could be material to future quarterly
or annual results of operations of the Company. In addition, it is not possible
to predict whether or not such costs can be passed on to customers through price
increases.
Lack of Environmental Impairment Insurance. In general, the Company's
subsidiaries do not carry environmental impairment liability insurance. In
general, the Company's subsidiaries operate under general liability insurance
policies, which do not cover environmental damage. If one or more of the
Company's subsidiaries were to incur significant liability for environmental
damage not covered by environmental impairment insurance, or for other claims in
excess of its general liability insurance and umbrella coverage, the Company's
results of operations and financial condition could be materially adversely
affected.
Risks Associated With Certain By-Products. Although the majority of the
Company's metal products are currently exempt from applicable solid waste
regulations, the Company's scrap metals recycling operations produce significant
amounts of by-products. Heightened environmental risk is associated with certain
of these by-products. For example, certain of the Company's subsidiaries operate
shredders for which the primary feed materials are automobile hulks and obsolete
household appliances. Approximately 20% of the weight of an automobile hulk
consists of material ("shredder fluff") which remains after the segregation of
ferrous and saleable non-ferrous metals. Federal environmental regulations
require shredder fluff to pass a toxic leaching test to avoid classification as
a hazardous waste. The Company endeavors to have hazardous contaminants from the
feed material removed prior to shredding and, as a result, the Company believes
the shredder fluff generated is properly not considered a hazardous waste.
Should the laws, regulations or testing methods change with regard to shredder
fluff disposal, the Company may incur additional significant expenditures.
Potential Superfund Liability. (a) The Company's Reserve Iron & Metal,
Cozzi Iron & Metal and Kankakee Scrap subsidiaries have received notices from
the EPA that each such company and numerous other parties are considered PRPs
and may be obligated under Superfund to pay a portion of the cost of
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remedial investigation, feasibility studies and, ultimately, remediation to
correct alleged releases of hazardous substances at the Standard Scrap
Metal/Chicago International Exporting Removal Action Site. Superfund may impose
joint and several liability for the costs of remedial investigations and actions
on the entities that arranged for disposal of certain wastes, the waste
transporters that selected the disposal sites, and the owners and operators of
such sites. Responsible parties (or any one of them) may be required to bear all
of such costs regardless of fault, legality of the original disposal, or
ownership of the disposal site. Based upon their analysis of the situation, the
management of Reserve Iron & Metal, Cozzi Iron & Metal and Kankakee Scrap
currently do not expect their aggregate potential liability to be in excess of
$175,000. There can be no assurance, however, that their aggregate potential
liability may not be greater than $175,000.
(b) Cozzi Iron & Metal has received a notice from the EPA that Cozzi Iron
& Metal is a PRP under Superfund in regard to the site referred to as H&H
Recycling in Gary, Indiana. Cozzi Iron & Metal believes that a settlement may be
reached with respect to the H&H Recycling site which would result in a cost of
approximately $600,000. There can be no assurance that such potential liability
will not be material.
(c) Cozzi Iron & Metal was served in a private cost recovery action
alleging that Cozzi Iron & Metal is a PRP under Superfund in regard to the site
referred to as Gould Battery Site in Pennsylvania. Based upon its analysis of
the situation, including transaction documentation and indemnifications, Cozzi
Iron & Metal currently expects that its ultimate liability in regard to this
matter will be de minimus, but there can be no assurance this will be the case.
(d) Cozzi Iron & Metal has received a notice from the Port Refinery Joint
Defense Group that an entity known as Riverside Trading has been joined as a
defendant in a cost recovery action brought on behalf of the EPA under
Superfund. Cozzi Iron & Metal is the parent of a subsidiary that operates a
facility known as Riverside Iron & Steel. Based upon its analysis of the
situation, including transaction documentation, Cozzi Iron & Metal currently
expects that its ultimate liability in regard to this matter will be de minimus,
but there can be no assurance this will be the case.
(e) Bluestone has received notice from the EPA that it is a PRP under
Superfund in regard to the site referred to as the Metcoa Site in Pulaski,
Pennsylvania. Bluestone has entered into a settlement agreement with the EPA
regarding the cleanup of this site and has paid its initial settlement share
under the settlement agreement. However, the aggregate costs of cleaning up this
site are likely to exceed the original estimate of the aggregate cleanup costs
upon which the initial settlement amount paid by Bluestone was based. Based on
its current analysis of the situation, Bluestone expects that its share of the
additional cleanup costs at this site will not exceed $100,000. Although
Bluestone has reserved funds to address additional cleanup costs and has
obtained an indemnity from the previous owners of the company for costs which
exceed this reserve, there can be no assurance that Bluestone may not be
required to make additional expenditures in connection with this site.
(f) Bluestone has received notice from the EPA that it is a PRP under
Superfund in regard to the site referred to as the Jacks Creek/Sitkin Smelting
Facility Superfund Site in Mifflin County, Pennsylvania. Bluestone joined a PRP
group which has submitted a good faith offer to the EPA to enter into a consent
decree. Based on its analysis of the situation, Bluestone expects that its share
of the cleanup costs at this site will not exceed $250,000. Although Bluestone
has reserved funds to address such cleanup costs and has obtained an indemnity
from the previous owners of the company for costs which exceed this reserve,
there can be no assurance that Bluestone may not be required to make additional
expenditures in connection with this site.
Underground Storage Tanks. Underground storage tanks ("USTs") exist at
several of the Company's sites. USTs are subject to various federal, state and
local laws on their operation. In the event a release of regulated product has
occurred, the Company may incur significant costs to investigate and remediate
the release.
Recommendations of Environmental Consultants. Environmental consultants to
the Company have recommended that a variety of preventative and/or remedial
actions be undertaken, including: the sampling of soil, surface and groundwater
at its various facilities; the remediation of any existing contamination under
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applicable regulations; the development of Spill Prevention Control and
Countermeasure Plans ("SPCC"); the completion of certain actions in regard to
Storm Water Pollution Prevention Plans; the timely completion and/or filing of
certain annual reports and summaries required by governmental agencies; the
completion of Oil Discharge and Response Plans; and the remediation of certain
materials suspected of containing asbestos. If the Company fails to follow these
recommendations for an indefinite period of time, one or more of the sites
might, potentially, be subject to a governmental enforcement action, the
imposition of fines, penalties and damages, and/or require remediation at some
future time at a cost which may have an adverse effect on the Company's results
of operations and financial condition.
Compliance History. The Company has, in the past, been found not to be in
compliance with certain environmental laws and regulations, and has incurred
fines associated with such violations which have not been material in amount and
may in the future incur additional fines associated with such violations. The
Company has also paid a portion of the costs of certain remediation actions at
certain sites. No assurance can be given that material fines, penalties, damages
and expenses resulting from additional compliance issues and liabilities will
not be imposed on the Company in the future.
EMPLOYEE HEALTH AND SAFETY
The Company's operations are subject to regulation by federal, state and
local agencies responsible for employee health and safety, including the
Occupational Safety and Health Administration ("OSHA"). A total of four
accidental deaths of, and two serious accidental injuries to, employees have
occurred at the Company's Cozzi Iron & Metal, HouTex and Reserve Iron & Metal
subsidiaries during the past four years. Cozzi Iron & Metal and Reserve Iron &
Metal have been fined by OSHA in regard to such incidents. HouTex has also been
cited and fined by OSHA for alleged failure to establish energy control
procedures and employee training in regard to mobile shearing equipment. No
assurance can be given that potential liabilities of the Company in regard to
such deaths and injuries, or in regard to any future deaths of or injuries to
the Company's employees, will not be material.
LABOR RELATIONS
Many of the Company's active employees are represented by various labor
unions, including the Teamsters Union, the United Steel Workers Union and the
United Auto Workers. As the Company's (and its subsidiaries') agreements with
these unions expire, there can be no assurance that the Company will be able to
negotiate extensions or replacements thereof on terms favorable to the Company,
or at all, or that the Company will not experience strikes, lockouts or other
labor actions from time to time. There can be no assurance that new labor
agreements will be reached with the Company's unions as such labor contracts
expire. Any labor action resulting from the foregoing may have a material
adverse effect on the Company or its results of operations.
CONTROL BY PRINCIPAL STOCKHOLDERS; POTENTIAL CONFLICTS OF INTEREST
Pursuant to the stockholder's agreement (the "Stockholders Agreement"),
among Albert A. Cozzi, Frank J. Cozzi and Gregory P. Cozzi (the "Cozzi
Shareholders"), T. Benjamin Jennings and Gerard M. Jacobs (the "MTLM
Shareholders"), Samstock, L.L.C. ("Samstock") and the Company, the Company's
Board of Directors is comprised of five directors nominated by the Cozzi
Shareholders, five directors nominated by the MTLM Shareholders, and one
director nominated by Samstock. Further, the Cozzi Shareholders, the MTLM
Shareholders and Samstock own approximately 37% of the issued and outstanding
shares of Common Stock. As a result of their shareholdings, the Cozzi
Shareholders, the MTLM Shareholders and Samstock may be deemed to have effective
control over the affairs and management of the Company. There can be no
assurance that this influence will be used in a manner that is consistent with
the interests of the holders of the Notes.
The parties to the Stockholders Agreement also have agreed to vote for
proposals, if and when presented by the Company, to amend the Company's
organizational documents to require the approval of at least two-thirds of the
Board of Directors to take certain actions. If the Company's organizational
documents are
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amended to reflect these restrictions, and the Board of Directors cannot agree
on the Company's strategic direction, a minority of four dissenting directors
could prevent the Company from taking certain actions. Should the Board of
Directors be unable to act because a minority of dissenting directors prevents
it from taking a significant action, this impasse could have a material adverse
effect on the Company's results of operations and financial condition.
Certain decisions concerning the operations or financial structure of the
Company may present conflicts of interest between the Company's shareholders and
the holders of the Notes. For example, if the Company encounters financial
difficulties or is unable to pay its debts as they become due, the interests of
the Company's shareholders might conflict with those of the holders of the
Notes. The Company's shareholders also may have an interest in pursuing
acquisitions, divestitures, financings or other transactions that could enhance
their equity investment, even though such transactions might involve risk to the
holders of the Notes. Because the members of the Company's senior management
team are significant shareholders of the Company, any such conflict of interest
may be resolved in favor of the Company's shareholders to the detriment of the
holders of the Notes.
DEPENDENCE ON KEY PERSONNEL
The Company's operations to date have depended in large part on the skills
and efforts of its senior management team, including T. Benjamin Jennings, its
Chairman and Chief Development Officer, Gerard M. Jacobs, its Chief Executive
Officer, and Albert A. Cozzi, its President and Chief Operating Officer. In
addition, because the Company's senior management team (other than Mr. Cozzi)
has limited experience in the scrap metals recycling business, the Company
relies substantially on the experience of the management of its subsidiaries
with regard to day-to-day operations. While the Company has employment
agreements with Messrs. Jennings, Jacobs and Cozzi and certain members of its
management team at the subsidiary level, there can be no assurance that the
Company will be able to retain the services of any of the foregoing. The loss of
any member of its senior management team or a significant number of managers
could have a material adverse effect on the Company's efforts to manage and
integrate the Completed Acquisitions, any Pending Acquisitions or other
acquisitions and may also adversely impact the Company's ability to implement
its consolidation strategy.
DEPENDENCE ON SCRAP SUPPLIERS
The profitability of the Company's scrap recycling operations depends, in
part, on the availability of an adequate source of supply. The Company acquires
its scrap inventory from numerous sources. These suppliers generally are not
bound by long-term contracts and have no obligation to continue selling scrap
materials to the Company. If a substantial number of scrap suppliers cease
selling scrap metals to the Company, the Company's results of operations or
financial condition would be materially and adversely affected.
CONCENTRATION OF CUSTOMERS AND CREDIT RISK
The Company's ten largest customers represented approximately 40.6% of
consolidated net sales for the year ended March 31, 1998. Accounts receivable
balances from these customers represented approximately 36.1% of consolidated
accounts receivable at December 31, 1997. The loss of any one of the Company's
significant customers could adversely affect the Company's results of operations
or financial condition.
In connection with the sale of the Company's products, the Company
generally does not require collateral as security for customer receivables.
Certain of the Company's subsidiaries have significant balances owing from
customers that operate in cyclical industries and under leveraged conditions
that may impair the collectibility of these receivables. Failure to collect a
significant portion of amounts due on these receivables could have a material
adverse effect on the Company's results of operations or financial condition.
COMPETITION
The metals recycling industry is highly competitive and subject to
significant changes in overall market conditions. Certain of the Company's
competitors have substantially greater financial, marketing and other
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<PAGE> 30
resources. There can be no assurance that the Company will be able to obtain its
desired market share or compete effectively in its markets.
USE OF SCRAP ALTERNATIVES
The increased demand for scrap metals by the expanding mini-mill industry
has caused a tightness in the supply and demand balance for ferrous scrap. The
relative scarcity of ferrous scrap, particularly the "cleaner" grades, and its
high price have created opportunities for producers of alternatives to scrap
metals. Although these alternatives have not been a major factor in the industry
to date, there can be no assurance that the use of alternatives to scrap metals
will not proliferate if the prices for scrap metals continue to rise and if the
levels of available unprepared ferrous scrap continue to decrease. Any
significant increase in the use of scrap metals alternatives by current
consumers of processed scrap metals could have a material adverse effect on the
Company.
FRAUDULENT CONVEYANCE
The Company believes that the indebtedness represented by the Notes is
being incurred for proper purposes and in good faith and that, based on present
forecasts, asset valuations and other financial information, the Company is,
and, after the consummation of the Offering, the Company will be, solvent, will
have sufficient capital for carrying on its business and will be able to pay its
debts as they mature. Notwithstanding this belief, however, under federal or
state fraudulent transfer laws, if a court of competent jurisdiction in a suit
by an unpaid creditor or a representative of creditors (such as a trustee in
bankruptcy or a debtor-in-possession) were to find that the Company (i) issued
the Notes with the intent of hindering, delaying or defrauding current or future
creditors or (ii)(A) did not receive fair consideration (or reasonably
equivalent value) for incurring the indebtedness represented by the Notes and
(B) at the time of the incurrence of such indebtedness, the Company (1) was
insolvent or was rendered insolvent by reason of such incurrence, (2) was
engaged in a business or transaction for which its remaining assets constituted
unreasonably small capital or (3) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they matured, then such
court could, among other things, (i) void all or a portion of the Company's
obligations to the holders of the Notes, the effect of which would be that the
holders of the Notes may not be repaid in full, (ii) recover all or a portion of
the payments made to holders of the Notes and/or (iii) subordinate the Company's
obligations to the holders of the Notes to other existing and future
indebtedness of the Company to a greater extent than would otherwise be the
case, the effect of which would be to entitle such other creditors to be paid in
full before any payment could be made on the Notes. The measure of insolvency
for purposes of the foregoing will vary depending upon the law of the relevant
jurisdiction. Generally, however, a company would be considered insolvent for
purposes of the foregoing if the sum of the company's debts is greater than all
of the company's property at a fair valuation, or if the present fair saleable
value of the company's assets is less than the amount that will be required to
pay its probable liability on its existing debts as they become absolute and
mature. There can be no assurances as to what standards a court would apply to
determine whether the Company was solvent at the relevant time or whether,
whatever standard was applied, the Notes would not be voided on another of the
grounds set forth above.
In addition, the Guarantees may be subject to review under relevant federal
and state fraudulent conveyance and similar statutes in a bankruptcy or
reorganization case or a lawsuit by or on behalf of creditors of any of the
Guarantors. In such a case, the analysis set forth above would generally apply,
except that the Guarantees could also be subject to the claim that, because they
were incurred for the benefit of the Company (and only indirectly for the
benefit of the Guarantors), the obligations of the Guarantors thereunder were
incurred for less than reasonably equivalent value or fair consideration. A
court could void a Guarantor's obligation under its Guarantee, subordinate the
Guarantee to other indebtedness of a Guarantor or take other action detrimental
to the holders of the Notes.
ABSENCE OF PRIOR MARKET FOR NEW NOTES
The New Notes will constitute a new class of securities with no established
trading market. Although the New Notes will generally be permitted to be resold
or otherwise transferred by nonaffiliates of the Company
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<PAGE> 31
without compliance with the registration requirements under the Securities Act,
the Company does not intend to apply for a listing of the New Notes on any
securities exchange or to arrange for the New Notes to be quoted on the NASDAQ
National Market or other quotation system. The Initial Purchasers have advised
the Company that they intend to make a market in the New Notes; however, the
Initial Purchasers are not obligated to do so, and any market-making with
respect to the New Notes may be discontinued at any time without notice. As a
result, there can be no assurance that an active trading market for the New
Notes will develop. If a market were to develop, the New Notes could trade at
prices that may be lower than the initial market values thereof depending on
many factors, including prevailing interest rates and the markets for similar
securities.
RESTRICTIONS ON RESALE
The Old Notes were offered and sold by the Company in a private offering
exempt from registration pursuant to the Securities Act and have been resold
pursuant to Rule 144A, Regulation S and certain other available exemptions under
the Securities Act. As a result, the Old Notes may not be reoffered or resold by
purchasers, except pursuant to an effective registration statement under the
Securities Act, or pursuant to an applicable exemption from such registration.
Based on interpretations by the staff of the Commission, the Company
believes that each holder (other than (i) a broker-dealer who purchased Old
Notes directly from the Company for resale pursuant to Rule 144A of the
Securities Act or any other available exemption under the Securities Act, (ii)
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or (iii) a broker-dealer who acquired the Old Notes as a result
of market-making or other trading activities) who duly exchanges Old Notes for
New Notes in the Exchange Offer will receive notes that are freely transferable
under the Securities Act, provided, that such New Notes are acquired in the
ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any other person to
participate, in a distribution (within the meaning of the Securities Act) of the
New Notes. The Company has not, however, sought its own no-action letter from
the staff of the Commission regarding resales of the New Notes and there can be
no assurance that the staff of the Commission would make a similar determination
with respect to the resale of the New Notes. Any holder of Old Notes who is not
able to rely upon such staff interpretations must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any sale of such Old Notes, unless such sale is made pursuant to an exemption
from such requirements. See "Prospectus Summary--The Exchange Offer."
CERTAIN MARKET CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
To the extent that Old Notes are tendered and accepted for exchange
pursuant to the Exchange Offer, the trading market for Old Notes that remain
outstanding may be significantly more limited, which might adversely affect the
liquidity of the Old Notes not tendered for exchange. The extent of the market
therefor and the availability of price quotations would depend upon a number of
factors, including the number of holders of Old Notes remaining at such time and
the interest in maintaining a market in such Old Notes on the part of securities
firms. An issue of securities with a smaller outstanding market value available
for trading (the "float") may command a lower price than would a comparable
issue of securities with a greater float. As a result, the market price for Old
Notes that are not exchanged in the Exchange Offer may be affected adversely to
the extent that the amount of Old Notes exchanged pursuant to the Exchange Offer
reduces the float. The reduced float also may make the trading price of the Old
Notes that are not exchanged more volatile. In addition, holders of Old Notes
who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer
will continue to be subject to restrictions on transfer of such Old Notes
contained in the legend thereon. In general, the Old Notes may not be offered or
sold unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register the Old Notes under the Securities Act. See "--Restrictions on Resale"
and "The Exchange Offer--Consequences of Failure to Exchange."
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<PAGE> 32
YEAR 2000 LIABILITY
The Company is in the process of reviewing its existing computer software
systems, and in connection with that process is analyzing whether or not the
Company faces a "Year 2000" problem, a problem that is expected to arise with
respect to computer programs that use only two digits to identify a year in the
date field, and which were designed and developed without considering the impact
of the upcoming change in the century. Although the Company has not yet made a
final determination as to whether the various computer systems at its operations
will give rise to a "Year 2000" problem, the Company believes that any such
problem, if it arises in the future, should not be material to the Company's
operations.
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<PAGE> 33
THE EXCHANGE OFFER
The following discussion set forth or summarizes what the Company believes
are the material terms of the Exchange Offer, including those set forth in the
Letters of Transmittal distributed with this Prospectus. This Summary is
qualified in its entirety by reference to the full text of the documents
underlying the Exchange Offer, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part, and are incorporated
by reference herein.
PURPOSE AND EFFECT
The Old Notes were sold by the Company to the Initial Purchasers on May 13,
1998 (the "Closing Date"), pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Old Notes in reliance on Rule 144A and
Regulation S. The Company, the Guarantors and the Initial Purchasers also
entered into the Registration Rights Agreement, which provides that (i) the
Company will file an Exchange Offer Registration Statement with the Commission
on or prior to 60 days after the Closing Date, (ii) the Company will use
commercially reasonable efforts to have the Exchange Offer Registration
Statement declared effective by the Commission on or prior to 135 days after the
date on which such Exchange Offer Registration Statement is filed with the
Commission (which 135-day period shall be extended for a number of days equal to
the number of business days, if any, that the Commission is officially closed
during such period) and (iii) unless the Exchange Offer would not be permitted
by applicable law or Commission policy, the Company will commence the Exchange
Offer and use its commercially reasonable efforts to issue, on or prior to 25
business days after the date on which the Exchange Offer Registration Statement
is declared effective by the Commission, New Notes in exchange for all Old Notes
tendered prior thereto in the Exchange Offer. Pursuant to such Registration
Rights Agreement, the Company will endeavor to, within the applicable time
periods, register under the Securities Act all of the New Notes pursuant to a
registration statement under which the Company will offer each holder of Old
Notes the opportunity to exchange any and all of the outstanding Old Notes held
by such holder for New Notes in an aggregate principal amount equal to the
aggregate principal amount of Old Notes tendered for exchange by such holder.
Subject to limited exceptions, the Exchange Offer being made hereby, if
commenced and consummated within such applicable time periods, will satisfy
those requirements under the Registration Rights Agreement. In such event, Old
Notes not exchanged for New Notes in the Exchange Offer would remain outstanding
and would continue to accrue interest, but would generally not retain any rights
under the Registration Rights Agreement. Holders of Old Notes seeking liquidity
in their investment would have to rely on an exemption to the registration
requirements under the securities laws, including the Securities Act. This
Exchange Offer is intended to satisfy the Company's exchange offer obligations
under the Registration Rights Agreement.
TERMS OF THE EXCHANGE OFFER
The Company hereby offers, upon the terms and subject to the conditions set
forth herein and in the accompanying Letter of Transmittal, to exchange $1,000
in principal amount of the New Notes for each $1,000 in principal amount of the
outstanding Old Notes. The Company will accept for exchange any and all Old
Notes that are validly tendered on or prior to 5:00 p.m., New York City time, on
the Expiration Date. Tenders of the Old Notes may be withdrawn in accordance
with the procedures described under "--Withdrawal Rights" at any time prior to
5:00 p.m., New York City time, on the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. However, the Exchange Offer is subject to certain customary conditions
that may be waived by the Company, and to the terms and provisions of the
Registration Rights Agreement. See "--Conditions of the Exchange Offer."
Old Notes may be tendered only in multiples of $1,000. Subject to the
foregoing, holders may tender less than the aggregate principal amount
represented by the Old Notes held by them, provided that they appropriately
indicate this fact on the Letter of Transmittal accompanying the tendered Old
Notes (or so indicate pursuant to the procedures for book-entry transfer).
As of the date of this Prospectus, $180 million in aggregate principal
amount of the Old Notes were outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about ,
1998, to all holders of Old Notes known to the Company.
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<PAGE> 34
Because the Exchange Offer is for any and all Old Notes, the number of Old
Notes tendered and exchanged in the Exchange Offer will reduce the principal
amount of Old Notes outstanding. Following the consummation of the Exchange
Offer, holders who did not tender their Old Notes generally will not have any
further registration rights under the Registration Rights Agreement, and such
Old Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Old Notes could be adversely
affected. The Old Notes are currently eligible for sale pursuant to Rule 144A
through the Private Offering, Resales and Trading through Automated Linkages
("PORTAL") system. Because the Company anticipates that most holders of Old
Notes will elect to exchange such Old Notes for New Notes due to the absence of
restrictions on the resale of New Notes under the Securities Act, the Company
anticipates that the liquidity of the market for any Old Notes remaining after
the consummation of the Exchange Offer may be substantially limited. See "Risk
Factors--Certain Market Consequences of Failure to Exchange Old Notes."
The form and terms of the New Notes are generally the same as the form and
terms of the Old Notes except that (i) the New Notes have been registered under
the Securities Act and will not bear legends restricting the transfer thereof,
(ii) the holders of New Notes will not be entitled to any Additional Interest
under the terms of the Registration Rights Agreement and (iii) holders of New
Notes will not be entitled to certain other rights under the Registration Rights
Agreement. The New Notes will evidence the same debt as the Old Notes and will
be entitled to the benefits of the Indenture.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Old Notes and for the purposes of receiving the New Notes from the Company
and delivering New Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders of Old Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"--Fees and Expenses."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS
OF OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE
EXCHANGE OFFER AND, IF SO, THE AGGREGATE PRINCIPAL AMOUNT OF OLD NOTES TO
TENDER, AFTER READING CAREFULLY THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL
AND CONSULTING WITH THEIR ADVISORS, IF ANY, BASED ON THEIR OWN FINANCIAL
POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Exchange Offer shall remain open for a period of not less than 20
business days after notice is mailed to holders. The Expiration Date shall be
, 1998 at 5:00 p.m., New York City time, unless the Company,
in its sole discretion, extends the Exchange Offer, in which case the Expiration
Date shall be the latest date and time to which the Exchange Offer is extended;
provided, that the Expiration Date will not be extended beyond ,
1998.
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In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, by means of a press release or any other acceptable means,
each prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
The Company expressly reserves the right, in its sole and absolute
discretion, (i) to delay accepting any Old Notes, (ii) to extend the Exchange
Offer, (iii) if any of the conditions set forth below under "Conditions of the
Exchange Offer" shall not have been satisfied, to terminate the Exchange Offer,
by giving oral or written notice of such delay, extension or termination to the
Exchange Agent, and (iv) to waive any condition or otherwise amend the terms of
the Exchange Offer in any manner. If such waiver or amendment constitutes a
material change to the Exchange Offer, the Company will promptly disclose such
waiver or amendment by means of a prospectus supplement that will be distributed
to the registered holders of the Old Notes, and the Company will extend the
Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Company may choose to make any public announcement and
subject to applicable law, the Company shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to the Dow Jones News Service.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company will not be required to accept for
exchange, or to exchange, any Old Notes for any New Notes, and, as described
below, may terminate the Exchange Offer (whether or not any Old Notes have
theretofore been accepted for exchange) or may waive any conditions to or amend
the Exchange Offer, if any of the following conditions have occurred or exists
or have not been satisfied:
(i) the due tendering of Old Notes in accordance with the Exchange
Offer;
(ii) the Exchange Offer, or the making of any exchange by a holder,
violates any applicable law, statute, rule, regulation or any applicable
interpretation of the staff of the Commission;
(iii) any law, statute, rule, regulation or interpretation by the
staff of the Commission is proposed, adopted or enacted, which, in the
reasonable judgment of the Company, might materially impair the ability of
the Company to proceed with the Exchange Offer or materially impair the
contemplated benefits of the Exchange Offer to the Company;
(iv) each holder of Old Notes exchanged in the Exchange Offer shall
have made certain customary representations, including representations
that, among other things, (i) the holder is not an "affiliate" of the
Company as defined in Rule 405 of the Securities Act, (ii) the holder is
not a broker-dealer that acquired Old Notes directly from the Company in
order to resell them pursuant to Rule 144A of the Securities Act or any
other available exemption under the Securities Act, (iii) the holder will
acquire the New Notes in the ordinary course of business and (iv) that the
holder is not participating, and does not intend to participate, and has no
arrangement or understanding with any person to participate, in the
distribution of the New Notes;
(v) all governmental approvals have been obtained, which such
approval the Company shall, in its reasonable judgment, deem necessary for
the consummation of the Exchange Offer as contemplated hereby;
(vi) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (a) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange
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<PAGE> 36
Offer, or assessing or seeking any damages as a result thereof or (b)
resulting in a material delay in the ability of the Company to accept for
exchange or exchange some or all of the Old Notes pursuant to the Exchange
Offer; or any statute, rule, regulation, order or injunction shall be
sought, proposed, introduced, enacted, promulgated or deemed applicable to
the Exchange Offer or any of the transactions contemplated by the Exchange
Offer by any government or governmental authority, domestic or foreign, or
any action shall have been taken, proposed or threatened, by any
government, governmental authority, agency or court, domestic or foreign,
that in the sole judgment of the Company might directly or indirectly
result in any of the consequences referred to in clauses (a) and (b) above
or, in the sole judgment of the Company, might result in the holders of New
Notes having obligations with respect to resales and transfers of New Notes
which are greater than those described in the interpretation of the
Commission referred to elsewhere in this Prospectus, or would otherwise
make it inadvisable to proceed with the Exchange Offer;
(vii) there shall have occurred (a) any general suspension of or
general limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (b) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Company to complete the transactions contemplated by the
Exchange Offer, (c) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States or any limitation by
any governmental agency or authority which adversely affects the extension
of credit or (d) a commencement of a war, armed hostilities or other
similar international calamity directly or indirectly involving the United
States, or, in the case of any of the foregoing existing at the time of the
commencement of the Exchange Offer, a material acceleration or worsening
thereof; or
(viii) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole that, in the
sole judgment of the Company, is or may be adverse to the Company, or the
Company shall have become aware of facts that, in the sole judgment of the
Company, have or may have an adverse effect on the value of the Old Notes
or the New Notes.
If the Company determines in its sole and absolute discretion that any of
the foregoing events or conditions has occurred or exists or has not been
satisfied, the Company may, subject to applicable law, (i) terminate the
Exchange Offer (whether or not any Old Notes have theretofore been accepted for
exchange), (ii) extend the Exchange Offer and retain all Old Notes tendered
prior to the expiration of the Exchange Offer subject, however, to the rights of
holders to withdraw such Old Notes or (iii) waive any such condition or
otherwise amend the terms of the Exchange Offer in any respect. If such waiver
or amendment constitutes a material change to the Exchange Offer, the Company
will promptly disclose such waiver or amendment by means of a prospectus
supplement that will be distributed to the registered holders of the Old Notes,
and the Company will extend the Exchange Offer to the extent required by Rule
14e-1 under the Exchange Act.
The foregoing conditions are for the sole benefit of the Company and may be
waived by the Company in whole or in part at any time and from time to time in
its sole discretion. The failure by the Company at any time to exercise any of
the foregoing rights shall not be deemed a waiver of such rights and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time. Any determination by the Company concerning the events
described above will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939.
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<PAGE> 37
TERMINATION OF CERTAIN RIGHTS
Holders of New Notes will not be and, upon consummation of the Exchange
Offer, holders of Old Notes who were permitted to participate in the Exchange
Offer will no longer be, entitled to (i) the right to receive Additional
Interest under the Registration Rights Agreement or (ii) certain other rights
under the Registration Rights Agreement intended for the holders of unregistered
securities; provided, that holders of Old Notes who are not permitted to
participate in the Exchange Offer or who do not receive fully tradeable New
Notes pursuant to the Exchange Offer, shall have the right to require the
Company to file a Shelf Registration Statement solely for the benefit of such
holders of Old Notes and will be entitled to receive Additional Interest
following the occurrence of a Registration Default in connection with the filing
of such Shelf Registration Statement. See "Registration Rights." Notwithstanding
anything to the contrary in the foregoing, Old Notes not tendered in the
Exchange Offer will remain outstanding and continue to accrue interest in
accordance with their terms.
ACCRUED INTEREST ON THE OLD NOTES
Holders whose Old Notes are accepted for exchange will have the right to
receive interest accrued thereon from the date of their original issuance or the
last interest payment date, as applicable, to, but not including, the date of
issuance of the New Notes, such interest to be payable with the first interest
payment on the New Notes. Interest on the Old Notes accepted for exchange, which
interest accrued at the rate of 10% per annum, will cease to accrue on the day
prior to the issuance of the New Notes.
PROCEDURES FOR TENDERING OLD NOTES
The tender of a holder's Old Notes as set forth below and the acceptance
thereof by the Company will constitute a binding agreement between the tendering
holder and the Company upon the terms and subject to the conditions set forth in
this Prospectus and in the accompanying Letter of Transmittal. Except as set
forth below, a holder who wishes to tender Old Notes for exchange pursuant to
the Exchange Offer must transmit a properly completed and duly executed Letter
of Transmittal, including all other documents required by such Letter of
Transmittal, to the Exchange Agent at the address set forth under "--The
Exchange Agent; Assistance" prior to 5:00 p.m., New York City time on the
Expiration Date. In addition, either (i) certificates of such Old Notes must be
received by the Exchange Agent along with the Letter of Transmittal, or (ii) a
timely confirmation of book-entry transfer of such Old Notes, if such procedure
is available, into the Exchange Agent's account at DTC pursuant to the procedure
for book-entry transfer described below, must be received by the Exchange Agent
prior to the Expiration Date, or (iii) the holder must comply with the
guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
ELIGIBLE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. INSTEAD OF
DELIVERY BY MAIL, IT IS RECOMMENDED THAT THE ELIGIBLE HOLDER USE AN OVERNIGHT OR
HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE
COMPANY OR DTC. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT SUCH TENDER FOR SUCH
HOLDER.
Any beneficial owner of the Old Notes (a "Beneficial Owner") whose Old
Notes are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender Old Notes in the Exchange
Offer should contact such registered holder promptly and instruct such
registered holder to tender on such Beneficial Owner's behalf. If such
Beneficial Owner wishes to tender directly, such Beneficial Owner must, prior to
completing and executing the Letter of Transmittal and tendering Old Notes,
either make appropriate arrangements to register ownership of the Old Notes in
such Beneficial Owner's name
30
<PAGE> 38
or obtain a properly completed bond power from the registered holder. Beneficial
Owners should be aware that the transfer of registered ownership may take
considerable time.
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at DTC for the purposes of the Exchange Offer within two
business days after the date of this Prospectus, any financial institution that
is a participant in DTC's Book-Entry Transfer Facility system may make
book-entry delivery of the Old Notes by causing DTC to transfer such Old Notes
into the Exchange Agent's account in accordance with DTC's procedures for such
transfer. However, although delivery of the Old Notes may be effected through
book-entry transfer into the Exchange Agent's accountant at DTC, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other required documents, must in any
case, be delivered to and received by the Exchange Agent at its address set
forth under "--The Exchange Agent; Assistance" on or prior to the Expiration
Date, or the guaranteed delivery procedure set forth below must be complied
with, within the time period provided under such procedures. Delivery of
documents to DTC does not constitute delivery to the Exchange Agent.
Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined herein)
unless the Old Notes surrendered for exchange pursuant hereto are tendered (i)
by a registered holder of the Old Notes who has not completed either the box
entitled "Special Exchange Instructions" or the box entitled "Special Delivery
Instructions" in the Letter of Transmittal, or (ii) for the account of an
Eligible Institution. In the event that a signature on a Letter of Transmittal
or a notice of withdrawal, as the case may be, is required to be guaranteed,
such signature must be guaranteed by an Eligible Institution. If the Letter of
Transmittal is signed by a person other than the registered holder of the Old
Notes, the Old Notes surrendered for exchange must be endorsed or accompanied by
appropriate bond powers and a proxy which authorizes such person to tender the
Old Notes on behalf of the registered holder, in each case, signed as the name
of the registered holder, with the signature thereon guaranteed by an Eligible
Institution. The term "registered holder" as used herein with respect to the Old
Notes means any person in whose name the Old Notes are registered on the books
of the Registrar. The term "Eligible Institution" as used herein means a firm
which is a member of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office or correspondent in the United States or any other
"eligible guarantor institution" as such term is defined in Rule 17Ad-15 under
the Exchange Act.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Old Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and all
Old Notes not properly tendered and to reject any Old Notes the Company's
acceptance of which might, in the judgment of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to particular Old Notes
either before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) by the
Company shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes for exchange must be
cured within such period of time as the Company shall determine. Neither the
Company, the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Old Notes,
nor shall any of them incur any liability for failure to give notification of
defects or irregularities with respect to tenders of Old Notes. Tenders of the
Old Notes will not be deemed to have been made until such irregularities have
been cured or waived.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person
should so indicate when signing, and, unless waived by the Company, proper
evidence satisfactory to the Company, in its sole discretion, of such person's
authority so to act must be submitted with the Letter of Transmittal.
By tendering, each registered holder will represent to the Company, among
other things, that: (i) the holder is not an "affiliate" of the Company as
defined in Rule 405 of the Securities Act, (ii) the holder is not a
31
<PAGE> 39
broker-dealer that acquired Old Notes directly from the Company in order to
resell them pursuant to Rule 144A of the Securities Act or any other available
exemption under the Securities Act, (iii) the holder will acquire the New Notes
in the ordinary course of business and (iv) the holder is not participating, and
does not intend to participate, and has no arrangement or understanding with any
person to participate, in the distribution of the New Notes. Any holder of Old
Notes that is unable to make these representations to the Company will not be
able to rely on the interpretations of the staff of the Commission described in
"--Resales of New Notes" and therefore will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Old Notes unless such sale is
made pursuant to an exemption from such requirements.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other documents required by the Letter of Transmittal to the
Exchange Agent on or prior to the Expiration Date or (iii) who cannot complete
the procedure for book-entry transfer on a timely basis, may tender their Old
Notes according to the guaranteed delivery procedures set forth in the Letter of
Transmittal. Pursuant to such procedures: (i) such tender must be made by or
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent must have received from the holder and the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder, the certificate or registration number or numbers of the tendered Old
Notes, and the principal amount of tendered Old Notes, stating that the tender
is being made thereby and guaranteeing that, at least within four (4) New York
Stock Exchange trading days after the Expiration Date, the tendered Old Notes, a
duly executed Letter of Transmittal (or facsimile thereof) and any other
required documents will be deposited by the Eligible Institution with the
Exchange Agent and (iii) such properly completed and executed documents required
by the Letter of Transmittal (or facsimile thereof) and the tendered Old Notes
in proper form for transfer (or confirmation of a book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC) must be received by the
Exchange Agent at least within four (4) New York Stock Exchange trading days
after the Expiration Date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all the conditions to the Exchange Offer,
the Company will accept any and all Old Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date.
The New Notes issued pursuant to the Exchange Offer will be delivered as
promptly as practicable after acceptance of the Old Notes. For purposes of the
Exchange Offer, the Company shall be deemed to have accepted validly tendered
Old Notes, when, as, and if the Company has given oral or written notice thereof
to the Exchange Agent.
In all cases, issuances of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Notes, a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) and all other required documents
(or of confirmation of a book-entry transfer of such Old Notes into the Exchange
Agent's account at DTC); provided, that the Company reserves the absolute right
to waive any defects or irregularities in the tender or conditions of the
Exchange Offer. If any tendered Old Notes are not accepted for any reason, such
unaccepted Old Notes will be returned without expense to the tendering holder
thereof as promptly as practicable after the expiration or termination of the
Exchange Offer.
WITHDRAWAL RIGHTS
Tenders of the Old Notes may be withdrawn by delivery of a written or
facsimile transmission notice to the Exchange Agent, at its address set forth
herein, at any time prior to 5:00 p.m., New York City time, on the Expiration
Date after which tenders of Old Notes are irrevocable. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Old
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate or registration number or numbers and
principal amount of such Old Notes, as applicable or, in the case of notes
transferred by book-entry transfer, the name and number of the account at DTC to
be credited), (iii) be signed by the Depositor in the same
32
<PAGE> 40
manner as the original signature on the Letter of Transmittal by which such Old
Notes were tendered (including any required signature guarantees) or be
accompanied by a bond power in the name of the person withdrawing the tender, in
satisfactory form as determined by the Company in its sole discretion, duly
executed by the registered holder, with the signature thereon guaranteed by an
Eligible Institution together with the other documents required upon transfer by
the Indenture, (iv) specify the name in which such Old Notes are to be
re-registered, if different from the Depositor, pursuant to such documents of
transfer and (v) include a statement that such holder is withdrawing his
election to have such Old Notes exchanged. All questions as to the validity,
form and eligibility (including time of receipt) of such notices will be
determined by the Company, in its sole discretion. The Old Notes so withdrawn
will be deemed not to have been validly tendered for exchange for purposes of
the Exchange Offer and no New Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered for exchange but which are withdrawn will be returned to the holder
thereof without cost to such holder as promptly as practicable after withdrawal.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "--Procedures for Tendering Old Notes" at any time on
or prior to the Expiration Date.
THE EXCHANGE AGENT; ASSISTANCE
[ ] has been appointed the Exchange Agent for the Exchange Offer.
All tendered Old Notes, executed Letters of Transmittal and other related
documents should be directed to the Exchange Agent. Questions and requests for
assistance and requests for additional copies of the Prospectus, the Letter of
Transmittal and other related documents should be addressed to the Exchange
Agent as follows:
By Hand, Registered or Certified Mail or Overnight Courier:
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
By Facsimile:
------------------------------------------------------
Attention:
------------------------------------------------------
Confirm by Telephone
------------------------------------------------------
DELIVERY OF DOCUMENTS TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF DOCUMENTS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY OF SUCH DOCUMENTS.
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. However, additional solicitations may be
made by facsimile, telephone or in person by officers and regular employees of
the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptance of the Exchange Offer. The Company,
33
<PAGE> 41
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith and pay other registration expenses, including fees and
expenses of the Trustee, filing fees, blue sky fees and printing and
distribution expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered or if
a transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss will be recognized by the Company for accounting
purposes in connection with the Exchange Offer. The expenses of the Exchange
Offer will be amortized over the term of the New Notes.
RESALES OF NEW NOTES
Upon consummation of the Exchange Offer, holders of Old Notes that were not
prohibited from participating in the Exchange Offer and did not tender their Old
Notes will generally not have any registration rights under the Registration
Rights Agreement with respect to such nontendered Old Notes and such Old Notes
will continue to be subject to the restrictions on transfer contained in the
legend thereon. In general, the Old Notes may not be offered or sold unless
registered under the Securities Act and applicable state securities laws, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under The Securities
Act.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in certain interpretive letters addressed
to third parties in other transactions. However, the Company has not sought its
own interpretive letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange Offer
as it has in such interpretive letters to third parties. Based on these
interpretations by the staff of the Commission, the Company believes that New
Notes issued pursuant to the Exchange Offer to a holder in exchange for Old
Notes may be offered for resale, resold and otherwise transferred by a holder
(other than (i) a broker-dealer who purchased Old Notes directly from the
Company for resale pursuant to Rule 144A or any other available exemption under
the Securities Act, (ii) an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act or (iii) a broker-dealer who acquired the Old
Securities as a result of market-making or other trading activities), without
further compliance with the registration and prospectus delivery provisions of
the Securities Act, provided, that such holder is acquiring the New Notes in the
ordinary course of business and is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of the New
Notes. Any holder wishing to accept the Exchange Offer must represent to the
Company, as required by the Registration Rights Agreement, that (i) it is not an
"affiliate" of the Company as defined in Rule 405 of the Securities Act, (ii) it
is not a broker-dealer that acquired Old Notes directly from the Company in
order to resell them pursuant to Rule 144A of the Securities Act or any other
available exemption under the Securities Act, (iii) it will acquire the New
Notes in the ordinary course of business and (iv) it is not participating, and
does not intend to participate, and has no arrangement or understanding with any
person to participate, in the distribution of the New Notes. Any holder of Old
Notes that is unable to make these representations to the Company will not be
able to rely on the interpretations of the staff of the Commission described
above and therefore will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or other transfer of such Old Notes unless such sale is made pursuant to an
exemption from such requirements.
34
<PAGE> 42
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it acquired the Old Notes for its own
account as a result of market-making activities or other trading activities and,
because it may be deemed a statutory underwriter, must agree that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Based on the position taken by the staff of the Commission in
the interpretive letters referred to above, the Company believes that Restricted
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to the New Notes received upon exchange of such Old Notes (other than Old Notes
which represent an unsold allotment from the original sale of the Old Notes)
with a prospectus meeting the requirements of the Securities Act, which may be
the prospectus prepared for an exchange offer so long as it contains a
description of the plan of distribution with respect to the resale of such New
Notes. Accordingly, this Prospectus, as it may be amended or supplemented from
time to time, may be used by a Restricted Broker-Dealer during the period
referred to below in connection with resales of New Notes received in exchange
for Old Notes where such Old Notes were acquired by such Restricted
Broker-Dealer for its own account as a result of market-making or other trading
activities. Subject to certain provisions and time limitations set forth in the
Registration Rights Agreement, the Company has agreed that this Prospectus, may
be used by a Restricted Broker-Dealer in connection with resales of such New
Notes. See "Plan of Distribution." However, a Restricted Broker-Dealer who
intends to use this Prospectus in connection with the resale of New Notes
received in exchange for Old Notes pursuant to the Exchange Offer must notify
the Company, or cause the Company to be notified, on or prior to the Expiration
Date, that it is a Restricted Broker-Dealer. Such notice may be given in the
space provided for that purpose in the Letter of Transmittal or may be delivered
to the Exchange Agent at one of the addresses set forth herein under "--The
Exchange Agent; Assistance." A Restricted Broker-Dealer who delivers this
Prospectus to purchasers in connection with resales of New Notes will be subject
to certain of the civil liabilities under the Securities Act and will be bound
by the provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations). Any Restricted Broker-Dealer who is an
"affiliate" of the Company may not rely on such interpretive letters and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
In that regard, each Restricted Broker-Dealer who surrenders Old Notes
pursuant to The Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that, upon receipt of notice from the Company of the
occurrence of any event or the discovery of any fact which makes any statement
contained in this Prospectus untrue in any material respect or which causes this
Prospectus to omit to state a material fact necessary in order to make the
statements contained herein, in light of the circumstances under which they were
made, not misleading or of the occurrence of certain other events specified in
the Registration Rights Agreement, such Restricted Broker-Dealer will suspend
the sale of New Notes pursuant to this Prospectus until the Company has amended
or supplemented this Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to such Restricted
Broker-Dealer or the Company has given notice that the sale of the New Notes may
be resumed, as the case may be.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who are permitted to participate in the Exchange Offer
and who do not tender their Old Notes generally will not have any further
registration rights under the Registration Rights Agreement or otherwise.
Accordingly, any holder that does not exchange such holder's Old Notes for New
Notes will continue to hold the untendered Old Notes and will be entitled to all
the rights and limitations applicable thereto under the Indenture, except to the
extent that such rights or limitations, by their terms, terminate or cease to
have further effectiveness as a result of the Exchange Offer.
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will continue to be subject to the restrictions on transfer contained in
the legend thereon. In general, the Old Note may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not
35
<PAGE> 43
currently anticipate that it will register the Old Notes under the Securities
Act. Accordingly, such Old Notes may be resold only (i) to the Company (upon
redemption thereof or otherwise), (ii) pursuant to an effective registration
statement under the Securities Act, (iii) so long as the Old Notes are eligible
for resale pursuant to Rule 144A to a Qualified Institutional Buyer (as defined
in the Securities Act) in a transaction meeting the requirements of Rule 144A,
(iv) outside the United States to a foreign person pursuant to the exemption
from the registration requirements of the Securities Act provided by Regulation
S, (v) to an institutional "accredited investor" (as defined in the Securities
Act) in a transaction exempt from the registration requirements of the
Securities Act, in each case in accordance with any applicable securities laws
of any state of the United States or other applicable jurisdiction, or (vi)
pursuant to any other available exemption from the registration requirements of
the Securities Act.
MISCELLANEOUS
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
The Company may in the future seek to acquire untendered Old Notes, to the
extent permitted by applicable law, in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. The Company has
no present plans to acquire any Old Notes that are not tendered in the Exchange
Offer or to file a registration statement to permit resales of any untendered
Old Notes.
HOLDERS OF OLD NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS
IN CONNECTION WITH THE EXCHANGE OFFER.
36
<PAGE> 44
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange of the Old Notes
for New Notes pursuant to the Exchange Offer.
The net proceeds to the Company from the Offering were used to repay
substantially all of the Company's existing short and long-term indebtedness,
other than $21.6 million in principal amount of indebtedness owed to former
Isaac Group shareholders (the "Issac Notes") (the "Outstanding Indebtedness"),
and to fund general corporate purposes and acquisitions. The table below sets
forth the outstanding principal balance, interest rate and current maturities of
the Outstanding Indebtedness and the Isaac Notes as of March 31, 1998 ($ in
millions):
<TABLE>
<CAPTION>
OUTSTANDING INTEREST CURRENT
BALANCE RATE MATURITIES
----------- ---------- ----------
<S> <C> <C> <C>
Operating lines of credit................................ $ -- -- $ --
Third party debt......................................... 98.9 5.5%-12.5% 1.1
Related party debt to the former shareholders of:
Ellis Metals........................................... 2.6 9.0% --
MacLeod Companies...................................... 3.0 8.5% --
Isaac Group............................................ 21.6 8.5% 10.8
Proler Southwest....................................... 2.4 7.0% --
Cozzi Iron & Metal..................................... 12.7 6.4% --
------ -----
Total related party debt............................ 42.3 10.8
------ -----
Total............................................... $141.2 $11.9
====== =====
</TABLE>
The following table sets forth the pro forma sources and uses of funds in
connection with the Offering and certain transactions described in the notes to
the Pro Forma Financial Data included herein:
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN MILLIONS)
<S> <C>
SOURCES:
Proceeds from the Offering.................................. $180.0
Existing Cash............................................... 14.8
Borrowings on Senior Credit Facility........................ 28.2
------
$223.0
======
USES:
Repayment of Outstanding Indebtedness(a).................... $119.7
Repayment of debt assumed in connection with the merger with
Bluestone and acquisition of Naporano..................... 11.9
Cash consideration paid to the former shareholders of
Naporano.................................................. 84.0
Prepayment penalties, net of income taxes, incurred in
connection with
the repayment of Outstanding Indebtedness................. 1.0
Transaction fees for the Offering........................... 6.4
------
$223.0
======
</TABLE>
- ------------------------
(a) On April 1, 1998, the Company borrowed $106.8 million under the Senior
Credit Facility to: (i) repay outstanding secured debt of approximately
$96.5 million; (ii) buyout of operating leases of approximately $9.3
million; and (iii) pay prepayment penalties of approximately $1.0 million,
leaving the Company with approximately $17.3 million available under the
Senior Credit Facility as of such date. Borrowings outstanding under the
Senior Credit Facility as of April 1, 1998 bore interest at 9.0%. On May
13, 1998, all indebtedness under the Senior Credit Facility and all
remaining Outstanding Indebtedness were repaid with proceeds from the
Offering. See "Description of the Senior Credit Facility."
37
<PAGE> 45
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of March 31, 1998 and on a pro forma basis to give effect to the
Offering, the application of the net proceeds therefrom, and certain other
transactions described in the notes to the Pro Forma Financial Data included
herein. See "Use of Proceeds." The pro forma capitalization does not give effect
to insignificant acquisitions as defined in Regulation S-X. The information set
forth below should be read in conjunction with the Financial Statements and
notes thereto.
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1998
------------------
ACTUAL PRO FORMA
------ ---------
(IN MILLIONS)
<S> <C> <C>
Cash and equivalents(1)..................................... $ 4.4 $ --
====== ======
Debt (including current portion):
Third party debt.......................................... $ 98.9 --
Related party debt........................................ 42.3 21.6
Senior Credit Facility.................................... -- 28.2
Notes offered hereby...................................... -- 180.0
------ ------
Total debt............................................. 141.2 229.8
Stockholders' equity:
Convertible preferred stock............................... $ 33.0 $ 33.0
Common stock, warrants and additional paid-in
capital(2)............................................. 246.3 266.1
Accumulated deficit....................................... (30.4) (27.6)
------ ------
Total stockholders' equity............................. 248.9 271.5
------ ------
Total capitalization................................... $390.1 $501.3
====== ======
</TABLE>
- ------------------------
(1) See Note (1) to Unaudited Pro Forma Condensed Consolidated Balance Sheet.
(2) The increase in the balance is due to the issuance of Common Stock in
connection with the Naporano acquisition ($19.4 million) and the merger with
Bluestone ($0.4 million). See "Notes to Unaudited Pro Forma Condensed
Consolidated Balance Sheet."
38
<PAGE> 46
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)
The following table sets forth selected historical and pro forma financial
data of the Company for the periods indicated. The selected historical data as
of and for each of the three fiscal years in the period ended October 31, 1995,
the five months ended March 31, 1996 and as of and for each of the two fiscal
years in the period ended March 31, 1998 were derived from the audited
consolidated financial statements of the Company. The information contained in
this table should be read in conjunction with the Pro Forma Financial Data
appearing elsewhere in this Prospectus and the Financial Statements and related
notes thereto. The financial data included in the table below reflect the
results of the Company's prior operations of designing, manufacturing and
marketing electronic presentation products and color printers and related
consumable products as discontinued operations. The Company sold the assets
relating to these operations in July and December 1996. See "Incorporation of
Certain Documents by Reference."
39
<PAGE> 47
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA -- (CONTINUED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED FIVE MONTHS FISCAL YEARS ENDED
OCTOBER 31, ENDED MARCH 31,
--------------------- MARCH 31, ------------------
HISTORICAL 1993 1994 1995 1996 1997 1998
- ---------- ----- ----- ----- ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Net sales......................................... $-- $-- $-- $-- $ 65.2 $ 479.7
Cost of sales..................................... -- -- -- -- 58.3 431.9
----- ----- ----- ----- ------- --------
Gross profit.................................... -- -- -- -- 6.9 47.8
General and administrative expenses............... -- -- -- 0.2 6.2 24.4
Depreciation and amortization..................... -- -- -- -- 2.3 10.0
Non-recurring expenses(2)......................... -- -- -- -- -- 33.7
----- ----- ----- ----- ------- --------
Operating loss from continuing operations....... -- -- -- (0.2) (1.6) (20.3)
Interest expense.................................. -- -- -- -- 1.5 9.0
Income from joint ventures........................ -- -- -- -- -- 0.1
Other income, net................................. 0.3 0.2 0.3 0.1 0.2 0.2
----- ----- ----- ----- ------- --------
Income (loss) from continuing operations before
taxes......................................... 0.3 0.2 0.3 (0.1) (2.9) (29.0)
Benefit for income taxes.......................... -- -- -- (0.1) (0.9) (0.4)
----- ----- ----- ----- ------- --------
Net income (loss) from continuing operations.... 0.3 0.2 0.3 -- (2.0) (28.6)
Net income (loss) from discontinued operations.... (0.2) (0.4) (2.7) -- 0.8 0.2
Preferred stock dividends......................... -- -- -- -- -- 7.1
----- ----- ----- ----- ------- --------
Net income (loss) applicable to common stock.... $ 0.1 $(0.2) $(2.4) $-- $ (1.2) $ (35.5)
===== ===== ===== ===== ======= ========
Net income (loss) from continuing operations
applicable to common stock
Basic........................................... $0.06 $0.04 $0.05 $-- $ (0.22) $ (1.81)
Diluted......................................... 0.06 0.04 0.05 -- $ (0.22) $ (1.81)
Cash dividends per common share................... $0.24 $0.24 $0.18 $-- -- --
OTHER FINANCIAL DATA:
Adjusted EBITDA(3)................................ $-- $-- $-- $(0.2) $ 0.7 $ 23.5
Cash flows from continuing operations............. 0.3 0.2 0.3 -- (1.7) 0.6
Capital expenditures.............................. -- -- -- -- 3.2 7.6
Deficiency of earnings to fixed charges(4)........ N.M N.M. N.M. N.M. N.M N.M.
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and equivalents.............................. $ 0.9 $ 0.6 $ 3.0 $ 3.1 $ 5.7 $ 4.4
Working capital (deficit)......................... 8.0 8.1 9.1 9.0 (13.6) 88.4
Total assets...................................... 15.3 13.5 10.1 10.3 70.1 480.8
Total debt (including current maturities)......... -- -- -- -- 36.4 141.2
Convertible preferred stock....................... -- -- -- -- -- 33.0
Common stockholders' equity....................... 13.8 12.4 9.3 9.6 23.1 215.9
PRO FORMA
PRO FORMA STATEMENT OF OPERATIONS DATA:
Net sales......................................................................................... $1,020.0
Interest expense.................................................................................. 23.9
PRO FORMA OTHER FINANCIAL DATA:
Pro Forma Adjusted EBITDA(5)...................................................................... 43.0
Net cash interest expense(6)...................................................................... 23.3
Ratio of Pro Forma Adjusted EBITDA to net cash interest expense................................... 1.8x
Deficiency of earnings to fixed charges(4)........................................................ N.M.
Net debt to Pro Forma Adjusted EBITDA............................................................. 5.3
PRO FORMA BALANCE SHEET DATA (AT END OF PERIOD):
Cash and equivalents.............................................................................. $ 0.0
Working capital................................................................................... 116.0
Total assets...................................................................................... 605.9
Total debt (including current maturities)......................................................... 229.8
Convertible preferred stock....................................................................... 33.0
Common stockholders' equity....................................................................... 238.5
</TABLE>
See Notes to Selected Historical and Pro Forma Financial Data
40
<PAGE> 48
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
(1) Operating results for fiscal 1993, 1994 and 1995, and the five month
transitional period ended March 31, 1996, have been restated to reflect the
results of the Company's prior operations as discontinued operations.
(2) During the fiscal year ended March 31, 1998, the Company recorded the
following non-recurring pre-tax charges (in millions):
<TABLE>
<S> <C>
Non-cash warrant compensation............................... $19.1(a)
Severance and other termination benefits.................... 2.8(b)
EMCO Recycling shut-down.................................... 11.8(c)
-----
$33.7
=====
</TABLE>
(a) On December 1, 1997, the Company issued non-recurring, fully vested
warrants to purchase 1,655,000 shares of Common Stock at exercise prices
ranging from $4.00 per share to $12.00 per share. These warrants were
issued to certain officers, employees and an outside director. The
warrants, for accounting purposes, were valued using the "intrinsic
value method" as prescribed under Accounting Principles Board ("APB")
No. 25, "Accounting for Stock Based Compensation".
(b) On December 1, 1997, the Company entered into a Separation Agreement
and a Stock Warrant Settlement Agreement with a former officer resulting
in a non-recurring charge totaling $2.8 million comprised of (a) $0.9
million of cash payments, (b) an accrual of $0.2 million for other
benefits under the Separation Agreement, and (c) $1.7 million
representing the value (calculated in accordance with APB No. 25) of
warrants issued to purchase 200,000 shares of Common Stock.
(c) Upon completion of the Cozzi Iron & Metal acquisition in December
1997, the Company adopted a formal plan to shut down its EMCO Recycling
operations and to transfer certain of EMCO Recycling's assets to the
Salt River facility, which the Company operates under the Metal
Management Arizona name. In connection with the plan to shut down EMCO
Recycling, the Company recorded a pre-tax charge of approximately $11.8
million, comprised of $9.3 million for the impairment of EMCO Recycling
goodwill, $2.0 million for the write-down to fair value (less selling
costs) of the EMCO Recycling's fixed assets to be sold or otherwise
abandoned, and $0.5 million for other exit-related costs. The cost of
transferring EMCO Recycling's remaining assets to Salt River will be
expensed as incurred. The exit plan is expected to be completed by
December 31, 1998.
(3) Adjusted EBITDA represents net income from continuing operations plus
interest expense (including amortization of debt issuance costs), taxes,
depreciation and amortization. Adjusted EBITDA also excludes historical
non-recurring expenses and other non-operating income and expenses.
Adjusted EBITDA is presented here to provide additional information about
the Company's ability to meet its future debt service, capital expenditure
and working capital requirements. Adjusted EBITDA is not a measure of
financial performance under GAAP and should not be considered as an
alternative either to net income as an indicator of the Company's operating
performance, or to cash flows as a measure of the Company's liquidity.
Items excluded from Adjusted EBITDA, such as non-recurring expenses,
depreciation and amortization, are significant components of the Company's
financial statements and should be considered in assessing the financial
performance of the Company. Adjusted EBITDA as defined in this Prospectus
may differ from similarly titled measures presented by other companies.
(4) For purposes of the computation, the ratio of earnings to fixed charges has
been calculated by dividing (i) pre-tax loss from continuing operations
plus fixed charges by (ii) fixed charges. Fixed charges are equal to
interest expense plus the portion of the rent expense estimated to
represent interest expense. For fiscal 1993, 1994 and 1995, and the five
months ended March 31, 1996, the ratio is not applicable as there
41
<PAGE> 49
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA -- (CONTINUED)
was no interest expense or rent expense incurred in continuing operations.
The deficiency of earnings to fixed charges was as follows (in millions):
<TABLE>
<CAPTION>
FISCAL YEARS
ENDED MARCH 31,
----------------
1997 1998
------ ------
<S> <C> <C>
Historical.................................................. $ 2.9 $29.0
Pro Forma................................................... n/a $30.5
</TABLE>
Included in the pre-tax loss from continuing operations for the year ended
March 31, 1998 were non-recurring charges of $33.7 million (see Note 2).
(5) Pro Forma Adjusted EBITDA represents Adjusted EBITDA after giving effect to
Pro Forma Operating Statement Acquisitions and the merger with Bluestone as
if they had occurred on April 1, 1997 and the following related items:
contractual changes in management compensation, changes in inventory
valuation from a LIFO basis to a FIFO basis to conform to the Company's
accounting policy for inventory valuation and an adjustment to reflect
lease expense related to real estate not purchased from Aerospace.
(continued on next page)
42
<PAGE> 50
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA -- (CONTINUED)
(5) continued
The following table presents a reconciliation of Adjusted EBITDA to Pro
Forma Adjusted EBITDA for the following periods (in millions):
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
MARCH 31,
1998
-----------
<S> <C>
Metal Management historical Adjusted EBITDA(a).............. $23.5
Bluestone historical Adjusted EBITDA........................ 1.7
Pro Forma Operating Statement Acquisitions Adjusted
EBITDA(b)
Reserve Iron & Metal...................................... $ 0.4
Isaac Group............................................... (2.0)
Proler Southwest.......................................... 0.5
Cozzi Iron & Metal........................................ 5.1
Aerospace................................................. 2.6
Naporano.................................................. 11.3
-----
$17.9
-----
$43.1
Pro Forma Adjustments:
Inventory valuation(c)
Isaac Group............................................ 0.2
Aerospace.............................................. (0.3)
Bluestone.............................................. (0.9)
-----
$(1.0)
Management compensation(d)
Isaac Group............................................ 0.2
Proler Southwest....................................... 0.3
Aerospace.............................................. 0.6
-----
$ 1.1
Real estate lease expense(e)
Aerospace.............................................. $(0.2)
-----
Total Adjustments.................................... $(0.1)
-----
Total Pro Forma Adjusted EBITDA...................... $43.0
=====
</TABLE>
- ------------------------
(a) Represents Adjusted EBITDA for all periods from and after the date of
acquisition for all Pro Forma Operating Statement Acquisitions closed
prior to March 31, 1998.
(b) Represents Adjusted EBITDA from April 1, 1997 to the date each Pro
Forma Operating Statement Acquisition was acquired by the Company.
(c) Represents change in inventory valuation from a LIFO basis to a FIFO
basis to conform to the Company's accounting policy.
(d) Represents contractual reduction in management compensation.
(e) Represents lease expense on real estate not purchased from Aerospace.
(6) Net cash interest expense is defined as interest expense less amortization
of debt issuance cost.
43
<PAGE> 51
PRO FORMA FINANCIAL DATA
(UNAUDITED)
The following unaudited pro forma condensed consolidated balance sheet of
the Company gives effect to the Offering, the application of the net proceeds
therefrom, borrowings under the Senior Credit Facility, the application of
proceeds therefrom, the merger with Bluestone accounted for as a pooling of
interests and the acquisition of Naporano as if such transactions had occurred
on March 31, 1998 (the "Pro Forma Balance Sheet Transactions"). The unaudited
pro forma condensed consolidated balance sheet does not give effect to
acquisitions that are not significant as defined by Regulation S-X. The
following unaudited pro forma condensed consolidated statement of operations of
the Company gives effect to the Offering and borrowings under the Senior Credit
Facility, the application of the net proceeds therefrom, the Pro Forma Operating
Statement Acquisitions and certain debt and equity transactions as if such
transactions had occurred on April 1, 1997.
The unaudited pro forma condensed consolidated statement of operations do
not reflect the operating results from discontinued operations or insignificant
acquisitions. The discontinued operations include the Company's prior operations
of designing, manufacturing and marketing electronic presentation products and
color printers and related consumable products which were sold in July and
December 1996.
The following Pro Forma Operating Statement Acquisitions are presented in
the Company's historical condensed consolidated statement of operations from the
effective date of each acquisition. The effective date of each Pro Forma
Operating Statement Acquisition is as follows:
<TABLE>
<CAPTION>
ACQUISITION EFFECTIVE DATE
----------- --------------
<S> <C>
Reserve Iron & Metal........................................ 5/1/97
Isaac Group................................................. 6/23/97
Proler Southwest............................................ 9/1/97
Cozzi Iron & Metal.......................................... 12/1/97
Aerospace................................................... 1/20/98
Naporano.................................................... 7/1/98
</TABLE>
The merger with Bluestone is accounted for as a pooling of interest.
Accordingly, the pro forma statement of operations reflects Bluestone's accounts
on a pooled basis from April 1, 1997.
The accompanying unaudited pro forma condensed consolidated financial
statements have been derived from:
a. The Company's audited consolidated balance sheet at March 31, 1998 and
audited consolidated statement of operations for the year ended March
31, 1998;
b. Reserve Iron & Metal's unaudited statement of income for the one month
ended April 30, 1997;
c. The unaudited statements of operations for the twelve weeks ended June
23, 1997 of The Isaac Corporation and Ferrex Trading Corporation;
d. Proler Southwest's unaudited combined statement of operations for the
five months ended August 31, 1997;
e. Cozzi Iron & Metal's unaudited consolidated statement of operations
for the eight months ended November 30, 1997;
f. Aerospace's unaudited consolidated statement of income and retained
earnings for the period ended January 20, 1998;
g. Bluestone's audited balance sheet at March 31, 1998 and audited
statement of operations for the fiscal year ended March 31, 1998; and
h. Naporano's unaudited balance sheet at March 31, 1998 and unaudited
statement of operations for the twelve months ended March 31, 1998.
44
<PAGE> 52
PRO FORMA FINANCIAL DATA -- CONTINUED
(UNAUDITED)
The excess of the acquisition cost over the fair value (as estimated by the
Company) of the net assets of Naporano has been allocated to goodwill. The
Company considers all intangible assets in the allocation of purchase price.
Such allocation of the purchase price may change upon the final determination of
the fair value of assets acquired (including other intangibles) and liabilities
assumed.
Certain amounts presented in the historical financial statements of the Pro
Forma Operating Statement Acquisitions have been reclassified in the pro forma
presentation to conform to the Company's operating statement presentation.
The unaudited pro forma condensed consolidated financial statements are
presented for comparative purposes only and do not purport to be indicative of
the combined financial position or results of operations which would have been
realized had the transactions reflected therein been consummated as of the date
or during the periods for which the unaudited pro forma financial statements are
presented or for any future period or date.
45
<PAGE> 53
METAL MANAGEMENT, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT MARCH 31, 1998
<TABLE>
<CAPTION>
BLUESTONE NAPORANO PRO FORMA
HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ---------- ----------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Cash.................................. $ 4.4 $ 0.1 $ 10.3 $(14.8)(1) $ --
Accounts receivable, net.............. 107.8 14.6 12.5 -- 134.9
Inventories........................... 56.8 4.7 10.8 0.4(2) 72.7
Other current assets.................. 8.5 -- 1.1 -- 9.6
------ ------ ------ ------ ------
Total current assets.................. 177.5 19.4 34.7 (14.4) 217.2
Property and equipment, net........... 109.1 0.8 6.5 9.1(3) 125.5
Goodwill and other intangibles, net... 186.5 -- -- 59.4(4) 252.3
-- -- -- 6.4(5) --
Other assets.......................... 7.7 1.0 2.2 -- 10.9
------ ------ ------ ------ ------
TOTAL ASSETS.......................... $480.8 $ 21.2 $ 43.4 $ 60.5 $605.9
====== ====== ====== ====== ======
Operating lines of credit............. $ -- $ 9.9 $ -- $ (9.9)(6) $ --
Accounts payable...................... 60.2 6.7 1.3 0.7(7) 68.9
Accrued liabilities................... 17.0 -- 4.5 -- 21.5
Current portion of debt............... 11.9 0.4 0.3 (1.8)(6) 10.8
------ ------ ------ ------ ------
Total current liabilities............. 89.1 17.0 6.1 (11.0) 101.2
Long-term portion of debt............. 129.3 -- 1.4 88.3(6) 219.0
Deferred taxes........................ 12.0 (0.3) -- 0.2(2) 11.9
Other liabilities..................... 1.5 0.8 -- -- 2.3
------ ------ ------ ------ ------
TOTAL LIABILITIES..................... 231.9 17.5 7.5 77.5 334.4
Convertible preferred stock, Series
A................................... 14.0 -- -- -- 14.0
Convertible preferred stock, Series
B................................... 19.0 -- -- -- 19.0
Common stock, warrants and additional
paid-in-capital..................... 246.3 0.1 0.4 19.3(8) 266.1
Retained earnings (accumulated
deficit)............................ (30.4) 3.6 35.5 0.2(2) (27.6)
-- -- -- (36.5)(9) --
------ ------ ------ ------ ------
TOTAL SHAREHOLDERS' EQUITY............ 248.9 3.7 35.9 (17.0) 271.5
------ ------ ------ ------ ------
TOTAL LIABILITIES AND EQUITY.......... $480.8 $ 21.2 $ 43.4 $ 60.5 $605.9
====== ====== ====== ====== ======
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
46
<PAGE> 54
METAL MANAGEMENT, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS)
The unaudited pro forma condensed consolidated balance sheet at March 31,
1998 reflects the Pro Forma Balance Sheet Transactions as if these transactions
had occurred on March 31, 1998.
The Company's merger with Bluestone is being accounted for under the
pooling-of-interests method. Accordingly, except for pro forma adjustments to
conform accounting policies (as described below), no other pro forma adjustments
are required as Bluestone's historical results will be combined with the
Company.
The purchase consideration for Naporano is comprised of the following:
<TABLE>
<S> <C>
Shares of MTLM restricted Common Stock issued............... 1,938,879
Cash payment................................................ $ 84.0
Value of restricted Common Stock issued..................... 19.7
Cash payment for acquisition costs.......................... 0.7
----------
Total estimated consideration............................... $ 104.4
==========
</TABLE>
The estimated purchase consideration for Naporano is allocated for pro
forma purposes as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 34.7
Noncurrent assets........................................... 17.8
Current liabilities......................................... (6.1)
Long term debt/other liabilities............................ (1.4)
Goodwill.................................................... 59.4
----------
$ 104.4
==========
</TABLE>
The above allocation of the estimated purchase consideration is preliminary
and may change upon final determination of the fair value of assets acquired and
liabilities assumed. Goodwill is being amortized over 40 years.
(1) Reflects the following:
<TABLE>
<S> <C>
Total sources:
Proceeds of the Old Notes............................ $ 180.0
Borrowings on Senior Credit Facility................. 28.2
----------
208.2
----------
Total uses:
Cash consideration paid to the former shareholders of
Naporano in partial consideration for all the stock
of Naporano......................................... (84.0)
Repayment of existing lines of credit................ (9.9)
Repayment of existing debt........................... (109.8)
Repayment of debt assumed in connection with the
merger with Bluestone and acquisition of Naporano... (11.9)
Prepayment penalties incurred with the repayment of
existing debt, net of taxes......................... (1.0)
Estimated transaction fees for the Old Notes......... (6.4)
----------
(223.0)
----------
$ (14.8)
==========
</TABLE>
47
<PAGE> 55
METAL MANAGEMENT, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS)
(2) Reflects the adjustment of inventory valuation for Bluestone from a LIFO
basis to a FIFO basis to conform to the Company's accounting policy for
inventory valuation. Also, reflects the deferred tax and retained earnings
impact of the change in inventory valuation.
(3) Reflects the write-up of fixed assets purchased from Naporano to estimated
fair market value.
(4) Reflects goodwill, net of transaction costs already capitalized, related to
the acquisition of Naporano.
(5) Reflects the debt issuance costs incurred for the Old Notes. These costs are
being amortized over the 10 year life of the Notes.
(6) Reflects the following:
<TABLE>
<S> <C>
Repayment of existing current portion of debt.......... $ (1.8)
----------
Repayment of existing operating lines of credit........ (9.9)
----------
Repayment of existing long-term portion of debt........ (119.9)
Outstanding balance of the Old Notes issued in the
Offering.............................................. 180.0
Borrowings on Senior Credit Facility................... 28.2
----------
Net adjustment to long-term portion of debt............ 88.3
----------
$ 76.6
==========
</TABLE>
(7) Reflects estimated remaining transaction costs to be incurred related to the
acquisition of Naporano.
(8) Reflects the following:
<TABLE>
<S> <C>
Issuance of approximately 1.9 million shares of
restricted Common Stock to the shareholders of
Naporano in partial consideration for all the common
stock of Naporano. The Company has agreed to register
the Common Stock within 30 days. Therefore, the Common
Stock was valued at approximately the closing stock
price of $10.69 on June 30, 1998...................... $ 19.7
The elimination of common stock and additional paid in
capital of Naporano................................... (0.4)
----------
$ 19.3
==========
</TABLE>
(9) Reflects the following:
<TABLE>
<S> <C>
Elimination of retained earnings of Naporano........... $ (35.5)
In connection with the repayment of certain bank debt,
the Company incurred approximately $1.0 million, net
of income taxes, of one-time prepayment penalties. The
prepayment penalties will be recorded as an
extraordinary charge during the first quarter of
fiscal 1999........................................... (1.0)
----------
$ (36.5)
==========
</TABLE>
48
<PAGE> 56
METAL MANAGEMENT, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
BLUESTONE
AND
PRO FORMA
OPERATING
STATEMENT
ACQUISITIONS PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------ ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales.............................. $479.7 $540.3(1) $ -- $ 1,020.0
Cost of sales.......................... 431.9 491.0(2) 1.2(9) 924.1
------ ------ ------ ---------
Gross profit........................... 47.8 49.3 (1.2) 95.9
General and administrative expenses.... 24.4 29.4(3) (1.1)(10) 52.7
Depreciation and amortization.......... 10.0 5.2(4) 2.7(11) 17.9
Non-recurring expenses................. 33.7 -- -- 33.7
------ ------ ------ ---------
Operating profit (loss) from continuing
operations........................... (20.3) 14.7 (2.8) (8.4)
Income (loss) from joint ventures...... 0.1 (0.3)(5) -- (0.2)
Other income, net...................... 0.2 1.8(6) -- 2.0
------ ------ ------ ---------
Income (loss) from continuing
operations before interest expense
and income taxes..................... (20.0) 16.2 (2.8) (6.6)
Interest expense....................... 9.0 5.1(7) 9.8(12) 23.9
------ ------ ------ ---------
Income (loss) from continuing
operations before income taxes....... (29.0) 11.1 (12.6) (30.5)
Provision (benefit) for income taxes... (0.4) 2.0(8) (2.2)(13) (0.6)
------ ------ ------ ---------
Net income (loss) from continuing
operations........................... (28.6) 9.1 (10.4) (29.9)
Preferred stock dividends.............. 7.1 -- -- 7.1
------ ------ ------ ---------
Net income (loss) from continuing
operations applicable to Common
Stock................................ $(35.7) $ 9.1 $(10.4) $ (37.0)
====== ====== ====== =========
Weighted average shares outstanding.... 19.7 n/a 16.7(14) 36.4
Basic loss from continuing operations
applicable to Common Stock........... $(1.81) n/a $(0.62) $ (1.02)
====== ====== ====== =========
Diluted loss from continuing operations
applicable to Common Stock........... $(1.81) n/a $(0.62) $ (1.02)
====== ====== ====== =========
OTHER FINANCIAL DATA:
Adjusted EBITDA (15)................... $ 23.5 $ 19.6 $ -- $ 43.1
====== ======
Adjustments............................ (0.1) (0.1)
------ ---------
Pro Forma Adjusted EBITDA.............. $ (0.1) $ 43.0
====== =========
</TABLE>
See notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
49
<PAGE> 57
METAL MANAGEMENT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS)
The unaudited pro forma condensed consolidated statement of operations for
the fiscal year ended March 31, 1998 reflects the Offering, the application of
the net proceeds therefrom, borrowings under the Senior Credit Facility and the
application of net proceeds therefrom, the merger with Bluestone, the Pro Forma
Operating Statement Acquisitions and certain other transactions described below
as if such transactions had occurred on April 1, 1997.
The unaudited Bluestone Historical and Pro Forma Operating Statement
Acquisitions historical information for each period includes historical
information of the Pro Forma Operating Statement Acquisitions through each
respective acquisition date (see introduction to "Pro Forma Financial Data") as
follows:
<TABLE>
<S> <C>
(1) Reflects the historical net sales for:
Reserve Iron & Metal.............................. $ 9.3
Isaac Group....................................... 46.0
Proler Southwest.................................. 13.5
Cozzi Iron & Metal................................ 173.8
Aerospace......................................... 44.4
Bluestone......................................... 90.3
Naporano.......................................... 163.0
------
$540.3
======
(2) Reflects the historical cost of sales for:
Reserve Iron & Metal.............................. $ 8.4
Isaac Group....................................... 44.6
Proler Southwest.................................. 11.1
Cozzi Iron & Metal................................ 162.1
Aerospace......................................... 38.8
Bluestone......................................... 85.1
Naporano.......................................... 140.9
------
$491.0
======
(3) Reflects the historical general and administrative
expenses for:
Reserve Iron & Metal.............................. $ 0.5
Isaac Group....................................... 3.4
Proler Southwest.................................. 1.9
Cozzi Iron & Metal................................ 5.9
Aerospace......................................... 3.1
Bluestone......................................... 3.7
Naporano.......................................... 10.9
------
$ 29.4
======
</TABLE>
50
<PAGE> 58
METAL MANAGEMENT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS--(CONTINUED)
(DOLLARS IN MILLIONS)
<TABLE>
<S> <C>
(4) Reflects the historical depreciation and amortization
expense for:
Reserve Iron & Metal.............................. $ 0.2
Isaac Group....................................... 0.4
Proler Southwest.................................. 0.1
Cozzi Iron & Metal................................ 1.9
Aerospace......................................... 0.5
Bluestone......................................... 0.2
Naporano.......................................... 1.9
------
$ 5.2
======
(5) Reflects the historical income (loss) from joint
ventures for:
Cozzi Iron & Metal................................ $ (0.7)
Bluestone......................................... 0.2
Naporano.......................................... 0.2
------
$ (0.3)
======
(6) Reflects the historical other income for:
Proler Southwest.................................. $ 0.1
Cozzi Iron & Metal................................ 0.5
Aerospace......................................... 0.2
Bluestone......................................... 0.2
Naporano.......................................... 0.8
------
$ 1.8
======
(7) Reflects the historical interest expense for:
Reserve Iron & Metal.............................. $ 0.2
Isaac Group....................................... 0.7
Proler Southwest.................................. 0.1
Cozzi Iron & Metal................................ 2.8
Aerospace......................................... 0.1
Bluestone......................................... 1.0
Naporano.......................................... 0.2
------
$ 5.1
======
(8) Reflects the historical income tax expense for:
Proler Southwest.................................. $ 0.2
Cozzi Iron & Metal................................ 0.5
Aerospace......................................... 0.9
Bluestone......................................... 0.3
Naporano.......................................... 0.1
------
$ 2.0
======
</TABLE>
The following reflects pro forma adjustments to the Company's condensed
consolidated statement of operations giving effect to the Offering and
borrowings under the Senior Credit Facility, the application of net proceeds
therefrom, the merger with Bluestone, the Pro Forma Operating Statement
Acquisitions and certain other equity transactions described below as if such
transactions had occurred on April 1, 1997.
51
<PAGE> 59
METAL MANAGEMENT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS--(CONTINUED)
(DOLLARS IN MILLIONS)
<TABLE>
<S> <C>
(9) Reflects the following:
Adjustment of the Isaac Group's LIFO cost of goods
sold to a FIFO basis to conform to the Company
policy for inventory valuation.................... $ (0.2)
Adjustment of Aerospace's LIFO cost of goods sold
to a FIFO basis to conform to the Company policy
for inventory valuation........................... 0.3
Adjustment of Bluestone's LIFO cost of goods sold
to a FIFO basis to conform to the Company policy
for inventory valuation........................... 0.9
Adjustment to reflect lease expense on Aerospace's
real property which the Company is leasing under a
10 year lease agreement........................... 0.2
------
$ 1.2
======
(10) Reflects the contractual reduction in compensation
expense for the former shareholders
of the Pro Forma Operating Statement Acquisitions
who have signed new employment agreements with the
Company:
Isaac Group....................................... $ (0.2)
Proler Southwest.................................. (0.3)
Aerospace......................................... (0.6)
------
$ (1.1)
======
(11) Reflects the following adjustments to conform
depreciation policies to the Company's
policy and record additional depreciation expense
on the fair value of fixed assets acquired:
Adjustment to eliminate accelerated depreciation
expense recognized by the following:
Reserve Iron & Metal.............................. $ (0.2)
Isaac Group....................................... (0.4)
Cozzi Iron & Metal................................ (1.9)
Naporano.......................................... (1.8)
------
Subtotal.......................................... $ (4.3)
------
Adjustment to record depreciation expense based on
the straight-line method based on the fair market
value of fixed assets, using an average useful life
of 30 years for buildings and improvements and 7 to
19 years for machinery and equipment, for the
following:
Reserve Iron & Metal.............................. $ 0.1
Isaac Group....................................... 0.4
Cozzi Iron & Metal................................ 1.3
Naporano.......................................... 1.7
------
Subtotal.......................................... $ 3.5
------
Adjustment to record incremental depreciation expense
for those companies already using the straight-line
depreciation method based on the fair market value
of fixed assets, using an average useful life of 30
years for buildings and improvements and 7 to 19
years for machinery and equipment, for the
following:
Proler Southwest.................................. $ 0.2
Aerospace......................................... 0.2
------
Subtotal.......................................... $ 0.4
------
Adjustment to eliminate depreciation expense on the
Aerospace real estate which was not acquired by the
Company:
Subtotal.......................................... $ (0.1)
------
</TABLE>
52
<PAGE> 60
METAL MANAGEMENT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS--(CONTINUED)
(DOLLARS IN MILLIONS)
<TABLE>
<S> <C>
Adjustment to eliminate goodwill amortization on intangible assets of Cozzi Iron & Metal which
were not acquired by the Company:
Subtotal..................................................................................... $ (0.1)
---------
Adjustment to record goodwill and intangible amortization associated with the acquisitions of
the following:
Isaac Group.................................................................................. 0.4
Proler Southwest............................................................................. 0.3
Cozzi Iron & Metal........................................................................... 1.1
Aerospace.................................................................................... 0.1
Naporano..................................................................................... 1.4
---------
Subtotal..................................................................................... $ 3.3
---------
TOTAL........................................................................................ $ 2.7
=========
(12) Reflects the following:
Adjustment to record amortization of debt issuance costs of $6.8 million over the 10 year life
of the Notes................................................................................... $ 0.6
Adjustment to reverse interest expense recognized on notes payable issued to the former limited
partners of Reserve Iron & Metal which were converted into Common Stock........................ (0.1)
Adjustment to eliminate historical interest expense on debt repaid.............................. (12.8)
Adjustment to record interest expense on the $180 million of Notes at an annual interest rate of
10.0%.......................................................................................... 18.0
Adjustment to record interest expense on $21.6 million of notes payable to the former
shareholders of the Isaac Group at 8.5%........................................................ 1.8
Adjustment to record interest expense on borrowings on the Senior Credit Facility at 8.0%....... 2.3
---------
TOTAL........................................................................................ $ 9.8
=========
(13) Adjustment to record income taxes on Reserve Iron & Metal, the Isaac Group, Naporano and the tax
effects of deductible pro forma adjustments at an estimated statutory rate of 40.95%........... $ (2.2)
=========
(14) Reflects the following:
Adjustment to weighted average shares outstanding to reflect incremental shares issued with each
respective acquisition and other issuances of Common Stock
Isaac Group.................................................................................. $ 0.4
Proler Southwest............................................................................. 0.7
Cozzi Iron & Metal........................................................................... 7.7
Aerospace.................................................................................... 0.3
Bluestone.................................................................................... 1.0
Naporano..................................................................................... 1.9
Other issuances of Common Stock.............................................................. 3.0
---------
Subtotal..................................................................................... 15.0
---------
In April and May 1997, the Company completed a private offering of 2,025,000 shares of Common
Stock at $7.25 per share. Adjustment to reflect the incremental shares issued for each
respective period:
Subtotal..................................................................................... 0.3
---------
</TABLE>
53
<PAGE> 61
METAL MANAGEMENT, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS--(CONTINUED)
(DOLLARS IN MILLIONS)
<TABLE>
<S> <C>
On December 18, 1997, the Company completed a private
offering of 1,470,588 shares of Common Stock to
Samstock, L.L.C. Adjustment to reflect the
incremental shares issued:
Subtotal.......................................... 1.4
------
TOTAL............................................. 16.7
======
(15) Adjusted EBITDA represents earnings before interest
expense, income expense, income taxes, depreciation,
and amortization. Adjusted EBITDA also excludes
non-operating income and expense and non-recurring
charges. Adjusted EBITDA is presented because it is
commonly used as by certain investors to analyze and
compare operating performance and to determine a
company's ability to serve and/or incur debt. However,
Adjusted EBITDA should not be considered in isolation
or as a substitute for net income, cash flows or other
income or cash flow data presented in accordance with
generally accepted accounting principles or as a
measure of a company's profitability of liquidity.
</TABLE>
54
<PAGE> 62
THE COMPANY
Metal Management is one of the largest and fastest-growing full service
metals recyclers in the United States, with 59 recycling facilities in 14
states. The Company is a leading consolidator in the metals recycling industry
and has achieved this position primarily through the implementation of its
national strategy of completing and integrating regional acquisitions. The
Company believes that its consolidation strategy will enhance the competitive
position and profitability of the operations that it acquires through improved
managerial and financial resources and increased economies of scale.
Metal Management is primarily engaged in the collection and processing of
ferrous and non-ferrous metals for resale to metals brokers, steel producers,
and producers and processors of other metals. The Company collects industrial
scrap and obsolete scrap, processes it into reusable forms, and supplies the
recycled metals to its customers, including mini-mills, integrated steel mills,
foundries and metals brokers. The Company believes that it provides one of the
most comprehensive offerings of both ferrous and non-ferrous scrap metals in the
industry. The Company's ferrous products primarily include shredded, sheared,
hot briquetted, cold briquetted and bundled scrap and broken furnace iron. The
Company also processes non-ferrous metals, including aluminum, copper, stainless
steel, brass, titanium and high-temperature alloys, using similar techniques and
through application of the Company's proprietary technologies. For the year
ended March 31, 1998, the Company sold or brokered approximately 3.1 million
tons of ferrous scrap and approximately 178.1 million pounds of non-ferrous
scrap.
The Company's predecessor was incorporated on September 24, 1981 as a
California corporation under the name General Parametrics Corporation, and was
re-incorporated as a Delaware corporation in June 1986 under the same name.
Prior to April 1996, the Company manufactured and marketed color thermal and dye
sublimation printers and related consumables, including ribbons, transparencies
and paper. The Company sold this business in two separate transactions in July
and December of 1996 for $1.3 million in cash and future royalty streams which
the Company does not anticipate will result in material payments to the Company.
On April 12, 1996, the Company changed its name to "Metal Management, Inc."
The Common Stock is traded on NASDAQ under the trading symbol "MTLM". The
Company's principal executive offices are located at 500 North Dearborn Street,
Suite 405, Chicago, Illinois 60610, and its telephone number is (312) 645-0700.
RECENT DEVELOPMENTS
On July 1, 1998, the Company acquired all of the outstanding capital stock
of Naporano, which has recycling facilities in Newark, New Jersey. The purchase
price was approximately $84.0 million in cash (of which $75.0 million was
financed through borrowings under the Senior Credit Facility) and approximately
1,900,000 shares of restricted Common Stock.
On July 1, 1998, the Company acquired substantially all of the scrap metal
recycling assets of Schiavone, which has recycling facilities in North Haven,
Connecticut. The purchase price was approximately $21.0 million in cash (all of
which was financed through borrowings under the Senior Credit Facility) and
approximately 436,000 shares of restricted Common Stock.
On July 8, 1998, the Company acquired the assets and operations of
Kimerling, which has recycling facilities in Birmingham, Alabama. The purchase
price was approximately $46.4 million in cash (all of which was financed through
borrowings under the Senior Credit Facility) and 650,000 shares of restricted
Common Stock.
55
<PAGE> 63
DESCRIPTION OF THE SENIOR CREDIT FACILITY
On March 31, 1998, the Company and its subsidiaries entered into a credit
facility (the "Senior Credit Facility") with BT Commercial Corporation, as agent
for the lenders (the "Agent"), and certain commercial lending institutions. The
Senior Credit Facility originally provided for a revolving credit and letter of
credit facility of up to $200 million, subject to a borrowing base limitation as
described below. On June 19, 1998, the Senior Credit Facility was amended to
increase the maximum amount available under the facility to $250 million,
subject to the borrowing base limitation. The Senior Credit Facility terminates
on March 31, 2001. The Senior Credit Facility bears interest at a floating rate
per annum equal to (at the Company's option): (i) 1.75% over LIBOR or (ii) 0.5%
over Bankers Trust Company's prime rate as in effect from time to time. The
Senior Credit Facility is available for working capital and general corporate
purposes, including acquisitions. The Company and its subsidiaries are required
under the Senior Credit Facility to pay the Agent and the lenders certain fees
and expenses which include an unused line fee on a monthly basis. The
obligations of the Company and its subsidiaries under the Senior Credit Facility
are secured by a security interest in substantially all of the assets and
properties of the Company and its subsidiaries. Availability of loans and
letters of credit under the Senior Credit Facility is limited to a borrowing
base constituted of 85% of eligible accounts receivable, 70% of eligible
inventory and a $40 million fixed asset sublimit that amortizes on a quarterly
basis.
On April 1, 1998, the Company borrowed $106.8 million under the Senior
Credit Facility to: (i) repay outstanding secured debt of approximately $96.5
million; (ii) buyout operating leases of approximately $9.3 million; and (iii)
pay prepayment penalties of approximately $1.0 million, leaving the Company with
approximately $17.3 million available under the Senior Credit Facility as of
such date. On May 13, 1998, all indebtedness outstanding under the Senior Credit
Facility as of such date was repaid with proceeds from the Offering.
As of July 9, 1998, the Company had outstanding borrowings under the Senior
Credit Facility of $135.6 million and letters of credit outstanding in the
amount of $25.1 million (including $21.6 million supporting the Company's
obligations under the Isaac Notes), leaving the Company with approximately $44.0
million available under the Senior Credit Facility as of such date. Borrowings
outstanding under the Senior Credit Facility as of July 9, 1998 bore interest at
a rate of 9.0% per annum.
The Senior Credit Facility contains a number of covenants that, among other
things, restrict the ability of the Company to dispose of assets, incur
additional indebtedness, pay dividends or make distributions, create liens on
assets, enter into sale and leaseback transactions, make investments, loans or
advances, make acquisitions, engage in mergers or consolidations and form
subsidiaries and otherwise restrict certain corporate activities. In addition,
the Company is required to comply with specified financial ratios and tests.
The Senior Credit Facility contains various events of default, including
defaults relating to payments, breaches of representations, warranties and
covenants, certain events of bankruptcy and insolvency, defaults on certain
other indebtedness, certain liens and encumbrances on assets and certain changes
of control of the Company.
56
<PAGE> 64
DESCRIPTION OF THE NEW NOTES
GENERAL
The Old Notes were issued, and the New Notes will be issued, by the Company
pursuant to an Indenture (the "Indenture") among the Company, the Guarantors and
LaSalle National Bank, as trustee (the "Trustee"), in a private transaction that
is not subject to the registration requirements of the Securities Act. The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The Notes are subject to all such terms, and Holders of
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of certain provisions of the Indenture and the
Registration Rights Agreement does not purport to be complete and is qualified
in its entirety by reference to the Indenture and the Registration Rights
Agreement, including the definitions therein of certain terms used below. A copy
of the Indenture is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, and is incorporated by reference herein. The
definitions of certain terms used in the following summary are set forth below
under "--Certain Definitions". The term "Company" as used in this Description of
the New Notes refers only to Metal Management, Inc. and does not include any of
its Subsidiaries. Reference to the Notes include the New Notes and the Old Notes
unless the context otherwise requires.
The New Notes will be general unsecured obligations of the Company and will
be subordinated in right of payment to all Senior Debt of the Company, whether
outstanding on the date of the Indenture or incurred thereafter. See
"--Subordination". The New Notes will be issued solely in exchange for an equal
principal amount of outstanding Old Notes pursuant to the Exchange Offer. The
form and terms of the New Notes will be identical in all material respects to
the form and terms of the Old Notes, except that (i) the New Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof, (ii) holders of New Notes will not be entitled
to any Liquidated Damages thereon pursuant to certain circumstances under the
Registration Rights Agreement and (iii) holders of New Notes will no longer be
entitled to certain other rights under the Registration Rights Agreement. The
New Notes will be issued only in fully registered form without coupons, in
denominations of $1,000 and integral multiples thereof. Principal of, premium,
if any, and interest on the Notes are payable, and the Notes are exchangeable
and transferable, at the office or agency of the Company in the City of New York
maintained for such purposes (which initially will be the corporate trust office
of the Trustee). See "--Form, Denomination, Transfer, Exchange and Book-Entry
Procedures." No service charge will be made for any registration of transfer,
exchange or redemption of the Notes, except in certain circumstances for any tax
or other governmental charge that may be imposed in connection therewith.
The Company's obligations under the New Notes will be unconditionally
guaranteed on an unsecured, senior subordinated basis, jointly and severally, by
each of the current Subsidiaries of the Company and each future Subsidiary of
the Company (other than Foreign Subsidiaries) that is material to the Company or
becomes a borrower under the Senior Credit Facility. See "--Subsidiary
Guarantees". As of the date of this Prospectus, all of the Company's
Subsidiaries were Restricted Subsidiaries. However, under certain circumstances,
the Company will be able to designate current or future Subsidiaries as
Unrestricted Subsidiaries.
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $300.0 million,
of which $180.0 million principal amount was offered in the Offering, and will
mature on May 15, 2008. Interest on the Notes will accrue at the rate of 10% per
annum and will be payable in cash semi-annually in arrears on each May 15 and
November 15, commencing on November 15, 1998, to Holders of record on the
immediately preceding May 1 and November 1. Interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the date of original issuance. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. Principal, interest,
premium and Liquidated Damages, if any, on the Notes will be payable at the
office or agency of the Company maintained for such purpose within the City and
State of New York or, at the option of the Company, payment of interest and
Liquidated Damages, if any, may be made by check mailed to the Holders of the
Notes at their respective addresses set
57
<PAGE> 65
forth in the register of Holders of Notes; provided that all payments with
respect to Global Notes and definitive notes the Holders of which have given
written wire transfer instructions to the Company will be required to be made by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof. Until otherwise designated by the Company, the Company's office
or agency in New York will be the office of the Trustee maintained for such
purpose. The New Notes will be issued in minimum denominations of $1,000 and
integral multiples thereof.
SETTLEMENT AND PAYMENT
Payments by the Company in respect of the New Notes (including principal,
interest, premium and Liquidated Damages, if any) will be made in immediately
available funds. The New Notes are expected to be eligible to trade in the
PORTAL market and to trade in the Depositary's Same-Day Funds Settlement System,
and any permitted secondary market trading activity in the Notes will,
therefore, be required by the Depositary to be settled in immediately available
funds. No assurance can be given as to the effect, if any, of such settlement
arrangements on trading activity in the Notes.
Because of time zone differences, the securities account of a Euroclear or
CEDEL participant purchasing an interest in a Global Note from a Participant (as
defined herein) in DTC will be credited, and any such crediting will be reported
to the relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear and CEDEL)
immediately following the settlement date of DTC. DTC has advised the Company
that cash received in Euroclear or CEDEL as a result of sales of interests in a
Global Note by or through a Euroclear or CEDEL participant to a Participant in
DTC will be received with value on the settlement date of DTC but will be
available in the relevant Euroclear or CEDEL cash account only as of the
business day for Euroclear or CEDEL following DTC's settlement date.
SUBORDINATION
The payment of principal of, interest, premium and Liquidated Damages, if
any, on, and all other Obligations in respect of, the Notes will be subordinated
in right of payment, in certain circumstances as set forth in the Indenture, to
the prior payment in full in cash or Cash Equivalents of all Senior Debt,
whether outstanding on the date of the Indenture or thereafter incurred.
The Indenture provides that, upon any distribution to creditors of the
Company in a liquidation or dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property, an assignment for the benefit of creditors or any
marshaling of the Company's assets and liabilities, the holders of Senior Debt
will be entitled to receive payment in full in cash or Cash Equivalents of all
Obligations due in respect of such Senior Debt (including interest after the
commencement of any such proceeding at the rate specified in the documents
relating to the applicable Senior Debt, whether or not the claim for such
interest is allowed as a claim in such proceeding) before the Holders of Notes
will be entitled to receive any payment on account of any Obligations with
respect to the Notes, and until all Obligations with respect to Senior Debt are
paid in full in cash or Cash Equivalents, any distribution to which the Holders
of Notes would be entitled will be made to the holders of Senior Debt (except
that Holders of Notes may receive Permitted Junior Securities and payments made
from the trust described below under "--Legal Defeasance and Covenant
Defeasance").
The Indenture also provides that the Company may not make any payment on
account of any Obligations in respect of the Notes (except in Permitted Junior
Securities or from the trust described below under "--Legal Defeasance and
Covenant Defeasance") if (i) a default in the payment of the principal of,
premium, if any, or interest on Designated Senior Debt occurs and is continuing,
or any judicial proceeding is pending to determine whether any such default has
occurred, or (ii) any other default occurs and is continuing with respect to
Designated Senior Debt that permits, or would permit, with the passage of time
or the giving of notice or both, holders of the Designated Senior Debt as to
which such default relates to accelerate its maturity and the Trustee receives a
notice of such default (a "Payment Blockage Notice") from the Company or the
holders of any Designated Senior Debt. Payments on the Notes may and shall be
resumed (a) in the case of a payment default, upon the date on which such
default is cured or waived or shall have ceased to exist,
58
<PAGE> 66
unless another default, event of default or other event that would prohibit such
payment shall have occurred and be continuing, or all Obligations in respect of
such Designated Senior Debt shall have been paid in full in cash or Cash
Equivalents and (b) in case of a nonpayment default, the earlier of the date on
which such nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received by the Trustee. No new
period of payment blockage may be commenced unless and until 360 days have
elapsed since the first day of effectiveness of the immediately prior Payment
Blockage Notice. No nonpayment default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such default
shall have been subsequently cured or waived for a period of not less than 180
days.
The Indenture further requires that the Company promptly notify holders of
Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. See "Risk
Factors--Subordination". On a pro forma basis, after giving effect to the
Offering, the application of the net proceeds therefrom and certain other
transactions described in the notes to the Pro Forma Financial Data, the Company
would have had $49.8 million of Senior Debt outstanding at March 31, 1998. The
Indenture limits, subject to certain financial tests, the amount of additional
Indebtedness, including Senior Debt, that the Company and its Restricted
Subsidiaries can incur. See "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Disqualified Stock".
The New Notes will rank pari passu or senior in right of payment to all
Subordinated Indebtedness of the Company. At March 31, 1998, there was no
Subordinated Indebtedness outstanding.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the New Notes will be jointly and
severally guaranteed on a senior subordinated basis (the "Subsidiary
Guarantees") by the Guarantors, which currently consists of all of the Company's
Subsidiaries. The Subsidiary Guarantee of each Guarantor will be subordinated to
the prior payment in full of all Senior Debt of such Guarantor and the amounts
for which the Guarantors will be liable under the guarantees issued from time to
time with respect to Senior Debt. The obligations of each Guarantor under its
Subsidiary Guarantee will be limited so as not to constitute a fraudulent
conveyance under applicable law. See, however, "Risk Factors--Fraudulent
Conveyance".
The Indenture provides that, except for a merger of a Guarantor with and
into the Company or another Guarantor, no Guarantor may consolidate or merge
with or into (whether or not such Guarantor is the surviving Person) another
corporation, Person or entity unless (i) subject to the provisions of the
following paragraph, the Person formed by or surviving any such consolidation or
merger (if other than such Guarantor) assumes all the obligations of such
Guarantor pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee under the Notes and the Indenture; (ii) immediately
after giving effect to such transaction, no Default or Event of Default exists;
and (iii) the Company would be permitted to incur, immediately after giving
effect to such transaction, at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the covenant described
below under the caption "--Incurrence of Indebtedness and Issuance of
Disqualified Stock".
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "--Repurchase at
the Option of Holders--Asset Sales".
59
<PAGE> 67
OPTIONAL REDEMPTION
Except as described below, the Notes are not redeemable at the Company's
option prior to May 15, 2003. From and after May 15, 2003, the Notes will be
subject to redemption at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' written notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on May 15
of each of the years indicated below:
<TABLE>
<CAPTION>
PERCENTAGE OF
YEAR PRINCIPAL AMOUNT
---- ----------------
<S> <C>
2003........................................................ 105.000%
2004........................................................ 103.333%
2005........................................................ 101.667%
2006 and thereafter......................................... 100.000%
</TABLE>
Prior to May 15, 2001, the Company may, at its option, on any one or more
occasions, redeem up to 35% of the aggregate principal amount of Notes
originally offered in the Offering at a redemption price equal to 110% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the redemption date, with the net proceeds of one or
more sales of Common Stock; provided that at least 65% of the original aggregate
principal amount of Notes remains outstanding immediately after the occurrence
of each such redemption; and provided further, that any such redemption shall
occur within 60 days of the date of the closing of the corresponding sale of
Common Stock. For purposes of this section, a repurchase by the Company or a
Restricted Subsidiary of the Notes in open market purchase transactions shall
not be deemed to be a redemption.
SELECTION AND NOTICE
Notices of redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each Holder of Notes to be
redeemed at such Holder's registered address. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Note. On and after the
redemption date, unless the Company defaults in payment of the redemption price,
interest ceases to accrue on Notes or portions of Notes called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders",
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (of at least
$1,000 principal amount or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash (the "Change of Control Payment") equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of purchase. Within 30 days
following any Change of Control, the Company will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase Notes pursuant to the procedures required by the
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
60
<PAGE> 68
The Indenture provides that, prior to complying with the provisions of this
covenant, but in any event within 30 days following a Change of Control, the
Company will either repay in full in cash or Cash Equivalents all outstanding
amounts under the Senior Credit Facility or offer to repay in full in cash or
Cash Equivalents all outstanding amounts under the Senior Credit Facility and
repay the Obligations held by each lender under the Senior Credit Facility who
has accepted such offer or obtain the requisite consents, if any, under the
Senior Credit Facility to permit the repurchase of the Notes required by this
covenant.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee for cancellation the Notes so accepted together with an Officer's
Certificate stating the aggregate principal amount of Notes or portions thereof
being purchased by the Company. The Paying Agent will promptly mail to each
Holder of Notes so tendered the Change of Control Payment for such Notes, and
the Trustee will promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided that each such
new Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Company will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The existence of a Holder's right to require the Company to repurchase such
Holder's Notes upon the occurrence of a Change of Control may deter a third
party from seeking to acquire the Company in a transaction that would constitute
a Change of Control.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, cause or make an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value (evidenced by a resolution of the Board of Directors, which in the case of
an Asset Sale with a Fair Market Value exceeding $5 million, shall be set forth
in an Officer's Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash or Cash Equivalents; provided that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet) of the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Company
or such Restricted Subsidiary from further liability and (y) any notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are immediately converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received), shall be deemed to be
cash for purposes of this provision.
Within 270 days after the Company's or any Restricted Subsidiary's receipt
of the Net Proceeds of any Asset Sale, the Company or such Restricted
Subsidiary, at its option, may apply (or, in the case of clause (ii) or (iii)
below, enter into a binding, definitive agreement within such time period to
apply) the Net Proceeds from such Asset Sale (i) to permanently reduce
Obligations under the Senior Credit Facility (and to correspondingly reduce
commitments with respect thereto) or other Senior Debt or Pari Passu
Indebtedness,
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(ii) to the acquisition of a controlling interest in any one or more businesses,
to the making of a capital expenditure (including the construction or
improvement of properties and capital assets) or the acquisition of long-term
assets, in each case, that is engaged in or that is used or useful in a
Principal Business and/or (iii) to an investment in properties or assets that
replace the properties and assets that are the subject of such Asset Sale.
Pending the final application of any such Net Proceeds, the Company or such
Restricted Subsidiary may temporarily reduce Indebtedness under a revolving
credit facility, if any, or otherwise invest such Net Proceeds in Cash
Equivalents. The Indenture will provide that any Net Proceeds from the Asset
Sale that are not invested as provided and within the time period set forth in
the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds". When the aggregate amount of Excess Proceeds exceeds $10.0 million,
the Company will be required to make an offer to all Holders of Notes (an "Asset
Sale Offer") to purchase the maximum principal amount of Notes, that is an
integral multiple of $1,000, that may be purchased out of the Excess Proceeds at
an offer price in cash in an amount equal to 100% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date fixed for the closing of such offer, in accordance with the
procedures set forth in the Indenture. The Company will commence an Asset Sale
Offer with respect to Excess Proceeds within ten business days after the date
that the aggregate amount of Excess Proceeds exceeds $10.0 million by mailing
the notice required pursuant to the terms of the Indenture, with a copy to the
Trustee. To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for any purpose not prohibited by the Indenture. If
the aggregate principal amount of Notes surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Upon completion of any such Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of an Asset Sale.
The Senior Credit Facility currently prohibits the Company from purchasing
any Notes under certain circumstances, and also provides that certain change of
control events with respect to the Company would constitute a default
thereunder. Any future credit agreements or other agreements relating to Senior
Debt to which the Company becomes a party may contain similar restrictions and
provisions. In the event a Change of Control occurs or an Asset Sale Offer is
required to be made at a time when the Company is prohibited from purchasing
Notes, the Company could seek the consent of the lenders under the Senior Credit
Facility or such future agreements relating to Senior Debt to the purchase of
Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Company's failure to make such offer or to purchase tendered Notes
would constitute an Event of Default under the Indenture. See "--Events of
Defaults and Remedies".
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any other payment or distribution on account of the
Company's Equity Interests (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company); (ii) purchase,
redeem, defease or otherwise acquire or retire for value any Equity Interests of
the Company or any direct or indirect parent of the Company; (iii) make any
principal payment on, or purchase, redeem, defease or otherwise acquire or
retire for value any Subordinated Indebtedness, except at final maturity or
scheduled installment or sinking fund payments; or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i) through
(iv) above being
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collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and
immediately after giving pro forma effect thereto as if such Restricted
Payment had been made at the beginning of the applicable four-quarter
period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
the first paragraph of the covenant described below under the caption
"--Incurrence of Indebtedness and Issuance of Disqualified Stock"; and
(c) the amount of such Restricted Payment, together with the
aggregate amount of all other Restricted Payments made by the Company and
its Restricted Subsidiaries after the date of the Indenture (including
Restricted Payments permitted by clauses (i), (vi) and (viii) of the next
succeeding paragraph, but excluding all other Restricted Payments permitted
by the next succeeding paragraph), is less than the sum of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the fiscal quarter immediately
following the date of the Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the Company from
the issue or sale since the date of the Indenture of Equity Interests of
the Company (including the net cash proceeds of any exercise or conversion
payments with respect to Equity Interests) or of Disqualified Stock or debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests, Disqualified Stock or convertible
debt securities of the Company sold to a Restricted Subsidiary of the
Company and other than Disqualified Stock or debt securities that have been
converted into Disqualified Stock), plus (iii) 100% of the aggregate
amounts contributed to the capital of the Company since the date of the
Indenture, plus (iv) to the extent that any Restricted Investment that was
made after the date of the Indenture was sold for cash or was repaid, the
lesser of (A) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (B) the initial
amount of such Restricted Investment, plus (v) without duplication, to the
extent that any Unrestricted Subsidiary is designated by the Company as a
Restricted Subsidiary, an amount equal to the lesser of (A) the net book
value of the Company's Investment in such Unrestricted Subsidiary at the
time of such designation and (B) the Fair Market Value of such Investment
at the time of such designation, plus (vi) 50% of any cash dividends
received by the Company or a Restricted Subsidiary of the Company (except
to the extent that such dividends were already included in Consolidated Net
Income and, in the case of a Restricted Subsidiary, only to the extent of
the Company's ownership interest in such Restricted Subsidiary) after the
date of the Indenture from an Unrestricted Subsidiary of the Company.
The foregoing provisions will not prohibit:
(i) the payment of any dividend or redemption payment within 60 days
after the date of declaration thereof, if at the date of declaration such
payment would have complied with the provisions of the Indenture;
(ii) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company or any Restricted Subsidiary or any
Subordinated Indebtedness of the Company in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of Equity Interests of the Company (other than
any Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement
or other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph;
(iii) the defeasance, redemption, repurchase, retirement or other
acquisition of Subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness;
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(iv) the redemption, repurchase, retirement or other acquisition of
Subordinated Indebtedness; provided that the aggregate price paid for all
such redemptions, repurchases, retirements or other acquisitions since the
date of the Indenture does not exceed the principal amount (or, in the case
of Indebtedness issued with original issue discount, the consideration
received by the Company or any Restricted Subsidiary) of such Subordinated
Indebtedness incurred by the Company or any of its Restricted Subsidiaries
since the date of the Indenture; and provided further, that the amount of
any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition shall be excluded from the
immediately preceding clause (iii) and from clause (c)(ii) of the preceding
paragraph;
(v) repurchases of Equity Interests deemed to occur upon exercise of
stock options if such Equity Interests represent a portion of the exercise
price of such options;
(vi) repurchases or redemptions of Equity Interests held by officers
or employees or former officers or employees of the Company or any
Restricted Subsidiary pursuant to any employment or other written
agreement, in an aggregate amount not to exceed $2 million in any fiscal
year, and any such repurchases or redemptions funded by life insurance
proceeds received by the Company upon the death of an insured officer or
employee;
(vii) the acquisition by the Company of Equity Interests previously
issued and delivered to an escrow agent pursuant to an escrow agreement or
previously issued but never delivered pursuant to contingent or "earn-out"
payments, in each case in connection with the acquisition agreements of the
Company or any Subsidiary;
(viii) the payment of any dividend on, or the redemption of, the
Company Preferred Stock, in each case in accordance with the terms thereof
as in effect on the date of the Indenture; provided that (other than in the
case of a dividend payable solely in Equity Interests of the Company) the
Fixed Charge Coverage Ratio for the Company for the most recently ended
four full fiscal quarters for which internal financial statements are
available immediately preceding the date of such payment, redemption,
repurchase, retirement or other acquisition would have been at least 2.0 to
1.0 determined on a pro forma basis, as if such payment, redemption,
repurchase, retirement or other acquisition, together with any other
payments, redemptions, repurchases, retirements and other acquisitions
permitted by this clause (viii) occurring during the preceding twelve-month
period, had occurred at the beginning of the applicable four-quarter
period;
(ix) guarantees of obligations of Unrestricted Subsidiaries or
Permitted Joint Ventures by the Company or a Restricted Subsidiary (other
than obligations constituting Indebtedness of the Company or a Restricted
Subsidiary) to the extent that a cash Investment by the Company or such
Restricted Subsidiary would be permitted in such Unrestricted Subsidiaries
under this covenant; provided, however, that the extension of any such
guarantees shall be deemed to be an Investment by the Company or such
Restricted Subsidiary in an amount equal to the obligations subject to the
guarantees and shall be deemed to be made at the time of such extension;
and
(x) the making of other Restricted Payments not to exceed $10 million
in the aggregate;
provided further, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (iv), (v), (viii) or (ix) above, no
Default or Event of Default shall have occurred and be continuing or would occur
as a consequence thereof; and provided further that for purposes of determining
the aggregate amount expended for Restricted Payments in accordance with clause
(c) of the immediately preceding paragraph, only the amounts expended under
clauses (i), (vi) and (viii) shall be included.
As of the date of this Prospectus, all of the Company's Subsidiaries are
Restricted Subsidiaries. The Company will not permit any Unrestricted Subsidiary
to become a Restricted Subsidiary except pursuant to the last sentence of the
definition of "Unrestricted Subsidiary." For purposes of designating any
Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments
by the Company and its Restricted Subsidiaries (except to the extent repaid) in
the Subsidiary so designated will be deemed to be Restricted Payments in an
amount equal to the Fair Market Value of such Investment at the time of such
designation.
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Such designation will only be permitted if a Restricted Payment in such amount
would be permitted to be made at such time and if such Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries
will not be subject to any of the restrictive covenants set forth in the
Indenture.
The amount of all Restricted Payments (other than cash) shall be the Fair
Market Value (evidenced by a resolution of the Board of Directors set forth in
an Officer's Certificate delivered to the Trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
Not later than the date of making any Restricted Payment with a Fair Market
Value in excess of $5 million, the Company shall deliver to the Trustee an
Officer's Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by the "Restricted
Payments" covenant were computed, which calculations may be based upon the
Company's latest available financial statements.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur" and
correlatively, an "incurrence" of) any Indebtedness (including Acquired Debt)
and that the Company will not issue any Disqualified Stock and will not permit
any of its Restricted Subsidiaries to issue any shares of Preferred Stock;
provided, however, that the Company may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio
for the Company for the most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date of
such incurrence would have been at least 2.0 to 1.0 determined on a Pro Forma
Basis.
The foregoing provisions will not apply to:
(a) the incurrence by the Company or any of its Restricted
Subsidiaries of indebtedness under the Senior Credit Facility and
Guarantees thereof by the Guarantors so long as, immediately after any such
incurrence, the aggregate principal amount outstanding under the Senior
Credit Facility (together with any Permitted Refinancing Indebtedness
incurred to refund, replace or refinance any Indebtedness incurred pursuant
to the Senior Credit Facility) pursuant to this paragraph (a) does not
exceed an amount equal to the greater of (x) $200.0 million, less the
aggregate amount of all Loan Reductions and (y) the sum of (i) 85% of the
consolidated book value of the accounts receivable of the Company and its
Restricted Subsidiaries, (ii) 70% of the consolidated book value of the
inventory of the Company and its Restricted Subsidiaries and (iii) the
orderly liquidation value of the Company's property, plant and equipment
(initially $40 million), subject to automatic and permanent reduction by
$1.4 million each quarter, commencing July 1, 1998, and subject to
increases (but not in excess of $40 million) based on increases in the
orderly liquidation value of the Company's property, plant and equipment
resulting from acquisitions completed by the Company (as set forth in the
appraisals accepted by the agent under the Senior Credit Facility and
provided that the automatic and permanent reduction described above shall
be increased by the amount of any such increase divided by 28); provided,
however, that in no event may the aggregate principal amount outstanding
under the Senior Credit Facility pursuant to this paragraph (a) exceed
$300.0 million; and provided, further, that the amount of Indebtedness
which may be incurred under the Senior Credit Facility pursuant to this
paragraph (a) shall be reduced by the principal amount of any Acquired Debt
incurred solely pursuant to paragraph (j) below;
(b) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by the Notes and the Subsidiary
Guarantees in an amount not to exceed $180.0 million;
(c) Guarantees by the Company or a Guarantor of Indebtedness incurred
by the Company or a Restricted Subsidiary of the Company so long as the
incurrence of such Indebtedness by the primary obligor thereon was
permitted under the terms of the Indenture;
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(d) the incurrence by the Company or a Restricted Subsidiary of the
Company of intercompany Indebtedness between or among the Company and any
of its Restricted Subsidiaries; provided, however, that (i) all such
intercompany Indebtedness is expressly subordinate to the prior payment in
full of all Obligations with respect to the Notes and the Subsidiary
Guarantees and (ii)(A) any subsequent issuance or transfer of Equity
Interests that results in any such intercompany Indebtedness being held by
a Person other than the Company or a Restricted Subsidiary and (B) any sale
or transfer of any such intercompany Indebtedness to a Person that is not
either the Company or a Restricted Subsidiary of the Company shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by
the Company or such Restricted Subsidiary, as the case may be, that is not
permitted by this clause (d);
(e) the incurrence by the Company or any Restricted Subsidiary of
Indebtedness (including reimbursement obligations relating thereto) in
respect of bid, payment or performance bonds, bankers' acceptances, letters
of credit and surety or appeal bonds, or guarantees of such obligations of
others, in the ordinary course of business;
(f) the issuance by a Restricted Subsidiary of the Company of any
shares of Preferred Stock to the Company or any of its Restricted
Subsidiaries, provided, however, that (i) all such Preferred Stock is
expressly subordinate to the prior payment in full of all Obligations with
respect to the Notes and the Subsidiary Guarantees and (ii) (A) any
subsequent issuance or transfer of Equity Interests that results in any
such Preferred Stock being held by a Person other than the Company or a
Restricted Subsidiary and (B) any sale or transfer of any such shares of
Preferred Stock to a Person that is not either the Company or a Restricted
Subsidiary of the Company shall be deemed, in each case, to constitute an
issuance of such Preferred Stock by such Restricted Subsidiary that is not
permitted by this clause (f);
(g) Hedging Obligations of the Company or a Restricted Subsidiary
that are incurred (1) for the purpose of fixing or hedging interest rate
risk with respect to any Indebtedness that is permitted by the terms of the
Indenture to be outstanding or (2) for the purpose of fixing or hedging
currency exchange rate risk with respect to any currency exchanges or
commodity price risk with respect to commodities utilized by the Company in
the ordinary course of business;
(h) subject to paragraph (a) above, the incurrence by the Company or
any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in
exchange for, or the net proceeds of which are used to extend, refinance,
renew, replace, defease or refund, Indebtedness that was permitted by the
Indenture to be incurred;
(i) the incurrence of Indebtedness (but excluding any funded
Indebtedness) arising from agreements providing for indemnification,
adjustment of purchase price or similar Obligations, incurred or assumed in
connection with the acquisition or disposition of any business by the
Company or any Restricted Subsidiary;
(j) the incurrence of any Acquired Debt in an aggregate principal
amount permitted solely by this clause (j) not to exceed $25 million at any
one time outstanding;
(k) Capital Lease Obligations and Purchase Money Indebtedness of the
Company or any of its Restricted Subsidiaries (including any Permitted
Refinancing Indebtedness incurred to refund, replace or refinance any
Capital Lease Obligations or Purchase Money Indebtedness incurred pursuant
to this clause (k)) not to exceed $10 million at any one time outstanding;
and
(l) additional Indebtedness of the Company or any of its Restricted
Subsidiaries (including any Permitted Refinancing Indebtedness incurred to
refund, replace or refinance any Indebtedness incurred pursuant to this
clause (l)) in an aggregate principal amount not to exceed $30 million at
any one time outstanding (which Indebtedness may, but need not, be incurred
under the Senior Credit Facility).
ANTI-LAYERING
The Indenture provides that (i) the Company will not directly or indirectly
incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to
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any Senior Debt and senior in any respect in right of payment to the Notes and
(ii) no Guarantor will incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to its Senior Debt and senior in any respect in right of payment to the
Subsidiary Guarantees.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided that the Company may enter into a sale and leaseback
transaction if (i) the Company could have (a) incurred Indebtedness in an amount
equal to the Attributable Debt relating to such sale and leaseback transaction
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under the caption "--Incurrence of
Indebtedness and Issuance of Disqualified Stock" and (b) incurred a Lien to
secure such Indebtedness pursuant to the covenant described below under the
caption "--Liens", (ii) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the Fair Market Value (as determined in good
faith by the Board of Directors and, in the case of a sale and leaseback
transaction having a Fair Market Value in excess of $5 million, set forth in an
Officer's Certificate delivered to the Trustee) of the property that is the
subject of such sale and leaseback transaction and (iii) the transfer of assets
in such sale and leaseback transaction is permitted by, and the Company applies
the proceeds of such transaction in compliance with, the covenant described
above under the caption "--Repurchase at the Option of Holders--Asset Sales".
LIENS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien that secures obligations under any Pari Passu
Indebtedness or Subordinated Indebtedness on any asset or property now owned or
hereafter acquired by the Company or any of its Restricted Subsidiaries, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, unless the Notes are equally and ratably secured with the obligations
so secured or until such time as such obligations are no longer secured by a
Lien; provided that in any case involving a Lien securing Subordinated
Indebtedness, such Lien is subordinated to the Lien securing the Notes on a
basis no less favorable than such Subordinated Indebtedness is subordinated to
the Notes.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) sell, lease or transfer any of
its properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (a)
Existing Indebtedness as in effect on the date of the Indenture, (b) the Senior
Credit Facility as in effect as of the date of the Indenture and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, in whole or in part, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive in any material
respect with respect to such dividend and other payment restrictions than those
contained in the Senior Credit Facility as in effect on the date of the
Indenture, (c) the Indenture and the Notes, (d) applicable law, (e) Indebtedness
or Capital Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (f) by reason of nonassignment or net worth
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maintenance provisions in leases entered into in the ordinary course of
business, (g) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(iii) above on the property so acquired, or (h) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive in any
material respect than those contained in the agreements governing the
Indebtedness being refinanced.
ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that if (i) the Company acquires or creates any
additional Subsidiary that is a Restricted Subsidiary and (A) any such
Restricted Subsidiary has assets or revenues in any fiscal year in excess of
$200,000, or (B) any such Restricted Subsidiary previously in existence has
assets or revenues in any fiscal year in excess of $200,000, or (C) any such
Restricted Subsidiary, together with all other Restricted Subsidiaries which are
not Guarantors, has assets or revenues in any fiscal year in excess of $1.0
million in the aggregate, or (ii) any Restricted Subsidiary of the Company that
is not a Guarantor guarantees any Indebtedness of the Company other than the
Notes or is a borrower under the Senior Credit Facility (in each case described
in clauses (i) and (ii), except for Foreign Subsidiaries), the Company will
cause such Restricted Subsidiary to execute and deliver to the Trustee a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee pursuant to which such Restricted Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes on the terms set
forth in such supplemental indenture.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions to, another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and the Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; and (iv) except in the case
of a merger of the Company with or into a Wholly Owned Restricted Subsidiary of
the Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
prior to the transaction and (B) will, at the time of such transaction and after
giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Disqualified Stock". The
sale, assignment, transfer, lease, conveyance or other disposition by the
Company or its Restricted Subsidiaries of all or substantially all of their
respective property or assets to one or more of their Subsidiaries shall not
relieve either the Company or the Restricted Subsidiaries from their respective
obligations under the Indenture or the Notes. Subject to the foregoing, any
Restricted Subsidiary may consolidate with, merge into or transfer all or part
of its properties and assets to the Company or any other Restricted Subsidiary
or other entity that becomes, by reason of such consolidation, merger or
transfer, a Restricted Subsidiary.
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TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary than those that might reasonably have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $2.0 million, a
certificate of the Chief Executive Officer of the Company certifying that such
Affiliate Transaction complies with clause (i) above, (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, a resolution of the Board of
Directors set forth in an Officer's Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of
Directors and (c) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $10.0
million, an opinion as to the fairness to the Holders of the Notes of such
Affiliate Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing.
The foregoing provisions will not apply to the following: (i) transactions
between or among the Company and/or any of its Restricted Subsidiaries in which
no Affiliate of the Company owns Capital Stock (other than directors' qualifying
shares); (ii) Restricted Payments or Permitted Investments permitted by the
provisions of the Indenture described above under the caption entitled
"--Restricted Payments"; and (iii) the payment of reasonable and customary
regular fees and compensation (including compensation payable in Equity
Interests) to, and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any Subsidiary or Permitted Joint
Venture of the Company.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED RESTRICTED
SUBSIDIARIES
The Indenture provides that the Company (i) will not, and will not permit
any Wholly Owned Restricted Subsidiary of the Company to, transfer, convey,
sell, lease or otherwise dispose of any Capital Stock of any Wholly Owned
Restricted Subsidiary of the Company to any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Stock of such
Wholly Owned Restricted Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with the covenant described above under the caption "--Repurchase at the Option
of Holders--Asset Sales", and (ii) will not permit any Wholly Owned Restricted
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Restricted
Subsidiary of the Company.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than a Principal Business, except to such extent as
would not be material to the Company and its Restricted Subsidiaries, taken as a
whole.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Company will furnish to the Trustee (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's certified
independent
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accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such reports. In
addition, whether or not required by the rules and regulations of the
Commission, commencing immediately after the consummation of the Exchange Offer
contemplated by the Registration Rights Agreement, the Company will file a copy
of all such information and reports with the Commission (which may be contained
in Forms 10-K, 10-Q and 8-K) for public availability (unless the Commission will
not accept such a filing). In addition, the Company and the Guarantors have
agreed that, for so long as any Notes remain outstanding, they will furnish to
the Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest or
Liquidated Damages, if any, on the Notes (whether or not prohibited by the
subordination provisions of the Indenture); (ii) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (iii) failure by the Company to
comply with the provisions described above under the captions "Repurchase at the
Option of Holders--Change of Control", "Repurchase at the Option of
Holders--Asset Sales" or "Certain Covenants--Merger, Consolidation or Sale of
Assets"; (iv) failure by the Company for 60 days after notice from the Trustee
or the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes to comply with any of its other covenants, agreements or
warranties in the Indenture or the Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness the maturity
of which has been so accelerated, aggregates $10 million or more; (vi) failure
by the Company or any of its Restricted Subsidiaries to pay final judgments for
the payment of money damages aggregating in excess of $10 million, which
judgments are not paid, discharged or stayed for a period of 60 days; (vii)
except as permitted by the Indenture, any Significant Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect (except by its terms) or any
Guarantor, or any Person acting on behalf of any Guarantor, shall deny or
disaffirm its obligations under its Significant Subsidiary Guarantee, in each
case if such default continues for a period of ten days after notice to the
Company from the Trustee or the Holders of at least 25% in aggregate principal
amount of the then outstanding Notes; and (viii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries.
If any Event of Default (other than an Event of Default under clause (viii)
of the preceding paragraph with respect to the Company) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes, by notice to the Trustee and the Company, may
declare all the Notes to be due and payable immediately; provided, however, that
so long as the Senior Credit Facility shall be in full force and effect, if an
Event of Default shall have occurred and be continuing (other than an Event of
Default under clause (viii) of the preceding paragraph with respect to the
Company), any such acceleration shall not be effective until the earlier to
occur of (x) five days following the delivery of a notice of such acceleration
to the agent or other representative of the lenders under the Senior Credit
Facility and (y) acceleration of any Indebtedness under the Senior Credit
Facility. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency described in clause
(viii) of the preceding paragraph, with respect to the Company, any Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a
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Default or Event of Default relating to the payment of principal, interest or
Liquidated Damages, if any) if it determines that withholding notice is in their
interest.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the Notes, the Holders of a majority in principal
amount of the Notes may rescind and cancel such declaration and its consequences
(i) if the rescission would not conflict with any judgment or decree, (ii) if
all existing Events of Default have been cured or waived except nonpayment of
principal, interest or Liquidated Damages that has become due solely because of
the acceleration, (iii) if, to the extent the payment of such interest is
lawful, interest on overdue installments of interest and overdue principal at a
rate equal to the rate borne by the Notes, which has become due otherwise than
by such declaration of acceleration, has been paid, (iv) if the Company has paid
the Trustee its reasonable compensation and reimbursed the Trustee for its
expenses, disbursements and advances and (v) if, in the event of the cure or
waiver of an Event of Default of the type described in clause (viii) of the
description above of Events of Default, the Trustee shall have received an
Officer's Certificate and an opinion of counsel that such Event of Default has
been cured or waived. No such rescission shall affect any subsequent Default or
impair any right consequent thereto.
The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture and its consequences,
except a default in the payment of the principal of or interest on, or
Liquidated Damages with respect to, any Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any Guarantor, as such, shall have any liability for any obligations of the
Company or the Guarantors under the Notes, the Subsidiary Guarantees, the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium and Liquidated Damages,
if any, and interest on such Notes when such payments are due from the trust
referred to below, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment or certain bankruptcy, receivership,
rehabilitation and insolvency events) described above under the caption
"--Events of Default" will no longer constitute an Event of Default with respect
to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium and Liquidated Damages, if any, and interest on
the outstanding Notes on the stated maturity or on the applicable redemption
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date, as the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date; (ii) either (x)
in the case of Legal Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred, or (y) in the case of Covenant Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred; (iii) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of such deposit; (iv) such Legal
Defeasance or Covenant Defeasance will not result in a breach or violation of,
or constitute a default under the Senior Credit Facility or any other material
agreement or instrument (other than the Indenture) to which the Company or any
of its Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound; (v) the Company must have delivered to the
Trustee an opinion of counsel to the effect that (assuming no intervening
bankruptcy or insolvency of the Company between the date of such deposit and the
91st day after such deposit and that no Holder is an insider of the Company)
after the 91st day following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; (vi) the Company must deliver to the
Trustee an Officer's Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Notes over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and (vii) the Company must
deliver to the Trustee an Officer's Certificate and an opinion of counsel, each
stating that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance, as the case may be, have been complied
with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
The Old Notes were offered and sold to qualified institutional buyers in
reliance on Rule 144A ("Rule 144A Notes"). Old Notes were also offered and sold
in offshore transactions in reliance on Regulation S ("Regulation S Notes").
New Notes will be issued only in fully registered form, without interest
coupons, in denominations of $1,000 and integral multiples thereof. New Notes
will not be issued in bearer form.
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RULE 144A AND REGULATION S NOTES
Rule 144A Notes initially will be represented by one or more Notes in
registered, global form without interest coupons (collectively, the "Restricted
Global Note"). Regulation S Notes initially will be represented by one or more
Notes in registered, global form without interest coupons (collectively, the
"Regulation S Global Note" and, together with the Restricted Global Note, the
"Global Notes"). The Global Notes will be deposited upon issuance with the
Trustee as custodian for The Depository Trust Company ("DTC"), in New York, New
York, and registered in the name of DTC or its nominee, in each case for credit
to an account of a direct or indirect participant in DTC as described below.
Through and including the 40th day after the latest of the commencement of the
Offering and the original issue date of the Notes (such period through and
including such 40th day, the "Restricted Period"), beneficial interests in the
Regulation S Global Note may be held only through the Euroclear System
("Euroclear") or CEDEL, S.A. ("CEDEL") (as indirect participants in DTC), unless
exchanged for interests in the Restricted Global Note in accordance with the
transfer and certification requirements described below.
Rule 144A Notes (including beneficial interests in the Restricted Global
Note) will be subject to certain restrictions on transfer and will bear a
restrictive legend as described under "Notice to Investors". Regulation S Notes
will be subject to certain restrictions on transfer and will bear a legend as
described under "Notice to Regulation S Investors" in the International
Supplement to the Offering Circular. Beneficial interests in the Restricted
Global Note may not be exchanged for beneficial interests in the Regulation S
Global Note or vice versa at any time except in the limited circumstances and
subject to the certification requirements described below. See "--Exchanges
between the Restricted Global Note and the Regulation S Global Note".
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee.
In addition, transfer of beneficial interests in the Global Notes will be
subject to the applicable rules and procedures of DTC and its direct or indirect
participants (including, if applicable, those of Euroclear and CEDEL), which may
change from time to time. Beneficial interests in the Global Notes may not be
exchanged for Notes in certificated form except in the limited circumstances
described below. See "--Exchanges of Book-Entry Notes for Certificated Notes".
EXCHANGES BETWEEN THE RESTRICTED GLOBAL NOTE AND THE REGULATION S GLOBAL NOTE
Beneficial interests in the Restricted Global Note may be exchanged for
beneficial interests in the Regulation S Global Note and vice versa only in
connection with a transfer of such interest. Such transfers are subject to
compliance with the certification requirements described below.
A beneficial interest in the Restricted Global Note may be transferred to a
person who takes delivery in the form of an interest in the Regulation S Global
Note, whether before or after the expiration of the Restricted Period, only upon
receipt by the Trustee of a written certification on behalf of the transferor
(in the form provided in the Indenture) to the effect that such transfer is
being made in accordance with Rule 904 of Regulation S or (if available) Rule
144 under the Securities Act (a "Regulation S Global Note Certificate") and
that, if such transfer occurs prior to the expiration of the Restricted Period,
the interest transferred will be held immediately thereafter through Euroclear
or CEDEL.
Prior to the expiration of the Restricted Period, a beneficial interest in
the Regulation S Global Note may be transferred to a person who takes delivery
in the form of an interest in the Restricted Global Note only upon receipt by
the Trustee of a written certification on behalf of the transferor (in the form
provided in the Indenture) to the effect that such transfer is being made to a
person who the transferor reasonably believes is a qualified institutional buyer
acquiring for its own account or the account of a qualified institutional buyer
in a transaction complying with Rule 144A and any applicable securities laws of
the states of the United States and other jurisdictions (a "Restricted Global
Note Certificate"). After the expiration of the Restricted Period, this
certification requirement will no longer apply to such transfers.
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Any beneficial interest in one of the Global Notes that is exchanged for an
interest in the other Global Note will cease to be an interest in such Global
Note and will become an interest in the other Global Note. Accordingly, such
interest will thereafter be subject to all transfer restrictions and other
procedures applicable to beneficial interests in such other Global Note for as
long as it remains such an interest.
Any exchange of a beneficial interest in the Regulation S Global Note for a
beneficial interest in the Restricted Global Note or vice versa will be effected
by DTC by means of an instruction originated by the Trustee through the DTC
Deposit/Withdraw at Custodian ("DWAC") system. Accordingly, in connection with
any such exchange, appropriate adjustments will be made in the records of the
Security Registrar to reflect a decrease in the principal amount of such
Regulation S Global Note and a corresponding increase in the principal amount of
such Restricted Global Note or vice versa, as applicable.
EXCHANGES OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A beneficial interest in a Global Note may not be exchanged for a Note in
certificated form unless (i) DTC (x) notifies the Company that it is unwilling
or unable to continue as Depositary for the Global Note or (y) has ceased to be
a clearing agency registered under the Exchange Act, and in either case the
Company thereupon fails to appoint a successor Depositary, (ii) the Company, at
its option, notifies the Trustee in writing that it elects to cause the issuance
of the Notes in certificated form or (iii) there shall have occurred and be
continuing an Event of Default or any event which after notice or lapse of time
or both would be an Event of Default with respect to the Notes. In all cases,
certificated Notes delivered in exchange for any Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the Depositary (in accordance with
its customary procedures). Any certificated Note issued in exchange for an
interest in a Global Note will bear the legend restricting transfers that is
borne by such Global Note. Any such exchange will be effected through the DWAC
System and an appropriate adjustment will be made in the records of the Security
Registrar to reflect a decrease in the principal amount of the relevant Global
Note.
DEPOSITORY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Access to DTC's system is also available to
other entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly (collectively, the "Indirect Participants"). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The ownership interests
and transfer of ownership interests of each actual purchaser of each security
held by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established
by it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Notes and (ii) ownership of such interests in the Global
Notes will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC (with respect to the Participants) or by
the Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Notes).
Investors in the Restricted Global Note may hold their interests therein
directly through DTC, if they are participants in such system, or indirectly
through organizations (including Euroclear and CEDEL) which are participants in
such system. Investors in the Regulation S Global Note must initially hold their
interests therein through Euroclear or CEDEL, if they are participants in such
systems, or indirectly through organizations which are participants in such
systems. After the expiration of the Restricted Period (but not earlier),
investors may also hold interests in the Regulation S Global Notes through
organizations other than
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Euroclear and CEDEL that are participants in the DTC system. Euroclear and CEDEL
will hold interests in the Regulation S Global Notes on behalf of their
participants through customers' securities accounts in their respective names on
the books of their respective depositories, which are Morgan Guaranty Trust
Company of New York, Brussels office, as operator of Euroclear, and Citibank,
N.A., as operator of CEDEL. The depositories, in turn, will hold such interests
in the Regulation S Global Note in customers' securities accounts in the
depositories' names on the books of DTC. All interests in a Global Note,
including those held through Euroclear or CEDEL, may be subject to the
procedures and requirements of DTC. Those interests held through Euroclear or
CEDEL may also be subject to the procedures and requirements of such systems.
The laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such persons will be limited
to that extent. Because DTC can act only on behalf of Participants, which in
turn act on behalf of Indirect Participants and certain banks, the ability of a
person having beneficial interests in a Global Note to pledge such interests to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests. For certain other restrictions on the
transferability of the Notes, see "--Exchanges of Book-Entry Notes for
Certificated Notes" and "--Exchanges between the Restricted Global Note and the
Regulation S Global Note".
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of and premium and Liquidated Damages,
if any, and interest on a Global Note registered in the name of DTC or its
nominee will be payable by the Trustee to DTC in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee will treat the persons in whose names the Notes, including the
Global Notes, are registered as the owners thereof for the purpose of receiving
such payments and for any and all other purposes whatsoever. Consequently,
neither the Company, the Initial Purchasers, the Trustee nor any agent of the
Company or the Trustee has or will have any responsibility or liability for (i)
any aspect of DTC's records or any Participant's or Indirect Participant's
records relating to or payments made on account of beneficial ownership
interests in the Global Notes, or for maintaining, supervising or reviewing any
of DTC's records or any Participant's or Indirect Participant's records relating
to the beneficial ownership interests in the Global Notes or (ii) any other
matter relating to the actions and practices of DTC or any of its Participants
or Indirect Participants. DTC has advised the Company that its current practice,
upon receipt of any payment in respect of securities such as the Notes
(including principal and interest), is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in the principal amount of beneficial interests in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company,
the Initial Purchasers nor the Trustee will be liable for any delay by DTC or
any of its Participants in identifying the beneficial owners of the Notes, and
the Company and the Trustee may conclusively rely on and will be protected in
relying on instructions from DTC or its nominee for all purposes.
Except for trades involving only Euroclear and CEDEL participants,
interests in the Global Notes are expected to be eligible to trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will therefore settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its participants.
Subject to the transfer restrictions set forth under "Notice to Investors",
transfers between Participants in DTC will be effected in accordance with DTC's
procedures, and will be settled in same-day funds, and transfers between
participants in Euroclear and CEDEL will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
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Subject to compliance with the transfer restrictions applicable to the
Notes described herein, cross-market transfers between the Participants in DTC,
on the one hand, and Euroclear or CEDEL participants, on the other hand, will be
effected through DTC in accordance with DTC's rules on behalf of Euroclear or
CEDEL, as the case may be, by its respective depositary; however such
cross-market transactions will require delivery of instructions to Euroclear or
CEDEL, as the case may be, by the counterparty in such system in accordance with
the rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or CEDEL, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by delivering
or receiving interests in the relevant Global Note in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and CEDEL participants may
not deliver instructions directly to the depositories for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear or
CEDEL participant purchasing an interest in a Global Note from a Participant in
DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or CEDEL participant, during the securities settlement processing day
(which must be a business day for Euroclear and CEDEL) immediately following the
settlement date of DTC. DTC has advised the Company that cash received in
Euroclear or CEDEL as a result of sales of interests in a Global Note by or
through a Euroclear or CEDEL participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or CEDEL cash account only as of the business day for
Euroclear or CEDEL following DTC's settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Notes only at the direction of one or more Participants to
whose account with DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Notes, DTC reserves the right
to exchange the Global Notes for legended Notes in certificated form, and to
distribute such Notes to its Participants.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
to facilitate transfers of interests in the Regulation S Global Notes and in the
U.S. Global Notes among participants in DTC, Euroclear and CEDEL, they are under
no obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company, the Initial
Purchasers nor the Trustee will have any responsibility for the performance by
DTC, Euroclear or CEDEL or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company, the Guarantors and the Initial Purchasers entered into the
Registration Rights Agreement on the Closing Date. Pursuant to the Registration
Rights Agreement, the Company agreed to file with the Commission, on or prior to
60 days after the Closing Date, the Exchange Offer Registration Statement on the
appropriate form under the Securities Act with respect to the Exchange Notes.
Upon the effectiveness of the Exchange Offer Registration Statement, pursuant to
the Exchange Offer, the Company will offer to the Holders of Transfer Restricted
Securities (as defined below) who are able to make certain representations the
opportunity to exchange their Transfer Restricted Securities for Exchange Notes.
If (i) the Company is not required to file the Exchange Offer Registration
Statement or permitted to consummate the Exchange Offer because the Exchange
Offer is not permitted by applicable law or Commission policy or (ii) any Holder
of Transfer Restricted Securities notifies the Company on or prior to the tenth
business day following consummation of the Exchange Offer that it (A) is
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) may not resell the Exchange Notes acquired by it in the Exchange Offer to
the public without delivering a prospectus and the prospectus contained in the
Exchange Offer Registration
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Statement is not appropriate or available for such resales or (C) is a
broker-dealer and owns Notes acquired directly from the Company or an affiliate
of the Company, the Company will file with the Commission a Shelf Registration
Statement to cover resales of the Notes by the Holders thereof who satisfy
certain conditions relating to the provision of information in connection with
the Shelf Registration Statement. The Company will use commercially reasonable
efforts to cause the applicable registration statement to be declared effective
as promptly as practicable by the Commission. For purposes of the foregoing,
"Transfer Restricted Securities" means each Note until (i) the date on which
such Note has been exchanged by a person other than a broker-dealer for an
Exchange Note in the Exchange Offer, (ii) following the exchange by a
broker-dealer in the Exchange Offer of a Note for an Exchange Note, the date on
which such Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Note has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement or (iv) the date on which
such Note is distributed to the public pursuant to Rule 144 under the Securities
Act. Notwithstanding the foregoing, subject to the limitations contained in the
Registration Rights Agreement, at any time after Consummation (as defined in the
Registration Rights Agreement) of the Exchange Offer, the Company may allow the
Shelf Registration Statement to cease to be effective and usable if the
prospectus contained in the Shelf Registration Statement contains an untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; provided that the period referred to in the
Registration Rights Agreement during which the Shelf Registration Statement is
required to be effective and usable will be extended by the number of days
during which such registration statement was not effective or usable pursuant to
the foregoing provisions.
The Registration Rights Agreement provides that (i) the Company will file
an Exchange Offer Registration Statement with the Commission on or prior to 60
days after the Closing Date, (ii) the Company will use commercially reasonable
efforts to have the Exchange Offer Registration Statement declared effective by
the Commission on or prior to 135 days after the date on which such Exchange
Offer Registration Statement is filed with the Commission (which 135-day period
shall be extended for a number of days equal to the number of business days, if
any, that the Commission is officially closed during such period), (iii) unless
the Exchange Offer would not be permitted by applicable law or Commission
policy, the Company will commence the Exchange Offer and use its commercially
reasonable efforts to issue on or prior to 25 business days after the date on
which the Exchange Offer Registration Statement was declared effective by the
Commission, Exchange Notes in exchange for all Notes tendered prior thereto in
the Exchange Offer and (iv) if obligated to file the Shelf Registration
Statement, the Company will use its best efforts to file the Shelf Registration
Statement with the Commission on or prior to 60 days after such filing
obligation arises and to use commercially reasonable efforts to cause the Shelf
Registration Statement to be declared effective by the Commission on or prior to
135 days after such filing obligation arises. If (a) the Company fails to file
either of the Registration Statements required by the Registration Rights
Agreement on or before the date specified for such filing, (b) either of such
Registration Statements is not declared effective by the Commission on or prior
to the date specified for such effectiveness (the "Effectiveness Target Date"),
(c) the Company fails to consummate the Exchange Offer within 25 business days
of the Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) subject to the last sentence of the preceding paragraph, the
Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but thereafter ceases to be effective or usable (other than
as described in the last sentence of the preceding paragraph) in connection with
resales of Transfer Restricted Securities during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), then, subject to the last sentence
of the preceding paragraph, the Company will pay Liquidated Damages to each
Holder of Transfer Restricted Securities affected thereby, with respect to the
first 90-day period immediately following the occurrence of such Registration
Default, in an amount equal to $0.05 per week per $1,000 in principal amount of
Notes constituting Transfer Restricted Securities held by such Holder. The
amount of the Liquidated Damages will increase by an additional $0.05 per week
per $1,000 in principal amount of Notes constituting Transfer Restricted
Securities with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages of $0.50
per
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week per $1,000 in principal amount of Notes constituting Transfer Restricted
Securities. All accrued Liquidated Damages will be paid by the Company in cash
to persons entitled thereto on each Interest Payment Date to the Global Note
Holder (and any Holder of Certificated Securities who has given wire transfer
instructions to the Company prior to the Interest Payment Date) by wire transfer
of immediately available funds and to all other Holders of Certificated
Securities by mailing checks to their registered addresses. Following the cure
of all Registration Defaults, the accrual of Liquidated Damages will cease.
Holders of Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the Company's most recent
Annual Report on Form 10-K.
Except as described below under "--Amendment, Supplement and Waiver", the
Notes and the Exchange Notes will be considered collectively to be a single
class for all purposes under the Indenture, including, without limitation,
waivers, amendments, redemptions and repurchase offers, and for purposes of this
"Description of the Notes" (except under this caption, "--Registration Rights;
Liquidated Damages") all reference herein to "Notes" shall be deemed to refer
collectively to the Notes and any Exchange Notes, unless the context otherwise
requires.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"-- Repurchase at the Option of Holders"), (iii) reduce the rate of or change
the time for payment of interest or Liquidated Damages, if any, on any Note,
(iv) waive a Default or Event of Default, in each case in the payment of
principal of or premium or Liquidated Damages, if any, or interest on the Notes
(except a rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration), (v) make any Note payable in
money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults (other than to
add sections of the Indenture or the Notes which are subject thereto) or the
rights of Holders of Notes to receive payments of principal of or premium or
Liquidated Damages, if any, or interest on the Notes, (vii) waive a redemption
payment with respect to any Note (other than a payment required by one of the
covenants described above under the caption "--Repurchase at the Option of
Holders") or (viii) make any change in the foregoing amendment and waiver
provisions. In addition, any amendment to the provisions of the Article of the
Indenture relating to subordination will require the consent of the Holders of
at least 66 2/3% in aggregate principal amount of the Notes then outstanding if
such amendment would adversely affect the rights of Holders of Notes.
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Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Trustee is a lender under the Senior Credit Facility.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
the Registration Rights Agreement without charge by writing to Metal Management,
Inc., 500 North Dearborn St., Suite 405, Chicago, Illinois 60610; Attention:
Chief Financial Officer.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured at
the time of acquisition thereof by a Lien encumbering any asset acquired by such
specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
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"Asset Sale" means:
(i) the sale, conveyance, transfer or other disposition (whether in
a single transaction or a series of related transactions) of property or
assets (including by way of a sale and leaseback) of the Company or any
Restricted Subsidiary to any Person other than the Company or any
Restricted Subsidiary of the Company (each referred to in this definition
as a "disposition") or
(ii) the issuance or sale of Equity Interests of any Restricted
Subsidiary (other than directors' qualifying shares) to any Person other
than the Company or any Restricted Subsidiary of the Company (whether in a
single transaction or a series of related transactions), in each case set
forth in these clauses (i) and (ii), other than:
(a) a disposition of Cash Equivalents or tangible personal property
(including obsolete or redundant equipment) in the ordinary course of
business of the Company or the applicable Restricted Subsidiary;
(b) the disposition of all or substantially all of the assets of the
Company in a manner permitted pursuant to the provisions described above
under the caption "--Merger, Consolidation or Sale of Assets" or any
disposition that constitutes a Change of Control pursuant to the Indenture;
(c) any disposition that is a Restricted Payment or Permitted
Investment that is not prohibited under the covenant described above under
the caption "--Restricted Payments"; and
(d) any disposition, or related series of dispositions, of assets
with an aggregate Fair Market Value of less than $1.5 million.
"Attributable Debt" means, in respect of a sale and leaseback transaction,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet of the lessee
thereof in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person (excluding "earn-out" payments
pursuant to the acquisition agreements of the Company or any Subsidiary).
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition, (iii) certificates of deposit and time
deposits with maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any commercial bank having combined capital and
surplus in excess of $200.0 million (or the foreign currency equivalent thereof)
and whose short-term commercial paper rating, or that of its parent holding
company, is at least "A-1" or the equivalent by Standard & Poor's Corporation
and at least "Prime-1" or the equivalent by Moody's Investors Service, Inc.,
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) shares of money market or similar funds which comply
with Rule 2a-7 or any successor rule of the Commission and (vi) commercial paper
rated A-1 or higher by Standard & Poor's
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Corporation or P-1 by Moody's Investors Service, Inc. and in each case maturing
within one year after the date of acquisition.
"Change of Control " means the occurrence of any of the following: (i) the
sale, lease or transfer, in one or a series of related transactions (other than
by merger or consolidation), of all or substantially all of the assets of the
Company and its Restricted Subsidiaries, taken as a whole, to any "person" (as
such term is used in Section 13(d)(3) of the Exchange Act); (ii) the adoption of
a plan relating to the liquidation or dissolution of the Company; (iii) (A) the
acquisition by any Person or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act), other than the Principals, of a direct or
indirect interest in more than 35% of the voting power of the Voting Stock of
the Company by way of acquisition, merger or consolidation or otherwise and (B)
the Principals beneficially owning, directly or indirectly, a lesser percentage
of the voting power of the Voting Stock of the Company than such Person or group
and the Principals not having the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors of the Company; (iv) a majority of the members of the Board of
Directors of the Company ceasing to be Continuing Directors; or (v) any Person
or group effecting a "Rule 13e-3 transaction" (within the meaning of Rule 13e-3
under the Exchange Act) with respect to the Company.
"Company Preferred Stock" means the $25 million in aggregate liquidation
preference of the Series A Convertible Preferred Stock and the $20 million in
aggregate liquidation preference of the Series B Convertible Preferred Stock of
the Company outstanding on the date of the Indenture.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary or non-recurring loss plus any net loss realized, in
each case, in connection with all Asset Sales (to the extent such losses were
deducted in computing such Consolidated Net Income), plus (ii) provision for
taxes based on income or profits of such Person and its Restricted Subsidiaries
for such period, to the extent that such provision for taxes was deducted in
computing such Consolidated Net Income, plus (iii) consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
any Consolidated Non-Cash Charges that were deducted in computing such
Consolidated Net Income, less (v) any non-cash items increasing Consolidated Net
Income for such period and plus (vi) any cash dividends received by the Company
or any of its Restricted Subsidiaries which are paid by an Unrestricted
Subsidiary.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the cumulative effect of a change in accounting principles
shall be excluded and (iv) the Net Income of any Unrestricted Subsidiary shall
be excluded, whether or not distributed to the Company or one of its
Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the total of the following amounts of the Person and its Restricted
Subsidiaries, determined on a consolidated basis in accordance with GAAP as of
such date: (i) the par or stated value of all outstanding Capital Stock of the
Person plus (ii) paid-
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in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Consolidated Non-Cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation and amortization (including (a) amortization
of goodwill, (b) any incremental increase in amortization of account inventory
resulting from write-ups of such inventory in connection with the purchase
accounting treatment of an acquisition and (c) amortization of other intangibles
and other noncash charges or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Restricted Subsidiaries for such
period, in each case, determined on a consolidated basis in accordance with
GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with, or whose election to such Board of
Directors was approved by, the affirmative vote of a majority of the Continuing
Directors who were members of such Board of Directors at the time of such
nomination or election.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means so long as the Senior Bank Debt is
outstanding, the Senior Bank Debt.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the Holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the Senior Credit
Facility) in existence on the date of the Indenture, until such amounts are
repaid.
"Fair Market Value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, in cash,
between an informed and willing seller and an informed and willing and able
buyer, neither of whom is under undue pressure or compulsion to complete the
transaction. Fair Market Value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and, in the case of Fair Market
Value that exceeds $5 million, shall be evidenced by a Board Resolution
delivered to the Trustee; provided, however, that, in the case of any
determination of Fair Market Value for purposes of the covenant described under
the caption "--Restricted Payments", if the aggregate Fair Market Value could be
reasonably likely to exceed $10.0 million, the Fair Market Value shall be
determined by an accounting, appraisal or investment banking firm of nationally
recognized standing that is, in the reasonable and good faith judgment of the
Board of Directors of the Company, qualified to perform the task for which such
firm has been engaged.
"Fixed Charges" means, with respect to any Person for any period, the sum
of (i) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations, imputed
interest with respect to Attributable Debt, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations, but
excluding amortization of deferred financing costs) and (ii) the consolidated
interest expense of such Person and its Restricted Subsidiaries that was
capitalized during such period and (iii) any interest expense on Indebtedness of
another Person that is Guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon)
and (iv) all cash dividend
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payments (and non-cash dividend payments in the case of a Person that is a
Restricted Subsidiary) on any series of Preferred Stock of such Person, in each
case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means, with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
Preferred Stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of Preferred Stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been consummated by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow and Fixed Charges for such reference
period shall be calculated giving pro forma effect (excluding any pro forma
increase in revenues other than historical revenue of the acquired business, but
including any pro forma expense and cost reductions, in each case calculated on
a basis consistent with Regulation S-X under the Securities Act) to such
acquisition and related financing transactions and (ii) the Consolidated Cash
Flow attributable to discontinued operations, as determined in accordance with
GAAP, and operations or businesses disposed of prior to the Calculation Date,
calculated giving pro forma effect to such disposition, shall be excluded, and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"Foreign Subsidiaries" means any Subsidiary of the Company incorporated or
organized under the laws of a jurisdiction outside of the United States of
America and which, individually or together with all other such Subsidiaries
outside of the United States of America, represents less than 10% of the assets
or revenues of the Company and its Restricted Subsidiaries for any period, on a
consolidated basis and determined in accordance with GAAP.
"GAAP " means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the net
obligations of such Person under (i) currency exchange or interest rate swap
agreements, currency exchange or interest rate cap agreements and currency
exchange or interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in currency
exchange or interest rates or commodity prices.
"Holder" means a holder of any of the Notes.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the maximum fixed redemption or
repurchase price of Redeemable Interests of such Person at the time of
determination or the balance deferred and unpaid of the purchase price of any
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property (other than contingent or "earnout" payment obligations) or
representing any net Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of the
foregoing indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP as well as all indebtedness of others secured by a Lien on
any asset of such Person (whether or not such indebtedness is assumed by such
Person) and, to the extent not otherwise included, the Guarantee by such Person
of any indebtedness of any other Person.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Restricted Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
Fair Market Value of the Equity Interests of such Subsidiary not sold or
disposed of. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Loan Reductions" means permanent commitment reductions with respect to
revolving loans under the Senior Credit Facility (or any Permitted Refinancing
Indebtedness relating thereto) that have been made since the date of the
Indenture.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and brokerage and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than Senior Bank Debt) in connection with
such Asset Sale, distributions and payments to minority interest holders in
connection with such Asset Sale and any reserve for adjustment in respect of the
sale price of such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders
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thereof may have to take enforcement action against an Unrestricted Subsidiary)
would permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Company or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer's Certificate" means a certificate signed on behalf of the Company
by the principal executive officer, the principal financial officer, the
treasurer or the principal accounting officer of the Company that meets the
requirements set forth in the Indenture.
"Pari Passu Indebtedness" means Indebtedness that ranks pari passu in right
of payment to the Notes.
"Permitted Investments" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company; (b) any Investment in cash and Cash
Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment (A) such Person
becomes a Restricted Subsidiary of the Company or (B) such Person, in one
transaction or a series of related transactions, is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company; (d) any Restricted Investment made as a result of the receipt of
consideration not constituting cash or Cash Equivalents from an Asset Sale that
was made pursuant to and in compliance with the covenant described above under
the caption "--Repurchase at the Option of Holders--Asset Sales"; (e) any
Investment existing on the date of the Indenture, and any renewals or
replacements thereof; (f) any Investment by Restricted Subsidiaries in other
Restricted Subsidiaries and Investments by Subsidiaries that are not Restricted
Subsidiaries in other Subsidiaries that are not Restricted Subsidiaries; (g) any
Investment acquired or made by the Company or any of its Restricted Subsidiaries
(A) in exchange for any other Investment or receivable held by the Company or
any such Restricted Subsidiary in connection with or as a result of a
bankruptcy, workout, reorganization or recapitalization of the issuer of such
other Investment or receivable or (B) as a result of a foreclosure by the
Company or any of its Restricted Subsidiaries with respect to any secured
Investment or other transfer of title with respect to any secured Investment in
default; (h) Hedging Obligations; (i) any acquisition of assets, Equity
Interests or other securities by the Company for consideration consisting of
common Equity Interests of the Company; (j) loans and advances to officers,
directors and employees for business-related travel expenses, moving expenses
and other similar expenses, in each case, incurred in the ordinary course of
business; (k) Investments the payment for which consists exclusively of Equity
Interests (exclusive of Disqualified Stock) of the Company; (l) repurchases of
Notes by the Company or any Restricted Subsidiary in open market purchase
transactions; (m) Investments not to exceed $15 million in the aggregate
outstanding at any time in Unrestricted Subsidiaries or Permitted Joint
Ventures; (n) any Investment by the Company or any Restricted Subsidiary in any
of its suppliers in the form of "take or pay" or "requirements" contracts
entered into by the Company or such Restricted Subsidiary in the ordinary course
of business; and (o) the making of other Investments not to exceed $15 million
in the aggregate outstanding at any time.
"Permitted Joint Venture" means, with respect to any Person, any
corporation, partnership, limited liability company or other business entity of
which at least 25% of the total voting power of shares of Capital 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 such Person or one or more of the other Subsidiaries
of that Person (or a combination thereof).
"Permitted Junior Securities" means equity securities of the Company or
debt securities of the Company that are subordinated in right of payment to all
Senior Debt and all securities issued in exchange for Senior Debt that may at
the time be outstanding, to substantially the same extent as, or to a greater
extent than, the Notes.
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"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of any premium required
to be paid in connection therewith and plus reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing Indebtedness has a final
maturity date no earlier than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date no
earlier than the final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Restricted Subsidiary who is the
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock", as to any Person, means any Equity Interest with
preferential right of payment of dividends or upon liquidation, dissolution or
winding up over Equity Interests of any other class of such Person.
"Principal Business" means any business in the metals industry, and
businesses reasonably related thereto.
"Principals" mean, collectively, (i) Samstock, L.L.C. and its affiliates
and successors and (ii) T. Benjamin Jennings, Gerard M. Jacobs, Albert A. Cozzi,
Frank J. Cozzi and Gregory P. Cozzi, and the respective spouses, parents and
lineal descendants (by blood, adoption or marriage) of the foregoing, trusts the
sole beneficiaries of which (other than contingent beneficiaries) are any of the
foregoing, or corporations, partnerships or limited liability companies the sole
shareholders, sole partners or sole members of which are any of the foregoing.
"Pro Forma Basis" means, with respect to any additional Indebtedness
incurred or Disqualified Stock issued, as the case may be, the Fixed Charge
Coverage Ratio for the Company for the most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date of such occurrence, as adjusted to reflect the incurrence of
such additional Indebtedness or the issuance of such Disqualified Stock, as the
case may be, and the application of the net proceeds therefrom, as of the
beginning of such four-quarter period.
"Purchase Money Indebtedness" means Indebtedness the net proceeds of which
are used for the purchase of property or assets acquired in the ordinary course
of business by the Person incurring such Indebtedness.
"Redeemable Interest" of any Person means any equity security of or other
ownership interest in such Person that by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable) or
otherwise (including upon the occurrence of an event) matures or is required to
be redeemed (pursuant to any sinking fund obligation or otherwise) or is
convertible into or exchangeable for Indebtedness or is redeemable at the option
of the holder thereof, in whole or in part, at any time prior to the final
stated maturity of the Notes.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of such Person
that is not (i) an Unrestricted Subsidiary or (ii) a direct or indirect
Subsidiary of an Unrestricted Subsidiary; provided, however, that upon
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the occurrence of any Unrestricted Subsidiary ceasing to be an Unrestricted
Subsidiary, such Subsidiary shall be included in the definition of Restricted
Subsidiary.
"Senior Bank Debt" means all Obligations under or in respect of the Senior
Credit Facility, together with any refunding, refinancing or replacement, in
whole or part, of such Indebtedness.
"Senior Credit Facility" means that certain credit facility dated as of
March 31, 1998, by and among the Company, certain Subsidiaries of the Company,
BT Commercial Corporation, as agent for the lenders, and certain commercial
lending institutions party thereto, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended (including any amendment and restatement
thereof), modified, renewed, refunded, replaced or refinanced from time to time,
including any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including increasing the amount of available borrowings
thereunder (provided that such increase in borrowings is permitted by the
covenant described under the caption "--Incurrence of Indebtedness and Issuance
of Disqualified Stock") or adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
"Senior Debt" means (i) the Senior Bank Debt and (ii) any other
Indebtedness permitted to be incurred by the Company or a Guarantor under the
terms of the Indenture, unless the instrument under which such Indebtedness is
incurred expressly provides that it is on a parity with or subordinated in right
of payment to the Notes (including interest after the filing of any petition in
bankruptcy or insolvency proceeding at the rate specified in the documents
relating to the applicable Senior Debt). Notwithstanding anything to the
contrary in the foregoing, Senior Debt will not include (1) any liability for
federal, state, local or other taxes owed or owing by the Company, (2) any
Indebtedness of the Company to any of its Restricted Subsidiaries or other
Affiliates, (3) any trade payables, (4) that portion of any Indebtedness that is
incurred in violation of the Indenture, (5) Indebtedness which, when incurred
and without respect to any election under Section 1111 (b) of the Title 11,
United States Code, is without recourse to the Company, (6) Indebtedness
evidenced by the Notes and (7) Capital Stock.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Significant Subsidiary Guarantee" means the Subsidiary Guarantee of a
Significant Subsidiary.
"Subordinated Indebtedness" means any Indebtedness of the Company or any of
its Restricted Subsidiaries which is expressly by its terms subordinated in
right of payment to any other Indebtedness.
"Subsidiary" means, with respect to any Person, (i) any corporation,
limited liability company, association or other business entity of which more
than 50% of the total voting power of shares of Capital 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 such Person or one or more of the other Subsidiaries
of that Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or one or more Subsidiaries of such Person (or any combination thereof).
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, which designation may only be made if such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified
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levels of operating results; and (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officer's
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by the covenant described above under the caption
"--Certain Covenants--Restricted Payments". If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described above under the caption "--Incurrence of Indebtedness and
Issuance of Disqualified Stock", the Company shall be in violation of such
covenant). The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted to be incurred by the covenant described above under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Disqualified
Stock", and (ii) no Default or Event of Default would be in existence following
such designation.
"Voting Stock" means, with respect to any Person, any class or series of
capital stock of such Person that is ordinarily entitled to vote in the election
of directors thereof at a meeting of stockholders called for such purpose,
without the occurrence of any additional event or contingency.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" is any Wholly Owned Subsidiary that is
a Restricted Subsidiary.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
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CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
The following discussion is a summary of certain United States federal
income tax considerations relevant to the purchase, ownership and disposition of
the New Notes by the beneficial owners thereof ("Holders"). The discussion is
limited to Holders of New Notes exchanged for Old Notes of which such Holders
were the initial Holders and does not address the tax consequences to subsequent
purchasers of New Notes. This summary does not purport to be a complete analysis
of all the potential federal income and estate tax effects relating to the
purchase, ownership and disposition of the New Notes. There can be no assurance
that the Internal Revenue Service (the "Service") will take a similar view of
such consequences. Further, the discussion does not address all aspects of
taxation that might be relevant to particular Holders in light of their
individual circumstances (including the effect of any state, local, non-United
States or other tax laws) or to certain types of Holders (including dealers in
securities, insurance companies, financial institutions and tax-exempt entities)
subject to special treatment under United States federal tax law. The discussion
below assumes that the New Notes are held as capital assets.
The discussion of the United States federal income tax consequences set
forth below is based upon provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), regulations thereunder, judicial decisions, and
administrative interpretations, all in effect as of the date hereof, all of
which are subject to change at any time, and any such change may be applied
retroactively. Because individual circumstances may differ, each prospective
purchaser of the New Notes is strongly urged to consult its own tax advisor with
respect to its particular tax situation and the particular tax effects of any
state, local, non-United States, or other tax laws and possible changes in the
tax laws.
As used herein, the term "United States Holder" means a Holder of a New
Note who or which is for United States federal income tax purposes either (i) a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in the United States or organized under the
laws of the United States or of any State thereof (including the District of
Columbia), (iii) an estate the income of which is subject to United States
federal income taxation regardless of its source, or (iv) a trust described in
Section 7701(a)(30) of the Code (taking into account changes thereto and
associated effective dates, elections and transition rules). The term "United
States Holder" also includes certain former citizens or residents of the United
States whose income and gain on the New Notes will be subject to United States
taxation. As used herein, the term "Non-United States Holder" means a Holder of
a New Note who or which is not a United States Holder.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
Consequences of the Exchange Offer to Exchanging and Nonexchanging Holders
The exchange of an Old Note for a New Note pursuant to the Exchange Offer
will not be taxable to an exchanging Holder for federal income tax purposes. As
a result (i) an exchanging Holder will not recognize any gain or loss on the
exchange; (ii) the holding period for the New Note will include the holding
period for the Old Note; (iii) the basis of the New Note will be the same as the
basis for the Old Note; and (iv) any original issue discount ("OID") on the New
Note will be the same as on the Old Note.
The Exchange Offer will result in no federal income tax consequences to a
nonexchanging holder of Old Notes.
The treatment of interest described below with respect to the New Notes is
based in part upon the Company's determination that, as of the date of issuance
of the Old Notes, the possibility that additional interest would be paid to
Holders pursuant to a Registration Default was remote, in which case the
possibility of such payment should not, as of the issue date, have caused the
Old Notes to be treated as having been issued with contingent interest under
certain United States Treasury Regulations (the "Contingent Interest
Regulations") and, therefore, the New Notes should not be subject to the
Contingent Interest Regulations. The Service may take a different position,
which could affect the timing and character of interest income reported by
United States Holders. The Company's determination that the possibility of such
additional
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payments was remote for these purposes is binding on a United States Holder,
unless such Holder discloses in the proper manner to the Service that it is
taking a different position.
Payments of Interest
Interest paid on a New Note will generally be taxable to a United States
Holder as ordinary interest income at the time it accrues or is received in
accordance with the United States Holder's method of accounting for United
States federal income tax purposes.
Sale, Exchange, Redemption or Retirement of Notes
Upon the sale, exchange, redemption or retirement of a New Note, a United
States Holder will recognize taxable gain or loss equal to the difference
between the amount realized on the sale, exchange, redemption or retirement (not
including any amount attributable to accrued but unpaid interest) and such
Holder's adjusted tax basis in the New Note. To the extent attributable to
accrued but unpaid interest, the amount recognized by the United States Holder
will be treated as a payment of interest. See "--Tax Consequences to United
States Holders--Payments of Interest". A United States Holder's adjusted tax
basis in a New Note will equal the cost of the Old Note to such Holder, reduced
by any principal payments received by such Holder.
Gain or loss recognized on the sale, exchange, redemption or retirement of
a Note by a United States Holder generally will be capital gain or loss. Capital
gain realized by a non-corporate taxpayer on the disposition of a capital asset
(including a New Note) held for more than one year but not more than 18 months
is taxed at a maximum rate of 28% and capital gain recognized on the disposition
of a capital asset (including a New Note) held for more than 18 months generally
is taxed at a maximum rate of 20%. Capital gain on the disposition of an asset
(including a New Note) by non-corporate taxpayers held for one year or less
continues to be taxed at the rates applicable to ordinary income (i.e., up to
39.6%). The distinction between capital gain or loss and ordinary income or loss
is also relevant for purposes of, among other things, limitations on the
deductibility of capital losses.
The Conference Report for the IRS Restructuring and Reform Bill of 1998
(H.R. 2676) (the "1998 Tax Bill") provides that under the conference agreement,
the 1998 Tax Bill would eliminate the 18 month holding period requirement for 20
percent capital gain rates and replace it with a holding period requirement of
more than one year. The change would apply to amounts properly taken into
account on or after January 1, 1998. No assurance can be given that this change
will be enacted in its present or any other form. Holders should consult their
tax advisors concerning this proposal.
A Holder attempting to sell a New Note in the secondary market should be
aware that a subsequent Holder who purchases a New Note at a discount may be
subject to the "market discount" rules of the Code. A subsequent Holder who
purchases a New Note at a premium may elect to amortize and deduct the premium
over the remaining term of the New Note in accordance with rules set forth in
Section 171 of the Code.
TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) payments of principal and interest on the New Notes by the Company or
any paying agent to a Non-United States Holder, as defined above, will
not be subject to withholding of United States federal income tax,
provided that, in the case of interest, (i) such Non-United States
Holder does not own, actually or constructively, 10 percent or more of
the total combined voting power of all classes of stock of the Company
entitled to vote, (ii) such Non-United States Holder is not, for United
States federal income tax purposes, a controlled foreign corporation
related, directly or indirectly, to the Company through stock ownership,
(iii) such Non-United States Holder is not a bank receiving interest
described in Section 881(c)(3)(A) of the Code and (iv) the certification
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requirements under Section 871(h) or Section 881(c) of the Code and
Treasury regulations thereunder (summarized below) are met;
(b) a Non-United States Holder will not be subject to United States
federal income tax on gain recognized on the sale, exchange or other
disposition of a New Note, unless (i) such Non-United States Holder is a
non-resident alien individual who is present in the United States for
183 days or more in the taxable year of sale, exchange or other
disposition, and certain other conditions are met or (ii) such gain is
effectively connected with the conduct by such Holder of a trade or
business in the United States; and
(c) a New Note held by an individual who is not a citizen or resident of
the United States (as defined for United States federal estate tax
purposes) at the time of his death will not be subject to United States
federal estate tax as a result of such individual's death, provided
that, at the time of such individual's death, (i) the individual does
not own, actually or constructively, 10 percent or more of the total
combined voting power of all classes of stock of the Company entitled to
vote and (ii) payments with respect to such New Note, if received at the
time of the individual's death, would not have been effectively
connected to the conduct by such individual of a trade or business in
the United States.
Certification Requirements
Sections 871(h) and 881(c) of the Code and Treasury Regulations relating
thereto require that, in order to obtain the exemption from withholding tax
described in paragraph (a) above, either (i) the beneficial owner of a New Note
must certify, under penalties of perjury, to the Company or paying agent, as the
case may be, that such owner is a Non-United States Holder and must provide such
owner's name and address or (ii) a securities clearing organization, bank or
other financial institution that holds customers securities in the ordinary
course of its trade or business (a "Financial Institution") and holds the New
Note on behalf of the beneficial owners thereof must certify, under penalties of
perjury, to the Company or paying agent, as the case may be, that such
certificate has been received from the beneficial owner by it or by a Financial
Institution between it and the beneficial owner and must furnish the payor with
a copy thereof. A certificate described in this paragraph is effective only with
respect to payments of interest made to the certifying Non-United States Holder
after issuance of the certificate in the calendar year of its issuance and the
two immediately succeeding calendar years. Such requirement will be fulfilled if
the beneficial owner of a New Note certifies on Internal Revenue Service Form
W-8, under penalties of perjury, that it is a Non-United States Holder and
provides its name and address, and if any Financial Institution holding the New
Note on behalf of the beneficial owner files a statement with the withholding
agent to the effect that it has received such a statement from the beneficial
owner (and furnishes the withholding agent with a copy thereof).
The United States Treasury Department adopted new Regulations published in
the Federal Register on October 14, 1997 (the "New Regulations") which affect
the United States taxation of Non-United States Holders with respect to
withholding and backup withholding. As promulgated, the New Regulations are
generally effective, subject to certain transition rules described below, for
payments after December 31, 1998, regardless of the issue date of the instrument
with respect to which such payments are made. The Service recently announced its
intention to amend the New Regulations to extend the effective date to those
payments made after December 31, 1999, subject to certain transition rules. The
discussion under this heading and under "Information Reporting and Backup
Withholding" below, is not intended to be a complete discussion of the
provisions of the New Regulations or the recent Service announcement, and
Holders of the New Notes are urged to consult their tax advisors concerning the
tax consequences of their acquiring, holding and disposing of the New Notes in
light of the New Regulations.
The New Regulations provide documentation procedures designed to simplify
compliance by withholding agents. The New Regulations generally do not affect
the documentation rules described above, but add other certification options.
Under one such option, a withholding agent will be allowed to rely on an
intermediary withholding certificate furnished by a "qualified intermediary" (as
defined below) on behalf of one or more beneficial owners (or other
intermediaries) without the withholding agent having to obtain the beneficial
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<PAGE> 99
owner certificate described above. "Qualified intermediaries" include: (i)
foreign financial institutions or foreign clearing organizations (other than a
United States branch or United States office of such institution or
organization) or (ii) foreign branches or offices of United States financial
institutions or foreign branches or offices of United States clearing
organizations, which, as to both (i) and (ii), have entered into withholding
agreements with the Service. In addition to certain other requirements,
qualified intermediaries must obtain withholding certificates, such as revised
Internal Revenue Service Form W-8 (see below), from each beneficial owner. Under
another option, an authorized foreign agent of a United States withholding agent
will be permitted to act on behalf of the United States withholding agent,
provided certain conditions are met.
For purposes of the certification requirements, the New Regulations
generally treat as the beneficial owners of payments on a New Note those persons
that, under United States tax principles, are the taxpayers with respect to such
payments, rather than persons such as nominees or agents legally entitled to
such payments. In the case of payments to an entity classified as a foreign
partnership under United States tax principles, the partners, rather than the
partnership, generally will be required to provide the required certifications
to qualify for the withholding exemption described above. A payment to a United
States partnership, however, is treated for these purposes as payment to a
United States payee, even if the partnership has one or more foreign partners.
The New Regulations provide certain presumptions with respect to withholding for
Holders not furnishing the required certifications to qualify for the
withholding exemption described above. In addition, the New Regulations will
replace a number of current tax certification forms (including Internal Revenue
Service Form W-8, Form 1001 (treaty exemptions) and possibly Form 4224
(discussed below) with a single, revised Internal Revenue Service Form W-8
(which, in certain circumstances, will require information in addition to that
previously required). Under the New Regulations, this Internal Revenue Service
Form W-8 will remain valid until the last day of the third calendar year
following the year in which the certificate is signed. The New Regulations
contain detailed rules, which might be changed in light of the recent
announcement by the Service that the effective date will be postponed, governing
tax certifications during the transition period prior to and immediately
following the effectiveness of the New Regulations.
United States Trade or Business
If a Non-United States Holder is engaged in a trade or business in the
United States, and if interest on the New Note, or gain recognized on the sale,
exchange or other disposition of the New Note, is effectively connected with the
conduct of such trade or business, the Non-United States Holder, although exempt
from withholding of United States income tax, will generally be subject to
United States income tax on such interest or gain in the same manner as if it
were a United States Holder. See "--Tax Consequences to United States Holders".
In lieu of the certificates described above, such a Non-United States Holder
will be required to provide the withholding agent a properly executed Internal
Revenue Service Form 4224 (Statement Claiming Exemption of Tax on Income
Effectively Connected with the Conduct of Business in the United States) (or
successor form) in order to claim an exemption from withholding. If such
Non-United States Holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30% (or such lower rate provided by an applicable treaty)
of its effectively connected earnings and profits for the taxable year, subject
to certain adjustments. For purposes of the branch profits tax, interest on, and
any gain recognized on the sale, exchange or other disposition of, a New Note
will be included in the effectively connected earnings and profits of such
Non-United States Holder if such interest or gain is effectively connected with
the conduct by the Non-United States Holder of a trade or business in the United
States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under current United States federal income tax law, a 31% backup
withholding tax requirement applies to certain payments of interest on, and the
proceeds of a sale, exchange or redemption of, the New Notes. In addition,
certain persons making such payments are required to submit information returns
(i.e., Internal Revenue Service Forms 1099) to the Service with regard to those
payments.
Backup withholding will generally not apply with respect to payments made
to certain "exempt recipients" such as corporations (within the meaning of
Section 7701(a) of the Code) or certain tax-exempt
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<PAGE> 100
entities. In the case of a non-corporate United States Holder, backup
withholding generally will apply only if such Holder (i) fails to furnish to the
payor in the manner required its Taxpayer Identification Number ("TIN") which,
for an individual, would be his Social Security number, (ii) furnishes an
incorrect TIN and the payor is so notified by the Service, (iii) is notified by
the Service that it has failed to properly report payments of interest and
dividends and the payor is so notified by the Service or (iv) under certain
circumstances, fails to certify, under penalties of perjury, that it has
furnished a correct TIN and has not been notified by the Service that it is
subject to backup withholding for failure to report interest or dividend
payments.
In the case of a Non-United States Holder, under current United States
federal income tax law, information reporting on Internal Revenue Service Form
1099 (including Internal Revenue Service Form 1099B) and backup withholding will
not apply to payments of principal or interest made by the Company or any paying
agent thereof on a New Note if such Holder has provided the required
certification on Internal Revenue Service Form W-8 (see "--Tax Consequences to
Non-United States Holders") under penalties of perjury that it is not a United
States Holder or has otherwise established an exemption, provided in each case
that the Company or such paying agent, as the case may be, does not have actual
knowledge that the payee is a United States Holder. However, interest on a New
Note beneficially owned by a Non-United States Holder will be required to be
reported annually on Internal Revenue Service Form 1042S. If a Non-United States
Holder does not provide the required certification, such Holder may nevertheless
avoid backup withholding or information reporting in the circumstances described
below, but such Holder might be subject to withholding of United States income
tax as described under "--Tax Consequences to Non-United States Holders".
Under current United States federal income tax laws, if payments of
principal or interest on a New Note are made to or through a foreign office of a
custodian, nominee, broker or other agent acting on behalf of a beneficial owner
of a New Note, such custodian, nominee, broker or other agent will not be
required to apply backup withholding to such payments made to such beneficial
owner and generally will not be subject to information reporting requirements.
However, if such custodian, nominee, broker or other agent is a United States
person for United States federal income tax purposes, a controlled foreign
corporation for United States federal income tax purposes, or a foreign person
50% or more of whose gross income is effectively connected with the conduct of a
United States trade or business for a specified three-year period, such
custodian, nominee, broker or other agent may be subject to certain information
reporting requirements with respect to such payments unless it has in its
records documentary evidence that the beneficial owner is a Non-United States
Holder and certain conditions are met or the beneficial owner otherwise
establishes an exemption.
Under current United States federal income tax law, payments on the sale,
exchange, redemption, retirement or other disposition of a New Note made to or
through a foreign office of a broker generally will not be subject to backup
withholding and generally will not be subject to information reporting
requirements. Such payments, however, will be subject to information reporting
if the broker is a United States person for United States federal income tax
purposes, a controlled foreign corporation for United States federal income tax
purposes, or a foreign person 50% or more of whose gross income is effectively
connected with the conduct of a United States trade or business for a specified
three-year period, unless the broker has in its records documentary evidence
that the beneficial owner is a Non-United States Holder and certain other
conditions are met, or the beneficial owner otherwise establishes an exemption.
Such payments made to or through the United States office of a broker will be
subject to backup withholding and information reporting unless the Non-United
States Holder certifies, under penalties of perjury, that it is a Non-United
States Holder or otherwise establishes an exemption.
In general, the New Regulations do not significantly alter the substantive
backup withholding and information reporting requirements described above. As
under current law, backup withholding and information reporting will not apply
to (i) payments to a Non-United States Holder of principal and interest and (ii)
payments to a Non-United States Holder on the sale, exchange, redemption,
retirement or other disposition of a New Note, in each case if such Non-United
States Holder provides the required certification to establish an exemption from
the withholding of United States federal income tax or otherwise establishes an
exemption. Similarly, even in the absence of a Non-United States Holder
providing such certification or
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<PAGE> 101
otherwise establishing an exemption, unless the payor has actual knowledge that
the payee is a United States Holder, backup withholding will not apply to (i)
payments of interest made outside the United States to certain offshore accounts
and (ii) payments on the sale, exchange, redemption, retirement or other
disposition of a New Note effected outside the United States. However,
information reporting (but not backup withholding) will apply to (i) payments of
interest made by a payor outside the United States and (ii) payments on the
sale, exchange, redemption, retirement or other disposition of a New Note
effected outside the United States if payment is made by a broker that is, for
United States federal income tax purposes, (a) a United States person, (b) a
controlled foreign corporation, (c) a United States branch of a foreign bank or
foreign insurance company, (d) a foreign partnership controlled by United States
persons or engaged in a United States trade or business or (e) a foreign person
50% or more of whose gross income is effectively connected with the conduct of a
United States trade or business for a specified three year period, in each case
unless such payor or broker has in its records documentary evidence that the
beneficial owner is not a United States Holder and certain other conditions are
met or the beneficial owner otherwise establishes an exemption (in which case,
neither information reporting nor backup withholding will apply). As noted
above, the Service has announced that the New Regulations will be amended to be
effective generally for payments made after December 31, 1999, subject to
certain transition rules.
Backup withholding tax is not an additional tax. Rather, any amounts
withheld from a payment to a person under backup withholding rules are allowed
as a refund or a credit against such person's United States federal income tax,
provided that the required information is furnished to the Service.
Holders should consult their tax advisors regarding the application of
information reporting and backup withholding in their particular situations, the
availability of an exemption therefrom, and the procedure for obtaining such an
exemption, if available.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH PROSPECTIVE HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO
THE PARTICULAR TAX CONSEQUENCES OF THE PROSPECTIVE HOLDER, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, OR NON-UNITED STATES INCOME TAX
LAWS AND ANY RECENT OR PROSPECTIVE CHANGES IN APPLICABLE TAX LAWS.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account ("Restricted
Broker-Dealers") pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Restricted Broker-Dealer in connection with resales of New Notes received
in exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that it will make this Prospectus, as amended or supplemented, available to any
Restricted Broker-Dealer for use in connection with any such resale and
Restricted Broker-Dealers shall be authorized to deliver this Prospectus for a
period not exceeding 180 days after the Expiration Date.
The Company will not receive any proceeds from any sales of the New Notes
by Restricted Broker-Dealers. New Notes received by Restricted Broker-Dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time, in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Notes or a combination
of such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from such Restricted Broker-Dealer or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a Restricted Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
The Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any Restricted Broker-Dealer that
reasonably requests such documents in the Letter of Transmittal. See "The
Exchange Offer."
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
Notes offered hereby will be passed upon for the Company by Mayer, Brown &
Platt, Chicago, Illinois.
EXPERTS
The consolidated financial statements of the Company incorporated in this
Prospectus by reference to the Company's Annual Report on Form 10-K for the year
ended March 31, 1998, the supplementary consolidated financial statements of the
Company incorporated by reference to the Company's Form 8-K dated July 1, 1998,
the financial statements of Aerospace Metals, Inc incorporated by reference to
the Company's Form 8-K dated May 1, 1998, and the combined financial statements
of Naporano Iron & Metal Co. and Nimco Shredding Co. incorporated by reference
to the Company's Form 8-K dated July 1, 1998, have been so incorporated in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The consolidated balance sheets of Cozzi Iron & Metal, Inc. and
subsidiaries as of December 31, 1996 and 1995 and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1996 incorporated in this Prospectus by
reference from the Company's Proxy Statement, dated November 20, 1997, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES BY ANY PERSON IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information...................... iv
Incorporation of Certain Documents
by Reference............................. iv
Prospectus Summary......................... 1
Risk Factors............................... 14
The Exchange Offer......................... 26
Use of Proceeds............................ 37
Capitalization............................. 38
Selected Historical and Pro Forma
Financial Data........................... 39
Pro Forma Financial Data................... 44
The Company................................ 55
Recent Developments........................ 55
Description of the Senior Credit
Facility................................. 56
Description of the New Notes............... 57
Certain United States Federal Tax
Consequences............................. 89
Plan of Distribution....................... 95
Legal Matters.............................. 95
Experts.................................... 95
</TABLE>
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UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$180,000,000
METAL MANAGEMENT, INC.
10% SENIOR SUBORDINATED
NOTES DUE 2008
-----------------------
PROSPECTUS
-----------------------
, 1998
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<PAGE> 104
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to the provisions of Section 145(a) of the Delaware General
Corporation Law, the Company has the power to indemnify anyone made or
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by or in the right of the Company) because such person is
or was a director or officer of the Company against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred in the defense or settlement of such action, suit, or
proceeding, provided that (i) such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the Company's best interest and
(ii) in the case of a criminal proceeding such person had no reasonable cause to
believe his conduct was unlawful.
With respect to an action or suit by or in the right of the Company to
procure a judgement in its favor, Section 145(b) of the Delaware General
Corporation Law provides that the Company shall have the power to indemnify
anyone who was, is, or is threatened to be made a party to a threatened,
pending, or completed action or suit brought by or in the right of the Company
to procure a judgment in its favor because such person is or was a director or
officer of the Company against expenses (including attorneys' fee) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit, provided that such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the Company's best interests,
except that no indemnification shall be made in a case in which such person
shall have been adjudged to be liable to the Company unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall have determined upon application that, despite the adjudication of
liability, but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses.
Indemnification as described above shall only be granted in a specific case
upon a determination that indemnification is proper under the circumstances
using the applicable standard of conduct which is made by (a) a majority of a
quorum of directors who were not parties to such proceeding, (b) independent
legal counsel in a written opinion of such quorum cannot be obtained or if a
quorum of disinterested directors so directs, or (c) the shareholders of the
Company.
Section 145(g) of the Delaware General Corporation Law permits the purchase
and maintenance of insurance to indemnify directors and officers against any
liability asserted against or incurred by them in any such capacity, whether or
not the Company itself would have the power to indemnify any such director or
officer against such liability. The Company has purchased this type of
insurance, has paid and intends to continue paying the premiums thereon.
The Company's Amended Certificate of Incorporation provides for the
indemnification of directors and officers of the Company to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law, as the same
may be amended or supplemented. The Certificate of Incorporation further
provides that the indemnification provided for therein shall not be exclusive of
any rights to which those indemnified may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors, or otherwise.
The Amended Certificate of Incorporation also contains a provision that
eliminates the personal liability of the Company's directors to the Company or
its shareholders of monetary damages for breach of fiduciary duty as a director.
The provision does not limit a director's liability for (i) breaches of duty of
loyalty to the Company or its shareholders, (ii) acts or omissions not in good
faith, involving intentional misconduct or involving knowing violations of law,
(iii) the payment of unlawful dividends or unlawful stock repurchases or
redemptions under Section 174 of the Delaware General Corporation Law, or (iv)
transactions in which the director received an improper personal benefit.
Depending on judicial interpretation, the provision may not affect liability for
violations of the federal securities laws.
II-1
<PAGE> 105
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The Company understands that the staff of the Securities and Exchange
Commission is of the opinion that statutory, charter and contractual provisions
as are described above have no effect on claims arising under the federal
securities laws. The Company is not aware of any material threatened or ongoing
litigation or proceeding that may result in a claim for such indemnification.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
The exhibits filed as part of this registration statement are as follows:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<C> <S>
1.1 Purchase Agreement, dated May 8, 1998, among the Company,
the Guarantors, Goldman, Sachs & Co., BT Alex. Brown
Incorporated and Salomon Brothers Inc (incorporated by
reference to Exhibit 10.1 of the Company's report on Form
8-K dated May 13, 1998).
2.1 Purchase Agreement, dated as of March 10, 1997, between the
Company and BancBoston Ventures, Inc. (incorporated by
reference to Exhibit 2.1 of the Company's report on Form 8-K
dated May 2, 1997).
2.2 Purchase Agreement, dated as of January 17, 1997, among the
Company, P. Joseph Iron & Metal, Inc., the sole general
partner of Reserve Iron & Metal Limited Partnership, and
Paul D. Joseph, Steven Joseph and Scott Joseph (incorporated
by reference to Exhibit 2.2 of the Company's report on Form
8-K dated May 2, 1997).
2.3 First Amendment to Purchase Agreement, dated as of March 6,
1997, among the Company, P. Joseph Iron & Metal, Inc., the
sole general partner of Reserve Iron & Metal Limited
Partnership, and Paul D. Joseph, Steven Joseph and Scott
Joseph (incorporated by reference to Exhibit 2.3 of the
Company's report on Form 8-K dated May 2, 1997).
2.4 Second Amendment to Purchase Agreement, dated May 1, 1997,
among the Company, P. Joseph Iron & Metal, Inc., the sole
general partner of Reserve Iron & Metal Limited Partnership,
and Paul D. Joseph, Steven Joseph and Scott Joseph
(incorporated by reference to Exhibit 2.4 of the Company's
report on Form 8-K dated May 2, 1997).
2.5 Purchase Agreement, dated as of June 23, 1997, among the
Company, Isaac Corporation, Ferrex Trading Corporation,
Paulding Recycling, Inc. and Briquetting Corporation of
America (incorporated by reference to Exhibit 2.1 of the
Company's report on Form 8-K dated
June 23, 1997).
2.6 Agreement and Plan of Merger dated as of August 27, 1997, by
and among the Company, Proler Acquisition, Inc., Proler
Southwest Inc. and the Shareholders of Proler Southwest Inc.
(incorporated by reference to Exhibit 2.1 of the Company's
report on Form 8-K dated August 28, 1997).
</TABLE>
II-2
<PAGE> 106
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<C> <S>
2.7 Purchase Agreement for Membership Interests of Proler
Steelworks L.L.C., dated as of August 27, 1997, by and among
the Company, Proler Steelworks L.L.C. and the Members of
Proler Steelworks L.L.C. (incorporated by reference to
Exhibit 2.2 of the Company's report on Form 8-K dated August
28, 1997).
2.8 Agreement and Plan of Merger, dated May 16, 1997 (as
amended), among Cozzi Iron & Metal, Inc. and its
shareholders, the Company and CIM Acquisition, Co.
(incorporated by reference to Exhibit 2.1 of the Company's
report on Form 8-K dated December 1, 1997).
2.9 Agreement and Plan of Merger, dated December 11, 1997, by
and among the Company, HCS Acquisition, Inc., Houston
Compressed Steel Corp. and the Shareholders of Houston
Compressed Steel Corp. (incorporated by reference to Exhibit
4.11 of the Company's registration statement on Form S-3/A
dated January 13, 1998).
2.10 Asset Purchase Agreement, dated as of January 20, 1998,
between the Company, AMI Acquisition Co., Aerospace Metals,
Inc., Aerospace Parts Security, Inc., Suisman Titanium
Corporation, and Michael Suisman, the sole shareholder of
Aerospace Metals, Inc. and Aerospace Parts Security, Inc.
(incorporated by reference to Exhibit 2.1 of the Company's
report on Form 8-K dated January 20, 1998).
2.11 Stock Purchase Agreement, dated as of May 24, 1998, by and
among the Company, Joseph F. Naporano and Andrew J.
Naporano, Jr. (incorporated by reference to Exhibit 2.1 of
the Company's report on Form 8-K dated July 1, 1998).
4.1 Specimen of Stock Certificate (incorporated by reference to
Exhibit 4.1 of the Company's Annual Report on Form 10-K for
the year ended March 31, 1997).
4.2 1995 Stock Plan and Form of Option Agreement (incorporated
by reference to Exhibit 4.2 of the Company's Annual Report
on Form 10-K for the year ended March 31, 1997).
4.3 1996 Director Option Plan and Form of Option Agreement
(incorporated by reference to Exhibit 4.3 of the Company's
Annual Report on Form 10-K for the year ended March 31,
1997).
4.4 Registration Rights Agreement, dated as of June 23, 1997, by
and between the Company and the George A. Isaac, III Second
Revocable Trust (incorporated by reference to Exhibit 4.4 of
the Company's Annual Report on Form 10-K for the year ended
March 31, 1998).
4.5 Registration Rights Agreement, dated as of November 20,
1997, by and among the Company, Proprietary Convertible
Investment Group, Inc., and Capital Ventures International
(incorporated by reference to Exhibit 10.5 of the Company's
report on Form 8-K dated December 1, 1997).
4.6 Shelf Registration Rights Agreement, dated December 19,
1997, between the Company and Samstock, L.L.C. (incorporated
by reference to Exhibit 4.2 of the Company's report on Form
8-K dated December 18, 1997).
4.7 Amended and Restated Registration Rights Agreement, dated
December 19, 1997, among the Company, T. Benjamin Jennings,
Gerard M. Jacobs, Albert A. Cozzi, Frank J. Cozzi,
Gregory P. Cozzi and Samstock, L.L.C. (incorporated by
reference to Exhibit 4.3 of the Company's report on Form 8-K
dated December 18, 1997).
4.8 Registration Rights Agreement, dated December 18, 1997,
between the Registrant and Ronald I. Romano, Lolita A.
Romano, Ronald T. Romano and Ryan E. Romano (incorporated by
reference to Exhibit 4.4 of the Company's report on Form 8-K
dated January 2, 1998).
4.9 Registration Rights Agreement, dated January 20, 1998, by
and between the Company and Aerospace Metals, Inc.
(incorporated by reference to Exhibit 10.3 of the Company's
report on Form 8-K dated January 20, 1998).
4.10 Registration Rights Agreement, dated January 30, 1998, by
and between the Company and Newell Phoenix, L.L.C.
(incorporated by reference to Exhibit 4.5 of the Company's
registration statement on Form S-3 dated February 10, 1998).
</TABLE>
II-3
<PAGE> 107
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<C> <S>
4.11 Indenture, dated as of May 13, 1998, among the Company, the
Guarantors (as defined therein) and LaSalle National Bank,
as Trustee (incorporated by reference to Exhibit 10.2 of the
Company's report on Form 8-K dated May 13, 1998).
4.12 First Supplemental Indenture, dated as of May 31, 1998,
executed by R&P Holdings, Inc., Charles Bluestone Company
and R&P Real Estate, Inc., amending Indenture, dated as of
May 13, 1998, among the Company, the Guarantors and LaSalle
National Bank, as Trustee (incorporated by reference to
Exhibit 4.12 of the Company's Annual Report on Form 10-K for
the year ended March 31, 1998).
4.13 Second Supplemental Indenture, dated as of June 19, 1998,
executed by Metal Management Gulf Coast, Inc., amending
Indenture, dated as of May 13, 1998, among the Company, the
Guarantors and LaSalle National Bank, as Trustee
(incorporated by reference to Exhibit 4.13 of the Company's
Annual Report on Form 10-K for the year ended March 31,
1998).
4.14 * Third Supplemental Indenture, dated as of June 24, 1998,
executed by Newell Recycling West, Inc., amending Indenture,
dated as of May 13, 1998, among the Company, the Guarantors
and LaSalle National Bank, as Trustee.
4.15 * Fourth Supplemental Indenture, dated as of July 1, 1998,
executed by Naporano Iron & Metal Co. and NIMCO Shredding
Co., amending Indenture, dated as of May 13, 1998, among the
Company, the Guarantors and LaSalle National Bank, as
Trustee.
4.16 * Fifth Supplemental Indenture, dated as of July 1, 1998,
executed by Michael Schiavone & Sons, Inc. and Torrington
Scrap Company, amending Indenture, dated as of May 13, 1998,
among the Company, the Guarantors and LaSalle National Bank,
as Trustee.
4.17 ** Sixth Supplemental Indenture, dated as of July 7, 1998,
executed by M. Kimerling & Sons, Inc., amending Indenture,
dated as of May 13, 1998, among the Company, the Guarantors
and LaSalle National Bank, as Trustee.
4.18 ** Seventh Supplemental Indenture, dated as of July 9, 1998,
executed by Nicroloy Company, amending Indenture, dated as
of May 13, 1998, among the Company, the Guarantors and
LaSalle National Bank, as Trustee.
4.19 Exchange and Registration Rights Agreement, dated as of May
13, 1998, by and among the Company, the Guarantors, Goldman,
Sachs & Co., BT Alex. Brown Incorporated and Salomon
Brothers Inc (incorporated by reference to Exhibit 10.3 of
the Company's report on Form 8-K dated May 13, 1998).
4.20 Registration Rights Agreement, dated as of July 1, 1998, by
and among the Company, McDonald & Company Securities, Joseph
F. Naporano and Andrew J. Naporano, Jr. (incorporated by
reference to Exhibit 10.1 of the Company's report on Form
8-K dated July 1, 1998).
4.21 Declaration of Registration Rights, dated March 17, 1998, by
the Company for the benefit of Ian Albert, Betty Albert,
Eric Albert, Brian Albert, Lisa Albert and Alan Shumway
(incorporated by reference to Exhibit 4.15 of the Company's
registration statement on Form S-3 dated July 7, 1998).
4.22 Registration Rights Agreement, dated April 29, 1998, by and
between the Company and 138 Scrap, Inc. and Katrick, Inc.
(incorporated by reference to Exhibit 4.16 of the Company's
registration statement on Form S-3 dated July 7, 1998).
4.23 Registration Rights Agreement, dated as of June 24, 1998, by
and between the Company and G. Robert Triesch, III
(incorporated by reference to Exhibit 4.17 of the Company's
registration statement on Form S-3 dated July 7, 1998).
5.1 ** Form of Opinion of Mayer, Brown & Platt.
12.1 ** Statement re Computation of Ratio of Earnings to Fixed
Charges.
23.1 * Consent of PricewaterhouseCoopers LLP.
</TABLE>
II-4
<PAGE> 108
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<C> <S>
23.2 * Consent of Deloitte & Touche LLP.
23.3 Consent of Mayer, Brown & Platt (included in the opinion
filed as Exhibit 5.1).
24.1 Powers of Attorney (included as part of the signature page
hereof).
25.1 * Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of LaSalle National Bank.
27.1 * Financial Data Schedule.
99.1 * Form of Letter of Transmittal for the 10 1/4 Senior
Subordinated Notes due 2007.
99.2 * Guidelines for Certification of Taxpayer Identification
Numbers on Substitute Form W-9.
99.3 * Form of Notice of Guaranteed Delivery.
</TABLE>
- ------------------------
* Included with this Registration Statement.
** To be included with an Amendment to this Registration Statement.
(B) FINANCIAL STATEMENTS SCHEDULES
Schedules not listed above have been omitted because they are inapplicable
or the information required to be set forth therein is provided in the
Consolidated Financial Statements or the notes thereto.
ITEM 22. UNDERTAKINGS
Each of the undersigned registrants hereby undertakes:
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(a) Each of the undersigned registrants hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
II-5
<PAGE> 109
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Each of the undersigned registrants hereby undertakes:
(1) To respond to requests for information that is incorporated by
reference into the Prospectus pursuant to Item 4, 10(b), 11 or 13
of this form, within one business day of receipt of such request,
and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the
request.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the
registration statement when it became effective.
II-6
<PAGE> 110
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Chicago, Illinois on July 10, 1998.
METAL MANAGEMENT, INC.
/s/ GERARD M. JACOBS
By:
--------------------------------------
Gerard M. Jacobs
Director and Chief Executive Officer
/s/ T. BENJAMIN JENNINGS
By:
--------------------------------------
T. Benjamin Jennings
Director, Chairman of the Board and
Chief Development Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Gerard M. Jacobs and T. Benjamin
Jennings, and either of them acting individually, as his attorney-in-fact and
agent with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign, each and all
amendments to this Registration Statement (including post-effective amendments),
to sign any additional registration statements for the same offering and
amendments to the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto the
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
satisfying and confirming that the attorney-in-fact and agent, or his
substitutes, may lawfully do or cease to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on July 10, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ GERARD M. JACOBS Director and Chief Executive Officer
- --------------------------------------------- (Principal Executive Officer)
Gerard M. Jacobs
/s/ T. BENJAMIN JENNINGS Director, Chairman of the Board and
- --------------------------------------------- Chief Development Officer
T. Benjamin Jennings
/s/ ALBERT A. COZZI Director, President and Chief Operating Officer
- ---------------------------------------------
Albert A. Cozzi
/s/ GEORGE A. ISAAC III Director and Executive Vice President
- ---------------------------------------------
George A. Isaac III
</TABLE>
II-7
<PAGE> 111
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ FRANK J. COZZI Director and Vice President
- ---------------------------------------------
Frank J. Cozzi
/s/ GREGORY P. COZZI Director
- ---------------------------------------------
Gregory P. Cozzi
/s/ ROD F. DAMMEYER Director
- ---------------------------------------------
Rod F. Dammeyer
/s/ CHRISTOPHER G. KNOWLES Director
- ---------------------------------------------
Christopher G. Knowles
/s/ WILLIAM T. PROLER Director
- ---------------------------------------------
William T. Proler
/s/ HAROLD RUBENSTEIN Director
- ---------------------------------------------
Harold Rubenstein
/s/ ROBERT C. LARRY Vice President, Finance, Treasurer and Chief
- --------------------------------------------- Financial
Robert C. Larry Officer (Principal Financial and Accounting
Officer)
</TABLE>
II-8
<PAGE> 1
EXHIBIT 4.14
THIRD SUPPLEMENTAL INDENTURE
THIS THIRD SUPPLEMENTAL INDENTURE, dated as of June 24, 1998, is executed
by NEWELL RECYCLING WEST, INC., a Colorado corporation ("Newell West") and
wholly-owned subsidiary of METAL MANAGEMENT, INC., a Delaware corporation (the
"Company"), for the sole purpose of granting a guarantee under the Indenture
(as amended from time to time, the "Indenture"), dated as of May 13, 1998, with
respect to the Company's 10% Senior Subordinated Notes due 2008 (the "Notes"),
entered into among the Company, the Guarantors (as defined therein) and LASALLE
NATIONAL BANK, as trustee (the "Trustee").
PRELIMINARY STATEMENT
The Company, the Guarantors and the Trustee have entered into the
Indenture. Capitalized terms used herein, not otherwise defined herein, shall
have the meanings given them in the Indenture.
Section 4.18 of the Indenture expressly provides that any Restricted
Subsidiary (i) that has assets or revenues in any fiscal year in excess of
$200,000 or (ii) that is not a Guarantor and is a borrower under the Senior
Credit Facility shall execute a supplemental indenture to become a Guarantor of
the Company's Notes. Pursuant to Section 4.18 of the Indenture, Newell West
executes this Third Supplemental Indenture to a become Guarantor of the
Company's Notes. Newell West, has by Board Resolution, authorized this Third
Supplemental Indenture. The Trustee has determined that this Third
Supplemental Indenture is in form satisfactory to it.
NOW, THEREFORE, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes issued under the Indenture
from and after the date of this Third Supplemental Indenture, as follows:
Section 1. Guarantee on the Notes.
Newell West hereby subjects itself to the provisions of the Indenture as a
Guarantor in accordance with Article 11 of the Indenture.
Section 2. Counterparts
This Third Supplemental Indenture may be executed in several counterparts,
all of which together shall constitute one agreement binding on all parties,
notwithstanding that all parties have not signed the same counterpart.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have caused this Supplemental
Indenture to be duly executed by its respective officers as of the day and year
first above written.
NEWELL RECYCLING WEST, INC.
By: /s/ David A. Carpenter
--------------------------------
David A. Carpenter
Vice President
-2-
<PAGE> 1
EXHIBIT 4.15
FOURTH SUPPLEMENTAL INDENTURE
THIS FOURTH SUPPLEMENTAL INDENTURE, dated as of July 1, 1998, is executed
by Naporano Iron & Metal Co., a New Jersey corporation ("Naporano") and NIMCO
Shredding Co., a New Jersey corporation ("NIMCO") both of which are
wholly-owned subsidiaries of METAL MANAGEMENT, INC., a Delaware corporation
(the "Company"), for the sole purpose of granting a guarantee under the
Indenture (as amended from time to time, the "Indenture"), dated as of May 13,
1998, with respect to the Company's 10% Senior Subordinated Notes due 2008 (the
"Notes"), entered into among the Company, the Guarantors (as defined therein)
and LASALLE NATIONAL BANK, as trustee (the "Trustee").
PRELIMINARY STATEMENT
The Company, the Guarantors and the Trustee have entered into the
Indenture. Capitalized terms used herein, not otherwise defined herein, shall
have the meanings given them in the Indenture.
Section 4.18 of the Indenture expressly provides that any Restricted
Subsidiary (i) that has assets or revenues in any fiscal year in excess of
$200,000 or (ii) that is not a Guarantor and is a borrower under the Senior
Credit Facility shall execute a supplemental indenture to become a Guarantor of
the Company's Notes. Pursuant to Section 4.18 of the Indenture, Naporano and
NIMCO hereby execute this Fourth Supplemental Indenture to a become Guarantor
of the Company's Notes. Each of Naporano and NIMCO, has by Board Resolution,
authorized this Fourth Supplemental Indenture. The Trustee has determined that
this Fourth Supplemental Indenture is in form satisfactory to it.
NOW, THEREFORE, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes issued under the Indenture
from and after the date of this Fourth Supplemental Indenture, as follows:
Section 1. Guarantee on the Notes.
Naporano and Nimco each hereby subjects itself to the provisions of the
Indenture as a Guarantor in accordance with Article 11 of the Indenture.
Section 2. Counterparts
This Fourth Supplemental Indenture may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties, notwithstanding that all parties have not signed the same
counterpart.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have caused this Supplemental
Indenture to be duly executed by its respective officers as of the day and year
first above written.
NAPORANO IRON & METAL CO.
By: /s/ DAVID A. CARPENTER
---------------------------------
David A. Carpenter
Vice President
NIMCO SHREDDING CO.
By: /s/ DAVID A. CARPENTER
---------------------------------
David A. Carpenter
Vice President
-2-
<PAGE> 1
EXHIBIT 4.16
FIFTH SUPPLEMENTAL INDENTURE
THIS FIFTH SUPPLEMENTAL INDENTURE, dated as of July 1, 1998, is executed by
MICHAEL SCHIAVONE & SONS, INC., a Delaware corporation ("MSS"), and TORRINGTON
SCRAP COMPANY, a Delaware corporation ("Torrington"), each a wholly-owned
subsidiary of METAL MANAGEMENT, INC., a Delaware corporation (the "COMPANY"),
for the sole purpose of granting a guarantee under the Indenture (as amended
from time to time, the "INDENTURE"), dated as of May 13, 1998, with respect to
the Company's 10% Senior Subordinated Notes due 2008 (the "NOTES"), entered into
among the Company, the Guarantors (as defined therein) and LASALLE NATIONAL
BANK, as trustee (the "TRUSTEE").
PRELIMINARY STATEMENT
The Company, the Guarantors and the Trustee have entered into the
Indenture. Capitalized terms used herein, not otherwise defined herein,
shall have the meanings given them in the Indenture.
Section 4.18 of the Indenture expressly provides that any Restricted
Subsidiary (i) that has assets or revenues in any fiscal year in excess of
$200,000 or (ii) that is not a Guarantor and is a borrower under the Senior
Credit Facility shall execute a supplemental indenture to become a Guarantor of
the Company's Notes. Pursuant to Section 4.18 of the Indenture, each of MSS and
Torrington execute this Fifth Supplemental Indenture to become a Guarantor of
the Company's Notes. Each of MSS and Torrington have, by Board Resolution,
authorized this Fifth Supplemental Indenture. The Trustee has determined that
this Fifth Supplemental Indenture is in form satisfactory to it.
NOW, THEREFORE, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes issued under the Indenture
from and after the date of this Fifth Supplemental Indenture, as follows:
Section 1. GUARANTEE ON THE NOTES.
Each of MSS and Torrington hereby subjects itself to the provisions of the
Indenture as a Guarantor in accordance with Article 11 of the Indenture.
Section 2. COUNTERPARTS
This Fifth Supplemental Indenture may be executed in several counterparts,
all of which together shall constitute one agreement binding on all parties,
notwithstanding that all parties have not signed the same counterpart.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have caused this Fifth Supplemental
Indenture to be duly executed by its respective officers as of the day and year
first above written.
MICHAEL SCHIAVONE & SONS, INC.
TORRINGTON SCRAP COMPANY
By: /s/ David A. Carpenter
-----------------------------------
Name: David A. Carpenter
-----------------------------------
Its: Vice President
-----------------------------------
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of the following:
our report dated May 28, 1998, appearing on page F-1 of Metal Management,
Inc.'s Annual Report on Form 10-K for the year ended March 31, 1998; our report
dated May 28, 1998, relating to the supplementary consolidated financial
statements of Metal Management, Inc., appearing in Metal Management, Inc.'s
Current Report on Form 8-K dated July 2, 1998; our report dated August 12,
1997, except for Note 7 which is as of March 9, 1998, related to the Aerospace
Metals, Inc. financial statements appearing in Metal Management, Inc.'s Form 8-K
dated May 1, 1998; and, our report dated June 23, 1998 related to the Naparano
Iron & Metal Co. and Nimco Shredding Co. financial statements appearing in Metal
Management, Inc.'s Form 8-K/A dated July 9, 1998. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
PricewaterhouseCoopers LLP
Chicago, Illinois
July 10, 1998
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Registration Statement
of Metal Management, Inc. on Form S-4 of our report, dated April 22, 1997, on
the Cozzi Iron & Metal, Inc. financial statements appearing in the Proxy
Statement of Metal Management, Inc. dated November 20, 1997. We also consent
to the reference to us under the heading "Experts" in such Prospectus.
Deloitte & Touche LLP
Chicago, Illinois
July 10, 1998
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------
LASALLE NATIONAL BANK
(Exact name of trustee as specified in its charter)
36-0884183
(I.R.S. Employer
Identification No.)
135 South LaSalle Street, Chicago, Illinois 60603
(Address of principal executive offices) (Zip Code)
-----------------------
M. ROBERT K. QUINN
Group Senior Vice President
General Counsel and Secretary
Telephone: (312) 904-2010
135 South LaSalle Street
Chicago, Illinois 60603
(Name, address and telephone number of agent for service)
-----------------------
METAL MANAGEMENT, INC.
(Exact name of obligor as specified in its charter)
Delaware 94-2835068
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
500 North Dearborn
Suite 405
Chicago, Illinois 60610
(Address of Principal Executive Offices) (Zip Code)
--------------------
Senior Subordinated Notes Due 2008
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
1. Comptroller of the Currency, Washington D.C.
2. Federal Deposit Insurance Corporation, Washington, D.C.
3. The Board of Governors of the Federal Reserve Systems, Washington,
D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
If the obligor or any underwriter for the obligor is an affiliate of the
trustee, describe each such affiliation.
Neither the obligor nor any underwriter for the obligor is an
affiliate of the trustee.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
Furnish the following information as to each class of voting securities of the
trustee:
Not applicable
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, furnish the following information:
(a) Title of the securities outstanding under each other indenture.
Not applicable
(b) A brief statement of the facts relied upon as a basis for the
claim that no conflicting interest within the meaning of Section
310(b)(1) of the Act arises as a result of the trusteeship under
such other indenture, including a statement as to how the
indenture securities will rank as compared with the
securities issued under such other indenture.
Not applicable
<PAGE> 3
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR
OR UNDERWRITERS.
If the trustee or any of the directors or executive officers of the trustee is
a director, officer, partner, employee, appointee, or representative of the
obligor or of any underwriter for the obligor, identify each such person having
any such connection and state the nature of each such connection.
Not applicable
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.
Furnish the following information as to the voting securities of the trustee
owned beneficially by the obligor and each director, partner and executive
officer of the obligor.
Not applicable
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
Furnish the following information as to the voting securities of the trustee
owned beneficially by each underwriter for the obligor and each director,
partner, and executive officer of each such underwriter.
Not applicable
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default by the
trustee:
Not applicable
ITEM 9. SECURITIES OF THE UNDERWRITER OWNED OR HELD BY THE TRUSTEE.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the obligor,
furnish the following information as to each class of securities of such
underwriter any of which are so owned or held by the trustee.
Not applicable
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the knowledge of
the trustee (1) owns 10 percent or more of the voting securities of the obligor
or (2) is an affiliate, other than a subsidiary, of the obligor, furnish the
following information as to the voting securities of such person.
Not applicable
<PAGE> 4
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the knowledge of the
trustee, owns 50 percent or more of the voting securities of the obligor,
furnish the following information as to each class of securities of such person
any of which are so owned or held by the trustee.
Not applicable
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
If the obligor is indebted to the trustee, furnish the following information.
Not applicable
ITEM 13. DEFAULTS BY THE OBLIGOR.
a) State whether there is or has been a default with respect to the securities
under this indenture. Explain the nature of any such default.
Not applicable
b) If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, or is trustee for more than one
outstanding series of securities under the indenture, state whether there has
been a default under any such indenture or series, identify the indenture or
series affected, and explain the nature of any such default.
Not applicable
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not applicable
ITEM 15. FOREIGN TRUSTEE.
Identify the order or rule pursuant to which the foreign trustee is authorized
to act as sole trustee under indentures qualified or to be qualified.
Not applicable
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility and
qualification.
1. A copy of the Articles of Association of LaSalle National Bank
now in effect.
2. A copy of the certificate of authority to commence business.
3. A copy of the authorization to exercise corporate trust powers.
<PAGE> 5
4. A copy of the existing By-Laws of LaSalle National Bank.
5. Not applicable.
6. The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
8. Not applicable.
9. Not applicable.
<PAGE> 6
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
LaSalle National Bank, a corporation organized and existing under the laws of
the United States of America, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Chicago, State of Illinois, on the 7th day of
July, 1998.
LASALLE NATIONAL BANK
By: /s/ Sarah H. Webb
----------------------
Sarah H. Webb
First Vice President
<PAGE> 7
EXHIBIT 1
ARTICLES OF ASSOCIATION
<PAGE> 8
ARTICLES
OF
ASSOCIATION
LA SALLE NATIONAL BANK (LOGO)
LA SALLE NATIONAL BANK
CHICAGO, ILLINOIS
<PAGE> 9
(LOGO)
LaSalle National Bank
ARTICLES OF ASSOCIATION
FIRST. The title of this association, which shall carry on the business of
banking under the laws of the United States shall be "LaSalle National Bank."
SECOND. The place where the main banking house or office of this
association shall be located, its operations of discount and deposit carried
on, and its general business conducted, shall be Chicago, County of Cook, State
of Illinois.
THIRD. The Board of Directors of this association shall consist of such
number of its shareholders, not less than five nor more than twenty-five, as
from time to time shall be determined by a majority of the votes to which all
of its shareholders are at the time entitled. A majority of the Board of
Directors shall be necessary to constitute a quorum for the transaction of
business. The Board of Directors, by vote of a majority of the full board, may,
between annual meetings of shareholders increase the membership of the Board
where the number of directors last elected by shareholders was 15 or less, by
not more than two members, and where the number of directors last elected by
shareholders was 16 or more, by not more than four members and by a like vote
appoint qualified persons to fill the vacancies created thereby; provided that
the number of Directors shall at no time exceed twenty-five.
FOURTH. The regular annual meeting of the shareholders of this association
shall be held at its main banking house, or other convenient place duly
authorized by the board of directors on such day of each year as is specified
therefor in the bylaws.
FIFTH. The amount of capital stock which this association is authorized to
issue shall be Twenty Million Dollars ($20,000,000.00) divided into 2,000,000
shares of common capital stock of the par value of $10.00 each; but said
capital stock may be increased or decreased from time to time, in accordance
with the provisions of the laws of the United States.
If the capital stock is increased by the sale of additional shares
thereof, other than to key officers and employees of the association upon the
exercise of options granted pursuant to the terms of a stock option plan then
in effect, as to which sales all pre-emptive rights are waived, each
shareholder shall be entitled to subscribe for such additional shares in
proportion to the number of shares of said capital stock owned by him at the
time the increase is authorized by the shareholders, unless another time
subsequent to the date of the shareholders' meeting is specified in a
resolution adopted by the shareholders at the time the increase is authorized.
The board of directors shall have the power to prescribe a reasonable period of
time within which the pre-emptive rights to subscribe to the new shares of
capital stock may be exercised.
The association, at any time and from time to time, may authorize and
issue debt obligations, whether or not subordinated, without the approval of
the shareholders.
SIXTH. The board of directors shall appoint one of its members president
of this association, who shall be chairman of the board, but the board of
directors may appoint a director in lieu of the president to be chairman of the
board, who shall perform such duties as may be designated by the board of
directors. The board of directors shall have the power to appoint one or more
vice presidents, a cashier and such other officers as may be required to
transact the business of this association; to fix the salaries to be paid to
all officers of this association; and to dismiss such officers, or any of them.
The board of directors shall have the power to define the duties of
officers and employees of this association, to require bonds from them, and to
fix the penalty thereof; to regulate the manner in which
<PAGE> 10
directors shall be elected or appointed, and to appoint judges of the election;
to make all bylaws that it may be lawful for them to make for the general
regulation of the business of this association and the management of its
affairs; and generally to do and perform all acts that it may be lawful for a
board of directors to do and perform.
SEVENTH. This association shall have succession from the date of its
organization certificate until such time as it be dissolved by act of its
shareholders in accordance with the provisions of the banking laws of the
United States, or until its franchise becomes forfeited by reason of violation
of law, or until terminated by either a general or a special act of Congress,
or until its affairs be placed in the hands of a receiver and finally wound up
by him.
EIGHTH. The board of directors of this association, or any three or more
shareholders owning, in the aggregate, not less than ten percentum of the stock
of this association, may call a special meeting of shareholders at any time:
Provided, however, that, unless otherwise provided by law, not less than ten
days prior to the date fixed for any such meeting, a notice of the time, place,
and purpose of the meeting shall be given by first-class mail, postage prepaid,
to all shareholders of record of this association at their respective addresses
as shown upon the books of the association. These articles of association may
be amended at any regular or special meeting of the shareholders by the
affirmative vote of the shareholders owning at least a majority of the stock of
this association, subject to the provisions of the banking laws of the United
States. The notice of any shareholders' meeting, at which an amendment to the
articles of association of this association is to be considered, shall be given
as herein-above set forth.
NINTH. Any person, his heirs, executors, or administrators, may be
indemnified or reimbursed by the association for reasonable expenses actually
incurred in connection with any action, suit, or proceeding, civil or criminal,
to which he or they shall be made a party by reason of his being or having been
a director, officer, or employee of the association or of any firm,
corporation, or organization which he served in any such capacity at the
request of the association: Provided, however, that no person shall be so
indemnified or reimbursed in relation to any matter in such action, suit, or
proceeding as to which he shall finally be adjudged to have been guilty of or
liable for negligence or wilful misconduct in the performance of his duties to
the association: And, provided further, that no person shall be so indemnified
or reimbursed in relation to any matter in such action, suit, or proceeding
which has been made the subject of a compromise settlement except with the
approval of a court of competent jurisdiction, or the holders of record of a
majority of the outstanding shares of the association, or the board of
directors, acting by vote of directors not parties to the same or substantially
the same action, suit, or proceeding, constituting a majority of the whole
number of the directors. The foregoing right of indemnification or
reimbursement shall not be exclusive of other rights to which such person, his
heirs, executors, or administrators, may be entitled as a matter of law.
********
May 17, 1982
Form No. 181, Rev 5/17/82 GW
<PAGE> 11
EXHIBIT 2
CERTIFICATE OF AUTHORITY
TO COMMENCE BUSINESS
<PAGE> 12
STATE OF ILLINOIS
AUDITOR'S OFFICE
NO. 333 (LOGO)
NATIONAL BANK TRUST CERTIFICATE
Springfield, FEBRUARY 15th 1928
I, OSCAR NELSON, Auditor of Public Accounts of the State of Illinois, do
hereby certify that the NATIONAL BUILDERS BANK OF CHICAGO located at CHICAGO,
County of COOK and State of Illinois, a corporation organized under and by
authority of the statutes of the United States governing National Banks and
authority granted by the Federal Reserve Act for the purpose of accepting and
executing trusts, has this day deposited in this office, securities in the sum
of TWO HUNDRED THOUSAND Dollars, $200,000.00 of the character designated by
Section 6 of the Act of the Legislature of the State of Illinois entitled "An
Act to provide for and regulate the administration of trusts by trust
companies,"
The said deposit is made for the benefit of the creditors of said NATIONAL
BUILDERS BANK OF CHICAGO under and by virtue of the provisions of the Act above
referred to and the said securities are now held by me in this office in my
official capacity as such Auditor of Public Accounts, for the uses and purposes
aforesaid.
I further certify that by virtue of the Acts aforesaid, the NATIONAL
BUILDERS BANK OF CHICAGO is hereby authorized to accept and execute trusts and
receive deposits of trust funds under the provisions and limitations of "An Act
to provide for and regulate the administration of trusts in Illinois.
IN TESTIMONY WHEREOF, I hereunto subscribe my name and affix the
(SEAL) seal of my office, the day and year first above written.
/s/ Oscar Nelson
----------------------------
AUDITOR OF PUBLIC ACCOUNTS.
STATE OF ILLINOIS.
<PAGE> 13
\
NO. 13146.
TREASURY DEPARTMENT (LOGO)
OFFICE OF COMPTROLLER OF THE CURRENCY
Washington, D.C., NOVEMBER 29, 1927.
WHEREAS, by satisfactory evidence presented to the undersigned, it has
been made to appear that "NATIONAL BUILDERS BANK OF CHICAGO" in the CITY of
CHICAGO in the County of COOK and State of ILLINOIS has complied with all the
provisions of the Statutes of the United States, required to be complied with
before an association shall be authorized to commence the business of Banking;
NOW THEREFORE I, J.W. MCINTOSH, Comptroller of the Currency, do hereby
certify that "NATIONAL BUILDERS BANK OF CHICAGO" in the CITY of CHICAGO in the
County of COOK and State of ILLINOIS is authorized to commence the business of
Banking as provided in Section Fifty one hundred and sixty nine of the Revised
Statutes of the United States.
IN TESTIMONY WHEREOF witness my hand and Seal of office
(SEAL) this TWENTY-NINTH day of (SEAL) NOVEMBER, 1927.
/s/ J.W. McIntosh
---------------------------
Comptroller of the Currency
<PAGE> 14
CERTIFICATE OF CHANGE OF CORPORATE TITLE
(LOGO)
NO. 13146.
TREASURY DEPARTMENT
OFFICE OF THE COMPTROLLER OF THE CURRENCY
WASHINGTON, D.C., MAY 1, 1940.
WHEREAS, by satisfactory evidence presented to me, it appears that under
authority of sections 2, 3, and 4, of the Act of Congress approved May 1, 1886,
entitled "An Act to enable national banking associations to increase their
capital stock and to change their names or location," shareholders owning
two-thirds of the stock of the national banking association heretofore known
as-- "NATIONAL BUILDERS BANK OF CHICAGO," located in CHICAGO, County of COOK,
State of ILLINOIS, have voted to change the name of said association to--
"LASALLE NATIONAL BANK," and have complied with all the provisions of the said
Act relative to national banking associations changing their name.
NOW, THEREFORE, IT IS HEREBY CERTIFIED, that the name of the said
association has been changed to-- "LASALLE NATIONAL BANK," and that such change
of name is hereby approved under authority conferred by said Act.
(SEAL) IN TESTIMONY WHEREOF, witness my hand and seal of office this
FIRST day of MAY, 1940.
/s/
--------------------------------------
ACTING Comptroller of the Currency.
<PAGE> 15
EXHIBIT 3
AUTHORIZATION TO EXERCISE
CORPORATE TRUST POWERS
<PAGE> 16
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM [LETTERHEAD]
WASHINGTON
May 9, 1940
LaSalle National Bank,
Chicago, Illinois.
Gentlemen:
The Board of Governors of the Federal Reserve System has been officially
advised by the Comptroller of the Currency that on May 1, 1940, National
Builders Bank of Chicago, Chicago, Illinois, changed its title to LaSalle
National Bank, and accordingly there is enclosed herewith a certificate showing
that LaSalle National Bank has authority to exercise the fiduciary powers
enumerated therein.
Kindly acknowledge receipt of this certificate.
Very truly yours,
S. R. Carpenter
----------------------------
S. R. Carpenter,
Assistant Secretary.
Enclosure
<PAGE> 17
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
I, S. R. Carpenter, Assistant Secretary of the Board of Governors of the
Federal Reserve System (formerly known as the Federal Reserve Board), do hereby
certify that it appears from the records of the Board of Governors of the
Federal Reserve System that:
(1) Pursuant to the authority vested in the Federal Reserve Board by an
Act of Congress approved December 23, 1913, known as the Federal Reserve Act,
as amended, the Federal Reserve Board on December 8, 1927, granted to National
Builders Bank of Chicago, Chicago, Illinois, the right to act, when not in
contravention of State or local law, as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee, receiver,
committee of estates of lunatics, or in any other fiduciary capacity in which
State banks, trust companies or other corporations which come into competition
with national banks are permitted to act under the laws of the State of
Illinois;
(2) Under the provisions of an Act of Congress approved May 1, 1886,
National Builders Bank of Chicago, Chicago, Illinois, on May 1, 1940, changed
its title to LaSalle National Bank; and
(3) By virtue of the foregoing, LaSalle National Bank, Chicago, Illinois,
has authority to act, when not in contravention of State or local law, as
trustee, executor, administrator, registrar of stocks and bonds, guardian of
estates, assignee, receiver, committee of estates of lunatics, or in any other
fiduciary capacity in which State banks, trust companies or other corporations
which come into competition with national banks are permitted to act under the
laws of the State of Illinois, subject to regulations prescribed by the Board
of Governors of the Federal Reserve System.
IN WITNESS WHEREOF, I have hereunto subscribed my name and caused the seal
of the Board of Governors of the Federal Reserve System to be affixed at the
City of Washington in the District of Columbia.
/s/ S. R. Carpenter
--------------------
Assistant Secretary.
Dated May 9, 1940
<PAGE> 18
EXHIBIT 4
BY-LAWS OF LA SALLE NATIONAL BANK
<PAGE> 19
BYLAWS
OF
LA SALLE NATIONAL BANK
CHICAGO, ILLINOIS
LA SALLE NATIONAL BANK (LOGO)
Organized Under the National Banking Laws
of the United States
<PAGE> 20
BYLAWS
of the
LA SALLE NATIONAL BANK
(a National Banking Association which association
is herein referred to as the "bank")
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.1. ANNUAL MEETING. The regular annual meeting of the
shareholders for the election of directors and the transaction of whatever
other business may properly come before the meeting, shall be held at the main
office of the Bank, 135 South LaSalle Street, Chicago, Illinois, or such other
place as the Board of Directors may designate, at 9:00 A.M., on the third
Wednesday of March of each year. Notice of such meeting shall be mailed,
postage prepaid, at least ten days prior to the date thereof, addressed to each
shareholder at his address appearing on the books of the Bank. If for any
cause, an election of directors is not made on the said day, the Board of
Directors shall order the election to be held on some subsequent day as soon
thereafter as practicable, according to the provisions of law; and notice
thereof shall be given in the manner herein provided for the annual meeting.
SECTION 1.2. SPECIAL MEETINGS. Except as otherwise specifically provided
by statute, special meetings of the shareholders may be called for any purpose
at anytime by the board of directors or by any three or more shareholders
owning, in the aggregate, not less than ten percent of the stock of the bank.
Every such special meeting, unless otherwise provided by law, shall be called
by mailing, postage pre-paid, not less than ten days prior to the date fixed
for such meeting, to each shareholder at his address appearing on the books of
the bank, a notice stating the purpose of the meeting.
SECTION 1.3. NOMINATIONS FOR DIRECTOR. Nominations for election to the
board of directors may be made by the board of directors or by any shareholder
of any outstanding class of capital stock of the bank entitled to vote for the
election of directors. Nominations, other than those made by or on behalf of
the existing management of the bank, shall be made in writing and shall be
delivered or mailed to the president of the bank and to the Comptroller of the
Currency, Washington, D.C., not less than 14 days nor more than 50 days prior
to any meeting of shareholders called for the election of directors, provided,
however, that if less than 21 days' notice of the meeting is given to the
shareholders, such nomination shall be mailed or delivered to the president of
the bank and to the Comptroller of the Currency not later than the close of
business on the seventh day following the day on which the notice of meeting
was mailed. Such notification shall contain the following information to the
extent known to the notifying shareholder: (a) the name and address of each
proposed nominee; (b) the principal occupation of each proposed nominee; (c)
the total number of shares of capital stock of each proposed nominee; (d) the
name and address of the notifying shareholder; and (e) the number of shares of
capital stock of the bank owned by the notifying shareholder. Nominations not
made in accordance herewith, may, in his discretion, be disregarded by the
chairman of the meeting, and upon his instructions, the vote tellers may
disregard all votes cast for each such nominee.
SECTION 1.4. JUDGES OF ELECTION. Every election of directors shall be
managed by three judges, who shall be appointed by the board of directors prior
lo the time of said election. The judges of election shall hold and conduct the
election at which they are appointed to serve; and after the election, they
shall file with the cashier a certificate under their hands, certifying the
result thereof and the names of the directors elected. The judges of election.
at the request of the chairman of the meeting, shall act as tellers of any
other vote by ballot taken at such meeting, and shall certify the result
thereof.
<PAGE> 21
SECTION 1.5. PROXIES. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this bank shall act as proxy. Proxies shall be valid only for one meeting,
to be specified therein, and any adjournments of such meeting. Proxies shall be
dated and shall be filed with the records of the meeting.
SECTION 1.6. QUORUM. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the articles of association.
ARTICLE II
DIRECTORS
SECTION 2.1. BOARD OF DIRECTORS. The board of directors (hereinafter
referred to as the "board"), shall have power to manage and administer the
business affairs of the bank. Except as expressly limited by law, all corporate
powers of the bank shall be vested in and may be exercised by said board.
SECTION 2.2. NUMBER. The board shall consist of not less than five or more
than twenty-five shareholders, the exact number within such minimum and maximum
limits to be fixed and determined from time to time by resolution of a majority
of the full board or by resolution of the shareholders at any meeting thereof;
provided, however, that a majority of the full board may not increase the
number of directors by more than two if the number of directors last elected by
shareholders was fifteen or less and by not more than four where the number of
directors last elected by shareholders was sixteen or more, provided that in no
event shall the number of directors exceed twenty-five.
SECTION 2.3. ORGANIZATION MEETING. The cashier, upon receiving the
certificate of the judges, of the result of any election, shall notify the
directors-elect of their election and of the time at which they are required to
meet at the main office of the bank for the purpose of organizing the new board
and electing and appointing officers of the bank for the succeeding year. Such
meeting shall be appointed to be held on the day of election or as soon
thereafter as practicable, and, in any event, within thirty days thereof. If,
at the time fixed for such meeting, there shall not be a quorum present the
directors present may adjourn the meeting, from time to time, until a quorum
is obtained.
SECTlON 2.4 REGULAR MEETINGS. The regular meetings of the board shall be
held, without notice, on the third Wednesday of each month at the main office.
When any regular meeting of the board falls upon a holiday, the meeting shall
be held on the next banking business day unless the board shall designate some
other day.
SECTION 2.5 SPECIAL MEETINGS. Special meetings of the board may be called
by the chairman of the board, the president, or at the request of three or more
directors. Each member of the board shall be given notice stating the time and
place, by telegram, letter or in person, of each such special meeting.
SECTION 2.6. QUORUM. A majority of the directors shall constitute a quorum
at any meeting, except when otherwise provided by law; but a less number may
adjourn any meeting from time to time, and the meeting may be held, as
adjourned, without further notice.
<PAGE> 22
SECTION 2.7. VACANCIES. When any vacancy occurs among the directors, the
remaining members of the board, in accordance with the laws of the United
States, may appoint a director to fill such vacancy at any regular meeting of
the board, or at a special meeting called for that purpose.
SECTION 2.8. RETIREMENT POLICY. A retirement policy adopted by the board
of directors shall be applicable to directors who are not active officers of
the bank.
ARTICLE III
COMMITTEES OF THE BOARD
SECTION 3.1. EXECUTIVE COMMITTEE. There shall be an executive committee of
the board. The members of the executive committee shall be chosen by the board
from time to time, shall hold office during its pleasure, and shall consist of
the chairman of the board, the chairman of the executive committee selected by
the board, who may but need not be the same person designated to be president,
and the president, ex officio, and not less than seven additional members of
the board who shall not be active officers of the bank. It shall be the duty of
this committee to exercise such powers and perform such duties in respect to
the making of loans and discounts as shall from time to time be specified by
resolution of the board. During such periods as the board shall not be in
session, the executive committee shall have and may exercise all the powers of
the board except such as are by law or by these bylaws required to be exercised
only by the board. The executive committee may make rules for holding and
conducting its meetings and keep in the minute book of the bank a report of all
action taken which shall be submitted for approval at each regular meeting of
the board and the action of the board shall be recorded in the minutes of that
meeting. A quorum of the executive committee shall consist of not less than
five of its members, at least three of whom shall not be active officers of the
bank. The chairman of the board, or in his absence in the order named if
present, the chairman of the executive committee or the president, may
designate any director who is not an active officer of the bank, or a
designated member, to serve as a member of the executive committee at any
specified meeting. Vacancies in the executive committee at any time existing
may be filled by appointment by the board. The board may at anytime revise or
change the membership and chairmanship of the executive committee and make new
or additional appointments thereto. The chairman of the executive committee
shall be ex officio a member of all committees except the examining committee
and the trust audit committee, and shall have such other duties as may from
time to time be assigned him by the board.
SECTION 3.2. OFFICERS' COMPENSATION COMMITTEE. There shall be an officers'
compensation committee of the board. The members of the officers' compensation
committee shall consist of the members ex officio provided for in other
sections of these bylaws and not less than three additional non-officer members
of the board who shall be appointed by the board each year at its first meeting
after the directors have been elected and qualified. It shall be the duty of
this committee to study the compensation of all officers of the bank and from
time to time report their recommendations to the board; and such other duties,
if any, as may from time to time be assigned to it by the board. A majority of
the committee, including at least two non-officer members, shall be necessary
for the committee to keep records of its action.
SECTION 3.3. EXAMINING COMMITTEE. There shall be an examining committee of
the board. The members of the examining committee shall consist of the members
ex officio provided for in other sections of these bylaws, but exclusive of any
active officer of the bank and not less than three additional non-officer
members of the board who shall be appointed by the board each year at its first
meeting after the directors have been elected and qualified. It shall be the
duty of this committee to make an examination at least twice each year into the
affairs of the bank or to cause the examinations to be made by accountants (who
may be the bank's own accountants) responsible only to the board in such
examinations, and to report the result of such examinations in writing to the
board at the next regular meeting thereafter, or it may, at its sole
discretion, submit the reports of the national bank examiner or of
<PAGE> 23
the Chicago Clearing House Association examination, with or without additional
comments by the committee itself, for, and in lieu of its personal
examinations. Such reports shall state whether the bank is in sound condition,
whether adequate internal audit controls and procedures are being maintained
and shall recommend to the board such changes in the manner of doing business
or conducting the affairs of the bank as shall be deemed advisable.
SECTION 3.4. OTHER COMMITTEES. The board may appoint, from time to time,
from its own members, other committees of one or more persons, for such
purposes and with such powers as the board may determine.
ARTICLE IV
OFFICERS AND EMPLOYEES
SECTION 4.1. CHAIRMAN OF THE BOARD. The board shall appoint one of its
members to be chairman of the board. The chairman of the board shall supervise
the carrying out of the policies adopted or approved by the board. He shall
have general executive powers, as well as the specific powers conferred by
these bylaws. He shall be ex officio a member of all committees, except the
examining committee and the trust audit committee. He shall have general
supervision and direction of the business, affairs and personnel of the bank.
He shall also have and may exercise such further powers and duties as from time
to time may be conferred upon, or assigned to him by the board.
SECTION 4. 2. VICE CHAIRMAN OF THE BOARD. The board may appoint one of its
members to be vice chairman of the board. He shall perform such duties as may
from time to time be assigned to him by the board.
SECTION 4.3. PRESIDENT. The board shall appoint one of its members to be
president of the bank. He shall be the chief executive officer and the chief
administrative officer of the bank and in the absence of the chairman of the
board, he shall preside at any meeting of the board at which he is present. The
president shall have general executive powers, and shall have and may exercise
any and all other powers and duties pertaining by law, regulation, or practice
to the office of president, or imposed by these bylaws. He shall be ex officio
a member of all committees, except the examining committee and trust audit
committee. He shall have general supervision of the business, affairs and
personnel of the bank and in the absence of the chairman of the board, shall
exercise the powers and perform the duties of the chairman of the board. He
shall also have and may exercise such further powers and duties as from time to
time may be conferred upon or assigned to him by the board.
SECTION 4.4. SENIOR OFFICERS. The board may appoint one or more executive
vice presidents and one or more senior vice presidents. Each such senior
officer shall have such powers and duties as may be assigned to him by the
board, the chairman of the board, or the president.
SECTION 4.5. VICE PRESIDENT. The board may appoint one or more vice
presidents. Each vice president shall have such powers and duties as may be
assigned to him by the board, the chairman of the board, or the president.
SECTION 4.6. CASHIER. The board shall appoint a cashier who shall have
such powers and duties as may be assigned to him by the board, the chairman of
the board, or the president. The cashier shall be custodian of the corporate
seal, records, documents and papers of the bank. He shall provide for keeping
of proper records of all transactions of the bank.
SECTION 4.7. SECRETARY. The board shall appoint a secretary who shall be
secretary of the bank. He shall also perform such duties as may be assigned to
him from time to time by the board.
<PAGE> 24
The board may appoint a secretary of the board who shall keep accurate minutes
of all meetings. He shall attend to the giving of all notices; he shall also
perform such other duties as may be assigned to him from time to time by the
board.
SECTION 4.8. OTHER OFFICERS. The board may appoint one or more assistant
vice presidents, one or more trust officers, one or more assistant secretaries,
one or more assistant cashiers, and such other officers and attorneys-in-fact
as from time to time may appear to the board to be required or desirable to
transact the business of the bank. Such officers, respectively, shall exercise
such powers and perform such duties as pertain to their several offices or as
may be conferred upon or assigned to them by the board the chairman of the
board or the president.
SECTION 4.9. CLERKS AND AGENTS. The chairman of the board, the president,
or any other active officer of the bank authorized by the chairman of the
board, or the president, may appoint and dismiss all or any paying tellers
receiving tellers note tellers, vault custodians, bookkeepers and other clerks,
agents and employees as they may deem advisable for the prompt and orderly
transaction of the business of the bank, define their duties, fix the salaries
to be paid them and the conditions of their employment.
SECTION 4.10. RESPONSIBILITY FOR MONEYS, ETC. Each of the active officers
and clerks of this bank shall be responsible for all moneys, funds valuables
and property of every kind and description that may from time to time be
entrusted to his care or placed in his hands by the board or others, or that
otherwise may come into his possession as an active officer or clerk of this
bank.
SECTION 4.11. SURETY BONDS. All the active officers and clerks of this
bank may be covered by one of the blanket form bonds customarily written by the
surety companies, drawn for such an amount, and executed by such surety
company, as the board may from time to time require, and duly approve; or at
the discretion of the board, all such active officers and clerks shall, each
for himself, give such bond, with such security, and in such denominations as
the board may from time to time require and direct. All bonds approved by the
board shall assure the faithful and honest discharge of the respective duties
of such active officer or clerk and shall provide that such active officer or
clerk shall faithfully apply and account for all moneys, funds, valuables and
property of every kind and description that may from time to time come into his
hands or be entrusted to his care, and pay over and deliver the same to the
order of the board or to such other person or persons as may be authorized to
demand and receive the same.
SECTION 4.12. TERM OF OFFICE - OFFICER DIRECTOR. The chairman of the
board, the vice chairman of the board and the president, together with any
other active officers who may be duly elected members of the board, shall hold
their respective offices for the current year for which the board (of which
they shall be members) was elected and until their successors are appointed,
unless they shall resign, be disqualified, or be removed; and any vacancy
occurring in the office of the chairman of the board, the vice chairman of the
board, the president, or in the board, shall, if required by these bylaws, be
filled by the remaining members.
SECTION 4.13. TERM OF OFFICE - OFFICER. The executive vice presidents, the
senior vice presidents, the vice presidents, the assistant vice presidents, the
cashier, the secretary, the trust officers and all other officers and
attorneys-in-fact who are not duly elected members of the board, shall be
appointed to hold their offices, respectively, during the pleasure of the
board.
<PAGE> 25
ARTICLE V
TRUST DEPARTMENT
SECTION 5.1. TRUST DEPARTMENT. There shall be a department of the bank
known as the trust department which shall perform the fiduciary
responsibilities of the bank.
SECTION 5.2. TRUST OFFICER. There shall be a senior vice president and
trust officer, or vice president and trust officer of this bank, who shall be
designated as the managing officer of the trust department and whose duties
shall be to manage, supervise and direct all the activities of the trust
department. He shall do, or cause to be done, all things necessary or proper in
carrying on the business of the trust department in accordance with provisions
of law and regulations. He shall act pursuant to opinion of counsel where such
opinion is deemed necessary. Opinions of counsel shall be retained on file in
connection with all important matters pertaining to fiduciary activities. The
trust officer shall be responsible for all assets and documents held by the bank
in connection with fiduciary matters. The board may appoint such other officers
of the trust department as it may deem necessary, with such duties as may be
assigned to them by the board, the chairman of the board, or the president.
SECTION 5.3. TRUST INVESTMENT COMMITTEE. There shall be appointed by the
board a trust investment committee of this bank composed of not less than four
members, including members ex officio provided for in other sections of these
bylaws, who shall be capable and experienced officers or directors of the bank.
All investments of funds held in a fiduciary capacity shall be made, retained
or disposed of only with the approval of the trust investment committee; and
the committee shall keep minutes of all its meetings, showing the disposition
of all matters considered and passed upon by it. The committee shall, promptly
after the acceptance of an account for which the bank has investment
responsibilities, review the assets thereof, to determine the advisability of
retaining or disposing of such assets. The committee shall conduct a similar
review at least once during each calendar year thereafter and within fifteen
months of the last such review. A report of all such reviews, together with the
action taken as a result thereof, shall be noted in the minutes of the
committee. Three members of the trust investment committee shall constitute a
quorum, and any action approved by a majority of those present shall constitute
the action of the committee.
SECTION 5.4. TRUST AUDIT COMMITTEE. The board shall appoint a committee of
not less than three directors, including members ex officio provided for in
other sections of these bylaws, exclusive of any active officers of the bank,
which shall at least once during each calendar year and within fifteen months
of the last such audit make suitable audits of the trust department, or cause
suitable audits to be made, by auditors responsible only to the board, and at
such time shall ascertain whether the department has been administered in
accordance with law, Regulation 9, and sound fiduciary principles.
Notwithstanding the provisions of this Section, the board at any time may
assign to the Examining Committee, in addition to the duties of the Examining
Committee set forth in Section 3.3 of these bylaws, all of the duties of the
Trust Audit Committee and during such time as the Examining Committee is
performing the duties of both committees, the Trust Audit Committee shall cease
to function as a committee of this board. The board at any time may reassign
the duties provided for in this Section to the Trust Audit Committee.
SECTION 5.5. TRUST DEPARTMENT FILES. There shall be maintained in the
trust department, files containing all fiduciary records necessary to assure
that its fiduciary responsibilities have been properly undertaken and
discharged.
SECTION 5.6. TRUST INVESTMENTS. Funds held in a fiduciary capacity shall
be invested in accordance with the instrument establishing the fiduciary
relationship and local law. Where such instrument does not specify the
character and class of investments to be made and does not vest in the bank a
discretion in the matter, fund shield pursuant to such instrument shall be
invested in investments in which corporate fiduciaries may invest under local
law.
<PAGE> 26
ARTICLE VI
STOCK AND STOCK CERTIFICATES
SECTION 6.1. TRANSFERS. Shares of capital stock shall be transferable on
the books of the bank and a transfer book shall be kept in which all transfers
of stock shall be recorded. Every person becoming a shareholder be such
transfer shall in proportion to his shares, succeed to all rights and
liabilities of the prior holder of such shares.
SECTION 6.2. STOCK CERTIFICATES. Certificates of capital stock shall bear
the signature of any one of, the chairman of the board, or the president (which
may be engraved, printed or impressed) and shall be signed manually or by
facsimile process by the secretary, assistant secretary, cashier, assistant
cashier, or any other officer appointed by the board for that purpose, to be
known as an authorized officer and the seal of the bank shall be engraven
thereon. Each certificate shall recite on its face that the stock represented
thereby is transferable, properly endorsed, only on the books of the bank.
ARTICLE VII
CORPORATE SEAL
SECTION 7.1. CORPORATE SEAL. The chairman of the board, the president, the
cashier, the secretary or any assistant cashier or assistant secretary, or
other officer thereunto designated by the board, shall have authority to affix
the corporate seal to any document requiring such seal, and to attest the same.
Such seal shall be substantially in the form set forth herein.
ARTICLE VIII
INDEMNIFYING OFFICERS AND DIRECTORS
SECTION 8.1. INDEMNIFYING OFFICERS AND DIRECTORS. Any person, his heirs,
executors or administrators, may be indemnified or reimbursed by the bank for
reasonable expenses actually incurred in connection with any action, suit or
proceeding, civil or criminal, to which he or they shall be made a party by
reason of his being or having been a director, officer or employee of the bank
or of any firm, corporation or organization which he served in any such
capacity at the request of the bank; provided, however, that no person shall be
so indemnified or reimbursed in relation to any matter in such action, suit or
proceeding as to which he shall finally be adjudged to have been guilty of or
liable for negligence or willful misconduct in the performance of his duties to
the bank; and, provided further, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit or proceeding which
has been made the subject of a compromise settlement except with the approval
of a court of competent jurisdiction, or the holders of record of a majority of
the outstanding shares of the bank, or the board, acting by vote of directors
not parties to the same or substantially the same action suit or proceeding,
constituting a majority of the whole number of the directors. The foregoing
right of indemnification or reimbursement shall not be exclusive of other
rights to which such person, his heirs, executors or administrators, may be
entitled as a matter of law.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1. FISCAL YEAR. The fiscal year of the bank shall be the
calendar year.
<PAGE> 27
SECTION 9.2. EXECUTION OF INSTRUMENTS. All agreements, indentures
mortgages, deeds, conveyances transfers certificates declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or accepted
for the bank by the chairman of the board, or the vice chairman of the board, or
the president, or any executive vice president, or any senior vice president, or
any vice president, or the secretary or the cashier, or, if in connection with
the exercise of fiduciary powers of the bank by any of said officers or by any
officer in the trust department. Any such instruments may also be signed,
executed, acknowledged, verified, delivered or accepted for the bank in such
other manner and by such other officers as the board may from time to time
direct. The provisions of this Section 9.2 are supplementary to any other
provisions of these bylaws.
SECTION 9.3. RECORDS. The articles of association, the bylaws, and the
proceedings of all meetings of the shareholders and of the board shall be
recorded in appropriate minute books provided for the purpose; where these
bylaws so provide, the proceedings of standing committees of the board shall be
recorded in appropriate minute books provided for the purpose.
ARTICLE X
EMERGENCIES
SECTION 10.1. CONTINUATION OF BUSINESS. In the event of a state of
emergency of sufficient severity to interfere with the conduct and management
of the affairs of this bank, the officers and employees will continue to
conduct the affairs of the bank under such guidance from the directors as may
be available except as to matters which by statute require specific approval of
the board of directors and subject to conformance with any governmental
directives during the emergency.
SECTION 10.2. DESIGNATION OF PLACE OF BUSINESS. The offices of the bank at
which its business shall be conducted shall be the main office thereof located
at 135 South LaSalle Street, Chicago, Illinois, and any other legally
authorized location which may be leased or acquired by this bank to carry on
its business. During an emergency resulting in any authorized place of business
of this bank being unable to function, the business ordinarily conducted at
such location shall be relocated elsewhere in suitable quarters, in addition to
or in lieu of the locations heretofore mentioned, as may be designated by the
board of directors or by the executive committee or by such persons as are
then, in accordance with resolutions adopted from time to time by the board of
directors dealing with the exercise of authority in the time of such emergency,
conducting the affairs of this bank. Any temporarily relocated place of
business of this bank shall be returned to its legally authorized location as
soon as practicable and such temporary place of business shall then be
discontinued.
ARTICLE XI
BYLAWS
SECTION 11.1 INSPECTION. A copy of the bylaws with all amendments thereto,
shall at all times be kept in a convenient place at the main office of the bank
and shall be open for inspection to all shareholders, during banking hours.
SECTION 11.2 AMENDMENTS. The bylaws may be amended, altered or repealed, at
any regular meeting of the board, by a vote of a majority of the whole number of
the directors.
***
<PAGE> 28
I........................................... hereby certify that I am
the................................ Cashier/Secretary of LaSalle National Bank,
Chicago, Illinois and that the foregoing is a true and correct copy of the
bylaws of this bank as amended and that the same are in full force and effect
............. day of...................19........
...............................
Cashier/Secretary.
December 15, 1982
(SEAL)
<PAGE> 29
EXHIBIT 5
NOT APPLICABLE
<PAGE> 30
EXHIBIT 6
LaSalle National Bank hereby consents in accordance with the provisions of
Section 321(b) of the Trust Indenture Act of 1939, that reports of examinations
by Federal, State, Territorial and District authorities may be furnished by
such authorities to the Securities and Exchange Commission upon its request
therefor.
LA SALLE NATIONAL BANK
By: /s/ Sarah H. Webb
------------------------------
Sarah H. Webb
First Vice President
<PAGE> 31
EXHIBIT 7
Latest Report of Condition of
Trustee published pursuant to
law or the requirement of its
surviving or examining authority.
<PAGE> 32
<TABLE>
<S> <C> <C> <C> <C>
LaSalle National Bank Call Date: 3/31/98 ST-BK: 17-1520 FFIEC 031
135 South LaSalle Street Page RC-1
Chicago, IL 60603 Vendor ID: D CERT: 15407 11
</TABLE>
Transit Number: 71000505
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND
STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1998
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC - BALANCE SHEET
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): RCFD
----
a. Noninterest-bearing balances and currency and coin (1) 0081 873,752 1.a
b. Interest-bearing balances (2) 0071 564 1.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 969,505 2.a
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 4,539,683 2.b
3. Federal funds sold and securities purchased under agreements to resell 1350 72,318 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income RCFD
----
(from Schedule RC-C) 2122 12,381,405 4.a
b. LESS: Allowance for loan and lease losses 3123 231,482 4.b
c. LESS: Allocated transfer risk reserve 3128 0 4.c
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b
and 4.c) 2125 12,149,923 4.d
5. Trading assets (from Schedule RC-D) 3545 142,506 5.
6. Premises and fixed assets (including capitalized leases) 2145 83,138 6.
7. Other real estate owned (from Schedule RC-M) 2150 528 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding 2155 9,777 9.
10. Intangible assets (from Schedule RC-M) 2143 19,658 10.
11. Other assets (from Schedule RC-F) 2160 286,763 11.
12. Total assets (sum of items 1 through 11) 2170 19,148,115 12. 19,148,115
</TABLE>
- ----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE> 33
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
LaSalle National Bank Call Date: 3/31/98 ST-BK: 17-1520 FFIEC 031
135 South LaSalle Street Page RC- 2
Chicago, IL 60603 Vendor ID: D CERT: 15407 12
Transit Number: 71000505
</TABLE>
SCHEDULE RC - CONTINUED
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of RCON
columns A and C from Schedule RC-E, part I) ----
2200 10,112,345 13.a
RCON
----
(1) Noninterest-bearing (1) 6631 2,069,551 13.a.1
(2) Interest-bearing 6636 8,042,794 13.a.2 10,112,345
RCFN
----
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs
(from Schedule RC-E, part II) 2200 2,231,400 13.b
RCFN
----
(1) Noninterest-bearing 6631 0 13.b.1
(2) Interest-bearing 6636 2,231,400 13.b.2
14. Federal funds purchased and securities sold under agreements RCFD
to repurchase ----
2800 2,139,075 14.
15. a. Demand notes issued to the U.S. Treasury RCON
----
2840 417,791 15.a
b. Trading liabilities (from Schedule RC-D) RCFD
----
3548 35,004 15.b
16. Other borrowed money (includes mortgage indebtedness and
obligations under capitalized leases):
a. With a remaining maturity of one year or less 2332 2,093,462 16.a
b. With a remaining maturity of more than one year through
three years A547 27,542 16.b
c. With a remaining maturity of more than three years A548 41,482 16.c
17. Not applicable.
18. Bank's liability on acceptances executed and outstanding 2920 9,777 18.
19. Subordinated notes and debentures (2) 3200 416,000 19.
20. Other liabilities (from Schedule RC-G) 2930 363,678 20.
21. Total liabilities (sum of items 13 through 20) 2948 17,887,556 21. 17,887,556
22. Not applicable.
EQUITY CAPITAL
RCFD
----
23. Perpetual preferred stock and related surplus 3838 0 23.
24. Common stock 3230 26,911 24.
25. Surplus (exclude all surplus related to preferred stock) 3839 346,971 25.
26. a. Undivided profits and capital reserves 3632 845,390 26.a
b. Net unrealized holding gains (losses) on available-for-sale
securities 8434 41,287 26.b
27. Cumulative foreign currency translation adjustments 3284 0 27.
28. Total equity capital (sum of items 23 through 27) 3210 1,260,559 28. 1,260,559
29. Total liabilities and equity capital (sum of items 21 and 28) 3300 19,148,115 29.
MEMORANDUM
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1. Indicate in the box at the right the number of the statement below that RCFD Number
best describes the most comprehensive level of auditing work performed ---- ------
for the bank by independent external auditors as of any date during 1997 6724 2 M.1
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company (but external auditors
not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in accordance 8 = No external audit work
with generally accepted auditing standards by a certified
public accounting firm (may be required by state charter-
ing authority)
- ------------------------------------
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Includes limited-life preferred stock and related surplus.
</TABLE>
<PAGE> 34
EXHIBIT 8
NOT APPLICABLE
<PAGE> 35
EXHIBIT 9
NOT APPLICABLE
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 4,443,000
<SECURITIES> 0
<RECEIVABLES> 109,434,000
<ALLOWANCES> 1,629,000
<INVENTORY> 56,794,000
<CURRENT-ASSETS> 177,569,000
<PP&E> 117,115,000
<DEPRECIATION> 8,029,000
<TOTAL-ASSETS> 480,811,000
<CURRENT-LIABILITIES> 89,131,000
<BONDS> 0
0
33,008,000
<COMMON> 330,000
<OTHER-SE> 215,544,000
<TOTAL-LIABILITY-AND-EQUITY> 480,811,000
<SALES> 479,707,000
<TOTAL-REVENUES> 479,707,000
<CGS> 431,947,000
<TOTAL-COSTS> 34,415,000
<OTHER-EXPENSES> 33,710,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,018,000
<INCOME-PRETAX> (36,120,000)
<INCOME-TAX> (407,000)
<INCOME-CONTINUING> (35,713,000)
<DISCONTINUED> 200,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35,513,000)
<EPS-PRIMARY> (1.80)
<EPS-DILUTED> (1.80)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
METAL MANAGEMENT, INC.
OFFER TO EXCHANGE
ALL 10% SENIOR SUBORDINATED NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ALL OUTSTANDING 10% SENIOR SUBORDINATED NOTES DUE 2008
PURSUANT TO THE PROSPECTUS DATED , 1998.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998,
UNLESS EXTENDED (THE "EXPIRATION DATE").
The Exchange Agent
for the Exchange Offer is:
LASALLE NATIONAL BANK
By Hand, Registered or Certified Mail or Overnight Courier:
LaSalle National Bank
135 South LaSalle Street
Room 1825
Chicago, Illinois 60603
Attention: Sarah Webb
By Facsimile:
(312) 904-2236
Attention: Sarah Webb
Confirm by Telephone: (312) 904-2444
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE VALID
DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE> 2
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1998 (as it may be amended or supplemented from time to time, the
"Prospectus") of Metal Management, Inc., a Delaware corporation (the
"Company"), and this Letter of Transmittal, which together constitute the
Company's offer (the "Exchange Offer") to exchange an aggregate of up to
$180,000,000 principal amount of its 10% Senior Subordinated Notes due 2008
(the "New Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration Statement of
which the Prospectus is a part, for an identical principal amount of its
outstanding 10% Senior Subordinated Notes due 2008 (the "Old Notes"). The term
"Expiration Date" shall mean 5:00 p.m., New York City time on , 1998,
unless the Exchange Offer is extended, in which case the term "Expiration Date"
means the latest date and time to which the Exchange Offer is extended.
Capitalized terms used but not defined herein have the meaning given to them in
the Prospectus.
This Letter of Transmittal is to be used (i) if certificates of Old Notes
are to be forwarded herewith, (ii) if delivery of Old Notes is to be made by
book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company (the "Depository" or "DTC") pursuant to the procedures
set forth in "The Exchange Offer--Procedures for Tendering Old Notes" in the
Prospectus or (iii) if tender of the Old Notes is to be made according to the
guaranteed delivery procedures described in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures."
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, this Letter of
Transmittal or any other documents required by this Letter of Transmittal to
the Exchange Agent on or prior to the Expiration Date or (iii) who cannot
complete the procedure for book-entry transfer on a timely basis, may tender
their Old Notes according to the guaranteed delivery procedures set forth in
the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures." See Instruction 2.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE
AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, list the certificate numbers and
principal amount on a separate signed schedule and attach that schedule to this
Letter of Transmittal. See Instruction 4.
<TABLE>
<CAPTION>
ALL TENDERING HOLDERS COMPLETE THIS BOX:
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DESCRIPTION OF OLD NOTES TENDERED
- ------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER
(FILL IN, IF BLANK) OLD NOTES TENDERED
- ------------------------------------------------------------------------------------------------------------------
CERTIFICATE OR AGGREGATE PRINCIPAL PRINCIPAL AMOUNT
REGISTRATION AMOUNT REPRESENTED TENDERED **
NUMBER(S)* BY OLD NOTES
--------------------------------------------------------------------
$ $
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
TOTAL AMOUNT TENDERED: $ $
- ------------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders. Such holders should check the appropriate box below and
provide the requested information.
** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount
represented by such Old Notes. All tenders must be in integral multiples of $1,000.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE> 3
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must
complete this letter in its entirety.
(THE FOLLOWING BOXES ARE TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY.)
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT AT DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:___________________________________________
DTC Account Number:______________________________________________________
Transaction Code Number:_________________________________________________
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):_________________________________________
Date of Execution of Notice
of Guaranteed Delivery:__________________________________________________
Name of Eligible Institution Which Guaranteed Delivery:__________________
If Guaranteed Delivery is to be made by book-entry transfer:_____________
DTC Account Number:______________________________________________________
Transaction Code Number:_________________________________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED OLD NOTES FOR YOUR
OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:____________________________________________________________________
Address:_________________________________________________________________
Telephone Number and Contact Person:_____________________________________
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<PAGE> 4
LADIES AND GENTLEMEN:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above described principal amount
of Old Notes in exchange for an identical principal amount of New Notes.
Subject to, and effective upon, the acceptance for exchange of the Old Notes
tendered herewith, the undersigned hereby exchanges, assigns and transfers to
or upon the order of the Company all right, title and interest in and to such
Old Notes as are being tendered herewith, including all rights to accrued and
unpaid interest thereon as of the Expiration Date. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent as its agent and
attorney-in-fact (with full knowledge that the Exchange Agent is also acting as
agent of the Company in connection with the Exchange Offer) to cause the Old
Notes to be assigned, transferred and exchanged.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, ASSIGN AND TRANSFER THE OLD NOTES
TENDERED HEREBY AND TO ACQUIRE NEW NOTES ISSUABLE UPON THE EXCHANGE OF SUCH
TENDERED OLD NOTES, AND THAT, WHEN THE OLD NOTES ARE ACCEPTED FOR EXCHANGE, THE
COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD
NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE
UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS
DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED
HEREBY. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE
EXCHANGE OFFER.
The undersigned understands that tenders of Old Notes pursuant to any one
of the procedures described in "The Exchange Offer--Procedures for Tendering
Old Notes" in the Prospectus and in the instructions herein will, upon the
Company's acceptance for exchange of such tendered Old Notes, constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Old Notes or transfer ownership of such Old Notes on the account books
maintained by a book-entry transfer facility. The undersigned further agrees
that acceptance of any tendered Old Notes by the Company and the issuance of
New Notes in exchange therefor shall constitute performance in full by the
Company of its obligations under the Registration Rights Agreement and that the
Company shall have no further obligations or liabilities thereunder for the
registration of the Old Notes or the New Notes.
The Exchange Offer is not conditioned upon any principal amount of Old
Notes being tendered for exchange. However, the Exchange Offer is subject to
certain conditions set forth in the Prospectus under the caption "The Exchange
Offer--Conditions of the Exchange Offer." The undersigned recognizes that as a
result of these conditions (which may be waived, in whole or in part, by the
Company), as more particularly set forth in the Prospectus, the Company may not
be required to exchange any of the Old Notes tendered hereby and, in such
event, the Old Notes not exchanged will be returned to the undersigned at the
address shown below the signature of the undersigned.
The name(s) and addressee(s) of the registered holder(s) of the Old Notes
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Old Notes. The
Certificate number(s) and the Old Notes that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
The undersigned acknowledges that this Exchange Offer is being made in
reliance on the position of the staff of the Securities and Exchange Commission
(the "Commission") as set forth in certain interpretive letters addressed to
third parties in other transactions substantially similar to the Exchange
Offer, which lead the Company to believe that New Notes issued pursuant to the
Exchange Offer to a holder in exchange for Old Notes may be
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<PAGE> 5
offered for resale, resold and otherwise transferred by a holder (other than
(i) a broker-dealer who purchased Old Notes directly from the Company for
resale pursuant to Rule 144A or any other available exemption under the
Securities Act, (ii) an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act or (iii) a broker-dealer who acquired the Old
Securities as a result of market-making or other trading activities) without
further compliance with the registration and prospectus delivery provisions of
the Securities Act, provided, that such holder is acquiring the New Notes in
the ordinary course of business and is not participating, and has no
arrangement or understanding with any person to participate, in the
distribution of the New Notes. Accordingly, the undersigned represents that
(i) it is not an "affiliate" of the Company as defined in Rule 405 of the
Securities Act, (ii) it is not a broker-dealer that acquired Old Notes directly
from the Company in order to resell them pursuant to Rule 144A of the
Securities Act or any other available exemption under the Securities Act, (iii)
it will acquire the New Notes in the ordinary course of business and (iv) it is
not participating, and does not intend to participate, and has no arrangement
or understanding with any person to participate, in the distribution of the New
Notes. The undersigned acknowledges that if it is unable to make these
representations to the Company, it will not be able to rely on the
interpretations of the staff of the Commission described above and therefore
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other
transfer of such Old Notes unless such sale is made pursuant to an exemption
from such requirements. If the undersigned is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes, it represents
that it acquired the Old Notes for its own account as a result of market-making
activities or other trading activities and acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of Section 2(11) of the Securities Act.
Failure to comply with any of the above-mentioned requirements could result in
the undersigned or any such other person incurring liability under the
Securities Act for which such persons are not indemnified by the Company.
Unless otherwise indicated in the box entitled "Special Exchange
Instructions" or the box entitled "Special Delivery Instructions" in this
Letter of Transmittal, certificates for all New Notes delivered in exchange for
tendered Old Notes, and any Old Notes delivered herewith but not exchanged,
will be registered in the name of the undersigned and shall be delivered to the
undersigned at the address shown below the signature of the undersigned. If a
New Note is to be issued to a person other than the person(s) signing this
Letter of Transmittal, or if the New Note is to be mailed to someone other than
the person(s) signing this Letter of Transmittal or to the person(s) signing
this Letter of Transmittal at an address different than the address shown on
this letter of Transmittal, the appropriate boxes of this Letter of Transmittal
should be completed. If Old Notes are surrendered by holder(s) that have
completed either the box entitled "Special Exchange Instructions" or the box
entitled "Special Delivery Instructions" in this Letter of Transmittal,
signature(s) on this Letter of Transmittal must be guaranteed by an Eligible
Institution (as defined in Instruction 2).
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Tendered Old
Notes may be withdrawn in accordance with Instruction 3 hereto at any time
prior to the Expiration Date.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES
TENDERED" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE
OLD NOTES AS SET FORTH IN SUCH BOX.
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<PAGE> 6
REGISTERED HOLDERS OF OLD NOTES SIGN HERE
(IN ADDITION, COMPLETE SUBSTITUTE FORM W-9 BELOW)
PLEASE SIGN HERE PLEASE SIGN HERE
- ------------------------------------- -----------------------------------------
Authorized Signature of Registered Authorized Signature of Registered
Holder Holder
Must be signed by registered holder(s) exactly as name(s) appear(s) on the Old
Notes or on a security position listing as the owner of the Old Notes or by
person(s) authorized to become registered holder(s) by properly completed bond
powers transmitted herewith. See Instruction 4. If signature is by
attorney-in-fact, trustee, executor, administrator, guardian, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please provide the following information:
<TABLE>
<S> <C>
Name: Name:
- --------------------------------------------------- -----------------------------------------------------
Title: Title:
- --------------------------------------------------- -----------------------------------------------------
Address: Address:
- --------------------------------------------------- -----------------------------------------------------
- --------------------------------------------------- -----------------------------------------------------
Telephone Number: Telephone Number:
- --------------------------------------------------- -----------------------------------------------------
Dated: Dated:
- --------------------------------------------------- -----------------------------------------------------
- --------------------------------------------------- -----------------------------------------------------
Taxpayer Identification or Social Security Number Taxpayer Identification or Social Security Number
</TABLE>
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<PAGE> 7
- --------------------------------------------------------------------------------
SIGNATURE GUARANTEE
(IF REQUIRED--SEE INSTRUCTION 4)
<TABLE>
<S> <C>
Signature(s) Guaranteed by an
Eligible Institution: Date:
----------------------------------- --------------------------------------
Authorized Signature
Name of Eligible Institution
Guaranteeing Signature:
-----------------------------------
Address:
-----------------------------------
Capacity (full title):
----------------------------------- --------------------------------------------
Telephone Number:
---------------------------------------- --------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SPECIAL EXCHANGE INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if the New Notes or any Old Notes that are not tendered or
not accepted are to be issued in the name of someone other than the
undersigned.
Issue:
[ ] New Notes to:
[ ] Old Notes to:
Name(s)
-------------------------------------------------
Address
-------------------------------------------------
Telephone Number:
----------------------------------------
Book-Entry Transfer Facility Account:
--------------------
-------------------------------------------------
-------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if the New Notes or any Old Notes that are not tendered or
not accepted are to be sent to someone other than the undersigned, or to the
undersigned at an address other than that shown above under "Description of Old
Notes Tendered."
Mail:
[ ] New Notes to:
[ ] Old Notes to:
Name(s)
-------------------------------------------------
Address
-------------------------------------------------
Telephone Number:
----------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
- --------------------------------------------------------------------------------
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<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
All physically delivered Old Notes or confirmation of any book-entry
transfer to the Exchange Agent's account at DTC, as well as a properly
completed and duly executed copy of this Letter of Transmittal (or facsimile
thereof), and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent at any of its addresses set forth herein on
or prior to the Expiration Date. The method of delivery of this Letter of
Transmittal, the Old Notes and all other required documents is at the election
and risk of the holder. Instead of delivery by mail, it is recommended that
holders use an overnight or hand delivery service. Except as otherwise
provided below, the delivery will be deemed made only when actually received by
the Exchange Agent.
Any beneficial holder whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Old Notes in the Exchange Offer should contact such registered holder
promptly and instruct such registered holder to tender on such beneficial
holder's behalf. If such beneficial holder wishes to tender directly, such
beneficial holder must, prior to completing and executing the Letter of
Transmittal and tendering Old Notes, either make appropriate arrangements to
register ownership of the Old Notes in such beneficial holder's own name or
obtain a properly completed bond power from the registered holder. Beneficial
holders should be aware that the transfer of registered ownership may take
considerable time.
Delivery to an address other than as set forth herein, or instructions via
a facsimile number other than the ones set forth herein, will not constitute a
valid delivery.
The Company expressly reserves the right, at any time or from time to
time, to extend the Expiration Date by complying with certain conditions set
forth in the Prospectus.
LETTERS OF TRANSMITTAL SHOULD NOT BE SENT TO THE COMPANY OR TO DTC.
2. GUARANTEED DELIVERY PROCEDURES.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date or (iii) who cannot complete the procedures for book-entry
transfers on a timely basis, may effect a tender if:
a. the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(an "Eligible Institution");
b. prior to the Expiration Date, the Exchange Agent receives from such
holder and the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail
or hand delivery) setting forth the name and address of the holder of
the Old Notes, the certificate or registration number(s) of the tendered
Old Notes, and the principal amount of Old Notes tendered, stating that
the tender is being made thereby and guaranteeing that, at least within
four (4) New York Stock Exchange trading days after the Expiration Date,
the tendered Old Notes, a duly executed Letter of Transmittal (or
facsimile thereof) and any other required documents will be deposited by
the Eligible Institution with the Exchange Agent; and
c. a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), any other required documents and tendered Old Notes
in proper form for transfer (or a confirmation of book-entry transfer
of
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<PAGE> 9
such Old Notes into the Exchange Agent's account at DTC) must be received
by the Exchange Agent at least within four (4) New York Stock Exchange
trading days after the Expiration Date.
Any holder who wishes to tender Old Notes pursuant to the guaranteed
delivery procedures described above must ensure that the Exchange Agent
receives the Notice of Guaranteed Delivery relating to such Old Notes prior to
the Expiration Date. Failure to complete the guaranteed delivery procedures
outlined above will not, of itself, affect the validity or effect a revocation
of any Letter of Transmittal form properly completed and executed by a holder
who attempted to use the guaranteed delivery procedures.
3. PARTIAL TENDERS; WITHDRAWALS.
Tenders of Old Notes will be accepted only in integral multiples of $1,000
principal amount at maturity. If less than the entire principal amount of Old
Notes evidenced by a submitted certificate is tendered, the tendering holder
should fill in the principal amount tendered in the column entitled "Principal
Amount Tendered" of the box entitled "Description of Old Notes Tendered." A
newly issued Old Note for the principal amount of Old Notes submitted but not
tendered will be sent to such holder, unless the appropriate boxes on this
Letter of Transmittal are completed, as soon as practicable after the
Expiration Date. All Old Notes delivered to the Exchange Agent will be deemed
to have been tendered in full unless otherwise indicated.
Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date, after which tenders of Old Notes are
irrevocable. To withdraw a tender of Old Notes in the Exchange Offer, a
written or facsimile transmission notice of withdrawal must be received by the
Exchange Agent by 5:00 p.m., New York City time, on the Expiration Date. Any
such notice of withdrawal must (i) specify the name of the person having
deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the
Old Notes to be withdrawn (including the certificate or registration number(s)
and principal amount of such Old Notes, or, in the case of Old Notes
transferred by book-entry transfer, the name and number of the account at DTC
to be credited), (iii) be signed by the Depositor in the same manner as the
original signature on this Letter of Transmittal (including any required
signature guarantees) or be accompanied by a bond power in the name of the
person withdrawing the tender, in satisfactory form as determined by the
Company in its sole discretion, duly executed by the registered holder, with
the signature thereon guaranteed by a Eligible Institution together with the
other documents required upon transfer by the Indenture, (iv) specify the name
in which such Old Notes are to be registered, if different from that of the
Depositor, pursuant to such documents of transfer, and (v) include a statement
that such holder is withdrawing his election to have such Old Notes exchanged.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, in its sole
discretion, whose determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no New Notes will be issued with respect
thereto unless the Old Notes so withdrawn are validly retendered. Any Old
Notes which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as promptly as
practicable after withdrawal.
4. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder(s) of the
Old Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the certificates without alteration or enlargement or
any change whatsoever. If this Letter of Transmittal is signed by a
participant in DTC, the signature must correspond with the name as it appears
on the security position listing as the owner of the Old Notes.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Old Notes.
-9-
<PAGE> 10
Signatures on this Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution unless the Old Notes
tendered hereby are tendered (i) by a registered holder who has not completed
the box entitled "Special Exchange Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If this Letter of Transmittal is signed by the registered holder or
holders of Old Notes (which term, for the purposes described herein, shall
include a participant in DTC whose name appears on a security listing as the
owner of the Old Notes) listed and tendered hereby, no endorsements of the
tendered Old Notes or separate written instruments of transfer or exchange are
required. In any other case, the registered holder (or acting holder) must
either properly endorse the Old Notes or transmit properly completed bond
powers with this Letter of Transmittal (in either case executed exactly as the
name(s) of the registered holder(s) appear(s) on the Old Notes, and, with
respect to a participant in DTC whose name appears on a security position
listing as the owner of Old Notes, exactly as the name of the participant
appears on such security position listing), with the signature on the Old Notes
or bond power guaranteed by an Eligible Institution (except where the Old Notes
are tendered for the account of an Eligible Institution).
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by attorneys-in-fact, trustees,
executors, administrators, guardians, officers of corporations or others acting
in a fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Company, proper evidence satisfactory to the
Company of their authority so to act must be submitted.
5. SPECIAL EXCHANGE AND DELIVERY INSTRUCTIONS.
Tendering holders should indicate, in the applicable box, the name and
address (or account at DTC) in which the New Notes or Old Notes for principal
amounts not tendered or not accepted for exchange are to be issued and
delivered (or deposited), if different from the names and addresses or accounts
of the person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification number or social security number of
the person named must also be indicated and the tendering holder should
complete the applicable box.
If no instructions are given, the New Notes (and any Old Notes not
tendered or not accepted) will be issued in the name of and delivered to the
acting holder of the Old Notes or deposited at such holder's account at the
Depository.
6. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however,
certificates representing New Notes or Old Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered
holder of the Old Notes tendered, or if tendered Old Notes are registered in
the name of any person other than the person signing the Letter of Transmittal,
or if a transfer tax is imposed for any reason other than the exchange of Old
Notes pursuant to the Exchanged Offer, then the amount of any such transfer
taxes (whether imposed on the registered holder or any other person) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer stamps to be affixed to the Old Notes listed in the Letter of
Transmittal.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive, in whole or in part, any
of the specified conditions to the Exchange Offer set forth in the Prospectus.
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<PAGE> 11
8. MUTILATED, LOST, STOLEN OR DESTROYED NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal may be
directed to the Exchange Agent at the address and telephone number set forth
above.
10. VALIDITY AND FORM.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject
any and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Old Notes either before
or after the Expiration Date (including the right to waive the ineligibility of
any holder who seeks to tender Old Notes in the Exchange Offer). The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in this Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Old Notes must be cured within such time as the Company shall
determine. Neither the Company, the Exchange Agent nor any other person shall
be under any duty to give notification of defects or irregularities with
respect to tenders of Old Notes, nor shall any of them incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned without cost to such holder by the Exchange Agent to the tendering
holders of Old Notes, unless otherwise provided herein, as soon as practicable
following the Expiration Date.
11. IMPORTANT TAX INFORMATION
Under U.S. federal income tax law, a holder tendering Old Notes is
required to provide the Exchange Agent with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 above. If such holder is
an individual, the TIN is the holder's social security number. The Certificate
of Awaiting Taxpayer Identification Number should be completed if the tendering
holder has not been issued a TIN and has applied for a number or intends to
apply for a number in the near future. If the Exchange Agent is not provided
with the correct TIN, the holder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, payments that are made to such holder
with respect to tendered Old Notes may be subject to backup withholding.
Certain holders (including, among others, all domestic corporations and
certain foreign individuals and foreign entities) are not subject to these
backup withholding and reporting requirements. Such a holder who satisfies one
or more of the conditions set forth in Part 2 of the Substitute Form W-9 should
execute the certification following such Part 2. In order for a foreign holder
to qualify as an exempt recipient, that holder must submit to the Exchange
Agent a properly completed Internal Revenue Service Form W-9, signed under
penalties of perjury, attesting to that holder's exempt status. A copy of such
form is attached to this Letter of Transmittal.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any amounts otherwise payable to the holder. Backup withholding is not
an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
To prevent backup withholding on payments that are made to a holder with
respect to Old Notes tendered for exchange, the holder is required to notify
the Exchange Agent of his or her correct TIN by completing the form
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<PAGE> 12
herein certifying that the TIN provided on Substitute Form W-9 is correct (or
that such holder is awaiting a TIN) and that (i) such holder is exempt, (ii)
such holder has not been notified by the Internal Revenue Service that he or
she is subject to backup withholding as a result of failure to report all
interest or dividends or (iii) the Internal Revenue Service has notified such
holder that he or she is no longer subject to backup withholding.
Each holder is required to give the Exchange Agent the social security
number or employer identification number of the record holder(s) of the Old
Notes. If Old Notes are in more than one name or are not in the name of the
actual holder, consult the instructions on Internal Revenue Service Form W-9,
which are attached to this Letter of Transmittal, for additional guidance on
which number to report.
If the tendering holder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, write "Applied For"
in the space for the TIN on Substitute Form W-9, sign and date the form and the
Certificate of Awaiting Taxpayer Identification Number and return them to the
Exchange Agent. If such certificate is completed and the Exchange Agent is not
provided with the TIN within 60 days, the Exchange Agent will withhold 31% of
all payments made thereafter until a TIN is provided to the Exchange Agent.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER
WITH OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE
AGENT ON OR PRIOR TO THE EXPIRATION DATE.
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<PAGE> 13
TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS:
PAYOR'S NAME: THE GSI GROUP, INC.
<TABLE>
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<S> <C> <C> <C>
SUBSTITUTE PART 1--PLEASE PROVIDE SOCIAL SECURITY NUMBER OR EMPLOYER
Form W-9 YOUR TIN ON THE LINE IDENTIFICATION NUMBER
Department of the AT RIGHT AND CERTIFY _____________________________
Treasury BY SIGNING AND DATING
Internal Revenue BELOW
Service ----------------------------------------------------------------------------------
Payor's PART 2--CERTIFICATION--Under penalties of perjury, I certify that:
Request for (1) The number shown on this form is my correct taxpayer identification
Taxpayer's number (or I am waiting for a number to be issued to me);
Identification (2) I am not subject to backup withholding either because: (a) I am
Number (TIN) exempt from backup withholding; (b) I have not been notified by the
Internal Revenue Service ("IRS") that I am subject to backup withholding
as a result of a failure to report all interest or dividends; or (c) the
IRS has notified me that I am no longer subject to backup withholding;
and
(3) Any other information provided on this form is true and correct.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you
have been notified by the IRS that you are subject to backup withholding
because of underreporting interest or dividends on your tax return and
you have not been notified by the IRS that you are no longer subject to
backup withholding.
----------------------------------------------------------------------------------
SIGNATURE PART 3--
-------------------------------------- Awaiting TIN _
DATE
-------------------------------------------
----------------------------------------------------------------------------------
NOTE:FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN
CIRCUMSTANCES RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO
YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
----------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or
delivered an application to receive a taxpayer identification number to
the appropriate Internal Revenue Service Center or Social Security
Administration Office or (2) i intend to mail or deliver an application
in the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all payments made
to me on account of the Exchange Notes shall be retained until I provide
a taxpayer identification number to the Exchange Agent and that, if I do
not provide my taxpayer identification number within 60 days, such
retained amounts shall be remitted to the Internal Revenue Service as
backup withholding and 31% of all reportable payments made to me
thereafter will be withheld and remitted to the Internal Revenue Service
until I provide a taxpayer identification number.
SIGNATURE: DATE:
----------------------------------- ----------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
-13-
<PAGE> 1
EXHIBIT 99.2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social Security numbers have nine digits separated by two hyphens: i.e,
000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
GIVE THE SOCIAL GIVE THE EMPLOYER
FOR THIS TYPE SECURITY NUMBER FOR THIS TYPE IDENTIFICATION
OF ACCOUNT: OF- OF ACCOUNT: NUMBER OF-
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Individual The individual 6. Sole proprietorship The owner(1/)
2. Two or more The actual owner of 7. A valid trust, Legal entity(3/)
individuals (joint the account or, if estate, or pension
account) combined funds, the trust
first individual on
the account.(2/) 8. Corporate The corporation
9. Association, club,
religious,
3. Custodian account The minor(4/) charitable,
of a minor (Uniform educational or
Gift to Minors Act) other tax-exempt The organization
organization
The partnership
10. Partnership
4.a. The usual revocable The grantor-trustee 11. A broker or registered nominee The broker or nominee
savings trust
(grantor is also 12. Account with the The public entity
trustee) Department of
Agriculture in the
name of a public
entity (such as a
b. So-called trust The actual owner(2/) State or local
account that is not government, school
a legal or valid district, or
trust under State prison) that
law receives
agricultural
5. Sole proprietorship The owner(1/) program payments
</TABLE>
_____________________________________
(1/) You must show your individual name, but you may also enter your business or
"doing business as" name. Or may use either your SSN or EIN.
(2/) List first and circle the name of the person whose number you furnish.
(3/) List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the identifying number of the personal unless the
legal entity itself is not representative or trustee designated in the
account title).
(4/) Circle the minor's name and furnish the minor's social security number.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and apply
for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisers
Act of 1940 U.C. who regularly acts s a broker are exempt. Payments subject to
reporting under sections 6041 and 6041A are generally exempt from backup
withholding only if made to payees described in items (1) through (7), except a
corporation that provides medical and health care services or bills and
collects payments for such services is not exempt from backup withholding or
information reporting. Only payees described in items (2) through (6) are
exempt from backup withholding for barter exchange transactions and patronage
dividends.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan or custodial account under section 403(b)(7).
(3) The United States or any agency or instrumentality thereof.
(4) A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
(5) A foreign government, a political subdivision of a foreign government, or
an agency or instrumentality thereof.
(6) An international organization or any agency or instrumentality thereof.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S. or
a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times under the Investment Company Act of
1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc. Nominee List.
(15) An exempt charitable remainder trust, or a non-exempt trust described in
section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
* Payments to nonresident aliens subject to withholding under section 1441.
* Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
* Payment of patronage dividends not paid in money.
* Payments made by certain foreign organizations.
* Section 404(k) payments made by an ESOP.
Interest payments that are generally exempt from back-up withholding include:
* Payments of interest on obligations issued by individuals. NOTE: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
* Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
* Payments described in section 6049(b)(5) to nonresident aliens.
* Payments on tax-free covenant bonds under section 1451.
* Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE OF THE FORM AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, royalties, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
EXHIBIT 99.3
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
10% SENIOR SUBORDINATED NOTES DUE 2008
(INCLUDING THOSE IN BOOK-ENTRY FORM)
OF
METAL MANAGEMENT, INC.
This Notice of Guaranteed Delivery, or one substantially equivalent to
this form, and the related Letter of Transmittal (the "Letter of Transmittal")
must be used to accept the Exchange Offer (as defined below) of Metal
Management, Inc., a Delaware corporation (the "Company"), made pursuant to the
Prospectus, dated , 1998 (as it may be amended or supplemented from
time to time, the "Prospectus"), if (i) certificates for the outstanding 10%
Senior Subordinated Notes due 2008 of the Company (the "Old Notes") are not
immediately available, (ii) time will not permit the Letter of Transmittal
(together with the documents required by such Letter of Transmittal) to reach
LaSalle National Bank (the "Exchange Agent") on or prior to 5:00 p.m. New York
City time on the Expiration Date (as defined herein), or (iii) Holders cannot
complete the procedure for book-entry transfer on a timely basis. Such form
may be delivered or transmitted by facsimile transmission, mail or hand
delivery to the Exchange Agent as set forth below. In addition, in order to
utilize the guaranteed delivery procedure to tender the Old Notes pursuant to
the Exchange Offer, a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), any other required documents and tendered
Old Notes in proper form for transfer (or confirmation of a book-entry transfer
of such Old Notes into the Exchange Agent's account at DTC) must also be
received by the Exchange Agent prior to 5:00 p.m., New York City time, within
four (4) New York Stock Exchange trading days after the Expiration Date.
Capitalized terms not defined herein are defined in the Prospectus.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer is:
LASALLE NATIONAL BANK
By Hand, Registered or Certified Mail or Overnight Courier:
LaSalle National Bank
135 South LaSalle Street
Room 1825
Chicago, Illinois 60603
Attention: Sarah Webb
By Facsimile:
(312) 904-2236
Attention: Sarah Webb
Confirm by Telephone: (312) 904-2444
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY
VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the Letter of Transmittal
(which together constitute the "Exchange Offer"), receipt of which are hereby
acknowledged, the aggregate principal amount of Old Notes set forth below
pursuant to the guaranteed delivery procedure described in "The Exchange
Offer--Guaranteed Delivery Procedures" section in the Prospectus and
Instruction 2 of the Letter of Transmittal.
Name(s) of Registered Holder(s):____________________________________________
(Please Print or Type)
Principal Amount of Old Notes Tendered:* Certificate No(s). (if available):
$
---------------------------------------- ----------------------------------
$
---------------------------------------- ----------------------------------
$
---------------------------------------- ----------------------------------
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
If Old Notes will be delivered by book-entity transfer to The Depository
Trust Company ("DTC"), provide the DTC account number.
DTC Account Number:__________________________________________
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, personal
representatives, trustees in bankruptcy, legal representatives, successors and
assigns of the undersigned.
PLEASE SIGN HERE
Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery.
-------------------------------------------------- -------------------------
-------------------------------------------------- -------------------------
Signature(s) of Holder(s) or Authorized Signatory Date
Area Code and Telephone Number:
----------------------------------------------
If signature is by attorney-in-fact, trustee, executor, administrator,
guardian, officer or other person acting in a fiduciary or representative
capacity, such person must set forth his or her full title below.
Please print name(s) and address(es)
Name(s) of Holder(s)
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
Title/Capacity:
----------------------------------------------------------
Address(es):
----------------------------------------------------------
-2-
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or a correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby
guarantees that the undersigned will deliver to the Exchange Agent the
certificates representing the Old Notes being tendered hereby in proper form
for transfer (or a confirmation of book-entry transfer of such Old Notes into
the Exchange Agent's account at the book-entry transfer facility of DTC) with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other required documents, all within four (4) New York Stock
Exchange trading days after the Expiration Date.
Name of Firm______________________________ __________________________________
(Authorized Signature)
Address___________________________________ Name______________________________
Please Print or Type
__________________________________________ Title_____________________________
Zip Code
Dated_____________________________
Telephone Number__________________________
The institution that completes this form must communicate the guarantee to
the Exchange Agent by the Expiration Date, and must deliver the certificates
representing any Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC),the Letter of Transmittal
(or facsimile thereof) and any other required documents to the Exchange Agent
within the time period shown herein. Failure to do so could result in a
financial loss to such institution.
NOTE: DO NOT SEND CERTIFICATES OF OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
-3-
