<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 14, 1994
REGISTRATION NO. 33-72486
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------
BAYOU STEEL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 3312 72-1125783
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL(I.R.S. EMPLOYER IDENTI-
JURISDICTION OF CLASSIFICATION CODE NUMBER) FICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
RIVER ROAD
P.O. BOX 5000
LAPLACE, LOUISIANA 70069
(504) 652-4900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
RICHARD J. GONZALEZ
VICE PRESIDENT, TREASURER
AND CHIEF FINANCIAL OFFICER
BAYOU STEEL CORPORATION
RIVER ROAD
P.O. BOX 5000
LAPLACE, LOUISIANA 70069
(504) 652-4900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
RORY A. GREISS GARY L. SELLERS
KAYE, SCHOLER, FIERMAN, SIMPSON THACHER & BARTLETT
HAYS & HANDLER 425 LEXINGTON AVENUE
425 PARK AVENUE NEW YORK, NEW YORK 10017
NEW YORK, NEW YORK 10022 (212) 455-2000
(212) 836-8000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933,check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION ACTING
PURSUANT TO SAID SECTION 8(A) MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
BAYOU STEEL CORPORATION
CROSS-REFERENCE SHEET SHOWING LOCATION IN THE PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS ON FORM S-1 REGISTRATION STATEMENT
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION HEADING IN PROSPECTUS
----------------------- ---------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front Cover Cover of the Registration Statement;
Page of Prospectus................ Cross Reference Sheet; and Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus............... Inside Front and Outside Back Cover
Pages of Prospectus
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed Prospectus Summary; Investment
Charges........................... Considerations; and Selected
Financial Data
4. Use of Proceeds.................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price.... Underwriting
6. Dilution........................... *
7. Selling Security Holders........... *
8. Plan of Distribution............... Outside Front Cover Page of
Prospectus; and Underwriting
9. Description of Securities to be Outside Front Cover Page of
Registered........................ Prospectus; Prospectus Summary; and
Description of the First Mortgage
Notes
10. Interests of Named Experts and
Counsel........................... *
11. Information With Respect to the Cover of the Registration Statement;
Registrant........................ Prospectus Summary; Investment
Considerations; Capitalization;
Selected Financial Data;
Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Principal Stockholders;
Certain Related Party Transactions;
Description of the First Mortgage
Notes; Description of Certain
Indebtedness; and Financial
Statements
12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities................... *
</TABLE>
- --------
* Not Applicable
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 14, 1994
BAYOU STEEL CORPORATION
$75,000,000 % FIRST MORTGAGE NOTES DUE 2001
Bayou Steel Corporation (the "Company") is offering (the "Offering")
$75,000,000 aggregate principal amount of % First Mortgage Notes due 2001 (the
"First Mortgage Notes"). Interest on the First Mortgage Notes is payable semi-
annually on 15 and 15 of each year, commencing 15, 1994, at the
rate of % per annum. The First Mortgage Notes are redeemable, in whole or in
part, at the option of the Company on and after 15, 1998, at the
redemption prices set forth herein, plus accrued interest.
The First Mortgage Notes will rank pari passu in right of payment with all
senior Indebtedness (as defined herein) of the Company, including obligations
of the Company arising in connection with the Credit Facility (as defined
herein), and will rank senior to all subordinated Indebtedness of the Company.
After giving effect to the Offering, as of December 31, 1993, the Company had
approximately $1.3 million of total Indebtedness in addition to the First
Mortgage Notes, all of which would rank pari passu with the First Mortgage
Notes.The First Mortgage Notes will be secured by a first priority security
interest, subject to certain exceptions, in substantially all unencumbered
existing and future real and personal property, fixtures, machinery and
equipment (including certain operating equipment classified as inventory) of
the Company and the proceeds thereof, whether existing or hereafter acquired,
but excluding inventory and accounts receivable.
In the event of a Change of Control (as defined herein), the Company is
obligated to make an offer to purchase all outstanding First Mortgage Notes
from the holders thereof (the "Holders") at a redemption price of 101% of the
principal amount thereof plus accrued interest. Under certain circumstances,
the Company is obligated to apply the net cash proceeds of asset sales to the
purchase of substitute property for use in the Company's business (that will
become subject to the lien of the Indenture and the Security Documents (each as
defined herein)) or to make offers to purchase a portion (calculated as set
forth herein) of the First Mortgage Notes at a redemption price of 100% of the
principal amount thereof plus accrued interest with the net cash proceeds from
such asset sales.
--------------------------
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED
WITH AN INVESTMENT IN THE FIRST MORTGAGE NOTES.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
--------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- --------------------------------------------------------------------------------
- -
<S> <C> <C> <C>
Per First Mortgage Note................. % % %
Total................................... $ $ $
</TABLE>
(1) Plus accrued interest, if any, from , 1994.
(2) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $ .
--------------------------
The First Mortgage Notes are offered by Chemical Securities Inc. (the
"Underwriter"), subject to prior sale, when, as and if issued by the Company
and accepted by the Underwriter, and subject to certain other conditions. The
Underwriter reserves the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that the delivery of the
First Mortgage Notes will be made in book-entry form through the facilities of
The Depository Trust Company on or about , 1994.
CHEMICAL SECURITIES INC.
The date of this Prospectus is January , 1994
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE FIRST MORTGAGE
NOTES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Company with the Securities and Exchange Commission
may be inspected and copied at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549, and at the following regional offices of the Commission: 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such materials can be
obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at prescribed
rates. In addition, reports, proxy statements and other information concerning
the Company may be inspected at the offices of the American Stock Exchange, on
which shares of the Company's Class A Common Stock are listed, at 86 Trinity
Place, New York, New York.
The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the securities offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
items of which are contained in schedules and exhibits to the Registration
Statement as permitted by the rules and regulations of the Commission.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to such exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. The Registration Statement,
including the exhibits thereto, may be inspected and copied in the manner and
at the sources described above.
----------------
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
See "Investment Considerations" for certain factors that should be considered
in connection with an investment in the First Mortgage Notes offered hereby.
Unless the context otherwise requires, all references to "the Company" mean the
Company and its subsidiaries and all references to a fiscal year refer to the
fiscal year of the Company which ends September 30 (for example, references to
"fiscal 1993" mean the fiscal year ended September 30, 1993).
THE COMPANY
The Company is a leading producer of light structural steel products. The
Company owns and operates a steel minimill strategically located on the
Mississippi River in LaPlace, Louisiana, 35 miles northwest of New Orleans. The
minimill, constructed at a cost of $243 million in 1981, is one of the most
modern facilities in the world in its product line and utilizes state-of-the-
art equipment and technology. The Company produces a variety of light
structural steel products including angles, flats, channels, standard beams and
wide-flange beams (collectively, "shapes"). The shapes produced by the Company
have a wide range of commercial and industrial applications, including the
construction and manufacturing of petrochemical plants, barges and light ships,
railcars, trucks and trailers, rack systems, tunnel and mine support products,
joists, sign and guardrail posts for highways, power and radio transmission
towers, and bridges. The Company sells its products to approximately 600
customers, most of which are steel service centers, in 44 states, Canada,
Mexico and overseas. The Company also sells excess billets (which have not been
rolled into shapes) on a worldwide basis to other steel producers for their own
rolling or forging applications. In fiscal 1993, the Company sold 403,274 tons
of shapes and 59,604 tons of billets.
According to the American Iron and Steel Institute ("AISI"), the domestic
market demand for all structural steel shape products in 1992 was 5.1 million
tons. The Company estimates that its share of the total domestic shapes market
was approximately 8% in 1992. The Company believes that its share of the light
structural steel shapes market (the primary market in which the Company
competes) is much higher, and that it is one of the five largest producers of
light structural steel shapes in the U.S.
The term "minimill" refers to a relatively low-cost steel production facility
which uses steel scrap, rather than iron ore, as its basic raw material. In
general, minimills recycle scrap using electric arc furnaces, continuous
casters and rolling mills. The Company's minimill, which was owned and operated
by Voest-Alpine A.G. (a state-owned Austrian industrial company) ("Voest-
Alpine") until it was purchased by the Company in September 1986, includes a
Krupp computer-controlled, electric arc furnace utilizing water-cooled
sidewalls and roofs, two Voest-Alpine four-strand continuous casters, a
computer supervised, Italimpianti reheat furnace and a 15-stand Danieli rolling
mill (a second Krupp furnace is currently not in operation, but is available
for additional production).
The Company's steelmaking facility, which includes a deep-water dock, is
strategically located on the Mississippi River, which the Company believes
gives it certain transportation cost advantages because it can ship its product
by barge, the least costly method of transportation in the steel industry. In
addition, the Company operates three inventory stocking warehouses in Chicago,
Tulsa and Pittsburgh which supplement its operations in Louisiana. These
facilities, each of which includes an inland waterway dock, enable the Company
to significantly increase its marketing territory by providing storage capacity
for its finished products in three additional markets and by allowing the
Company to meet customer demand far from its minimill facility on a timely
basis. The Company believes that the location of its minimill on the
Mississippi River, and its network of inland waterway warehouses, enable it to
access markets for its products that would otherwise be unavailable to the
Company.
3
<PAGE>
The Company believes that the Mississippi River location of its minimill also
gives it advantages over other minimills in the purchase of steel scrap, which
accounts for nearly 42% of total production costs. The Company is able to
efficiently transport scrap from suppliers throughout the inland waterway
system and through the Gulf of Mexico, permitting it to take advantage of scrap
purchasing opportunities far from its minimill facility, and to protect itself
from supply imbalances that develop from time to time in specific local
markets. In addition, unlike most other minimills, the Company, through its own
scrap purchasing staff, buys scrap directly from scrap dealers and contractors
rather than through brokers. The Company believes that its enhanced knowledge
of scrap market conditions gained by being directly involved in scrap
procurement on a daily basis, coupled with management's long experience in
metals recycling markets, gives the Company a competitive advantage.
In March 1993, following the expiration of its existing labor contract, the
United Steelworkers of America Local 9121 (the "Union") initiated a strike
against the Company after the Company and the Union failed to reach agreement
on a new labor contract. The Company is currently operating at full capacity,
utilizing a combination of temporary replacement workers, Union employees who
have returned to work and salaried employees, and since July 1993 overall
production and productivity have been near pre-strike levels. The Company
believes it can maintain and continue to improve its current production and
productivity levels even if the strike continues indefinitely.
During the initial phases of the strike, however, the Company had to curtail
its operations (which resulted in reduced production of approximately 27,000
tons in the melt shop and approximately 30,000 tons in the rolling mill, higher
fixed costs per ton produced during such period, higher per ton conversion
costs, the cost of converting raw materials into shapes, and lost sales due to
lower inventory levels resulting from reduced production) and productivity was
impacted by retraining of new employees and higher consumption of materials for
several months, all of which adversely affected the Company's profitability,
particularly in the early weeks of the strike. As of November 30, 1993, the
Company has incurred approximately $3.5 million in out-of-pocket costs for
security, legal matters and other services related to the strike ($2.5 million
of which was incurred during the first three months of the strike). Although
uncertainties inherent in strikes generally make it impossible to predict the
duration or ultimate cost of the strike to the Company, the Company expects
that future strike-related costs will not exceed $100,000 per month.
The Company's principal operating strategy is to improve operating results by
reducing costs and increasing sales of higher margin shape products. The
Company believes that it can lower its labor costs by as much as $7 per ton
from fiscal 1993 levels through increasing production (which represents
approximately half of the anticipated savings), and making operational changes
such as changing from three to four shifts (which enables the Company to reduce
scheduled overtime) and operating the minimill with fewer workers. The Company
began to implement many of these operational changes in fiscal 1993, but their
impact is not fully reflected in fiscal 1993 results since these changes were
implemented over the course of the year. Labor costs per ton in fiscal 1993
also were somewhat distorted by the effects of the strike, which resulted in
periods of lower production and productivity, periods of substantially
increased overtime and the Company's need to temporarily use outside
contractors.
In addition, if the Company is able to implement the proposals in its last
contract offer to the Union, the Company would realize an additional savings in
average labor costs of approximately $2 per ton, primarily through benefit cost
reductions. The Company also expects to achieve further labor productivity
gains when its proposed incentive compensation plan is put into effect.
Although the Company believes it will be able to implement its basic proposals
in some form, there can be no assurance that such proposals will be accepted by
the Union or that the proposals can be implemented.
The Company also intends to implement a two-year, $8.6 million capital
expenditure program upon completion of the Offering to reduce its production
and operating costs and increase its rolling mill capacity.
4
<PAGE>
The principal elements of this program are (i) an automobile shredder to enable
the Company to shred car bodies on-site and reduce scrap costs, (ii) a steel
straightener to improve production capacity in the rolling mill, (iii) an off-
line sawing system and conveyor to further improve production capacity in the
rolling mill, (iv) a second overhead crane to reduce product changeover time in
the rolling mill and (v) a shipping bay rail spur to reduce the handling of
finished products. The Company believes that these capital projects, when fully
implemented, would result in annual operating cost savings of approximately
$7.60 per ton.
The Company believes that the aggregate annual operating cost savings
resulting from its labor initiatives and proposed capital expenditure program,
when fully implemented, would approximate $8 million. Although these savings
estimates are based upon historical data and assumptions that management
believes are reasonable, there can be no assurance that the Company will be
able to achieve these cost savings. Furthermore, these anticipated cost savings
could be offset by increases in raw material costs (the largest component of
which is the cost of scrap), recessionary conditions in the steel industry,
decreased demand for the Company's products, oversupply of shape products and
competition, each of which have had, or in the future could have, a material
impact on the Company's costs.
THE OFFERING
Securities..............
$75,000,000 aggregate principal amount of % First
Mortgage Notes due 2001.
Interest Payment Dates.. Interest will accrue from the date of issuance and
will be payable semi-annually on each 15 and
15, commencing 15, 1994.
Optional Redemption..... The First Mortgage Notes will be redeemable, in whole
or in part, at any time on and after 15, 1998,
initially at % of their principal amount, plus ac-
crued interest to the date of redemption, and declin-
ing ratably to par at maturity.
Ranking................. The First Mortgage Notes will rank pari passu in
right of payment with any existing and future senior
Indebtedness of the Company, including obligations of
the Company arising in connection with the Credit Fa-
cility, and will rank senior to all subordinated In-
debtedness of the Company.
Security................ As security for the First Mortgage Notes, the Company
will grant a first priority security interest, sub-
ject to certain exceptions, in substantially all un-
encumbered existing and future real and personal
property, fixtures, machinery and equipment (includ-
ing certain operating equipment classified as inven-
tory) and the proceeds thereof, whether existing or
hereafter acquired. The Credit Facility and a pur-
chase money facility relating to the Tulsa stocking
location are secured by a lien on the inventory and
accounts receivable of the Company.
Change of Control....... In the event of a Change of Control, Holders will
have the right to require the Company to purchase all
First Mortgage Notes then outstanding at a purchase
price equal to 101% of the principal amount thereof,
plus accrued interest to the date of repurchase.
5
<PAGE>
Change of Control generally means that control of the
Company (whether through stock ownership or control
of the Company's assets) is held by persons other
than controlling persons of the Company as of the
date of the Indenture.
A Change of Control could constitute a default under
the Credit Facility. If a Change of Control were to
occur, the Company might be unable to repay all of
its obligations under the Credit Facility, to pur-
chase all of the First Mortgage Notes tendered and to
repay other indebtedness that may become payable upon
the occurrence of a Change of Control.
Asset Sale Offers.......
The net cash proceeds of certain sales or other dis-
positions of assets by the Company shall become sub-
ject to the lien of the Indenture and the Security
Documents. In the event the net cash proceeds of as-
set sales (excluding the sale of certain obsolete as-
sets) equal or exceed $5 million, the Company shall
elect, within six months of such date, to either ap-
ply such net cash proceeds to the acquisition of as-
sets that, upon purchase, shall become subject to the
lien of the Security Documents, or to make offers to
purchase a portion (calculated as set forth herein)
of the First Mortgage Notes at a purchase price equal
to 100% of the principal amount thereof, plus accrued
interest to the date of repurchase.
Covenants............... The Indenture under which the First Mortgage Notes
will be issued will contain certain restrictive cove-
nants that, among other things, will limit the abil-
ity of the Company to incur additional indebtedness;
create liens; make certain restricted payments; en-
gage in certain transactions with affiliates; engage
in sale and leaseback transactions; dispose of as-
sets; issue preferred stock of its subsidiaries;
transfer assets to its subsidiaries; enter into
agreements that restrict the ability of its subsidi-
aries to make dividends and distributions; engage in
mergers, consolidations and transfers of substan-
tially all of the Company's assets; make certain in-
vestments, loans and advances; and create non-re-
course subsidiaries.
For a more detailed description of the First Mortgage Notes, see "Description
of the First Mortgage Notes."
USE OF PROCEEDS
The net proceeds of this Offering will be used for the repayment of
outstanding indebtedness, implementation of capital projects and general
working capital purposes. See "Use of Proceeds."
INVESTMENT CONSIDERATIONS
Prospective investors should carefully consider the matters set forth under
"Investment Considerations."
6
<PAGE>
Set forth below is summary financial information for the Company since 1987,
the Company's first full year of operations following the acquisition of the
Company from Voest-Alpine.
SUMMARY FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT RATIO AND PER TON DATA)
<TABLE>
<CAPTION>
AS OF AND FOR YEARS ENDED SEPTEMBER 30,
-------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales............... $136,008 $119,772 $131,271(1) $183,563 $208,962 $189,849 $134,729
Cost of Sales........... 128,033 109,116 124,436 170,998 187,132 152,148 117,997
-------- -------- -------- -------- -------- -------- --------
Gross Profit............ 7,975 10,656 6,835 12,565 21,830 37,701 16,732
Selling, General and
Administrative......... 3,986 4,071 4,125 4,582 4,323 4,409 4,249
Non-Production Strike
Expenses............... 3,162(2)
-------- -------- -------- -------- -------- -------- --------
Operating Income........ 827 6,585 2,710 7,983 17,507 33,292 12,484
Interest Expense........ (8,261) (8,977) (8,821) (9,514) (11,131) (9,639) (9,445)
Interest Income......... 193 486 638 1,850 1,540 649 61
Miscellaneous........... 502 554 902 1,380(3) 421 (734) 88
-------- -------- -------- -------- -------- -------- --------
Income (Loss) Before
Taxes.................. (6,739) (1,352) (4,571) 1,699 8,337 23,568 3,188
Provision (Benefit) for
Income Taxes........... -- -- -- (116) 281 237 --
-------- -------- -------- -------- -------- -------- --------
Income (Loss) Before
Cumulative Effect of
Accounting Change and
Extraordinary Gain..... (6,739) (1,352) (4,571) 1,815 8,056 23,331 3,188
Cumulative Effect on
Prior Years of
Accounting Change...... -- -- -- (1,572) -- -- --
Extraordinary Gain...... 585 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net Income (Loss)....... (6,154) (1,352) (4,571) 243 8,056 23,331(4) 3,188(4)
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA:
Working Capital......... $ 32,389 $ 57,167 $ 57,532 $ 64,386 $ 77,266 $ 74,478 $ 34,142
Total Assets............ 138,280 149,381 148,669 162,411 165,518 162,098 110,867
Total Debt.............. 54,817 62,057 62,355 67,440 66,364 66,021 61,020
Stockholders' Equity.... $ 61,231 $ 67,385 $ 68,737 $ 73,308 $ 73,064 $ 65,008 $ 274
OTHER PERTINENT DATA:
EBITDA
Actual(5)............... $ 6,530 $ 11,448 $ 7,415 $ 11,767 $ 21,548 $ 36,071 $ 15,348
Adjusted................ 10,294(6) 11,047(7) 8,503(7) 14,324(7) 21,548 36,071 15,348
Ratio of Earnings to
Fixed Charges(8)....... 0.22(9) 0.85(9) 0.49(9) 1.15 1.66 3.28 1.32
Ratio of Adjusted EBITDA
to Net Interest
Expense................ 1.26 1.28 1.01 1.83 2.14 3.92 1.64
Ratio of Adjusted EBITDA
to Pro Forma Net
Interest Expense....... 1.26(10)
Net Tons Shipped
Shapes.................. 403,274 372,943 381,069 411,660 425,376 504,228 405,425
Billets................. 59,604 31,962 43,557(1) 216,790 247,815 93,645 102,361
Average Selling Price
Per Ton
Shapes.................. $ 300 $ 296 $ 307 $ 320 $ 345 $ 333 $ 271
Billets................. 209 204 210 226 235 216 200
Capital Expenditures.... $ 3,184 $ 3,235 $ 7,374 $ 11,519 $ 9,001 $ 9,728 $ 3,795
Depreciation and
Amortization........... $ 4,616 $ 4,309 $ 3,803 $ 3,976 $ 3,620 $ 3,513 $ 2,776
Average number of
Employees.............. 455(11) 495 547 654 685 673 636
Tons Shipped Per
Employee............... 1,017 818 776 961 983 888 798
</TABLE>
(footnotes on following page)
7
<PAGE>
- --------
(1) In fiscal 1991 the Company decided to reduce its melting capacity by
discontinuing the operation of one of its two electric furnaces and
ceasing the practice of exporting large quantities of billets. In prior
years, billet sales contributed small margins; however, the margins on
billets sales virtually disappeared as a result of worldwide market
conditions in late 1990. The Company believes its decision to stop
producing large quantities of billets for export resulted in a decline in
sales of approximately $40 million.
(2) In fiscal 1993, Non-Production Strike Expenses include $3.2 million in
expenses for security, legal matters and other services related to the
strike.
(3) In fiscal 1990, Miscellaneous includes income in connection with a
favorable settlement of a lawsuit for $1.3 million.
(4) In fiscal 1988 and 1987, income applicable to common shares after
accretion and dividends accrued on preferred stock was $19.8 million and
$0.5 million, respectively.
(5) EBITDA represents earnings before interest, taxes, depreciation and
amortization, and is calculated as net income plus interest, taxes,
depreciation and amortization. EBITDA provides additional information for
determining the Company's ability to meet debt service requirements.
EBITDA does not represent and should not be considered as an alternative
to net income, as a measure of operating results, nor is it presented as
an alternative to cash flow from operations as determined by generally
accepted accounting principles. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for a discussion of
liquidity and operating results.
(6) The adjustment to fiscal 1993 EBITDA relates to production and non-
production strike expenses, as well as an extraordinary gain. First,
reduced production affected the fixed charge component of the inventory
produced during the initial phases of the strike. Since the Company
produced approximately 27,000 fewer tons in the melt shop and
approximately 30,000 fewer tons in the rolling mill than it normally
produced in comparable prior periods, the cost of each ton of inventory
produced during that period included a higher amount of fixed costs. As
the inventory produced during this period was sold, the allocation of
fixed charges to the cost of that inventory resulted in higher cost of
sales for fiscal 1993 of $1.2 million, which increased cost has been
eliminated in the Adjusted EBITDA. This adjustment does not reflect
increased consumption of materials during the period of training new
employees nor does it reflect lost sales attributable to a lack of
inventory caused by the temporary decrease in production, both of which
the Company believes were significant. Second, the Company incurred $3.2
million in expenses for security, legal matters and other services related
to the strike. This increased expense has been eliminated in the Adjusted
EBITDA. Third, the Company's extraordinary gain of $0.6 million (which
arose principally from the repurchase of the Company's Senior Secured
Notes due 1998 at favorable prices) has similarly been eliminated in the
Adjusted EBITDA.
(7) The adjustment relates to the write-down to market of various shape
inventories and costs associated with remedying customer complaints
related to products with rust. The rust problem was eliminated in 1992
with the construction of the Company's warehouse and by the implementation
of certain product spraying techniques. In fiscal 1992, 1991 and 1990, the
adjustments to EBITDA for the rust problem were ($0.4) million, $1.1
million, and $1.0 million, respectively. The adjustments to fiscal 1992,
1991 and 1990 EBITDA do not include the effect on EBITDA of lost sales due
to surface rust, which the Company believes was significant.
(8) For purposes of computing the ratio of earnings to fixed charges (a)
earnings consist of income before the cumulative effect of an accounting
change, and income taxes plus fixed charges and (b) fixed charges consist
of interest expense, including capitalized interest, and amortization of
debt expense.
(9) In fiscal 1993, 1992 and 1991, earnings were inadequate to cover fixed
charges by $6.9 million, $1.5 million, and $4.8 million, respectively.
(10) The ratio of Adjusted EBITDA to Pro Forma Net Interest Expense has been
calculated assuming the completion of the Offering and the application of
the proceeds therefrom on the first day of fiscal 1993 and at an assumed
interest rate of 11%. The effect on earnings or net income of a 1/8
percent variance in the interest rate would be approximately $94,000.
(11) In fiscal 1993, the Company utilized approximately 60 outside contractors
working for six months who were not employees of the Company but which are
included in the weighted average number of employees.
8
<PAGE>
INVESTMENT CONSIDERATIONS
In addition to the other information set forth in this Prospectus,
prospective investors should carefully consider the following information in
evaluating the Company and its business before making an investment in the
First Mortgage Notes.
LEVERAGE; CERTAIN RESTRICTIONS; DEFICIENCY OF EARNINGS TO FIXED CHARGES
The Company currently has, and after the Offering will continue to have, a
substantial amount of long-term debt in relation to stockholders' equity. As of
September 30, 1993, the Company had total debt of $54.8 million compared to
$62.1 million as of September 30, 1992. The Company repurchased $11.1 million
of its Senior Secured Notes due 1998 (the "14.75% Notes") during fiscal 1993.
After giving effect to the Offering and the use of proceeds therefrom, the
Company will have $ million of total debt, including the $75 million
aggregate principal amount of the First Mortgage Notes. In fiscal 1993, the
Company's total interest expense was $8.3 million and is not expected to
materially change after giving effect to the Offering and the application of
the proceeds therefrom. For fiscal 1993, 1992 and 1991, the Company's earnings
were insufficient to cover fixed charges by $6.9 million, $1.5 million and $4.8
million, respectively. On a pro forma basis for fiscal 1993, assuming the
completion of the Offering (at an assumed interest rate of 11%) on the first
day of such period and the application of the proceeds of the Offering applied
on the first day of such period, fixed charges would have been in excess of
earnings by $6.3 million. The Company's ability to make interest payments on
and to repay the principal of the First Mortgage Notes will depend upon the
Company's ability to generate cash sufficient to meet such required payments or
to refinance its debt. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
The Company's level of indebtedness, together with the restrictive covenants
included in the Indenture, the Credit Facility and one of the Company's
mortgages, may have the effect of limiting the Company's ability to incur
additional indebtedness, sell assets or acquire other entities, and may
otherwise limit the operational and financial flexibility of the Company. The
effect of these restrictions may be to place the Company at a competitive
disadvantage in relation to less leveraged competitors.
The Company's access to working capital lines under the Credit Facility is
dependent on the Company's compliance with certain financial and other
covenants, including, among others, an interest expense coverage ratio test,
which, if breached, could result in the termination of the commitments of the
lenders under the Credit Facility or a default, and possible acceleration, with
respect to the amounts due thereunder. During fiscal 1994 and the first quarter
of fiscal 1995, the interest expense coverage ratio test contained in the
Credit Facility is applied solely on the results for the prior quarter. Thus, a
single event which has a negative impact on the Company's earnings in a
particular quarter could result in a default under the Credit Facility even if
the longer term effects of such event or condition were insignificant. The
Company is currently in compliance with all of the financial covenants under
the Credit Facility entered into in November 1993. The loans made under the
Credit Facility are floating rate obligations and, consequently, the interest
rates thereunder may be revised upward or downward depending on movements in
the relevant funding option. See "Description of Certain Indebtedness--Credit
Facility."
EFFECTS OF THE STRIKE
In March 1993, following the expiration of their existing labor contract, the
Union initiated a strike against the Company. For approximately six weeks after
the strike began, the Company operated at approximately 50% of capacity. The
Company has since resumed operating at full capacity (with a combination of
temporary replacement workers, Union employees who have returned to work and
salaried employees), and production and productivity since July 1993 have been
near pre-strike levels. The Company believes it can maintain and continue to
improve its current production and productivity levels even if the strike
continues indefinitely. While the Company has incurred approximately $3.5
million in strike-related
9
<PAGE>
expenses as of November 30, 1993 ($2.5 million of which was incurred during the
first three months of the strike), it expects that future strike-related costs
will not exceed $100,000 per month, although uncertainties inherent in strikes
generally make it impossible to predict the duration or ultimate cost of the
strike to the Company. There can be no assurance that the Company will be able
to continue to increase production and improve productivity or that the Company
will not incur significant strike-related costs again if the strike continues
indefinitely.
The Union has filed charges against the Company with the regional office of
the National Labor Relations Board ("NLRB") alleging a number of unfair labor
practices in connection with negotiations with the Union. The Company has
communicated with representatives of the NLRB regional office to refute the
accusations and continues to cooperate with the NLRB in its efforts to complete
the investigation. The Company believes that it possesses meritorious defenses
to the unfair labor practice charges. If the NLRB were to find cause that the
Company engaged in unfair labor practices, the commitment of the strikers to
their negotiating position, the work stoppage and the corporate campaign might
be strengthened. Any hardening of the strikers' positions could affect the
length of the strike and the resolution of the labor contract disputes. Such a
decision could also delay and impair the Company's labor initiatives because
the Company would be unable to implement all or part of its last proposed labor
agreement until it returned to the bargaining process and remedied the unfair
labor practices, and until such time as either an agreement with the Union was
ratified or impasse in the bargaining process was reached.
Under current Federal labor law, a company is not subject to back-pay
liabilities even if the NLRB determines that the company has engaged in an
unfair labor practice, unless the company has failed to reemploy striking
workers who have made an unconditional offer to return to work. The Company has
not hired permanent replacements for the striking workers and could let the
striking workers return to their jobs if the workers make an unconditional
offer to return to work. If the striking workers were to make such an
unconditional offer and resume their jobs, the Company's operations could be
temporarily disrupted as those workers are absorbed back into the work force.
Although the Company does not believe that any disruption from the introduction
of returning workers would be lengthy, the Company cannot predict how long any
such disruption could last.
In August 1993 the Union announced a corporate campaign designed to bring
pressure on the Company from individuals and institutions with direct financial
or other interests in the Company. Although the Company believes the corporate
campaign has not had, and is not expected to have, an effect on its operations,
the potential impact of such a campaign is difficult to assess. See "Business--
Strike and Impact Upon the Company."
RECENT LOSSES
The Company reported net losses of $6.2 million for fiscal 1993, $1.4 million
for fiscal 1992 and $4.6 million for fiscal 1991. These net losses are
primarily due to recessionary declines in demand for and the selling prices of
shapes, customer resistance to surface rust on the Company's product (which
affected fiscal 1990 to 1992 results) and the recent labor strike by the Union
(which affected fiscal 1993 results). The Company anticipates that it will
report a loss for the first quarter of fiscal 1994 as a result of shape prices
lagging the increases in the price of scrap. The Company has net operating loss
carryforwards ("NOLs") totalling $310 million which will expire in varying
amounts through fiscal 2008. In addition, the Company has $30.2 million of
future tax benefits attributable to its tax benefit transfer lease (the "Tax
Lease Agreement") which may, to the extent of taxable income in the year such
tax benefit is produced, be utilized prior to the NOLs. Although the Company
believes it will be profitable in the future and will be able to realize the
benefit of a portion of the NOLs, under the method of accounting for income
taxes for financial reporting purposes to be adopted by the Company in the
first quarter of fiscal 1994, the Company has determined that it will be
required to establish a valuation allowance for all of these net deferred tax
assets due to its cumulative losses in recent years. The Company believes that
a combination of economic recovery, the elimination of the surface rust
problem, and the diminishing impact of the strike will improve the
10
<PAGE>
Company's results of operations; however, there can be no assurance that the
Company will return to profitability. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
DECLINING STEEL SALES
From fiscal 1989 through fiscal 1992, the Company experienced year to year
decreases in net sales. In fiscal 1991 the Company decided to reduce its
melting capacity by discontinuing the operation of one of its two electric
furnaces and ceasing the practice of exporting large quantities of billets. In
prior years, billet sales contributed small margins; however, the margins on
billet sales virtually disappeared as a result of worldwide market conditions
in late 1990. The Company's decision to stop producing billets for export
resulted in a decline in sales of approximately $40 million. The idled electric
furnace affords the Company significant additional melting capacity in the
event the Company improves or expands its rolling mill operations or the
Company elects to re-enter the billet market as a major producer; however, the
Company has no immediate plans to do so.
Shape shipments and selling prices decreased from 1989 through 1992.
Shipments decreased due to the decline in the economy and customer resistance
to excessive surface rust on the Company's products. In addition to the effect
of a declining economy, selling prices also fell in response to declining scrap
prices (the principal raw material used by the Company), and as a result of
discounts offered by the Company to sell products that had excessive surface
rust. Due to an improving economy and the Company's elimination of excessive
surface rust from its products, shape shipments improved in fiscal 1993. If a
declining trend were to resume, the Company's results of operations, liquidity
and capital resources would be adversely affected, particularly if the Company
were unable to offset the decrease in sales with scrap and operating cost
reductions. Furthermore, since the Company's plans to reduce its costs through
labor savings and capital expenditures are partly dependent on increased levels
of production, a decline in steel sales could affect the Company's ability to
fully realize such cost savings. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Sales."
CYCLICAL INDUSTRY AND SENSITIVITY TO ECONOMIC CONDITIONS
The demand for steel is cyclical in nature and is sensitive to trends in
commercial and industrial construction and general economic conditions. In
addition, excess production in the structural steel industry has resulted in
pressure on industry profit margins. Future economic downturns may adversely
affect the Company.
COMPETITION
The Company competes with a number of domestic minimills in each of its four
stocking locations. The domestic minimill steel industry is characterized by
vigorous competition with respect to price, quality and service, as well as
competition to achieve technological advancements that would allow a minimill
to produce higher quality products or lower its production costs. In addition,
excess production capacity in the domestic minimill steel industry has resulted
in competitive product pricing and continued pressures on industry profit
margins. Currently, the domestic minimill steel industry's capacity utilization
rate is approximately 90%. The high fixed costs of operating a steel minimill
encourage minimill operators to maintain high levels of output, regardless of
levels of demand, which exacerbates the pressures on industry profit margins.
Several domestic minimills which are competitors of the Company have financial
resources substantially greater than those available to the Company.
The domestic steel industry has historically faced significant competition
from foreign steel producers, particularly in the 1980's when exchange rates
and the domestic demand for steel products made the United States an attractive
market for such producers. Although domestic minimills have experienced little
competition from foreign producers in recent years due to the cost
competitiveness of domestic minimills,
11
<PAGE>
there can be no assurance that foreign competition will not increase in the
future, which could adversely affect the Company's operating results. See
"Business--Competition."
VOLATILITY IN RAW MATERIAL COSTS AND FLUCTUATIONS IN ENERGY COSTS
The market for steel scrap, the principal raw material used in the Company's
operations, is highly competitive and subject to price volatility influenced by
periodic shortages (due to increased demand by foreign and domestic users),
freight costs, speculation by scrap brokers and other market conditions largely
beyond the Company's control. Although the domestic minimill industry attempts
to maintain its profit margin by increasing the price of its finished products
in response to fluctuations in scrap costs, increases in the prices of finished
products often do not fully compensate for such scrap price increases and
generally lag several months behind increases in steel scrap prices, thereby
restricting the ability of minimill producers to recover higher raw material
costs. While the Company was able to increase shape prices several times during
fiscal 1993, these price increases still lagged the increases in scrap prices.
For fiscal 1993, metal margin (the difference between shape selling price and
scrap cost) was at its lowest level since fiscal 1986. The Company has not
experienced any improvement in metal margin in early fiscal 1994 as scrap
prices have continued to increase. During periods of declining steel prices,
declines in scrap prices may not be as significant as declines in steel prices
and, likewise, a decline in scrap prices may cause a decline in shape and
billet prices. See "Business--Raw Materials."
The Company's manufacturing process consumes large amounts of electricity and
natural gas. A significant increase in the Company's electricity costs or in
the price of natural gas would have an adverse impact on the Company's cost
structure. The Company's energy costs, including electricity and natural gas,
increased by $2.0 million in fiscal 1993 compared to fiscal 1992, but are
expected to increase by approximately $0.6 million in fiscal 1994 compared to
fiscal 1993. The Company's operating results would be adversely affected to the
extent it is unable to pass such higher energy costs on to its customers. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Other Comments--Inflation" and "Business--Energy."
ABSENCE OF A PUBLIC MARKET FOR THE FIRST MORTGAGE NOTES
The First Mortgage Notes comprise a new issue of securities for which there
is currently no market. The Underwriter has informed the Company that it
currently intends to make a market in the First Mortgage Notes. However, the
Underwriter is not obligated to do so, and any such market making may be
discontinued at any time without notice. If the First Mortgage Notes are traded
after their initial issuance, they may trade at a discount from their initial
offering price, depending upon prevailing interest rates, the market for
similar securities, the performance of the Company and other factors.
Therefore, no assurance can be given as to whether an active trading market
will develop or be maintained for the First Mortgage Notes or at what prices
the First Mortgage Notes will trade.
CERTAIN LIMITATIONS ON THE SECURITY FOR THE FIRST MORTGAGE NOTES
The First Mortgage Notes will be secured by a first priority security
interest, subject to certain exceptions, in substantially all unencumbered
existing and future real and personal property, fixtures, machinery and
equipment (including certain operating equipment classified as inventory) of
the Company and the proceeds thereof, whether existing or hereafter acquired,
but excluding inventory and accounts receivable which have been pledged to
secure the Credit Facility and a purchase money facility relating to the Tulsa
stocking location (the "Collateral"). No appraisals of any of the Collateral
have been prepared by or on behalf of the Company. At September 30, 1993, the
net book value of the Collateral was approximately $80.6 million. There can be
no assurance that the proceeds of any sale of the Collateral pursuant to the
Indenture and the Security Documents following an acceleration after an Event
of Default under the Indenture would be sufficient with respect to amounts owed
with respect to the First Mortgage Notes. By its nature, some or all of the
Collateral will be illiquid and may have no readily ascertainable market value.
12
<PAGE>
Accordingly, there can be no assurance that the Collateral will be able to be
sold in a short period of time, even if it is saleable. In addition, the
ability of the Collateral Agent to realize upon the Collateral may be subject
to certain bankruptcy law and fraudulent conveyance limitations in the event of
a bankruptcy. See "Description of the First Mortgage Notes--Security" and "--
Certain Bankruptcy Limitations." In addition, the Trustee for the First
Mortgage Notes will enter into an intercreditor agreement with Chemical Bank,
the agent for the lenders under the Credit Facility, that may delay the sale of
the property subject to the lien of the Indenture and the Security Documents in
order to permit the orderly sale of the property securing the Credit Facility.
Certain of the Company's property comprising the Collateral under the
Security Documents is subject to the Tax Lease Agreement. Pursuant to the Tax
Lease Agreement, the Company effectively transferred in 1981 the Federal income
tax benefits normally associated with the ownership of such property to an
unaffiliated third party. Pursuant to a separate agreement, the Trustee under
the Indenture (i) will release the Federal income tax ownership of such
property from the security interest and lien created by the Indenture and the
Security Documents until the expiration of the Tax Lease Agreement in 1996,
(ii) will agree to take or refrain from taking certain actions in an attempt to
ensure that any disposition upon a foreclosure of the property would not
constitute a "disqualifying event" within the meaning of the regulations
promulgated under the applicable section of the Internal Revenue Code as in
effect prior to the enactment of the Tax Equity and Fiscal Responsibility Act
of 1982 (the "Old Code") and (iii) will agree that subsequent transferees shall
be required to consent to similar limitations. As a consequence, the Tax Lease
Agreement and such release agreement may have the effect of reducing the value
of the property, restricting the number of persons eligible to purchase the
property and delaying the sale of the property if it were to be sold in a
foreclosure proceeding. The Tax Lease Agreement expires on November 11, 1996.
Voest-Alpine International Corporation ("V.A.I.C."), a wholly-owned subsidiary
of Voest-Alpine, through its ownership of Class C Common Stock, and Howard M.
Meyers, through his voting control of the Class B Common Stock, each have the
right to prevent certain transactions affecting the Collateral, including,
among others, liquidation, certain mergers and the sale of the assets subject
to the Tax Lease Agreement which, in each case, could result in the loss of tax
benefits by the unaffiliated third party under the Tax Lease Agreement. See
"Certain Related Party Transactions--Tax Benefit Transfer Lease Agreement" and
"Description of the First Mortgage Notes."
LIMITATIONS ON ABILITY TO PURCHASE THE FIRST MORTGAGE NOTES FOLLOWING A CHANGE
OF CONTROL
A Change of Control could constitute a default under the Credit Facility. If
a Change of Control were to occur, the Company might be unable to repay all of
its obligations under the Credit Facility, to purchase all of the First
Mortgage Notes tendered and to repay other indebtedness that may become payable
upon the occurrence of a Change of Control. See "Description of the First
Mortgage Notes--Change of Control."
COSTS OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
The Company is subject to various Federal, state and local laws and
regulations, including, among others, the Clean Air Act, the 1990 amendments to
the Clean Air Act (the "1990 Amendments"), the Resource Conservation and
Recovery Act, the Clean Water Act and the Louisiana Environmental Quality Act,
and the regulations promulgated in connection therewith, concerning the
discharge of contaminants which may be emitted into the air and discharged into
the waterways, and the disposal of solid and/or hazardous waste such as
electric arc furnace dust. The Company has spent substantial amounts to comply
with these requirements, and the 1990 Amendments may require significant
additional expenditures for air pollution control.
The Company's minimill is classified, in the same manner as similar steel
mills in the industry, as generating hazardous waste due to the production of
dust that contains lead, cadmium and chromium in the melting operation. In the
event of a release of a hazardous substance generated by the Company, the
Company could be potentially responsible for the remediation of contamination
associated with such a release.
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<PAGE>
In the past, the Company's operations in some respects have not met all of
the applicable standards promulgated pursuant to such environmental laws and
regulations. Although the Company believes that it is presently in compliance
in all material respects with the requirements of all relevant governmental
agencies in respect of environmental matters, there can be no assurance that
environmental requirements will not change in the future or that the Company
will not incur significant costs in the future to comply with such
requirements. See "Business--Environmental Matters."
VOTING CONTROL
Bayou Steel Properties Limited ("BSPL"), formerly RSR Steel Corporation, owns
100% of the Class B Common Stock of the Company and currently has the voting
power to elect approximately 60% of the Company's Board of Directors, entitling
BSPL to elect four of the seven directors on the Board of Directors, and to
cast a maximum of 60% of the votes on all other matters, subject to certain
class voting rights in favor of the holders of Class C Common Stock. Howard M.
Meyers, Chairman of the Board and Chief Executive Officer of the Company, owns
a majority of the common stock of BSPL and thus, through BSPL, controls the
Company. As a result of this voting power, the holder of the Class B Common
Stock can determine or significantly influence the outcome of various matters
submitted to stockholders for approval, including, among others, mergers, sales
and acquisitions involving the issuance of additional shares of the Company's
capital stock. The Board of Directors of the Company has approved the merger of
BSPL with and into the Company pursuant to which the number of shares of the
Company's Class B Common Stock currently held by BSPL will be issued to the
shareholders of BSPL in the same proportion as they currently hold the shares
of BSPL. The merger is subject to stockholder approval. See "Principal
Stockholders."
USE OF PROCEEDS
The net proceeds from the sale of the First Mortgage Notes offered hereby are
estimated at approximately $72.8 million. The Company intends to apply the net
proceeds from the sale of the First Mortgage Notes as follows: (i)
approximately $55.8 million to redeem or defease the $48.9 million principal
amount of 14.75% Notes outstanding (which bear interest at a rate of 14.75% per
annum with a final principal installment due March 15, 1998) including the
premium of approximately $4.0 million and interest of approximately $3.0
million thereon; (ii) approximately $4.9 million to pay borrowings under the
Credit Facility (which are floating rate obligations and bear interest at a
rate of 5.26% per annum as of December 31, 1993 and mature on November 30,
1996); (iii) to implement a two-year, $8.6 million capital expenditure program;
and (iv) the remainder for general corporate purposes, including working
capital, other capital improvements and possible acquisitions. The Company has
from time to time considered acquisitions of other businesses and may in the
future continue to explore acquisition opportunities. However, the Company is
not presently engaged in negotiations regarding any acquisition. Until used for
the purposes set forth in clause (iv), the Company will invest the remaining
net proceeds in short-term, interest-bearing securities. $39.9 million
principal amount of the 14.75% Notes outstanding will be redeemed shortly after
the date of this Offering; the remaining $9.0 million principal payment will be
redeemed at a scheduled mandatory redemption date in March 1994. All of the
14.75% Notes outstanding will be legally defeased upon consummation of the sale
of the First Mortgage Notes offered hereby.
As set forth in clause (iii) above, the Company intends to use $8.6 million
of the proceeds of the Offering to implement the construction of the following
projects over the next two years: (a) an automobile shredder, (b) a steel
straightener, (c) an off-line sawing system and conveyor, (d) a second overhead
crane and (e) a shipping bay rail spur. For a more detailed description of the
Company's capital expenditure program, see "Business--Strategy--Capital
Improvements."
14
<PAGE>
CAPITALIZATION
The following table sets forth the cash and cash equivalents, current
maturities of long-term debt and capitalization of the Company as of September
30, 1993, and as adjusted to reflect the sale of the First Mortgage Notes
offered hereby and the application of the net proceeds as described under "Use
of Proceeds." This information should be read in conjunction with the Company's
Financial Statements and Notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
herein.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................. $ 518(1) $ 14,639
======== ========
Current maturities:
14.75% Notes........................................ $ 9,000(2) $ 0
Revolving credit facility........................... 4,000(3) 0
Other notes payable................................. 282 282
-------- --------
Total current maturities.......................... $ 13,282 $ 282
======== ========
Long-term debt, less current maturities:
First Mortgage Notes................................ $ 0 $ 75,000
14.75% Notes........................................ 39,900(2) 0
Other notes payable................................. 1,635(4) 1,635
-------- --------
Total long-term debt.............................. $ 41,535 $ 76,635
-------- --------
Stockholders' equity:
Common stock, $.01 par value--
Class A, 24,271,127 authorized and 10,613,380
outstanding....................................... $ 106 $ 106
Class B, 4,302,347 authorized and 2,271,127
outstanding....................................... 23 23
Class C, 100 authorized and outstanding............ 0 0
-------- --------
Total common stock................................ $ 129 $ 129
Paid-in capital....................................... 44,891 44,891
Retained earnings..................................... 16,212 10,181(5)
-------- --------
Total stockholders' equity.......................... $ 61,231 $ 55,201
-------- --------
Total Capitalization.................................. $102,766 $131,836
======== ========
</TABLE>
- --------
(1) As of November 30, 1993, the Company had $2.1 million of cash.
(2) As of September 30, 1993, there were $48.9 million of the 14.75% Notes
outstanding, of which $39.9 million was classified as long-term debt.
During fiscal 1993, the Company repurchased $11.1 million principal amount
of 14.75% Notes at an aggregate cost of $10.4 million.
(3) The Credit Facility provides for a revolving credit commitment until
November 30, 1996 in the amount of $30.0 million. As of November 30, 1993,
$4.9 million was outstanding under the Credit Facility.
(4) As of November 30, 1993, outstanding amounts under other notes payable
(current and long-term) was $1,385,000.
(5) The reduction in retained earnings reflects the $3.99 million prepayment
cost to redeem $39.9 million of the 14.75% Notes, the write-off of the $1.0
million unamortized debt issuance costs related thereto and $1.0 million of
interest charges relating to the 14.75% Notes.
15
<PAGE>
SELECTED FINANCIAL DATA
Set forth below is selected financial information for the Company since 1987,
the Company's first full year of operations following the acquisition of the
Company from Voest-Alpine. The following selected financial data is qualified
by reference to and should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Company's Financial Statements and Notes thereto included elsewhere herein. The
financial data as of and for each of the years in the seven-year period ended
September 30, 1993 have been derived from the Company's audited Financial
Statements.
<TABLE>
<CAPTION>
AS OF AND FOR YEARS ENDED SEPTEMBER 30,
-------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT RATIO AND PER TON DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales............... $136,008 $119,772 $131,271(1) $183,563 $208,962 $189,849 $134,729
Cost of Sales........... 128,033 109,116 124,436 170,998 187,132 152,148 117,997
-------- -------- -------- -------- -------- -------- --------
Gross Profit............ 7,975 10,656 6,835 12,565 21,830 37,701 16,732
Selling, General and
Administrative......... 3,986 4,071 4,125 4,582 4,323 4,409 4,249
Non-Production Strike
Expenses............... 3,162(2)
-------- -------- -------- -------- -------- -------- --------
Operating Income........ 827 6,585 2,710 7,983 17,507 33,292 12,484
Interest Expense........ (8,261) (8,977) (8,821) (9,514) (11,131) (9,639) (9,445)
Interest Income......... 193 486 638 1,850 1,540 649 61
Miscellaneous........... 502 554 902 1,380(3) 421 (734) 88
-------- -------- -------- -------- -------- -------- --------
Income (Loss) Before
Taxes.................. (6,739) (1,352) (4,571) 1,699 8,337 23,568 3,188
Provision (Benefit) for
Income Taxes........... -- -- -- (116) 281 237 --
-------- -------- -------- -------- -------- -------- --------
Income (Loss) Before
Cumulative Effect of
Accounting Change and
Extraordinary Gain..... (6,739) (1,352) (4,571) 1,815 8,056 23,331 3,188
Cumulative Effect on
Prior Years of
Accounting Change...... -- -- -- (1,572) -- -- --
Extraordinary Gain...... 585 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net Income (Loss)....... (6,154) (1,352) (4,571) 243 8,056 23,331(4) 3,188(4)
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA:
Working Capital......... $ 32,389 $ 57,167 $ 57,532 $ 64,386 $ 77,266 $ 74,478 $ 34,142
Total Assets............ 138,280 149,381 148,669 162,411 165,518 162,098 110,867
Total Debt.............. 54,817 62,057 62,355 67,440 66,364 66,021 61,020
Stockholders' Equity.... $ 61,231 $ 67,385 $ 68,737 $ 73,308 $ 73,064 $ 65,008 $ 274
OTHER PERTINENT DATA:
EBITDA
Actual(5)............... $ 6,530 $ 11,448 $ 7,415 $ 11,767 $ 21,548 $ 36,071 $ 15,348
Adjusted................ 10,294(6) 11,047(7) 8,503(7) 14,324(7) 21,548 36,071 15,348
Ratio of Earnings to
Fixed Charges(8)....... 0.22(9) 0.85(9) 0.49(9) 1.15 1.66 3.28 1.32
Ratio of Adjusted EBITDA
to Net Interest
Expense................ 1.26 1.28 1.01 1.83 2.14 3.92 1.64
Ratio of Adjusted EBITDA
to Pro Forma Net
Interest Expense....... 1.26(10)
Net Tons Shipped
Shapes.................. 403,274 372,943 381,069 411,660 425,376 504,228 405,425
Billets................. 59,604 31,962 43,557(1) 216,790 247,815 93,645 102,361
Average Selling Price
Per Ton
Shapes.................. $ 300 $ 296 $ 307 $ 320 $ 345 $ 333 $ 271
Billets................. 209 204 210 226 235 216 200
Capital Expenditures.... $ 3,184 $ 3,235 $ 7,374 $ 11,519 $ 9,001 $ 9,728 $ 3,795
Depreciation and
Amortization........... $ 4,616 $ 4,309 $ 3,803 $ 3,976 $ 3,620 $ 3,513 $ 2,776
Average number of
Employees.............. 455(11) 495 547 654 685 673 636
Tons Shipped Per
Employee............... 1,017 818 776 961 983 888 798
</TABLE>
(footnotes on following page)
16
<PAGE>
- --------
(1) In fiscal 1991 the Company decided to reduce its melting capacity by
discontinuing the operation of one of its two electric furnaces and
ceasing the practice of exporting large quantities of billets. In prior
years, billet sales contributed small margins; however, the margins on
billets sales virtually disappeared as a result of worldwide market
conditions in late 1990. The Company believes its decision to stop
producing large quantities of billets for export resulted in a decline in
sales of approximately $40 million.
(2) In fiscal 1993, Non-Production Strike Expenses includes $3.2 million in
expenses for security, legal matters and other services related to the
strike.
(3) In fiscal 1990, Miscellaneous includes income in connection with a
favorable settlement of a lawsuit for $1.3 million.
(4) In fiscal 1988 and 1987, income applicable to common shares after
accretion and dividends accrued on preferred stock was $19.8 million and
$0.5 million, respectively.
(5) EBITDA represents earnings before interest, taxes, depreciation and
amortization, and is calculated as net income plus interest, taxes,
depreciation and amortization. EBITDA provides additional information for
determining the Company's ability to meet debt service requirements.
EBITDA does not represent and should not be considered as an alternative
to net income, as a measure of operating results, nor is it presented as
an alternative to cash flow from operations as determined by generally
accepted accounting principles. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for a discussion of
liquidity and operating results.
(6) The adjustment to fiscal 1993 EBITDA relates to production and non-
production strike expenses, as well as an extraordinary gain. First,
reduced production affected the fixed charge component of the inventory
produced during the initial phases of the strike. Since the Company
produced approximately 27,000 fewer tons in the melt shop and
approximately 30,000 fewer tons in the rolling mill than it normally
produced in comparable prior periods, the cost of each ton of inventory
produced during that period included a higher amount of fixed costs. As
the inventory produced during this period was sold, the allocation of
fixed charges to the cost of that inventory resulted in higher cost of
sales for fiscal 1993 of $1.2 million, which increased cost has been
eliminated in the Adjusted EBITDA. This adjustment does not reflect
increased consumption of materials during the period of training new
employees nor does it reflect lost sales attributable to a lack of
inventory caused by the temporary decrease in production, both of which
the Company believes were significant. Second, the Company incurred $3.2
million in expenses for security, legal matters and other services related
to the strike. This increased expense has been eliminated in the Adjusted
EBITDA. Third, the Company's extraordinary gain of $0.6 million (which
arose principally from the repurchase of the Company's 14.75% Notes at
favorable prices) has similarly been eliminated in Adjusted EBITDA.
(7) The adjustment relates to the write-down to market of various shape
inventories and costs associated with remedying customer complaints
related to products with rust. The rust problem was eliminated in 1992
with the construction of the Company's warehouse and by the implementation
of certain product spraying techniques. In fiscal 1992, 1991 and 1990, the
adjustments to EBITDA for the rust problem were ($0.4) million, $1.1
million, and $1.0 million, respectively. The adjustments to fiscal 1992,
1991 and 1990 EBITDA do not include the effect on EBITDA of lost sales due
to surface rust, which the Company believes was significant.
(8) For purposes of computing the ratio of earnings to fixed charges (a)
earnings consist of income before the cumulative effect of an accounting
change, and income taxes plus fixed charges and (b) fixed charges consist
of interest expense, including capitalized interest, and amortization of
debt expense.
(9) In fiscal 1993, 1992 and 1991, earnings were inadequate to cover fixed
charges by $6.9 million, $1.5 million, and $4.8 million, respectively.
(10) The ratio of Adjusted EBITDA to Pro Forma Net Interest Expense has been
calculated assuming the completion of the Offering and the application of
the proceeds therefrom on the first day of fiscal 1993 and at an assumed
interest rate of 11%. The effect on earnings or net income of a 1/8
percent variance in the interest rate would be approximately $94,000.
(11) In fiscal 1993, the Company utilized approximately 60 outside contractors
working for six months who were not employees of the Company but which are
included in the weighted average number of employees.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The Company reported a net loss of $6.2 million in fiscal 1993. The 1993 net
loss was primarily caused by the strike and by sharp increases in scrap costs.
The strike has adversely affected the Company in four ways. First, as of
November 30, 1993, the Company has incurred approximately $3.5 million in out-
of-pocket expenses for security, legal, and other services related to the
strike ($2.5 million of which was incurred during the first three months of the
strike). Second, a reduction in production of approximately 27,000 tons in the
melt shop and approximately 30,000 tons in the rolling mill during the initial
phases of the strike resulted in higher fixed costs per ton produced during
that period. As the inventory produced during this period was sold, the
allocation of fixed charges to the cost of that inventory resulted in higher
cost of sales for fiscal 1993 of $1.2 million. Third, the impact of training
new employees affected productivity and led to higher consumption of materials
for several months. Fourth, reduced production during the early weeks of the
strike resulted in lost sales due to reduced inventory levels. The increase in
scrap costs during the year was only partially offset by increases in selling
prices, resulting in reduced metal margins.
In fiscal 1992, the net loss of $1.4 million was $3.2 million less than the
loss incurred in fiscal 1991. This improvement, despite fewer shipments and
lower selling prices, was accomplished by a reduction in operating costs per
ton.
The following table sets forth shipment and sales data for the fiscal years
indicated.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Shape Shipment Tons.................................. 403,274 372,943 381,069
Average Shape Selling Price Per Ton.................. $300 $296 $307
Billet Shipment Tons................................. 59,604 31,962 43,557
Average Billet Selling Price Per Ton................. $209 $204 $210
Net Sales (in thousands)............................. $136,008 $119,772 $131,271
</TABLE>
SALES
Net sales increased in fiscal 1993 compared to fiscal 1992 due to an increase
in shipments and selling prices for both shapes and billets, whereas net sales
decreased in fiscal 1992 compared to fiscal 1991 for the same reasons.
Shapes. In 1993, the improvement in domestic shape shipments was mainly due
to an improving economy and the Company's efforts to recapture market share
which had been lost in prior years due to the presence of excessive surface
rust on the Company's products. The Company lost some sales in fiscal 1993 due
to a temporary disruption in shipments out of LaPlace and the stocking
locations and curtailed production due to the strike. Despite these factors,
the Company's total shipments increased in fiscal 1993 compared to fiscal 1992.
Export shape shipments in fiscal 1993 were 11.1% of shape shipments as compared
to 9.7% for the previous year. Export shipments to Canada and the Far East
improved while shipments to Mexico declined. Even though there were extreme
pressures on prices in the form of rebates and discounting, the average selling
price for the Company's shape products rose approximately $4 per ton in fiscal
1993. These higher prices were primarily in response to sharp increases in raw
material costs; however, the price increases only partially offset the raw
material increases. The Company anticipates a slight improvement in the economy
in fiscal 1994 which should result in increased sales. In 1992, the prevailing
recessionary conditions, decreased demand, and the reluctance of steel mills to
reduce rolling capacity, caused an oversupply of shape products relative to
demand, resulting in continued competitive pricing and reductions in shipments.
Even though demand for shape products was weak, the Company continued to
improve its position with customers because of the improved surface condition
of its products; however, the Company did not completely regain
18
<PAGE>
in fiscal 1992 the market share it lost in fiscal 1991 and fiscal 1990. Export
shape shipments were 9.7% of shape shipments in fiscal 1992 and 10% in fiscal
1991.
Billets. In fiscal 1990, foreign governments resumed the practice of heavily
subsidizing their steel-making industries, precipitating a sharp decline in
worldwide billet prices as foreign steel-making companies produced more billets
for export. Unable to sell billets at acceptable margins, the Company curtailed
excess billet production by discontinuing the operation of one of its two
furnaces. Since that time, the Company has increased the productivity of its
one-furnace melt shop, including a 7% increase in 1993. As a result of this
increased productivity, the Company was able to take advantage of several
seasonal export opportunities in the last half of fiscal 1991 and the first
half of fiscal 1992. In fiscal 1993, the Company increased shipped tons of
billets by 86% as compared to fiscal 1992. The average selling price of billets
improved in fiscal 1993 compared to fiscal 1992 due to an increase in domestic
shipments, which carry a higher selling price than export shipments, and
increasing raw material prices which were partially passed on to billet
customers. In fiscal 1994, the Company will continue to ship billets on a
supply contract or on an occasional and selective basis to domestic and export
customers.
COST OF SALES
Cost of sales was 94.1% of sales in fiscal 1993 compared to 91.1% in fiscal
1992 and 94.8% in fiscal 1991. The significant decrease in fiscal 1992 compared
to fiscal 1991 was due to lower scrap costs and conversion costs (the cost of
converting raw materials into shapes). The cost of sales increase in fiscal
1993 compared to fiscal 1992 was primarily due to increases in the same two
factors. Also contributing to the increase in cost of sales as a percentage of
sales were higher per ton production costs caused by the curtailment of
operations during the initial phases of the strike and higher costs for
electricity, natural gas and electrodes.
The major component of cost of sales is scrap. In fiscal 1992, scrap cost
decreased 8.4% compared to fiscal 1991, but shape prices dropped $2 per ton
more than scrap prices, reducing margins. In the first quarter of fiscal 1993,
scrap prices bottomed out and began rising sharply over the remainder of the
fiscal year. Scrap costs increased an average of 14.6% in fiscal 1993 compared
to fiscal 1992. Overall, in fiscal 1993, scrap cost per ton increased $10 more
than the increase in the shape selling prices, further reducing margins. For
fiscal 1993, the average metal margin (the difference between shape selling
price and scrap costs) was 4.0% below the average metal margin in fiscal 1992.
During the first quarter of fiscal 1994, metal margins have continued to
decrease as scrap costs have continued to rise. However, the Company recently
announced two price increases, the second of which became effective December
31, 1993, to offset the decrease in metal margins.
Another significant portion of cost of sales is conversion costs, which
include the labor, energy, maintenance material, and supplies used to convert
raw materials into billets and billets into shapes. Conversion costs per ton,
which include fixed and variable costs, decreased 9.0% in fiscal 1992 compared
to fiscal 1991, but increased by 3.0% in fiscal 1993 compared to fiscal 1992.
The decrease in conversion costs per ton for fiscal 1992 was due to the
Company's cost reduction efforts. The Company reduced conversion costs by
operating at a higher level of capacity, implementing capital improvements,
reducing overhead, and renegotiating several major supply contracts. Also,
during the later part of fiscal 1992, the rolling mill operation went from a
six day per week operation to operating at full capacity without additional
staff.
The increase in per ton conversion costs in fiscal 1993 was due to the strike
and increased energy costs. The inability to operate at full capacity during
the initial phases of the strike resulted in reduced production of
approximately 27,000 tons in the melt shop and approximately 30,000 tons in the
rolling mill. As a result, each ton produced during this period included a
higher level of fixed costs than in comparable periods. Conversion costs per
ton also increased due to overtime wages paid to workers as a result of reduced
staffing and training new employees during the strike period. The Company
believes that, without the effect of the strike, conversion costs per ton would
have declined in fiscal 1993 compared to fiscal 1992. Compared to fiscal 1992,
the price of the fuel adjustment component of power increased 28% and the
prices of natural gas
19
<PAGE>
and electrodes increased 32% and 9%, respectively, further increasing
conversion costs. Increased consumption of certain supplies and materials,
particularly as new employees were trained, also contributed to higher per ton
conversion costs. The Company is currently operating at full capacity and since
July 1993 overall production and productivity have been near pre-strike levels.
With only a slight improvement in the economy expected in fiscal 1994, the
Company will continue to emphasize cost reductions to be achieved through
operating efficiencies and capital projects.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were relatively stable for
fiscal 1993, 1992, and 1991.
NON-PRODUCTION STRIKE EXPENSES
In fiscal 1993, the Company incurred $3.2 million ($2.5 million of which was
incurred during the first three months of the strike) of non-production strike
expenses, such as legal, security, and other services during the strike. The
Company expects that future strike-related costs will not exceed $100,000 per
month. See "Investment Considerations--Effect of the Strike" and "Business--
Strike and Impact Upon the Company."
INTEREST EXPENSE & MISCELLANEOUS
Interest expense decreased in fiscal 1993 compared to fiscal 1992 by $0.7
million as the Company purchased $11.1 million aggregate principal of its
14.75% Notes at a purchase price of $10.4 million. Interest expense for fiscal
1992 and 1991 was relatively stable.
Interest income decreased in fiscal 1993 compared to fiscal 1992 and did not
significantly change in fiscal 1992 compared to fiscal 1991. In fiscal 1993,
the Company had less cash to invest following its purchases of the 14.75% Notes
and interest rates were lower compared to fiscal 1992.
Miscellaneous income in fiscal 1993 and 1992 was approximately $0.5 million.
Miscellaneous income in fiscal 1991 included a favorable adjustment due to the
execution of a renewal contract with the State of Louisiana to abate state
franchise taxes and state sales and use taxes. The agreement applied
retroactively to the prior fiscal year.
INCOME TAX
The Company has not incurred income tax expense for fiscal 1993, 1992 and
1991 due to a net loss in each of these years. See "--Other Comments."
NET LOSS
The net loss increased by $4.8 million in fiscal 1993 compared to fiscal
1992. The primary reasons for the increase are strike-related matters, lower
average metal margin and higher prices for energy compared to fiscal 1992.
The net loss in fiscal 1992 decreased by $3.2 million from fiscal 1991 due to
reductions in per ton conversion costs resulting from operational improvements.
Cost of goods sold as a percentage of sales was 91.1% in fiscal 1992 compared
to 94.8% in fiscal 1991 largely due to lower scrap costs and conversion costs.
LIQUIDITY AND CAPITAL RESOURCES
Working capital decreased by $24.8 million to $32.4 million in fiscal 1993.
The decrease in fiscal 1993 was due to the reclassification of $9.0 million of
the 14.75% Notes from long-term debt to a current liability, the decrease in
inventories as a result of reduced production during the strike and reductions
in cash caused by the purchase of $11.1 million in principal of the 14.75%
Notes, offset partially by an increase of $6.2 million in receivables.
20
<PAGE>
Net cash used in operations was $0.9 million in fiscal 1993 mainly due to the
net loss and the increase in receivables. The increase in receivables was
primarily due to the increased billet and shape sales in August and September
1993 as compared to the prior year. This was partially offset by the decrease
in inventories and increases in accounts payable.
Despite higher accounts receivable at year end, based on a better aging
profile of the Company's outstanding accounts and reductions in the number of
accounts older than 60 days, the Company's allowance for doubtful accounts has
decreased compared to prior periods.
Capital expenditures amounted to $3.2 million in fiscal 1993. These
expenditures were used for minor upgrades to the plant and major maintenance
projects. The Company intends to implement a two-year, $8.6 million capital
expenditure program.
Cash flow from financing activities decreased cash by $6.6 million in fiscal
1993 due to a purchase of $11.1 million aggregate principal amount of the
14.75% Notes for $10.4 million. This was partially offset by $4.0 million of
short-term borrowings.
On November 23, 1993, the Company entered into an amendment and restatement
of the Credit Facility, which is a three-year line of credit that permits loans
to be made to the Company thereunder, on a secured basis, of up to $30 million.
As of November 30, 1993, there was $4.9 million borrowed under the Credit
Facility. Interest rates under the Credit Facility are prime plus 1% or LIBOR
plus 2% at the Company's option. The Company's Credit Facility contains certain
covenants, such as the interest expense coverage ratio, which become more
restrictive over time. The Company believes that its normal operations, coupled
with continuing operating improvements, will be sufficient to satisfy these
covenants. See "Description of Certain Indebtedness--Credit Facility." The
Company will use the proceeds of this Offering to defease and redeem the $48.9
million of outstanding 14.75% Notes and repay all outstanding loans under the
Credit Facility. The Company believes that current cash balances, internally
generated funds, the Credit Facility and additional purchase money mortgages
will provide adequate funds for the Company's operating requirements.
There are no financial obligations with respect to post-employment or post-
retirement benefits.
OTHER COMMENTS
ENVIRONMENTAL MATTERS
See "Business--Environmental Matters" and "Investment Considerations--Costs
of Compliance with Environmental Regulations" for a description of the
Company's environmental matters.
STRIKE
See "Business--Strike and Impact Upon the Company" and "Investment
Considerations--Effects of the Strike" for a description of the strike.
INFLATION
The Company is subject to increases in the cost of energy, supplies, salaries
and benefits, additives, alloy and scrap due to inflation. Shape prices are
influenced by supply, which varies with steel mill capacity and utilization,
and market demand.
ACCOUNTING FOR INCOME TAXES
The Company has $310 million of NOLs to offset against regular taxes. The
NOLs expire in varying amounts through fiscal 2008. A substantial portion of
the available NOLs, approximately $200 million, expires by fiscal 2000. In
addition, the Company has $30.2 million of future tax benefits attributable to
the
21
<PAGE>
Tax Lease Agreement which expires in 1996 (see Note 8 to the Financial
Statements) and which may, to the extent of taxable income in the year such tax
benefit is produced, be utilized prior to the NOLs. Even though management
believes the Company will be profitable in the future and will be able to
utilize a portion of the NOLs, management does not believe that it is likely
that all of the NOLs will be utilized. In February 1992, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("FAS 109"), which will require the
Company to change its method of accounting for income taxes for financial
reporting purposes for the fiscal year beginning October 1, 1993. FAS 109
requires, among other things, recognition of future tax benefits, subject to a
valuation allowance based on the likelihood of realizing such benefits.
Preliminary calculations indicate that deferred tax assets of approximately
$118 million (NOLs and other temporary timing differences multiplied by the
federal income tax rate) and deferred tax liabilities of approximately $8
million will be recorded upon adoption of FAS 109 in fiscal 1994. However, in
recording these deferred assets, FAS 109 requires the Company to determine
whether it is "more-likely-than-not" that the Company will realize such
benefits and that all negative and positive evidence be considered (with more
weight given to evidence that is "objective and verifiable") in making the
determination. FAS 109 indicates that "forming a conclusion that a valuation
allowance is not needed is difficult when there is negative evidence such as
cumulative losses in recent years"; therefore, the Company has determined that
it will be required by the provisions of FAS 109 to establish a valuation
allowance for all of the recorded net deferred tax assets at the time the
standard is adopted. In view of the fact that this determination was based
primarily on historical losses with no regard for the impact of proposed
capital expenditures and business plans, future favorable adjustments to the
valuation allowance may be required if and when circumstances change and the
Company returns to profitability. Adoption of FAS 109 will have no material
adverse impact on income for financial reporting or tax purposes.
QUARTERLY RESULTS
The following table provides certain summary financial information for the
eight quarters of fiscal 1993 and 1992:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30, 1993 FISCAL YEAR ENDED SEPTEMBER 30, 1992
----------------------------------------------------- -----------------------------------------------
4TH QUARTER 3RD QUARTER 2ND QUARTER 1ST QUARTER 4TH QUARTER 3RD QUARTER 2ND QUARTER 1ST QUARTER
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT RATIO AND PER TON DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $ 36,282 $ 34,485(1) $ 33,408(1) $ 31,833 $ 30,474 $ 31,050 $29,037 $29,211
Gross Profit............ 1,556(2) 745(2) 2,040(2) 3,634 2,893 2,618 2,759 2,386
Net Income (Loss)....... (1,481) (4,078) (1,697) 1,102 203 (504) (352) (699)
Gross Profit Margin..... 4.3% 2.2% 6.1% 11.4% 9.5% 8.4% 9.5% 8.2%
EBITDA.................. 1,859(2) 819(2) 2,187(2) 3,832 3,242 2,614 2,647 2,391
EBITDA Margin........... 5.1% 2.4% 6.5% 12.0% 10.6% 8.4% 9.1% 8.2%
Tons Shipped
Shapes................. 100,494 105,541 104,752 92,487 95,195 97,318 95,560 84,871
Billets................ 20,493 13,129 7,494 18,488 7,133 9,387 1,465 13,979
-------- -------- -------- -------- -------- -------- ------- -------
Total................... 120,987 118,670 112,246 110,975 102,328 106,705 97,025 98,850
Average Selling Price
per Ton
Shapes................. $ 311 $ 297 $ 298 $ 295 $ 297 $ 294 $ 292 $ 301
Billets................ 214 210 207 202 210 204 218 199
</TABLE>
- --------
(1) The Company believes that it lost approximately 27,000 tons of production
in the melt shop and approximately 30,000 tons of production in the rolling
mill and some sales during the second and third quarters due to the strike.
(2) The Company believes that the strike significantly impacted its operating
results in the second, third and fourth quarters of fiscal 1993.
22
<PAGE>
BUSINESS
GENERAL
The Company is a leading producer of light structural steel products. The
Company owns and operates a steel minimill strategically located on the
Mississippi River in LaPlace, Louisiana, 35 miles northwest of New Orleans. The
minimill, constructed at a cost of $243 million in 1981, is one of the most
modern facilities in the world in its product line and utilizes state-of-the-
art equipment and technology. The Company produces a variety of shapes,
including angles, flats, channels, standard beams and wide flange beams. The
shapes produced by the Company have a wide range of commercial and industrial
applications, including the construction and manufacturing of petrochemical
plants, barges and light ships, railcars, trucks and trailers, rack systems,
tunnel and mine support products, joists, sign and guardrail posts for
highways, power and radio transmission towers, and bridges. The Company sells
its products to approximately 600 customers, most of which are steel service
centers, in 44 states, Canada, Mexico and overseas. The Company also sells
excess billets (which have not been rolled into shapes) on a worldwide basis to
other steel producers for their own rolling or forging applications. In fiscal
1993, the Company sold 403,274 tons of shapes and 59,604 tons of billets.
According to the AISI, the domestic market demand for all structural steel
shapes products in 1992 was 5.1 million tons. The Company estimates that its
share of the total domestic shapes market was approximately 8% in 1992. The
Company also believes that its share of the light structural steel shapes
market (the primary market in which the Company competes) is much higher, and
that it is one of the five largest producers of light structural steel shapes
in the U.S.
The term "minimill" refers to a relatively low-cost steel production facility
which uses steel scrap, rather than iron ore, as its basic raw material. In
general, minimills recycle scrap using electric arc furnaces, continuous
casters and rolling mills. The Company's minimill, which was owned and operated
by Voest-Alpine until it was purchased by the Company in September 1986,
includes a Krupp computer-controlled, electric arc furnace utilizing water-
cooled sidewalls and roofs, two Voest-Alpine four-strand continuous casters, a
computer supervised, Italimpianti reheat furnace and a 15-stand Danieli rolling
mill (a second Krupp furnace is currently not in operation, but is available
for additional production).
In August 1988, the Company completed an initial public offering of its Class
A Common Stock which shares are traded on the American Stock Exchange. The
Company was incorporated under the laws of the State of Louisiana in 1979 and
was reincorporated in Delaware in 1988 in connection with its public offering.
The address of the Company's principal place of business is River Road, P.O.
Box 5000, LaPlace, Louisiana 70069 and its telephone number is (504) 652-4900.
MANUFACTURING PROCESS AND FACILITIES
In its production process, the Company uses steel scrap which is received by
barge, rail, and truck, and then stored in a scrap receiving yard. The scrap is
transported to the Company's melt shop by rail car or truck and loaded into its
furnace. The steel scrap is melted with electricity in a 75-ton capacity
electric arc furnace which heats the scrap to approximately 3100(degrees)F.
During the scrap melting and refining process, impurities are removed from the
molten steel. After the scrap reaches a molten state, it is poured from the
furnace into ladles, where adjustments of alloying elements and carbon are made
to obtain the desired chemistry. The ladles of steel are then transported to
one of two four-strand continuous casters in which the molten steel is
solidified in water-cooled molds. The casters produce long strands of steel
which are cut by torch into billets and moved to a cooling bed and marked for
identification. After cooling, the billets are transferred to the rolling mill
for further processing. In the rolling mill, the billets are reheated in a
walking beam furnace with recuperative burners. Once the billets are heated to
approximately 2000(degrees)F, they are rolled through up to fifteen mill stands
which mold the billets into the dimensions and sizes of the finished products.
The heated finished shapes are placed on a cooling bed and then straightened
and cut into the appropriate
23
<PAGE>
customer lengths. The shapes are sprayed to prevent surface rust and then
bundled into 2 1/2- to 5-ton stacks and placed in a climate controlled
warehouse where they are subsequently shipped to the Company's stocking
locations via barge, or to customers directly via truck, rail, or barge.
The Company is currently able, using only one of its two furnaces, to produce
more billets than it can consume in its rolling mill. Prior to 1991, the
Company operated both of its furnaces and produced a much greater tonnage of
billets for sale in the billet market than it currently produces. The Company
discontinued this practice in 1991 due to declining margins on such products
and has been operating only one of its two furnaces since then. The Company
believes that it could restart its other furnace with an expenditure of less
than $1 million. As a result, the Company believes that it has significant
additional capacity to produce more billets if conditions in the worldwide
billet market improve or if the Company obtains additional rolling mill
capacity.
PRODUCTS
Finished Steel. The Company produces a variety of light structural steel
products (including angles, flats, channels, standard beams and wide-flange
beams) that are collectively referred to as "shapes." The Company currently
produces and sells shapes in the forms of equal leg angles (2"x 2" through
6"x 6"), unequal leg angles (4"x 3" through 7"x 4"), channels (3" through 8"),
flats (3" through 8"), standard beams (3" through 6"), and wide flange beams
(4" through 8"). The shapes produced by the Company have a wide range of
commercial and industrial applications, including the construction and
manufacturing of petrochemical plants, barges and light ships, railcars, trucks
and trailers, rack systems, tunnel and mine support products, joists, sign and
guardrail posts for highways, power and radio transmission towers, and bridges.
The Company's shapes are produced to various national specifications, such as
those set by the American Society for Testing and Materials ("ASTM"). In
addition, the Company is one of a few minimills that is approved by the
American Bureau of Shipping ("ABS") and certified for nuclear applications. The
Company's products are also certified for state highway and bridge structures.
The Company is currently in the approval process for ISO-9000 certification,
the new international steel standard.
The Company's shape products are distinguishable from bar mill products which
include hot rolled bars, cold finished bars and reinforcing bars. The
manufacture of structural steel products is generally more labor intensive and
technically demanding than the manufacture of steel bar mill products.
Semi-finished Steel. The Company sells its excess billets on a worldwide
basis to other steel producers for their own rolling or forging applications.
The billets are sold both domestically and worldwide through supply contracts
or on an occasional and selective basis. During fiscal 1993, the Company
produced in excess of 25 grades and 5 sizes (120 mm to 200 mm square or
rectangle) of billets.
CUSTOMERS
The Company has approximately 600 customers in 44 states, Canada, Mexico and
overseas. The majority of the Company's shape products (approximately 74% in
fiscal 1993) are sold to steel service centers, while the remainder are sold to
original equipment manufacturers (approximately 15% in fiscal 1993) and export
customers (approximately 11% in fiscal 1993). Steel service centers purchase
nearly 30% of all carbon industrial steel products produced in the United
States. Steel service centers warehouse steel products from various minimills
and integrated mills and sell combinations of products from different mills to
their customers. Some steel service centers also provide additional labor
intensive value added services such as fabricating, cutting or selling steel by
the piece rather than by the bundle.
In fiscal 1993, the Company's top ten customers accounted for approximately
30% of total sales, and no one customer accounted for more than 6% of total
sales. The Company believes that it is not dependent on any customer and that
it could, over time, replace lost sales attributable to any one customer.
24
<PAGE>
DISTRIBUTION
The Company's steelmaking facility, which includes a deep-water dock, is
strategically located on the Mississippi River, which the Company believes
gives it transportation cost advantages because it can ship its product by
barge, the least costly method of transportation in the steel industry.
Furthermore, the Company operates three inventory stocking warehouses in
Chicago, Tulsa and Pittsburgh, which supplement its operations in Louisiana.
These facilities, each of which includes an inland waterway dock, enable the
Company to significantly increase its marketing territory by providing storage
capacity for its finished products in three additional markets and by allowing
the Company to meet customer demand far from its minimill facility on a timely
basis. The Company believes that the location of its minimill on the
Mississippi River, and its network of inland waterway warehouses, enable it to
access markets for its products that would otherwise be unavailable to the
Company.
The Company's deep-water dock at its manufacturing facility enables the
Company to load vessels or ocean-going barges for overseas shipments, giving
the Company low cost access to overseas markets. Since the minimill is only 35
miles from the Port of New Orleans, smaller quantities of shapes or billets can
be shipped overseas on cargo ships from that port. In addition, the Company
makes rail shipments to some customers, primarily those on the West Coast and
in Mexico. Relative to its domestic competitors, the Company believes it has a
$25 per ton or more freight cost advantage over land-locked minimills in
serving the export market. This advantage permits the Company to compete with
foreign minimills in certain export markets.
The Company believes that the elimination of current duties in Canada and
Mexico as a result of the passage of the North American Free Trade Agreement
("NAFTA") will increase the competitiveness of the Company's products compared
to locally produced products in such countries. During fiscal 1993 and 1992,
2.9% and 3.4%, respectively, of the Company's tons shipped were exported to
Canada and Mexico. There can be no assurance, however, that there will be an
increase in the Company's shipments to Canada and Mexico as a result of the
passage of NAFTA.
MARKETS AND SALES
According to the AISI, the domestic market demand for all structural steel
shape products in 1992 was 5.1 million tons. The Company estimates that its
share of the total domestic shapes market was approximately 8% in 1992. The
Company believes that its share of the light structural steel shapes market
(the primary market in which the Company competes) is much higher, and that it
is one of the five largest producers in this market of light structural steel
shapes in the U.S.
The Company's shape products are sold domestically and in Canada, Mexico and
overseas on the basis of price, availability, quality and service. The Company
maintains a real-time computer information system, which tracks prices offered
by competitors, as well as freight rates from its customers to both the
Company's stocking locations and the nearest competitive facilities. In
addition, the Company maintains a full product assortment at its stocking
locations to ensure availability of its product and operates on a predetermined
production schedule that is provided to customers to assist customers in
scheduling their purchases.
Although sales of shapes tend to be slower during the winter months due to
the impact of winter weather on construction and transportation, and during the
late summer due to planned plant shutdowns of end-users, seasonality has not
been a material factor in the Company's business. The Company's backlog of
unfilled cancelable purchase orders for shapes, which typically are filled in
approximately three months, totaled $24.3 million as of September 30, 1993 as
compared to $14.3 million as of September 30, 1992.
The level of billet sales to third parties is dependent on the Company's
internal billet requirements and worldwide market conditions, which may vary
greatly from year to year. In the past three fiscal years, shipments of billets
to third parties have ranged from 8% to 13% of the Company's total tonnage
sales, as compared to 35% in fiscal 1990. The Company is currently able, using
only one of its two furnaces, to produce
25
<PAGE>
more billets than it can consume in its rolling mill. Prior to 1991, the
Company operated both of its furnaces and produced a much greater tonnage of
billets for sale in the billet market than it currently produces. The Company
discontinued this practice in 1991 in response to a decision by foreign
governments to resume the practice of heavily subsidizing their steel-making
industries. This decision precipitated a sharp decline in worldwide billet
prices, as foreign steel-making companies produced more billets for export. Due
to current margins, the Company has chosen to sell its excess billets through
supply contracts or on an occasional and selective basis. If the market for
billets were to improve, the Company could increase its billet production by
restarting its idled second furnace.
STRATEGY
The Company's principal operating strategy is to improve operating results by
reducing labor costs and increasing sales of higher margin shape products. In
addition, upon completion of the Offering the Company intends to implement a
two-year, $8.6 million capital expenditure program to reduce its production
costs and increase its rolling mill capacity. The Company may also consider
strategic acquisitions which complement or expand the Company's current
operations, such as businesses engaged in the metals field or recycling
operations.
Operating Efficiencies. The Company believes that it can lower its labor
costs by as much as $7 per ton from fiscal 1993 levels through increasing
production (which represents approximately half of the anticipated
savings), and making operational changes such as changing from three to
four shifts (which enables the Company to reduce scheduled overtime) and
operating the minimill with fewer workers. The Company began to implement
many of these operational changes in fiscal 1993, but their impact is not
fully reflected in fiscal 1993 results since these changes were implemented
over the course of the year. Labor costs per ton in fiscal 1993 also were
somewhat distorted by the effects of the strike, which resulted in periods
of lower production and productivity, periods of substantially increased
overtime and the Company's need to temporarily use outside contractors.
The Company also believes that the adoption of a labor contract
comparable to its last proposal to the Union would reduce labor costs an
additional $2 per ton. If implemented, the Company believes the proposed
contract would reduce the Company's benefit costs by approximately $750,000
annually through employee contributions for health and dental coverage and
the benefits of a proposed managed care program (which would still provide
comprehensive benefits to employees). The Company has also proposed several
changes which would reduce the quantity of overtime. For instance, the
Company has proposed that it be given the right to buy back certain
vacation time of employees. Flexibility in using contractors and
supervisors, another element of the proposed contract, would also
contribute to lowering costs.
Moreover, the Company believes that its labor costs per ton can be
reduced even further through the adoption of its proposed incentive
compensation plan. The incentive plan, which is similar to incentive plans
employed by other minimills which have achieved lower labor costs per ton
than the Company, would compensate production workers and supervisors for
improvements in productivity, with the costs of the incentive payments
offset by the benefits of increased productivity. This improved
productivity would have the additional benefit of reducing per ton
conversion costs. Due to the continuing strike, the Company may be
precluded from implementing any or all of its labor initiatives. See "--
Strike and Impact Upon the Company--Unfair Labor Practice Charge and--
Status of Negotiations."
In the event the Company is able to sustain the labor cost savings
already achieved through operational changes implemented in fiscal 1993,
the Company achieves its anticipated labor cost savings and the Company
implements its additional labor initiatives, the Company believes that its
labor costs per ton will be comparable to those of the Company's leading
competitors. However, no assurance can be given that the ultimate labor
contract will permit the Company to realize significant labor cost savings.
The Company has committed to developing a Total Quality Management work
culture. Through extensive training and individual development efforts, the
Company will attempt to reinforce its basic
26
<PAGE>
values of employee improvement, teamwork, and increased individual
accountability. The Company believes that the workforce, through this
program, will have an impact in achieving operational and productivity
improvements. The Total Quality Management program does not involve the
terms and conditions of the workplace and is therefore not subject to the
collective bargaining process. As a result, the Company has begun
implementing the Total Quality Management Program with its supervisory
personnel and intends to begin implementing the program with the remainder
of its workforce in the near-term.
Capital Improvements. From fiscal 1987 through fiscal 1993, the Company
spent an aggregate of approximately $48 million on capital projects. Most
of these expenditures were directed toward establishing its stocking
location distribution system, establishing a controlled warehouse
environment to minimize surface rust, extending its product line by adding
equipment to roll wide-flange beams and complying with changing
environmental regulations.
In contrast to prior years, capital expenditures in the next three years
will primarily be directed toward efficiency and cost reduction within its
manufacturing facility. In addition to normal maintenance programs, the
Company intends to implement a two-year, $8.6 million capital expenditure
program to reduce its production and operating costs and increase its
rolling mill capacity. The principal elements of this program are (i) an
automobile shredder to enable the Company to shred car bodies on-site and
reduce scrap costs, (ii) a steel straightener to improve production
capacity in the rolling mill, (iii) an off-line sawing system and conveyor
to further improve production capacity in the rolling mill, (iv) a second
overhead crane to reduce product changeover time in the rolling mill and
(v) a shipping bay rail spur to reduce the handling of finished products.
The Company believes that these capital projects, when fully implemented,
would result in annual operating cost savings of approximately $7.60 per
ton.
The following table summarizes the capital expenditures and estimated
production cost savings (excluding depreciation and additional interest
expense) associated with the Company's capital expenditure program.
<TABLE>
<CAPTION>
ESTIMATED
TOTAL PRODUCTION
ESTIMATED COST
CAPITAL ANNUAL SAVINGS
PROJECT EXPENDITURE SAVINGS(1) (PER TON)(2)
------- ------------ ------------ -------------
(IN MILLIONS, EXCEPT PER TON AMOUNTS)
<S> <C> <C> <C>
Automobile Shredder...... $ 4.2 $ 1.7 $ 3.40
Steel Straightener....... 1.9 1.1 2.20
Off-Line Sawing
System/Conveyor......... 1.3 0.6 1.20
Overhead Crane........... 0.6 0.2 0.40
Shipping Bay Rail Spur... 0.6 0.2 0.40
------------ ------------ -------------
Total.................. $ 8.6 $ 3.8 $ 7.60
============ ============ =============
</TABLE>
- --------
(1) Assumes production and sales of 500,000 tons per year. The Company's
business plan for 1994 projects shipments in excess of 500,000 tons. Based
on the operational changes implemented during fiscal 1993 and the Company's
shipment levels for the first three months of fiscal 1994 (117,000 tons),
the Company believes that 500,000 tons is a realistic assumption. The
Company historically records its lowest level of shipments in the first
fiscal quarter of each year. The assumption does not include any increased
production that might result from implementation of the Company's capital
expenditure projects.
(2) Estimated cost savings per ton are based on certain estimates of historical
operating data. Estimated savings related to the automobile shredder may
vary depending on fluctuations in the market price for scrap.
Automobile Shredder. The proposed automobile shredder, which would
operate at the LaPlace site, would enable the Company to prepare car bodies
and sheet material into shredded material ready for the melting process,
thereby providing the Company with shredded scrap at a lower cost than it
27
<PAGE>
currently procures such scrap. In addition, the Company believes that the
automobile shredder would produce scrap of a consistently higher quality
than purchased shredded scrap. The Company believes that on-site
preparation of scrap would enhance the efficiency of the dock in handling
finished goods since fewer shipments of scrap by barge would arrive. The
Company estimates that the purchase and installation of the on-site
shredder would require $4.2 million of capital expenditures. Assuming
production and sales levels of 500,000 tons per year, the estimated annual
cost savings will be approximately $1.7 million or $3.40 per ton.
Steel Straightener. The proposed steel straightener would replace the
Company's existing steel straightener and would contain enhanced features
which would allow it to operate more rapidly, thereby eliminating the
bottleneck caused by the existing straightener in the rolling mill. The
steel straightener, together with the off-line sawing system and conveyor,
would expand the capacity of the rolling mill and permit the production of
light bar shape products (2"x2" angles), which historically are products
with a strong demand, but which the Company previously dropped from its
production schedule due to the rolling mill's inability to produce such
products efficiently. The Company estimates that the purchase and
installation of the steel straightener would require $1.9 million of
capital expenditures. Assuming production and sales levels of 500,000 tons
per year, the estimated annual cost savings relating to the steel
straightener will be approximately $1.1 million or $2.20 per ton.
Off-Line Sawing System and Conveyor. The proposed off-line sawing system
would allow the rolling mill to operate more rapidly by removing the
bottleneck that currently exists when shape products are cut into lengths
less than 40 feet. The off-line sawing system will include a conveyor to
move shapes from the last rolling mill operation to shipping bays. The off-
line sawing system and conveyor, together with the steel straightener,
would expand the capacity of the rolling mill and permit the production of
light bar shape products. The Company estimates that the purchase and
installation of the off-line sawing system and conveyor would require $1.3
million of capital expenditures. Assuming production and sales levels of
500,000 tons per year, the estimated annual cost savings relating to the
off-line sawing system and conveyor will be approximately $0.6 million or
$1.20 per ton.
Overhead Crane. The proposed overhead crane, along with the existing
overhead crane in the rolling mill, would allow both product changeovers
and routine maintenance to occur simultaneously, thereby reducing
changeover time between production runs. The Company estimates that the
purchase and installation of an additional overhead crane would require
capital expenditures of $0.6 million. Assuming production and sales levels
of 500,000 tons per year, the estimated annual cost savings will be
approximately $0.2 million or $0.40 per ton.
Shipping Bay Rail Spur. The proposed rail spur in the shipping bay would
move finished products from the Company's warehouse to the rail lines
adjacent to the minimill without loading and unloading such products into
and from trucks. The Company believes that its labor costs and operating
and capital costs of mobile equipment would be reduced by installation of
the shipping bay rail spur, as well as reduce damage to its finished
products. The Company estimates that the installation of the shipping bay
rail spur would require $0.6 million of capital expenditures. Assuming
production and sales levels of 500,000 tons per year, the estimated annual
costs savings will be approximately $0.2 million or $0.40 per ton.
Other Projects. The Company is currently evaluating the construction of a
rail system that would permit the movement of scrap from the Company's
deep-water dock, which is located approximately 500 yards from the
minimill, to the scrap inventory area and the movement of finished goods
from the warehouse to the dock without loading and unloading the scrap and
finished goods into and from trucks. The Company believes that its labor
costs, contracted services, truck and crane rentals and fuel requirements
would be reduced by the implementation of the rail system. After
preliminary review, the Company estimates that construction of the rail
system would require $11.0 million of capital expenditures. The Company
will continue to analyze the feasibility and potential cost savings of this
project. In addition, the Company is considering modification of the
furnace shell and tapping hole to increase productivity and reduce
consumption of refractory material. The Company is currently
28
<PAGE>
considering various designs for such modifications. After preliminary
review, the Company estimates that it may be able to effect such
modifications for less than $1.0 million of capital expenditures. The
Company believes that the potential cost savings of such project could be
significant relative to the capital expenditures required.
Since the estimated operating cost savings from the Company's expected
operating efficiencies and planned capital improvements are based upon a number
of assumptions, estimated operating cost savings are not necessarily indicative
of the Company's expected financial performance and increases in the cost of
raw materials and other conversion costs may offset any operating cost savings
to cause actual results to vary significantly. There can be no assurance that
the ultimate labor contract will permit the Company to realize significant
labor cost savings. In addition, although the Company believes its assumptions
with respect to its planned capital expenditure program to be reasonable, there
can be no assurance that the estimated production cost savings of the Company's
capital expenditure program will actually be achieved, sufficient demand for
structural steel products will exist for the additional capacity, or other
difficulties will not be encountered in completing the capital expenditure
program, or that the projects can be installed or constructed at the estimated
prices.
Acquisition Program and Tax Benefits. The Company may, from time to time,
seek strategic acquisitions in order to accelerate its growth, focusing on
businesses which complement or expand the Company's current operations, such as
businesses in the metals field or involving recycling operations. The Company
is not presently engaged in negotiations with respect to any acquisition. As of
September 30, 1993, the Company had approximately $310 million of NOLs which
could be used to offset taxable earnings of the Company, including the earnings
of acquired entities, subject to certain limitations imposed by the Internal
Revenue Code of 1986, as amended (the "Tax Code"). See "Investment
Considerations--Recent Losses," "Certain Related Party Transactions--Tax
Benefit Transfer Lease Agreement and Release Agreement" and the Notes to the
Financial Statements.
COMPETITION
The Company's location on the Mississippi River, as well as its stocking
locations in three additional regions of the country, provide it with access to
vast markets in the eastern, midwestern, southern, and central portions of the
United States. As a result, the Company competes in the shape market with
several major domestic minimills in each of these regions. Depending on the
region and product, the Company competes with, among others, Nucor Corporation,
Structural Metals, Inc., North Star Steel Co., Northwestern Steel and Wire
Company, and Lake Ontario Steel Corporation. The Company does not currently
compete with minimills producing flat rolled or rebar products, nor does it
compete with any domestic integrated steel producers.
Foreign steel producers historically have not competed significantly with the
Company in the domestic market for shape sales due to higher freight costs in
the relatively low priced shape market. Foreign competition could increase,
however, as a result of changes in currency exchange rates and increased steel
subsidies by foreign governments.
The Company is currently able, using only one of its two furnaces, to produce
more billets than it can consume in its rolling mill. Prior to 1991, the
Company operated both of its furnaces and produced a much greater tonnage of
billets for sale in the billet market than it currently produces. The Company
discontinued this practice in 1991 in response to a decision by foreign
governments to resume the practice of heavily subsidizing their steel-making
industries. This decision precipitated a sharp decline in worldwide billet
prices, as foreign steel-making companies produced more billets for export. Due
to current margins, the Company has chosen to sell its excess billets on a
supply contract or on an occasional and selective basis. Since most steel
companies produce billets, the Company competes with steel companies that may
also have an excess billet supply at any particular time.
29
<PAGE>
RAW MATERIALS
The Company's major raw material is steel scrap, which is generated
principally from industrial, automotive, demolition, railroad and other scrap
sources and is primarily purchased directly by the Company in the open market
through a large number of steel scrap dealers. The Company is able to
efficiently transport scrap from suppliers throughout the inland waterway
system and through the Gulf of Mexico, permitting it to take advantage of scrap
purchasing opportunities far from its minimill, and to protect itself from
supply imbalances that develop from time to time in specific local markets. In
addition, unlike many other minimills, the Company, through its own scrap
purchasing staff, buys scrap directly from scrap dealers and contractors rather
than through brokers. The Company believes that its enhanced knowledge of scrap
market conditions gained by being directly involved in scrap procurement on a
daily basis, coupled with management's long experience in metals recycling
markets, gives the Company a competitive advantage. The Company does not
currently depend upon any single supplier for its scrap. The Company, on
average, maintains a 25-day inventory of steel scrap.
The Company has initiated a program of buying directly from local scrap
peddlers and small dealers for cash. Through this program, the Company has
procured approximately 20% of its scrap at prices lower than those of large
scrap dealers.
The cost of steel scrap is subject to market forces, including demand by
other steel producers. The cost of steel scrap to the Company can vary
significantly, and product prices generally cannot be adjusted in the short-
term to recover large increases in steel scrap costs. Over longer periods of
time, however, product prices and steel scrap prices have tended to move in the
same direction.
The long-term demand for steel scrap and its importance to the domestic steel
industry may be expected to increase as steel makers continue to expand steel
scrap-based electric arc furnace capacity. For the foreseeable future, however,
the Company believes that supplies of steel scrap will continue to be available
in sufficient quantities at competitive prices. In addition, a number of
technologies exist for the processing of iron ore into forms which may be
substituted for steel scrap in electric arc furnace-based steelmaking. Such
forms include direct-reduced iron, iron carbide and hot-briquetted iron. While
such forms may not be cost competitive with steel scrap at present, a sustained
increase in the price of steel scrap could result in increased implementation
of these alternative technologies.
In addition to steel scrap, the Company consumes smaller quantities of
additives, alloys and flux ("AAF"), a substantial portion of which is imported
through the Port of New Orleans. As a result of its proximity to the port, the
Company believes it has a freight advantage over competitors when procuring
alloys. The Company does not currently depend upon a single supplier for its
AAF requirements.
The Company has not experienced any shortages or significant delays in
delivery of these materials. Management believes that an adequate supply of raw
materials will continue to be available.
ENERGY
The Company's manufacturing process consumes large amounts of electrical
energy. The Company purchases its electrical service needs from Louisiana Power
and Light ("LPL") pursuant to a contract originally executed in 1980 and
extended in 1991 for a five year period. The base contract is supplemented to
provide lower cost off-peak power and known maximums in higher cost firm demand
power. In addition, the Company receives discounted peak power rates in return
for LPL's right to periodically curtail service during periods of peak demand.
These curtailments are generally limited to a few hours and during the last
several years have had negligible impact on operations. Although the
supplemental contract with LPL expires February 1, 1996, the Company has no
reason to believe that this contract will not be renewed upon substantially
similar terms. To a lesser extent, the Company's manufacturing facility
consumes quantities of natural gas. The Company purchases its natural gas on a
month-to-month basis from a variety of suppliers. Due to the effect of a fuel
adjustment provision in the contract with LPL and price increases in natural
gas,
30
<PAGE>
the Company's energy expense increased by $2.0 million in fiscal 1993 compared
to fiscal 1992. Historically, the Company has been adequately supplied with
electricity and natural gas and does not anticipate any curtailment in its
operations resulting from energy shortages.
The Company believes that its utility rates are very competitive in the
domestic minimill steel industry. As one of LPL's largest customers, the
Company is able to obtain competitive rates from LPL.
ENVIRONMENTAL MATTERS
The Company is subject to various Federal, state and local laws and
regulations, including, among others, the Clean Air Act, the 1990 amendments to
the Clean Air Act (the "1990 Amendments"), the Resource Conservation and
Recovery Act, the Clean Water Act and the Louisiana Environmental Quality Act,
and the regulations promulgated in connection therewith, concerning the
discharge of contaminants which may be emitted into the air and discharged into
the waterways, and the disposal of solid and/or hazardous waste such as
electric arc furnace dust.
In addition, in the event of a release of a hazardous substance generated by
the Company, the Company could be potentially responsible for the remediation
of contamination associated with such a release. In the last five years, the
only environmental penalty assessed to the Company was a fine in the amount of
$43,000 levied in 1989 in conjunction with a Hazardous Waste Compliance Order
issued by the Louisiana Department of Environmental Quality with respect to
hazardous waste management violations. At this time, the Company is in
compliance in all material respects with applicable environmental requirements.
The Company has a full-time compliance officer who is responsible for knowing
the environmental rules and regulations to which the Company is subject and
monitoring the Company's procedures for compliance with such rules and
regulations. The Company does not anticipate any substantial increase in its
costs for environmental remediation or that such costs will have a material
adverse effect on the Company's competitive position, operations or financial
condition. The Company has proposed a sampling plan to the Louisiana Department
of Environmental Quality to analyze the contents of two storm-water retention
ponds at the LaPlace minimill in connection with plans to close the ponds.
Depending upon the results of such sampling, some level of clean-up may be
appropriate; however, the Company does not anticipate that such expenditures,
if needed, would be material.
The Company's minimill is classified, in the same manner as similar steel
mills in the industry, as generating hazardous waste due to the production of
dust that contains lead, cadmium and chromium. The Resource Conservation and
Recovery Act regulates the management of such emission dust from electric arc
furnaces. The Company currently collects the dust resulting from its melting
operation through an emissions control system and disposes of it through an
approved waste recycling firm. The dust disposal costs were approximately $1.5
million in fiscal 1993, and are estimated to be approximately the same for
fiscal 1994. In fiscal 1990, a small quantity of dust containing very low
emissions of radioactive material inadvertently entered the scrap stream on one
occasion. All of the dust containing such material was captured by the
emissions control system and is being held pending decision as to appropriate
disposal. The Company has estimated that the ultimate cost of disposal of such
dust will be approximately $500,000.
The Company's future expenditures for installation of environmental control
facilities are difficult to predict. Environmental legislation, regulations and
related administrative policies are constantly changing. Environmental issues
are also subject to differing interpretations by the regulated community, the
regulating authorities and the courts. Consequently, it is difficult to
forecast expenditures needed to comply with future regulations, such as those
forthcoming as a result of the 1990 Amendments. Comprehensive regulations
applicable to the Company have yet to be promulgated under the authority of the
1990 Amendments. Therefore, at this time, the Company cannot estimate those
costs associated with compliance and the effect the upcoming regulations will
have on the Company's competitive position, operations or financial condition.
In fiscal 1994, the Company intends to spend approximately $300,000 on various
environmental capital projects, including those related to the 1990 Amendments.
31
<PAGE>
STRIKE AND IMPACT UPON THE COMPANY
General. The Company's six-year labor contract with the Union expired on
February 28, 1993. On March 21, 1993, after three short contract extensions,
the Union initiated a strike by its 338 bargaining unit employees after the
parties failed to reach agreement on a new labor contract due to differences on
economic issues. Initially, the Company had to curtail its operations (for six
weeks the Company operated at 50% capacity), which resulted in reduced
production, higher per ton conversion costs and lost sales, all of which
adversely affected the Company's profitability, particularly in the early weeks
of the strike.
During its negotiations with the Union, the Company developed a strategic
contingency plan to maintain continued operation of the plant in the event of a
work stoppage. As a result of such planning, the Company was able to avoid
complete suspension of operations by operating the minimill with fewer workers
and by utilizing a combination of temporary replacement workers, Union
employees who returned to work and salaried employees. As a result of such
measures, the Company is currently operating at full capacity and since July
1993 overall production and productivity have been near pre-strike levels.
As of November 30, 1993, the Company has incurred approximately $3.5 million
in out-of-pocket costs for security, legal matters and other services related
to the strike ($2.5 million of which was incurred during the first three months
of the strike). Although uncertainties inherent in the strike generally make it
impossible to predict the duration or ultimate cost of the strike to the
Company, the Company expects that future strike-related costs will not exceed
$100,000 per month.
Injunction. The Company obtained an injunction from a Louisiana state court
on April 1, 1993 imposing constraints on the number of picketers and regulating
conduct on the picket line. As a result of violations of the injunction, the
Company has obtained contempt orders against the violators, as well as
additional injunctive relief to further regulate picketing activity. Assault
and battery charges have been filed against several striking Union members, as
well as non-striking Company employees. Access to the minimill has been
generally unimpaired since the injunction was issued (with the exception of a
court imposed 90-second per vehicle waiting time) and the Company has been
allowed by the court to open additional gates to its facility. The injunctive
relief has also permitted the Company to significantly reduce its out-of-pocket
expenses for security and housing of temporary replacement workers.
Unfair Labor Practice Charge. On May 4, 1993, the Union filed unfair labor
practice charges against the Company with the regional office of the NLRB,
which charges were amended on May 20, 1993 and July 15, 1993 to contain twenty-
two specific allegations including allegations that the Company had failed to
provide the Union with a fully developed incentive plan, that the Company
maintained its position that the incentive plan, which could be unilaterally
changed, would not be subject to the arbitration and grievance procedure and
that the Company had made regressive offers prior to the strike. The Union is
seeking a finding that the Company negotiated in bad faith which, under the
National Labor Relations Act (the "NLRA"), could convert the strike from an
"economic" strike to an "unfair labor practice" strike. If the Company were
found to have engaged in an "unfair labor practice" strike, the Company would
be precluded from hiring permanent replacement workers and from declaring an
impasse. If the Company were to hire permanent replacement workers or declare
an impasse prior to the time of such decision, the NLRB could reverse such
actions. Furthermore, if the strike was deemed an "unfair labor practice"
strike and the Company refused to re-employ striking workers who made an
unconditional offer to return to work, the Company could be subject to exposure
for back-pay.
The Company has communicated with representatives of the NLRB regional office
to refute the Union's accusations and continues to cooperate with the NLRB in
its efforts to complete the investigation. The Company believes that it
possesses meritorious defenses to the unfair labor practice charges. Oral
arguments were heard by the regional office of the NLRB in mid-December and a
decision could be handed down as early as January 1994.
If the NLRB were to find cause that the Company engaged in unfair labor
practices, the commitment of the strikers to their negotiating position, the
work stoppage and the corporate campaign might be strengthened. Any hardening
of the strikers' positions could affect the length of the strike and the
resolution
32
<PAGE>
of the labor contract disputes. Such a decision could also delay and impair the
Company's labor initiatives because the Company would be unable to implement
all or part of its last proposed labor agreement until it returned to the
bargaining process and remedied the unfair labor practices, and until such time
as either an agreement with the Union was ratified or impasse in the bargaining
process was reached.
The Company does not expect the NLRB's determination of the unfair labor
practice charges, whether favorable or not, to have a material long-term effect
on the Company. Since the Company has not hired permanent replacement workers,
the Company would not be liable for any back-pay in the event that the NLRB
reached an adverse decision. In addition, if the striking workers made an
unconditional offer to return to work, it is expected that disruptions to the
Company's business caused by the return of such workers would be temporary.
Status of Negotiations. Union and Company representatives have continued to
hold negotiating meetings since March 21, 1993 in attempts to reach a
resolution of the outstanding issues. However, no progress has been made since
August 11, 1993. The Company made a contract proposal to the Union on November
22, 1993 which was rejected by the Union. The NLRA provides that a company, in
the absence of unfair labor practices in connection with the negotiations, may
implement all or individual parts of its last labor agreement proposal in the
event that the bargaining process reaches impasse. The determination of impasse
is strictly dependent on the facts of each individual case. The Company has not
made a determination that it is at an impasse and any such determination would
be subject to review by the NLRB. If the Company were to implement its last
proposed labor agreement and the NLRB were to subsequently find that the
Company had engaged in unfair labor practices, the Company would be liable to
make the employees economically whole with respect to those labor agreement
provisions that adversely affected such workers since the Company could not
have been at impasse if it were found to have bargained in bad faith.
While the Company and the Union currently remain apart on several issues with
respect to the proposed labor contract, the Company believes that the following
issues are significant in reaching agreement on a new labor contract:
Health Benefits. The Company has proposed a managed health care plan
which would require employees to contribute $20 per week to the plan for
family coverage. In addition, any future increases in the cost of the plan
would be shared equally by the Company and employees. The Union
alternatively has proposed that employees be required to contribute only
$6.92 per week, that employees bear no responsibility for future increases
in the cost of the plan and that the obligation to make contributions not
become effective until three years from the date of adoption of the
contract.
Incentive Plan. The Company has proposed an incentive plan and profit
sharing plan for its employees as the primary basis for increases in
compensation, the components of which would be subject to change at the
discretion of the Company. The Union is proposing that these plans be
subject to the grievance and arbitration procedure under the contract (and
therefore not subject to amendment at the Company's discretion).
Contract Labor. The Company has proposed a provision granting the Company
the right to utilize contract labor and outside contractors, although no
employee directly affected would be terminated or suffer a loss of pay rate
as a result of using contract labor. The Union is seeking a more
restrictive provision limiting the Company's ability to utilize such
contractors.
Bargaining Unit Work. The Company has proposed reduced limitations on
non-bargaining unit employees, primarily supervisors, from performing
bargaining unit work. The Union's proposal maintains past restrictions
contained in the expired contract, in addition to more severe penalties in
the event of future violations.
Union Representatives. The Company and the Union disagree as to which
party should be responsible for the compensation of union representatives
for the performance of Union duties during Company hours.
33
<PAGE>
Picket Line Misconduct. The Company maintains that it has a right to
subject picketers who have engaged in picket line misconduct (meeting the
criteria established by the NLRB as behavior not protected by the NLRA) to
disciplinary action, including termination of employment. The Union demands
that all striking employees, even those who have engaged in such
misconduct, be returned to their positions at the cessation of the strike.
Corporate Campaign. In August 1993 the Union announced a corporate campaign
designed to bring pressure on the Company from individuals and institutions
with direct financial or other interests in the Company. Although the Company
believes the corporate campaign has not had, and is not expected to have, an
effect on its operations, the potential impact of such a campaign is difficult
to assess.
EMPLOYEES
As of September 30, 1992, the Company had 491 employees, of whom 153 were
salaried office, supervisory, and sales personnel, and 338 were hourly
employees. 20 salaried non-exempt employees and 329 hourly employees were
covered by a collective bargaining contract which expired on February 28, 1993
between the Company and the Union. 9 hourly employees are covered by a
collective bargaining contract which expires on July 31, 1994 between the
Company and the Union. As of September 30, 1993, the Company had 412 non-
striking employees, of whom 145 were salaried office, supervisory, and sales
personnel, and 267 were hourly employees. As of September 30, 1993, the Company
had utilized 196 temporary replacement workers to perform certain of the
services of striking workers. Of the original 349 bargaining unit employees, 91
have returned to work, six have resigned and 252 remain on strike.
The strike has not prevented the Company from committing to develop a Total
Quality Management work culture, which is a managerial philosophy that
encourages employee participation, employee empowerment, teamwork and increased
individual accountability. The Company intends to accomplish this through
extensive training and individual development efforts. The Total Quality
Management program does not involve the terms and conditions of the workplace
and is therefore not subject to the collective bargaining process. As a result,
the Company has begun implementing the Total Quality Management Program with
its supervisory personnel and intends to begin implementing the program with
the remainder of its workforce in the near-term.
PROPERTIES
The Company's principal operating properties are listed in the table below.
The Company believes that its properties and warehouse facilities are suitable
and adequate to meet its needs and that the size of its warehouse facilities is
sufficient to store the level of inventory necessary to support its level of
distribution.
<TABLE>
<CAPTION>
LOCATION PROPERTY
-------- --------
<S> <C>
LaPlace, Louisiana Approximately 287 acres of land, including a melt
shop, rolling mill, related equipment, a new 75,000
square foot warehouse, and dock facilities situated
on state-leased waterbottom in the Mississippi Riv-
er.
Chicago, Illinois Approximately 7 acres of land, a dock on the Calumet
River and buildings, including a recently renovated
100,000 square foot warehouse.
Tulsa, Oklahoma 63,500 square foot warehouse facility with a dock on
the Arkansas River system. Located on land under a
long-term lease. The original term of the lease is
from April 1, 1989 through March 31, 1999; the Com-
pany has two 10-year renewal options through March
31, 2019.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
LOCATION PROPERTY
-------- --------
<S> <C>
Pittsburgh, Pennsylvania 112,000 square foot leased warehouse facility with a
dock on the Ohio River. The original term of the
lease was from January 1, 1987 through June 30,
1992; the Company is in the first of three 5-year
renewal options through June 30, 2007.
Knoxville, Tennessee Approximately 25 acres of undeveloped land along the
Tennessee River, available for future use as a
stocking location.
</TABLE>
LEGAL PROCEEDINGS
See "--Strike and Impact Upon the Company" for a description of the NLRB
proceedings. The Company is not involved in any pending legal proceedings which
involve claims for damages exceeding 10% of its current assets. The Company is
not a party to any material pending litigation which, if decided adversely,
would have a significant impact on the business, income, assets or operation of
the Company, and the Company is not aware of any material threatened litigation
which might involve the Company.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------------------------------------
<S> <C> <C>
Howard M. Meyers...................... 51 Director, Chairman of the Board,
President, and Chief Executive
Officer
Jerry M. Pitts........................ 42 Executive Vice President and Chief
Operating Officer
Richard J. Gonzalez................... 46 Vice President, Treasurer, and Chief
Financial Officer
Rodger A. Malehorn.................... 51 Vice President of Commercial
Operations
Timothy R. Postlewait................. 43 Vice President of Plant Operations
Henry S. Vasquez...................... 43 Vice President of Human Resources
John A. Canning, Jr. ................. 49 Director
Lawrence E. Golub..................... 34 Director
Melvyn N. Klein....................... 52 Director
Albert P. Lospinoso................... 57 Director
Alan J. Patricof...................... 59 Director
Stanley S. Shuman..................... 58 Director
</TABLE>
All of the directors, except Alan J. Patricof, served from September 5, 1986
through July 19, 1988 as directors of Bayou Steel Corporation (of LaPlace) (the
Company's predecessor), and thereafter as a director of the Company. Alan J.
Patricof has been a director since February 21, 1991.
35
<PAGE>
BUSINESS BACKGROUND OF EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
Howard M. Meyers has been a director, Chairman of the Board, President and
Chief Executive Officer of the Company since September 5, 1986. He has also
been a director, Chairman of the Board, Chief Executive Officer and President
of Quexco Incorporated ("Quexco") since 1984. Quexco, through its wholly-owned
subsidiary, RSR Corporation ("RSR"), is a privately owned, non-ferrous metals
recycle smelting and refining company located in Dallas, Texas. Mr. Meyers has
also been President and a director of BSPL since its inception. Mr. Meyers is a
former co-president and current member of the Board of Directors of the
Institute of Scrap Recycling Industries Inc. He also serves on the Boards of
Directors of the Steel Manufacturers Association and the Lead Industries
Association. Mr. Meyers was formerly employed as a scrap metal buyer at AMAX
Copper Corporation.
Jerry M. Pitts was elected Executive Vice President and Chief Operating
Officer of the Company on June 7, 1991. He had been Executive General Manager
of the Company since July 1, 1987 and has worked in the steel industry since
1974. From 1986 to 1987, he served the Company as General Manager of
Operations; from 1984 to 1986, he was Superintendent of Melting Operations; and
from 1980 to 1984, he was General Foreman of Melting. Mr. Pitts worked in
various management capacities related to production and process engineering at
U.S. Steel Corporation from 1974 to 1980.
Richard J. Gonzalez was elected Vice President, Treasurer, and Chief
Financial Officer of the Company on June 7, 1991. He had been General Manager,
Finance of the Company since July 1, 1987. He has served the Company since
October 1983 in the capacities of Data Processing Manager and Assistant to the
Vice President of Finance and Controller. From 1982 to 1983, he was Vice
President and Chief Financial Officer of Jimco, Incorporated. Prior to that,
Mr. Gonzalez was a Manager in the Consulting Division of the accounting firm of
Arthur Andersen & Co. for nine years. Mr. Gonzalez is a certified public
accountant.
Rodger A. Malehorn was elected Vice President of Commercial Operations of the
Company on June 7, 1991. He had been General Manager, Commercial Operations
since July 1, 1987. Mr. Malehorn has served in management-level positions with
the Company related to raw material supply, trades purchasing and billet sales
since April 1, 1984. From 1981 to 1984, he was Vice President and General
Manager of Louisiana Scrap Metal Inc. Prior to that, Mr. Malehorn worked for
Luria Brothers & Co., Inc., a scrap recycling operation, for three years and
Lukens Steel Company for thirteen years in various management positions
relating to melt shop operations.
Timothy R. Postlewait was elected Vice President of Plant Operations of the
Company on June 7, 1991. He had been General Manager, Plant Operations of the
Company since July 1, 1987. He has served in management positions with the
Company as Superintendent, Melt Shop Operations from 1986 to 1987 and
Superintendent, Quality Assurance from 1981 to 1986. From 1977 to 1981, Mr.
Postlewait worked in management positions with Chaparral Steel Company, and
from 1972 to 1977, he worked with United Nuclear Corporation as a Senior
Engineer.
Henry S. Vasquez was elected Vice President of Human Resources of the Company
on September 24, 1992 after joining the Company on April 27, 1992. He had been
employed in various executive Human Resource positions with Lyondell
Petrochemical Co. from April 1989 to April 1992; with Frito Lay Company from
August 1983 to April 1989; with Hydril Co. from May 1977 to August 1983; and
with Stanco Industries from April 1975 to May 1977.
John A. Canning, Jr. has been President of Madison Dearborn Partners Inc.,
which is the management company for a private equity investment fund, Madison
Dearborn Capital Partners L.P., and a limited partnership, Madison Dearborn
Advisers, L.P., which provides venture capital advisory services to First
Chicago Corporation since January 1993. For more than five years prior to that,
Mr. Canning was President of First Capital Corporation of Chicago and First
Chicago Investment Corporation, both subsidiaries of First
36
<PAGE>
Chicago Corporation, engaged in venture capital projects. He is a director of
Tyco Toys, Inc. and the Interlake Corporation.
Lawrence E. Golub has been a Managing Director of Bankers Trust Company in
New York, New York since September 1993. From September 1992 to August 1993,
Mr. Golub was a White House Fellow. Mr. Golub was Managing Director of
Wasserstein Perella Capital Markets from February 1990 to August 1992 and an
officer of Allen & Company Incorporated, an investment banking firm, from 1984
to February 1990. He is Chairman of Mosholu Preservation Corporation.
Melvyn N. Klein has been, for more than the past five years, a practicing
attorney and private investor in Corpus Christi, Texas. He has been a Director
of Quexco since 1984. He is the sole shareholder, sole director and the
President of JAKK Holding Corporation, a General Partner of GKH Partners, L.P.,
which is the sole General Partner of GKH Investments, L.P., an investment fund;
President of Rockwood Holding Company; and a director of Itel Corporation,
American Medical International, Inc., Santa Fe Energy Resources and Savoy
Pictures Entertainment, Inc.
Albert P. Lospinoso has been the President of RSR since July 1992 and is a
director of RSR and Quexco. For more than five years prior to that, he was the
Executive Vice President, Chief Operating Officer and a director of RSR and its
predecessor companies.
Alan J. Patricof has been, for more than five years, Chairman of Patricof &
Co. Ventures, Inc. (formerly Alan Patricof Associates, Inc.), a venture capital
firm. He is also a director of Cellular Communications, Inc., Cellular
International, Cellular Communications of Puerto Rico, Creative Biomolecules,
Datascope Corporation, Harman International Industries, Inc. and Ocom
Corporation.
Stanley S. Shuman has been, for more than the past five years, Executive Vice
President, Managing Director and member of the executive committee of Allen &
Company Incorporated. He is a director of The News Corporation Limited, Hudson
General Corporation, Global Asset Management, U.S.A., Sesac Inc. and Knight
Corp.
There are no family relationships among the directors and executive officers
of the Company.
The Company pays each outside director $30,000 per year, payable in quarterly
installments, for serving as a director, plus expenses, for each meeting of the
Board of Directors that a director attends. The Company does not compensate
directors who are officers of the Company for services as directors. Mr. Meyers
is the only director who is an officer of the Company.
37
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation received by the Company's
Chief Executive Officer and the four other most highly-compensated executive
officers for the fiscal 1993, 1992, and 1991.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
(A)
NAME AND (I)
PRINCIPAL (B) (C) (D) ALL OTHER
POSITION YEAR SALARY BONUS(1) COMPENSATION(2)(3)
--------- ---- -------- -------- ------------------
<S> <C> <C> <C> <C>
Howard M. Meyers..................... 1993 $437,990 $ -0- $ -0-
Chairman, Chief Executive 1992 435,041 -0- -0-
Officer, and President 1991 420,053 -0- -0-
Jerry M. Pitts....................... 1993 225,000 9,750 1,316
Executive Vice President and 1992 225,000 9,750 1,702
Chief Operating Officer 1991 210,417 9,750 1,312
Timothy R. Postlewait................ 1993 150,000 6,000 1,560
Vice President of 1992 150,000 6,000 1,560
Plant Operations 1991 148,250 6,000 875
Richard J. Gonzalez.................. 1993 147,000 5,313 1,462
Vice President, Treasurer, 1992 147,000 5,313 1,498
and Chief Financial Officer 1991 143,249 5,313 875
Rodger A. Malehorn................... 1993 120,000 5,313 1,253
Vice President of 1992 120,000 5,313 1,253
Commercial Operations 1991 120,000 5,313 700
</TABLE>
- --------
(1) Bonus includes incentive compensation paid pursuant to the Company's
Incentive Compensation Plan and reflects awards made in 1988, half of which
was paid in 1989 and the remainder of which was paid from 1990 to 1993. No
awards were made in fiscal 1993, 1992 or 1991. See "Employee Benefit
Plans--Incentive Compensation Plan."
(2) Includes amounts contributed by the Company to the Company's Savings Plan
in respect of matching contributions. See "Employee Benefit Plans--Savings
Plan." Also includes the dollar value of term life insurance premiums paid
by the Company for the benefit of these officers. The value of this premium
is approximately $125 for each officer per year.
(3) The aggregate amount of non-cash compensation received by each such
executive officer did not exceed the lesser of $50,000 or 10% of the total
of annual salary and bonus reported for the named executive officer.
EMPLOYEE BENEFIT PLANS
Savings Plan
The Bayou Steel Corporation Savings Plan (the "Savings Plan") was adopted,
effective March 1, 1991 and is intended to qualify for approval under Sections
401 and 410 through 417 of the Tax Code and comply with the provisions of the
Employee Retirement Income Security Act of 1974, as amended. The Savings Plan
is designed to allow all eligible employees to accumulate savings for
retirement.
Employees of the Company eligible to participate in the Savings Plan are
those employees who are at least age 21, have completed one year of service,
and are not employed under a collective bargaining agreement. Savings Plan
participation is voluntary. To join the Savings Plan, an eligible employee must
agree to defer from 1% to 15% of the employee's total pay, subject to annual
limitations imposed by the Tax Code;
38
<PAGE>
the deferral amount is then invested in his or her Savings Plan account. The
Company may make matching discretionary contributions to the employee's
account. In 1993 the Company matched 25% of the employee's deferred amount up
to 4% of total pay contributed in respect of each participant's payroll
deferral election.
Under the Savings Plan, assets are held in a trust fund (the "Trust Fund") by
an independent trustee appointed by the Company. The Trust Fund has been
divided into four investment funds, to which an employee may periodically make
allocations of existing account balances and future contributions. All of the
discretionary Company contributions are invested by the Trustee in the purchase
on the open market of the Company's Class A Common Stock.
Participants are always 100% vested in the contributions made as a result of
their payroll deferral elections. A participant's interest in his Company
matching contributions is based upon a graded vesting schedule and is fully
vested after six years of service.
Retirement Plan
The following table specifies the estimated annual benefits upon retirement
under the Retirement Plan to eligible employees of the Company of various
levels of average annual compensation and for the years of service
classifications specified:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ANNUAL --------------------------------------------------------------
COMPENSATION 10 20 30 45
-------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
$ 20,000 $1,200 $2,400 $3,600 $3,600
50,000 4,360 8,730 13,090 13,090
100,000 9,860 19,730 29,590 29,590
150,000 15,360 30,730 46,090 46,090
200,000 20,860 41,730 62,590 62,590
250,000 24,810 49,610 74,420 74,420
300,000 24,810 49,610 74,420 74,420
</TABLE>
The Company has adopted the Bayou Steel Corporation Retirement Plan (the
"Retirement Plan") and will file a request for approval by the Internal Revenue
Service. The Retirement Plan became effective October 1, 1991. The Retirement
Plan is a defined benefit plan for eligible employees of the Company not
covered by a collective bargaining agreement (the Company adopted a separate
retirement plan for Union employees that also became effective October 1,
1991). Employees are automatically eligible to participate on the October 1 or
April 1 following the completion of one year of service. Service before the
effective date of the Retirement Plan is credited to participants for purposes
of retirement benefit calculation. Contributions to the Retirement Plan are
provided solely from the Company contributions; employees are unable to make
contributions. A participant's benefits under the Retirement Plan are vested
after five years of service. Under the terms of the Retirement Plan the monthly
retirement benefits of a participant payable at the participant's normal
retirement date are equal to (i) .6% of average monthly compensation,
multiplied by years of credited service (not to exceed 30 years), plus (ii) .5%
of that portion, if any, of average monthly compensation which is in excess of
the participant's average social security taxable wage base, multiplied by
years of credited service (not to exceed 30 years). Normal retirement under the
Retirement Plan is age 65 with at least five years of service. The Tax Code
limits the amount of annual compensation that may be counted for the purpose of
calculating pension benefits, as well as the annual pension benefits that may
be paid, under the Retirement Plan. For 1993, these amounts are $235,840 and
$115,641, respectively. The Retirement Plan also limits the amount of annual
compensation that may be counted for the purpose of calculating pension
benefits to $250,000.
39
<PAGE>
The figures for estimated annual retirement benefits are computed on a
straight life annuity basis and are payable to an employee who attains age 65
in 1993 and are exclusive of retirement benefits from Social Security.
Earnings of executive officers included in the Summary Compensation Table,
for purposes of calculating pension benefits, approximate the aggregate amounts
shown in the columns (c) and (d) of such Summary Compensation Table, except for
Mr. Meyers whose earnings for purposes of such calculation are subject to the
$250,000 limitation discussed above.
The years of credited service under the Retirement Plan as of October 1, 1993
for each of the five most highly compensated officers of the Company are:
Howard M. Meyers, 7.1 years; Jerry M. Pitts, 12.8 years; Richard J. Gonzalez,
10 years; Rodger A. Malehorn, 9.5 years; and Timothy R. Postlewait, 12.3 years.
Incentive Compensation Plan
The Company has instituted an Incentive Compensation Plan (the "ICP") to
provide incentives for the attainment of corporate financial objectives to
those key employees of the Company (including all executive officers, except
Mr. Meyers), as selected by the ICP's Administrative Committee, who have the
responsibility and authority to affect the operating results of the Company.
Each year the Board of Directors may, in its sole discretion, cause to be
credited to the ICP any amount not to exceed fifty percent of the aggregate of
the base salaries of the participants in the ICP for such year. The
Administrative Committee, composed of one or all of the Company's officers,
including Howard M. Meyers, as appointed by the Compensation Committee,
determines the amounts awarded to each participant based on quantitative
measures of performance relating to financial or other indicators of
performance for the Company and achievement of measurable individual goals of
participants established prior to the commencement of each year. One-half of a
participant's award is paid in the February following the year to which the
award relates. The balance of such award is divided into fourths and paid to
each participant during the February of each of the four years next succeeding
the year in which the initial payment was made. If a participant is not
employed by the Company on February 1 following the year to which an award
relates or on the February 1 of any of the succeeding four years, such
participant shall forfeit all awards or installments thereof which have been
accrued but not actually paid. No awards have been made since 1988.
1991 Plan
On February 21, 1992 the stockholders of the Company approved the 1991
Employees' Stock Option Plan (the "1991 Plan") for the purpose of attracting
and retaining key employees including officers, managerial and supervisory
employees. The Board of Directors has authorized the reservation of 600,000
shares of Class A Common Stock of the Company for issuance in accordance with
the 1991 Plan. Shares of Class A Common Stock to be issued under the provisions
of the 1991 Plan may be issued by the Company from its authorized and unissued
shares of Class A Common Stock or from shares of treasury stock held by the
Company. (There are presently no such treasury shares.) The 1991 Plan is
administered by the Company's Board of Directors or a committee appointed by
the Board comprised of three disinterested persons. The Board or the committee,
as the case may be, is referred to as the "Administrator."
The Administrator of the 1991 Plan, at its sole discretion, designates such
options granted under the 1991 Plan as (a) "Incentive Stock Options" as defined
in Section 422 of the Tax Code, (b) other stock options subject to the terms
and conditions set forth in the 1991 Plan ("Nonqualified Stock Options"), or
(c) any combination of Incentive Stock Options and Nonqualified Stock Options.
In the event that a portion of an option cannot be exercised as an Incentive
Stock Option by reason of the limitation contained in Section 422(d) of the Tax
Code (which limits the treatment as Incentive Stock Options during any calendar
year to those options, which, when they become exercisable, entitle the holder
to purchase stock having a fair market value of not more than $100,000), such
portion shall be treated as a Nonqualified Stock Option.
40
<PAGE>
Options granted under the 1991 Plan may not be exercised more than ten years
from the date such option is granted, or earlier than six months from the date
such option is granted. Within such limitations, the Administrator of the 1991
Plan will establish the time or times at which options may be exercised and
whether all of the options may be exercisable at one time or in increments over
time.
The exercise price of any option granted under the 1991 Plan is the closing
price of the Company's Class A Common Stock on the American Stock Exchange on
the day the option is granted. The Administrator may in its discretion set such
other exercise price for Nonqualified Stock Options as it may deem appropriate.
Upon exercise, the price is payable in cash, or if the Administrator deems
appropriate, in shares of Class A Common Stock of the Company valued at fair
market value. At the discretion of the Administrator, the Company may loan
funds to an optionee in connection with the exercise of options. The initial
term of any loan under the 1991 Plan cannot exceed five years, but any such
loan may be renewable at the discretion of the Administrator. All such loans
must comply with the applicable regulations of the Federal Reserve Board or any
other governmental agency having jurisdiction over the Company.
Options may not be exercised unless the optionee has been an employee of the
Company or its subsidiaries at all times from the date of grant of the option
to the date of exercise, unless the option is exercised within the time periods
specified in the 1991 Plan after employment is terminated by reason of
retirement, disability, death or other reason otherwise than for cause. No
option is transferable by the optionee except by will or by the laws of descent
and distribution.
The 1991 Plan may be modified, amended, or terminated by the Board of
Directors, except no such action, without the approval of stockholders, may (a)
increase the total amount of Class A Common Stock on which options may be
granted, (b) change the manner of determining the option price, or (c) change
the class of employees eligible to receive options; and no such action may
affect any option previously granted under the 1991 Plan without the consent of
the then holder of the option.
As of September 30, 1993, no options have been granted under the 1991 Plan.
There are no prior stock option plans.
EMPLOYMENT ARRANGEMENT
Howard M. Meyers serves as Chief Executive Officer of the Company and in
connection therewith has signed a letter agreement dated July 26, 1988,
containing a provision included in his prior employment agreement (which has
terminated in accordance with its terms), which provides that all steel-related
acquisition activities undertaken by Mr. Meyers must be through the Company and
that all other acquisition activities undertaken by Mr. Meyers must be through
the Company to the extent required by any fiduciary duty of Mr. Meyers as a
direct or indirect controlling shareholder and/or director of the Company,
giving effect to the principles embodied in the legal doctrine of "corporate
opportunity," which requires that directors, officers and other persons with a
fiduciary duty towards a corporation not appropriate for their own benefit and
advantage a business opportunity properly belonging to the corporation.
The compensation payable to Mr. Meyers for all services performed on behalf
of the Company in any capacity is limited by the terms of the letter agreement
and a Stock Purchase Agreement, dated as of August 28, 1986, between the
Company and certain original purchasers of the Company's Class A Common Stock
which provides that Mr. Meyers may not earn more than the greater of (x)
$350,000 multiplied by a fraction the numerator of which is the consumer price
index with respect to the December immediately preceding the year in question
and the denominator of which is the consumer price index for December 1985 or
(y) 2% of the Company's pretax net income earned in the previous fiscal year
(or 1% if Mr. Meyers is no longer both the Chairman and Chief Executive Officer
of the Company with substantial day-to-day managerial responsibilities).
41
<PAGE>
The Company's Second Restated Certificate of Incorporation provides that the
Class B Common Stock which Mr. Meyers controls through his ownership interest
in BSPL, loses its power to control the Company if Mr. Meyers resigns, retires,
is permanently disabled or is removed for cause as Chief Executive Officer of
the Company, or if 1,362,676 shares (as adjusted) of Class B Common Stock have
been converted into Class A Common Stock.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of September 30, 1993
with respect to the beneficial ownership of each class of Common Stock of the
Company by (a) each person known by the Company to own beneficially more than
5% of the Class A, Class B or Class C Common Stock of the Company, (b) each
director or officer of the Company, and (c) all directors and officers of the
Company as a group.
Except as to certain matters on which holders of the Class B Common Stock and
the holders of the Class C Common Stock have class voting rights, the holders
of the Class A Common Stock, together with the holders of the Class C Common
Stock, are entitled to one vote per share and in the aggregate 40% of the votes
eligible to be cast for all matters other than the election of directors. The
holders of the Class B Common Stock are entitled to 60% of the votes eligible
to be cast for all matters other than the election of directors. Certain
transactions, such as the sale or acquisition of assets that exceed 20% of the
Company's consolidated net worth (as determined in accordance with the
Company's certificate of incorporation) require the consent of stockholders
representing 80% of the votes that may be cast. In addition, the Class B Common
Stock and the Class C Common Stock have voting rights that enable each class to
block certain corporate actions which could result in liability to Voest-Alpine
and V.A.I.C. under the Tax Lease Agreement or to the Company and Howard M.
Meyers under certain indemnities in favor of Voest-Alpine and V.A.I.C. entered
into at the time of the acquisition of the Company from Voest-Alpine and
V.A.I.C. See "Certain Related Party Transactions--Tax Benefit Transfer Lease
Agreement and Release Agreement."
The holders of the Class A Common Stock have the right to elect, as a class,
that number of directors which represents 40% of the number of directors then
comprising the Board of Directors and the holders of the Class B Common Stock
have the right to elect, as a class, that number of directors which represents
60% of the number of directors then comprising the Board of Directors. Except
as set forth below, the holders of the Class C Common Stock are not entitled to
elect directors. So long as the Class A Common Stock is listed on the American
Stock Exchange, if the number of shares of Class B Common Stock outstanding is
less than 12.5% of the aggregate number of outstanding shares of Common Stock,
the holders of the Class A Common Stock will, in addition to the voting rights
discussed above, be entitled to vote as a Class with the Class B Common Stock
for the election of the remaining 60% of the Board of Directors, with the
holders of the Class A Common Stock entitled to one vote per share and the
holders of the Class B Common Stock entitled to ten votes per share. In the
event that Howard M. Meyers is no longer Chief Executive Officer of the Company
or more than 1,362,676 shares (as adjusted) of Class B Common Stock have been
converted into Class A Common Stock, the holders of the Class A, Class B and
Class C Common Stock will vote together, as a single class, in the election of
directors and will be entitled to one vote per share. The holders of Class B
Common Stock have the option to convert all or any portion of their shares of
Class B Common Stock into shares of Class A Common Stock at any time at the
rate of one share of Class A Common Stock for one share of Class B Common
Stock.
With certain limited exceptions, in the absence of the full approval of the
Board of Directors of the Company and the delivery of an opinion of counsel to
the effect that the Company will not lose the benefits of its NOLs, until
December 31, 2003, transfers of shares of Class A Common Stock or Class B
Common Stock shall be null and void insofar as such transaction would cause the
transferee to attain 5% ownership of the fair market value of the Company's
Class A Common Stock or if such transferee owned Class A or Class B Common
Stock with a fair market value equal to 5% or more of the fair market value of
the Company's Class A Common Stock. In addition, except for transfers to or for
the benefit of direct or indirect beneficial
42
<PAGE>
owners of Class B Common Stock, or the immediate family thereof, or
transactions approved by the holders of 75% of the then outstanding Class A
Common Stock, shares of Class B Common Stock are transferable only upon
conversion of such shares into shares of Class A Common Stock. Moreover,
pursuant to an agreement executed between the Company, BSPL and Howard M.
Meyers immediately prior to the 1988 public offering of the Class A Common
Stock, if any entity acquires within a four-year period a percentage of the
voting power of BSPL in excess of 50% (the "Percentage"), such entity shall
agree to purchase through a public tender offer a number of shares of Class A
Common Stock equal to the total number of outstanding shares of Class A Common
Stock multiplied by the Percentage, subject to certain exceptions.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
TITLE AS OF DECEMBER 31, 1993
OF DIRECTORS, EXECUTIVE ---------------------------
CLASS OFFICERS, AND 5% STOCKHOLDERS AMOUNT PERCENTAGE
----- ----------------------------- ------------- -------------
<C> <S> <C> <C>
A First Capital 1,755,000 16.54
Corporation of Chicago.
#3 First National Place
Suite 1330
Chicago, IL 60602
A Stanley S. Shuman(3).... 817,880 7.69
711 Fifth Avenue
New York, NY 10022
A Alan J. Patricof(1)..... 739,059 6.97
445 Park Avenue
New York, NY 10022
A How & Company........... 600,000 5.65
c/o The Northern Trust
Co.
P.O. Box 92303
Chicago, IL 60675-0002
A Allen & Company Holding, 522,528 4.92
Inc.(3) ...............
711 Fifth Avenue
New York, NY 10022-4207
A Howard M. Meyers(2)..... 300,000 2.82
1111 W. Mockingbird
Lane
Dallas, TX 75247
A John A. Canning, Jr.(4). 195,000 1.83
#3 First National Plaza
Suite 1330
Chicago, IL 60670
A Lawrence E. Golub....... 80,800 .76
2101 Connecticut Ave.
N.W.
Apt. 73
Washington, D.C. 20008
A Melvin N. Klein......... 60,000 .56
1940 First City Bank
Tower
Corpus Christi, TX
78477
A Albert P. Lospinoso..... 10,000 .09
1111 W. Mockingbird
Lane
Dallas, TX 75247
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
TITLE AS OF DECEMBER 31, 1993
OF DIRECTORS, EXECUTIVE ---------------------------
CLASS OFFICERS, AND 5% STOCKHOLDERS AMOUNT PERCENTAGE
----- ----------------------------- ------------- -------------
<C> <S> <C> <C>
A Jerry M. Pitts............................ 1,521 *
P.O. Box 5000
LaPlace, LA 70069-1156
A Timothy R. Postlewait..................... 1,073 *
P.O. Box 5000
LaPlace, LA 70069-1156
A Richard J Gonzalez........................ 1,021 *
P.O. Box 5000
LaPlace, LA 70069-1156
A Rodger A. Malehorn........................ 861 *
P.O. Box 5000
LaPlace, LA 70069-1156
A Henry S. Vasquez.......................... 0 *
P.O. Box 5000
LaPlace, LA 70069-1156
A All directors and officers as a group (12 2,207,215 20.79
persons).................................
B Bayou Steel Properties Limited(2)......... 2,271,127 100.00
B Howard M. Meyers(2)(5).................... 2,271,127 100.00
1111 W. Mockingbird Lane
Dallas, TX 75247
B Melvyn N. Klein(2)........................ 62,910 2.77
1940 First City Bank Tower
Corpus Christi, TX 78477
B Allen & Company Incorporated(2)........... 47,239 2.08
711 Fifth Avenue
New York NY 10022
B Stanley S. Shuman(2)...................... 26,572 1.17
711 Fifth Avenue
New York, NY 10022
B Albert Lospinoso(2)....................... 17,261 .76
1111 W. Mockingbird Lane
Dallas, TX 75247
C Voest-Alpine International Corporation(6). 100 100.00
</TABLE>
- --------
* Less than .01 percent.
(1) Includes 520,500 shares of Class A Common Stock owned by a partnership of
which Mr. Patricof is a general partner and an aggregate of 216,000 shares
of Class A Common Stock held by two corporations to which a third
corporation, of which Mr. Patricof is Chairman, serves as investment
advisor, and as to which Mr. Patricof disclaims beneficial ownership. Mr.
Patricof has sole voting and investment power with respect to 2,559 shares
and has shared voting power and investment power with respect to 736,500
shares.
(2) Through his ownership of 60% of the common stock of BSPL, Howard M. Meyers
controls BSPL's voting power. Since BSPL owns 100% of the Company's Class B
Common Stock, Howard M. Meyers has voting control of Class B Common Stock
which accounts for a maximum of 60% of the voting
44
<PAGE>
control of the Company. Howard M. Meyers may be deemed to "control" the
Company. Allen & Company Incorporated and Messrs. Klein, Lospinoso, and
Shuman are minority stockholders of BSPL and Messrs. Lospinoso and Meyers
are directors. The number of shares of Class B Common Stock held by BSPL has
been apportioned to each of Allen & Company Incorporated, Messrs. Klein,
Lospinoso and Shuman based on their percentage ownership in BSPL.
(3) Includes 522,528 shares of Class A Common Stock owned by Allen & Company
Holding, Inc., which owns all of the outstanding shares of Allen & Company
Incorporated; Mr. Shuman is an Executive Vice President and Managing
Director of Allen & Company Incorporated. Mr. Shuman disclaims beneficial
ownership of such shares. Includes an aggregate of 60,000 shares of Class A
Common Stock owned by trusts for the benefit of Mr. Shuman's children, of
which Mr. Shuman disclaims beneficial ownership. Mr. Shuman has no voting
or investment power, shared or otherwise, in the foregoing shares.
(4) Includes 195,000 shares of Class A Common Stock owned by a partnership of
which Mr. Canning is a general partner, and as to which he has shared
voting and investment power.
(5) Howard M. Meyers has voting control of the Class B Common Stock.
(6) Holders of Class C Common Stock have a vote on all matters, except for the
election of directors. See Note 13 to the Financial Statements.
CERTAIN RELATED PARTY TRANSACTIONS
SERVICE AGREEMENT
The Company, RSR and Quexco are parties to a Service Agreement dated
September 5, 1986 (the "Service Agreement"), pursuant to which RSR and Quexco
provide the Company advice with respect to legal and environmental matters, as
well as other services enumerated in the agreement and such other services as
to which the parties mutually may agree. The Company pays to RSR and/or Quexco
a fee equal to the costs of performing such services (including direct salary,
fringe benefits, general and administrative overhead and other charges incurred
directly in connection with the provision thereof). The Service Agreement will
remain in effect until terminated by any party on 90 days' prior written notice
to the other parties. Messrs. Klein, Lospinoso and Meyers are directors of
Quexco and each of Messrs. Meyers and Lospinoso is President of Quexco and RSR,
respectively. The fees paid by the Company to RSR and/or Quexco for fiscal 1993
for services rendered amounted to approximately $87,000. The Company believes
that the terms of the Service Agreement are fair and reasonable.
TAX BENEFIT TRANSFER LEASE AGREEMENT AND RELEASE AGREEMENT
Pursuant to the Tax Lease Agreement, the Company has transferred the Federal
income tax benefits that would normally be associated with the ownership of
certain of its property, including the melt shop facility (consisting of rail
and dock facilities, a furnace charging system, two electric melting furnaces,
two continuous casters and billet handling facilities), located at the LaPlace
facility to an unaffiliated third party. These assets comprise a significant
portion of the Company's assets. Under the Tax Lease Agreement, the Company
recognizes rental expense and interest income on its Federal income tax books
each year until its expiration in 1996. As of September 30, 1993, the Company's
unrecognized rental expense exceeded unrecognized interest income by $30.2
million. Such excess constitutes a net deduction that will be available to
offset future taxable earnings. At the time of the Tax Lease Agreement, Voest-
Alpine and V.A.I.C. agreed to indemnify such unaffiliated third party for
certain potential losses under the Tax Lease Agreement. Pursuant to the
acquisition agreement for the purchase of the Company from Voest-Alpine and
V.A.I.C., the Company agreed to comply with the terms of the Tax Lease
Agreement. In addition, the Company and Mr. Meyers agreed to indemnify Voest-
Alpine and V.A.I.C. for any payments required to be made by Voest-Alpine and
V.A.I.C. to the unaffiliated third party caused by a failure to comply with the
Tax Lease Agreement. The Company also agreed (a) that any mortgage covering the
property would be subject to such Tax Lease Agreement and (b) to require any
purchaser of the property to take the property subject to such Tax Lease
Agreement and to execute certain consents and statements to ensure that any
disposition of the
45
<PAGE>
property upon a foreclosure of the mortgage would not constitute a
"disqualifying event" within the meaning of the regulations promulgated under
the Old Code.
The Company entered into the Release of Federal Income Tax Ownership and
Agreement dated September 5, 1986 (the "Release Agreement") with the trustee
under the indenture for the 14.75% Notes, Voest-Alpine and Mr. Meyers. Pursuant
to the Release Agreement, the trustee (i) released the United States Federal
income tax ownership of the property subject to the Tax Lease Agreement from
the security interest and lien created by the indenture and security documents
related to the 14.75% Notes, (ii) agreed to take or refrain from taking certain
actions in an attempt to ensure that any disposition of the property upon a
foreclosure of the property would not constitute a "disqualifying event" within
the meaning of the regulations promulgated under the applicable section of the
Old Code and (iii) agreed that subsequent transferees would be required to
consent to similar limitations. As a consequence, the Tax Lease Agreement and
any release agreement may have the effect of reducing the value of the
property, restricting the number of persons eligible to purchase the property
and delaying the sale of the property if it were to be sold in a foreclosure
proceeding. The result of such Release Agreement may be to limit the
marketability of the subject property upon a foreclosure. In connection with
the sale of the First Mortgage Notes offered hereby, the Trustee will enter
into a release agreement substantially similar to the Release Agreement.
V.A.I.C. owns all of the outstanding shares of Class C Common Stock of the
Company, which shares contain certain limited voting rights. Through V.A.I.C.'s
ownership of the Class C Common Stock and Howard M. Meyers' control of the
Class B Common Stock, each has the right to prevent certain transactions, i.e.,
liquidation, certain mergers and certain sales of the property subject to the
Tax Lease Agreement which, in each case, could result in the loss of tax
benefits by the unaffiliated third party under the Tax Lease Agreement. In the
event of such a loss Voest-Alpine and V.A.I.C. may be required to indemnify the
unaffiliated third party, and the Company and Howard M. Meyers in turn may be
obligated to indemnify Voest-Alpine and V.A.I.C.
AGREEMENTS WITH ALLEN & COMPANY INCORPORATED
The Company entered into an agreement with Allen & Company Incorporated on
May 28, 1987 pursuant to which the Company granted Allen & Company Incorporated
a right of first refusal, on competitive terms, to perform investment banking
services for the Company in connection with all Company initiated investment
banking transactions until September 4, 1996. "Competitive terms" is defined to
include considerations of costs and expenses, services rendered and ability to
perform. No compensation was paid to Allen & Company Incorporated during fiscal
1992 and 1993. Stanley S. Shuman, a director of the Company, is Executive Vice
President and Managing Director of Allen & Company Incorporated and Lawrence E.
Golub, also a director of the Company, was a Vice President of Allen & Company
Incorporated until February 1990. See "Management."
AGREEMENTS WITH MMG PATRICOF & CO.
On June 20, 1991, MMG Patricof & Co. Inc. and MMG Placement Corp. entered
into an agreement with the Company with respect to merger and acquisition
advisory and private placement services in connection with a proposed corporate
acquisition by the Company which existed at that time. Alan J. Patricof, a
director of the Company, is a minority shareholder in the investment banking
firm of Patricof & Co. Capital Corp. ("Patricof") and its affiliate MMG
Placement Corp. ("Placement"), successors to MMG Patricof & Co. No compensation
was paid during fiscal 1991 and 1992; $25,000 was paid during fiscal 1992 for
out-of-pocket expenses. On December 16, 1992, Patricof entered into a second
arrangement with the Company to provide merger and acquisition advisory
services in connection with a proposed corporate acquisition by the Company.
The agreement provided for a retainer not to exceed $25,000. By its terms, the
agreement ends on December 16, 1993. Patricof was paid $25,000 for services
provided under the terms of such agreement during fiscal 1993. Each of the
foregoing agreements includes certain indemnification provisions which survive
termination.
46
<PAGE>
DESCRIPTION OF THE FIRST MORTGAGE NOTES
The First Mortgage Notes will be issued under an indenture (the "Indenture"),
between the Company and First National Bank of Commerce, New Orleans,
Louisiana, as trustee (the "Trustee"), a copy of which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
following summary of certain provisions of the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Trust Indenture Act of 1939, as amended ("TIA"), as in effect on the date
of the Indenture. The definitions of certain capitalized terms used in the
following summary are set forth below under "Certain Definitions."
PRINCIPAL, MATURITY AND INTEREST
The First Mortgage Notes will be senior secured obligations of the Company
limited to $75,000,000 aggregate principal amount and will mature on ,
2001. Interest on the First Mortgage Notes will accrue at the rate of % per
annum and will be payable semi-annually on each 15 and 15,
commencing 15, 1994, to the Holders of record of First Mortgage Notes at
the close of business on the 1 and 1 immediately preceding such
interest payment date. Interest on the First Mortgage Notes will accrue from
the most recent date to which interest has been paid or, if no interest has
been paid, from the original date of issuance (the "Issue Date"). Interest will
be computed on the basis of a 360-day year comprised of twelve 30-day months.
Interest on overdue principal and (to the extent permitted by law) on overdue
installments of interest will accrue at a rate equal to the stated rate of
interest.
As discussed below, payment of principal of, and interest on, First Mortgage
Notes represented by one or more permanent global First Mortgage Notes
registered in the name of or held by The Depository Trust Company (the
"Depositary") or its nominee will be made in immediately available funds to the
Depositary or its nominee, as the case may be, as the registered owner and
holder of such permanent global First Mortgage Note or Notes. See "--Same-Day
Settlement and Payment."
OPTIONAL REDEMPTION
The First Mortgage Notes may not be redeemed prior to , 1998. On and
after , 1998, the Company may, at its option, redeem the First Mortgage
Notes, in whole or in part, from time to time, at the redemption prices set
forth below (expressed as a percentage of the principal amount thereof), in
each case together with accrued interest, if any, to the date of redemption, if
redeemed during the twelve-month period beginning of the years indicated
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1998.............................. %
1999.............................. %
2000.............................. %
</TABLE>
; provided, that if the date fixed for redemption is 15 or 15, then
the interest payable on such date shall be paid to the Holder of record on the
next preceding 1 or 1.
In the event that less than all of the First Mortgage Notes are to be
redeemed at any time, selection of First Mortgage Notes for redemption will be
made by the Trustee on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate; provided, however, that no First
Mortgage Notes of $1,000 or less shall be redeemed in part. Notice 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 to be redeemed at its registered
address. If any First Mortgage Note is to be redeemed in part only, the notice
of redemption that relates to such First Mortgage Note shall state the portion
of the principal amount thereof to be redeemed. A new First Mortgage Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original First Mortgage
Note. On and after the redemption date, interest will cease to accrue on First
Mortgage Notes or the portion thereof called for redemption unless the Company
47
<PAGE>
defaults in the payment of the redemption price or accrued interest. First
Mortgage Notes that are optionally redeemed by the Company or that are
purchased by the Company pursuant to an Asset Sale Offer as described under "--
Certain Covenants--Restrictions on Asset Sales" or pursuant to a Change of
Control Offer as described under "--Change of Control" will be surrendered to
the Trustee for cancellation.
The Credit Facility contains certain financial covenants that may restrict
the ability of the Company to redeem the First Mortgage Notes without the prior
written consent of the Lenders. See "Description of Certain Indebtedness--
Credit Facility."
CHANGE OF CONTROL
The Indenture provides that upon a Change of Control, each Holder shall have
the right to require the Company to repurchase all or any part of such Holder's
First Mortgage Notes at a cash purchase price equal to 101% of the principal
amount plus accrued interest to the date of repurchase pursuant to the
procedures set forth in the Indenture (a "Change of Control Offer"). As more
fully described below, if the Company recapitalizes or enters into a
transaction with management which results in control of the Company being held
by persons other than the controlling persons as of the date of the Indenture,
a Change of Control may be deemed to occur.
Within 30 days following any Change of Control, the Company shall send, by
first class mail, a notice to each Holder, with a copy to the Trustee, which
notice will govern the terms of the Change of Control Offer. This notice will
state, among other things, the repurchase date (which shall not be earlier than
30 days or later than 60 days from the date such notice is mailed) and the
circumstance and relevant facts regarding such Change of Control (including
information with respect to pro forma historical income, cash flow and
capitalization after giving effect to such Change of Control). Holders electing
to have a First Mortgage Note repurchased will be required to surrender the
First Mortgage Note, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the First Mortgage Note completed, to the paying
agent at the address specified in the notice prior to the close of business on
the date of repurchase. Holders will be entitled to withdraw their election if
the paying agent receives, not later than the close of business on the third
business day (or such shorter period as may be required by applicable law)
preceding the date of repurchase, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the First
Mortgage Notes the Holder delivered for repurchase, and a statement that such
Holder is withdrawing his election to have such First Mortgage Notes
repurchased. Failure to make a Change of Control Offer as required will
constitute a covenant Default under the Indenture.
In the event a Change of Control occurs and the Holders exercise their right
to require the Company to repurchase the First Mortgage Notes, and assuming
that such repurchase constitutes a "tender offer" for purposes of rule 14e-1
under the Exchange Act at the time it is required, the Company will comply with
the requirements of Rule 14e-1 as then in effect with respect to such
repurchase.
A Change of Control under the Indenture could constitute a default under the
Credit Facility. Therefore, upon the occurrence of a Change of Control, the
Lenders may accelerate their loans and the Company may be required to prepay
all of its outstanding obligations under the Credit Facility simultaneously
with the payment of the principal of any of the First Mortgage Notes that the
Company is required to repurchase pursuant to the Indenture. See "Description
of Certain Indebtedness--Credit Facility."
The definition of "Change of Control," and the other components of this
covenant, generally mean that the Company will be obligated to repurchase First
Mortgage Notes from tendering Holders if control of the Company (whether
through stock ownership or control of the Company's assets) is held by Persons
other than the controlling Persons of the Company. With respect to the
disposition of assets, the phrase "all or substantially all" as used in the
Indenture (including as set forth under "Certain Covenants--Limitations on
Investments, Loans and Advances") varies according to the facts and
circumstances of the subject transaction, has no clearly established meaning
under New York law (which governs the Indenture) and is
48
<PAGE>
subject to judicial interpretation. Accordingly, in certain circumstances there
may be a degree of uncertainty in ascertaining whether a particular transaction
would involve a disposition of "all or substantially all" of the assets of the
Company, and therefore it may be unclear as to whether a Change of Control has
occurred and whether the Holders have the right to require the Company to
repurchase First Mortgage Notes. None of the provisions relating to a
repurchase upon a Change of Control are waivable by the Board of Directors of
the Company.
If a Change of Control were to occur, the Company may be unable to repay all
of its obligations under the Credit Facility, to purchase all of the First
Mortgage Notes tendered and to repay other indebtedness that may become payable
upon the occurrence of such Change of Control. Accordingly, it is possible that
a prospective acquiror would, in order to avoid the occurrence of an Event of
Default under the Credit Facility, either fund the Company's purchase of the
First Mortgage Notes tendered in the Change of Control Offer following such
acquisition or seek to refinance the First Mortgage Notes, which funding or
refinancing may have the effect of delaying, discouraging or preventing such an
acquisition. Consequently, the obligation of the Company to make a Change of
Control Offer and repurchase tendered First Mortgage Notes upon a Change of
Control could have the effect of preventing or delaying the ability of other
persons or entities to acquire control of the Company.
RANKING
The First Mortgage Notes will rank pari passu with respect to the payment in
full of the principal and interest on all existing and future senior
Indebtedness of the Company, including obligations of the Company arising in
connection with the Credit Facility, and will rank senior to all subordinated
Indebtedness of the Company.
SECURITY
For the benefit of the Trustee and the Holders, the Company and its
Subsidiaries (with the exception of Non-Recourse Subsidiaries) will assign and
pledge and grant a security interest in the following property and assets: (a)
the real property interests in the minimill and the stocking location in
LaPlace, Louisiana, the stocking location in Chicago, Illinois, and all future
real property interests and all extensions, additions or improvements thereto;
(b) all existing or future fixtures, machinery, tools, equipment (including
certain operating equipment classified as inventory) and similar property
(except such personal property located at the stocking location in Tulsa,
Oklahoma); and (c) all proceeds and products of any and all of the foregoing,
except as described under "Possession, Use and Release of Property" (the
property and assets described under clauses (a), (b), and (c) are collectively
referred to as "Collateral"). The security interest will not extend to the
inventory and accounts receivable of the Company as these assets secure the
obligations of the Company under the Credit Facility and a purchase money
facility relating to the Tulsa stocking location (the "Lender Secured
Property"). The security interest in the Collateral will be a first priority
interest (to the extent attainable by filing or possession) subject to certain
permitted encumbrances or Liens that, in the judgment of the Company, will not
adversely affect the value of the Collateral. The Subsidiaries of the Company
(with the exception of Non-Recourse Subsidiaries) shall execute a guarantee of
the Company's obligations with respect to the First Mortgage Notes (the
"Subsidiary Guarantee"). The guarantee of each Subsidiary shall be limited to
the amount which can be guaranteed by such Subsidiary under applicable Federal
and state laws relating to insolvency of debtors. The obligations of a
Subsidiary under the Subsidiary Guarantee will be secured by the Collateral
assigned by such Subsidiary.
The real property Collateral will be pledged pursuant to first mortgages or
deeds of trust (the "Mortgages"), subject to the Liens permitted by the
Indenture. See "--Certain Covenants--Limitation on Liens." Each Mortgage will
secure the full amount payable arising in connection with the First Mortgage
Notes. Upon issuance of the First Mortgage Notes, the Collateral Agent will
receive mortgagee's title insurance policies in satisfactory form. The personal
property to be included within the Collateral will be pledged pursuant to
security agreements and will constitute a first priority Lien, subject to the
Liens permitted
49
<PAGE>
by the Indenture (the "Security Documents"). See "--Certain Covenants--
Limitation on Liens." Upon the occurrence of an Event of Default under the
Indenture, the First Mortgage Notes or the Security Documents, the Collateral
Agent will have the customary rights and remedies of a secured party with
respect to the Collateral assigned by the Company, and to the Collateral
assigned by a Subsidiary upon a default under the Subsidiary Guarantee.
No appraisals of any of the Collateral have been prepared by or on behalf of
the Company in connection with the issuance and sale of the First Mortgage
Notes. In addition, the fair market value of the Collateral is subject to
fluctuations based on factors that include, among others, the condition of the
steel industry, the ability to sell the Collateral in an orderly sale, the
condition of the national and local economy, the availability of buyers and
similar factors. The net book value of the Collateral as of September 30, 1993
was approximately $80.6 million. There can be no assurance that the proceeds of
any sale of the Collateral, in whole or in part, pursuant to the Indenture and
the Security Documents following an Event of Default would be sufficient to
satisfy payments due on the First Mortgage Notes. To the extent that Liens have
been granted to third parties pursuant to clauses (iv) and (v) of "Certain
Covenants--Limitation on Liens," such third parties have or may exercise rights
and remedies with respect to the property subject to such Lien that could
adversely affect the value of such Collateral and the ability of the Collateral
Agent, Trustee or the Holders to realize or foreclose on such Collateral. In
addition, the ability of the Trustee to realize upon the Collateral may be
subject to certain bankruptcy law limitations in the event of a bankruptcy. See
"Certain Bankruptcy Limitations" below.
The following sets forth certain information with respect to the real and
personal property included in the Collateral:
LaPlace Minimill. The principal asset comprising the Collateral is the
Company's steel minimill located in LaPlace, Louisiana which was completed
in 1981 at a cost of $243 million. The minimill is approximately 472,000
square feet and includes a 75,000 square foot warehouse facility. The
minimill and the warehouse are located on approximately 287 acres of land
adjacent to the Mississippi River with a 280-foot deep river loading dock.
At September 30, 1993, the net book value of the land, land improvements
and building improvements with respect to this facility was approximately
$8.9 million, the net book value of certain operating equipment classified
as inventory was approximately $14.5 million and the net book value of the
other property and equipment located at this facility was approximately
$53.1 million.
Chicago Stocking Location. The Chicago stocking location is located
outside Chicago, Illinois on approximately 7 acres of land. This stocking
location is approximately 100,000 square feet and was renovated in 1992. At
September 30, 1993, the net book value of the land, land improvements and
building improvements with respect to this facility was approximately $3.7
million and the net book value of the other property and equipment located
at this facility was approximately $0.4 million.
The collateral release provisions of the Indenture permit the release of
Collateral in connection with Asset Sales of Collateral. See "--Possession, Use
and Release of Collateral." As described under "--Certain Covenants--
Restrictions on Asset Sales," the Net Cash Proceeds of such Asset Sales, above
prescribed amounts and subject to certain exceptions, are required to be
deposited in the Collateral Account prior to the making of an offer to purchase
First Mortgage Notes in an Asset Sale Offer or a Permitted Related Acquisition
(each as defined below). To the extent an Asset Sale Offer is not subscribed to
by Holders, the unutilized Net Cash Proceeds may be retained by the Company
free of the Lien of the Indenture and the Security Documents. In addition, the
Collateral release provisions of the Indenture permit the sale, lease, transfer
or other disposition of tangible personal property that, in the reasonable
judgement of the Company, has become worn out, obsolete or no longer necessary
to the operation of the Company's or its Subsidiaries' business and which is
disposed in the ordinary course of business, subject to certain limitations.
If an Event of Default has occurred and is continuing and the Trustee has
been directed by the Holders of at least 25% in aggregate principal amount of
First Mortgage Notes to foreclose upon all or any part of
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the Collateral (including the Collateral pledged by the Subsidiaries upon a
default under the Subsidiary Guarantee), the Trustee is required to direct the
Collateral Agent to take such action to foreclose upon the Collateral as is
consistent with such directions. The Collateral Agent will thereupon foreclose
upon the Collateral in accordance with instructions from such representatives,
unless Holders of a majority in aggregate principal amount of the First
Mortgage Notes shall have given contrary instructions, in each case as provided
in the Security Documents. The proceeds received by the Collateral Agent will
be applied by the Collateral Agent first to pay the expenses of such
foreclosure and fees and other amounts then payable to the Trustee under the
Indenture, and thereafter to pay, pro rata, the principal of, premium, if any,
and interest on the First Mortgage Notes.
Dispositions of real property Collateral may be subject to delay pursuant to
an intercreditor agreement to be entered into with the Lenders (the "Collateral
Agency and Intercreditor Agreement"). The Collateral Agency and Intercreditor
Agreement will provide that the Collateral Agent will provide access to and use
of the real property and, under certain circumstances, may delay liquidation of
the real property for a period of time to permit the agent for the Lenders to
conduct an orderly liquidation of the Lender Secured Property located on the
real property (including, without limitation, the processing of work in
progress inventory).
Pursuant to the Tax Lease Agreement, the Company has transferred the Federal
income tax benefits that would normally be associated with the ownership of
certain of its property, including the melt shop facility (consisting of rail
and dock facilities, a furnace charging system, two electric melting furnaces,
two continuous casters and billet handling facilities), located at the LaPlace
facility to an unaffiliated third party. The Trustee will enter into a release
agreement pursuant to which it will release the United States Federal income
tax ownership of such property from the Lien created by the Indenture or the
Security Documents for the term of the Tax Lease Agreement (the "Release
Agreement"). In addition, under the Release Agreement, the Trustee has agreed
to take or refrain from taking certain actions in an attempt to ensure that any
disposition of the property subject to the Tax Lease Agreement does not
constitute a "disqualifying event" within the meaning of the regulations
promulgated under Section 168(f)(8) of the Old Code. Furthermore, the Company
and Howard M. Meyers, the Chairman of the Board, Chief Executive Officer and
President of the Company and the beneficial owner of 60% of the voting power of
the Company, have each agreed to indemnify Voest-Alpine and its affiliate,
V.A.I.C., for liabilities to the purchaser of the Federal income tax benefits
from the loss of such benefits upon a disqualifying event such as destruction
of the underlying assets or the improper sale of legal title thereto. The
practical effect of the Release Agreement and the indemnification agreements,
individually or in the aggregate, may be to limit the marketability of the
property upon a foreclosure.
Real property pledged as security may be subject to known and unforeseen
environmental risks. Under the Comprehensive Environmental Compensation and
Liability Act, as amended ("CERCLA"), a secured party may be held liable, in
certain limited circumstances, for the costs of remediating or preventing
releases or threatened releases of hazardous substances at a mortgaged
property. There may be similar risks under various other Federal laws, state
laws and common law theories. Such liability has seldom been imposed, and
finding a secured party liable generally has been based on the secured party
having become sufficiently involved in the operations of the borrower so that
its "participation in the management" of the borrower meets the test set out in
CERCLA and elaborated in a number of court decisions and a recent Environmental
Protection Agency regulation.
If a secured party takes title to property by foreclosure, it may, under
certain circumstances, lose the security interest exclusion contained in CERCLA
and may therefore be held liable for cleanup costs. Additionally, foreclosure
may result in a lender becoming subject to substantial requirements, including
permitting obligations, under environmental laws. A recent Environmental
Protection Agency regulation allows a secured party to exercise some control
over a borrower's enterprise following foreclosure without incurring CERCLA
liability, so long as the secured party's actions are consistent with the
limitations set forth in the regulation. The regulation's protection of
foreclosing secured parties from CERCLA liability is
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subject to challenge, and the protection that the regulation provides in
private actions directed at secured parties to recover cleanup costs is unclear
at this time.
Under the Indenture, the Trustee may, prior to taking certain actions,
request Holders to provide an indemnification against its costs, expenses, and
liabilities. It is possible that CERCLA (or analogous) cleanup costs could
become a liability of the Trustee and cause a loss to any Holders that provided
an indemnification. In addition, such Holders may act directly rather than
through the Trustee, in specified circumstances, in order to pursue a remedy
under the Indenture. If Holders exercise that right, they could be deemed to be
secured parties that are subject to the risks discussed above.
CERTAIN BANKRUPTCY LIMITATIONS
The right of the Collateral Agent to repossess and dispose of the Collateral
upon the occurrence of an Event of Default would be significantly impaired by
applicable Bankruptcy Law in the event that a bankruptcy proceeding were to be
commenced by or against the Company and its Subsidiaries prior to the
Collateral Agent having repossessed and disposed of the Collateral. Upon the
commencement of a case for relief under Title 11 of the United States Code, as
amended (the "Bankruptcy Code"), a secured creditor such as the Collateral
Agent is prohibited from repossessing its security from a debtor in a
bankruptcy case, or from disposing of security repossessed from such debtor,
without bankruptcy court approval. Moreover, the Bankruptcy Code permits the
debtor to continue to retain and use collateral even though the debtor is in
default under the applicable debt instruments provided that the secured
creditor is given "adequate protection." The meaning of the term "adequate
protection" may vary according to circumstances, but it is intended in general
to protect the value of the secured creditor's interest in the collateral and
may include cash payments or the granting of additional security, if and at
such times as the court in its discretion determines, for any diminution in the
value of the collateral as a result of the stay of repossession or disposition
or any use of the collateral by the debtor during the pendency of the
bankruptcy case. A bankruptcy court may determine that a secured creditor may
not require compensation for a diminution in the value of the collateral if the
value of the collateral exceeds the debt it secures.
In view of the broad equitable powers of a bankruptcy court, it is impossible
to predict how long payments under the First Mortgage Notes could be delayed
following commencement of a bankruptcy case, whether or when the Collateral
Agent could repossess or dispose of the Collateral, the value of the Collateral
at the time of a bankruptcy petition or whether or to what extent Holders would
be compensated for any delay in payment or loss of value of the Collateral
through the requirement of "adequate protection." Any disposition of the
Collateral would also require approval of the bankruptcy court. Furthermore, in
the event a bankruptcy court determines the value of the Collateral is not
sufficient to repay all amounts due on the First Mortgage Notes, the Holders
would hold secured claims to the extent of the value of the Collateral to which
the Holders are entitled, and unsecured claims with respect to such shortfall.
The Bankruptcy Code only permits the payment and/or accrual of post-petition
interest, costs and attorney's fees to a secured creditor during a debtor's
bankruptcy case to the extent the value of the Collateral is determined by the
bankruptcy court to exceed the aggregate outstanding principal amount of the
First Mortgage Notes.
POSSESSION, USE AND RELEASE OF COLLATERAL
Unless an Event of Default shall have occurred and be continuing, the Company
and its Subsidiaries will have the right to remain in possession and retain
exclusive control of the Collateral securing the First Mortgage Notes (other
than Trust Moneys and other personal property held by, or required to be
deposited or pledged with, the Collateral Agent under the Indenture or any
Security Document), to freely operate the Collateral and to collect, invest and
dispose of any income thereon. In case a Default or an Event of Default shall
have occurred and be continuing, the Company and its Subsidiaries, while in
possession of the Collateral (other than cash and other personal property held
by, or required to be deposited or pledged with, the Collateral Agent under the
Indenture or any Security Document or with any trustee, mortgagee or other
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holder of a prior Lien permitted under the Security Documents), may do any of
the things enumerated in the "Release of Collateral" provisions only if the
Trustee, in its discretion, or the Holders of a majority in aggregate principal
amount of the outstanding First Mortgage Notes, shall consent to such action.
Release of Collateral. The Company and its Subsidiaries will have the right
to sell, exchange or otherwise dispose of any of the Collateral (excluding
Trust Moneys) (the "Released Collateral") upon delivery to the Trustee of
certain documents that may include, among others, a Board Resolution, an
Officers' Certificate, all documentation required by the TIA prior to the
release of the Released Collateral by the Collateral Agent, and an Opinion of
Counsel. Subject to certain exceptions for obsolete assets and certain amounts
the Company and its Subsidiaries are permitted to retain pursuant to "--Certain
Covenants--Restrictions on Asset Sales," all cash or Cash Equivalents received
by the Collateral Agent upon an Asset Sale will be held by the Collateral Agent
as Trust Moneys under the Indenture prior to application as provided in "Use of
Trust Moneys" below and "--Certain Covenants--Restrictions on Asset Sales." All
purchase money and other obligations received as part of the Net Proceeds by
the Collateral Agent pursuant to these "Release of Collateral" provisions shall
be held by the Collateral Agent.
As long as no Event of Default shall have occurred and be continuing, the
Company and its Subsidiaries, collectively, may, without any release or consent
by the Collateral Agent, sell or otherwise dispose of any machinery, equipment,
furniture, apparatus, tools or implements or other similar property subject to
the Lien of the Security Documents, which may have become worn out, obsolete or
no longer necessary to the operation of the Company's or its Subsidiaries'
business ("Obsolete Assets"), not exceeding an aggregate fair market value of
$1 million in any year, and any excess Net Cash Proceeds shall be deposited
with the Collateral Agent as Trust Moneys and become subject to the Lien of the
Security Documents pending application in an Asset Sale Offer or Permitted
Related Acquisition.
Use of Trust Moneys. All Trust Moneys shall be held by the Collateral Agent
as a part of the Collateral securing the First Mortgage Notes or the
obligations of the Subsidiaries of the Company under the Subsidiary Guarantee,
and, so long as no Event of Default shall have occurred and be continuing, may
either, at the direction of the Company, upon delivery to the Trustee of
certain documents that may include, among others, a Board Resolution, an
Officer's Certificate, all documentation required by the TIA and an Opinion of
Counsel, be applied by the Collateral Agent from time to time to a Permitted
Related Acquisition or to the payment of the principal, premium, if any, and
interest on any First Mortgage Notes at maturity or to the repurchase of First
Mortgage Notes in an Asset Sale Offer, each of the foregoing being performed by
the Company in accordance with the Indenture.
CERTAIN COVENANTS
The following is a summary of certain covenants that will be contained in the
Indenture. Such covenants will be applicable (unless waived or amended) so long
as any of the First Mortgage Notes are outstanding.
Limitations on Indebtedness. The Indenture provides that the Company will
not, and will not permit any of its Subsidiaries, directly or indirectly, to
incur, create, assume, suffer to exist, guarantee, become liable, contingently
or otherwise, with respect to, or otherwise become responsible for the payment
of (each event, an "incurrence") any Indebtedness unless (a) the pro forma
Consolidated Fixed Charge Ratio of the Company and its Subsidiaries for the
Reference Period prior to the incurrence of such Indebtedness (taken as a whole
and calculated on the assumptions that such Indebtedness had been incurred and
the proceeds thereof had been applied on the first day of the Reference Period)
would have been greater than (i) 2.00 to 1.00 and (b) no Default or Event of
Default shall have occurred and be continuing at the time of, or after giving
effect to, the incurrence of such Indebtedness.
The foregoing limitation will not apply to (i) Indebtedness evidenced by the
First Mortgage Notes and the obligations of the Company and its Subsidiaries
under the Indenture and the Security Documents; (ii) Indebtedness of the
Company issued to any Wholly-Owned Subsidiary; provided, that (a) any such
Indebtedness is unsecured and is subordinated to the First Mortgage Notes and
(b) that any subsequent
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issuance or transfer of any Capital Stock which results in any such Wholly-
Owned Subsidiary ceasing to be a Wholly-Owned Subsidiary or any transfer of
such Indebtedness by any Wholly-Owned Subsidiary to someone not a Wholly-Owned
Subsidiary will, in each case, be deemed an incurrence of Indebtedness under
the Indenture; (iii) Indebtedness of the Company which is existing immediately
following the issuance of the First Mortgage Notes and the application of the
proceeds of the First Mortgage Notes in the manner set forth under "Use of
Proceeds"; (iv) Indebtedness arising in connection with the Credit Facility at
any time outstanding not to exceed the lesser of (1) $30,000,000 and (2)
amounts available to be borrowed under the Credit Facility without causing a
mandatory prepayment thereunder in the absence of a waiver or consent; (v)
Indebtedness incurred with respect to Interest Rate Agreements covering
floating rate Indebtedness of the Company that is permitted under this covenant
to the extent the notional principal amount of such Interest Rate Agreements
does not exceed the principal amount of the Indebtedness to which such Interest
Rate Agreements relate; (vi) Indebtedness incurred in connection with
Industrial Development Bonds (including Pollution Control Bonds) as such terms
are defined under the Tax Code, in an aggregate principal amount not to exceed
$5,000,000; (vii) Indebtedness incurred with respect to the deferred purchase
price of machinery and equipment related to the business of the Company or its
Subsidiaries at the time of purchase and other purchase money obligations
(including Capitalized Lease Obligations) not to exceed $5,000,000; provided,
that the maturity of any such obligation does not exceed the anticipated useful
life of the asset being financed; and (viii) any renewal, extension or
refinancing (and subsequent renewals, extensions or refinancings) of any
Indebtedness of the Company permitted under the Indenture, in an amount not in
excess of the amount permitted under the Indenture at the time of such renewal,
extension or refinancing; provided, that Indebtedness which constitutes a
renewal, extension or refinancing of Indebtedness of the Company shall be pari
passu or subordinated in right of payment to the First Mortgage Notes;
provided, further, that in no event may Indebtedness of the Company be renewed,
extended or refinanced by means of Indebtedness of any Subsidiary of the
Company pursuant to this clause (viii).
The foregoing limitation will not apply to: (i) Indebtedness of a Wholly-
Owned Subsidiary issued to and held by the Company or any Wholly-Owned
Subsidiary of the Company; provided, that any subsequent issuance or transfer
of any Capital Stock which results in any such Wholly-Owned Subsidiary ceasing
to be a Wholly-Owned Subsidiary or any transfer of such Indebtedness by the
Company or any Wholly-Owned Subsidiary to someone not a Wholly-Owned Subsidiary
will, in each case, be deemed an incurrence of Indebtedness under the
Indenture; (ii) Indebtedness of the Company's Subsidiaries which is existing
immediately following the issuance of the First Mortgage Notes and the
application of the proceeds of the First Mortgage Notes in the manner set forth
under "Use of Proceeds"; (iii) Non-Recourse Indebtedness incurred by Non-
Recourse Subsidiaries; and (iv) any renewal, extension or refinancing (and
subsequent renewals, extensions or refinancings) of any Indebtedness of the
Company's Subsidiaries permitted under the Indenture, in an amount not in
excess of the amount permitted under the Indenture at the time of such renewal,
extension or refinancing; provided, that Indebtedness which constitutes a
renewal, extension or refinancing of Indebtedness of a Subsidiary of the
Company shall be pari passu or subordinated in right of payment to the
obligations under the Subsidiary Guarantee.
Limitation on Liens. The Indenture provides that the Company shall not, and
shall not permit, cause or suffer any of its Subsidiaries to, create, incur,
assume or suffer to exist any Liens of any kind upon any property or assets of
the Company or any Subsidiary, whether now owned or hereafter acquired, except
for (i) Liens in favor of the Collateral Agent or the Holders, including Liens
created by the First Mortgage Notes, the Indenture and the Security Documents;
(ii) Liens on the Lender Secured Property to secure the Credit Facility and the
purchase money facility relating to the Tulsa stocking location; (iii)
Permitted Liens; (iv) Liens on the property of the Company or any of its
Subsidiaries created solely for the purpose of securing purchase money
obligations for property acquired in the ordinary course of business; provided,
that (a) such property so acquired for use in the ordinary course of business
is for use in lines of business related to the Company's or its Subsidiaries'
business as it exists immediately prior to the issuance of the related debt and
(b) no such Lien shall extend to or cover other property or assets of the
Company and its Subsidiaries other than the respective property or assets so
acquired and the principal amount of Indebtedness secured by
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any such Lien shall at no time exceed the original purchase price of such
property or assets; (v) Liens on the assets of any entity existing at the time
such entity or assets are acquired by the Company or any of its Subsidiaries,
whether by merger, consolidation, purchase of assets or otherwise; provided,
that such Liens (a) are not created, incurred or assumed in connection with, or
in contemplation of, such assets being acquired by the Company or any of its
Subsidiaries and (b) do not extend to any other property of the Company or any
of its Subsidiaries; (vi) Liens in existence on the date of the Indenture
(excluding Liens relating to all or any portion of the 14.75% Notes); (vii)
Liens securing Industrial Development Bonds (including Pollution Control Bonds)
as such terms are defined in the Tax Code; provided, that any Lien permitted by
this clause (vii) shall not extend to any other property of the Company or any
of its Subsidiaries; and (viii) any extension, renewal or replacement (or
successive extensions, renewals or replacements), in whole or in part, of any
Lien referred to in the foregoing clauses; provided, that the principal amount
of Indebtedness secured thereby shall not exceed the principal amount of
Indebtedness so secured immediately prior to the time of such extension,
renewal or replacement, and that such extension, renewal, or replacement Lien
shall be limited to all or a part of the property which secured the Lien so
extended, renewed or replaced (plus improvements on such property).
Limitation on Preferred Stock of Subsidiaries. The Indenture provides that
the Company will not permit any of its Subsidiaries to issue, directly or
indirectly, any Preferred Stock, except: (i) Preferred Stock issued to and held
by the Company or a Wholly-Owned Subsidiary, except that any subsequent
issuance or transfer of any Capital Stock which results in any Wholly-Owned
Subsidiary ceasing to be a Wholly-Owned Subsidiary or any transfer of such
Preferred Stock by any Wholly-Owned Subsidiary will, in each case, be deemed an
issuance of Preferred Stock under the Indenture; (ii) Preferred Stock issued by
a Person prior to the time (a) such Person became a Subsidiary, (b) such Person
merges with or into a Subsidiary or (c) another Subsidiary merges with or into
such Person (in a transaction in which such Person becomes a Subsidiary), in
each case if such Preferred Stock was not incurred in anticipation of such
transaction; and (iii) Preferred Stock (other than Disqualified Stock) which is
exchanged for, or the proceeds of which are used to refinance Indebtedness or
any Preferred Stock permitted to be outstanding pursuant to clauses (i) and
(ii) (or any extension, renewal or refinancing thereof), having a liquidation
preference not to exceed the liquidation preference of the Preferred Stock or
the principal amount of the Indebtedness so exchanged or refinanced.
Transfer of Assets to Subsidiaries. The Indenture provides that
notwithstanding the covenant restricting Asset Sales, the Company shall not,
and shall not permit any of its Subsidiaries to, make any sale, transfer or
other disposition (including by way of Sale and Leaseback Transaction) to any
of its Subsidiaries (other than in the ordinary course of business) of (i) any
assets of the Company or its Subsidiaries or (ii) any shares of Capital Stock
of any of the Company's Subsidiaries directly owned by the Company, in either
case with an aggregate fair market value in excess of $250,000 (as determined
in good faith by an Independent Appraiser or Independent Financial Adviser, as
the circumstances dictate) unless the Company or its Subsidiaries shall receive
consideration from the Subsidiary acquiring such assets or Capital Stock by way
of any such sale, transfer or otherwise from the Company in cash or Cash
Equivalents equal to the amount in excess of $250,000.
Limitations on Restricted Payments. The Indenture provides that neither the
Company nor any of its Subsidiaries shall, directly or indirectly, declare, pay
or set apart for payment, any Restricted Payment, if after giving effect
thereto: (i) a Default or an Event of Default shall have occurred and be
continuing; (ii) the Company or its Subsidiaries would not be permitted to
incur or become liable with respect to at least $1.00 of additional
Indebtedness as determined in accordance with the covenant "--Limitations on
Indebtedness"; or (iii) the aggregate amount of all Restricted Payments made by
the Company or any of its Subsidiaries (the amount expended or distributed for
such purposes, if other than in cash, to be valued at its fair market value as
determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive and evidenced by a Board Resolution delivered
to the Trustee) from and after the date of the Indenture, through and including
the date on which such Restricted Payment is made, would exceed the sum of:
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(a) the aggregate of 50% of the Company's Consolidated Net Income accrued
for the period (taken as one accounting period) (or if such aggregate
Consolidated Net Income shall be less than zero, minus 100% of the amount
of such loss) commencing with the first full fiscal quarter after the Issue
Date to and including the fiscal quarter ended immediately prior to the
date of such calculation; and
(b) the aggregate net cash proceeds received by the Company after the
Issue Date from the issuance or sale (other than to a Subsidiary) by the
Company of its Capital Stock (excluding Disqualified Stock, but including
Capital Stock other than Disqualified Stock issued upon conversion of, or
exchange for, Disqualified Stock or securities other than its Capital
Stock), and upon the exercise of warrants and rights to purchase such
Capital Stock. For purposes of clause (b), the aggregate net cash proceeds
received by the Company (x) from the issuance of its Capital Stock upon the
conversion of, or exchange for, securities evidencing Indebtedness of the
Company, shall be calculated on the assumption that the gross proceeds from
such issuance are equal to the aggregate principal amount (or, if
discounted Indebtedness, the accreted principal amount) of Indebtedness
evidenced by such securities converted or exchanged and (y) upon the
conversion or exchange of other securities of the Company shall be equal to
the aggregate net proceeds of the original sale of the securities so
converted or exchanged if such proceeds of such original sale were not
previously included in any calculation for the purposes of clause (b) of
the preceding sentence, plus any additional sums payable upon conversion or
exchange.
Notwithstanding the foregoing, this provision shall not prevent (i) the
payment of any dividend within 60 days after the date of its declaration (if
the declaration of such dividend was permitted by the foregoing provision at
the time of such declaration); or (ii) the repurchase, retirement or other
acquisition of any shares of the Company's Capital Stock, or any option,
warrant or other right to purchase shares of the Company's Capital Stock, or
the repayment of any Indebtedness of the Company solely in exchange for shares
of, or out of the proceeds of a substantially contemporaneous issuance of,
Capital Stock (other than Disqualified Stock).
Limitations on Transactions with Stockholders and Affiliates. The Indenture
provides that the Company shall not, and shall not permit any of its
Subsidiaries to, enter into or permit to exist any transaction (or series of
related transactions), including, without limitation, any loan, advance,
guarantee or capital contribution to, or for the benefit of, or any sale,
purchase, lease, exchange or otherwise disposition of any property or the
rendering of any service, or any other direct or indirect payment, transfer or
other disposition (a "Transaction"), involving payments, with any holder of 5%
or more of any class of Capital Stock of the Company or with any Affiliate of
such holder or with any Affiliate of the Company (other than a Wholly-Owned
Recourse Subsidiary of the Company), on terms and conditions less favorable to
the Company or such Subsidiary, as the case may be, than would be available at
such time in a comparable Transaction in arm's length dealings with an
unrelated Person as determined by the Board of Directors of the Company or a
Subsidiary, such approval to be evidenced by a Board Resolution.
The provisions of the foregoing paragraph will not apply to (i) Restricted
Payments otherwise permitted pursuant to the Indenture; (ii) transactions
between the Company and one or more of its Recourse Subsidiaries; provided,
that such transactions are not otherwise prohibited by the Indenture; (iii)
reasonable and customary fees and compensation (including amounts paid pursuant
to employee benefit plans) paid to, and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Subsidiary,
as determined by the Board of Directors of the Company or any Subsidiary or the
senior management thereof in good faith; (iv) annual payments in an aggregate
amount not to exceed $150,000 under the Service Agreement, dated as of
September 5, 1986, between the Company, RSR and Quexco; and (v) payments for
goods and services purchased in the ordinary course of business on an arms-
length basis.
Restrictions on Asset Sales. The Indenture provides that the Company will
not, and will not permit any of its Recourse Subsidiaries to, make any Asset
Sale, unless (a) the Company (or its Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the Capital Stock or assets to be sold (as determined in good faith by
its Board of Directors); (b) at least 85% of the consideration therefor is
received by the Company or such Subsidiary in the form of cash or Cash
Equivalents; and (c) 100% of the consideration therefor is received by the
Company or such Subsidiary in the form of cash, Cash Equivalents or instruments
with respect to which a security interest therein may be perfected by
possession.
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Within six months of the date that the sum of the Net Cash Proceeds of Asset
Sales (less the sum of the Net Cash Proceeds (i) previously applied to the
acquisition of property and assets used in lines of business related to the
Company's or the Subsidiaries' business at such time (each a "Permitted
Related Acquisition") and (ii) from the sale of Obsolete Assets not exceeding
an aggregate fair market value of $1 million in any year), together with
Condemnation Proceeds and Net Insurance Awards (the "Available Amount"),
equals or exceeds $5,000,000, the Company will elect to either (a) apply or
cause to be applied the Available Amount to a Permitted Related Acquisition or
the commencement thereof (provided that such project is completed within a
reasonable time of the commencement thereof), (b) make an offer to purchase
First Mortgage Notes (an "Asset Sale Offer") from all Holders up to an amount
equal to the Available Amount (rounded to the next lowest multiple of $1,000)
at a purchase price equal to 100% of the principal amount thereof plus accrued
interest thereon, if any, to the date of purchase or (c) any combination of
clauses (a) and (b) above; provided, that (i) property acquired at any time as
a Permitted Related Acquisition that has been acquired with Collateral
Proceeds shall be subject to a first priority Lien in favor of the Collateral
Agent for the benefit of the Trustee and the Holders; (ii) pending application
to a Permitted Related Acquisition or an Asset Sale Offer, the Collateral
Proceeds, together with all Condemnation Proceeds and Net Insurance Awards
received by the Collateral Agent, will be retained by the Collateral Agent in
the Collateral Account; and (iii) notwithstanding the foregoing, the Company
and its Subsidiaries, in the aggregate, shall be permitted to retain
$1,000,000 of Net Cash Proceeds from Asset Sales. To the extent that Holders
do not subscribe to an Asset Sale Offer, the Company may retain the unutilized
Available Amount free of the Lien of the Security Documents.
Each Asset Sale Offer will be mailed to the Holders not more than 195 days
after the Available Amount equals or exceeds $5,000,000, with a copy to the
Trustee, will specify the purchase date (which will be no earlier than 30 days
nor more than 60 days from the date such notice is mailed) and will otherwise
comply with the procedures set forth in the Indenture and the Security
Documents. The Company will comply, to the extent applicable, with the
requirements of Section 14(e) under the Exchange Act and any other securities
laws or regulations in connection with the purchase of the First Mortgage
Notes pursuant to an Asset Sale Offer. To the extent that the provisions of
any securities laws or regulations conflict with provisions of this covenant,
the Company shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under this covenant
by virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Indenture provides that the Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly, create, assume or
otherwise cause or suffer to exist or enter into any agreement with any Person
that would cause any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to (a) pay dividends, in cash or otherwise, or
make any other distributions on its Capital Stock; (b) make payments in
respect of any Indebtedness owed to the Company or any of the Company's
Subsidiaries; (c) make loans or advances to the Company or any of the
Company's Subsidiaries; or (d) transfer any of its assets to the Company or
any of the Company's Subsidiaries, other than by reason of (i) the First
Mortgage Notes, the Indenture and the Security Documents; (ii) restrictions
existing under agreements in effect on the Issue Date, including, without
limitation, restrictions under the Credit Facility as in effect on the Issue
Date; (iii) consensual encumbrances or restrictions binding upon any Person at
the time such Person becomes a Subsidiary of the Company so long as such
encumbrances or restrictions are not created, incurred or assumed in
contemplation of such Person becoming a Subsidiary of the Company; (iv)
restrictions existing under any agreement which refinances or replaces any of
the agreements containing the restrictions in (ii) or (iii); provided, that
the terms and conditions of any such restrictions are not materially less
favorable to the Company or such Subsidiary than those under the agreement
evidencing the refinanced Indebtedness; (v) customary non-assignment or
sublease provisions of any lease governing a leasehold interest of the Company
or any of its Subsidiaries; (vi) customary restrictions relating to assets
acquired with the proceeds of a purchase money obligation; (vii) customary
non-assignment provisions restricting subletting or assignment of any lease or
assignment entered into by a subsidiary; and (viii) any restrictions with
respect to a Subsidiary of the Company imposed pursuant to an agreement which
has been entered into for the sale or disposition of all or substantially all
of the Capital Stock or assets of such Subsidiary.
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Merger and Consolidation. The Indenture provides that the Company may not
consolidate with or merge into any other Person or convey, sell, assign,
transfer or lease all or substantially all of its properties and assets
(determined on a consolidated basis for the Company and its Subsidiaries taken
as a whole) in one transaction or a series of transactions to any other Person
or Persons, or permit any Person to consolidate with or merge into the Company,
or convey, sell, assign, transfer or lease all or substantially all of such
Person's properties and assets in one transaction or a series of transactions
to the Company, unless: (i) such Person is a solvent corporation, partnership
or trust organized under the laws of the United States, one of the States
thereof or the District of Columbia; (ii) the resulting, surviving or
transferee corporation, partnership or trust (if other than the Company)
assumes by a supplemental indenture executed and delivered to the Trustee, in
form satisfactory to the Trustee, all of the Company's obligations under the
First Mortgage Notes, the Indenture and the Security Documents; (iii)
immediately before and after giving effect to such transaction or series of
transactions, no Default or Event of Default shall have occurred and be
continuing; (iv) immediately after giving effect to such transaction or series
of transactions (including, without limitation, any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of the transaction
or series of transactions), the Company, or the successor or transferee
corporation, would be permitted to incur an additional $1.00 of Indebtedness
pursuant to the Indenture; (v) the Person formed by or surviving any such
consolidation or merger (if other than the Company), or the Person to whom such
sale or conveyance shall have been made, shall have a Consolidated Net Worth
immediately after the transaction or series of transactions (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of the transaction or series of transactions)
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction; and (vi) the Company or the surviving entity shall
have delivered to the Trustee an Officer's Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, conveyance, sale,
transfer or lease and, if a supplemental indenture has been executed in
connection with such transaction or series of transactions, such supplemental
indenture complies with this covenant and that all conditions precedent in the
Indenture relating to the transaction or series of transactions have been
satisfied. Notwithstanding the foregoing, clause (iv) of the preceding sentence
shall not prohibit a transaction, the principal purpose of which is (as
determined in good faith by the Board of Directors of the Company and evidenced
by the resolution or resolutions thereof) to change the state of incorporation
of the Company, and such transaction does not have as one of its purposes the
evasion of the limitation on merger, consolidations and sales of assets.
Nothing contained in this section should be deemed to prevent the Company or
any Subsidiary from granting a security interest in, or a mortgage or Lien
upon, or otherwise encumbering, any of its assets, subject to the limitations
on Liens set forth in the Indenture.
Limitation on Sale and Leaseback Transactions. The Indenture provides that
the Company will not, and will not permit any of its Subsidiaries to, enter
into, directly or indirectly, any Sale and Leaseback Transaction, with respect
to any real or tangible personal property, other than (i) a Sale and Leaseback
Transaction entered into between the Company and any of its Wholly-Owned
Subsidiaries or between Wholly-Owned Subsidiaries of the Company, as the case
may be; and (ii) Capitalized Lease Obligations permitted to be incurred by the
Company or any of its Subsidiaries pursuant to the limitations on Indebtedness
set forth in the Indenture.
Limitations on Investments, Loans and Advances. The Indenture provides that
the Company will not, and will not permit any of its Subsidiaries to, make any
advances or loans to, or Investments (by way of transfers of property,
contributions to capital, acquisitions of stock, securities or evidences of
indebtedness, or otherwise) in any other Person, except (i) the Company may
make advances and loans to, and Investments in, any Wholly-Owned Recourse
Subsidiary and any Subsidiary may make advances or loans to, and Investments
in, the Company or any Wholly-Owned Recourse Subsidiary of the Company; (ii)
the Company and its Subsidiaries may acquire and hold cash and Cash
Equivalents; (iii) the Company and its Subsidiaries may make advances and loans
to officers and employees in the ordinary course of business not to exceed
$50,000 to any one officer or employee or $100,000 in the aggregate at any one
time outstanding; (iv) the Company and its Subsidiaries may make payroll
advances in the ordinary course of business; (v) the Company
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may make advances or loans in connection with Currency Agreements provided such
agreements are made in the ordinary course of business; (vi) the Company may
make advances or loans in connection with Interest Rate Agreements provided
such agreements are made in the ordinary course of business; (vii) the Company
and its Subsidiaries may make loans to, or Investments in, any Person,
including Non-Recourse Subsidiaries, not to exceed at any time outstanding an
aggregate amount equal to $250,000 with respect to loans to, and Investments
in, all such Persons (the value of any such loans and Investments shall be the
original cost less the amount returned in cash); (viii) the Company and its
Subsidiaries may make Investments in exchange for assets sold or otherwise
disposed of in accordance with the provisions described under "--Restrictions
on Asset Sales"; (ix) the Company and its Subsidiaries may make Investments in
the form of advances, extensions of credit, progress payments and prepayments
for asset purchases in the ordinary course of business; and (x) accounts
receivable arising and trade credit granted in the ordinary course of business
and any securities received in satisfaction or partial satisfaction thereof
from financially troubled account debtors to the extent reasonably necessary in
order to prevent or limit loss.
Limitations as to Non-Recourse Subsidiaries. The Indenture provides that the
Company will not permit any Non-Recourse Subsidiary to create, assume, incur,
guarantee or otherwise become liable in respect of any Indebtedness unless the
lender in respect thereof has effectively waived all claims and/or recourse on
or in respect of such Indebtedness against the Company or any other Subsidiary
of the Company and the Company has delivered to the Trustee an Opinion of
Counsel and a Board Resolution confirming the foregoing, in each case in form
and substance satisfactory to the Trustee. Neither the Company nor any of its
Subsidiaries (other than Non-Recourse Subsidiaries) will sell, lease, convey or
otherwise transfer to any Non-Recourse Subsidiary any asset which is essential
for the steelmaking operations of the Company or its Subsidiaries (other than
Non-Recourse Subsidiaries). The Company will not permit any Non-Recourse
Subsidiary to acquire any such essential asset, and the Company and its
Subsidiaries will not purchase any Non-Recourse Subsidiary, unless in the
judgment of the Board of Directors of the Company the creation and operation of
the Non-Recourse Subsidiary and its future acquisition of such assets are
neither intended nor reasonably expected to adversely affect the financial
condition, business, prospects or operations of the Company and its
Subsidiaries (other than Non-Recourse Subsidiaries).
Impairment of Security Interest. The Indenture provides that the Company will
not, and will not permit any of its Subsidiaries to, take or omit to take any
action, which action or omission might or would have the result of affecting or
impairing the security interest in favor of the Collateral Agent, on behalf of
the Trustee and the Holders with respect to the Collateral, and the Company
shall not grant to any Person (other than the Collateral Agent on behalf of the
Trustee and the Holders) any interest whatsoever in the Collateral, except, in
either case, as expressly permitted by the Indenture and the Security
Documents.
Conflicting Agreements. The Indenture provides that the Company will not, and
will not permit any of its Subsidiaries to, enter into any agreement or
instrument that by its terms expressly (i) prohibits the Company from redeeming
or otherwise making any payments on or in respect of the First Mortgage Notes
in accordance with the terms thereof and of the Indenture, as in effect from
time to time, or (ii) requires that the proceeds received from the sale of any
Collateral be applied to repay, redeem or otherwise retire any Indebtedness of
any Person other than the Indebtedness represented by the First Mortgage Notes,
except as expressly permitted by the Indenture or the Security Documents.
Amendment to Security Documents. The Indenture provides that the Company will
not, and will not permit any of its other Subsidiaries to, amend, modify or
supplement, or permit or consent to any amendment, modification or supplement
of, any of the Security Documents in any way which would be adverse to the
Holders or which would constitute a Default under the Indenture or a default
under any Security Document.
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EVENTS OF DEFAULT
The following events will be defined in the Indenture as "Events of Default":
(i) the Company defaults in the payment of interest on any First Mortgage
Note when due and payable and such default in the payment of interest
continues for a period of 30 days;
(ii) the Company defaults in the payment of the principal, or premium, if
any, of any First Mortgage Note when due and payable at maturity, upon
acceleration, redemption, pursuant to an offer to purchase required under
the Indenture or otherwise (including failure to make payment pursuant to a
Change of Control offer or Asset Sale Offer);
(iii) the Company fails to comply with any of its covenants or agreements
described under "--Certain Covenants--Restrictions on Asset Sales" or "--
Change of Control," and such failure continues for a period of five days;
(iv) the Company fails to observe or perform any covenant, condition or
agreement in the First Mortgage Notes, the Indenture or the Security
Documents (other than as described in clause (i), (ii) or (iii)) and such
failure to observe or perform continues for a period of 30 days after there
has been given to the Company by the Trustee or has been received by the
Company and the Trustee from the Holders of at least 25% of the principal
amount of the First Mortgage Notes then outstanding a written notice
specifying such default, demanding that it be remedied and stating that the
notice is a "Notice of Default", unless, with respect to defaults under the
Security Documents, the remedy or cure of such default requires work to be
performed, acts to be done or conditions to be removed which cannot, by
their nature, reasonably be performed, done or removed within such 30-day
period, or if such remedy or cure is prevented by causes outside of the
control or responsibility of the Company, in which case no "Event of
Default" shall be deemed to exist for a period of 90 days after such
written notice so long as the Company shall have commenced cure within such
90-day period and shall diligently prosecute the same to completion;
(v) a default in the payment of principal at final maturity under any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness of the Company or
any of its Recourse Subsidiaries (or the payment of which is guaranteed now
or hereafter by the Company or any of its Subsidiaries), whether such
Indebtedness or Guarantee now exists or shall be created hereafter, in a
principal amount of at least $1,000,000;
(vi) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness (including any interest thereon) of the Company or its
Recourse Subsidiaries (or the payment of which is guaranteed now or
hereafter by the Company or any of its Subsidiaries), whether such
Indebtedness or Guarantee now exists or shall be created hereafter, if (i)
as a result of such event of default the maturity of such Indebtedness has
been accelerated prior to its stated maturity and (ii) the principal amount
of such Indebtedness, together with the principal amount of any other
Indebtedness of the Company and its Subsidiaries the maturity of which has
been so accelerated, aggregates $1,000,000 or more;
(vii) the Company or any Subsidiary (other than a Non-Recourse
Subsidiary, unless such action or proceeding adversely affects the
interests of the Company or any Recourse Subsidiary) pursuant to or within
the meaning of any Bankruptcy Law: (a) commences a voluntary case or
proceeding; (b) consents to the entry of an order for relief against it in
an involuntary case or proceeding; (c) consents to the appointment of a
Custodian of it or for all or substantially all of its property; (d) makes
a general assignment for the benefit of its creditors; or (e) admits in
writing its inability to pay its debts as the same become due;
(viii) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (a) is for relief against the Company or any
Subsidiary in an involuntary case; (b) appoints a Custodian of the Company
or any Subsidiary for all or substantially all of its property; or (c)
orders the liquidation of the Company or any Subsidiary; provided, that,
clauses (a), (b) and (c) shall not apply to a Non-Recourse Subsidiary,
unless such action or proceeding adversely affects the interests of the
Company or
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any Recourse Subsidiary; and in any such case the order or decree remains
unstayed and in effect for 60 days;
(ix) the Company or any Subsidiary shall fail to discharge any one or
more judgments not covered by insurance (from which no further appeal may
be taken) in excess of $1,500,000, and such judgments shall remain in
force, undischarged, unsatisfied, unstayed and unbonded for more than 30
days; or
(x) the Security Documents shall cease, for any reason, to be in full
force and effect or shall cease to be effective to grant a perfected Lien
on the Collateral with the priority purported to be created thereby.
If an Event of Default (other than an Event of Default specified in
subparagraph (vii) or (viii) set forth above) occurs and is continuing, the
Trustee or the Holders of at least 25% of the principal amount of the First
Mortgage Notes then outstanding by notice to the Company (and to the Trustee
if such notice is given by the Holders) may declare the principal amount and
accrued interest on the First Mortgage Notes to be immediately due and
payable. If an Event of Default specified in section (vii) or (viii) above
occurs, the principal amount and accrued interest shall ipso facto become and
be immediately due and payable on all outstanding First Mortgage Notes without
any declaration or other act on the part of the Trustee or any Holder. The
Holders of a majority in principal amount of the then outstanding First
Mortgage Notes by notice to the Company and the Trustee may rescind an
acceleration and its consequences if all existing Events of Default, other
than the nonpayment of the principal of the First Mortgage Notes which have
become due solely by such declaration of acceleration, have been cured or
waived. The Holders of a majority in principal amount of the outstanding First
Mortgage Notes also have the right to waive certain past defaults under the
Indenture except a default in the payment of the principal of, premium, if
any, or interest on any First Mortgage Note, or in respect of a covenant or a
provision which cannot be modified or amended without the consent of all
Holders.
No Holder has the right to institute any proceeding with respect to the
Indenture, the Security Documents or any remedy thereunder, unless the Holders
of at least 25% in principal amount of the outstanding First Mortgage Notes
have made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as Trustee, the Trustee has failed to institute such
proceeding within 15 days after receipt of such notice, the Trustee has not
within such 15-day period received directions inconsistent with such written
request by Holders of a majority in principal amount of the outstanding First
Mortgage Notes^. Such limitations do not apply, however, to suit instituted by
a Holder for the enforcement of the payment of the principal of, premium, if
any, or interest on such First Mortgage Note on or after the respective due
dates expressed in such First Mortgage Note.
The Holders of a majority in principal amount of the outstanding First
Mortgage Notes will have the right, subject to certain limitations, to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee. The Indenture will provide that in case an Event of Default shall
occur and be continuing, the Trustee will exercise such of its rights and
powers under the Indenture, and use the same degree of care and skill in their
exercise, as a prudent Person would exercise or use under the circumstances in
the conduct of his or her own affairs. Subject to certain provisions of the
Indenture, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the Holders
unless they have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it in
compliance with such request. The Trustee may withhold from Holders notice of
any continuing default (except a default in payment) if it determines in good
faith that the withholding of such notice is in the interest of such Holders.
Under the Indenture, the Company will be required to furnish to the Trustee
annually (i) a statement by certain officers of the Company to the effect that
to the best of their knowledge the Company is not in default in the
fulfillment of any of its obligations under such Indenture or, if there has
been such default, specifying each such default and (ii) an Opinion of Counsel
either stating that action has been taken with respect to the
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filing, refiling, recording or re-recording of the Indenture as is necessary to
maintain the Lien of the Indenture or that no such action is necessary to
maintain such Lien.
MODIFICATION OF THE INDENTURE
From time to time, the Company, when authorized by resolutions of its Board
of Directors, and the Trustee and the Collateral Agent (if a party thereto)
may, without the consent of the Holders of not less than a majority in
principal amount of outstanding First Mortgage Notes, amend, waive or
supplement the Indenture, the Security Documents or the First Mortgage Notes
for certain specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies, maintaining the qualification of the
Indenture under the TIA, making any change that does not adversely affect the
rights of any Holder or mortgaging, pledging or granting a security interest in
favor of the Collateral Agent as additional security for the payment and
performance of the obligations under the Indenture, in any property or assets,
including any which are required to be mortgaged, pledged or hypothecated, or
in which a security interest is required to be granted, to the Collateral Agent
pursuant to any Security Document or otherwise; provided, that the Company
delivers to the Trustee an Opinion of Counsel stating that such change does not
adversely affect the rights of any Holder. Other amendments and modifications
of the Indenture, the First Mortgage Notes or the Security Documents may be
made by the Company, the Collateral Agent (if a party thereto) and the Trustee
with the consent of the Holders of not less than a majority of the aggregate
principal amount of the outstanding First Mortgage Notes; provided, that no
such modification or amendment may, without the consent of the Holder of each
outstanding First Mortgage Note affected thereby, (i) reduce the principal
amount of, extend the final maturity of or alter the redemption provisions of,
the First Mortgage Notes, (ii) change the currency in which any First Mortgage
Notes or any premium thereon is payable, (iii) reduce the percentage in
principal amount of outstanding First Mortgage Notes that must consent to an
amendment, supplement or waiver or consent to take any action under the
Indenture, the First Mortgage Notes or the Security Documents, (iv) impair the
right to institute suit for the enforcement of any payment on or with respect
to the First Mortgage Notes, (v) waive a default in payment with respect to the
First Mortgage Notes, (vi) reduce or change the rate or time for payment of
interest on the First Mortgage Notes, or (vii) affect the ranking or security
of the First Mortgage Notes.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company at any time may terminate (i) all its obligations under the First
Mortgage Notes, the Indenture and the Security Documents ("legal defeasance
option") or (ii) its obligations to comply with certain restrictive covenants,
including certain of the covenants described under "--Certain Covenants" above
("covenant defeasance option"). The Company may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the First
Mortgage Notes may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Notes may not
be accelerated because of certain Events of Default described under "Defaults"
above (not including Events of Default relating to non-payment, bankruptcy and
insolvency events, among others) or because of the failure of the Company to
comply with certain covenants specified in the Indenture.
The Company may exercise its legal defeasance option or its covenant
defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on
the First Mortgage Notes to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certain certificate from a
nationally recognized firm of independent certified public accountants
expressing their opinion that the payments of principal and interest when
due and without reinvestment on the deposited U.S. Government Obligations
plus any deposited money without investment will provide cash at such times
and in such amounts as will be
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sufficient to pay principal and interest when due on all the First Mortgage
Notes to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day period
no Default relating to bankruptcy and insolvency events with respect to the
Company occurs which is continuing at the end of the period;
(4) no Default has occurred and is continuing on the date of such deposit
and after giving effect thereto;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that (i) the trust resulting from the deposit does not constitute,
or is qualified as, a regulated investment company under the Investment
Company Act of 1940, (ii) the Holders have a valid first priority perfected
security interest in the trust funds, and (iii) after passage of 123 days
following the deposit (except, with respect to any trust funds for the
account of any Holder who may be deemed to be an "insider" for purposes of
the Bankruptcy Code, after one year following the deposit), the trust funds
will not be subject to the effect of Section 547 of the Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law in a case commenced by
or against the Company under either such statute, and either (A) the trust
funds will no longer remain the property of the Company (and therefore,
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally) or
(B) if a court were to rule under any such law in any case or proceeding
that the trust funds remained property of the Company, (x) assuming such
trust funds remained in the possession of the Trustee prior to such court
ruling to the extent not paid to Holders, the Trustee will hold, for the
benefit of the Holders, a valid first priority perfected security interest
in such trust funds that is not avoidable in bankruptcy or otherwise except
for the effect of Section 552(b) of the Bankruptcy Code on interest on the
trust funds accruing after the commencement of a case under such statute
and (y) the Holders will be entitled to receive adequate protection of
their interests in such trust funds if such trust funds are used in such
case or proceeding;
(6) in the case of the legal defeasance option, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (i) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling, or (ii) since the date of the Indenture there has been a
change in the applicable U.S. Federal income tax law or a regulation
clarifying existing law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders will not
recognize income, gain or loss for U.S. Federal income tax purposes as a
result of such defeasance and will be subject to U.S. Federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred;
(7) in the case of the covenant defeasance option, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that the
Holders will not recognize income, gain or loss for U.S. Federal income tax
purposes as a result of such covenant defeasance and will be subject to
U.S. Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such covenant defeasance had not
occurred; and
(8) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the First Mortgage Notes have
been complied with.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will cease to be of further effect (except as to the surviving
rights of registration of transfer or exchange of First Mortgage Notes, as
expressly provided for in the Indenture, and as otherwise expressly provided
for in the Indenture) when either (i) all such First Mortgage Notes theretofore
authenticated and issued have been delivered (except lost, stolen or destroyed
First Mortgage Notes which have been replaced or paid) to the Trustee for
cancellation or (ii) all such First Mortgage Notes not theretofore delivered to
the Trustee for cancellation have become due and payable and the Company has
irrevocably deposited or caused
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to be deposited with the Trustee funds in an amount sufficient to pay at
maturity or redemption the entire indebtedness on such First Mortgage Notes not
theretofore delivered to the Trustee for cancellation, including interest
thereon, and the Company has paid all sums payable by it under the Indenture.
The Trustee is required to acknowledge satisfaction and discharge of the
Indenture on demand of the Company accompanied by an Officers' Certificate and
an Opinion of Counsel and at the cost and expense of the Company.
BOOK-ENTRY, DELIVERY AND FORM
Upon issuance, the First Mortgage Notes will be represented by a permanent
global First Mortgage Note or First Mortgage Notes. Each permanent global First
Mortgage Note will be deposited with, or on behalf of, the Depositary and
registered in the name of a nominee of the Depositary. Except under the limited
circumstances described below, permanent global First Mortgage Notes will not
be exchangeable for definitive certificated First Mortgage Notes.
Ownership of beneficial interests in a permanent global First Mortgage Note
will be limited to institutions that have accounts with the Depositary or its
nominee ("participants") or persons that may hold interests through
participants. In addition, ownership of beneficial interests by participants in
such permanent global First Mortgage Note will be evidenced only by, and the
transfer of that ownership interest will be effected only through, records
maintained by the Depositary or its nominee for such permanent global First
Mortgage Note. Ownership of beneficial interests in such permanent global First
Mortgage Note by persons that hold through participants will be evidenced only
by, and the transfer of that ownership interest within such participant will be
effected only through, records maintained by such participant. The Depositary
has no knowledge of the actual beneficial owners of the First Mortgage Notes.
Beneficial owners will not receive written confirmation from the Depositary of
their purchase, but beneficial owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the participants through which the
beneficial owners entered the transaction. The laws of some jurisdictions
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such laws may impair the ability to transfer
beneficial interests in such permanent global First Mortgage Note.
The Company has been advised by the Depositary that upon the issuance of a
permanent global First Mortgage Note and the deposit of such permanent global
First Mortgage Note with the Depositary, the Depositary will immediately
credit, on its book-entry registration and transfer system, the respective
principal amounts represented by such permanent global First Mortgage Note to
the accounts of such participants.
Payment of principal of, and interest on, First Mortgage Notes represented by
a permanent global First Mortgage Note registered in the name of or held by the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner and holder of the permanent global First
Mortgage Note representing such First Mortgage Notes. The Company has been
advised by the Depositary that upon receipt of any payment of principal of, or
interest on, a permanent global First Mortgage Note, the Depositary will
immediately credit, on its book-entry registration and transfer system,
accounts of participants with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such permanent
global First Mortgage Note as shown in the records of the Depositary. Payments
by participants to owners of beneficial interests in a permanent global First
Mortgage Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name,"
and will be the sole responsibility of such participants, subject to any
statutory or regulatory requirements as may be in effect from time to time.
None of the Company, the Trustee or any other agent of the Company or the
Trustee will have any responsibility or liability for any aspect of the records
of the Depositary, any nominee or any participant relating to, or payments made
on account of, beneficial interests in a permanent global First Mortgage Note
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or for maintaining, supervising or reviewing any of the records of the
Depositary, any nominee or any participant relating to such beneficial
interests.
A permanent global First Mortgage Note is exchangeable for definitive First
Mortgage Notes registered in the name of, and a transfer of a permanent global
First Mortgage Note may be registered to, any person other than the Depositary
or its nominee, only if:
(a) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for such permanent global First Mortgage Note or if
at any time the Depositary ceases to be a clearing agency registered under
the Exchange Act;
(b) the Company in its sole discretion determines that such permanent
global First Mortgage Note shall be exchangeable for definitive First
Mortgage Notes in registered form; or
(c) there shall have occurred and be continuing an Event of Default under
the First Mortgage Notes.
Any permanent global First Mortgage Note that is exchangeable pursuant to the
preceding sentence will be exchangeable in whole for definitive First Mortgage
Notes in registered form, of like tenor and of an equal aggregate principal
amount as the permanent global First Mortgage Note, in denominations of $1,000
and integral multiples thereof. Such definitive First Mortgage Notes will be
registered in the name or names of such persons as the Depositary shall
instruct the Trustee. It is expected that such instructions may be based upon
directions received by the Depositary from its participants with respect to
ownership of beneficial interests in such permanent global First Mortgage Note.
With respect to definitive First Mortgage Notes, any principal and interest
will be payable, the transfer of the definitive First Mortgage Notes will be
registerable and the definitive First Mortgage Notes will be exchangeable at
the office of the Trustee in New Orleans, Louisiana, provided that payment of
interest may be made at the option of the Company by check mailed to the
address of the person entitled thereto and as shown on the register for the
First Mortgage Notes.
Except as provided above, owners of beneficial interests in such permanent
global First Mortgage Note will not be entitled to receive physical delivery of
First Mortgage Notes in definitive form and will not be considered the holders
thereof for any purpose under the Indenture, and no permanent global First
Mortgage Note shall be exchangeable except for another permanent global First
Mortgage Note of like denomination and tenor to be registered in the name of
the Depositary or its nominee. Accordingly, each person owning a beneficial
interest in such permanent global First Mortgage Note must rely on the
procedures of the Depositary and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a holder under the permanent global First Mortgage Note.
The Company understands that, under existing industry practices, in the event
that the Company requests any action of Holders, or an owner of a beneficial
interest in such permanent global First Mortgage Note desires to give or take
any action that a Holder is entitled to give or take under the First Mortgage
Notes, the Depositary would authorize the participants holding the relevant
beneficial interests to give or take such action, and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
The Depositary has advised the Company that the Depositary is a limited
purpose trust company organized under the laws of the State of New York, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered under
the Exchange Act. The Depositary was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic book-
entry changes in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. The Depositary is owned by a
number of its
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participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the Depositary's book-entry system is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly. The
rules applicable to the Depositary and its participants are on file with the
Commission.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the First Mortgage Notes will be made in immediately available
funds. So long as the First Mortgage Notes are represented by a permanent
global First Mortgage Note or Notes, all payments of principal, premium, if
any, and interest will be made by the Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. So long as the First
Mortgage Notes are represented by a permanent global First Mortgage Note or
Notes registered in the name of the Depositary or its nominee, the First
Mortgage Notes will trade in the Depositary's Same-Day Funds Settlement System,
and secondary market trading activity in the First Mortgage Notes will
therefore be required by the Depositary to settle in immediately available
funds. No assurance can be given as to the effect, if any, of settlement in
immediately available funds on the trading activity in the First Mortgage
Notes.
REGARDING THE TRUSTEE AND THE COLLATERAL AGENT
First National Bank of Commerce will serve as Trustee under the Indenture and
will act as Collateral Agent under the Security Documents.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
Directors, officers, employees or stockholders of the Company will not have
any liability for any obligations of the Company under the First Mortgage
Notes, the Indenture or the Security Documents or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder,
by accepting a First Mortgage Note, waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the First
Mortgage Notes.
REPORTS
So long as five percent of the First Mortgage Notes are outstanding, the
Company will furnish the Trustee with copies of all quarterly and annual
reports, and any other documents it is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act, within five days after it
files the same with the Commission.
GOVERNING LAW
The Indenture, the Security Documents and the First Mortgage Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
"Affiliate" means, with respect to any specific Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specific Person. For the purposes of this definition,
"control," as used with respect to any Person, means the possession, directly
or indirectly, of
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the power to direct or cause the direction of the management or policies of
such Person whether through the ownership of voting securities, or by agreement
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Appraiser" means a Person who in the course of its business appraises
property and, where real property is involved, who is a member in good standing
of the American Institute of Real Estate Appraisers, recognized and licensed to
do business in the jurisdiction where the applicable real property is situated,
and who may be employed by the Company.
"Asset Acquisition" means (i) any capital contribution (by means of transfer
of cash or other property to others or payments for property or services for
the account or use of others, or otherwise), or purchase or acquisition of
Capital Stock by the Company or any of its Subsidiaries in any other Person, in
either case pursuant to which such Person shall become a Subsidiary of the
Company or any of its Subsidiaries or shall be merged with or into the Company
or any of its Subsidiaries or (ii) any acquisition by the Company or any of its
Subsidiaries of the assets of any Person which constitute substantially all of
an operating unit or business of such Person.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
or other disposition to any Person (including any Non-Recourse Subsidiary)
other than the Company or a Wholly-Owned Subsidiary of the Company, in one
transaction or a series of related transactions, of (i) any Capital Stock of
any Subsidiary of the Company or (ii) any other property or asset of the
Company or any Subsidiary of the Company, in each case, other than in the
ordinary course of business.
"Bankruptcy Law" means Title 11, United States Code or any similar Federal or
state law for the relief of debtors, as amended.
"Board Resolution" means a copy of a resolution certified by the Secretary or
an Assistant Secretary of the Company or its Subsidiaries, as the case may be,
to have been duly adopted by the Board of Directors of the Company or its
Subsidiaries, as the case may be, and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, warrants, options or other equivalents (however
designated and whether voting or non-voting) of capital stock of a corporation
and any and all equivalent ownership interests in a Person (other than a
corporation), in each case whether outstanding on the Issue Date or thereafter
issued, including, without limitation, all common stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) the discounted present value of the
rental obligations of such Person as lessee under which, in conformity with
GAAP, is required to be capitalized on the balance sheet of that Person.
"Capitalized Lease Obligation" means the discounted present value of the
rental obligations of any Person under any Capitalized Lease.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness with
a maturity of 365 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $250,000,000; (iii) commercial
paper with a maturity of 180 days or less issued by a corporation (except an
Affiliate of the Company) organized under the laws of any state of the United
States or the District of Columbia and rated at least A-1 by Standard & Poor's
Corporation or at least P-1 by Moody's Investors Service, Inc.
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"Change of Control" means the occurrence of one or more of the following
events:
(a) the direct or indirect sale, lease, exchange or other transfer of all
or substantially all of the assets of the Company to any Person or entity
or group of Persons or entities acting in concert as a partnership or other
group (a "Group of Persons") other than an Affiliate of the Company;
(b) the consummation of any consolidation or merger of the Company with
or into another corporation with the effect that the stockholders of the
Company as of the date of the Indenture hold less than 51% of the combined
voting power of the outstanding voting securities of the surviving entity
of such merger or the corporation resulting from such consolidation
ordinarily having the right to vote in the election of directors (apart
from rights accruing under special circumstances) immediately after such
merger or consolidation;
(c) the stockholders of the Company shall approve any plan or proposal
for the liquidation or dissolution of the Company; and
(d) a Person or Group of Persons acting in concert as a partnership,
limited partnership, syndicate or other group (other than management of the
Company and their respective Affiliates) shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases or
otherwise, have become the direct or indirect beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of securities of the Company
representing a majority or more of the combined voting power of the then
outstanding securities of the Company ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the
election of directors.
For purposes of this definition, the following shall not be considered a
Change of Control:
(i) Transfers among (A) Meyers; (B) any son, daughter, stepson,
stepdaughter or spouse of Meyers; (C) any lineal descendant of an
individual referred to in clause (A) or (B); and (D) any trust in which one
or more of the Persons referred to in clause (A), (B) or (C) are principal
beneficiaries; or
(ii) A merger resulting in the proportionate interest of the Class B
Common Stock held by BSPL being held by BSPL's shareholders, provided such
transaction shall have no adverse effect on the Company.
"Collateral" means, collectively, all of the property and assets (including,
without limitation, Trust Moneys) that are from time to time subject to the
Lien of the Security Documents.
"Collateral Account" means the collateral account to be established pursuant
to the Indenture.
"Collateral Proceeds" means the Net Cash Proceeds received by the Collateral
Agent from the sale of Collateral.
"Condemnation Award" means any proceeds, award or payment paid to the
mortgagee or beneficiary under the Mortgages pursuant to Section of each
Mortgage relating to any taking of the Collateral subject to such Mortgage by
condemnation or eminent domain or similar action, together with interest
accrued thereon, less certain expenses.
"Consolidated Cash Flow" of any Person for any period means the sum of (a)
Consolidated Net Income of such Person; (b) Consolidated Domestic Income Tax
Expense; (c) Consolidated Fixed Charges; (d) depreciation and amortization
expense determined on a consolidated basis for such Person and its consolidated
Subsidiaries in accordance with GAAP for such period (but only to the extent
not included in Consolidated Fixed Charges); and (e) all other non-cash items
decreasing Consolidated Net Income for such period, in each case determined for
such Person and its consolidated Subsidiaries in accordance with GAAP;
provided, that the amounts set forth in clauses (b) through (d) will be
included only to the extent such amounts reduced Consolidated Net Income.
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"Consolidated Domestic Income Tax Expense" of any Person for any period
means, without duplication, the aggregate amount of net U.S. taxes based on
income or profits for such period of the operations of such Person and its
consolidated Subsidiaries, determined in accordance with GAAP (to the extent
such income or profits were included in computing Consolidated Net Income).
"Consolidated Fixed Charges" of any Person for any period means, without
duplication, the aggregate of (a) Consolidated Interest Expense; (b) the
interest component of Capitalized Lease Obligations determined on a
consolidated basis for such Person and its consolidated Subsidiaries in
accordance with GAAP; and (c) cash and non-cash dividends paid or payable on
any Preferred Stock or Disqualified Stock (except dividends paid or payable in
shares of Disqualified Stock) of such Person or any of its Subsidiaries (other
than dividends paid or payable to such Person), determined in accordance with
GAAP.
"Consolidated Fixed Charge Ratio" means the ratio, on a pro forma basis, of
(a) the Consolidated Cash Flow of any Person for the Reference Period
immediately prior to the date of the transaction giving rise to the need to
calculate the Consolidated Fixed Charge Ratio (the "Transaction Date") to (b)
the Consolidated Fixed Charges of such Person during such Reference Period;
provided, that in making such computation, (i) the incurrence of the
Indebtedness giving rise to the need to calculate the Consolidated Fixed Charge
Ratio and the application of the proceeds therefrom shall be assumed to have
occurred on the first day of the Reference Period; (ii) Asset Sales and Asset
Acquisitions which occur during the Reference Period or subsequent to the
Reference Period but prior to the incurrence of the Indebtedness in question
(but including any Asset Acquisition to be made with such Indebtedness) shall
be assumed to occur on the first day of the Reference Period; (iii) the
issuance of any Indebtedness during the Reference Period or subsequent to the
Reference Period but prior to the Transaction Date and the application of the
proceeds therefrom shall be assumed to have occurred on the first day of the
Reference Period; (iv) the Consolidated Interest Expense attributable to
interest on any Indebtedness (whether existing or being incurred) computed on a
pro forma basis and bearing a floating interest rate shall be computed as if
the rate in effect on the date of computation had been the applicable rate for
the entire period, unless such Person or any of its Subsidiaries is a party to
an Interest Rate Agreement which has the effect of reducing the interest rate
below the rate on the date of computation, in which case such lower rate shall
be used; and (v) there shall be excluded from Consolidated Fixed Charges any
Consolidated Fixed Charges related to any Indebtedness which was outstanding
during and subsequent to the Reference Period but is not outstanding on the
Transaction Date, except for Consolidated Fixed Charges actually incurred with
respect to Indebtedness borrowed under a revolving credit or similar
arrangement to the extent the commitment thereunder remains in effect on the
Transaction Date. For the purposes of making the computation referred to in the
preceding sentence, Asset Sales and Asset Acquisitions which have been made by
any Person which has become a Subsidiary of the Company or been merged with or
into the Company or any Subsidiary of the Company during the Reference Period
or subsequent to the Reference Period and prior to the Transaction Date shall
be calculated on a pro forma basis (including all of the calculations referred
it in numbers (i) through (v) of the preceding sentence) assuming such Asset
Sales or Asset Acquisitions occurred on the first day of the Reference Period.
"Consolidated Interest Expense" of any Person for any period means the sum of
(a) the aggregate interest expense (including amortization of original issue
discount and non-cash interest payments or accruals) of such Person and its
Consolidated Subsidiaries for such period and (b) to the extent not included in
clause (a), all commissions, discounts and other fees and charges owed with
respect to letters of credit and banker's acceptance financing, the net cost
associated with Interest Rate Agreements and Currency Agreements, amortization
of other financing fees and expenses and the interest portion of any deferred
payment obligation.
"Consolidated Net Income" of any Person for any period means the Net Income
of such Person and its Consolidated Subsidiaries for such period, determined on
a consolidated basis in accordance with GAAP; provided, that there shall be
excluded (i) the Net Income of any Person (other than a Consolidated
Subsidiary) in which such Person or any of its Consolidated Subsidiaries has a
joint interest with a third party except to the extent of the amount of
dividends or distributions actually paid to such Person or a Subsidiary during
such period; (ii) except to the extent includable pursuant to the foregoing
clause (i), the Net Income of any
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Person accrued prior to the date it becomes a Subsidiary of such Person or is
merged into or consolidated with such Person or any of its Subsidiaries or that
Person's assets are acquired by such Person or any of its Subsidiaries; (iii)
the Net Income (if positive), or any portion thereof, of any Subsidiary of such
Person to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary to such Person or to any other Subsidiary of
such Net Income is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary; (iv) without
duplication, any gains or losses attributable to Asset Sales; (v) Net Income
(if positive), arising from the adoption of changes in accounting policy to
comply with GAAP or voluntarily by the Company with the consent of its
independent auditors that so qualify under Regulation S-X of the Securities
Act; (vi) Net Income arising in connection with a merger, combination or
consolidation that is accounted for as a pooling of interests; and (vii)
foreign currency translation gains and losses.
"Consolidated Net Worth" of any Person means as of any date all amounts that
would be included under stockholders' equity on a consolidated balance sheet of
such Person and its Consolidated Subsidiaries determined in accordance with
GAAP.
"Consolidated Subsidiary" of any Person means a Subsidiary which for
financial reporting purposes is or, in accordance with GAAP, should be,
accounted for by such Person as a consolidated Subsidiary.
"Credit Facility" means the Credit Agreement, dated June 28, 1989, as amended
and restated through November 23, 1993, among the Company, the Lenders named
therein and Chemical Bank, as agent and Lender, or any renewal, refinancing or
continuation thereof as each of the foregoing may be amended, supplemented or
otherwise modified from time to time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values.
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"Default" means any event which is, or after the giving of notice or passage
of time or both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock which, 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 redeemable
at the option of the holder thereof, in whole or in part on, or prior to, the
final maturity date of the First Mortgage Notes.
"Financial Advisor" means an investment banking firm of national reputation
which (except as otherwise expressly provided in this Indenture) may be
employed by the Company.
"GAAP" means generally accepted accounting principles in the United States as
in effect from time to time, including, without limitation, those 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 may be approved by a significant segment of
the accounting profession of the United States, which are applicable as of the
date of determination.
"Guarantee" means, as applied to any Indebtedness, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such Indebtedness, and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure the payment or
performance (or payment of damages in the event of
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nonperformance) of any part or all of such Indebtedness, including, without
limiting the foregoing, the payment of amounts drawn under letters of credit.
The amount of any Guarantee shall be deemed to be an amount equal to the stated
or determinable amount of the primary obligation in respect of which such
Guarantee is made (unless such Guarantee shall be expressly limited to a lesser
amount, in which case such lesser amount shall apply) or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
as determined by such Person in good faith.
"Indebtedness" of any Person means at any date, without duplication, (a) all
obligations of such Person for borrowed money or evidenced by bonds,
debentures, notes or other similar instruments; (b) all obligations of such
Person in respect of letters of credit or other similar instruments (or
reimbursement obligations with respect thereto); (c) all obligations of such
Person to pay the deferred purchase price of property or services, except Trade
Payables; (d) all Capitalized Lease Obligations of such Person; (e) all
Indebtedness of others secured by a Lien on any asset of such Person, whether
or not such Indebtedness is assumed by such Person, provided that, for purposes
of determining the amount of any Indebtedness of the type described in this
clause, if recourse with respect to such Indebtedness is limited to such asset,
the amount of such Indebtedness shall be limited to the fair market value of
the asset; (f) to the extent not otherwise included, all obligations under
Interest Rate Agreements and Currency Agreements; (g) all Guarantees of such
Person in respect of Indebtedness of others; and (h) all Disqualified Stock
issued by such Person (the amount of Indebtedness represented by any
Disqualified Stock will be the greater of the voluntary or involuntary
liquidation preference plus accrued and unpaid dividends).
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge agreement, to or under which the Company or
any of its Subsidiaries is a party or a beneficiary on the date of the
Indenture or becomes a party or a beneficiary thereafter.
"Independent" when used with respect to any specified Person means such a
Person who (a) is in fact independent, (b) does not have any direct financial
interest or any material indirect financial interest in the Company or in any
other obligor in respect of the First Mortgage Notes or in any Affiliate of the
Company or such other obligor and (c) is not an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions
to any of the foregoing for the Company or such other obligor or any Affiliate
thereof. Whenever it is provided in the Indenture that any Independent Person's
opinion or certificate shall be furnished to the Trustee, such Person shall be
appointed by the Company and approved by the Trustee in the exercise of
reasonable care, and such opinion or certificate shall state that the signer
has read this definition and that the signer is Independent within the meaning
thereof.
"Investment" of any Person means all investments in other Persons in the form
of loans, 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,
Capital Stock or other securities issued by any other Person.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided,
that as to any such arrangement in corporate form, such corporation shall not,
as to any Person of which such corporation is a Subsidiary, be considered to be
a Joint Venture to which such Person is a party.
"Lenders" means the lenders who are from time to time parties to the Credit
Facility.
"Lien" means, with respect to any property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
property. For the purposes of the Indenture and the Security Documents, the
Company and its Subsidiaries shall be deemed to own subject to a Lien any
property which they have acquired or hold subject to the interest of a vendor
or lessor under any conditional sales agreement, capital lease or other title
retention agreement relating to such property.
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"Meyers" means Howard M. Meyers, an individual with a business address on the
Issue Date at 1111 Mockingbird Lane, Dallas, Texas.
"Net Cash Proceeds" from a sale, transfer or other disposition of properties
or assets means cash payments received (including any cash payments received by
way of deferred payment of principal pursuant to a note or installment
receivable or otherwise, but only as and when received (including any cash
received upon sale or disposition of such note or receivable), excluding any
other consideration received in the form of assumption by the acquiring Person
of Indebtedness or other obligations relating to such properties or assets or
received in any other non-cash form) therefrom, in each case, net of all legal,
title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, provincial, foreign and local taxes required
to be accrued as a liability under GAAP as a consequence of such sale, transfer
or other disposition, and in each case net of appropriate amounts to be
provided by the Company as a reserve, in accordance with GAAP, against any
liabilities associated with such assets and retained by the Company or any
Subsidiary after such sale, transfer or other disposition, including, without
limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters and the after-tax-cost of any
indemnification payments (fixed and contingent) attributable to seller's
indemnities to the purchaser undertaken by the Company or any of its
Subsidiaries in connection with such sale, transfer or other disposition (but
excluding any payments, which by the terms of the indemnities will not, under
any circumstances, be made during the term of the First Mortgage Notes) and net
of all payments made on any Indebtedness which is secured by such assets, in
accordance with the terms of any Lien upon or with respect to such assets or
which must by its terms, or in order to obtain a necessary consent to such
asset disposition, or by applicable law be repaid out of the proceeds from such
sale, transfer or other disposition, and net of all distributions and other
payments made to minority interest holders in Subsidiaries or Joint Ventures as
a result of such sale, transfer or other disposition.
"Net Income" of any Person for any period means the net income (loss) of such
Person for such period, determined in accordance with GAAP, except that
extraordinary, unusual and non-recurring gains and losses as determined in
accordance with GAAP shall be excluded.
"Net Insurance Proceeds" means all proceeds paid to the mortgagee or
beneficiary under the Security Documents pursuant to Section of each Mortgage
or Section of each Security Agreement relating to damage to, or loss or
destruction of, improvements on equipment constituting Collateral, together
with interest earned thereon, less certain expenses.
"Non-Recourse Indebtedness" means Indebtedness of a Non-Recourse Subsidiary
where (a) neither the Company nor any Subsidiary (other than such Non-Recourse
Subsidiary): (i) provides any Guarantee or credit support for such Indebtedness
(including any undertaking, guaranty, indemnity, agreement or instrument which
would constitute Indebtedness); or (ii) is directly or indirectly liable for
such Indebtedness; (b) the holders of such Indebtedness expressly waive any
recourse which they may have, in law, equity or otherwise, whether based on
misrepresentation, control, ownership or otherwise, to the Company and any
Subsidiary (other than such Non-Recourse Subsidiary); and (c) no default with
respect to such Indebtedness (including any rights which the holder thereof may
have to take enforcement action against such Non-Recourse Subsidiary) would
permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Company or any Subsidiary (other than such Non-Recourse
Subsidiary) to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity.
"Non-Recourse Subsidiary" means a special purpose Subsidiary of the Company
or any of its Subsidiaries formed to acquire securities or assets of a third
party and which (i) has no Indebtedness other than Non-Recourse Indebtedness
and (ii) does not, directly or indirectly, own any Indebtedness, stock or
securities of, and has no Investment in, the Company or any Recourse
Subsidiary.
"Officers' Certificate" means, when used with respect to the Company, a
certificate signed by the Chairman of the Board, the President, a Vice Chairman
of the Board or the Chief Financial Officer of the
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Company (or any other officer identified by any of the foregoing officers in an
Officers' Certificate to be an executive officer of the Company) and the
Secretary, an Assistant Secretary or the Controller of the Company.
"Opinion of Counsel" means an opinion in writing signed by legal counsel, who
may be an employee of or of counsel to the Company, or who may be other counsel
satisfactory to the Trustee.
"Permitted Liens" means (a) Liens for taxes, assessments, governmental
charges or claims which are not yet delinquent or which are being contested in
good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor; (b) other Liens incidental to the conduct of the Company's and
its Subsidiaries' business or the ownership of its property and assets not
securing any Indebtedness, and which do not in the aggregate materially detract
from the value of the Company's and its Subsidiaries' property or assets when
taken as a whole, or materially impair the use thereof in the operation of its
business (including, without limitation, Liens securing any obligation to
landlords, vendors, carriers, warehousemen, mechanics, laborers and materialmen
and other similar obligations arising by operation of law not yet delinquent or
which are being contested in good faith by appropriate proceedings, if a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor); (c) Liens with respect to
assets of a Subsidiary granted by such Subsidiary to the Company to secure
Indebtedness owing to the Company; (d) Liens on assets owned by Non-Recourse
Subsidiaries to secure Non-Recourse Indebtedness; (e) Liens on assets not
constituting Collateral with an aggregate book value not in excess of 5% of the
book value of the Company's total assets as shown on the Company's most recent
consolidated balance sheet; (f) pledges and deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (g) deposits made to secure the
performance of tenders, bids, leases, statutory obligations, surety and appeal
bonds, government contracts, performance and return-of-money bonds and other
obligations of a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (h) zoning
restrictions, servitudes, easements, rights-of-way, restrictions and other
similar charges or encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount and which do not in any
case materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of the Company or its
Subsidiaries; (i) Liens arising out of judgments or awards against the Company
or any Subsidiary with respect to which the Company or such Subsidiary is
prosecuting an appeal or proceeding for review and the Company or such
Subsidiary is maintaining adequate reserves in accordance with GAAP; and (j)
any interest or title of a lessor in the property subject to any Capitalized
Lease Obligation or operating lease.
"Permitted Payments" means, with respect to the Company or any of its
Subsidiaries, (a) any dividend on shares of Capital Stock payable solely in
shares of Capital Stock (other than Disqualified Stock) or in options, warrants
or other rights to purchase Capital Stock (other than Disqualified Stock); (b)
any dividend, other distribution, loan or advance to the Company by any of its
Subsidiaries or by a Subsidiary to another Subsidiary (except a Non-Recourse
Subsidiary); (c) any defeasance, redemption, repurchase or other acquisition
for value of any Indebtedness of the Company with the proceeds from the
issuance of (i) Indebtedness which is subordinate to First Mortgage Notes at
least to the extent and in the manner as the Indebtedness to be defeased,
redeemed, repurchased or otherwise acquired is subordinate to the First
Mortgage Notes in right of payment to the First Mortgage Notes; provided, that
(1) such subordinated Indebtedness provides for no payments of principal by way
of sinking fund, mandatory redemption or otherwise (including defeasance at the
option of the holder) by the Company or its Subsidiaries (including, without
limitation, at the option of the holder thereof other than an option given to a
holder pursuant to a "Change of Control" covenant which (x) is no more
favorable to the holders of such Indebtedness than the provisions in favor of
the Holders and (y) such Indebtedness provides that the Company or its
Subsidiaries will not repurchase such Indebtedness pursuant to such provisions
prior to the Company's repurchase of the First Mortgage Notes required to be
repurchased by the Company upon a Change of Control) prior to the maturity of
the Indebtedness being replaced and (2) the proceeds of such new Indebtedness
are utilized for such purpose within 45 days of issuance or (ii) Capital Stock
(other than Disqualified Stock); and (d) the redemption by a Wholly-Owned
Subsidiary of its Capital Stock.
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"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding or issued after
the Issue Date, and includes, without limitation, all classes and series of
preferred or preference stock.
"Recourse Subsidiaries" means any Subsidiary other than a Non-Recourse
Subsidiary.
"Reference Period" means the four fiscal quarters for which financial
information is available preceding the date of a transaction giving rise to the
need to make a financial calculation.
"Restricted Investment" means any Investment in any Person other than a
Wholly-Owned Recourse Subsidiary of the Company.
"Restricted Payment" means, with respect to any Person, (a) any dividend or
other distribution on any shares of such Person's Capital Stock (other than
dividends or distributions payable in Capital Stock that is not Disqualified
Stock); (b) any payment on account of the purchase, redemption, retirement or
other acquisition of (i) any shares of such Person's Capital Stock or (ii) any
option, warrant or other right to acquire shares of such Person's Capital
Stock; (c) any defeasance, redemption, repurchase or other acquisition or
retirement for value prior to scheduled maturity of any Indebtedness ranked
pari passu or subordinate in right of payment to the First Mortgage Notes and
having a maturity date subsequent to the maturity of the First Mortgage Notes;
(d) any investment in, loan, advance to, Guarantee on behalf of, directly or
indirectly, or other transfer of assets to (i) any Restricted Subsidiary or
(ii) any holder of 5% or more of any class of Capital Stock of the Company
(including Affiliates thereof other than Subsidiaries of the Company); and (e)
any Restricted Investment (except to the extent permitted by "Limitations on
Investments, Loans and Advances"); provided, that "Restricted Payments" shall
not include any payment described in (a), (b) or (c) above made by a Subsidiary
to the Company or a Wholly-Owned Recourse Subsidiary of the Company.
Notwithstanding the foregoing, Restricted Payment shall not include any
Permitted Payment.
"Restricted Subsidiary" means (a) any Joint Venture in which the Company or
any of its Subsidiaries holds a 50% or less interest or (b) any Subsidiary
which is not a Wholly-Owned Recourse Subsidiary or (c) any Subsidiary subject
to consensual restrictions, other than pursuant to the Credit Facility, direct
or indirect, on the declaration or payment of dividends or similar
distributions by that Subsidiary to the Company or any other Consolidated
Subsidiary of the Company.
"Sale and Leaseback Transaction" means, with respect to any Person, an
arrangement with any bank, insurance company or other lender or investor or to
which such lender or investor is a party, providing for the leasing by such
Person or any of its Subsidiaries of any property or asset of such Person or
any of its Subsidiaries which has been or is being sold or transferred by such
Person or such Subsidiary to such lender or investor or to any person to whom
funds have been or are to be advanced by such lender or investor on the
security of such property or asset.
"Security Documents" means, collectively, (i) the Mortgages, (ii) the
Security Agreements, (iii) the Subsidiary Guarantee and (iv) the Collateral
Agency and Intercreditor Agreement.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which 50% or more of the Capital Stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person.
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"Trade Payables" means accounts payable or any other Indebtedness or monetary
obligations to trade creditors created or assumed by the Company or its
Subsidiaries in the ordinary course of business in connection with the
obtaining of materials or services.
"Trust Moneys" means all cash or Cash Equivalents received by the Collateral
Agent (a) as Net Cash Proceeds received by the Company and its Subsidiaries
from Asset Sales to be subject to the Lien of the Security Documents in
accordance with "--Restrictions on Asset Sales"; or (b) Condemnation Proceeds
with respect to Collateral; or (c) Net Insurance Proceeds with respect to all
or any part of the Collateral; or (d) as proceeds of any other sale or other
disposition of all or any part of the Collateral by or on behalf of the
Collateral Agent or any collection, recovery, receipt, appropriation or other
realization of or from all or any part of the Collateral pursuant to the
Security Documents or otherwise.
"Wholly-Owned Recourse Subsidiary" means a Wholly-Owned Subsidiary that is a
Recourse Subsidiary.
"Wholly-Owned Subsidiary" means, with respect to any Person, a Subsidiary of
which 95% of the Capital Stock (other than any director's qualifying stock), or
in the case of a non-corporate Subsidiary, other equity interests having
ordinary voting power for the election of directors or other governing body of
such Subsidiary, is owned by such Person or another Wholly-Owned Subsidiary of
such Person.
DESCRIPTION OF CERTAIN INDEBTEDNESS
CREDIT FACILITY
The following summary of certain provisions of the Credit Facility is
generalized, does not purport to be complete, and is subject to and is
qualified in its entirety by reference to the provisions of the Credit
Facility, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. Capitalized terms that are used
but not otherwise defined herein have the meanings assigned to them in the
Credit Facility and those definitions are incorporated herein by reference.
General. The Company amended and restated the Credit Facility on November 23,
1993. The Credit Facility provides that at any one time, the Company may borrow
up to the lesser of $30 million and the then current Borrowing Base under the
Credit Facility. The Borrowing Base is based on a percentage of the Company's
inventory and accounts receivable which must qualify for inclusion therein
under certain tests contained in the Credit Facility. Up to $10 million of the
Credit Facility is available for the issuance of standby letters of credit,
provided that the aggregate Loans and letters of credit outstanding under the
Credit Facility do not exceed $30 million or the Borrowing Base, whichever is
less. On October 31, 1993, the Borrowing Base under the Credit Facility would
have been $31.4 million. The Credit Facility will terminate on November 30,
1996. On such termination date, all amounts outstanding under the Credit
Facility will be due and payable together with any and all accrued interest
thereon to such date. Borrowings under the Credit Facility will be used by the
Company to repay certain outstanding indebtedness, to provide working capital,
to finance investments in stock (subject to certain limitations) or
acquisitions of assets of third parties (subject to certain limitations) and
for other general corporate purposes.
Interest. The Company will pay interest on outstanding amounts under Loans
comprising any ABR Borrowing at a rate per annum equal to the Alternate Base
Rate plus 1.0%. The Company will pay interest on amounts outstanding under
Loans comprising any Eurodollar Borrowing at a rate per annum equal to the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus
2.0%.
To the extent permitted by law, the Company will pay default interest on such
defaulted amount for any default in the payment of the principal of or interest
on any Loan or any other amount becoming due under the Credit Facility, by
acceleration or otherwise, at a rate per annum equal to the rate at the time
applicable to ABR Borrowings plus 2%.
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Security. The Loans will be secured by a first priority perfected security
interest in the inventory and accounts receivable of the Company.
Certain Covenants. The Credit Facility contains numerous operating and
financial covenants, including, without limitation, the following:
The Company and its Recourse Subsidiaries shall maintain a ratio of
Current Assets to Current Liabilities, on a Consolidated basis, equal to or
greater than 1.8 to 1. For the year ended September 30, 1993, the Company's
Current Ratio on a pro forma basis (assuming completion of the Offering)
would have been 3.65 to 1.00.
The Company and its Recourse Subsidiaries shall maintain a Tangible Net
Worth, computed on a Consolidated basis, at any time, equal to or in excess
of the sum of (i) $44 million plus (ii) 50% of Net Income for the fiscal
year ended September 30, 1993, and each fiscal year which shall have ended
after such date (but excluding any fiscal year for which Net Income is
negative). For the fiscal year ended September 30, 1993, the Company's
Tangible Net Worth on a pro forma basis (assuming completion of the
Offering) would have been $52.7 million.
The Company and its Recourse Subsidiaries shall maintain a total
Indebtedness to Capitalization Ratio, computed on a Consolidated basis, of
.65 to 1.00 or less. For the fiscal year ended September 30, 1993, the
Company's total Indebtedness to Capitalization Ratio on a pro forma basis
(assuming completion of the Offering) would have been .58 to 1.00.
The Company and its Recourse Subsidiaries shall maintain a ratio of
Consolidated Cash Flow Available for Fixed Charges to Consolidated Fixed
Charges (the "Interest Expense Coverage Ratio") from and including October
1, 1993, through and including December 31, 1993 (based only on such
period), of .50 to 1.00; from and including January 1, 1994, through and
including March 31, 1994 (based only on such period), of .75 to 1.00; from
and including April 1, 1994, through and including June 30, 1994 (based
only on such period), of 1.00 to 1.00; from and including July 1, 1994,
through and including September 30, 1994 (based only on such period), of
1.25 to 1.00; from and including October 1, 1994, through and including
December 31, 1994 (based only on such period), of 1.50 to 1.00; from and
including January 1, 1995, through and including March 31, 1995 (computed
on a rolling 2 quarter basis), of 1.60 to 1.00; from and including April 1,
1995, through and including June 30, 1995 (computed on a rolling 3 quarter
basis), of 1.60 to 1.00; from and including July 1, 1995, through and
including September 30, 1995 (computed on a rolling 4 quarter basis), of
1.60 to 1.00 and thereafter (computed on a rolling 4 quarter basis), of
1.80 to 1.00. For the fiscal year and quarter ended September 30, 1993, the
Company's Interest Expense Coverage Ratio on a pro forma basis (assuming
completion of the Offering) would have been .81 to 1.00 and .79 to 1.00,
respectively.
The Company shall not amend or modify the Indenture or the First Mortgage
Notes issued pursuant thereto without the prior written consent of the
Required Lenders if such amendment or modification would adversely affect
the interests of the Lenders.
In addition, the Credit Facility includes the following covenants: (i)
requirements that the Company deliver to the Agent (a) financial information,
(b) certified quarterly and audited annual financial statements, (c) periodic
Borrowing Base certificates, (d) compliance certificates and (e) other
materials as specified by the Agent or any Lender, (ii) requirements that the
Company and its subsidiaries maintain their corporate existence, (iii)
requirements for the payment and discharge by the Company of its and its
subsidiaries' obligations and indebtedness, (iv) requirements for the
maintenance by the Company of its books and records, (v) requirements for the
Company and its subsidiaries to deliver to the Agent notice of certain
occurrences, (vi) requirements for the perfection of liens for the benefit of
the Lenders, (vii) requirements for the compliance with laws and regulations by
the Company and it subsidiaries including the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), (viii) requirements for the Company
to maintain certain insurance coverage, (ix) prohibitions against the
incurrence of indebtedness by the Company and its subsidiaries, subject to
certain exceptions, (x) prohibitions against the Company and its subsidiaries
granting liens to secure obligations to parties other than the Agent, subject
to certain exceptions, (xi) limitations on
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the Company's and its subsidiaries' sales of assets and payment of dividends
and distributions, (xii) prohibitions on changes in the business of the Company
or its subsidiaries, (xiii) restrictions on mergers and acquisitions, loans and
investments, capital expenditures and transactions with affiliates by the
Company and its subsidiaries, (xiv) prohibitions on sale and lease-back
transactions, (xv) prohibitions on acts or omissions by the Company or any
subsidiary thereof constituting a default or an event of default under any loan
document or any other contract, lease, mortgage or instrument, unless such
contract, lease, mortgage or instrument is non-recourse, (xvi) limitations on
the incurrence of termination or withdrawal liability under ERISA by the
Company or any subsidiary thereof and (xvii) requirements that the proceeds of
the Loans and Letters of Credit be used for working capital, financing
investments in stock or acquisitions of assets of third parties (to the extent
permitted), the repayment of obligations under the Indenture and for other
general corporate purposes.
Defaults. The Credit Facility contains certain events of default after
expiration of applicable grace periods including, among others, (i) failure by
the Company to pay its obligations to the Lenders as they become due, (ii)
breach of any representation or warranty set forth in any Loan Document or in
any Borrowing Base Certificate, (iii) failure to observe the covenants,
conditions or agreements set forth in the Credit Facility or any other Loan
Document, (iv) a Change in Control, (v) entry of final judgments against the
Company in an aggregate amount in excess of $1,500,000 after giving effect to
reimbursement by insurance carriers, (vi) certain events of insolvency or
bankruptcy with respect to the Company and (vii) certain ERISA violations.
Upon the occurrence of an event of default thereunder, the Agent may, and at
the request of the Required Lenders shall, terminate the Credit Facility,
declare all obligations thereunder to be due and payable, exercise all rights
and remedies available under applicable law and revoke the Company's right to
use any cash collateral in which any Lender has an interest.
Consents/Waivers and Amendments. The provisions of the Credit Facility may
not be waived, amended or modified without the prior written consent of Lenders
holding Loans representing at least two-thirds of the aggregate principal
amount of Loans outstanding or, if no Loans are outstanding, Lenders having
Commitments representing at least two-thirds of the aggregate Commitments,
except that certain events, such as changing the principal amount of, or
extending the maturity date of, any payment of principal or interest with
respect to a Loan, require the consent of each Lender.
Certain Definitions.
"Capitalization" for any person means the sum of (i) such person's
Indebtedness plus (ii) such person's Tangible Net Worth.
"Consolidated Cash Flow Available For Fixed Charges" means, with respect
to the Company and its Recourse Subsidiaries, computed on a Consolidated
basis for any period, the sum of (i) Net Income for such period, (ii)
Interest Expense for such period, (iii) Federal, state and local income and
franchise taxes deducted from revenue in determining such Net Income, and
(iv) depreciation and amortization deducted from revenue in determining
such Net Income.
"Consolidated Fixed Charges" means, with respect to the Company and its
Recourse Subsidiaries, computed on a Consolidated basis for any period, the
Interest Expense incurred in such period.
"Net Income" means, with respect to the Company and its Recourse
Subsidiaries for any period, (a) net revenues and other proper income for
such period minus (b) the aggregate for such period of, without
duplication, (i) costs of goods sold, (ii) Interest Expense, (iii)
operating expenses, (iv) selling, general and administrative expenses, (v)
taxes, (vi) depreciation and amortization, (vii) any other items that are
treated as expenses under GAAP, but excluding from the definition of Net
Income any non-cash extraordinary gains or losses (including the effect of
the adoption of Financial Accounting Standards No. 106 and 109) and (viii)
excluding payments made with respect to premium on the prepayment under the
Indenture for the 14.75% Notes, all computed on a Consolidated basis in
accordance with GAAP consistently applied.
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"Tangible Net Worth" means, with respect to any person at any time, (i)
the sum of such person's capital stock, capital in excess of par or stated
value of shares of its capital stock, retained earnings and any other
account principles which, in accordance with GAAP, constitute stockholders'
equity, less (ii) treasury stock and any minority interest in Subsidiaries,
less (iii) the amount of all assets reflected as goodwill, patents,
research and development and all other assets required to be classified as
intangibles in accordance with GAAP and less (iv) the amount of the write-
up in the value of any asset above the cost or depreciated cost thereof to
such person.
TULSA AGREEMENT
The Company is party to a purchase money facility relating to its Tulsa
stocking location (the "Tulsa Agreement"). The principal amount currently
outstanding under the Tulsa Agreement is $903,000. The Tulsa Agreement contains
substantially the same covenants as the Credit Facility and provides that an
occurrence of an event of default under the Credit Facility or the First
Mortgage Notes will trigger a default under the Tulsa Agreement. In addition,
the Tulsa Agreement is secured by a second priority security interest in the
Company's inventory and accounts receivable.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING SUMMARY OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF
OWNERSHIP AND DISPOSITION OF THE FIRST MORTGAGE NOTES PURSUANT TO THIS OFFERING
IS BASED ON THE TAX CODE, AS AMENDED TO THE DATE HEREOF, EXISTING AND PROPOSED
TREASURY REGULATIONS AND APPLICABLE JUDICIAL AND ADMINISTRATIVE DETERMINATIONS,
ALL OF WHICH ARE SUBJECT TO CHANGE AT ANY TIME BY LEGISLATIVE, JUDICIAL OR
ADMINISTRATIVE ACTION, POSSIBLY WITH RETROACTIVE EFFECT. THIS SUMMARY DEALS
ONLY WITH FIRST MORTGAGE NOTES HELD AS CAPITAL ASSETS WITHIN THE MEANING OF
SECTION 1221 OF THE TAX CODE BY HOLDERS WHO ARE THE ORIGINAL PURCHASERS OF THE
FIRST MORTGAGE NOTES AND, EXCEPT AS NOTED, DOES NOT APPLY TO ANY SUBSEQUENT
PURCHASERS. THE TAX TREATMENT OF THE HOLDERS OF THE FIRST MORTGAGE NOTES MAY
VARY DEPENDING UPON THEIR PARTICULAR SITUATIONS. CERTAIN HOLDERS (INCLUDING
INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS, FINANCIAL INSTITUTIONS, BROKER-
DEALERS, FOREIGN ENTITIES AND INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF
THE UNITED STATES) MAY BE SUBJECT TO SPECIAL RULES NOT DISCUSSED BELOW. EACH
PURCHASER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF FIRST MORTGAGE NOTES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND ANY RECENT CHANGES IN APPLICABLE LAWS.
STATED INTEREST
A holder of a First Mortgage Note using the accrual method of accounting for
income tax purposes generally will be required to include interest in ordinary
income as such interest accrues, while a cash basis holder will be required to
include interest in income when cash payments are received (or made available
for receipt) by such holder.
DISPOSITION OF A FIRST MORTGAGE NOTE
In general, the holder of a First Mortgage Note will recognize gain or loss
upon the sale, exchange, retirement or other disposition of the First Mortgage
Note measured by the difference between the amount of cash and the fair market
value of property received (except to the extent the holder recognizes ordinary
income attributable to the payment of accrued interest), and the holder's tax
basis for the First Mortgage
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Note. Subject to the market discount rules discussed below, applicable to
subsequent purchasers of the First Mortgage Notes, the gain or loss on the sale
or redemption of a First Mortgage Note will be long-term capital gain or loss,
provided that the First Mortgage Note was held as a capital asset and had been
held for more than one year.
MARKET DISCOUNT ON RESALE
Purchasers of the First Mortgage Notes should be aware that their ability to
resell such Notes may be affected by the market discount provisions of the Tax
Code. These rules generally provide that if a subsequent holder of a First
Mortgage Note purchases it at a market discount in excess of a statutorily
defined de minimis amount, and thereafter recognizes gain upon a disposition
(including a partial redemption) of the First Mortgage Note, the lesser of such
gain or the portion of the market discount that accrued while the First
Mortgage Note was held by such holder will be treated as ordinary interest
income, rather than capital gain, at the time of the disposition. The rules
also provide that a holder who acquires a First Mortgage Note at a market
discount may be required to defer a portion of any interest expense that may
otherwise be deductible on any indebtedness incurred or maintained to purchase
or carry such First Mortgage Note until the holder disposes of such First
Mortgage Note in a taxable transaction. If a holder of a First Mortgage Note
elects to include market discount in income currently, both of the foregoing
rules would not apply. Such an election, once made, applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies, and may not be revoked without the consent
of the Internal Revenue Service.
BACKUP WITHHOLDING
Interest paid to a holder of a First Mortgage Note will ordinarily not be
subject to withholding of federal income taxes. Withholding of such tax at a
rate of 31 percent may be required, however, by reason of events specified in
section 3406 of the Tax Code, which events include a failure of a holder to
supply the Company or its agent with such holder's "Taxpayer Identification
Number." Such "backup" withholding may also apply to a holder who is otherwise
exempt from backup withholding if such holder fails properly to document his
exempt status. Each holder of a First Mortgage Note will be asked to provide
and certify his correct Taxpayer Identification Number or otherwise to document
his exempt status.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") between the Company and the Underwriter, the
Company has agreed to sell to the Underwriter, and the Underwriter has agreed
to purchase, the entire principal amount of the First Mortgage Notes.
In the Underwriting Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, to purchase all the First Mortgage
Notes offered hereby if any of the First Mortgage Notes are purchased. The
Company has been advised by the Underwriter that it proposes initially to offer
the First Mortgage Notes to the public at the public offering price set forth
on the cover page of this Prospectus, and to certain dealers at such price less
a discount not in excess of % of the principal amount of the First Mortgage
Notes. The Underwriter may allow, and such dealers may reallow, a concession to
certain other dealers not in excess of % of the principal amount of the First
Mortgage Notes. After the initial public offering, the public offering price,
discount and concession may be changed.
The First Mortgage Notes are a new issue of securities with no established
trading market. The Company does not intend to apply for listing of the First
Mortgage Notes on a national securities exchange, but has been advised by the
Underwriter that the Underwriter intends to make a market in the First Mortgage
Notes, as permitted by applicable laws and regulations. No assurance can be
given, however, that the Underwriter will make a market in the First Mortgage
Notes or as to the liquidity of, or the trading market for, the First Mortgage
Notes.
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The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments which the Underwriter may be required to make in respect thereof.
The Underwriter and its affiliates, Chemical Bank and Texas Commerce Bank,
have in the past engaged and continue to engage in transactions with, and
perform services for, the Company, Quexco, RSR, BSPL and Howard M. Meyers in
the ordinary course of business. Chemical Bank, in its capacities as agent and
lender, is party to the Credit Facility. See "Description of Certain
Indebtedness--Credit Facility."
LEGAL MATTERS
Certain legal matters related to the First Mortgage Notes offered hereby have
been passed upon for the Company by Kaye, Scholer, Fierman, Hays & Handler, New
York, New York and for the Underwriter by Simpson Thacher and Bartlett (a
partnership which includes professional corporations), New York, New York.
Certain other legal matters have been passed upon for the Company by Jones,
Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, Louisiana.
EXPERTS
The audited financial statements and schedules of the Company included in
this Prospectus have been audited by Arthur Andersen & Co., independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of such firm as experts in
auditing and accounting in giving such reports.
80
<PAGE>
INDEX TO FINANCIAL STATEMENTS
BAYOU STEEL CORPORATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................................. F-2
Balance Sheets as of September 30, 1993 and 1992.......................... F-3
Statements of Operations for the years ended September 30, 1993, 1992 and
1991..................................................................... F-4
Statements of Cash Flows for the years ended September 30, 1993, 1992 and
1991..................................................................... F-5
Statements of Changes in Equity for the years ended September 30, 1993,
1992 and 1991............................................................ F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Bayou Steel Corporation:
We have audited the accompanying balance sheets of Bayou Steel Corporation (a
Delaware corporation) as of September 30, 1993 and 1992, and the related
statements of income (loss), cash flows, and changes in equity for the years
ended September 30, 1993, 1992, and 1991. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bayou Steel Corporation as of
September 30, 1993 and 1992 and the results of its operations and its cash
flows for the years ended September 30, 1993, 1992, and 1991 in conformity with
generally accepted accounting principles.
Arthur Andersen & Co.
New Orleans, Louisiana
November 24, 1993
F-2
<PAGE>
BAYOU STEEL CORPORATION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1993 1992
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary cash investments................ $ 517,900 $ 11,149,702
Receivables, net of allowance for doubtful accounts
of $543,000 in 1993 and $943,000 in 1992.......... 18,676,907 12,339,576
Inventories........................................ 48,486,409 53,751,954
Prepaid expenses................................... 222,277 257,058
------------ ------------
Total current assets............................. 67,903,493 77,498,290
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Land............................................... 2,750,398 2,411,182
Machinery and equipment............................ 76,257,285 73,623,878
Plant and office building.......................... 14,036,845 13,825,104
------------ ------------
.................................................. 93,044,528 89,860,164
Less--Accumulated depreciation..................... 23,785,624 19,624,375
------------ ------------
Net property, plant and equipment................ 69,258,904 70,235,789
OTHER ASSETS......................................... 1,117,788 1,646,784
------------ ------------
Total assets..................................... $138,280,185 $149,380,863
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt............... $ 9,282,156 $ 391,797
Borrowings under line of credit.................... 4,000,000 --
Accounts payable................................... 17,671,926 14,837,557
Accrued liabilities................................ 4,560,249 5,101,568
------------ ------------
Total current liabilities........................ 35,514,331 20,330,922
------------ ------------
LONG-TERM DEBT....................................... 41,534,625 61,664,977
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value--
Class A: 24,271,127 authorized and
10,613,380 outstanding shares............. 106,134 106,134
Class B: 4,302,347 authorized and
2,271,127 outstanding shares.............. 22,711 22,711
Class C: 100 authorized and outstanding shares..... 1 1
------------ ------------
Total common stock............................... 128,846 128,846
Paid-in capital.................................... 44,890,554 44,890,554
Retained earnings.................................. 16,211,829 22,365,564
------------ ------------
Total stockholders' equity....................... 61,231,229 67,384,964
------------ ------------
Total liabilities and stockholders' equity....... $138,280,185 $149,380,863
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
BAYOU STEEL CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES............................ $136,008,039 $119,771,725 $131,270,887
------------ ------------ ------------
COST OF SALES........................ 128,032,556 109,115,193 124,435,433
------------ ------------ ------------
GROSS PROFIT......................... 7,975,483 10,656,532 6,835,454
------------ ------------ ------------
SELLING, GENERAL AND ADMINISTRATIVE.. 3,985,564 4,071,154 4,125,008
NON-PRODUCTION STRIKE EXPENSES....... 3,162,325 -- --
------------ ------------ ------------
827,594 6,585,378 2,710,446
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense................... (8,260,775) (8,976,619) (8,821,364)
Interest income.................... 192,821 485,557 638,189
------------ ------------ ------------
Miscellaneous...................... 501,084 554,015 901,699
------------ ------------ ------------
(7,566,870) (7,937,047) (7,281,476)
------------ ------------ ------------
INCOME (LOSS) BEFORE TAXES &
EXTRAORDINARY GAIN.................. (6,739,276) (1,351,669) (4,571,030 )
PROVISION FOR INCOME TAXES........... -- -- --
------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY
GAIN................................ (6,739,276) (1,351,669) (4,571,030)
EXTRAORDINARY GAIN................... 585,541 -- --
------------ ------------ ------------
NET INCOME (LOSS).................... $ (6,153,735) $ (1,351,669) $ (4,571,030)
============ ============ ============
INCOME (LOSS) PER COMMON SHARE:
Income (loss) before extraordinary
gain.............................. $ (.52) $ (.10) $ (.35)
Extraordinary gain................. .04 -- --
------------ ------------ ------------
Income (loss) per common share..... $ (.48) $ (.10) $ (.35)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
BAYOU STEEL CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------
1993 1992 1991
------------ ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss)........................ $ (6,153,735) $(1,351,669) $(4,571,030)
Extraordinary gain................... (585,541) -- --
Depreciation and amortization........ 4,616,286 4,308,936 3,803,291
Provision for losses on accounts
receivable.......................... (174,994) (233,025) 373,323
Changes in working capital:
(Increase) decrease in receivables.. (6,162,337) 2,219,855 2,338,345
Decrease (increase) in inventories.. 5,265,545 (3,740,480) 7,765,127
Decrease (increase) in prepaid
expenses........................... 34,781 92,839 (7,567)
Increase (decrease) in accounts
payable............................ 2,834,369 1,517,447 (5,326,494)
(Decrease) increase in accrued
liabilities........................ (541,319) 845,253 1,238,887
------------ ----------- -----------
Net cash (used in) provided by
operations........................ (866,945) 3,659,156 5,613,882
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Addition of property, plant and
equipment........................... (3,184,364) (3,234,659) (7,374,083)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit...... 4,000,000 -- --
Payments of long-term debt........... (10,836,789) (625,887) (5,691,567)
Proceeds from issuance of long-term
debt................................ 256,296 327,214 2,098,232
(Payment of) accrued interest on
unpaid dividends.................... -- -- (1,490,918)
(Increase) in other assets........... -- -- (41,677)
------------ ----------- -----------
Net cash used in financing
activities........................ (6,580,493) (298,673) (5,125,930)
------------ ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS...................... (10,631,802) 125,824 (6,886,131)
CASH AND CASH EQUIVALENTS, beginning
balance............................... 11,149,702 11,023,878 17,910,009
------------ ----------- -----------
CASH AND CASH EQUIVALENTS, ending
balance............................... $ 517,900 $11,149,702 $11,023,878
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
BAYOU STEEL CORPORATION
STATEMENTS OF CHANGES IN EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------------ PAID-IN RETAINED STOCKHOLDERS'
CLASS A CLASS B CLASS C CAPITAL EARNINGS EQUITY
-------- ------- ------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE,
October 1, 1990........ $106,134 $22,711 $ 1 $44,890,554 $28,288,263 $73,307,663
Net loss.............. -- -- -- -- (4,571,030) (4,571,030)
-------- ------- ---- ----------- ----------- -----------
ENDING BALANCE,
September 30, 1991..... 106,134 22,711 1 44,890,554 23,717,233 68,736,633
Net loss.............. -- -- -- -- (1,351,669) (1,351,669)
-------- ------- ---- ----------- ----------- -----------
ENDING BALANCE,
September 30, 1992..... 106,134 22,711 1 44,890,554 22,365,564 67,384,964
Net loss.............. -- -- -- -- (6,153,735) (6,153,735)
-------- ------- ---- ----------- ----------- -----------
ENDING BALANCE,
September 30, 1993..... $106,134 $22,711 $ 1 $44,890,554 $16,211,829 $61,231,229
======== ======= ==== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1993 AND 1992
1. OWNERSHIP:
Bayou Steel Corporation (of LaPlace) was incorporated in Louisiana in 1979.
On September 5, 1986, Bayou Steel Acquisition Corporation (BSAC) acquired
substantially all of the capital stock of Bayou Steel Corporation (of LaPlace)
from the former stockholders (the Acquisition) for $75,343,000. Simultaneously
with the Acquisition, BSAC merged into Bayou Steel Corporation (of LaPlace)
(the Company) with the Company being the surviving corporation. The Company
reincorporated as a Delaware corporation on July 19, 1988 and changed its name
from Bayou Steel Corporation (of LaPlace) to Bayou Steel Corporation on August
3, 1988.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INVENTORIES
Inventories are carried at the lower of cost (last-in, first-out) or market
except mill rolls, operating supplies, and other which are stated at average
cost.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment acquired as part of the Acquisition was
recorded based on the purchase price (see Note 1). Betterments and improvements
on property, plant and equipment are capitalized at cost. Interest during
construction of significant additions is capitalized. Interest of $115,000,
$107,000 and $264,000 was capitalized during the years ended September 30,
1993, 1992 and 1991, respectively. Repairs and maintenance are expensed as
incurred. Depreciation is provided on the units-of-production method for
machinery and equipment and on the straight-line method for buildings over an
estimated useful life of 30 years.
STATEMENT OF CASH FLOWS
The Company considers investments purchased with an original maturity of
generally three months or less to be cash equivalents.
Cash payments for interest and Federal income taxes during the three years
ended September 30, were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- -----------
<S> <C> <C> <C>
Interest...................................... $8,444,066 $9,083,712 $10,792,024
Income taxes.................................. -- -- --
</TABLE>
TAXES
The Company has not incurred income tax expense for fiscal 1993, 1992 and
1991 due to a net loss in each of these years.
CREDIT RISK
The Company extends credit to its customers primarily on 30 day terms and
encourages discounting. The Company believes that the credit risk is minimal
due to the ongoing review of its customers' financial
F-7
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
conditions and its requirement of letters of credit on some orders. Also, the
Company invests its excess cash in high-quality short-term financial
instruments.
OPERATING LEASE COMMITMENTS
The Company has no significant operating lease commitments that would be
considered material to the financial statement presentation.
3. INVENTORIES:
Inventories, as of September 30, 1993 and 1992 consisted of the following:
<TABLE>
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
Scrap steel........................................ $ 3,187,963 $ 3,449,093
Billets............................................ 3,918,223 3,830,571
Finished product................................... 25,242,294 25,920,243
LIFO adjustments................................... (324,303) 3,764,072
----------- -----------
32,024,177 36,963,979
Mill rolls, operating supplies, and other.......... 16,462,232 16,787,975
----------- -----------
$48,486,409 $53,751,954
=========== ===========
</TABLE>
Decrements in the last-in, first-out ("LIFO") inventories had the effect of
decreasing net loss by $124,000 or $0.01 per share in fiscal 1993. There was an
increment in the last-in, first-out inventories in fiscal 1992. At September
30, 1993 and 1992, the first-in, first-out ("FIFO") inventories were $32.3
million and $33.2 million, respectively. A lower of cost or market evaluation
of the carrying value of inventory was done at the end of each fiscal year. For
all years presented, market value was in excess of the carrying value of the
LIFO and FIFO inventories.
4. PROPERTY, PLANT AND EQUIPMENT:
Depreciation expense during the years ended September 30, 1993, 1992 and 1991
was allocated as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Inventory.................................. $ -- $ 87,193 $ --
Cost of sales.............................. 4,156,851 3,884,913 3,467,871
Selling, general and administrative........ 4,398 4,347 4,326
---------- ---------- ----------
$4,161,249 $3,976,453 $3,472,197
========== ========== ==========
</TABLE>
5. OTHER ASSETS:
Other assets consist of costs associated with the issuance of the Senior
Secured Notes and the line of credit (see Notes 6 and 7) which are being
amortized over the lives of the related debt. Amortization expense was
approximately $458,000, $332,000 and $331,000 for the years ended September 30,
1993, 1992 and 1991, respectively.
F-8
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT:
Long-term debt of the Company as of September 30, 1993 and 1992 included the
following:
<TABLE>
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
Senior Secured Notes (see below).................... $48,900,000 $60,000,000
Other notes payable, due monthly, bearing interest
from 8.5% to 10.50% secured by Company assets...... 1,916,781 2,056,774
----------- -----------
50,816,781 62,056,774
Less--current maturities............................ 9,282,156 391,797
----------- -----------
$41,534,625 $61,664,977
=========== ===========
</TABLE>
The Senior Secured Notes (the Notes) are secured by a mortgage (the Mortgage)
covering real property, plant and equipment. The Notes bear interest at the
nominal rate of 14.75% per annum (subject to increase as stated below) payable
on March 15 and September 15 of each year. If operating income, as defined,
plus depreciation and amortization, exceeds $20,000,000 for any fiscal year
ending September 30, the interest rate for the following calendar year only is
to be increased by 0.02% for each $50,000 of such excess. The nominal interest
rate and such excess rate cannot exceed a maximum rate of 20.75% per annum if
the Notes remain secured by the Mortgage on February 15 of the year for which
the excess interest rate is being determined or 23.50% per annum if on such
date the Notes are no longer secured by the Mortgage. For fiscal 1993 and 1992,
the Company accrued interest at a rate of 14.75%.
The Notes may be redeemed, at the Company's option, in whole or in part at
specified redemption prices plus accrued interest to the date of redemption.
This redemption price was 115% of principal amount at September 30, 1993 and is
to decline at a rate of 5% per year. Beginning October 1, 1995, the outstanding
principal can be redeemed at par. The Company is required to redeem $9,000,000
of the Notes on March 15 in each of the years 1994, 1995, 1996 and 1997, with a
$24,000,000 balloon payment due March 15, 1998. During fiscal 1993, the Company
purchased $11.1 million in principal of the Notes at a net discount. While the
Company has the right to apply the purchased Notes to any redemption date, it
has not decided which redemption the purchased Notes will be applied against.
The $9.0 principal payment due in March 1994 has been classified as a current
liability on the Company's balance sheet.
The result of the Note purchases at a net discount, reduced by the write-off
of the related unamortized deferred cost (see Note 5), has been reflected in
the accompanying statement of income as an extraordinary gain. There was no tax
effect related to this transaction.
7. SHORT-TERM BORROWING ARRANGEMENT:
On June 28, 1989, the Company arranged a five-year $40,000,000 line of credit
with a group of banks which will be used for general corporate purposes. The
Company can borrow against the line of credit at market rates. The amount that
may be advanced to the Company is limited to $40,000,000 less the balance of
outstanding letters of credit and unpaid loans under the line. Based on these
criteria, the amount available as of September 30, 1993 and 1992 was
$34,475,016 and $38,475,016, respectively. Amounts borrowed under the line of
credit are secured by a lien on the Company's receivables, inventory and
certain contract rights. There were no borrowings under the line of credit for
fiscal 1992 and the only borrowing for fiscal 1993 of $4,000,000 occurred on
September 15, 1993 and remained outstanding at a rate of 3.75% through
September 30, 1993.
F-9
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
On November 23, 1993, the Company entered into an amendment and restatement
of its line of credit agreement. The terms of the new agreement call for
available borrowings up to $30 million, secured by inventory and accounts
receivable, at interest rates of prime plus 1% or LIBOR plus 2%.
8. INCOME TAXES:
The Company is subject to United States Federal income taxes. The primary
difference between book and tax reporting of income relates to the allocation
of the carrying cost of property, plant and equipment to operations due to (a)
different depreciation methods used for tax and financial reporting purposes,
(b) a writedown of the carrying value of property, plant and equipment to
estimated net realizable value recorded for financial reporting purposes in
prior years, and (c) the sale of tax benefits discussed below.
In 1981, the Company (pre-Acquisition) entered into lease agreements with an
unrelated corporation whereby certain tax benefits were transferred to the
unrelated corporation as allowed under the provisions of the Economic Recovery
Tax Act of 1981. These agreements, the last of which will expire in late 1996,
include various covenants not to dispose of the property covered by the
agreement and indemnification of the unrelated corporation by the former
majority stockholder against any losses which might result from a breach of the
Company's warranties and covenants, including those related to the Federal
income tax implications of the transaction. Pursuant to the Acquisition and as
a result of the merger (see Note 1) and the Mortgage, the Company agreed to
require any purchaser of the property subject to such Mortgage to take the
property subject to such agreements and to ensure that any disposition of the
property upon a foreclosure of the Mortgage would not constitute a
"disqualifying event" within the meaning of the regulations promulgated under
Section 168(f)(8) of the Internal Revenue Code as in effect prior to the
enactment of the Tax Equity and Fiscal Responsibility Act of 1982. The result
of this and other related agreements may be to limit the marketability of the
property upon a foreclosure of the Mortgage. The Company will recognize
interest income of $8.2 million and rent expense of $38.4 million for tax
reporting purposes in fiscal years 1994 through 1997 based upon the foregoing
agreements.
As of September 30, 1993, for tax purposes, the Company had net operating
loss carryforwards ("NOLs") of approximately $310.5 million and $284.5 million
available to offset against regular tax and alternative minimum tax,
respectively. Due to the fact that book and tax losses were generated in 1993,
1992 and 1991, there was no provision for income taxes in any of these years.
The NOLs will expire in varying amounts through fiscal 2008. A substantial
portion of the available NOLs, approximately $200 million, expires by fiscal
2000. In addition, the Company has $30.2 million of future tax benefits
attributable to its tax benefit lease which expires in 1996 and which may, to
the extent of taxable income in the year such tax benefit is produced, be
utilized prior to the NOLs. Even though management believes the Company will be
profitable in the future and will be able to utilize a portion of the NOLs,
management does not believe that it is likely that all of the NOLs will be
utilized. In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("FAS 109"), which will require the Company to change its method of
accounting for income taxes for financial reporting purposes for the fiscal
year beginning October 1, 1993. FAS 109 requires, among other things,
recognition of future tax benefits, subject to a valuation allowance based on
the likelihood of realizing such benefits. Preliminary calculations indicate
that deferred tax assets of approximately $118 million (NOLs and other
temporary timing differences multiplied by the federal income tax rate) and
deferred tax liabilities of approximately $8 million will be recorded upon
adoption of FAS 109 in fiscal 1994. However, in recording these deferred
assets, FAS 109 requires the Company to determine whether it is "more-likely-
than-not" that the Company will realize such benefits and that all negative and
positive evidence be considered (with more weight given to evidence that is
"objective and verifiable") in
F-10
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
making the determination. FAS 109 indicates that "forming a conclusion that a
valuation allowance is not needed is difficult when there is negative evidence
such as cumulative losses in recent years"; therefore, the Company has
determined that it will be required by the provisions of FAS 109 to establish a
valuation allowance for all of the recorded net deferred tax assets at the time
the standard is adopted. In view of the fact that this determination was based
primarily on historical losses with no regard for the impact of proposed
capital expenditures and business plans, future favorable adjustments to the
valuation allowance may be required if and when circumstances change and the
Company returns to profitability. Adoption of FAS 109 will have no material
adverse impact on income for financial reporting or tax purposes.
The Company and an individual controlling the current majority stockholder
agreed to indemnify the former majority stockholder for any payments required
to be made to the unrelated corporation caused by the Company's failure to
comply with the foregoing agreements. The former stockholder retains ownership
of the Company's Class C Common Stock which carries certain limited voting
rights including the holders' right to prevent certain transactions
(liquidation and certain mergers) which could result in liability to the former
majority stockholder under its indemnification to the unrelated corporation.
The Company's Class B Common Stock carries these same voting rights.
9. COMMITMENTS AND CONTINGENCIES:
CONTRACT WITH KEY EMPLOYEE
The Company entered into an employment arrangement in 1986 with the Chief
Executive Officer (CEO). The agreement provides that the CEO's annual
compensation will be limited to the higher of a specified amount or a
percentage of the Company's pretax net income earned in the previous year. The
CEO has agreed not to pursue any steel-related acquisition activities other
than through the Company, and all other acquisition activities, to the extent
required by his fiduciary duty as a direct or indirect controlling stockholder
and director of the Company, must be through the Company, giving effect to the
legal doctrine of "corporate opportunity."
EMPLOYEE STOCK OPTION PLAN
The Board of Directors and the Stockholders approved the 1991 Employees Stock
Option Plan (the "1991 Plan") for the purpose of attracting and retaining key
employees. The 1991 Plan provides for granting up to 600,000 shares of Class A
Common Stock, over a ten year period, from the Company's authorized and
unissued shares or from Treasury Stock. No options have been granted.
STRIKE
On March 21, 1993, the United Steelworkers of America Local 9121 (the
"Union") initiated a strike against the Company. Negotiations on a new contract
have continued, but differences have thus far precluded an agreement. The
Company cannot predict the impact that a new collective bargaining contract
will have on the Company's results. However, the Company believes a new
contract will not have a material effect on the Company's results. Also, the
Union has filed charges with the National Labor Relations Board alleging that
the Company has violated the National Labor Relations Act relating to its
bargaining conduct. The Company believes it has meritorious defenses to these
charges and has responded timely to all of these allegations and believes that
it has negotiated in good faith with the Union. An unfavorable decision by the
National Labor Relations Board, however, should not materially affect the
Company.
F-11
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
ENVIRONMENTAL
The Company is subject to various Federal, state and local laws and
regulations concerning the discharge of contaminants which may be emitted into
the air, discharged into waterways, and the disposal of solids and/or hazardous
wastes such as electric arc furnace dust. In addition, in the event of a
release of a hazardous substance generated by the Company, the Company could be
potentially responsible for the remediation of contamination associated with
such a release. In the past, the Company's operations in some respects have not
met all of the applicable standards promulgated pursuant to such laws and
regulations. At this time, the Company believes that it is in compliance in all
material respects with applicable environmental requirements and that the cost
of such continuing compliance will not have a material adverse effect on the
Company's competitive position, operations or financial condition, or cause a
material increase in currently anticipated capital expenditures. The Company
currently has no mandated expenditures to address previously contaminated sites
and does not anticipate any infrequent or non-recurring clean-up expenditures.
Also, the Company is not designated as a Potential Responsible Party ("PRP")
under the Superfund legislation.
OTHER
The Company does not provide any post-employment or post-retirement benefits
to its employees other than those described in Note 10.
There are various claims and legal proceedings arising in the ordinary course
of business pending against or involving the Company wherein monetary damages
are sought. It is management's opinion that the Company's liability, if any,
under such claims or proceedings would not materially affect its financial
position.
10. EMPLOYEE RETIREMENT PLANS:
Effective October 1, 1991, the Company implemented two defined benefit
retirement plans (the "Plan(s)"), one for employees covered by the contracts
with the United Steelworkers of America ("hourly employees") and one for
substantially all other employees ("salaried employees"). The Plan for the
hourly employees provides benefits of stated amounts for a specified period of
service. The Plan for the salaried employees provides benefits based on
employees' years of service and average compensation for a specified period of
time before retirement. The Company follows the funding requirements under the
Employee Retirement Income Security Act of 1974 ("ERISA").
The net pension cost for both non-contributory Company sponsored pension
plans consists of the following components for fiscal year 1993 and 1992:
The actuarial present value of future benefit obligations:
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Vested benefit obligation.............................. $ 490,977 $ 246,271
Non-vested benefit obligation.......................... 17,960 16,593
--------- ---------
Accumulated benefit obligation......................... $ 508,937 $ 262,864
========= =========
Projected benefit obligation........................... $ 776,582 $ 369,070
Plan assets at fair value.............................. (473,305) --
--------- ---------
Funded Status.......................................... 303,277 $ 369,070
Unrecognized net loss.................................. (118,300) (82,708)
Adjustment for additional liability.................... 23,319 16,297
--------- ---------
Accrued pension liability.............................. $ 208,296 $ 302,659
========= =========
</TABLE>
F-12
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Determination of net periodic pension cost:
<TABLE>
<S> <C> <C>
Service cost........................................... $ 336,676 $ 298,332
Interest cost.......................................... 27,216 --
Experience loss........................................ (14,203) (11,970)
Net amortization....................................... 2,838 --
Deficiency in accumulated benefit obligation........... 23,319 16,297
--------- ---------
Total net periodic pension cost........................ $ 375,846 $ 302,659
========= =========
</TABLE>
The primary actuarial assumptions used in determining the above benefit
obligation amounts were established on the September 30, 1993 and 1992
measurement dates and include a discount rate of 7.5% per annum on valuing
liabilities; long-term expected rate of return on assets of 9% per annum;
salary increases of 5% per annum for salaried employees; and an inflation rate
of 5% per annum.
11. MAJOR CUSTOMERS:
No single customer accounts for 10% or more of the total sales for the years
ended September 30, 1993, 1992 and 1991.
12. RELATED PARTY TRANSACTIONS:
SERVICE AGREEMENT WITH RELATED PARTIES
The Company and related parties controlled by a stockholder entered into a
Service Agreement dated September 5, 1986 (the Service Agreement), pursuant to
which the related parties provide certain assistance and services (research and
development, industrial and labor relations, engineering, legal, etc.) to the
Company for a fee. Costs charged for these services were approximately $87,000
for the year ended September 30, 1993, $107,000 for the year ended September
30, 1992, and $84,000 for the year ended September 30, 1991. The Service
Agreement may be terminated by either the Company or the related parties on 90
days' prior written notice to the other party.
OTHER AGREEMENTS WITH STOCKHOLDERS
The Company entered into an agreement on May 28, 1987 with a stockholder to
provide certain investment banking services to the Company over the next 7
years on a competitive, first refusal basis. Although services were provided,
no obligations were incurred in fiscal years 1993 and 1992. On June 20, 1991
and December 16, 1992, another minority shareholder entered into an arms length
success fee agreement with the Company with respect to merger and acquisition
advisory and private placement services in connection with a possible corporate
acquisition by the Company. During fiscal 1992, the Company paid $25,000 for
out-of-pocket expenses; during fiscal 1993 the Company paid $25,000 for
services under such agreement.
13. COMMON STOCK:
Income per common share is based on the average number of common shares
outstanding of 12,884,607 for the years ended September 30, 1993, 1992 and
1991, respectively.
Other than for voting rights, all classes of Common Stock have similar
rights. With respect to voting rights, Class B Common Stock has 60% and Class A
and Class C Common Stock have 40% of the votes except for special voting rights
for Class B and Class C Common Stock on liquidation and certain mergers
F-13
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(see Note 8). The Company's ability to pay dividends is subject to restrictive
covenants under both the Indenture pursuant to which the Company's Notes were
issued and the Company's line of credit (see Notes 6 and 7).
14. MISCELLANEOUS:
Miscellaneous income/(expense) as of September 30, 1993, 1992 and 1991
included the following:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Discount earned.................................. $149,648 $211,200 $ 68,122
Allowance for doubtful accounts.................. 174,994 233,025 (373,323)
Tax abatement refund FY'90....................... -- -- 813,186
Power company refund FY'81....................... -- -- 152,950
Other income..................................... 176,442 109,790 240,764
-------- -------- --------
$501,084 $554,015 $901,699
</TABLE>
15. QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
FISCAL YEAR 1993 QUARTERS
------------------------------------------
FIRST SECOND THIRD FOURTH
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net Sales.......................... $ 31,833 $ 33,408 $ 34,485 $ 36,282
Gross Profit....................... 3,634 2,040* 745 1,556
Net Income (Loss) Before
Extraordinary Gain (Loss)......... 347 (1,697) (4,078) (1,311)
Extraordinary Gain (Loss).......... 756 -- -- (170)
Net Income (Loss).................. 1,102 (1,697) (4,078) (1,481)
Income (Loss) Per Common Share
Before Extraordinary Gain (Loss).. .03 (.13) (.32) (.10)
Extraordinary Gain (Loss) Per
Common Share...................... .06 -- -- (.01)
Income (Loss) Per Common Share..... .09 (.13) (.32) (.11)
<CAPTION>
FISCAL YEAR 1992 QUARTERS
------------------------------------------
FIRST SECOND THIRD FOURTH
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net Sales.......................... $ 29,211 $ 29,037 $ 31,050 $ 30,474
Gross Profit....................... 2,386 2,759 2,618 2,893
Net Income (Loss).................. (699) (352) (504) 203
Income (Loss) Per Common Share..... (.05) (.03) (.04) .02
</TABLE>
- --------
* Amount has been restated to conform with the 3rd and 4th quarter's 10-Q
presentation of strike-related expenses.
F-14
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REP-
RESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HERE-
UNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMA-
TION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.....................................................
Prospectus Summary........................................................
Investment Considerations.................................................
Use of Proceeds...........................................................
Capitalization............................................................
Selected Financial Data...................................................
Management's Discussion and Analysis of Financial Condition and Results of
Operations...............................................................
Business..................................................................
Management................................................................
Principal Stockholders....................................................
Certain Related Party Transactions........................................
Description of the First Mortgage Notes...................................
Description of Certain Indebtedness.......................................
Certain Federal Income Tax Consequences...................................
Underwriting..............................................................
Legal Matters.............................................................
Experts...................................................................
Index to Financial Statements.............................................
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BAYOU STEEL CORPORATION
$75,000,000
% FIRST MORTGAGE NOTES DUE 2001
-------------
PROSPECTUS
-------------
CHEMICAL SECURITIES INC.
JANUARY , 1994
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated (except for the Securities and
Exchange Commission registration fee and the National Association of Securities
Dealers, Inc. filing fee) fees and expenses in connection with the offering
described in this Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $25,862.07
National Association of Securities Dealers, Inc. filing fee...... 8,000.00
Trustee and fees................................................. 15,000.00
Blue sky filing and counsel fees and expenses....................
Printing and engraving...........................................
Accountants' fees and expense....................................
Legal fees and expenses..........................................
Rating agency fees...............................................
Miscellaneous....................................................
----------
Total.......................................................... $
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Second Restated Certificate of Incorporation (the "Charter")
provides that the Company shall, to the full extent permitted by Section 145 of
the General Corporation Law of the State of Delaware, as amended from time to
time ("DGCL"), indemnify all persons whom it may indemnify pursuant thereto. In
addition, the Charter eliminates personal liability to the Company of its
directors to the full extent permitted by Section 102(b)(7) of the DGCL. The
Company maintains policies of insurance to protect directors and officers
against certain liabilities asserted against or incurred by them in their
individual or collective capacities as directors or officers of the Company.
Section 145 of the DGCL permits a corporation to indemnify its directors and
officers against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by third parties, if
such directors or officers acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe their conduct was unlawful. In a derivative action, i.e., one by or in
the right of the corporation, indemnification may be made only for expenses
(including attorney fees) actually and reasonably incurred by directors and
officers in connection with the defense or settlement of an action or suit, and
only with respect to a matter as to which they shall have acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made if
such person shall have been adjudged liable to the corporation unless and only
to the extent that a court shall determine 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 as a court shall
deem proper, although the court in which the action or suit was brought may
determine upon application that the defendant officers or directors are
reasonably entitled to indemnity for expenses despite such adjudication of
liability.
Section 102(b)(7) of the DGCL provides that a corporation may eliminate or
limit the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that such provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the DGCL, or (iv) for any transaction from which the
director or officer derived an improper personal benefit. No such provision
shall eliminate or limit the liability of a director or officer for any act or
omission occurring prior to the date when such provision becomes effective.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. Exhibits
<TABLE>
<CAPTION>
NUMBER EXHIBIT
------ -------
<C> <S>
1.1 Form of Underwriting Agreement between the Company and Chemical
Securities Inc. (previously filed with this Registration Statement).
3.1 Second Restated Certificate of Incorporation of the Company
(incorporated by reference herein to Post-Effective Amendment No. 1 to
Registration Statement on Form S-1 (No. 33-10745)).
3.2 By-laws of the Company (incorporated herein by reference to
Registration Statement on Form S-1 (No. 33-10745)).
4.1 Form of Indenture (including form of First Mortgage Note) between the
Company and First National Bank of Commerce as trustee (the "Trustee").
4.2 Form of Mortgage granted by the Company and Subsidiary Guarantors to
the Trustee (Louisiana).
4.3 Form of Mortgage, Assignment of Rents and Leases and Security Agreement
from the Company to the Trustee (Non-Louisiana).
4.4 Form of Mortgage, Assignment of Rents and Leases and Security Agreement
from Subsidiary Guarantors to the Trustee (Non-Louisiana).
4.5 Form of Security Agreement between the Company and the Trustee.
4.6 Form of Subsidiaries Security Agreement between Subsidiary Guarantors
and the Trustee.
4.7 Form of Intercreditor Agreement between the Trustee and Chemical Bank,
as agent under the Credit Agreement.
4.8 Form of Subsidiary Guarantee between each recourse subsidiary of the
Company and the Trustee.
4.9 Form of Release of Federal Income Tax Ownership and Agreement between
the Trustee and the Company.
5 Opinion of Kaye, Scholer, Fierman, Hays & Handler.*
10.1 Employment Letter dated July 26, 1988, between Howard M. Meyers and the
Company (incorporated herein by reference to Post-Effective Amendment
No. 1 to Registration Statement on Form S-1 (No. 33-10745)).
10.2 (i) Agreement dated November 11, 1981, between Amoco Tax Leasing I
Corporation ("Amoco") and the Company, (ii) letter dated December 7,
1981 from Voest-Alpine A.G. ("VA") and Voest-Alpine International
Corporation ("VAIC") to Amoco, and (iii) letter dated November 11, 1981
from VAIC, Honen Investissements SARL, Barzel Investissements SARL,
Anku Foundation, Raphaely Steel Investments, N.V., Landotal Properties,
Inc., Canota Investments, Ltd., S.A. and Beruga Establishment and VA to
Amoco (incorporated herein by reference to Registration Statement on
Form S-1 (No.33-10745)).
10.3 Release of Federal Income Tax Ownership and Agreement dated September
5, 1986, among the Company, First National Bank of Commerce, Bayou
Steel Acquisition Corporation, VA and Howard M. Meyers (incorporated
herein by reference to Registration Statement on Form S-1 (No.
33-10745)).
10.4 Service Agreement dated September 5, 1986, between the Company and RSR
Corporation and the assignment by RSR Corporation of a portion of its
interest in the Service Agreement to RSR Holding Corp., now known as
Quexco Incorporated (incorporated herein by reference to Registration
Statement on Form S-1 (No.33-10745)).
10.5 Letter Agreement dated May 28, 1987 between the Company and Allen &
Company Incorporated relating to investment banking services
(incorporated herein by reference to Registration Statement on Form S-1
(No.33-10745)).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT
------ -------
<C> <S>
10.6 Agreement dated June 20, 1991 among the Company, MMG Patricof & Co.,
Inc., and MMG Placement Corp. relating to investment banking services
(incorporated herein by reference to Post-Effective Amendment No. 4 to
Registration Statement on Form S-1 (No. 33-10745)).
10.7 Agreement dated December 16, 1992 between the Company and Patricof &
Co. Capital Corp. relating to investment banking services.
10.8 Warehouse (Stocking Location) Leases.
(i) Leetsdale, Pennsylvania (incorporated herein by reference to
Registration Statement on Form S-1 (No. 33-10745)).
(ii) Catoosa, Oklahoma (incorporated herein by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1989).
10.9 Tax Abatement Agreement dated July 10, 1985 between the Company and the
Louisiana Board of Commerce and Industry (incorporated herein by
reference to Registration Statement on Form S-1 (No. 33-22603)).
10.10 Tax Abatement Renewal Agreement dated August 22, 1990 between the
Company and the State of Louisiana Board of Commerce and Industry
(incorporated herein by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1989).
10.11 Credit Agreement dated as of June 28, 1989, as amended and restated
through November 23, 1993, among the Company, the Lenders named
therein, and Chemical Bank, as agent (the "Credit Agreement")
(previously filed with this Registration Statement).
10.12 Security Agreement dated as of June 28, 1989, as amended and restated
through November 23, 1993, among the Company, the Lenders named in the
Credit Agreement, and Chemical Bank, as agent (previously filed with
this Registration Statement).
10.13 Intercreditor Agreement dated as of November 23, 1993 between First
National Bank of Commerce and Chemical Bank as agent under the Credit
Agreement (previously filed with this Registration Statement).
10.14 Loan Agreement dated as of January 9, 1991 between the Company and
Hibernia National Bank.
10.15 First Amendment dated as of November 22, 1993 to the Loan Agreement
dated as of January 9, 1991 between the Company and Hibernia National
Bank (previously filed with this Registration Statement).
10.16 Mortgage, Security Agreement and Financing Statement dated as of
January 9, 1991 by the Company in favor of Hibernia National Bank.
10.17 First Amendment dated as of November 22, 1993 to Mortgage, Security
Agreement and Financing Statement dated as of January 9, 1991 by the
Company in favor of Hibernia National Bank (previously filed with this
Registration Statement).
10.18 Intercreditor Agreement dated as of November 23, 1993 between Chemical
Bank and Hibernia National Bank (previously filed with this
Registration Statement).
10.19 Security Agreement dated as of November 22, 1993 between the Company
and Hibernia National Bank (previously filed with this Registration
Statement).
10.20 Bayou Steel Corporation Savings Plan dated March 7, 1991.
10.21 Incentive Compensation Plan for Key Employees dated March 3, 1988
(incorporated herein by reference to the Company's Annual Report on
Form 10-K for the year ended September 30, 1991).
10.22 1991 Employees' Stock Option Plan dated April 18, 1991 with technical
amendments (incorporated herein by reference to Post-Effective
Amendment No. 4 to Registration Statement on Form S-1 (No. 33-10745)).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT
------ -------
<C> <S>
10.23 Pension Plan for Bargained Employees and the Employees Retirement Plan
(incorporated by herein by reference to Post-Effective Amendment No. 5
to the Company's Registration Statement on Form S-1 (No. 33-10745)).
12 Computation of Earnings to Fixed Charges.
18.1 Letter from Arthur Andersen & Co. regarding change in accounting method
from first-in, first-out (FIFO) to last-in, first-out (LIFO) method of
accounting for inventories (incorporated herein by reference to the
Annual Report on Form 10-K for the year ended September 30, 1989).
18.2 Letter from Arthur Andersen & Co. regarding change in method of
accounting for interest from the effective interest method to another
acceptable method (incorporated herein by reference to the Annual
Report on Form 10-K for the year ended September 30, 1990).
23.1 Consent of Arthur Andersen & Co.
23.2 Consent of Kaye, Scholer, Fierman, Hays & Handler is included in the
opinion of Kaye, Scholer, Fierman, Hays & Handler, filed as Exhibit 5.*
23.3 Consent of Jones, Walker, Waechter, Poitevent, Carrere & Denegre.*
24 Powers of Attorney (reference is made to the signature page of this
Registration Statement).
25 Statement of Eligibility of Trustee under the Trust Indenture Act of
1939 on Form T-1.
</TABLE>
- --------
* To be filed by amendment.
B. Financial Statement Schedules
Report of Independent Public Accountants
Schedule V Property, Plant and Equipment
Schedule VI Accumulated Depreciation of Property, Plant and
Equipment
Schedule VIII Valuation and Qualifying Accounts
Schedule X Supplementary Income Statement Information
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the 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.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF
LAPLACE AND STATE OF LOUISIANA ON JANUARY 14, 1994.
Bayou Steel Corporation
/s/ Richard J. Gonzalez
By __________________________________
RICHARD J. GONZALEZ
VICE PRESIDENT, TREASURER AND
CHIEF FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED. EACH PERSON WHOSE SIGNATURE APPEARS
BELOW HEREBY AUTHORIZES HOWARD M. MEYERS AND RICHARD J. GONZALEZ AS ATTORNEYS-
IN-FACT, TO SIGN AND FILE ON HIS BEHALF, IN THE CAPACITY STATED BELOW, ALL
AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT.
TITLE DATE
* Chairman of the
- ------------------------------------- Board, January 14,
HOWARD M. MEYERS Chief Executive 1994
Officer,
* Vice President,
- ------------------------------------- President and January 14,
Director 1994
Treasurer and Chief
RICHARD J. GONZALEZ Financial Officer
* Director
- ------------------------------------- January 14,
JOHN A. CANNING, JR. 1994
- ------------------------------------- Director
LAWRENCE E. GOLUB January 14,
1994
* Director
- ------------------------------------- January 14,
MELVYN N. KLEIN 1994
Director
* January 14,
- ------------------------------------- 1994
ALBERT P. LOSPINOSO
II-5
<PAGE>
TITLE DATE
----- ----
Director
* January 14, 1994
- -------------------------------------
ALAN J. PATRICOF
Director
* January 14, 1994
- -------------------------------------
STANLEY S. SHUMAN
/s/ Richard J. Gonzalez
*By_____________________________
Richard J. Gonzalez
Individually and as Attorney-In-Fact
II-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Bayou Steel Corporation:
We have audited, in accordance with generally accepted auditing standards,
the financial statements included in this registration statement. Our audit was
made for the purpose of forming an opinion on the basic financial statements
taken as a whole. The schedules listed in the index above are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not part of the basic financial statements. The schedules have been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly state in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
Arthur Andersen & Co.
New Orleans, Louisiana,
November 24, 1993
S-1
<PAGE>
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING ADDITIONS RECLASSIFICATIONS END OF
CLASSIFICATION OF PERIOD AT COST RETIREMENTS PERIOD
-------------- ----------- ----------- ----------------- -----------
<S> <C> <C> <C> <C>
Year Ended September 30,
1993
Land................... $ 2,411,182 $ 339,216 $ $ 2,750,398
Machinery and
Equipment............. 71,119,778 1,834,903 72,954,681
Plant and Office
Building.............. 12,394,461 1,642,384 14,036,845
Construction-in-
Progress.............. 3,934,743 2,761,076 (3,393,215) 3,302,604
----------- ----------- ------------ -----------
TOTAL................ $89,860,164 $ 6,577,579 $ (3,393,215) $93,044,528
=========== =========== ============ ===========
Year Ended September 30,
1992
Land................... $ 2,411,182 $ $ $ 2,411,182
Machinery and
Equipment............. 69,031,413 2,119,651 (31,286) 71,119,778
Plant and Office
Building.............. 8,614,736 3,779,725 12,394,461
Construction-in-
Progress.............. 6,590,768 3,243,351 (5,899,376) 3,934,743
----------- ----------- ------------ -----------
TOTAL................ $86,648,099 $ 9,142,727 $ (5,930,662) $89,860,164
=========== =========== ============ ===========
Year Ended September 30,
1991
Land................... $ 2,111,182 $ 300,000 $ $ 2,411,182
Machinery and
Equipment............. 62,002,031 7,464,798 (435,416) 69,031,413
Plant and Office
Building.............. 3,698,639 4,916,097 8,614,736
Construction-in-
Progress.............. 11,731,454 7,240,209 (12,380,895) 6,590,768
----------- ----------- ------------ -----------
TOTAL................ $79,543,306 $19,921,104 $(12,816,311) $86,648,099
=========== =========== ============ ===========
SCHEDULE VI--ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING ADDITIONS END OF
DESCRIPTION OF PERIOD AT COST RETIREMENTS PERIOD
----------- ----------- ----------- ----------------- -----------
<S> <C> <C> <C> <C>
Year Ended September 30,
1993
Machinery and
Equipment............. $18,759,410 $ 3,917,892 $ $22,677,302
Plant and Office
Building.............. 864,965 243,357 1,108,322
----------- ----------- ------------ -----------
TOTAL................ $19,624,375 $ 4,161,249 $ $23,785,624
=========== =========== ============ ===========
Year Ended September 30,
1992
Machinery and
Equipment............. $15,037,292 $ 3,744,712 $ (22,594) $18,759,410
Plant and Office
Building.............. 633,224 231,741 864,965
----------- ----------- ------------ -----------
TOTAL................ $15,670,516 $ 3,976,453 $ (22,594) $19,624,375
=========== =========== ============ ===========
Year Ended September 30,
1991
Machinery and
Equipment............. $11,984,762 $ 3,321,822 $ (269,292) $15,037,292
Plant and Office
Building.............. 482,849 150,375 633,224
----------- ----------- ------------ -----------
TOTAL................ $12,467,611 $ 3,472,197 $ (269,292) $15,670,516
=========== =========== ============ ===========
</TABLE>
S-2
<PAGE>
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED TO END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS (1) PERIOD
----------- ---------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
September 30, 1993
Allowance for doubtful
accounts.................... $ 943,267 $(174,994) $ 225,548 $ 542,725
---------- --------- --------- ----------
September 30, 1992
Allowance for doubtful
accounts.................... $1,213,720 $ (36,096) $ 234,357 $ 943,267
---------- --------- --------- ----------
September 30, 1991
Allowance for doubtful
accounts.................... $1,420,690 $ 373,323 $ 580,293 $1,213,720
---------- --------- --------- ----------
</TABLE>
- --------
(1) Write-off of uncollectible accounts.
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
ITEM 1993 1992 1991
---- ----------- ----------- -----------
<S> <C> <C> <C>
Maintenance and Repairs..................... $ 9,001,320 $ 8,827,799 $ 8,944,936
Depreciation
Inventory................................. $ -- $ 87,193 $ --
Cost of Sales............................. 4,156,849 3,884,913 3,467,871
Selling, General and Administrative....... 4,398 4,347 4,326
Amortization
Loan Acquisition Costs (1)................ $ 457,770 $ 332,483 $ 331,094
</TABLE>
- --------
(1) Represents amortization of costs associated with the issuance of the Senior
Secured Notes entered into on September 5, 1986 and the line of credit
entered into on June 28, 1989.
S-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER EXHIBIT PAGE
- ------ ------- ----
<S> <C> <C>
1.1 Form of Underwriting Agreement between the Company and Chemical
Securities Inc. (previously filed with this Registration Statement).
3.1 Second Restated Certificate of Incorporation of the Company
(incorporated by reference herein to Post-Effective Amendment No. 1 to
Registration Statement on Form S-1 (No. 33-10745)).
3.2 By-laws of the Company (incorporated herein by reference to Registration
Statement on Form S-1 (No. 33-10745)).
4.1 Form of Indenture (including form of First Mortgage Note) between the
Company and First National Bank of Commerce as trustee (the "Trustee").
4.2 Form of Mortgage granted by the Company and Subsidiary Guarantors to the
Trustee. (Louisiana)
4.3 Form of Mortgage, Assignment of Rents and Leases and Security Agreement
from the Company to the Trustee (Non-Louisiana).
4.4 Form of Mortgage, Assignment of Rents and Leases and Security Agreement
from Subsidiary Guarantors to the Trustee (Non-Louisiana).
4.5 Form of Security Agreement between the Company and the Trustee.
4.6 Form of Subsidiaries Security Agreement between the Subsidiary
Guarantors and the Trustee.
4.7 Form of Intercreditor Agreement between the Trustee and Chemical Bank,
as agent under the Credit Agreement.
4.8 Form of Subsidiary Guarantee between recourse subsidiaries of the
Company and the Trustee.
4.9 Form of Release of Federal Income Tax Ownership and Agreement between
the Trustee and the Company.
5 Opinion of Kaye, Scholer, Fierman, Hays & Handler.*
10.1 Employment Letter dated July 26, 1988, between Howard M. Meyers and the
Company (incorporated herein by reference to Post-Effective Amendment
No. 1 to Registration Statement on Form S-1 (No. 33-10745)).
10.2 (i) Agreement dated November 11, 1981, between Amoco Tax Leasing I
Corporation ("Amoco") and the Company, (ii) letter dated December 7,
1981 from Voest-Alpine A.G. ("VA") and Voest-Alpine International
Corporation ("VAIC") to Amoco, and (iii) letter dated November 11, 1981
from VAIC, Honen Investissements SARL, Barzel Investissements SARL, Anku
Foundation, Raphaely Steel Investments, N.V., Landotal Properties, Inc.,
Canota Investments, Ltd., S.A. and Beruga Establishment and VA to Amoco
(incorporated herein by reference to Registration Statement on Form S-1
(No.33-10745)).
10.3 Release of Federal Income Tax Ownership and Agreement dated September 5,
1986, among the Company, First National Bank of Commerce, Bayou Steel
Acquisition Corporation, VA and Howard M. Meyers (incorporated herein by
reference to Registration Statement on Form S-1 (No. 33-10745)).
10.4 Service Agreement dated September 5, 1986, between the Company and RSR
Corporation and the assignment by RSR Corporation of a portion of its
interest in the Service Agreement to RSR Holding Corp., now known as
Quexco Incorporated (incorporated herein by reference to Registration
Statement on Form S-1 (No.33-10745)).
10.5 Letter Agreement dated May 28, 1987 between the Company and Allen &
Company Incorporated relating to investment banking services
(incorporated herein by reference to Registration Statement on Form S-1
(No.33-10745)).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT PAGE
------ ------- ----
<S> <C> <C>
10.6 Agreement dated June 20, 1991 among the Company, MMG Patricof & Co.,
Inc., and MMG Placement Corp. relating to investment banking services
(incorporated herein by reference to Post-Effective Amendment No. 4 to
Registration Statement on Form S-1 (No. 33-10745)).
10.7 Agreement dated December 16, 1992 between the Company and Patricof & Co.
Capital Corp. relating to investment banking services.
10.8 Warehouse (Stocking Location) Leases.
(i) Leetsdale, Pennsylvania (incorporated herein by reference to
Registration Statement on Form S-1 (No. 33-10745)).
(ii) Catoosa, Oklahoma (incorporated herein by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1989).
10.9 Tax Abatement Agreement dated July 10, 1985 between the Company and the
Louisiana Board of Commerce and Industry (incorporated herein by
reference to Registration Statement on Form S-1 (No. 33-22603)).
10.10 Tax Abatement Renewal Agreement dated August 22, 1990 between the
Company and the State of Louisiana Board of Commerce and Industry
(incorporated herein by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1989).
10.11 Credit Agreement dated as of June 28, 1989, as amended and restated
through November 23, 1993, among the Company, the Lenders named therein,
and Chemical Bank, as agent (the "Credit Agreement") (previously filed
with this Registration Statement).
10.12 Security Agreement dated as of June 28, 1989, as amended and restated
through November 23, 1993, among the Company, the Lenders named in the
Credit Agreement, and Chemical Bank, as agent (previously filed with
this Registration Statement).
10.13 Intercreditor Agreement dated as of November 23, 1993 between First
National Bank of Commerce and Chemical Bank as agent under the Credit
Agreement (previously filed with this Registration Statement).
10.14 Loan Agreement dated as of January 9, 1991 between the Company and
Hibernia National Bank.
10.15 First Amendment dated as of November 22, 1993 to the Loan Agreement
dated as of January 9, 1991 between the Company and Hibernia National
Bank (previously filed with this Registration Statement).
10.16 Mortgage, Security Agreement and Financing Statement dated as of January
9, 1991 by the Company in favor of Hibernia National Bank.
10.17 First Amendment dated as of November 22, 1993 to Mortgage, Security
Agreement and Financing Statement dated as of January 9, 1991 by the
Company in favor of Hibernia National Bank (previously filed with this
Registration Statement).
10.18 Intercreditor Agreement dated as of November 23, 1993 between Chemical
Bank and Hibernia National Bank (previously filed with this Registration
Statement).
10.19 Security Agreement dated as of November 22, 1993 between the Company and
Hibernia National Bank (previously filed with this Registration
Statement).
10.20 Bayou Steel Corporation Savings Plan dated March 7, 1991.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXHIBIT PAGE
------ ------- ----
<S> <C> <C>
10.21 Incentive Compensation Plan for Key Employees dated March 3, 1988
(incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended September 30, 1991).
10.22 1991 Employees' Stock Option Plan dated April 18, 1991 with technical
amendments (incorporated herein by reference to Post-Effective Amendment
No. 4 to Registration Statement on Form S-1 (No. 33-10745)).
10.23 Pension Plan for Bargained Employees and the Employees Retirement Plan
(incorporated herein by reference to Post-Effective Amendment No. 5 to
the Company's Registration Statement on Form S-1 (No. 33-10745)).
12 Computation of Earnings to Fixed Charges.
18.1 Letter from Arthur Andersen & Co. regarding change in accounting method
from first-in, first-out (FIFO) to last-in, first-out (LIFO) method of
accounting for inventories (incorporated herein by reference to the
Annual Report on Form 10-K for the year ended September 30, 1989).
18.2 Letter from Arthur Andersen & Co. regarding change in method of
accounting for interest from the effective interest method to another
acceptable method (incorporated herein by reference to the Annual Report
on Form 10-K for the year ended September 30, 1990).
23.1 Consent of Arthur Andersen & Co.
23.2 Consent of Kaye, Scholer, Fierman, Hays & Handler is included in the
opinion of Kaye, Scholer, Fierman, Hays & Handler, filed as Exhibit 5.*
23.3 Consent of Jones, Walker, Waechter, Poitevent, Carrere & Denegre.*
24 Powers of Attorney (reference is made to the signature page of this
Registration Statement).
25 Statement of Eligibility of Trustee under the Trust Indenture Act of
1939 on Form T-1.
</TABLE>
- --------
* To be filed by amendment.
B. Financial Statement Schedules
Report of Independent Public Accountants
Schedule V Property, Plant and Equipment
Schedule VI Accumulated Depreciation of Property, Plant and Equipment
Schedule VIII Valuation and Qualifying Accounts
Schedule X Supplementary Income Statement Information
<PAGE>
EXHIBIT 4.1
Draft of January 13, 1994
- --------------------------------------------------------------------------------
BAYOU STEEL CORPORATION
TO
FIRST NATIONAL BANK OF COMMERCE, as Trustee
-------------------
Indenture
Dated as of _____________, 1994
--------------------
$75,000,000
___% Securities due 2001
- --------------------------------------------------------------------------------
<PAGE>
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section(s)
- --------------- -----------
Section 310(a)(1) . . . . . . . . . . . . . . 9.9
(a)(2) . . . . . . . . . . . . . . 9.9
(a)(3) . . . . . . . . . . . . . . Not applicable
(a)(4) . . . . . . . . . . . . . . Not applicable
(a)(5) . . . . . . . . . . . . . . 9.9
(b) . . . . . . . . . . . . . . 9.8; 9.10
(c) . . . . . . . . . . . . . . Not applicable
Section 311(a) . . . . . . . . . . . . . . 9.13
(b) . . . . . . . . . . . . . . 9.13
(c) . . . . . . . . . . . . . . Not applicable
Section 312(a) . . . . . . . . . . . . . . 10.1; 10.2(a)
(b) . . . . . . . . . . . . . . 10.2(b)
(c) . . . . . . . . . . . . . . 10.2(c)
Section 313(a) . . . . . . . . . . . . . . 10.3(a)
(a)(4) . . . . . . . . . . . . . . 1.1
(b) . . . . . . . . . . . . . . 10.3(a)
(c) . . . . . . . . . . . . . . 10.3(a)
(d) . . . . . . . . . . . . . . 10.3(b)
Section 314(a) . . . . . . . . . . . . . . 10.4
(a)(4) . . . . . . . . . . . . . . 6.5
(b) . . . . . . . . . . . . . . 12.2
(c)(1) . . . . . . . . . . . . . . 13.4
(c)(2) . . . . . . . . . . . . . . 13.4
(c)(3) . . . . . . . . . . . . . . 13.4
(d) . . . . . . . . . . . . . . 12.2; 12.3;
12.4; 12.5
(e) . . . . . . . . . . . . . . 13.6
(f) . . . . . . . . . . . . . . Not applicable
Section 315(a) . . . . . . . . . . . . . . 9.1
(b) . . . . . . . . . . . . . . 9.2
(c) . . . . . . . . . . . . . . 9.1
(d) . . . . . . . . . . . . . . 9.1
(e) . . . . . . . . . . . . . . 8.14
Section 316(a) . . . . . . . . . . . . . . 1.1
(a)(1)(A) . . . . . . . . . . . . . . 8.2; 8.12
(a)(1)(B) . . . . . . . . . . . . . . 8.13
(a)(2) . . . . . . . . . . . . . . Not applicable
(b) . . . . . . . . . . . . . . 8.8
(c) . . . . . . . . . . . . . . 1.4
Section 317(a)(1) . . . . . . . . . . . . . . 8.3
(a)(2) . . . . . . . . . . . . . . 8.4
(b) . . . . . . . . . . . . . . 6.26
Section 318(a) . . . . . . . . . . . . . . 1.7
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page(s)
-------
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION.................. 1
SECTION 1.1. Definitions................................ 1
-----------
Act................................................. 2
Affiliate........................................... 2
Appraiser........................................... 2
Asset Acquisition................................... 2
Asset Sale.......................................... 2
Asset Sale Offer.................................... 2
Asset Sale Payment Date............................. 3
Authenticating Agent................................ 3
Available Amount.................................... 3
Bankruptcy Law...................................... 3
Board of Directors.................................. 3
Board Resolution.................................... 3
BSPL................................................ 3
Business Day........................................ 3
Capital Stock....................................... 3
Capitalized Lease................................... 3
Capitalized Lease Obligation ....................... 4
Cash Equivalents.................................... 4
Change of Control................................... 4
Change of Control Date.............................. 5
Change of Control Offer............................. 5
Change of Control Payment Date...................... 5
Collateral.......................................... 5
Collateral Account.................................. 5
Collateral Agent.................................... 5
Collateral Proceeds................................. 5
Commission.......................................... 5
Common Stock........................................ 5
Company............................................. 6
Company Obligations................................. 6
Company Request or Company Order.................... 6
Company Security Agreement.......................... 6
Condemnation Award.................................. 6
Consolidated Cash Flow.............................. 6
Consolidated Domestic Income Tax Expense............ 6
Consolidated Fixed Charges.......................... 7
Consolidated Fixed Charge Ratio..................... 7
Consolidated Interest Expense....................... 8
Consolidated Net Income............................. 8
Consolidated Net Worth.............................. 8
Consolidated Subsidiary............................. 9
Corporate Trust Office.............................. 9
corporation......................................... 9
Credit Facility..................................... 9
-i-
<PAGE>
Page(s)
-------
Currency Agreement.................................. 9
Custodian........................................... 9
Default............................................. 9
Defaulted Interest.................................. 9
Depositary.......................................... 9
Disqualified Stock.................................. 9
Event of Default.................................... 9
Exchange Act........................................ 9
Financial Advisor................................... 9
GAAP................................................ 10
Global Security..................................... 10
Guarantee........................................... 10
Holder.............................................. 10
Indebtedness........................................ 10
Indenture........................................... 11
Independent......................................... 11
Intercreditor Agreement............................. 11
Interest Payment Date............................... 11
Interest Rate Agreement............................. 11
Internal Revenue Code............................... 11
Investment.......................................... 11
Issue Date.......................................... 12
Joint Venture....................................... 12
Lenders............................................. 12
Lender Secured Property............................. 12
Lien................................................ 12
Maturity Date....................................... 12
Meyers.............................................. 12
Mortgage............................................ 12
Net Cash Proceeds................................... 12
Net Income.......................................... 13
Net Insurance Proceeds.............................. 13
Non-Collateral Proceeds............................. 13
Non-Recourse Indebtedness........................... 13
Non-Recourse Subsidiary............................. 14
Obsolete Assets..................................... 14
Officers' Certificate............................... 14
Opinion of Counsel.................................. 14
Outstanding......................................... 14
Paying Agent........................................ 15
Permitted Liens..................................... 15
Permitted Payments.................................. 16
Permitted Related Acquisition....................... 17
Person.............................................. 17
Predecessor Security................................ 17
Preferred Stock..................................... 17
Prospectus.......................................... 17
Recourse Subsidiaries............................... 17
Reference Period.................................... 17
Regular Record Date................................. 17
Release Agreement................................... 17
Released Interests.................................. 18
Released Trust Moneys............................... 18
-ii-
<PAGE>
Page(s)
-------
Responsible Officer................................. 18
Restricted Investment............................... 18
Restricted Payment.................................. 18
Restricted Subsidiary............................... 19
Retained Trust Moneys............................... 19
Sale and Leaseback Transaction...................... 19
Security Documents.................................. 19
Security Register and Security Registrar............ 19
Service Agreement................................... 19
Special Record Date................................. 19
Stated Maturity..................................... 19
Subsidiary.......................................... 19
Subsidiary Guarantee................................ 20
Subsidiary Security Agreement....................... 20
Tax Lessor.......................................... 20
TBT Lease........................................... 20
Trade Payables...................................... 20
Transaction......................................... 20
Trust Moneys........................................ 20
Trust Moneys Release Notice......................... 21
Trustee............................................. 21
Trust Indenture Act................................. 21
Trust Officer....................................... 21
Tulsa Facility...................................... 21
U.S. Government Obligations......................... 21
VAIC................................................ 22
Valuation Date...................................... 22
Vice President...................................... 22
Voest-Alpine........................................ 22
Wholly-Owned Recourse Subsidiary.................... 22
Wholly-Owned Subsidiary............................. 22
Withdrawal Notice................................... 22
SECTION 1.2. Compliance Certificates and Opinions...... 22
SECTION 1.3. Form of Documents Delivered to Trustee.... 23
SECTION 1.4. Acts of Holders; Record Dates............. 23
SECTION 1.5. Notices, Etc., to Trustee and Company..... 24
SECTION 1.6. Notice to Holders; Waiver................. 25
SECTION 1.7. Conflict with Trust Indenture Act......... 25
SECTION 1.8. Effect of Headings and Table of
Contents................................ 26
SECTION 1.9. Successors and Assigns.................... 26
SECTION 1.10. Separability Clause....................... 26
SECTION 1.11. Benefits of Indenture..................... 26
SECTION 1.12. Governing Law............................. 26
SECTION 1.13. Legal Holidays............................ 26
SECTION 1.14. Immunity of Incorporators, Stockholders,
Officers and Directors.................. 27
-iii-
<PAGE>
Page(s)
-------
ARTICLE II
SECURITY FORMS...................... 27
SECTION 2.1. Forms Generally........................... 27
SECTION 2.2. Form of Face of Security.................. 28
SECTION 2.3. Form of Trustee's Certificate of
Authentication.......................... 35
ARTICLE III
THE SECURITIES...................... 35
SECTION 3.1. Title and Terms........................... 35
SECTION 3.2. Denominations............................. 36
SECTION 3.3. Execution, Authentication, Delivery
and Dating.............................. 36
SECTION 3.4. Temporary Securities...................... 37
SECTION 3.5. Registration; Registration of Transfer
and Exchange............................ 37
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen
Securities.............................. 40
SECTION 3.7. Payment of Interest; Interest Rights
Preserved............................... 41
SECTION 3.8. Persons Deemed Owners..................... 42
SECTION 3.9. Cancellation.............................. 42
SECTION 3.10. Computation of Interest................... 43
SECTION 3.11. Paying Agent.............................. 43
ARTICLE IV
SATISFACTION AND DISCHARGE................ 43
SECTION 4.1. Satisfaction and Discharge of Indenture... 43
SECTION 4.2. Application of Trust Money................ 44
ARTICLE V
REDEMPTION........................ 45
SECTION 5.1. Notices to Trustee........................ 45
SECTION 5.2. Selection of Securities To Be Redeemed.... 45
SECTION 5.3. Notice of Redemption...................... 45
SECTION 5.4. Effect of Notice of Redemption............ 46
SECTION 5.5. Deposit of Redemption Price............... 47
SECTION 5.6. Securities Redeemed in Part............... 47
SECTION 5.7. Securities Exchange Act Requirements...... 47
ARTICLE VI
COVENANTS........................ 47
SECTION 6.1. Payment of Securities..................... 47
-iv-
<PAGE>
Page(s)
-------
SECTION 6.2. Maintenance of Office or Agency........... 48
SECTION 6.3. Corporate Existence....................... 48
SECTION 6.4. Payment of Taxes and Other Claims;
Tax Consolidation....................... 49
SECTION 6.5. Compliance Certificates................... 49
SECTION 6.6. SEC Reports............................... 50
SECTION 6.7. Waiver of Stay, Extension or Usury Laws... 51
SECTION 6.8. Maintenance of Properties; Insurance;
Books and Records; Compliance with
Law..................................... 51
SECTION 6.9. Limitations on Indebtedness............... 52
SECTION 6.10. Limitation on Liens....................... 54
SECTION 6.11. Limitation on the Issuance of
Preferred Stock by Subsidiaries......... 55
SECTION 6.12. Transfer of Assets to Subsidiaries........ 56
SECTION 6.13. Limitations on Restricted Payments........ 56
SECTION 6.14. Limitations on Transactions
with Stockholders and Affiliates........ 57
SECTION 6.15. Restrictions on Assets Sales............. 58
SECTION 6.16. Limitation on Dividend and Other
Payment Restrictions Affecting
Subsidiaries........................... 61
SECTION 6.17. Limitation on Sale and Leaseback
Transactions............................ 62
SECTION 6.18. Limitation on Investment, Loans
and Advances............................ 62
SECTION 6.19. Change of Control......................... 63
SECTION 6.20. Limitations as to Non-Recourse
Subsidiaries............................ 65
SECTION 6.21. Impairment of Security Interest........... 66
SECTION 6.22. Conflicting Agreements.................... 66
SECTION 6.23. Amendment to Security Documents........... 66
SECTION 6.24. Inspection................................ 66
SECTION 6.25. Use of Proceeds........................... 67
SECTION 6.26. Money for Security Payments to Be Held
in Trust................................ 67
ARTICLE VII
SUCCESSOR CORPORATION.................. 68
SECTION 7.1. When Company May Merge, etc............... 68
SECTION 7.2. Surviving Person Substituted.............. 69
ARTICLE VIII
EVENTS OF DEFAULT.................... 70
SECTION 8.1. Events of Default......................... 70
SECTION 8.2. Acceleration of Maturity; Rescission
and Annulment........................... 72
SECTION 8.3. Collection of Debt and Suits for
Enforcement by Trustee.................. 73
-v-
<PAGE>
Page(s)
-------
SECTION 8.4. Trustee May File Proofs of Claims......... 74
SECTION 8.5. Trustee May Enforce Claims
Without Possession of Securities........ 74
SECTION 8.6. Application of Money Collected........... 75
SECTION 8.7. Limitation on Suits...................... 75
SECTION 8.8. Unconditional Right of Holders to
Receive Principal and Interest......... 76
SECTION 8.9. Restoration of Rights and Remedies....... 76
SECTION 8.10. Rights and Remedies Cumulative........... 77
SECTION 8.11. Delay or Omission Not Waiver............. 77
SECTION 8.12. Control by Holders....................... 77
SECTION 8.13. Waiver of Past Defaults.................. 78
SECTION 8.14. Undertaking for Costs.................... 78
SECTION 8.15. Waiver of Stay or Extension Laws......... 78
SECTION 8.16. Collection Suit by Trustee............... 79
ARTICLE IX
THE TRUSTEE....................... 79
SECTION 9.1. Certain Duties and Responsibilities...... 79
SECTION 9.2. Notice of Defaults....................... 79
SECTION 9.3. Certain Rights of Trustee................ 80
SECTION 9.4. Not Responsible for Recitals
or Issuance of Securities.............. 81
SECTION 9.5. May Hold Securities...................... 81
SECTION 9.6. Money Held in Trust...................... 82
SECTION 9.7. Compensation and Reimbursement........... 82
SECTION 9.8. Disqualification; Conflicting
Interests.............................. 83
SECTION 9.9. Corporate Trustee Required;
Eligibility............................ 83
SECTION 9.10. Resignation and Removal; Appointment
of Successor........................... 83
SECTION 9.11. Acceptance of Appointment by Successor... 85
SECTION 9.12. Merger, Conversion, Consolidation or
Succession to Business................. 85
SECTION 9.13. Preferential Collection of Claims
Against Company........................ 86
SECTION 9.14. Appointment of Authenticating Agent...... 86
ARTICLE X
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY.... 88
SECTION 10.1. Company to Furnish Trustee
Names and Addresses of Holders......... 88
SECTION 10.2. Preservation of Information;
Communications to Holders.............. 88
SECTION 10.3. Reports by Trustee....................... 88
SECTION 10.4. Reports by Company....................... 89
ARTICLE XI
-vi-
<PAGE>
Page(s)
-------
SUPPLEMENTAL INDENTURES................. 89
SECTION 11.1. Supplemental Indentures without
Consent of Holders..................... 89
SECTION 11.2. Supplemental Indentures with Consent
of Holders............................. 90
SECTION 11.3. Execution of Supplemental Indentures..... 91
SECTION 11.4. Effect of Supplemental Indentures........ 92
SECTION 11.5. Conformity with Trust Indenture Act...... 92
SECTION 11.6. Reference in Securities to
Supplemental Indentures................ 92
ARTICLE XII
COLLATERAL AND SECURITY................. 92
SECTION 12.1. Collateral and Security Documents........ 92
SECTION 12.2. Recording and Opinions................... 94
SECTION 12.3. Release of Collateral.................... 95
SECTION 12.4. Possession and Use of Collateral......... 96
SECTION 12.5. Specified Releases of Collateral......... 96
SECTION 12.6. Disposition of Collateral Without
Release................................ 98
SECTION 12.7. Form and Sufficiency of Release.......... 98
SECTION 12.8. Purchaser Protected...................... 99
SECTION 12.9. Authorization of Actions To Be Taken
by The Trustee Under the Security
Documents.............................. 99
SECTION 12.10. Authorization of Receipt of Funds by
the Trustee Under the Security
Documents..............................100
ARTICLE XIII
APPLICATION OF TRUST MONEYS...............100
SECTION 13.1. Collateral Account.......................100
SECTION 13.2. Withdrawals of Insurance Proceeds
and Condemnation Awards................100
SECTION 13.3. Withdrawal of Trust Moneys for
Asset Sale Offer.......................102
SECTION 13.4. Withdrawal of Trust Moneys for
Permitted Related Acquisitions.........103
SECTION 13.5. Withdrawal of Trust Moneys for
Retention by the Company or its
Subsidiaries...........................104
SECTION 13.6. Withdrawal of Trust Moneys
on Basis of Retirement of
Securities.............................105
SECTION 13.7. Investment of Trust Moneys................106
-vii-
<PAGE>
Page(s)
-------
ARTICLE XIV
DEFEASANCE AND COVENANT DEFEASANCE............106
SECTION 14.1. Company's Option to Effect Defeasance
or Covenant Defeasance.................106
SECTION 14.2. Defeasance and Discharge.................107
SECTION 14.3. Covenant Defeasance......................107
SECTION 14.4. Conditions to Defeasance or Covenant
Defeasance.............................107
SECTION 14.5. Deposited Money and U.S. Government
Obligations to be held in Trust;
Other Miscellaneous Provisions.........110
SECTION 14.6. Reinstatement............................110
EXHIBITS
EXHIBIT A Form of Company Security Agreement
EXHIBIT B-1 Form of Mortgage (Louisiana)
EXHIBIT B-2 Form of Mortgage (non-Louisiana)
EXHIBIT C Form of Subsidiary Guarantee
EXHIBIT D Form of Subsidiary Security Agreement
EXHIBIT E Form of Release Agreement
EXHIBIT F Form of Intercreditor Agreement
-viii-
<PAGE>
INDENTURE, dated as of __________, 1994 between BAYOU STEEL CORPORATION, a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company"), having its principal office at River Road,
LaPlace, Louisiana 70069, and FIRST NATIONAL BANK OF COMMERCE, a corporation
duly organized and existing under the laws of the State of _______, as Trustee
(herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its ___% First
Mortgage Notes due 2001 (herein called the "Securities") of substantially the
tenor and amount hereinafter set forth, and to provide therefor the Company has
duly authorized the execution and delivery of this Indenture.
All things necessary to make the Securities, when executed by the Company
and authenticated and delivered hereunder and duly issued by the Company, the
valid obligations of the Company, and to make this Indenture a valid agreement
of the Company, in accordance with their and its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually agreed, for the equal and proportionate
benefit of all Holders of the Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1. Definitions
-----------
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any
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2
computation required or permitted hereunder shall mean such accounting
principles as are generally accepted at the date of this instrument; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified
in Section 1.4.
"Affiliate" means, with respect to any specific Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specific Person. For the purposes of this definition,
"control," as used with respect to any Person, means 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, or
by agreement or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Appraiser" means a Person who in the course of its business appraises
property and, where real property is involved, who is a member in good standing
of the American Institute of Real Estate Appraisers, recognized and licensed to
do business in the jurisdiction where the applicable real property is situated,
and who may be employed by the Company.
"Asset Acquisition" means (i) any capital contribution (by means of
transfer of cash or other property to others or payments for property or
services for the account or use of others, or otherwise), or purchase or
acquisition of Capital Stock by the Company or any of its Subsidiaries in any
other Person, in either case pursuant to which such Person shall become a
Subsidiary of the Company or any of its Subsidiaries or shall be merged with or
into the Company or any of its Subsidiaries or (ii) any acquisition by the
Company or any of its Subsidiaries of the assets of any Person which constitute
substantially all of an operating unit or business of such Person.
"Asset Sale" means any direct or indirect sale, conveyance, transfer,
lease or other disposition to any Person (including any Non-Recourse Subsidiary)
other than the Company or a Wholly-Owned Recourse Subsidiary of the Company, in
one transaction or a series of related transactions, of (i) any Capital Stock of
any Subsidiary of the Company or (ii) any other property or asset of the Company
or any Subsidiary of the Company, in each case, other than in the ordinary
course of business.
"Asset Sale Offer" has the meaning specified in Section 6.15(b).
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3
"Asset Sale Payment Date" has the meaning specified in Section
6.15(c).
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 9.14 to act on behalf of the Trustee to authenticate
Securities.
"Available Amount" has the meaning specified in Section 6.15(b).
"Bankruptcy Law" means Title 11, United States Code or any similar
Federal or state law for the relief of debtors, as amended.
"Board of Directors" means either the board of directors of the Company
or its Subsidiaries, as the case may be, or any duly authorized committee of
such boards or any duly authorized committee consisting of one or more officers
and/or directors of the Company, as the case may be.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company or its Subsidiaries, as the
case may be, to have been duly adopted by the Board of Directors of the Company
or its Subsidiaries, as the case may be, and to be in full force and effect on
the date of such certification, and delivered to the Trustee.
"BSPL" means Bayou Steel Properties Limited, formerly RSR Steel
Corporation, which is the owner of 100% of the Class B Common Stock of the
Company.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York City or New
Orleans are authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, warrants, options or other equivalents (however
designated and whether voting or non-voting) of capital stock of a corporation
and any and all equivalent ownership interests in a Person (other than a
corporation), in each case whether outstanding on the Issue Date or thereafter
issued, including, without limitation, all Common Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) the discounted present value of the
rental obligations of such Person or lessee under which, in conformity with
GAAP, is required to be capitalized on the balance sheet of that Person.
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4
"Capitalized Lease Obligation" means the discounted present value of the
rental obligations of any Person under any Capitalized Lease.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness
with a maturity of 365 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or acceptances with a
maturity of 180 days or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $250,000,000; (iii) commercial paper with a maturity of
180 days or less issued by a corporation (except an Affiliate of the Company)
organized under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by Standard & Poor's Corporation or at least P-1
by Moody's Investors Service, Inc.
"Change of Control" means the occurrence of one or more of the
following events:
(a) the direct or indirect sale, lease, exchange or other
transfer of all or substantially all of the assets of the Company to
any Person or entity or group of Persons or entities acting in concert
as a partnership or other group (a "Group of Persons") other than an
Affiliate of the Company;
(b) the consummation of any consolidation or merger of the
Company with or into another corporation with the effect that the
stockholders of the Company as of the date of the Indenture hold less
than 51% of the combined voting power of the outstanding voting
securities of the surviving entity of such merger or the corporation
resulting from such consolidation ordinarily having the right to vote
in the election of directors (apart from rights accruing under special
circumstances) immediately after such merger or consolidation;
(c) the stockholders of the Company shall approve any plan or
proposal for the liquidation or dissolution of the Company; and
(d) a Person or Group of Persons acting in concert as a
partnership, limited partnership, syndicate or other group (other than
management of the Company and their respective Affiliates) shall, as a
result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise, have become the direct or indirect
beneficial owner (within the meaning of Rule 13d-3 under the Exchange
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5
Act) of securities of the Company representing a majority or more of
the combined voting power of the then outstanding securities of the
Company ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors.
For purposes of this definition, the following shall not be considered
a Change of Control:
(i) transfers among (A) Meyers; (B) any son, daughter, stepson,
stepdaughter or spouse of Meyers; (C) any lineal descendant of an
individual referred to in clause (A) or (B); or (D) any trust in which one
or more of the Persons referred to in clause (A), (B) or (C) are principal
beneficiaries; or
(ii) a merger resulting in the proportionate interest of the
Class B Common Stock held by BSPL being held by BSPL's shareholders,
provided such transaction shall have no adverse effect on the Company.
"Change of Control Date" has the meaning specified in Section 6.19.
"Change of Control Offer" has the meaning specified in Section 6.19.
"Change of Control Payment Date" has the meaning specified in Section
6.19.
"Collateral" means, collectively, all of the property and assets
(including, without limitation, Trust Moneys) that are from time to time subject
to the Lien of the Security Documents.
"Collateral Account" means the collateral account to be established
pursuant to the Indenture.
"Collateral Agent" means the Trustee in its capacity as agent for the
Holders under the Security Documents.
"Collateral Proceeds" means the Net Cash Proceeds received by the
Collateral Agent from the sale of Collateral.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, or, if
at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Common Stock" includes any stock of any class of the Company which has
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary
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6
liquidation, dissolution or winding-up of the Company and which is not subject
to redemption by the Company.
"Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"Company Obligations" has the meaning specified in Section 12.1(a).
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Company Security Agreement" means the Security Agreement dated as of
the date hereof between the Company and the Trustee, in substantially the form
attached hereto as Exhibit A, as the same may be amended, supplemented or
otherwise modified from time to time.
"Condemnation Award" means any proceeds, award or payment paid to the
mortgagee or beneficiary under the Mortgages pursuant to Section ___ of each
Mortgage relating to any taking of the Collateral subject to such Mortgage by
condemnation or eminent domain or sold pursuant to the exercise by the United
States of America or any state, municipality or other governmental authority of
any right which it may then have to purchase, or to designate a purchaser or to
order a sale of any part of the Collateral, together with interest accrued
thereon, less certain expenses.
"Consolidated Cash Flow" of any Person for any period means the sum of
(a) Consolidated Net Income of such Person; (b) Consolidated Domestic Income Tax
Expense; (c) Consolidated Fixed Charges; (d) depreciation and amortization
expense determined on a consolidated basis for such Person and its Consolidated
Subsidiaries in accordance with GAAP for such period (but only to the extent not
included in Consolidated Fixed Charges); and (e) all other non-cash items
decreasing Consolidated Net Income for such period, in each case determined for
such Person and its consolidated Subsidiaries in accordance with GAAP; provided,
that the amounts set forth in clauses (b) through (d) will be included only to
the extent such amounts reduced Consolidated Net Income.
"Consolidated Domestic Income Tax Expense" of any Person for any period
means, without duplication, the aggregate amount of net U.S. taxes based on
income or profits for such period of the operations of such Person and its
consolidated Subsidiaries, determined in accordance with GAAP (to the extent
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7
such income or profits were included in computing Consolidated Net Income).
"Consolidated Fixed Charges" of any Person for any period means, without
duplication, the aggregate of (a) Consolidated Interest Expense; (b) the
interest component of Capitalized Lease Obligations determined on a consolidated
basis on such Person and its Consolidated Subsidiaries in accordance with GAAP;
and (c) cash and non-cash dividends paid or payable on any Preferred Stock or
Disqualified Stock (except dividends paid or payable in shares of Disqualified
Stock) of such Person or any of its Subsidiaries (other than dividends paid or
payable to such Person), determined in accordance with GAAP.
"Consolidated Fixed Charge Ratio" means the ratio, on a pro forma basis,
of (a) the Consolidated Cash Flow of any Person for the Reference Period
immediately prior to the date of the transaction giving rise to the need to
calculate the Consolidated Fixed Charge Ratio (the "Transaction Date") to (b)
the Consolidated Fixed Charges of such Person during such Reference Period;
provided, that in making such computation, (i) the incurrence of the
Indebtedness giving rise to the need to calculate the Consolidated Fixed Charge
Ratio and the application of the proceeds therefrom shall be assumed to have
occurred on the first day of the Reference Period; (ii) Asset Sales and Asset
Acquisitions which occur during the Reference Period or subsequent to the
Reference Period but prior to the incurrence of the Indebtedness in question
(but including any Asset Acquisition to be made with such Indebtedness) shall be
assumed to occur on the first day of the Reference Period; (iii) the issuance of
any Indebtedness during the Reference Period or subsequent to the Reference
Period but prior to the Transaction Date and the application of the proceeds
therefrom shall be assumed to have occurred on the first day of the Reference
Period; (iv) the Consolidated Interest Expense attributable to interest on any
Indebtedness (whether existing or being incurred) computed on a pro forma basis
and bearing a floating interest rate shall be computed as if the rate is effect
on the date of computation had been the applicable rate for the entire period,
unless such Person or any of its Subsidiaries is a party to an Interest Rate
Agreement which has the effect of reducing the interest rate below the rate on
the date of computation, in which case such lower rate shall be used; and (v)
there shall be excluded from Consolidated Fixed Charges any Consolidated Fixed
Charges related to any Indebtedness which was outstanding during and subsequent
to the Reference Period but is not outstanding on the Transaction Date, except
for Consolidated Fixed Charges actually incurred with respect to Indebtedness
borrowed under a revolving credit or similar arrangement to the extent the
commitment thereunder remains in effect on the Transaction Date. For the
purpose of making the computation referred to in the preceding sentence, Asset
Sales and Asset Acquisitions which have been made by any Person which has become
a Subsidiary of the Company or been merged with or into the Company or any
Subsidiary of the Company
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8
during the Reference Period or subsequent to the Reference Period and prior to
the Transaction Date shall be calculated on a pro forma basis (including all of
the calculations referred to in numbers (i) through (v) of the preceding
sentence) assuming such Asset Sales or Asset Acquisitions occurred on the first
day of the Reference Period.
"Consolidated Interest Expense" of any Person for any period means the
sum of (a) the aggregate interest expense (including amortization of original
issue discount and non-cash interest payments or accruals) of such Person and
its Consolidated Subsidiaries for such period and (b) to the extent not included
in clause (a), all commissions, discounts and other fees and charges owed with
respect to letters of credit and banker's acceptance financing, the net cost
associated with Interest Rate Agreements and Currency Agreements, amortization
of other financing fees and expenses and the interest portion of any deferred
payment obligation.
"Consolidated Net Income" of any Person for any period means the Net
Income of such Person and its Consolidated Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP; provided, that there
shall be excluded (i) the Net Income of any Person (other than a Consolidated
Subsidiary) in which such Person or any of its Consolidated Subsidiaries has a
joint interest with a third party except to the extent of the amount of
dividends or distributions actually paid to such Person or a Subsidiary during
such period; (ii) except to the extent includable pursuant to the foregoing
clause (i), the Net Income of any Person accrued prior to the date it becomes a
Subsidiary of such Person or is merged into or consolidated with such Person or
any of its Subsidiaries or that Person's assets are acquired by such Person or
any of its Subsidiaries; (iii) the Net Income (if positive), or any portion
thereof, of any Subsidiary of such Person to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary to such Person
or to any other Subsidiary of such Net Income is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary; (iv) without duplication, any gains or losses attributable to Asset
Sales; (v) Net Income (if positive), arising from the adoption of changes in
accounting policy to comply with GAAP or voluntarily by the Company with the
consent of its independent auditors that so qualify under Regulation S-X of the
Securities Act; (vi) Net Income arising in connection with a merger, combination
or consolidation that is accounted for as a pooling of interests; and (vii)
foreign currency translation gains and losses.
"Consolidated Net Worth" of any Person means as of any date all amounts
that would be included under stockholders' equity on a consolidated balance
sheet of such Person and its Consolidated Subsidiaries determined in accordance
with GAAP.
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9
"Consolidated Subsidiary" of any Person means a Subsidiary which for
financial reporting purposes is or, in accordance with GAAP, should be,
accounted for by such Person as a consolidated Subsidiary.
"Corporate Trust Office" means the principal office of the Trustee in
New Orleans at which at any particular time its corporate trust business shall
be administered.
"corporation" means a corporation, association, company, joint-stock
company or business trust.
"Credit Facility" means the Credit Agreement, dated June 28, 1989, as
amended and restated through November 23, 1993, among the Company, the Lenders
named therein and Chemical Bank, as agent and lender, or any renewal,
refinancing or continuation thereof as each of the foregoing may be amended,
supplemented or otherwise modified from time to time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Default" means any event which is, or after the giving of notice or
passage of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" means The Depository Trust Company or any successor
thereto.
"Disqualified Stock" means any Capital Stock which, 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 redeemable at
the option of the holder thereof, in whole or in part on, or prior to, the final
maturity date of the Securities.
"Event of Default" has the meaning specified in Section 8.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Advisor" means an investment banking firm of national
reputation which (except as otherwise expressly provided in this Indenture) may
be employed by the Company.
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10
"GAAP" means generally accepted accounting principles in the United
States as in effect from time to time, including, without limitation, those 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 may be approved by a significant segment of
the account profession of the United States, which are applicable as of the date
of determination.
"Global Security" means a Security evidencing all or part of a series of
Securities which is issued to the Depositary or its nominee and is registered in
the name of the Depositary or its nominee.
"Guarantee" means, as applied to any Indebtedness, (a) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such Indebtedness, and (b) an agreement, direct or indirect, contingent
or otherwise, the practical effect of which is to assure the payment or
performance (or payment of damages in the event of nonperformance) of any part
or all of such Indebtedness, including, without limiting the foregoing, the
payment of amounts drawn under letters of credit. The amount of any Guarantee
shall be deemed to be an amount equal to the stated or determinable amount of
the primary obligation in respect of which such Guarantee is made (unless such
Guarantee shall be expressly limited to a lesser amount, in which case such
lesser amount shall apply) or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by such Person
in good faith.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" of any Person means at any date, without duplication, (a)
all obligations of such Person for borrowed money or evidenced by bonds,
debentures, notes or other similar instruments; (b) all obligations of such
Person in respect of letters of credit or other similar instruments (or
reimbursement obligations with respect thereto); (c) all obligations of such
Person to pay the deferred purchase price of property or services, except Trade
Payables; (d) all Capitalized Lease Obligations of such Person; (e) all
Indebtedness of others secured by a Lien on any asset of such Person, whether or
not such Indebtedness is assumed by such Person, provided that, for purposes of
determining the amount of any Indebtedness of the type described in this clause,
if recourse with respect to such Indebtedness is limited to such asset, the
amount of such Indebtedness shall be limited to the fair market value of the
asset; (f) to the extent not otherwise included, all obligations under Interest
Rate Agreements and Currency Agreements; (g) all Guarantees of such Person in
respect of Indebtedness of others;
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11
and (h) all Disqualified Stock issued by such Person (the amount of Indebtedness
represented by any Disqualified Stock will be the greater of the voluntary or
involuntary liquidation preference plus accrued and unpaid dividends).
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Independent" when used with respect to any specified Person means such
a Person who (a) is in fact independent, (b) does not have any direct financial
interest or any material indirect financial interest in the Company or in any
other obligor in respect of the Securities or in any Affiliate of the Company or
such other obligor and (c) is not an officer, employee, promotor, underwriter,
trustee, partner, director or person performing similar functions to any of the
foregoing for the Company or such other obligor or any Affiliate thereof.
Whenever it is provided in the Indenture that any Independent Person's opinion
or certificate shall be furnished to the Trustee, such Person shall be appointed
by the Company and approved by the Trustee in the exercise of reasonable care,
and such opinion or certificate shall state that the signer has read this
definition and that the signer is Independent within the meaning thereof.
"Intercreditor Agreement" means the Intercreditor Agreement dated of
even date herewith among the Company, Chemical Bank, as agent for the financial
institutions parties to the Credit Facility and Hibernia National Bank, in
substantially the form of Exhibit __ hereto, as the same may be amended,
supplemented or otherwise modified from time to time.
"Interest Payment Date" means the stated Maturity of an installment of
interest on the Securities.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge agreement, to or under which the Company or any
of its Subsidiaries is a party or a beneficiary on the date of the Indenture or
becomes a party or a beneficiary thereafter.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Investment" of any Person means all investments in other Persons in the
form of loans, advances or capital contributions (excluding commission, travel
and similar advances
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12
to officers and employees made in the ordinary course of business), purchase (or
other acquisitions for consideration) of Indebtedness, Capital Stock or other
securities issued by any other Person.
"Issue Date" means the original date of issuance of the Securities.
"Joint Venture" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; provided,
that as to any such arrangement in corporate form, such corporation shall not,
as to any Person of which such corporation is a Subsidiary, be considered to be
a Joint Venture to which such Person is a party.
"Lenders" means the lenders who are from time to time parties to the
Credit Facility.
"Lender Secured Property" means the accounts receivable and inventory
(excluding certain rolling equipment classified as inventory in the books and
records of the Company) of the Company, and the proceeds thereof, that secure
the obligations of the Company under the Credit Facility and the Tulsa Facility.
"Lien" means, with respect to any property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
property. For the purposes of the Indenture and the Security Documents, the
Company and its Subsidiaries shall be deemed to own subject to a Lien any
property which they have acquired or hold subject to the interest of a vendor or
lessor under any conditional sales agreement, capital lease or other title
retention agreement relating to such property.
"Maturity Date" when used with respect to any Security, means the date
on which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption, Asset Sales Offer, Change of Control Offer or
otherwise.
"Meyers" means Howard M. Meyers, an individual with a business address
on the Issue Date at 1111 Mockingbird Lane, Dallas, Texas.
"Mortgage" means each mortgage (or deed of trust) dated as of the date
hereof, between the Company and the Trustee or between a Subsidiary of the
Company and the Trustee, in either case in substantially the form of Exhibit B-1
or B-2 hereto, as the same may be amended, supplemented or modified from time to
time in accordance with its terms.
"Net Cash Proceeds" from a sale, transfer or other disposition of
properties or assets means cash payments received
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13
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received (including any cash received upon sale or disposition of such note or
receivable), excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to such properties or assets or received in any other non-cash form) therefrom,
in each case, net of all legal, title and recording tax expenses, commissions
and other fees and expenses incurred, and all Federal, state, provincial,
foreign and local taxes required to be accrued as a liability under GAAP as a
consequence of such sale, transfer or other disposition, and in each case net of
appropriate amounts to be provided by the Company as a reserve, in accordance
with GAAP, against any liabilities associated with such assets and retained by
the Company or any Subsidiary after such sale, transfer or other disposition,
including, without limitation, pension and other post-employment benefit
liabilities and liabilities related to environmental matters and the after-tax-
cost of any indemnification payments (fixed and contingent) attributable to
seller's indemnities to the purchaser undertaken by the Company or any of its
Subsidiaries in connection with such sale, transfer or other disposition (but
excluding any payments, which by the terms of the indemnities will not, under
any circumstances, be made during the term of the Securities) and net of all
payments made on any Indebtedness which is secured by such assets, in accordance
with the terms of any Lien upon or with respect to such assets or which must by
its terms, or in order to obtain a necessary consent to such asset disposition,
or by applicable law be repaid out of the proceeds from such sale, transfer or
other disposition, and net of all distributions and other payments made to
minority interest holders in Subsidiaries or Joint Ventures as a result of such
sale, transfer or other disposition.
"Net Income" of any Person for any period means the net income (loss) of
such Person for such period, determined in accordance with GAAP, except that
extraordinary, unusual and non-recurring gains and losses as determined in
accordance with GAAP shall be excluded.
"Net Insurance Proceeds" means all proceeds paid to the mortgagee or
beneficiary under the Security Documents pursuant to Section ___ of each
Mortgage or Section ___ of the Company Security Agreement or each Subsidiary
Security Agreement relating to damage to, or loss or destruction of,
improvements on equipment constituting Collateral, together with interest earned
thereon, less certain expenses.
"Non-Collateral Proceeds" means the Net Cash Proceeds of any Asset
Sale that does not represent Collateral Proceeds.
"Non-Recourse Indebtedness" means Indebtedness of a Non-Recourse
Subsidiary where (a) neither the Company nor any Subsidiary (other than such
Non-Recourse Subsidiary): (i)
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14
provides any Guarantee or credit support for such Indebtedness (including any
undertaking, guaranty, indemnity, agreement or instrument which would constitute
Indebtedness); or (ii) is directly or indirectly liable for such Indebtedness;
(b) the holders of such Indebtedness expressly waive any recourse which they may
have, in law, equity or otherwise, whether based on misrepresentation, control,
ownership or otherwise, to the Company and any Subsidiary (other than such Non-
Recourse Subsidiary); and (c) no default with respect to such Indebtedness
(including any rights which the holder thereof may have to take enforcement
action against such Non-Recourse Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Company or any
Subsidiary (other than such Non-Recourse Subsidiary) to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity.
"Non-Recourse Subsidiary" means a special purpose Subsidiary of the
Company or any of its Subsidiaries formed to acquire securities or asses of a
third party and which (i) has no Indebtedness other than Non-Recourse
Indebtedness and (ii) does not, directly or indirectly, own any Indebtedness,
stock or securities of, and has no Investment in, the Company or any Recourse
Subsidiary.
"Obsolete Assets" means machinery, equipment, furniture, apparatus,
tools or implements or other similar property which have become worn out,
obsolete or no longer necessary to the operation of the business of the Company
or its Subsidiaries, as the case may be.
"Officers' Certificate" means, when used with respect to the Company, a
certificate signed by the Chairman of the Board, the President, a Vice Chairman
of the Board or the Chief Financial Officer of the Company (or any other officer
identified by any of the foregoing officers in an Officers' Certificate to be an
executive officer of the Company) and the Secretary, an Assistant Secretary or
the Controller of the Company. One of the officers signing an Officers'
Certificate given pursuant to Section 6.5 shall be the principal executive,
financial or accounting officer of the Company.
"Opinion of Counsel" means an opinion in writing signed by legal
counsel, who may be an employee of or of counsel to the Company, or who may be
other counsel satisfactory to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
<PAGE>
15
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and segregated
in trust by the Company (if the Company shall act as its own Paying Agent)
for the Holders of such Securities; provided, that if such Securities are
to be redeemed, notice of such redemption has been duly given pursuant to
this Indenture or provision therefor satisfactory to the Trustee has been
made; and
(iii) Securities which have been paid pursuant to Section 3.6 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid obligations of the
Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company or any other obligor upon the Securities or
any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company.
"Permitted Liens" means (a) Liens for taxes, assessments, governmental
charges or claims which are not yet delinquent or which are being contested in
good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor; (b) other Liens incidental to the conduct of the Company's and
its Subsidiaries' business or the ownership of its property and assets not
securing any Indebtedness, and which do not in the aggregate materially detract
from the value of the Company's and its Subsidiaries' property or assets when
taken as a whole, or materially impair the use thereof in the operation of its
business (including, without limitation, Liens securing any obligation to
landlords, vendors, carriers, warehousemen, mechanics, laborers and
<PAGE>
16
materialmen and other similar obligations arising by operation of law not yet
delinquent or which are being contested in good faith by appropriate
proceedings, if a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor); (c) Liens with
respect to assets of a Subsidiary granted by such Subsidiary to the Company to
secure Indebtedness owing to the Company; (d) Liens on assets owned by Non-
Recourse Subsidiaries to secure Non-Recourse Indebtedness; (e) Liens on assets
not constituting Collateral with an aggregate book value not in excess of 5% of
the book value of the Company's total assets as shown on the Company's most
recent consolidated balance sheet; (f) pledges and deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (g) deposits made to secure the
performance of tenders, bids, leases, statutory obligations, surety and appeal
bonds, government contracts, performance and return-of-money bonds and other
obligations of a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (h) zoning
restrictions, servitudes, easements, rights-of-way, restrictions and other
similar charges or encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount and which do not in any
case materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of the Company or its
Subsidiaries; (i) Liens arising out of judgments or awards against the Company
or any Subsidiary with respect to which the Company or such Subsidiary is
prosecuting an appeal or proceeding for review and the Company or such
Subsidiary is maintaining adequate reserves in accordance with GAAP; and (j) any
interest or title of a lessor in the property subject to any Capitalized Lease
Obligation or operating lease.
"Permitted Payments" means, with respect to the Company or any of its
Subsidiaries, (a) any dividend on shares of Capital Stock payable solely in
shares of Capital Stock (other than Disqualified Stock) or in options, warrants
or other rights to purchase Capital Stock (other than Disqualified Stock); (b)
any dividend, other distribution, loan or advance to the Company by any of its
Subsidiaries or by a Subsidiary to another Subsidiary (except a Non-Recourse
Subsidiary); (c) any defeasance, redemption, repurchase or other acquisition for
value of any Indebtedness of the Company with the proceeds from the issuance of
(i) Indebtedness which is subordinate to Securities at least to the extent and
in the manner as the Indebtedness to be defeased, redeemed, repurchased or
otherwise acquired is subordinate to the Securities in right of payment to the
Securities; provided, that (1) such subordinated Indebtedness provides for no
payments of principal by way of sinking fund, mandatory redemption or otherwise
(including defeasance at the option of the holder) by the Company or its
Subsidiaries (including, without limitation, at the option of the holder thereof
other than an option given to a holder pursuant to a
<PAGE>
17
"Change of Control" covenant which (x) is no more favorable to the holders of
such Indebtedness than the provisions in favor of the Holders and (y) such
Indebtedness provides that the Company or its Subsidiaries will not repurchase
such Indebtedness pursuant to such provisions prior to the Company's repurchase
of the Securities required to be repurchased by the Company upon a Change of
Control) prior to the maturity of the Indebtedness being replaced and (2) the
proceeds of such new Indebtedness are utilized for such purpose within 45 days
of issuance or (ii) Capital Stock (other than Disqualified Stock); and (d) the
redemption by a Wholly-Owned Subsidiary of its Capital Stock.
"Permitted Related Acquisition" has the meaning specified in Section
6.15(b).
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.6 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding or issued after
the Issue Date, and includes, without limitation, all classes and series of
preferred or preference stock.
"Prospectus" means the Prospectus dated ________ __, 1994 pursuant to
which the Securities were offered.
"Recourse Subsidiaries" means any Subsidiary other than a Non-Recourse
Subsidiary.
"Reference Period" means the four fiscal quarters for which financial
information is available preceding the date of a transaction giving rise to the
need to make a financial calculation.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the __________ or _________ (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Release Agreement" means the Release of Federal Income Tax Ownership
and Agreement dated as of the date hereof between
<PAGE>
18
the Trustee, the Company, Voest-Alpine and Meyers, in substantially the attached
hereto as Exhibit __, as the same may be amended, supplemented or otherwise
modified from time to time.
"Released Interests" has the meaning specified in Section 12.5(b).
"Released Trust Moneys" has the meaning specified in Section 13.4.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any Trust Officer or assistant Trust Officer, the controller
or any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means any Investment in any Person other than a
Wholly-Owned Recourse Subsidiary of the Company.
"Restricted Payment" means, with respect to any Person, (a) any dividend
or other distribution on any shares of such Person's Capital Stock (other than
dividends or distributions payable in Capital Stock that is not Disqualified
Stock); (b) any payment on account of the purchase, redemption, retirement or
other acquisition or (i) any shares of such Person's Capital Stock or (ii) any
option, warrant or other right to acquire shares of such Person's Capital Stock;
(c) any defeasance, redemption, repurchase or other acquisition or retirement
for value prior to scheduled maturity of any Indebtedness ranked pari passu or
subordinate in right of payment to the Securities and having a maturity date
subsequent to the maturity of the Securities; (d) any investment in, loan,
advance to, Guarantee on behalf of, directly or indirectly, or other transfer of
assets to (i) any Restricted Subsidiary or (ii) any holder of 5% or more of any
class of Capital Stock of the Company (including Affiliates thereof other than
Subsidiaries of the Company); and (e) any Restricted Investment (except to the
extent permitted by "Limitations on Investments, Loans and Advances"); provided,
that "Restricted Payments" shall not include any payment described in (a), (b)
or (c) above made by a Subsidiary to the Company or a Wholly-Owned Recourse
Subsidiary of the Company. Notwithstanding the foregoing, Restricted Payment
shall not include any Permitted Payment.
<PAGE>
19
"Restricted Subsidiary" means (a) any Joint Venture in which the Company
or any of its Subsidiaries holds a 50% or less interest or (b) any Subsidiary
which is not a Wholly-Owned Recourse Subsidiary or (c) any Subsidiary subject to
consensual restrictions, other than pursuant to the Credit Facility, direct or
indirect, on the declaration or payment of dividends or similar distributions by
that Subsidiary to the Company or any other Consolidated Subsidiary of the
Company.
"Retained Trust Moneys" has the meaning specified in Section 13.5.
"Sale and Leaseback Transaction" means, with respect to any Person, an
arrangement with any bank, insurance company or other lender or investor or to
which such lender or investor is a party, providing for the leasing by such
Person or any of its Subsidiaries of any property or asset of such Person or any
of its Subsidiaries which has been or is being sold or transferred by such
Person or such Subsidiary to such lender or investor or to any person to whom
funds have been or are to be advanced by such lender or investor on the security
of such property or asset.
"Security Documents" means, collectively, (i) the Mortgages, (ii) the
Company Security Agreements, (iii) the Subsidiary Security Agreements, (iv) the
Subsidiary Guarantee, (v) the Intercreditor Agreement, and (vi) any other
Mortgage, security agreement or other agreement evidencing a security interest
executed in accordance with Section 12.1 after the Issue Date.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Service Agreement" means the Service Agreement dated as of September 5,
1986, among the Company, Quexco Incorporated and RSR Corporation.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity", when used with respect to any Security or any
instalment of interest thereon, means the date specified in such Security as the
fixed date on which the principal of such Security or such instalment of
interest is due and payable.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which 50% or more of the Capital Stock or other ownership interests
have ordinary voting power to elect a majority of the board of directors of
other persons performing similar functions are at the time directly or
indirectly owned by such Person.
<PAGE>
20
"Subsidiary Guarantee" means each guarantee dated as of the date hereof,
or with respect to Persons that become Subsidiaries of the Company subsequent to
the Issue Date, as of such subsequent date, between the Trustee and each
Subsidiary of the Company, substantially in the form of Exhibit __ hereto, as
the same may be amended, supplemented or otherwise modified from time to time.
"Subsidiary Security Agreement" means each Security Agreement dated as
of the date hereof, or with respect to Persons that become Subsidiaries of the
Company subsequent to the Issue Date, as of such subsequent date, between the
Trustee and each Subsidiary of the Company, substantially in the form of Exhibit
D hereto, as the same may be amended, supplemented or otherwise modified from
time to time.
"Tax Lessor" means Amoco Tax Leasing I Corporation, a Delaware
corporation.
"TBT Lease" means the Agreement dated November 11, 1981 between the Tax
Lessor and the Company, as amended, supplemented or otherwise modified from time
to time.
"Trade Payables" means accounts payable or any other Indebtedness or
monetary obligations to trade creditors created or assumed by the Company or its
Subsidiaries in the ordinary course of business in connection with the obtaining
of materials or services.
"Transaction" has the meaning specified in Section 6.14.
"Trust Moneys" means all cash or Cash Equivalents received by the
Collateral Agent (a) upon the release of property from the Lien of the Security
Documents; or (b) Condemnation Proceeds with respect to Collateral; or (c) Net
Insurance Proceeds with respect to all or any part of the Collateral; or (d) as
proceeds of any other sale or other disposition of all or any part of the
Collateral by or on behalf of the Collateral Agent or any collection, recovery,
receipt, appropriation or other realization of or from all or any part of the
Collateral pursuant to the Security Documents or otherwise; or (e) for
application under Article XIII as elsewhere provided in this Indenture or the
Security Documents or whose disposition is not elsewhere otherwise specifically
provided for in the Indenture or in the Security Documents; provided, however,
that Trust Moneys shall not include any property deposited with the Trustee
pursuant to Article IV or XIV or Section 5.5 or delivered to or received by the
Trustee for application in accordance with Section 8.6 hereof. Trust Moneys
shall be held by the Trustee for the benefit of the Holders as a part of the
Collateral and, upon any entry upon or sale or other disposition of the
Collateral or any part thereof pursuant to the Security Documents, said Trust
Moneys shall be applied in accordance with
<PAGE>
21
Section 8.6; but, prior to any such entry, sale or other disposition, all or any
part of the Trust Moneys may be withdrawn, and shall be released, paid or
applied by the Trustee, from time to time as provided in Article XIII.
"Trust Moneys Release Notice" has the meaning specified in Section
13.4.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this instrument until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended,
and as in force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939, as so amended.
"Trust Officer" means any Vice President, any Assistant Vice President
or any other officer or assistant officer of the Trustee assigned by the Trustee
to administer its corporate trust matters.
"Tulsa Facility" means the Loan Agreement, dated as of January 9, 1991,
between the Company and Hibernia National Bank, together with the Mortgage,
Security Agreement and Financing Statement of even date therewith, each as
amended, supplemented or otherwise modified from time to time.
"U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act of 1933, as amended) as custodian with respect to any such
U.S. Government Obligation or a specific payment of principal of or interest on
any such U.S. Government Obligation held by such custodian for the account of
the holder of such depository receipt; provided, that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal of or interest on the U.S. Government Obligation evidenced by such
depository receipt.
<PAGE>
22
"VAIC" means Voest-Alpine International Corporation, a wholly-owned
subsidiary of Voest-Alpine.
"Valuation Date" has the meaning specified in Section 12.5(b).
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
"Voest-Alpine" means Voest-Alpine A.G., an Austrian company.
"Wholly-Owned Recourse Subsidiary" means a Wholly-Owned Subsidiary
that is a Recourse Subsidiary.
"Wholly-Owned Subsidiary" means, with respect to any Person, a
Subsidiary of which 95% of the Capital Stock (other than any director's
qualifying stock), or in the case of a non-corporate Subsidiary, other equity
interests having ordinary voting power for the election of directors or other
governing body of such Subsidiary, is owned by such Person or another Wholly-
Owned Subsidiary of such Person.
"Withdrawal Notice" has the meaning specified in Section 13.5.
SECTION 1.2. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act or under this Indenture. Each such certificate or opinion shall
be given in the form of an Officers' Certificate, if to be given by officers of
the Company, or an Opinion of Counsel, if to be given by counsel, and shall
comply with the requirements of the Trust Indenture Act and any other
requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(i) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
<PAGE>
23
(iii) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(iv) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.3. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one
such Person, or that they be so certified or covered by only one document,
but one such Person may certify or give an opinion with respect to some
matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an officer of the Company nay be
based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or
in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or
opinion of counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an officer or
officers of the Company stating that the information with respect to such
factual matters is in the possession of the Company, unless such counsel
knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
SECTION 1.4. Acts of Holders; Record Dates.
-----------------------------
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or
taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person
or by agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument
or instruments are delivered to the Trustee and, where it is hereby
<PAGE>
24
expressly required, to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 9.1) conclusive in favor of the Trustee
and the Company, if made in the manner provided in this Section 1.4.
(b) The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may be proved
in any manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of
determining the Holders entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to
vote on any action, authorized or permitted to be given or taken by
Holders. If not set by the Company prior to the first solicitation of a
Holder made by any Person in respect of any such action, or, in the case of
any such vote, prior to such vote, the record date for any such action or
vote shall be the 30th day (or, if later, the date of the most recent list
of Holders required to be provided pursuant to Section 10.1) prior to such
first solicitation or vote, as the case may be. With regard to any record
date, only the Holders on such date (or their duly designated proxies)
shall be entitled to give or take, or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued
upon the registration of transfer thereof or in exchange therefor or in
lieu thereof in respect of anything done, omitted or suffered to be done by
the Trustee or the Company in reliance thereon, whether or not notation of
such action is made upon such Security.
SECTION 1.5. Notices, Etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with:
(i) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed
in writing to or with the Trustee
<PAGE>
25
at its Corporate Trust Office, Attention: Corporate Trustee,
________________________, New Orleans, Louisiana _____; or
(ii) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to the
Company addressed to the attention of its Secretary at the address of its
principal office specified in the first paragraph of this instrument or at
any other address previously furnished in writing to the Trustee by the
Company.
SECTION 1.6. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each
Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date (if any), and not earlier than the
earliest date (if any), prescribed for the giving of such notice. In any
case where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular
Holder shall affect the sufficiency of such notice with respect to other
Holders. Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed
with the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every purpose
hereunder.
SECTION 1.7. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be
a part of and govern this Indenture, the latter provision shall control.
If any provision of this Indenture modifies or excludes any provision of
the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or to
be excluded, as the case may be.
<PAGE>
26
SECTION 1.8. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
SECTION 1.9. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 1.10. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 1.11. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their
successors hereunder and the Holders of Securities, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law.
-------------
This Indenture and the Securities shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 1.13. Legal Holidays.
--------------
In any case where any Interest Payment Date, Maturity Date or
Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the
Securities) payment of interest or principal need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the Interest Payment Date or Maturity Date, or at the
Stated Maturity; provided, that no interest shall accrue for the period
from and after such Interest Payment Date, Maturity Date or Stated
Maturity, as the case may be.
<PAGE>
27
SECTION 1.14. Immunity of Incorporators, Stockholders,
----------------------------------------
Officers and Directors.
----------------------
No recourse shall be had for the payment of the principal of or
interest on any Security or for any claim based thereon, or upon any
obligation, covenant or agreement of this Indenture, against any
incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
indirectly through the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law or by the enforcement of
any assessment of penalty or otherwise; it being expressly agreed and
understood that this Indenture and all the Securities are solely corporate
obligations, and that no personal liability whatever shall attach to, or is
incurred by, any incorporator, stockholder, officer or director, past,
present or future, of the Company or of any successor corporation, either
directly or indirectly through the Company or any successor corporation,
because of the incurring of the indebtedness hereby authorized or under or
by reason of any of the obligations, covenants or agreements contained in
this Indenture or in any of the Securities, or to be implied herefrom or
therefrom; and that all such personal liability is hereby expressly
released and waived as a condition of, and as part of the consideration
for, the execution of this Indenture and the issuance of the Securities.
ARTICLE II
SECURITY FORMS
SECTION 2.1. Forms Generally.
---------------
The Securities and the Trustee's certificates of authentication
shall be in substantially the forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements
placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution of the
Securities.
The definitive Securities shall be printed, lithographed or
engraved or produced by any combination of these methods on steel engraved
borders or may be produced in any other manner permitted by the rules of
any securities exchange on which the Securities may be listed, if any, all
as determined by the officers executing such Securities, as evidenced by
their execution of such Securities.
<PAGE>
28
SECTION 2.2. Form of Face of Security.
------------------------
BAYOU STEEL CORPORATION
No. _____________ $__________________
[Insert if the Security is to be a Global Security -- This Security is a
Global Security within the meaning of the Indenture hereinafter referred to and
is registered in the name of The Depository Trust Company (the "Depositary") or
a nominee of the Depositary. This Global Security is exchangeable for
Securities registered in the name of a Person other than the Depositary or its
nominee only in the limited circumstances described in the Indenture, and no
transfer of this Security (other than a transfer of this Security as a whole by
the Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary) may be registered except
in such limited circumstances.
Unless this Security is presented by an authorized representative of the
Depositary (55 Water Street, New York, New York) to the issuer or its agent for
registration of transfer, exchange or payment, and any Security issued upon
registration of transfer of, or in exchange for, or in lieu of, this Security is
registered in the name of Cede & Co. or such other name as requested by an
authorized representative of The Depository Trust Company and any payment hereon
is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof,
Cede & Co., has an interest herein.]
BAYOU STEEL CORPORATION, a corporation duly organized and existing under
the laws of Delaware (herein called the "Company", which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to [Insert if the Security is to be a Global
Security -- Cede & Co., as nominee for The Depository Trust Company]
______________, or registered assigns, the principal sum of ____________ Dollars
on ______________, and to pay interest thereon from ___________/1/ or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on and in each year, commencing ______________, at
the rate of ____% per annum, until the principal hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular
/1/ Insert date of the Indenture or, if the Securities are to be sold
"flat", the expected closing date.
<PAGE>
29
Record Date for such interest, which shall be the ____________ or ______________
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Securities not less
than 10 days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture. The
Company will pay interest on overdue principal and on overdue interest (to the
full extent permitted by law) at a rate of __% per annum.
Payment of the principal of and interest on this Security will be made
at the office or agency of the First National Bank of Commerce, acting as Paying
Agent, maintained for that purpose in the City of New Orleans, Louisiana, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public or private debts; provided, however, that
at the option of the Company payment of interest may be made by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Security Register; provided further, that a Holder of $10,000,000 in aggregate
principal amount of the Securities shall be entitled to receive payments of
interest by wire transfer in immediately available funds (but only if
appropriate payment instructions have been received in writing by the Paying
Agent not less than 15 calendar days prior to the applicable Interest Payment
Date). Holders must surrender the Security at maturity, whether such date occurs
by acceleration or otherwise, to the Paying Agent.
[Insert in place of preceding paragraph if the Security is to be a
Global Security -- Immediately available funds for the payment of the principal
of (and premium, if any) and interest on this Security due on any Interest
Payment Date, Maturity Date or Stated Maturity will be made available to the
Paying Agent to permit the Paying Agent to pay such funds to the Depositary
on such respective dates. The Depository will allocate and pay such funds to
the owners of beneficial interests in the Security in accordance with its
existing operating procedures.]
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any
<PAGE>
30
benefit under the Indenture or be valid or obligatory for any purpose.
The Company will appoint and at all times maintain a Paying Agent (which
may be the Trustee) authorized by the Company to pay the principal of (and
premium, if any) and interest on any Securities on behalf of the Company and
having an office or agency in the City of New Orleans, where Securities may be
presented or surrendered for payment and where notice, designations or requests
in respect of payments with respect to Securities may be served. The Company
has initially appointed The First National Bank of Commerce as such Paying
Agent, with its Corporate Trust Office currently at _____________________. The
Company will give prompt written notice to the Trustee of any such change in
appointment.
[Form of Reverse of Security]
---------------------------
This Security is one of a duly authorized issue of Securities of the
Company designated as its __% Securities due 2001 (herein called the
"Securities"), limited in aggregate principal amount to $75,000,000, issued and
to be issued under an Indenture, dated as of ___________, 1994 (herein called
the "Indenture"), between the Company and The First National Bank of Commerce,
as Trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. The terms of this
Security include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act. This Security is subject to
all such terms, and the Holders of the Securities are referred to the Indenture
and the Trust Indenture Act for a statement of them. Capitalized and certain
other terms used herein and not otherwise defined have the meanings set forth in
the Indenture.
This Security is a secured obligation of the Company limited in
aggregate principal amount to $75,000,000. The Indenture limits, among other
things, the ability of the Company to incur additional Indebtedness; create
Liens; make Restricted Payments; engage in certain transactions with Affiliates;
engage in Sale and Leaseback Transactions; dispose of assets, issue Preferred
Stock of Subsidiaries; transfer assets to its Subsidiaries; enter into
agreements that restrict the ability of its Subsidiaries to make dividends and
distributions; engage in mergers, consolidations and transfers of substantially
all of the Company's assets; make certain investments, loans, and advances; and
create Non-Recourse Subsidiaries. These limitations are subject to a number of
important qualifications and exceptions.
<PAGE>
31
The Company must report to the Trustee quarterly in compliance with the
limitations contained in the Indenture.
The Company, at its option, may redeem this Security, in whole or in
part, from time to time, at the redemption prices set forth below (expressed as
a percentage of the principal amount thereof), in each case together with
accrued interest, if any, to the date of redemption, if redeemed during the
twelve-month period beginning _______ ____ of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- --------------
<C> <S>
1998 %
1999 %
2000 %
</TABLE>
provided, that if the date fixed for redemption is ______ 15 or ____ 15, then
the interest payable on such date shall be paid to the Holder of record on the
next preceding ______1 or ______1.
In the event that less than all of the Securities are to be redeemed at
any time, selection of Securities for redemption will be made by the Trustee on
a pro rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate; provided, however, that no Securities of $1,000 or less shall be
redeemed in part. Notice 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 to
be redeemed at its registered address. If any Security is to be redeemed in
part only, the notice of redemption that relates to such Security shall state
the portion of the principal amount thereof to be redeemed. A new Security in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Security. On and
after the redemption date, interest will cease to accrue on Securities or the
portion thereof called for redemption unless the Company defaults in the payment
of the redemption price or accrued interest.
Sections 6.15 and 6.19 of the Indenture provide that after certain Asset
Sales and upon the occurrence of a Change of Control, and subject to further
limitations contained therein, the Company will make an offer to purchase
certain amounts of Securities in accordance with the procedures set forth in the
Indenture.
In order to secure the due and punctual payment of the principal of and
interest on the Securities and all other amounts payable by the Company under
the Indenture and the Securities when and as the same become due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Securities and the Indenture, the Company, subject to certain exceptions, has
granted security interests in and Liens on the Collateral owned by it to the
Collateral Agent for the benefit of
<PAGE>
32
the Holders pursuant to the Indenture and the Security Documents. The
Subsidiaries of the Company shall execute a Subsidiary Guarantee to guarantee
the obligations of the Company with respect to the Securities. The obligations
of a Subsidiary under the Subsidiary Guarantee will be secured by the Collateral
assigned by such Subsidiary pursuant to the Subsidiary Security Agreement.
Each Holder, by accepting a Security, agrees to all of the terms and
provisions of the Security Documents, as the same may be amended from time to
time pursuant to the respective provisions thereof and the Indenture.
The Trustee, the Collateral Agent and each Holder acknowledges that a
release of any of the Collateral or any Lien strictly in accordance with the
terms and provisions of the Indenture and Security Documents and the terms and
provisions of the Indenture will not be deemed for any purpose to be an
impairment of the Security under the Indenture.
If an Event of Default (other than an Event of Default specified in
Section 8.1(vii) or (viii)) occurs and is continuing, the Trustee or the Holders
of at least 25% of the principal amount of the Securities then outstanding by
notice to the Company (and to the Trustee if such notice is given by the
Holders) may declare the principal amount and accrued interest on the Securities
to be immediately due and payable. If an Event of Default specified in Section
8.1(vii) or (viii) occurs, the principal amount and accrued interest shall ipso
facto become and be immediately due and payable on all Outstanding Securities
without any declaration or other act on the part of the Trustee or any Holder.
The Holders of a majority in principal amount of the then Outstanding Securities
by notice to the Trustee may rescind an acceleration and its consequences if all
existing Events of Default, other than the nonpayment of the principal of the
Securities which have became due solely by such declaration of acceleration,
have been cured or waived. The Holders of a majority in principal amount of the
outstanding Securities also have the right to waive certain past defaults under
the Indenture, except a default in the payment of the principal of, premium, if
any, or interest on the Security, or in respect of a covenant or a provision
which cannot be modified or amended without the consent of all Holders.
From time to time, the Company when authorized by a Board Resolution,
and the Trustee (or the Collateral Agent, if a party thereto) may, without the
consent of the Holders of not less than a majority in principal amount of
Outstanding Securities, amend, waive, or supplement the Indenture, the Security
Documents or the Securities for certain specified proposes, including, among
other things, curing ambiguities, defects, or inconsistences, maintaining the
qualification of the Indenture under the Trust Indenture Act, making any change
that does not adversely affect the rights of any Holder or mortgaging,
<PAGE>
33
pledging, or granting a security interest in favor of the Collateral Agent as
additional security for the payment and performance of the obligations of the
Company under the Indenture, in any property or assets, including any which are
required to be mortgaged, pledged or hypothecated, or in which a security
interest is required to be granted, to the Collateral Agent pursuant to any
Security Document or otherwise; provided, that the Company delivers to the
Trustee an Opinion of Counsel stating that such change does not adversely affect
the rights of any Holder. Other amendments and modifications of the Indenture,
the Securities or the Security Documents may be made by the Company, the
Collateral Agent (if a party thereto) and the Trustee with the consent of the
Holders of not less than a majority of the aggregate principal amount of the
Outstanding Securities; provided, that no such modification or amendment may,
without the consent of the Holder of each Outstanding Security affected thereby
(i) change the Stated Maturity of the principal of, or any installment of
interest on, any Security, or alter the redemption provisions or reduce the
principal amount thereof or the rate of interest thereon, or change the place of
payment where, or the coin or currency in which, any Security or interest
thereon is payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof; or (ii) reduce the
percentage in principal amount of the Outstanding Securities, the consent of
whose Holders is required for any such supplemental indenture, or the consent of
whose Holders is required for any waiver (of compliance with certain provisions
of this Indenture or certain defaults hereunder and their consequences) provided
for in this Indenture; or (iii) modify any of the provisions of this Section
11.2 or Section 8.8 or 8.13, except to increase any such percentage or to
provide that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security affected
thereby; or (iv) affect the ranking of the Securities or the Liens in favor of
the Trustee, the Collateral Agent and the Holders in a manner adverse to the
Holders or release all or substantially all of the Collateral.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of an interest on this
Security at the times, place and rate, and in the coin or currency herein
prescribed.
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee or Paying Agent will pay the money back to the Company at
its request. After that, Holders entitled to the money must look to the Company
for payment as unsecured general creditors.
As provided in the Indenture and subject to certain limitations set
forth therein [(including in case of any Global Security, certain additional
limitations)] and as may be set
<PAGE>
34
forth on the face hereof, the transfer of this Security is registrable in the
Security Register upon surrender of this Security for registration of transfer
at the office or agency of the Company in any place where the principal of and
interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar, duly executed by the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities in an authorized
denomination and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of different
authorized denominations, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith, other than
exchanges pursuant to Section 3.4 or 11.6 not including any transfer.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture and the Securities endorsed thereon shall be governed by
and construed in accordance with the laws of the State of New York.
When a successor corporation assumes all the obligations of its
predecessor under the Securities and the Indenture and the transaction complies
with the terms of Article VII of the Indenture, the predecessor corporation will
be released from those obligations.
The Trustee, in its individual or any other capacity, may make loans to,
accept deposits and pledges from, and perform services for the Company or its
Affiliates, and may otherwise deal with the Company or its Affiliates, as if it
were not Trustee.
Directors, officers, employees or shareholders of the Company shall not
have any liability for any obligations of the Company under the Securities, the
Indenture or the Security
<PAGE>
35
Documents or for any claim based on, in respect of, or by reason of, such
obligation or their creation. The Holder of this Security, or any beneficial
interests in this Security, hereby waives and releases all such liability. Such
waiver and release are part of the consideration for the issue of the
Securities.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
SECTION 2.3. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
This is one of the Securities referred to in the within-mentioned
Indenture.
FIRST NATIONAL BANK OF COMMERCE,
as Trustee
By_____________________________
Authorized Officer
Date of Authentication:
ARTICLE III
THE SECURITIES
SECTION 3.1. Title and Terms.
---------------
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to $75,000,000, except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities pursuant to Section 3.4, 3.5, 3.6,
5.6, 6.15, 6.19 or 11.6. Subject to Section 3.5, the Securities will be
represented by a Global Security in the name of the Depositary or its nominee.
The Securities shall be known and designated as the "___% Securities due
2001" of the Company. Their Stated Maturity shall be _________________, 2001,
and they shall bear interest at the rate of ___% per annum, from
_________________/2/ or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, as the case may be, payable semi-
annually on ____________ and ____________ in each year, commencing
_____________ 1994, until the principal thereof is paid or made available for
payment.
/2/ Insert date of the Indenture or, if the Securities are to be sold "flat",
the expected closing date.
<PAGE>
36
The principal of and interest on the Securities shall be payable at the
office or agency of the Paying Agent in The City of New Orleans, maintained for
such purpose; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register; provided,
further, that a Holder of $10,000,000 in aggregate principal amount of the
Securities shall be entitled to receive payments of interest by wire transfer in
immediately available funds (but only if appropriate payment instructions have
been received in writing by the Paying Agent not less than 15 calendar days
prior to the applicable Interest Payment Date).
Notwithstanding any other provision of this Section 3.1, if the Security
is in the form of a Global Security, immediately available funds for the payment
of the principal of (and premium, if any) and interest on the Security due on
any Interest Payment Date or Maturity Date, as the case may be, will be made
available to the Paying Agent to permit the Paying Agent to pay such funds to
the Depositary on such respective dates. The Depositary will allocate and pay
such funds to the owners of beneficial interests in the Security in accordance
with its existing operating procedures.
The Securities shall be subject to repurchase by the Company as
provided in Sections 5.6, 6.15 and 6.19.
SECTION 3.2. Denominations.
-------------
The Securities shall be issuable only in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof.
SECTION 3.3. Execution, Authentication, Delivery
-----------------------------------
and Dating.
----------
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or its
Chief Financial Officer, under its corporate seal reproduced thereon and
attested by its Secretary or one of its Assistant Secretaries. The signature of
any of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices on the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver
<PAGE>
37
Securities executed by the Company to the Trustee for authentication, together
with a Company Order for the authentication and delivery of such Securities; and
the Trustee in accordance with such Company Order shall authenticate and deliver
such Securities as in this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 3.4. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 6.2, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities of
authorized denominations. Until so exchanged the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as definitive
Securities.
SECTION 3.5. Registration; Registration of Transfer and
------------------------------------------
Exchange.
--------
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 6.2 being herein sometimes
collectively
<PAGE>
38
referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at an office
or agency of the Company designated pursuant to Section 6.2 for such purpose,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Securities
of any authorized denominations and of a like aggregate principal amount.
Notwithstanding any other provision of this Section 3.5, unless and
until it is exchanged in whole or in part for Securities in definitive form, a
Global Security representing all or a portion of the Securities may not be
transferred except as a whole by the Depositary to a nominee of such Depositary
or by a nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor Depositary
for such series or a nominee of such successor Depositary. Unless otherwise
provided as contemplated by Section 3.1 with respect to any series of Securities
evidenced in whole or in part by a Global Security, the Depositary may not sell,
assign, transfer or otherwise convey any beneficial interest in a Global
Security evidencing all or part of the Securities of such series unless such
beneficial interest is in an amount equal to an authorized denomination for the
Securities.
If at any time the Depositary for the Securities notifies the Company
that it is unwilling or unable to continue as a Depositary for the Securities or
if at any time the Depositary for Securities shall no longer be registered or in
good standing under the Exchange Act or other applicable statute or regulation,
the Company shall appoint a successor Depositary with respect to the Securities.
If a successor Depositary for the Securities is not appointed by the Company
within 90 days after the Company receives such notice or becomes aware of such
condition, the Company will execute, and the Trustee, upon the written request
or authorization of any officer of the Company, will authenticate and deliver
Securities in definitive form in an aggregate principal amount equal to the
principal amount of the Global Security representing Securities in exchange for
such Global Security.
In the event that (i) the Company at any time and in its sole discretion
determines that the Securities issued in the form of a Global Security shall no
longer be represented by such Global Security or (ii) there shall have occurred
and be continuing a Default or an Event of Default, the Company will execute,
and the Trustee, upon the written request or authorization of any officer of the
Company, will authenticate
<PAGE>
39
and deliver Securities in definitive form and in an aggregate principal amount
equal to the principal amount of the Global Security representing the Securities
in exchange for such Global Security.
The Depositary may surrender a Global Security in exchange, in whole or
in part, for Securities in definitive form on such terms as are acceptable to
the Company and such Depositary. Thereupon, the Company shall execute and the
Trustee shall authenticate and deliver, without charge,
(i) to each Person specified by the Depositary, a new Security
or Securities of the same series in definitive form in an aggregate
principal amount equal to and in exchange for such Person's beneficial
interest in the surrendered Global Security; and
(ii) to the Depositary, a new Global Security in a denomination
equal to the difference, if any, between the principal amount of the
surrendered Global Security and the aggregate principal amount of
Securities of such series delivered in definitive form to Holders pursuant
to clause (i) above.
Upon the exchange of a Global Security for Securities in definitive
form, such Global Security shall be cancelled by the Trustee. Securities issued
in definitive form in exchange for a Global Security pursuant to this Section
3.4 shall be registered in such names and in such authorized denominations as
the Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall
deliver such Securities in definitive form to the Person in whose name such
Securities are so registered.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the
<PAGE>
40
Company and the Security Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 3.4 or 11.6 not involving any transfer.
During the period of 15 days preceding any Interest Payment Date or
Maturity Date, the Company shall not be required to register the transfer of or
to exchange any Securities. In addition, the Company shall not be required (i)
to register the transfer of or to exchange any Securities for a period of 15
days immediately preceding any date fixed for any selection of Securities of
such series to be redeemed and (ii) to register the transfer of or to exchange
any Securities selected for redemption, except the unredeemed portion of any
Security being redeemed in part.
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section 3.6, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
<PAGE>
41
Every new Security issued pursuant to this Section 3.6 in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this Clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such
<PAGE>
42
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his address as it appears in
the Security Register, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of business
on such Special Record Date and shall no longer be payable pursuant to the
following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this Clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 3.8. Persons Deemed Owners.
---------------------
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of and (subject to Section
3.7) interest on such Security and for all other purposes whatsoever, whether or
not such Security be overdue, and neither the Company, the Trustee nor any agent
of the Company or the Trustee shall be affected by notice to the contrary.
SECTION 3.9. Cancellation.
------------
All Securities surrendered for payment, redemption, repurchase,
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. All
<PAGE>
43
cancelled Securities held by the Trustee shall be destroyed and certification of
their destruction delivered to the Company unless by a Company Order the Company
shall direct that cancelled Securities be returned to it.
SECTION 3.10. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
SECTION 3.11. Paying Agent.
------------
The Company initially appoints the Trustee as a Paying Agent for the
Securities. The Company may have one or more additional Paying Agents at any
time, and may appoint itself as a Paying Agent. The Company shall deliver
notice in accordance with the terms of this Indenture of any future appointment
of a Paying Agent.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and issued (other
than (i) Securities which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 3.6 and (ii)
Securities for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter
repaid to the Trustee or discharged from such trust, as provided in
Section 6.26) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable; or
<PAGE>
44
(ii) will become due and payable at their Stated
Maturity within one year,
and the Company, in the case of (B) (i) or (ii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for the purpose an amount sufficient to pay and discharge the
entire indebtedness on such Securities not theretofore delivered to
the Trustee for cancellation, for principal and interest to the date
of such deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 9.7, the obligations of
the Trustee to any Authenticating Agent under Section 9.14 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section 4.1, the obligations of the Trustee under Section 4.2 and the last
paragraph of Section 6.26 shall survive.
SECTION 4.2. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 6.26, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and interest for
whose payment such money has been deposited with the Trustee.
<PAGE>
45
ARTICLE V
REDEMPTION
SECTION 5.1. Notices to Trustee.
------------------
If the Company elects to redeem Securities, it shall notify the Trustee
and the Paying Agent in writing of the redemption date and the principal amount
of Securities to be redeemed.
The Company shall give each notice provided for in this Section 5.1 at
least 75 days before the redemption date (unless a shorter notice shall be
agreed to by the Trustee in writing), together with an Officers' Certificate
stating that such redemption shall comply with the conditions contained herein
and in the Securities.
SECTION 5.2. Selection of Securities
-----------------------
To Be Redeemed.
--------------
If less than all of the Securities are to be redeemed, the Trustee shall
select the Securities to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, on which the Securities being
redeemed are listed or, if the Securities are not listed on a national
securities exchange, on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate; provided, that no Securities of $1,000
or less shall be redeemed in part.
The Trustee shall make the selection from the Outstanding Securities not
previously called for redemption. The Trustee shall promptly notify the Company
in writing of such Securities and, in the case of Securities selected for
partial redemption, the principal amount to be redeemed. The Trustee may select
for redemption portions (equal to $1,000 or any integral multiple thereof) of
the principal of Securities that have denominations larger than $1,000. The
Securities and portions of them the Trustee selects shall be in amounts of
$1,000 or integral multiples of $1,000. Provisions of this Indenture that apply
to Securities called for redemption also apply to portions of Securities called
for redemption.
SECTION 5.3. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days prior to a redemption date,
the Company shall mail or cause the mailing of a notice of redemption by first-
class mail to each Holder of Securities to be redeemed at its registered
address.
<PAGE>
46
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) that the Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price and accrued interest, if
any;
(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the redemption date and the only remaining right of the Holders
is to receive payment of the redemption price upon surrender to the Trustee
or the Paying Agent of the Securities redeemed;
(6) if any Security is being redeemed in part, the portion of the
principal amount (equal to $1,000 or any integral multiple thereof) of such
Security to be redeemed and that, on and after the redemption date, upon
surrender of such Security, a new Security or Securities in principal
amount equal to the unredeemed portion thereof shall be issued without
charge to the Holder; and
(7) if less than all of the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of the Securities estimated to
be outstanding after the redemption.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
SECTION 5.4. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the redemption date and at the redemption price and
shall cease to bear interest from and after the redemption date (unless the
Company shall default in the payment of the redemption price or accrued
interest). Upon surrender to the Paying Agent, such Securities shall be paid at
the redemption price, plus accrued interest to the redemption date; provided,
that if the redemption date is ________ 15 or ________ 15, then the interest
payable on such date shall be paid to the Holder of record on the next preceding
________ 1 or ________ 1.
<PAGE>
47
SECTION 5.5. Deposit of Redemption Price.
---------------------------
At least one Business Day prior to the redemption date, the Company
shall deposit with the Paying Agent in immediately available funds money
sufficient to pay the redemption price of and accrued interest on all Securities
or portions thereof to be redeemed on the redemption date.
If any Security surrendered for redemption in the manner provided in the
Securities shall not be so paid on the redemption date due to the failure of the
Company to deposit sufficient funds with the Paying Agent, interest shall
continue to accrue from the redemption date until such payment is made on the
unpaid principal and, to the extent lawful, on any interest not paid on such
unpaid principal, in each case at the date and in the manner provided in the
Securities.
SECTION 5.6. Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the Holder a new Security equal in
principal amount to the unredeemed portion of the Security surrendered.
SECTION 5.7. Securities Exchange Act Requirements.
------------------------------------
In connection with any repurchase of Securities pursuant to this
Indenture, the Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such requirements, laws and regulations are applicable.
ARTICLE VI
COVENANTS
SECTION 6.1. Payment of Securities.
---------------------
The Company shall pay, or cause to be paid, the principal of and
interest on the Securities on the dates and in the manner provided in the
Securities and this Indenture. If the Securities are not represented by one or
more global Securities, an installment of principal or interest shall be
considered paid on the date due if the Trustee or Paying Agent (other than the
Company or any Subsidiary) holds on that date money in immediately available
funds designated for and sufficient to pay such installment. The Company agrees
with the Trustee to deposit such funds with the Trustee or Paying Agent prior to
the close of business on the Business Day immediately preceding the date such
payment is due.
<PAGE>
48
The Company shall pay interest on overdue principal and (to the extent
permitted by law) on overdue installments of interest at a rate equal to ___%.
SECTION 6.2. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain in the City of New Orleans, an office or
agency where Securities may be surrendered for registration of transfer or
exchange or for presentation for payment and where notices and demands to or
upon the Company in respect of the Securities and this Indenture may be served.
The Company shall give prompt written notice to the Trustee of the location, and
any change in the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee as set
forth in Section 1.5 hereof.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
City of New Orleans, for such purposes. The Company shall give prompt written
notice to the Trustee of such designation or rescission and of any change in the
location of any such other office or agency.
The Company hereby initially designates the Corporate Trust Office of
the Trustee located at ____________________ as such offices of the Company in
accordance with Section 3.__ hereof.
SECTION 6.3. Corporate Existence.
-------------------
Subject to Article VII, the Company shall do or cause to be done, at its
own cost and expense, all things necessary to and shall cause each Subsidiary
to, preserve and keep in full force and effect the corporate existence and the
rights (charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate existence of any
Subsidiary, if in the judgment of the Board of Directors of the Company, (a)
such preservation or existence is not desirable in the conduct of business of
the Company or such Subsidiary and (b) the loss of such right, license or
franchise or the dissolution of such Subsidiary is not adverse in any material
respect to the Holders.
<PAGE>
49
SECTION 6.4. Payment of Taxes and Other Claims;
----------------------------------
Tax Consolidation.
-----------------
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or upon the income,
profits or property of the Company or any Subsidiary, and (b) all lawful claims
for labor, materials and supplies that, if unpaid, might by law become a Lien
upon the property of the Company or any Subsidiary; provided, however, that,
subject to the terms of the applicable Security Documents, the Company shall not
be required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which adequate
reserves (in the good faith judgment of the Board of Directors of the Company)
have been made.
SECTION 6.5. Compliance Certificates.
-----------------------
(a) The Company shall deliver to the Trustee, within 45 days after the
end of each of the respective first three quarters of the Company's fiscal year,
and within 90 days after the end of its respective fiscal year, Officers'
Certificates of the Company stating (i) that a review of the activities of the
Company during the preceding fiscal quarter or year, as the case may be, has
been made under the supervision of the signing officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such
Responsible Officer signing such certificate, (ii) that, to the best knowledge
of such Responsible Officer, the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and is not in
default in the performance or observance of any of the terms, provisions and
conditions hereof (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which such Responsible
Officer may have knowledge, their status and what action the Company is taking
or proposes to take with respect thereto) and (iii) that to the best of his
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Securities
are prohibited (or, if such event has occurred, describing the event and what
action the Company is taking or proposes to take with respect thereto).
(b) So long as (and to the extent) not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
annual financial statements delivered pursuant to Section 6.6 shall be
accompanied by a written statement of the Company's independent public
accountants that in making the examination necessary for certification of
<PAGE>
50
such annual financial statements nothing has come to their attention that would
lead them to believe that the Company has violated any provisions of this
Indenture or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation that would not be disclosed in the course of an
audit examination conducted in accordance with generally accepted auditing
standards.
(c) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, forthwith upon any officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SECTION 6.6. SEC Reports.
-----------
(a) In accordance with the provisions of Section 314(a) of the Trust
Indenture Act, at any time that the Company is required to file periodic reports
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act, the
Company shall file with the Trustee, within 15 days after it files them with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) which the Company is required
to file with the Commission. The Company also shall comply with the other
provisions of Section 314(a) of the Trust Indenture Act. In addition, at any
time that the Company has a class of equity securities registered under the
Exchange Act, the Company shall cause its annual report to stockholders and any
quarterly or other financial reports furnished by it to stockholders generally
to be filed with the Trustee and mailed, no later than the date such materials
are mailed or made available to the Company's stockholders, to the Holders at
their addresses as set forth in the Securities Register.
(b) At any time that the Company does not have a class of securities
registered under the Exchange Act, the Company shall furnish to the Trustee
(who is hereby authorized and directed to furnish a copy thereof to any person
requesting the same in writing) and shall mail (or cause to be mailed by the
Trustee at the Company's expense) to each of the Holders at their addresses as
set forth in the Securities Register maintained by the Securities Registrar
within 60 days after the close of each of the first three quarters of each
fiscal year and within 105 days after the close of each fiscal year consolidated
balance sheets of the Company as of the end of each such quarter or fiscal year,
as the case may be, and consolidated statements of income and changes in
financial position of the Company for the period commencing at the end of the
Company's previous fiscal
<PAGE>
51
year and ending with the end of such quarter or fiscal year, as the case may be,
all such financial statements setting forth in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year,
all in reasonable detail and duly certified (subject to year-end adjustments) by
a Responsible Officer of the Company as having been prepared in accordance with
GAAP consistently applied, and, in the case of annual consolidated financial
statements, certified by independent public accountants of recognized standing
and a discussion and analysis of the results of operations and financial
condition of the Company and its subsidiaries for the periods presented, which
discussion and analysis shall be prepared by the management of the Company in a
manner responsive to the requirements of Item 303 (or any successor item or
section) of Regulation S-K; provided, that the foregoing requirement shall not
apply if less than five percent of the original aggregate principal amount of
the securities remains Outstanding. All financial statements shall be prepared
in accordance with GAAP consistently applied, except for changes with which the
Company's independent public accountants concur and except that quarterly
statements may be subject to year-end adjustments.
SECTION 6.7. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or that may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not hinder, delay or
impede the execution of any power herein granted to the Trustee but shall suffer
and permit the execution of every such power as though no such law had been
enacted.
SECTION 6.8. Maintenance of Properties; Insurance;
-------------------------------------
Books and Records; Compliance with Law.
--------------------------------------
(a) Subject to the applicable provisions of the Security Documents, the
Company shall, and shall cause each Subsidiary to, at all times cause all
properties used or useful in the conduct of its business to be maintained and
kept in good working order and condition, ordinary wear and tear excepted, and
shall cause to be made all necessary (in the good faith opinion of management)
repairs, renewals, replacements, additions, betterments and improvements
thereto.
<PAGE>
52
(b) The Company shall and shall cause each Subsidiary to maintain
insurance with insurance companies or associations with a rating of "A-" or
better, as established by Best's Rating Guide (or an equivalent rating with such
other publication of a similar nature as shall be in current use), subject to
the provisions of the applicable Security Documents, in such amounts and
covering such risks as are usually and customarily carried with respect to
similar facilities according to their respective locations.
(c) The Company shall and shall cause each Subsidiary to keep proper
books of record and account in which full and correct entries shall be made of
all financial transactions and the assets and business of the Company and each
Subsidiary, in accordance with GAAP consistently applied to the Company and its
Subsidiaries taken as a whole.
(d) Except as otherwise provided in the Security Documents, the Company
shall and shall cause each Subsidiary to comply with all statutes, laws,
ordinances, or government rules and regulations to which it is subject, non-
compliance with which would adversely affect the business, prospects, earnings,
properties, assets or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole.
SECTION 6.9. Limitations on Indebtedness.
---------------------------
(a) The Company shall not, and shall not permit any of its
Subsidiaries, directly or indirectly, to incur, create, assume, suffer to exist,
guarantee, become liable, contingently or otherwise, with respect to, or
otherwise become responsible for the payment of (each event, an "incurrence")
any Indebtedness unless (a) the pro forma Consolidated Fixed Charge Ratio of the
Company and its Subsidiaries for the Reference Period prior to the incurrence of
such Indebtedness (taken as a whole and calculated on the assumptions that such
Indebtedness had been incurred and the proceeds thereof had been applied on the
first day of the Reference Period) would have been greater than (i) 2.00 to 1.00
and (b) no Default or Event of Default shall have occurred and be continuing at
the time of, or after giving effect to, the incurrence of such Indebtedness.
(b) The limitation set forth in paragraph (a) shall not apply to:
(i) Indebtedness evidenced by the Securities and the obligations
of the Company and its Subsidiaries under the Indenture and the Security
Documents;
(ii) Indebtedness of the Company issued to any Wholly-Owned
Subsidiary; provided, that (a) any such Indebtedness is unsecured and is
subordinated to the Securities and (b) that any subsequent issuance or
transfer of any Capital
<PAGE>
53
Stock which results in any such Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary or any transfer of such Indebtedness by any Wholly-
Owned Subsidiary to someone not a Wholly-Owned Subsidiary will, in each
case, be deemed an incurrence of Indebtedness under the Indenture;
(iii) Indebtedness of the Company which is existing immediately
following the issuance of the Securities and the application of the
proceeds of the Securities (in no event shall this clause be deemed to
permit the 14.75% Senior Secured Notes due 1998 to remain outstanding);
(iv) Indebtedness arising in connection with the Credit Facility
at any time outstanding not to exceed the lesser of (1) $30,000,000 and (2)
amounts available to be borrowed under the Credit Facility without causing
a mandatory prepayment thereunder in the absence of a waiver or consent;
(v) Indebtedness incurred with respect to Interest Rate
Agreements covering floating rate Indebtedness of the Company that is
permitted under this covenant to the extent the notional principal amount
of such Interest Rate Agreements does not exceed the principal amount of
the Indebtedness to which such Interest Rate Agreements relate;
(vi) Indebtedness incurred in connection with Industrial
Development Bonds (including Pollution Control Bonds) as such terms are
defined under the Internal Revenue Code, in an aggregate principal amount
not to exceed $5,000,000;
(vii) Indebtedness incurred with respect to the deferred
purchase price of machinery and equipment related to the business of the
Company or its Subsidiaries at the time of purchase and other purchase
money obligations (including Capitalized Lease Obligations) not to exceed
$5,000,000; provided, that the maturity of any such obligation does not
exceed the anticipated useful life of the asset being financed; and
(viii) any renewal, extension or refinancing (and subsequent
renewals, extensions or refinancing) of any Indebtedness of the Company
permitted under the Indenture, in an amount not in excess of the amount
permitted under the Indenture at the time of such renewal, extension or
refinancing; provided, that Indebtedness which constitutes a renewal,
extension or refinancing of Indebtedness of the Company shall be pari passu
or subordinated in right of payment to the Securities; provided, further,
that in no event may Indebtedness of the Company be renewed, extended or
refinanced by means of Indebtedness of any Subsidiary of the Company
pursuant to this clause (viii).
<PAGE>
54
(c) The limitation set forth in paragraph (a) shall not apply to:
(i) Indebtedness of a Wholly-Owned Subsidiary issued to and held
by the Company or any Wholly-Owned Subsidiary of the Company; provided,
that any subsequent issuance or transfer of any Capital Stock which results
in any such Wholly-Owned Subsidiary ceasing to be a Wholly-Owned Subsidiary
or any transfer of such Indebtedness by the Company or any Wholly-Owned
Subsidiary to someone not a Wholly-Owned Subsidiary shall, in each case, be
deemed an incurrence of Indebtedness under the Indenture;
(ii) Indebtedness of the Company's Subsidiaries which is existing
immediately following the issuance of the Securities;
(iii) Non-Recourse Indebtedness incurred by Non-Recourse
Subsidiaries; and (iv) any renewal, extension or refinancing (and
subsequent renewals, extensions or refinancings) of any Indebtedness of the
Company's Subsidiaries permitted under the Indenture, in an amount not in
excess of the amount permitted under the Indenture at the time of such
renewal, extension or refinancing; provided, that Indebtedness which
constitutes a renewal, extension or refinancing of Indebtedness of a
Subsidiary of the Company shall be pari passu or subordinated in right of
payment to the obligations under the Subsidiary Guarantee.
SECTION 6.10. Limitation on Liens.
-------------------
The Company shall not, and shall not permit, cause or suffer any of
its Subsidiaries to, create, incur, assume or suffer to exist any Liens of
any kind upon any property or assets of the Company or any Subsidiary,
whether now owned or hereafter acquired, except for:
(i) Liens in favor of the Collateral Agent or the Holders,
including Liens created by the Securities, the Indenture and the Security
Documents;
(ii) Liens on the Lender Secured Property to secure the Credit
Facility and the Tulsa Facility;
(iii) Permitted Liens;
(iv) Liens on the property of the Company or any of its
Subsidiaries created solely for the purpose of securing purchase money
obligations for property acquired in the ordinary course of business;
provided, that (a) such property so acquired for use in the ordinary course
of business is for use in lines of business related to the Company's or
its Subsidiaries' business as it exists
<PAGE>
55
immediately prior to the issuance of the related debt, (b) no such Lien
shall extent to or cover other property or assets of the Company and its
Subsidiaries other than the respective property or assets so acquired and
(c) the principal amount of Indebtedness secured by any such Lien shall at
no time exceed the original purchase price of such property or assets;
(v) Liens on the assets of any entity existing at the time such
entity or assets are acquired by the Company or any of its Subsidiaries,
whether by merger, consolidation, purchase of assets or otherwise;
provided, that such Liens (a) are not created, incurred or assumed in
connection with, or in contemplation of, such assets being acquired by the
Company or any of its Subsidiaries and (b) do not extend to any other
property of the Company or any of its Subsidiaries;
(vi) Liens in existence on the date of the Indenture (excluding
Liens relating to all or any portion of the 14.75% Senior Secured Notes due
1998);
(vii) Liens securing Industrial Development Bonds (including
Pollution Control Bonds) as such terms are defined in the Internal Revenue
Code; provided, that any Lien permitted by this clause (vii) shall not
extend to any other property of the Company or any of its Subsidiaries; and
(viii) any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any Lien referred to in
the foregoing clauses; provided, that the principal amount of Indebtedness
secured thereby shall not exceed the principal amount of Indebtedness so
secured immediately prior to the time of such extension, renewal or
replacement, and that such extension, renewal, or replacement Lien shall be
limited to all or a part of the property which secured the Lien so
extended, renewed or replaced (plus improvements on such property).
SECTION 6.11. Limitation on the Issuance of
-----------------------------
Preferred Stock by Subsidiaries.
-------------------------------
The Company shall not permit any of its Subsidiaries to issue,
directly or indirectly, any Preferred Stock, except:
(i) Preferred Stock issued to and held by the Company or a
Wholly-Owned Subsidiary, except that any subsequent issuance or transfer of
any Capital Stock which results in any Wholly-Owned Subsidiary ceasing to
be a Wholly-Owned Subsidiary or any transfer of such Preferred Stock by any
Wholly-Owned Subsidiary will, in each case, be deemed an issuance of
Preferred Stock under the Indenture;
<PAGE>
56
(ii) Preferred Stock issued by a Person prior to the time (a)
such Person became a Subsidiary, (b) such Person merges with or into a
Subsidiary or (c) another Subsidiary merges with or into such Person (in a
transaction in which such Person becomes a Subsidiary), in each case if
such Preferred Stock was not incurred in anticipation of such transaction;
and
(iii) Preferred Stock (other than Disqualified Stock) which is
exchanged for, or the proceeds of which are used to refinance Indebtedness
or any Preferred Stock permitted to be outstanding pursuant to clauses (i)
and (ii) (or any extension, renewal or refinancing thereof), having a
liquidation preference not to exceed the liquidation preference of the
Preferred Stock or the principal amount of the Indebtedness so exchanged or
refinanced.
SECTION 6.12. Transfer of Assets to Subsidiaries.
----------------------------------
Notwithstanding the covenant restricting Asset Sales, the Company
shall not, and shall not permit any of its Subsidiaries to, make any sale,
transfer or other disposition (including by way of Sale and Leaseback
Transaction) to any of its Subsidiaries (other than in the ordinary course
of business) of (i) any assets of the Company or its Subsidiaries or (ii)
any shares of Capital Stock of any of the company's Subsidiaries directly
owned by the Company, in either case with an aggregate fair market value in
excess of $250,000 (as determined in good faith by an Independent Appraiser
or Independent Financial Adviser, as the circumstances dictate) unless the
Company or its Subsidiaries shall receive consideration from the Subsidiary
acquiring such assets or Capital Stock by way of any such sale, transfer or
otherwise from the Company in cash or Cash Equivalents equal to the amount
in excess of $250,000.
SECTION 6.13. Limitations on Restricted Payments.
----------------------------------
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, declare, pay or set apart for payment, any Restricted Payment,
if after giving effect thereto: (i) a Default or an Event of Default shall
have occurred and be continuing; (ii) the Company or its Subsidiaries would
not be permitted to incur or become liable with respect to at least $1.00
of additional Indebtedness as determined in accordance with Section 6.9; or
(iii) the aggregate amount of all Restricted Payments made by the Company
or any of its Subsidiaries (the amount expended or distributed for such
purposes, if other than in cash, to be valued at its fair market value as
determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive and evidenced by a Board Resolution
delivered to the Trustee) from and after the date of
<PAGE>
57
the Indenture, through and including the date on which such Restricted
Payment is made, would exceed the sum of:
(i) the aggregate of 50% of the Company's Consolidated Net
Income accrued for the period (taken as one accounting period) (or if such
aggregate Consolidated Net Income shall be less than zero, minus 100% of
the amount of such loss) commencing with the first full fiscal quarter
after the Issue Date to and including the fiscal quarter ended immediately
prior to the date of such calculation; and
(ii) the aggregate net cash proceeds received by the Company
after the Issue Date from the issuance or sale (other than to a Subsidiary)
by the Company of its Capital Stock (excluding Disqualified Stock, but
including Capital Stock other than Disqualified Stock issued upon
conversion of, or exchange for, Disqualified Stock or securities other than
its Capital Stock), and upon the exercise of warrants and rights to
purchase such Capital Stock. For purposes of this clause (ii), the
aggregate net cash proceeds received by the Company (x) from the issuance
of its Capital Stock upon the conversion of, or exchange for, securities
evidencing Indebtedness of the Company, shall be calculated on the
assumption that the gross proceeds from such issuance are equal to the
aggregate principal amount (or, if discounted Indebtedness, the accredited
principal amount) of Indebtedness evidenced by such securities converted or
exchanged and (y) upon the conversion or exchange of other securities of
the Company shall be equal to the aggregate net proceeds of the original
sale of the securities so converted or exchanged if such proceeds of such
original sale were not previously included in any calculation for the
purposes of this clause (ii), plus any additional sums payable upon
conversion or exchange.
Notwithstanding the foregoing, this provision shall not prevent (i) the
payment of any dividend within 60 days after the date of its declaration (if the
declaration of such dividend was permitted by the foregoing provision at the
time of such declaration); or (ii) the repurchase, retirement or other
acquisition of any shares of the Company's Capital Stock, or any option, warrant
or other right to purchase shares of the Company's Capital Stock, or the
repayment of any Indebtedness of the Company solely in exchange for shares of,
or out of the proceeds of a substantially contemporaneous issuance of, Capital
Stock (other than Disqualified Stock).
SECTION 6.14. Limitations on Transactions
---------------------------
with Stockholders and Affiliates.
--------------------------------
(a) The Company shall not, and shall not permit any of its Subsidiaries
to, enter into or permit to exist any transaction (or series of related
transactions), including,
<PAGE>
58
without limitation, any loan, advance, guarantee or capital contribution to, or
for the benefit of, or any sale, purchase, lease, exchange or otherwise
disposition of any property or the rendering of any service, or any other direct
or indirect payment, transfer or other disposition (a "Transaction"), involving
payments, with any holder of 5% or more of any class of Capital Stock of the
Company or with any Affiliate of such holder or with any Affiliate of the
Company (other than a Wholly-Owned Recourse Subsidiary of the Company), on terms
and conditions less favorable to the Company or such Subsidiary, as the case may
be, than would be available at such time in a comparable Transaction in arm's
length dealings with an unrelated Person as determined by the Board of Directors
of the Company or a Subsidiary, such approval to be evidenced by a Board
Resolution.
(b) The provisions of paragraph (a) will not apply to:
(i) Restricted Payments otherwise permitted pursuant
to the Indenture;
(ii) transactions between the Company and one or more
of its Recourse Subsidiaries; provided, that such transactions are not
otherwise prohibited by the Indenture;
(iii) reasonable and customary fees and compensation
(including amounts paid pursuant to employee benefit plans) paid to,
and indemnity provided on behalf of, officers, directors, employees or
consultants of the Company or any Subsidiary, as determined by the
Board of Directors of the Company or any Subsidiary or the senior
management thereof in good faith;
(iv) annual payments in an aggregate amount not to
exceed $150,000 under the Service Agreement; and
(v) payments for goods and services purchased in the
ordinary course of business on an arms-length basis.
SECTION 6.15. Restrictions on Assets Sales.
----------------------------
(a) The Company shall not, and shall not permit any of its Recourse
Subsidiaries to, make any Asset Sale, unless (i) the Company (or its Subsidiary,
as the case may be) receives consideration at the time of such Asset Sale at
lease equal to the fair market value of the Capital Stock or assets to be sold
(as determined in good faith by its Board of Directors); (ii) at least 85% of
the consideration therefor is received by the Company or such Subsidiary in the
form of cash or Cash Equivalents; and (iii) 100% of the consideration is in the
form
<PAGE>
59
of cash or instruments that may be delivered to the Trustee for the perfection
of the security interest through possession.
(b) Within six months of the date that the sum of the Net Cash Proceeds
of Asset Sales (less the sum of the Net Cash Proceeds (i) previously applied to
the acquisition of property and assets used in lines of business related to the
Company's or the Subsidiaries' business at such time (each a "Permitted Related
Acquisition") and (ii) from the sale of Obsolete Assets not exceeding an
aggregate fair market value of $1 million in any year), together with
Condemnation Proceeds and Net Insurance Awards (the "Available Amount"), equals
or exceeds $5,000,000, the Company shall elect to either (A) apply or cause to
be applied the Available Amount to a Permitted Related Acquisition or the
commencement thereof (provided that such project is completed within a
reasonable time of the commencement thereof), (B) make an offer to purchase
Securities (an "Asset Sale Offer") from all Holders up to an amount equal to the
Available Amount (rounded to the next lowest multiple of $1,000) at a purchase
price equal to 100% of the principal amount thereof plus accrued interest
thereon, if any, to the date of purchase or (C) any combination of clauses (A)
and (B) above; provided, that (i) property acquired at any time as a Permitted
Related Acquisition that has been acquired with Collateral Proceeds shall be
subject to a first priority Lien in favor of the Collateral Agent for the
benefit of the Trustee and the Holders; (ii) pending application to a Permitted
Related Acquisition or an Asset Sale Offer, the Collateral Proceeds, together
with all Condemnation Proceeds and Net Insurance Awards received by the
Collateral Agent, will be retained by the Collateral Agent in the Collateral
Account; and (iii) notwithstanding the foregoing, the Company and its
Subsidiaries, in the aggregate, shall be permitted to retain $1,000,000 of Net
Cash Proceeds from Asset Sales.
(c) The Company shall provide the Trustee with notice of the Asset Sale
Offer at least 10 days before any notice of any Asset Sale Offer is mailed to
Holders of the Securities (unless shorter notice is acceptable to the Trustee).
Notice of an Asset Sale Offer shall be mailed by the Company to all Holders of
Securities, with a copy to the Trustee and the Paying Agent, not more than 195
days after the Available Amount equals or exceeds $5,000,000 which notice shall
specify the purchase date (which shall be no earlier than 30 days nor later than
60 days from the date such notice is mailed (the "Asset Sale Payment Date").
The Asset Sale Offer shall remain open from the time of mailing for at least 20
Business Days and until at least 5:00 p.m., Central time, on the Business Day
immediately preceding the Asset Sale Payment Date. The notice, which shall
govern the terms of the Asset Sale Offer, shall include such disclosures as are
required by law and shall state:
(i) that the Asset Sale Offer is being made pursuant to this
Section 6.15;
<PAGE>
60
(ii) the purchase price (including the amount of accrued
interest, if any) for each Security and the Asset Sale Payment Date;
(iii) that any Security not tendered or accepted for payment
shall continue to accrue interest in accordance with the terms thereof;
(iv) that any Security accepted for payment pursuant to the
Asset Sale Offer shall cease to accrue interest after the Asset Sale
Payment Date;
(v) that Holders electing to have Securities purchased pursuant
to an Asset Sale Offer must surrender their Securities with the form
"Option of Holder to Elect Purchase" on the reverse of the Securities
completed, to the Paying Agent at the address specified in the notice prior
to 5:00 p.m., Central time, on the Business Day immediately preceding the
Asset Sale Payment Date and must complete any form letter of transmittal
proposed by the Company and acceptable to the Trustee and the Paying Agent;
(vi) that Holders shall be entitled to withdraw their elections
if the Paying Agent receives, not later than 5:00 p.m., Central time, on
the Business Day immediately preceding the Asset Sale Payment Date, a
telegram, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Securities the Holder delivered for
purchase, the Security certificate number (if any) and a statement to have
such Securities purchased;
(vii) that if Securities in a principal amount in excess of the
Holders' pro rata share of the Available Amount are tendered pursuant to
the Offer, the Company shall purchase on a pro rata basis among the
tendered (with such adjustments as may be deemed appropriate by the Company
so that only Securities in denominations of $1,000 or integral multiples of
$1,000 shall be acquired);
(viii) that Holders whose Securities are purchased only in part
shall be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; and
(ix) the instructions that Holders must follow to tender their
Securities.
On or about the Asset Sale Payment date, the Company shall (i) accept
for payment, on a pro rata basis among the Securities, Securities or portions
thereof tendered pursuant to the Asset Sale Offer and (ii) deliver to the Paying
Agent the Securities so accepted together with an Officers' Certificate setting
forth the Securities or portions thereof tendered to and accepted for payment by
the Company. The Paying Agent shall
<PAGE>
61
promptly mail or deliver (or, in the case of a Global Security, transfer
immediately available funds, on the Asset Sale Payment Date to the Depositary)
to each Holder of the Securities so accepted payment in an amount equal to the
purchase price, and the Trustee shall promptly authenticate and mail or deliver
to each such Holder a new Security equal in principal amount to any unpurchased
portion of the Securities surrendered upon receipt from the Company thereof.
Any Security not so accepted shall be promptly mailed or delivered by the
Company to the Holder thereof. The Company shall publicly announce the results
of the Asset Sale Offer on the first Business Day following the Asset Sale
Payment Date. To the extent the Holders' pro rata portion of an Asset Sale
Offer is not fully subscribed to by such Holders, the Company may retain (free
and clear of the Lien of this Indenture and the Security Documents) such
unutilized portion. The Paying Agent shall promptly deliver to the Company the
balance of any such Trust Moneys held by the Paying Agent after payment to the
Holders as aforesaid. For purposes of this Section 6.15, so long as the
Collateral Agent is also the Trustee, the Collateral Agent shall act as the
Paying Agent and, otherwise, the Trustee shall act as Paying Agent.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to the
Asset Sale Offer. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 6.15, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 6.15 by virtue
thereof.
SECTION 6.16. Limitation on Dividend and Other Payment
----------------------------------------
Restrictions Affecting Subsidiaries.
-----------------------------------
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, assume or otherwise cause or suffer to exist or
enter into any agreement with any Person that would cause any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary to
(a) pay dividends, in cash or otherwise, or make any other distributions on its
Capital Stock; (b) make payments in respect of any Indebtedness owed to the
Company or any of the Company's Subsidiaries; (c) make loans or advances to the
Company or any of the Company's Subsidiaries; or, (d) transfer any of its assets
to the Company or any of the Company's Subsidiaries, other than by reason of (i)
the Securities, the Indenture and the Security Documents; (ii) restrictions
existing under agreements in effect on the Issue Date, including, without
limitation, restrictions under the Credit Facility as in effect on the Issue
Date; (iii) consensual encumbrances or restrictions binding upon any Person at
the time such Person becomes a Subsidiary of the Company so long as such
encumbrances or restrictions are not created,
<PAGE>
62
incurred or assumed in contemplation of such Person becoming a Subsidiary of the
Company; (iv) restrictions existing under any agreement which refinances or
replaces any of the agreements containing the restrictions in (ii) or (iii);
provided, that the terms and conditions of any such restrictions are not
materially less favorable to the Company or such Subsidiary than those under the
agreement evidencing the refinanced Indebtedness; (v) customary non-assignment
or sublease provisions of any lease governing a leasehold interest of the
Company or any of its Subsidiaries; (vi) customary restrictions relating to
assets acquired with the proceeds of a purchase money obligation; (vii)
customary non-assignment provisions restricting subletting or assignment of any
lease or assignment entered into by a subsidiary; and (viii) any restrictions
with respect to a Subsidiary of the Company imposed pursuant to an agreement
which has been entered into for the sale or disposition of all or substantially
all of the Capital Stock or assets of such Subsidiary.
SECTION 6.17. Limitation on Sale and Leaseback Transactions.
---------------------------------------------
The Company shall not, and shall not permit any of its Subsidiaries to,
enter into, directly or indirectly, any Sale and Leaseback Transaction, with
respect to any real or tangible personal property, other than (i) a Sale and
Leaseback Transaction entered into between the Company and any of its Wholly-
Owned Subsidiaries or between Wholly-Owned Subsidiaries of the Company, as the
case may be; and (ii) Capitalized Lease Obligations permitted to be incurred by
the Company or any of its Subsidiaries pursuant to the limitations on
Indebtedness set forth in Section 6.9.
SECTION 6.18. Limitation on Investment, Loans and Advances.
--------------------------------------------
The Company shall not, and shall not permit any of its Subsidiaries to,
make any advances or loans to, or Investments (by way of transfers of property,
contributions to capital, acquisitions of stock, securities or evidences of
indebtedness, or otherwise) in any other Person, except:
(i) the Company may make advances and loans to, and Investments
in, any Wholly-Owned Recourse Subsidiary and any Subsidiary may make
advances or loans to, and Investments in, the Company or any Wholly-Owned
Recourse Subsidiary of the Company;
(ii) the Company and its Subsidiaries may acquire and hold cash
and Cash Equivalents;
(iii) the Company and its Subsidiaries may make advances and
loans to officers and employees in the ordinary course of business not to
exceed $50,000 to any one officer or
<PAGE>
63
employee or $100,000 in the aggregate at any one time outstanding;
(iv) the Company and its Subsidiaries may make payroll advances
in the ordinary course of business;
(v) the Company may make advances or loans in connection with
Currency Agreements provided such agreements are made in the ordinary
course of business;
(vi) the Company may make advances or loans in connection with
Interest Rate Agreements provided such agreements are made in the ordinary
course of business;
(vii) the Company and its Subsidiaries may make loans to, to
Investments in, any Person, including Non-Recourse Subsidiaries, not to
exceed at any time outstanding an aggregate amount equal to $250,000 with
respect to loans to, and Investments in, all such Persons (the value of any
such loans and Investments shall be the original cost less the amount
returned in cash);
(viii) the Company and its Subsidiaries may make Investments in
exchange for assets sold or otherwise disposed of in accordance with the
Section 6.15;
(ix) the Company and its Subsidiaries may make Investments in
the form of advances, extensions of credit, progress payments and
prepayments for asset purchases in the ordinary course of business; and
(x) accounts receivable arising and trade credit granted in the
ordinary course of business and any securities received in satisfaction or
partial satisfaction thereof from financially troubled account debtors to
the extent reasonably necessary in order to prevent or limit loss.
SECTION 6.19. Change of Control.
-----------------
In the event of a Change of Control (the date of such occurrence,
the "Change of Control Date"), the Company shall notify the Holders of
Securities in writing of such occurrence and shall make an offer to
purchase (the "Change of Control Offer") on a Business Day (the "Change of
Control Payment Date") not earlier than 30 days nor later than 60 days from
the date such notice is mailed all Securities then outstanding at a
purchase price equal to 101% of the principal amount thereof plus accrued
interest to the Change of Control Payment Date, if any.
Notice of a Change of Control Offer shall be mailed by the Company
within 30 days following the Change of Control Date to the Holders of
Securities at their last registered addresses
<PAGE>
64
with a copy to the Trustee and the Paying Agent. The Change of Control
Offer shall remain open from time to time of mailing for at least 20
Business Days and until 5:00 p.m., Central time, on the Business Day
immediately preceding the Change of Control Payment Date. The notice,
which shall govern the terms of the Change of Control Offer, shall include
such disclosures as are required by law and shall state:
(i) that the Change of Control Offer is being made pursuant to this
Section 6.19 and that all Securities shall be accepted for payment;
(ii) the purchase price (including the amount of accrued interest, if
any) for each Security and the Change of Control Payment Date;
(iii) that any Security not tendered or accepted for payment shall
continue to accrue interest in accordance with the terms thereof;
(iv) that any Security accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Payment Date;
(v) that Holders electing to have Securities purchased pursuant to a
Change of Control Offer must surrender their Securities to the Paying Agent
at the address specified in the notice prior to 5:00 p.m., Central time, on
the Business Day immediately preceding the Change of Control Payment Date
and must complete any form letter of transmittal proposed by the Company
and acceptable to the Trustee and the Paying Agent;
(vi) that Holders shall be entitled to withdraw their election if the
Paying Agent receives, not later than 5:00 p.m., Central time, on the
Business Day immediately preceding the Change of Control Payment Date, a
telegram, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Securities the Holder delivered for
purchase, the Security certificate number (if any), and a statement that
such Holder is withdrawing his election to have such Securities purchased;
(vii) that Holders whose Securities are purchased only in part shall
be issued Securities equal in principal amount to the unpurchased portion
of the Securities surrendered;
(viii) the instructions that Holders must follow to tender their
Securities; and
(ix) the circumstances and relevant facts regarding such Change of
Control (including, but not limited to, information with respect to pro
forma historical financial information, including but not limited to
income, cash flow
<PAGE>
65
and capitalization, after giving effect to such Change of Control,
information regarding the Persons acquiring control and such Person's
business plans going forward).
On or before the Change of Control Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Payment Agent money sufficient to
pay the purchase price of all Securities or portions thereof so tendered and
accepted and (iii) deliver to the Trustee the Securities so accepted together
with an Officers' Certificate setting forth the Securities or portions thereof
tendered to and accepted for payment by the Company. The Paying Agent shall
promptly mail or deliver (or, in the case of a Global Security, transfer
immediately available funds on the Change of Control Payment Date to the
Depositary) to the Holders of Securities so accepted payment in an amount equal
to the purchase price, and the Trustee shall promptly authenticate and mail or
deliver to such Holders a new Security equal in principal amount to any
unpurchased portion of the Security surrendered upon receipt from the Company
thereof. Any Security not so accepted shall be promptly mailed or delivered by
the Company to the Holder thereof. The Company shall publicly announce the
results of the Change of Control Offer not later than the first Business Day
following the Change of Control Payment Date.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act, and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to a
Change of Control Offer. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this Section 6.19, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this Section 6.19 by virtue
thereof.
SECTION 6.20. Limitations as to Non-Recourse Subsidiaries.
-------------------------------------------
The Company shall not permit any Non-Recourse Subsidiary to create,
assume, incur, guarantee or otherwise become liable in respect to any
Indebtedness unless the lender in respect thereof has effectively waived all
claims and/or recourse on or in respect of such Indebtedness against the Company
or any other Subsidiary of the Company and the Company has delivered to the
Trustee an Opinion of Counsel and a Board Resolution confirming the foregoing,
in each case in form and substance satisfactory to the Trustee. Neither the
Company nor any of its Subsidiaries (other than Non-Recourse Subsidiaries) will
sell, lease, convey or otherwise transfer to any Non-Recourse Subsidiary any
asset which is essential for the steelmaking operations of the Company or its
Subsidiaries (other than Non-Recourse Subsidiaries). The Company will not
permit any Non-Recourse Subsidiary to acquire any such essential asset, and the
<PAGE>
66
Company and its Subsidiaries will not purchase any Non-Recourse Subsidiary,
unless in the judgment of the Board of Directors of the Company the creation and
operation of the Non-Recourse Subsidiary and its future acquisition of such
assets are neither intended nor reasonably expected to adversely affect the
financial condition, business, prospects or operations of the Company and its
Subsidiaries (other than Non-Recourse Subsidiaries).
SECTION 6.21. Impairment of Security Interest.
-------------------------------
The Company shall not, and shall not permit any of its Subsidiaries to,
take or omit to take any action, which action or omission might or would have
the result of affecting or impairing the security interest in favor of the
Collateral Agent, on behalf of the Trustee and the Holders with respect to the
Collateral, and the Company shall not grant to any Person (other than the
Collateral, except, in either case, as expressly permitted by Section 6.10 and
the Security Documents.
SECTION 6.22. Conflicting Agreements.
----------------------
The Company shall not, and shall not permit any of its Subsidiaries to,
enter into any agreement or instrument that by its terms expressly (i) prohibits
the Company from redeeming or otherwise making any payments on or in respect of
the Securities in accordance with the terms thereof or hereof, as in effect from
time to time, or (ii) requires that the proceeds received from the sale of any
Collateral be applied to repay, redeem or otherwise retire any Indebtedness of
any Person other than the Indebtedness represented by the Securities, except as
expressly permitted hereby or the Security Documents.
SECTION 6.23. Amendment to Security Documents.
-------------------------------
The Company shall not, and shall not permit any of its other
Subsidiaries to, amend, modify or supplement, or permit or consent to any
amendment, modification or supplement of, any of the Security Documents in any
way which would be adverse to the Holders or which would constitute a Default
hereunder or a default under any Security Document.
SECTION 6.24. Inspection.
----------
The Company shall, and shall cause each of its Subsidiaries to, permit
authorized representatives of the Trustee and the Collateral Agent to visit and
inspect the properties of the Company or its Subsidiaries, and any or all books,
records and documents in the possession of the Company relating to the
Collateral, and to make copies and take extracts therefrom and to
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67
visit and inspect the Collateral, all upon reasonable prior notice and at such
reasonable times during normal business hours and as often as may be reasonably
requested.
SECTION 6.25. Use of Proceeds.
---------------
The Company shall use any of the proceeds of the Securities in the
manner described in the Prospectus. The Company shall not use any part of such
proceeds to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock. Neither the issuance of
any Security nor the use of the proceeds thereof shall violate or be
inconsistent with the provisions of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
SECTION 6.26. Money for Security Payments to Be Held in Trust.
-----------------------------------------------
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents, it will, on
or prior to each due date of the principal of or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be
held as provided by the Trust Indenture Act, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee of its action or
failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of Section 317 of the
Trust Indenture Act applicable to it as a Paying Agent and (ii) during the
continuance of any default by the Company (or any other obligor upon the
Securities) in the making of any payment in respect of the Securities, upon the
written request of the Trustee, forthwith pay to the Trustee all sums held in
trust by such Paying Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by
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68
the Company or such Paying Agent; and, upon such payment by any Paying Agent to
the Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or interest on any
Security and remaining unclaimed for two years after such principal or interest
has become due and payable shall be paid to the Company on Company Request, or
(if then held by the Company) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general creditor, look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in New Orleans and New York City, or give by mail to
each Holder, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining will
be repaid to the Company.
ARTICLE VII
SUCCESSOR CORPORATION
SECTION 7.1. When Company May Merge, etc.
----------------------------
The Company shall not consolidate with or merge into any other Person or
convey, sell, assign, transfer or lease all or substantially all of its
properties and assets (determined on a consolidated basis for the Company and
its Subsidiaries taken as a whole) in one transaction or a series of
transactions to any other Person or Persons, or permit any Person to consolidate
with or merge into the Company, or convey, sell, assign, transfer or lease all
or substantially all of such Person's properties and assets in one transaction
or a series of transactions to the Company, unless:
(i) such Person is a solvent corporation, partnership or trust
organized under the laws of the United States, one or the States thereof or
the District of Columbia;
(ii) the resulting, surviving or transferee corporation,
partnership or trust (if other than the Company) assumes by a supplemental
indenture executed and delivered to the Trustee, in form satisfactory to
the Trustee, all of the Company's obligations under the Securities, the
Indenture and the Security Documents,
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69
(iii) immediately before and after giving effect to such
transaction or series of transactions, no Default or Event of Default shall
have occurred and be continuing;
(iv) immediately after giving effect to such transaction or
series of transactions (including, without limitation, any Indebtedness
incurred or anticipated to be incurred in connection with or in respect of
the transaction or series of transactions), the Company, or the successor
or transferee corporation, would be permitted to incur an additional $1.00
of Indebtedness pursuant to the Indenture;
(v) the Person formed by or surviving any such consolidation or
merger (if other than the Company), or the Person to whom such sale or
conveyance shall have been made, shall have a Consolidated Net Worth
immediately after the transaction or series of transactions (including,
without limitation, any Indebtedness incurred or anticipated to be incurred
in connection with or in respect of the transaction or series of
transactions) equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction; and
(vi) the Company or the surviving entity shall have delivered to
the Trustee an Officer's Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, conveyance, sale, transfer or
lease and, if a supplemental indenture has been executed in connection with
such transaction or series of transactions, such supplemental indenture
complies with this covenant and that all conditions precedent in the
Indenture relating to the transaction or series of transactions have been
satisfied.
Notwithstanding the foregoing, clause (iv) shall not prohibit a
transaction, the principal purpose of which is (as determined in good faith by
the Board of Directors of the Company and evidenced by the Board Resolution or
Board Resolutions thereof) to change the state of incorporation of the Company,
and such transaction does not have as one of its purposes the evasion of the
limitation on merger, consolidations and sales of assets. Nothing contained in
this Article shall be deemed to prevent the Company or any Subsidiary from
granting a security interest in, or a mortgage or Lien upon, or otherwise
encumbering, any of its assets, subject to the limitations on Liens set forth in
Section 6.10.
SECTION 7.2. Surviving Person Substituted.
----------------------------
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company in accordance with Section 7.1, the surviving
person formed by such consolidation or into which the Company is merged or to
which such transfer is made shall succeed to, and be substituted for,
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70
and may exercise every right and power of, the Company under this Indenture with
the same effect as if such surviving person had been named as the Company
herein.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Events of Default.
-----------------
"Event of Default", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) default in the payment of any interest upon any Security
when it becomes due and payable, and continuance of such default for a
period of 30 days; or
(ii) default in the payment of the principal, or premium, if any,
of any Security on a Maturity Date; or
(iii) default in the performance, or breach, of any covenant or
agreement described in Sections 6.15 or 6.25 of this Indenture (other than
a covenant or warranty a default in whose performance or whose breach is
elsewhere in this Section specifically dealt with), and continuance of such
default or breach for a period of five days; or
(iv) the Company fails to observe or perform any covenant,
condition or agreement in the Securities, the Indenture or the Security
Documents (other than as described in clause (i), (ii) or (iii)) and such
failure to observe or perform continues for a period of 30 days after there
has been given to the Company by the Trustee or has been received by the
Company and the Trustee from the Holders of at least 25% of the principal
amount of the Securities then outstanding a written notice specifying such
default, demanding that it be remedied and stating that the notice is a
"Notice of Default", unless, with respect to defaults under the Security
Documents, the remedy or cure of such default requires work to be
performed, acts to be done or conditions to be removed which cannot, by
their nature, reasonably be performed, done or removed within such 30-day
period, or if such remedy or cure is prevented by causes outside of the
control or responsibility of the Company, in which case no "Event of
Default" shall be deemed to exist for a period of 90 days after such
written notice so long as the Company shall have commenced cure within such
90-day period and shall diligently prosecute the same to completion;
<PAGE>
71
(v) a default under any bond, debenture, note or other evidence
of Indebtedness for money borrowed (other than the Securities) by the
Company or any Recourse Subsidiary of the Company or under any mortgage,
indenture or instrument (other than this Indenture or the Securities) under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company, (including, in each case
Guarantees of the Company and its Recourse Subsidiaries), whether such
Indebtedness or Guarantee now exists or shall hereafter be created, which
default shall constitute a failure to pay any portion of the principal of
such Indebtedness in a principal amount of at least $1,000,000 when due and
payable after the expiration of any applicable grace period with respect
thereto; or
(vi) a default under any bond, debenture, note or other evidence
of Indebtedness for money borrowed (other than the Securities) by the
Company or any Recourse Subsidiary of the Company or under any mortgage,
indenture or instrument (other than this Indenture or the Securities) under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company (including, in each case,
Guarantees of the Company and its Recourse Subsidiaries), whether such
Indebtedness or Guarantee now exists or shall hereafter be created if (i)
as a result of such event of default the maturity of such Indebtedness has
been accelerated prior to its stated maturity and (ii) the principal amount
of such Indebtedness, together with the principal amount of any other
Indebtedness of the Company and its Subsidiaries the maturity of which has
been so accelerated, aggregates $1,000,000 or more;
(vii) the Company or any Subsidiary (other than a Non-Recourse
Subsidiary, unless such action or proceeding adversely affects the
interests of the Company or any Recourse Subsidiary) pursuant to or within
the meaning of any Bankruptcy Law (a) commences a voluntary case or
proceeding; (b) consents to the entry of an order for relief against it in
an involuntary case or proceeding; (c) consents to the appointment of a
Custodian of it or for all or substantially all of its property; (d) makes
a general assignment for the benefit of its creditors; or (e) admits in
writing its inability to pay its debts as the same become due;
(viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (a) is for relief against the Company
or any Subsidiary in an involuntary case; (b) appoints a Custodian of the
Company or any Subsidiary for all or substantially all of its property; or
(c) orders the liquidation of the Company or any Subsidiary; provided,
that, clauses (a), (b) and (c) shall not apply to a Non-Recourse
Subsidiary, unless such action or proceeding adversely affects the
interests of the Company or any
<PAGE>
72
Recourse Subsidiary; and in any such case the order or decree remains
unstayed and in effect for 60 days;
(ix) the Company or any Subsidiary shall fail to discharge any
one or more judgments not covered by insurance (from which no further
appeal may be taken) in excess of $1,500,000, and such judgments shall
remain in force, undischarged, unsatisfied, unstayed and unbonded for more
than 30 days; or
(x) the Security Documents shall cease, for any reason, to be in
full force and effect or shall cease to be effective to grant a first
priority perfected Lien on the Collateral, subject to the exceptions
permitted by Section 6.10.
SECTION 8.2. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default (other than an Event of Default specified in
subparagraph (vii) or (viii) as set forth in Section 5.1) occurs and is
continuing, then and in every such case the Trustee or the Holders of not less
than 25% in principal amount of the Outstanding Securities may declare the
principal and accrued interest of all the Securities to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal shall become
immediately due and payable. If an Event of Default specified in clause (vii)
or (viii) above occurs, the principal amount and accrued interest shall ipso
facto become and be immediately due and payable on all Outstanding Securities
without any declaration or other act on the part of the Trustee or any Holder.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if:
(i) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(a) all overdue interest on all Securities;
(b) the principal of any Securities which have become due
otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Securities;
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73
(c) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities;
and
(d) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(ii) all Events of Default, other than the non-payment of the
principal of Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 8.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 8.3. Collection of Debt and Suits for
---------------------------------
Enforcement by Trustee
----------------------
The Company covenants that if:
(i) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days; or
(ii) default is made in the payment of the principal of any Security
on a Maturity Date,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and interest, and, to the extent that payment of such
interest shall be legally enforceable, interest on any overdue principal and on
any overdue interest, at the rate borne by the Securities, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or the Security
Documents or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
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74
Each Holder, by accepting a Security, acknowledges that the exercise of
remedies by the Trustee with respect to the Collateral is subject to the terms
and conditions of the Security Documents and the proceeds received upon
realization of the Collateral shall be applied by the Trustee in accordance with
Section 8.6.
SECTION 8.4. Trustee May File Proofs of Claims.
---------------------------------
In case of any judicial proceeding relative to the Company (or any other
obligor upon the Securities), its property or its creditors, the Trustee shall
be entitled and empowered, by intervention in such proceeding or otherwise, to
take any and all actions authorized under the Trust Indenture Act in order to
have claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to collect and receive any moneys or
other property payable or deliverable on any such claims and to distribute the
same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 9.7.
No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 8.5. Trustee May Enforce Claims
--------------------------
Without Possession of Securities.
--------------------------------
All rights of action and claims under this Indenture, the Security
Documents, or the Securities may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of the Securities in
respect of which such judgment has been recovered.
<PAGE>
75
SECTION 8.6. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or interest,
upon presentation of the Securities and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 9.7 and, in its capacity as Collateral Agent, for amounts due
under the Security Documents;
SECOND: To the payment of unpaid interest accrued on the
Securities in respect of which or for the benefit of which such money
has been collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on such Securities for
interest;
THIRD: To the payment of the unpaid principal of the Securities
in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal; and
FOURTH: To the Company or any other obligors on the Securities,
as their interests may appear, or as a court of competent jurisdiction
may direct.
SECTION 8.7. Limitation on Suits.
-------------------
Except as provided in Section 8.8, no Holder of any Security
shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless:
(i) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(ii) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs,
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76
expenses and liabilities to be incurred in compliance with such request;
(iv) the Trustee for 15 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding;
and
(v) no direction inconsistent with such written request has been
given to the Trustee during such 15-day period by the Holders of a majority
in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whether by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
The foregoing limitations shall not apply to a suit instituted by a
Holder for the enforcement of the payment of principal of or accrued interest on
such Securities on or after the respective due dates set forth in such
Securities.
SECTION 8.8. Unconditional Right of Holders to
---------------------------------
Receive Principal and Interest.
------------------------------
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of and (subject to Section 3.7) interest on such
Security on the respective Maturity Dates expressed in such Security and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired or affected without the consent of such Holder, except to the
extent that the institution or prosecution of such suit or entry of judgment
therein would, under applicable law, result in the surrender, impairment or
waiver of the Lien of this Indenture and the Security Documents upon the
Collateral.
SECTION 8.9. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies
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77
of the Trustee and the Holders shall continue as though no such proceeding had
been instituted.
SECTION 8.10. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 3.6, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 8.11. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 8.12. Control by Holders.
------------------
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee; provided, that the Trustee may
refuse to follow any direction that:
(i) conflicts with any rule of law or with this
Indenture;
(ii) the Trustee determines may be unduly prejudicial to the
rights of another Holder; or
(iii) may involve the Trustee in personal liability unless the
Trustee has indemnification satisfactory to it in its sole discretion
against any loss or expense caused by it following such directions;
provided, further, that the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
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78
SECTION 8.13. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
(i) in the payment of the principal of or interest on any
Security; or
(ii) in respect of a covenant or provision hereof which under
Article XI cannot be modified or amended without the consent of the Holder
of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 8.14. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess reasonable
costs, including reasonable attorneys' fees, against any such party litigant, in
the manner and to the extent provided in the Trust Indenture Act; provided, that
neither this Section nor the Trust Indenture Act shall be deemed to authorize
any court to require such an undertaking or to make such an assessment in any
suit instituted by the Trustee, a suit by a Holder pursuant to Section 8.8, or a
suit by Holder of more than 10% in aggregate principal amount of the outstanding
Securities.
SECTION 8.15. Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
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79
SECTION 8.16. Collection Suit by Trustee.
--------------------------
If an Event of Default specified in Section 8.1(i) or 8.1(ii) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company (or any other obligor upon the
Securities) for the whole amount of principal and accrued interest remaining
unpaid, together with interest overdue on principal and, to the extent that
payment of such interest is lawful, interest on overdue installments of
interest, in each case at the rate per annum borne by the Securities, and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
ARTICLE IX
THE TRUSTEE
SECTION 9.1. Certain Duties and Responsibilities.
-----------------------------------
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 9.1. If an Event of Default has
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in its exercise as a prudent person would exercise or use under the
circumstances in the conduct of its own affairs.
SECTION 9.2. Notice of Defaults.
------------------
The Trustee shall give the Holders notice of any default hereunder as
and to the extent provided by Section 315(b) of the Trust Indenture Act. Except
in the case of a Default or an Event of Default in payment of principal of or
interest on any Security (including the failure to make a mandatory redemption
or other payment in connection with an Asset Sale Offer or Change of Control
Offer), the Trustee may withhold the notice if and so long as the Trustee in
good faith determines that withholding the notice is in the interest of Holders.
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SECTION 9.3. Certain Rights of Trustee.
-------------------------
Subject to Sections 315(a) through (d) of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be
<PAGE>
81
entitled to examine the books, records and premises of the Company,
personally or by agent or attorney;
(g) the Trustee may execute any of the trust or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(h) Subject to Section 11.2 hereof, the Trustee may (but shall not be
obligated to), without the consent of the Holders, give any consent, waiver
or approval required under the Security Documents or by the terms hereof
with respect to the Collateral, but shall not without the consent of the
Holders of a majority in aggregate principal amount of the Securities at
the time outstanding (i) give any consent, waiver or approval or (ii) agree
to any amendment or modification of the Security Documents, in each case,
that shall have an adverse effect on the interests of any Holder. The
Trustee shall be entitled to request and conclusively rely on an Opinion of
Counsel with respect to whether any consent, waiver, approval, amendment or
modification shall have an adverse effect on the interests of any Holder.
SECTION 9.4. Not Responsible for Recitals
----------------------------
or Issuance of Securities.
-------------------------
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements
of the Company, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities. The Trustee shall not
be accountable for the use or application by the Company of Securities or
the proceeds thereof.
SECTION 9.5. May Hold Securities.
-------------------
The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in its individual or
any other capacity, may become the owner or pledgee of Securities and,
subject to Section 9.8 and 9.13, may otherwise deal with the Company with
the same rights it would have if it were not Trustee, Authenticating Agent,
Paying Agent, Security Registrar or such other agent.
<PAGE>
82
SECTION 9.6. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall
be under no liability for interest on any money received by it hereunder
except as otherwise agreed in writing with the Company.
SECTION 9.7. Compensation and Reimbursement.
------------------------------
The Company agrees:
(i) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder and under the
Security Documents (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(ii) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture or the Security Documents (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its negligence or bad faith; and
(iii) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance or
administration of this trust or the Security Documents, including the costs
and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
thereunder.
The Trustee shall notify the Company promptly of any claim asserted
against it for which it may seek indemnity.
As security for the performance of the obligations of the Company under
this Section the Trustee shall have a Lien prior to the Securities on all
properties and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of or interest on particular Securities.
If the Trustee incurs expenses or renders services after an Event of
Default specified in Section 8.1(vii) or (viii) occurs, the expenses and
compensation for the services will be intended to constitute expenses of
administration under any applicable Bankruptcy Law or other similar law.
<PAGE>
83
The Company's obligations under this Section 9.7 and any Lien arising
hereunder shall survive the resignation or removal of any Trustee, the discharge
of the Company's obligations pursuant to Articles IV or XII of this Indenture
and/or the termination of this Indenture.
SECTION 9.8. Disqualification; Conflicting Interests.
---------------------------------------
If the Trustee has or shall acquire a conflicting interest within the
meaning of Section 310(b) of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 9.9. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to Section 310(a) of the Trust Indenture Act to act as
such and has a combined capital and surplus of at least $50,000,000 and its
Corporate Trust Office in New York City or New Orleans. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section 9.9, the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.9, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
SECTION 9.10. Resignation and Removal;
------------------------
Appointment of Successor.
------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 9.11.
(b) The Trustee may resign at any time by giving written notice thereof
to the Company. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
<PAGE>
84
(d) If at any time:
(i) the Trustee shall fail to comply with Section 9.8 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months; or
(ii) the Trustee shall cease to be eligible under Section
9.9 and shall fail to resign after written request therefor by the Company
or by any such Holder; or
(iii) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any such case, (1) the Company by a Board Resolution may remove the
Trustee, or (2) subject to Section 8.14, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 1.6. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
(g) Any resignation or removal of the Trustee pursuant to this
Indenture shall be deemed to be a resignation or removal of the Trustee in its
capacity as Collateral Agent under the Security Documents and any appointment of
a successor Trustee
<PAGE>
85
pursuant to this Indenture shall be deemed to be an appointment of a successor
Collateral Agent under the Security Documents and such successor shall assume
all of the obligations of the Trustee in its capacity as Collateral Agent under
the Security Documents.
SECTION 9.11. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder, subject nevertheless to its Lien, if any,
provided for in Section 9.7. Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 9.12. Merger, Conversion, Consolidation or
------------------------------------
Succession to Business.
----------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder; provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
<PAGE>
86
SECTION 9.13. Preferential Collection of Claims Against Company.
-------------------------------------------------
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of Section 311 of the Trust Indenture Act regarding the collection of
claims against the Company (or any such other obligor).
SECTION 9.14. Appointment of Authenticating Agent.
-----------------------------------
The Trustee may appoint an Authenticating Agent or Agents which shall be
authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer or partial
repurchase or pursuant to Section 3.6, and Securities so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder. Wherever reference
is made in this Indenture to the authentication and delivery of Securities by
the Trustee or the Trustee's certificate of authentication, such reference shall
be deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section 9.14, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
an Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 9.14, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section 9.14, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
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87
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 9.14, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall mail
written notice of such appointment by first-class mail, postage prepaid, to all
Holders as their names and addresses appear in the Security Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section 9.14.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section 9.14, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 9.7.
If an appointment is made pursuant to this Section 9.14, the Securities
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities described in the within-mentioned
Indenture.
FIRST NATIONAL BANK
OF COMMERCE, As Trustee
By_______________________________
As Authenticating Agent
By_______________________________
Authorized Officer
<PAGE>
88
ARTICLE X
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 10.1. Company to Furnish Trustee
--------------------------
Names and Addresses of Holders.
------------------------------
The Company will furnish or cause to be
furnished to the Trustee:
(i) semi-annually, not more than 15 days after each Regular
Record Date, a list, in such form as the Trustee may reasonably require, of
the names and addresses of the Holders as of such Regular Record Date; and
(ii) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list
of similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
provided, no such list need be furnished if the Trustee is acting as Security
Registrar.
SECTION 10.2. Preservation of Information; Communications to Holders.
------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 10.1 and the names
and addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 10.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by Section
312 of the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of Holders made pursuant
to Section 312 of the Trust Indenture Act.
SECTION 10.3. Reports by Trustee.
------------------
(a) Within 60 days after each May 15 beginning with May 15,
1994, the Trustee shall transmit to Holders such reports
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89
concerning the Trustee and its actions under this Indenture as may be required
pursuant to Section 313 of the Trust Indenture Act at the times and in the
manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 10.4. Reports by Company.
------------------
The Company shall file with the Trustee and the Commission, and transmit
to Holders, such information, documents and other reports, and such summaries
thereof, as may be required pursuant to Section 314 of the Trust Indenture Act
at the times and in the manner provided pursuant to such Act; provided, that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same shall be so required to be filed with the
Commission; provided further that if the Company is not subject to the periodic
reporting and information requirements of the Exchange Act, it will provide to
Holders annual reports containing audited consolidated financial statements and
an opinion thereon by the Company's independent certified public accountants,
and quarterly reports for the first three quarters of each fiscal year
containing unaudited condensed consolidated financial statements.
ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 11.1. Supplemental Indentures without Consent of Holders.
--------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(i) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the Company
herein and in the Securities; or
(ii) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon the
Company; or
<PAGE>
90
(iii) to comply with any requirements of the Commission in order
to maintain the qualification of this Indenture under the Trust Indenture
Act, as contemplated by Section 11.5; or
(iv) to pledge or grant a security interest in favor of the
Trustee as additional security for the payment and performance of the
Company's obligations under this Indenture, in any property or assets,
including any that are required to be pledged or in which a security
interest is required to be granted, to the Trustee pursuant to the Security
Documents or otherwise; or
(v) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision herein,
or to make any other provisions with respect to matters or questions
arising under this Indenture which shall not be inconsistent with the
provisions of this Indenture; provided, that such action pursuant to this
Clause (v) shall not adversely affect the interests of the Holders.
SECTION 11.2. Supplemental Indentures with Consent of Holders.
-----------------------------------------------
(a) Subject to Section 8.8, the Company, when authorized by a Board
Resolution, and the Trustee or the Collateral Agent, as applicable, may amend or
supplement this Indenture, the Security Documents or the Securities with the
written consent of the Holders of at least a majority in aggregate principal
amount of the Outstanding Securities. Subject to Section 8.8, the Holders of at
least a majority in aggregate principal amount of the Outstanding Securities by
written notice to the Trustee may waive compliance by the Company with any
provision of this Indenture, the Security Documents or the Securities.
(b) With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or alter the redemption
provisions or reduce the principal
<PAGE>
91
amount thereof or the rate of interest thereon, or change the place of
payment where, or the coin or currency in which, any Security or interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Maturity Date thereof; or
(ii) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture; or
(iii) modify any of the provisions of this Section 11.2 or
Section 8.8 or 8.13, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security
affected thereby; or
(iv) affect the ranking of the Securities or the Liens in favor
of the Trustee, the Collateral Agent and the Holders in a manner adverse to
the Holders or release all or substantially all of the Collateral.
(c) It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
(d) After an amendment, supplement or waiver under this Section 11.2
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment, supplement or
waiver.
SECTION 11.3. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 9.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
<PAGE>
92
SECTION 11.4. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 11.5. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 11.6. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE XII
COLLATERAL AND SECURITY
SECTION 12.1. Collateral and Security Documents.
---------------------------------
(a) In order to secure the due and punctual payment of the principal of
and interest on the Securities when and as the same shall be due and payable,
whether on an Interest Payment Date, Maturity Date, by acceleration, redemption
or otherwise, and interest on the overdue principal of and interest (to the
extent permitted by law), if any, on the Securities and the performance of all
other obligations of the Company to the Holders or the Trustee under this
Indenture and the Securities (the "Company Obligations"), the Company and the
Trustee have simultaneously with the execution of this Indenture entered into
the Company Security Agreement and certain Mortgages pursuant to which the
Company has granted to the Trustee, in its capacity as Collateral Agent, for the
benefit of the Holders a first priority Lien on and security interest in the
Collateral described therein, subject to the exceptions permitted by Section
6.10. Simultaneously with the execution of the Indenture, or if later,
<PAGE>
93
the date on which a Person becomes a Subsidiary of the Company (with the
exception of Non-Recourse Subsidiaries), each Subsidiary of the Company shall
guarantee the Company Obligations pursuant to a Subsidiary Guarantee. On the
Issue Date, each of the Subsidiaries of the Company shall enter into a
Subsidiary Security Agreement and a Mortgage (if such Subsidiary holds title to
real property) to secure its obligations under its executed Subsidiary
Guarantee, pursuant to which such Subsidiary shall grant to the Trustee for the
benefit of the Holders a first priority Lien on and security interest in the
Collateral described in such Subsidiary Security Agreement or Mortgage(s),
subject to the exceptions permitted by Section 6.10. Subsequent to the Issue
Date, the Company and its Subsidiaries (with the exception of Non-Recourse
Subsidiaries) shall execute, as soon as practicable, any further security
agreements (substantially in the form of the Company Security Agreement or the
Subsidiary Security Agreement, as the case may be), Mortgages, or other
agreements necessary to create an effective security interest in the entirety of
their real property, machinery, equipment, vehicles and fixtures (including, but
not limited to all equipment, as such term is defined in the Uniform Commercial
Code as from time to time is in effect in the State of New York). The Trustee,
the Company and the Subsidiaries hereby agree that the Trustee holds the
Collateral in trust for the benefit of the Holders pursuant to the terms of the
Security Documents.
(b) The Trustee is authorized and directed by the Holders to enter into
and comply with the provisions of the Release Agreement in connection with any
sale or other disposition of the Collateral subject to the TBT Lease.
Compliance with the Release Agreement shall in no event serve as the basis for
any claim by the Company or any other party having an interest in the Collateral
that the Collateral was sold or otherwise disposed or in a commercially
unreasonable manner. Under no circumstances will any Holder or any portion of
the Collateral have any obligation, or be in any manner responsible to the
Company, the Tax Lessor, Meyers, Voest-Alpine or VAIC in respect of any loss
anticipated in connection with the TBT Lease and neither any portion of the
Collateral nor any Holder shall be liable to the Company, the Tax Lessor,
Meyers, Voest-Alpine or VAIC under the TBT Lease for any cost, damage,
liability, tax or indemnity, or other expense incurred by any of them relating
to the TBT Lease or any portion of the Collateral subject to the TBT Lease or
otherwise. The Trustee may, but shall not be required to obtain the Opinions of
Counsel referred to in the Release Agreement without direction from the Holders;
provided, that the Trustee shall upon direction of the Holders of a majority in
principal amount of the Outstanding Securities obtain an Opinion of Counsel from
a law firm designated in such direction and shall be protected in relying and
acting thereon.
(c) The Trustee is authorized and directed by the Holders to enter into
and comply with the provisions of the Intercreditor Agreement. Compliance with
the Intercreditor
<PAGE>
94
Agreement shall in no event serve as the basis for any claim by the Company or
any other party having an interest in the Collateral that the Collateral was
sold or otherwise disposed of in a commercially unreasonable manner. The
Trustee is authorized to execute and deliver the documents referred to in
Section 2(c) of the Intercreditor Agreement upon receipt of such documents and
an Officer's Certificate and an Opinion of Counsel, each to the effect that such
documents comply with the requirements of the Intercreditor Agreement and the
conditions contained herein to the execution of such documents have been
complied with and that such documents do not release property subject to the
Lien of this Indenture or the Security Documents in contravention of the
provisions of this Indenture or such Security Documents.
(d) Each Holder, by accepting a Security, agrees to all of the terms
and provisions of the Security Documents, as the same may be amended from time
to time pursuant to the provisions of the Security Documents and this Indenture.
SECTION 12.2. Recording and Opinions.
----------------------
(a) The Company as soon as practicable shall take or cause to be taken
all action required to perfect, maintain, preserve and protect the first
priority Lien on and security interest in the Collateral, subject to the
exceptions set forth in Section 6.10, granted by the Security Documents,
including without limitation, the filing of financing statements, continuation
statements and any instruments of further assurance, in such manner and in such
places as may be required by law fully to preserve and protect the rights of the
Holders and the Trustee under this Indenture and the Security Documents to all
property comprising the Collateral. The Company shall from time to time
promptly pay all financing and continuation statement recording and/or filing
fees, charges and taxes relating to this Indenture and the Security Documents,
any amendments thereto and any other instruments of further assurance required
pursuant to the Security Documents.
(b) The Company shall furnish to the Trustee at the time of execution
and delivery of this Indenture, Opinion(s) of Counsel either (i) substantially
to the effect that, in the opinion of such Counsel, this Indenture and the grant
of a security interest in the Collateral intended to be made by the Security
Documents and all other instruments of further assurance, including, without
limitation, financing statements, have been properly recorded and filed to the
extent necessary to perfect the security interests in the Collateral created by
the Security Documents and reciting the details of such action, and stating that
as to the security interests created pursuant to the Security Documents, such
recordings and filings are the only recordings and filings necessary to give
notice thereof and that no re-recordings or refilings are necessary to maintain
such notice (other than as stated in such opinion), or (ii) to the
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95
effect that, in the opinion of such counsel, no such action is necessary to
perfect such security interests. Promptly after execution and delivery of this
Indenture, the Company shall deliver the opinion(s) required by Section 314(b)
of the TIA. Subsequent to the Issue Date, at the time of the execution of any
Security Document, Opinion(s) of Counsel with respect to the identical matters
set forth in this paragraph (ii) and an Opinion of Counsel to the effect that
the Security Documents executed on such date constitute the legally valid,
binding and enforceable obligation of the Company or such Subsidiary, as the
case may be, subject to acceptable bankruptcy and similar exceptions.
(c) The Company shall furnish to the Trustee on ____________ 1 in each
year, beginning with _______________ 1, 1994, an Opinion of Counsel, dated as of
such date, either (i)(A) stating that, in the opinion of such counsel, action
has been taken with respect to the recording, filing, re-recording and refiling
of all supplemental indentures, financing statements and continuation statements
as is necessary to maintain the Lien of the Security Documents and reciting with
respect to the security interests in the Collateral the details of such action
or referring to prior Opinions of Counsel in which such details are given, and
(B) stating that, based on relevant laws as in effect on the date of such
Opinion of Counsel, all financing statements and continuation statements have
been executed and filed that are necessary as of such date and during the
succeeding 12 months fully to maintain the security interest of the Holders and
the Trustee hereunder and under the Security Documents with respect to the
Collateral, or (ii) stating that, in the opinion of such Counsel, no such action
is necessary to maintain such Lien.
SECTION 12.3. Release of Collateral.
---------------------
(a) The Trustee, in its capacity as Collateral Agent under the Security
Documents, shall not at any time release Collateral from the security interest
created by this Indenture and the Security Documents unless such release is in
accordance with the provisions of this Indenture and the Security Documents.
(b) At any time when an Event of Default shall have occurred and be
continuing, no release of Collateral pursuant to the provisions of this
Indenture and the Security Documents shall be effective as against the Holders
of the Securities.
(c) The release of any Collateral from the terms of the Security
Documents shall not be deemed to impair the security under this Indenture in
contravention of the provisions hereof if and to the extent the Collateral is
released pursuant to this Indenture and the Security Documents. To the extent
applicable, the Company shall cause Section 314(d) of the Trust Indenture Act
relating to the release of property from the Lien of the Security Documents and
relating to the substitution therefor of any property to be subjected to the
Lien of the Security Documents to
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96
be complied with. Any certificate or opinion required by Section 314(d) of the
Trust Indenture Act may be made by a Responsible Officer of the Company, except
in cases where Section 314(d) of the Trust Indenture Act requires that such
certificate or opinion be made by an independent Person, which Person shall be
an independent engineer, or other expert selected or approved by the Trustee in
the exercise of reasonable care.
SECTION 12.4. Possession and Use of Collateral.
--------------------------------
Subject to and in accordance with the provisions of this Indenture and
the Security Documents, so long as no Event of Default shall have occurred and
be continuing the Company and its Subsidiaries shall have the right to remain in
possession and retain exclusive control of the Collateral other than Trust
Moneys held by the Trustee, to operate, manage, develop, lease, use, consume and
enjoy the Collateral (other than Trust Moneys held by the Trustee), to alter or
repair any Collateral consisting of vehicles, machinery or equipment so long as
such alterations and repairs do not diminish the value thereof or impair the
Lien of the Security Documents thereon and to collect, receive, use, invest and
dispose of the reversions, remainders, interest, rents, lease payments, issues,
profits, revenues, proceeds and other income thereof.
SECTION 12.5. Specified Releases of Collateral.
--------------------------------
(a) Satisfaction and Discharge; Defeasance. The Company and its
--------------------------------------
Subsidiaries shall be entitled to obtain a full release of all of the Collateral
from the Liens of this Indenture and of the Security Documents upon compliance
with the conditions precedent set forth in Article IV for satisfaction and
discharge of this Indenture or for legal defeasance pursuant to Section 14.2.
Upon delivery by the Company to the Trustee of an Officers' Certificate and
Opinion of Counsel, each to the effect that such conditions precedent have been
complied with (and which may be the same Officers' Certificate and Opinion of
Counsel required by Section 4.1 or 14.4), the Trustee shall forthwith take all
necessary action (at the request of and the expense of the Company) to release
and reconvey to the Company all of the Collateral, and shall deliver such
Collateral in its possession to the Company including, without limitation, the
execution and delivery of releases and satisfactions whenever required.
(b) Sales of Collateral Permitted by Section 6.15. The Company shall
---------------------------------------------
be entitled to obtain a release of items of Collateral (the "Released
Interests") subject to an Asset Sale upon compliance with the condition
precedent that the Company shall have delivered to the Trustee the following:
(i) Company Order. A Company Order requesting release of
-------------
Released Interests, such Company Order (A) specifically
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97
describing the proposed Released Interests, (B) specifying the value of
such Released Interests on a date within 60 days of the Company Order (the
"Valuation Date"), (C) stating that the purchase price received is at least
equal to the fair value of the Released Interest, (D) stating that the
release of such Released Interests will not interfere with or impede the
Trustee's ability to realize the value of the remaining Collateral and will
not impair the maintenance and operation of the remaining Collateral, (E)
confirming the sale of, or an agreement to sell, such Released Interests in
a bona fide sale to a Person that is not an Affiliate of the Company or, in
the event that such sale is to a Person that is an Affiliate, that such
sale is being made in accordance with Section 6.14, (F) certifying that
such Asset Sale complies with the terms and conditions of Section 6.15
hereof and (G) in the event that there is to be a substitution of property
for the Collateral to be sold, specifying the property intended to be
substituted for the Collateral to be sold;
(ii) Officers' Certificate. An Officers' Certificate certifying
---------------------
that (A) such Asset Sale covers only the Released Interests and complies
with the terms and conditions of an Asset Sale pursuant to Section 6.15,
(B) all Net Cash Proceeds from the sale of any of the Released Interests
constitutes Collateral and will be deposited in the Collateral Account for
application in accordance with Section 6.15, (C) there is no Default or
Event of Default in effect or continuing on the date thereof, the Valuation
Date or the date of such Asset Sale, (D) the release of the Collateral will
not result in a Default or Event of Default hereunder and (E) all
conditions precedent to such release have been complied with; and
(iii) Other Documents. All documentation required by Section
---------------
314(d) of the Trust Indenture Act.
(c) Eminent Domain and Other Governmental Takings. The Company shall
---------------------------------------------
be entitled to obtain a release of, and the Trustee shall release, items of
Collateral taken by eminent domain or sold pursuant to the exercise by the
United States of America or any State, municipality or other governmental
authority of any right which it may then have to purchase, or to designate a
purchaser or to order a sale of, all or any part of the Collateral, upon
compliance with the condition precedent that the Company shall have delivered to
the Trustee the following:
(i) Officer's Certificate. An Officer's Certificate (A) stating
---------------------
that such property has been taken by eminent domain and the amount of the
award therefor, or that such property has been sold pursuant to a right
vested in the United States of America, or a State, municipality or other
governmental authority to purchase, or to designate a purchaser, or order a
sale of such property and the amount
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98
of the proceeds of such sale, and (B) stating that all conditions precedent
to such release have been complied with;
(ii) Opinion of Counsel. An Opinion of Counsel to the effect
------------------
that (A) such property has been lawfully taken by exercise of the right of
eminent domain, or has been sold pursuant to the exercise of a right vested
in the United States of America or a State, municipality or other
governmental authority to purchase, or to designate a purchaser or order a
sale of, such property, (B) in the case of any such taking by eminent
domain, the award for such property has become final or an appeal therefrom
is not advisable in the interests of the Company or the Holders, and (C)
all conditions precedent herein provided relating to such release have been
complied with; and
(iii) Eminent Domain Award. Subject to the requirements of any
--------------------
prior Lien on the Collateral so taken, cash equal to the amount of the
award for such property or the proceeds of such sale, to be held as Trust
Moneys subject to the disposition thereof pursuant to Article XIII hereof.
Upon compliance by the Company with the conditions precedent set forth
above, and upon delivery by the Company to the Trustee of an Opinion of Counsel
to the effect that such conditions precedent have been complied with, the
Trustee shall cause to be released and reconveyed to the Company, the Released
Interests.
SECTION 12.6. Disposition of Collateral Without Release.
-----------------------------------------
So long as no Event of Default shall have occurred and be continuing,
the Company or any of its Subsidiaries may, without any release or consent by
the Collateral Agent or the Trustee, sell or otherwise dispose of any Obsolete
Assets subject to the Lien of the Security Documents, not exceeding
individually, in fair market value, $25,000.
SECTION 12.7. Form and Sufficiency of Release.
-------------------------------
In the event that the Company or any of its Subsidiaries have sold,
exchanged or otherwise disposed of or proposes to sell, exchange or otherwise
dispose of any portion of the Collateral that under the provisions of Section
12.5 or 12.6 may be sold, exchanged or otherwise disposed of by the Company or
its Subsidiary, and the Company or its Subsidiary requests the Trustee to
furnish a written disclaimer, release or quit-claim of any interest in such
property under this Indenture and the Security Documents, the Trustee, in its
capacity as Collateral Agent under the Security Documents, shall execute,
acknowledge and deliver to the Company or its Subsidiary (in proper and
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99
recordable form) such an instrument promptly after satisfaction of the
conditions set forth herein for delivery of any such release. Notwithstanding
the preceding sentence, all purchasers and grantees of any property or rights
purporting to be released herefrom shall be entitled to rely upon any release
executed by the Trustee hereunder as sufficient for the purpose of this
Indenture and as constituting a good and valid release of the property therein
described from the Lien of this Indenture or of the Security Documents.
SECTION 12.8. Purchaser Protected.
-------------------
No purchaser or grantee of any property or rights purporting to be
released herefrom shall be bound to ascertain the authority of the Trustee to
execute the release or to inquire as to the existence of any conditions herein
prescribed for the exercise of such authority; nor shall any purchaser or
grantee of any property or rights permitted by this Indenture to be sold or
otherwise disposed of by the Company or any of its Subsidiaries be under any
obligation to ascertain or inquire into the authority of the Company or its
Subsidiary to make such sale or other disposition.
SECTION 12.9. Authorization of Actions To Be Taken by The Trustee Under the
-------------------------------------------------------------
Security Documents.
------------------
Subject to the provisions of the Security Documents, (a) the Trustee
may, in its sole discretion and without the consent of the Holders, take all
actions it deems necessary or appropriate in order to (i) enforce any of the
terms of the Security Documents and (ii) to collect and receive any and all
amounts payable in respect of the obligations of the Company hereunder or of the
Subsidiaries of the Company under the relevant Subsidiary Guarantee and (b) the
Trustee shall have power to institute and to maintain such suits and proceedings
as it may deem expedient to prevent any impairment of the Collateral by any acts
that may be unlawful or in violation of the Security Documents or this
Indenture, and such suits and proceedings as the Trustee may deem expedient to
preserve or protect its interests and the interests of the Holders in the
Collateral (including the power to institute and maintain suits or proceedings
to restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair the security interest thereunder or be prejudicial to the interests
of the Holders or of the Trustee.)
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100
SECTION 12.10. Authorization of Receipt of Funds by the Trustee Under the
----------------------------------------------------------
Security Documents.
------------------
The Trustee is authorized to receive any funds for the benefit of
Holders distributed under the Security Documents, and to make further
distributions of such funds to the Holders in accordance with the provisions of
Article XIII and the other provisions of this Indenture.
ARTICLE XIII
APPLICATION OF TRUST MONEYS
SECTION 13.1. Collateral Account.
------------------
On the Issue Date there shall be established and, at all times hereafter
until this Indenture shall have terminated, there shall be maintained with the
Trustee an account which shall be entitled the "Collateral Account" (the
"Collateral Account"). The Collateral Account shall be established and
maintained by the Trustee at its corporate trust offices. All Trust Moneys
which are received by the Trustee shall be deposited in the Collateral Account
and thereafter shall be held, applied and/or disbursed by the Trustee in
accordance with the terms of this Article.
SECTION 13.2. Withdrawals of Insurance Proceeds and Condemnation Awards.
---------------------------------------------------------
To the extent that any Trust Moneys consist of either (i) Net Insurance
Proceeds or (ii) Condemnation Awards, such Trust Moneys may be withdrawn by the
Company (or by a Subsidiary of the Company if title to the property damaged or
taken was held by such Subsidiary, but only to the extent of the Net Insurance
Proceeds or Condemnation Proceeds relating thereto) and shall be paid by the
Trustee upon a Company Order to reimburse the Company or its Subsidiary for
expenditures made, or to pay costs incurred, by the Company or its Subsidiary to
repair, rebuild or replace the property destroyed, damaged or taken, upon
receipt by the Trustee of the following:
(a) an Officers' Certificate of the Company or its Subsidiary, dated
not more than 30 days prior to the date of the application for the
withdrawal and payment of such Trust Moneys:
(i) that expenditures have been made or costs incurred, by
the Company or its Subsidiary in a specified amount for the purpose of
making certain repairs, rebuildings and replacements of the
Collateral, which shall be briefly described, and stating the fair
value thereof to the Company or its
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101
Subsidiary at the date of the expenditure or incurrence thereof by the
Company or its Subsidiary;
(ii) that no part of such expenditures or costs has been or
is being made the basis for the withdrawal of any Trust Moneys in any
previous or then pending application pursuant to this Section 13.2;
(iii) that there is no outstanding Indebtedness, other than
costs for which payment is being requested, known to the Company or
its Subsidiary, after due inquiry, for the purchase price or
construction of such repairs, rebuildings or replacements, or for
labor, wages, materials or supplies in connection with the making
thereof, which, if unpaid, might become the basis of a vendors',
mechanics', laborers', materialmen's, statutory or other similar Lien
upon any of such repairs, rebuildings or replacement, which Lien
might, in the opinion of the signers of such certificate, materially
impair the security afforded by such repairs, rebuildings or
replacements;
(iv) that the property to be repaired, rebuilt or replaced
is necessary or desirable in the conduct of the Company's or its
Subsidiary's business;
(v) whether any part of such repairs, rebuildings or
replacements within six months before the date of acquisition thereof
by the Company or its Subsidiary has been used or operated by others
than the Company or its Subsidiary in a business similar to that in
which such property has been or is to be used or operated by the
Company or its Subsidiary, and whether the fair value to the Company
or its Subsidiary, at the date of such acquisition of such part of
such repairs, rebuildings or replacement is at least $25,000, or 1% of
the aggregate principal amount of the Outstanding Securities;
(vi) that no Default or Event of Default shall have
occurred and be continuing; and
(vii) that all conditions precedent herein provided for
relating to such withdrawal and payment have been complied with;
(b) all documentation required under Section 314(d) of the Trust
Indenture Act; and
(c) an Opinion of Counsel substantially stating:
(i) that the instruments that have been or are therewith
delivered to the Trustee conform to the requirements of this Indenture
and the Security
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102
Documents, and that, upon the basis of such request of the Company or
its Subsidiary and the accompanying documents specified in this
Section 13.2, all conditions precedent herein provided for relating to
such withdrawal and payment have been complied with, and the Trust
Moneys whose withdrawal is then requested may be lawfully paid over
under this Section 13.2;
(ii) that the Trustee has a valid and perfected Lien on
such repairs, rebuilding and replacements, that the same and every
part thereof are subject to no Liens prior to the Lien of the Security
Documents, except Liens of the type permitted under the Security
Documents to which the property so destroyed or damaged shall have
been subject at the time of such destruction or damage; and
(iii) that all of the Company's or its Subsidiary's right,
title and interest in and to said repairs, rebuildings or
replacements, or combination thereof, are then subject to the Lien of
the Security Documents.
Upon compliance with the foregoing provisions of this Section 13.2, the
Trustee shall pay on the written request of the Company or its Subsidiary an
amount of Trust Moneys of the character aforesaid equal to the amount of the
expenditures or costs stated in the Officers' Certificate required by clause (i)
of subsection (a) of this Section 13.2, or the fair value to the Company or its
Subsidiary of such repairs, rebuildings and replacements stated in such
Officers' Certificate (or in such Independent Appraiser's or Independent
Financial Advisor's certificate, if required by the Trust Indenture Act),
whichever is less; provided, however, that notwithstanding the above, so long as
no Default or Event of Default shall have occurred and be continuing, in the
event that any Net Insurance Proceeds or Condemnation Award for such property or
proceeds of such sale does not exceed the lesser of $25,000 or 1% of the
principal amount of the Outstanding Securities, and, in the good faith estimate
of the Company, such destruction or damage resulting in such Net Insurance
Proceeds or Condemnation Award does not detrimentally affect the value or use of
the applicable Collateral in any material respect, upon delivery to the Trustee
of an Officers' Certificate of the Company or its Subsidiary to such effect, the
Trustee shall release to the Company or its Subsidiary such Net Insurance
Proceeds or Condemnation Award for such property or proceeds of such sale, free
of the Lien hereof and of the Security Documents.
SECTION 13.3. Withdrawal of Trust Moneys for Asset Sale Offer.
------------------------------------------------
Trust Moneys may be withdrawn by the Company and shall be paid by the
Trustee to the Company (or as otherwise directed
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103
by the Company) upon a Company Order to the Trustee and upon receipt by the
Trustee of the following:
(a) an Officers' Certificate, dated not more than five days prior to
the Asset Sale Payment Date stating:
(i) that no Event of Default exists;
(ii) (A) that pursuant to and in accordance with Section
6.15, the Company has made an Asset Sale Offer, (B) the amount of
money to be applied to the repurchase of the Securities pursuant to
the Asset Sale Offer, and (C) the amount of money to be retained by
the Company;
(iii) the Asset Sale Payment Date; and
(iv) that all conditions precedent and covenants herein
provided for relating to such application of Trust Moneys have been
complied with; and
(b) all documentation required under Section 314(d) of the Trust
Indenture Act; and
(c) an Opinion of Counsel stating that the documents that have been
or are therewith delivered to the Trustee in connection with the Asset Sale
Offer pursuant to this Section 12.3 conform to the requirements of this
Indenture and that all conditions precedent herein provided for relating to
such application of Trust Moneys have been complied with.
Upon compliance with the foregoing provisions of this Section 13.3, the
Trustee shall apply the Trust Moneys as directed and specified by such Company
Order.
SECTION 13.4. Withdrawal of Trust Moneys for Permitted Related Acquisitions..
--------------------------------------------------------------
In the event the Company (or a Subsidiary of the Company if such
Subsidiary has engaged in such Asset Sale) intends to reinvest such Net Cash
Proceeds in a manner that would constitute a Permitted Related Acquisition (the
"Released Trust Moneys"), such Trust Moneys may be withdrawn by the Company (or,
to the extent that the legal title to the property transferred in an Asset Sale
is held by a Subsidiary, by such Subsidiary; provided, that the aggregate cost
of the Permitted Related Acquisitions to be made by such Subsidiary shall not
exceed the Net Cash Proceeds of such Asset Sale) and shall be paid by the
Trustee to the Company or its Subsidiary (or as otherwise directed by the
Company or its Subsidiary) upon a Company Order to the Trustee and upon receipt
by the Trustee of the following:
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104
(a) A notice (each, a "Trust Moneys Release Notice"), which shall (i)
refer to this Section 13.4, (ii) contain all documents referred to below,
(iii) describe with particularity the Related Trust Moneys, (iv) describe
with particularity the Permitted Related Acquisition to be made with
respect to the Released Trust Moneys and (v) be accompanied by a
counterpart of the instruments proposed to give effect to the release fully
executed and acknowledged (if applicable) by all parties thereto other than
the Trustee;
(b) An Officer's Certificate certifying that (i) the release of the
Released Trust Moneys complies with the terms and conditions of Section
6.15 of this Indenture, (ii) there is no Default or Event of Default in
effect or continuing on the date thereof, (iii) the release of the Released
Trust Moneys will not result in a Default or Event of Default hereunder and
(iv) all conditions precedent to such release have been complied with;
(c) All documentation required under Section 314(d) of the Trust
Indenture Act; and
(d) An Opinion of Counsel stating that the documents that have been
or are therewith delivered to the Collateral Agent and the Trustee in
connection with a Permitted Related Acquisition conform to the requirements
of this Indenture and that all conditions precedent herein provided for
relating to such application of Trust Moneys have been complied with.
Upon compliance with the foregoing provisions of this Indenture, the
Trustee shall apply the Released Trust Moneys as directed and specified by the
Company or its Subsidiary.
SECTION 13.5. Withdrawal of Trust Moneys for Retention by the Company or its
--------------------------------------------------------------
Subsidiaries.
------------
To the extent that any Trust Moneys consist of Net Cash Proceeds
received by the Trustee pursuant to the provision of Section 6.15 (including
Asset Sales relating to Obsolete Assets), and the Company (or a Subsidiary of
the Company if such Subsidiary has engaged in an Asset Sale, including an Asset
Sale relating to Obsolete Assets) intends to retain, subject to the limitations
set forth in Section 6.15, all or a portion of such Net Cash Proceeds (the
"Retained Trust Moneys"), such Trust Moneys may be withdrawn by the Company or
its Subsidiary and shall be paid by the Trustee to the Company or its Subsidiary
(or as otherwise directed by the Company or its Subsidiary) upon a Company Order
to the Trustee and upon receipt by the Trustee of the following:
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105
(a) A notice (each, a "Withdrawal Notice"), which shall (i) refer to
this Section 13.5, (ii) contain all documents referred to below, (iii)
describe with particularity the Retained Trust Moneys and the Asset Sale
from which such Retained Trust Moneys were held as Collateral and (iv) be
accompanied by a counterpart of the instruments proposed to give effect to
the release fully executed and acknowledged (if applicable) by all parties
thereto other than the Trustee;
(b) An Officer's Certificate certifying that (i) the release of the
Retained Trust Moneys complies with the terms and conditions of Section
6.15 of the Indenture (including, but not limited to, specific statements
that (A) the Net Cash Proceeds from the sale of Obsolete Assets retained by
the Company and its Subsidiaries does not exceed $1,000,000 in the
aggregate in any given year and (B) from the Issue Date, the aggregate of
the Net Cash Proceeds of Asset Sales retained by the Companies and its
Subsidiaries does exceed $1,000,000, regardless of whether the funds
retained by the Company and its Subsidiaries constitute Collateral Proceeds
or Non-Collateral Proceeds), (ii) there is no Default or Event of Default
in effect or continuing on the date thereof, (iii) the release of the
Retained Trust Moneys will not result in a Default or Event of Default
hereunder and (iv) all conditions precedent to such release have been
complied with;
(c) All documentation required under Section 314(d) of the Trust
Indenture Act; and
(d) An Opinion of Counsel stating that the documents that have been
or are therewith delivered to the Collateral Agent and the Trustee in
connection with a release of Retained Trust Moneys conform to the
requirements of this Indenture and that all conditions precedent herein
provided for relating to such application of Trust Moneys have been
complied with.
Upon compliance with the foregoing provisions of this Indenture, the
Trustee shall apply the Retained Trust Moneys as directed and specified by the
Company or its Subsidiary.
SECTION 13.6.Withdrawal of Trust Moneys on Basis of Retirement of
----------------------------------------------------
Securities.
----------
Trust Moneys may be withdrawn by the Company to be applied to the
redemption and retirement of the Securities and shall be paid by the Trustee to
the Company (or as otherwise directed by the Company) upon a Company Order to
the Trustee and upon receipt by the Trustee of the following:
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106
(a) a Board Resolution requesting the withdrawal and payment of a
specified amount of Trust Moneys;
(b) an Officer's Certificate, dated not more than 30 days prior to
the date of the application for the withdrawal and payment of such Trust
Moneys, certifying that (i) there is no Default or Event of Default in
effect or continuing on the date thereof and (ii) all conditions precedent
herein provided relating to such withdrawal and application have been
complied with; and
(c) an Opinion of Counsel stating that the Trust Moneys whose
withdrawal and payment is then requested may be lawfully paid over under
this Section 13.6 and that all conditions precedent herein provided
relating to such withdrawal have been complied with.
Upon compliance with the foregoing provisions of this Indenture, the
Trustee shall apply the Trust Moneys as directed and specified by such Company
Order.
SECTION 13.7. Investment of Trust Moneys.
--------------------------
All or any part of any Trust Moneys held by the Trustee shall from time
to time be invested or reinvested by the Trustee in any Cash Equivalents
pursuant to the written direction of the Company, which shall specify the Cash
Equivalents in which such Trust Moneys shall be invested. Unless an Event of
Default occurs and is continuing, any interest in such Cash Equivalents (in
excess of any accrued interest paid at the time of purchase) that may be
received by the Trustee shall be forthwith paid to the Company. Such Cash
Equivalents shall be held by the Trustee as a part of the Collateral, subject to
the same provisions hereof as the cash used by it to purchase such Cash
Equivalents.
The Trustee shall not be liable or responsible for any loss resulting
from such investments or sales except only for its own grossly negligent action,
its own grossly negligent failure to act or its own willful misconduct in
complying with this Section 13.7.
ARTICLE XIV
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 14.1. Company's Option to Effect Defeasance or Covenant Defeasance.
------------------------------------------------------------
The Company may at its option by Board Resolution, at any time, elect
to have either Section 14.2 or Section 14.3 applied to the Outstanding
Securities upon compliance with the applicable conditions set forth below in
this Article XIV.
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107
SECTION 14.2. Defeasance and Discharge.
------------------------
Upon the Company's exercise of the option provided in Section 14.1
applicable to this Section 14.2, the Company shall be deemed to have been
discharged from its obligations with respect to the Outstanding Securities
(other than those specified in the next sentence) on the date the applicable
conditions set forth below are satisfied (hereinafter, "defeasance"). For this
purpose, such defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the Outstanding Securities and
to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (A) the rights of Holders of such Securities to
receive, solely from the trust fund described in Section 14.4 and as more fully
set forth in such Section, payments in respect of the principal of and interest
on such Securities when such payments are due, (B) the Company's obligations
with respect to such Securities under Sections 3.4, 3.5, 3.6, 6.2 and 6.26 and
with respect to the Trustee under Section 9.7, (C) the rights, powers, trusts,
duties and immunities of the Trustee hereunder and (D) this Article XIV.
Subject to compliance with the applicable conditions under this Article XIV, the
Company may exercise its option under this Section 14.2 notwithstanding the
prior exercise of its option under Section 14.3.
SECTION 14.3. Covenant Defeasance.
-------------------
Upon the Company's exercise of the option provided in Section 14.1
applicable to this Section 14.3, (i) the Company shall be released from its
obligations under Sections 6.9 through 6.25 and (ii) the occurrence of an event
specified in Section 8.1(iv) (with respect to any of Section 6.9 through 6.25),
8.1(v) and (vi)) shall not be deemed to be an Event of Default (hereinafter,
"covenant defeasance"). For this purpose, such covenant defeasance means that
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such Section, whether
directly, or indirectly by reason of any reference elsewhere herein to any such
Section or by reason of any reference in any such Section to any other provision
herein or in any other document, but the remainder of this Indenture and such
Securities shall be unaffected thereby.
SECTION 14.4. Conditions to Defeasance or Covenant Defeasance.
-----------------------------------------------
Except as otherwise indicated below, the following shall be the
conditions to application of either Section 14.2 or Section 14.3 to the then
Outstanding Securities:
<PAGE>
108
The Company may exercise its legal defeasance option or its covenant
defeasance option only if:
(1) the Company shall irrevocably have deposited or caused to be
deposited in trust with the Trustee (or another trustee satisfying the
requirements of Section 9.9 who shall agree to comply with the provisions
of this Article applicable to the Trustee) as trust funds in trust for the
purpose of making the following payments, specifically pledged as security
for, and dedicated solely to, the benefit of the Holders of such
Securities, (A) money in an amount, or (B) U.S. Government Obligations
which through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than one day
before the due date of any payment, money in an amount sufficient to pay
the principal of and each instalment of interest on the Securities on the
Maturity Date of such principal or Interest Payment Date, as the case may
be, in accordance with the terms of this Indenture and of the Securities,
or (C) a combination of (A) and (B).
(2) the Company delivers to the Trustee a certain certificate from a
nationally recognized firm of independent certified public accountants
expressing their opinion that the payments of principal and interest when
due and without reinvestment on the deposited U.S. Government Obligations
plus any deposited money without investment will provide cash at such times
and in such amounts as will be sufficient to pay principal and interest
when due on all the Securities to maturity or redemption, as the case may
be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Event of Default or Default relating to bankruptcy and insolvency
events with respect to the Company occurs which is continuing at the end of
the period;
(4) no Event of Default or Default has occurred and is continuing on
the date of such deposit and after giving effect thereto;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that (i) the trust resulting from the deposit does not constitute,
or is qualified as, a regulated investment company under the Investment
Company Act of 1940, (ii) the Holders have a valid first priority perfected
security interest in the trust funds, and (iii) after passage of 123 days
following the deposit (except, with respect to any trust funds for the
account of any Holder who may be deemed to be an "insider" for purposes of
the Bankruptcy Code, after one year following the deposit), the trust funds
will not be subject to the effect of Section 547 of the Bankruptcy Law or
Section 15 of the New York Debtor and Creditor Law in a case commenced by
or against the Company under either such statute, and either (A) the trust
<PAGE>
109
funds will no longer remain the property of the Company (and therefore,
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally) or
(B) if a court were to rule under any such law in any case or proceeding
that the trust funds remained property of the Company, (x) assuming such
trust funds remained in the possession of the Trustee prior to such court
ruling to the extent not paid to Holders, the Trustee will hold, for the
benefit of the Holders, a valid first priority perfected security interest
in such trust funds that is not avoidable in bankruptcy or otherwise except
for the effect of Section 552(b) of the Bankruptcy Law on interest on the
trust funds accruing after the commencement of a case under such statute
and (y) the Holders will be entitled to receive adequate protection of
their interests in such trust funds if such trust funds are used in such
case or proceeding;
(6) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of the Indenture there has
been a change in the applicable U.S. Federal income tax law or a regulation
clarifying existing law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders will not
recognize income, gain or loss for U.S. Federal income tax purposes as a
result of such defeasance and will be subject to U.S. Federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred;
(7) in the case of the covenant defeasance option, the company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders will not recognize income, gain or loss for U.S. Federal income tax
purposes as a result of such covenant defeasance and will be subject to
U.S. 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;
(8) such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest as defined in Section 9.8 and for
purposes of the Trust Indenture Act with respect to any securities of the
Company;
(9) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute default under, any other agreement or
instrument to which the Company is a party or by which it is bound; and
(10) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each
<PAGE>
110
stating that all conditions precedent to the defeasance and discharge of
the Securities have been complied with.
SECTION 14.5. Deposited Money and U.S. Government Obligations to be held in
-------------------------------------------------------------
Trust; Other Miscellaneous Provisions.
-------------------------------------
Subject to the provisions of the last paragraph of Section 6.26, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee -- collectively, for purposes of
this Section 14.5 and Section 14.6, the "Trustee") pursuant to Section 14.4 in
respect of the Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Securities, of all sums due and to become due thereon in respect of
principal and interest.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 14.4 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities.
Anything in this Article XIV to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 14.4 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance.
The provisions of the last paragraph of Section 6.26 shall apply to any
money held by the Trustee or any Paying Agent under this Article XIV that
remains unclaimed for two years after the Maturity Date of any Securities for
which money or Government Obligations have been deposited pursuant to Section
14.4.
SECTION 14.6. Reinstatement.
-------------
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 14.5 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with
<PAGE>
111
Section 14.5; provided, however, that if the Company makes any payment of
principal of or interest on any Security following the reinstatement of the
Company's obligations, the Company shall be subrogated to the rights of the
Holders of such Securities to receive such payment from the money held by the
Trustee or the Paying Agent.
______________________
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
BAYOU STEEL CORPORATION
By__________________________
Attest:
_______________________
FIRST NATIONAL BANK OF
COMMERCE, as Trustee
By__________________________
Attest:
_______________________
ACKNOWLEDGED AND
CONSENTED TO BY:
[NAME SUBSIDIARIES]
<PAGE>
112
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ________ day of ____________, 1994, before me personally came
__________________________, to me known, who, being by me duly sworn, did depose
and say that [he -- she] resides at __________________________; that [he -- she]
is _______________________________ of BAYOU STEEL CORPORATION, one of the
corporations described in and which executed the foregoing instrument; that [he
- -- she] knows the seal of said corporate; that the seal affixed to said
instrument is such corporation seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that [he -- she] signed [his --
her] name thereto by like authority.
_____________________________
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ________ day of ____________, 1994, before me personally came
__________________________, to me known, who, being by me duly sworn, did depose
and say that [he -- she] resides at __________________________; that [he -- she]
is _______________________________ of FIRST NATIONAL BANK OF COMMERCE, one of
the corporations described in and which executed the foregoing instrument; that
[he -- she] knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that [he -- she] signed [his -- her]
name thereto by like authority.
_____________________________
<PAGE>
EXHIBIT 4.2
MORTGAGE AND COLLATERAL UNITED STATES OF AMERICA
ASSIGNMENT OF LEASES
STATE OF LOUISIANA
BY:
PARISH OF ST. JOHN
BAYOU STEEL CORPORATION and THE BAPTIST
RIVER ROAD REALTY CORPORATION
IN FAVOR OF:
FIRST NATIONAL BANK OF COMMERCE,
AS TRUSTEE
BE IT KNOWN, that on this ____ day of the month of _________, 1994, before
me, the undersigned Notary Public, duly commissioned and qualified in and for
the Parish and State aforesaid, and in the presence of the undersigned witnesses
personally appeared:
BAYOU STEEL CORPORATION, a Delaware corporation ("BSC" or "Mortgagor"), the
--- ---------
Federal Employer Identification Number of which is ______________,
represented herein by ___________________, its _______________, being
hereunto duly authorized by virtue of resolutions of the Board of Directors
of said corporation, a certified copy of which is annexed hereto and made a
part hereof, which Mortgagor is the successor by merger to Bayou Steel
Corporation (of La Place), formerly a Louisiana corporation, which was
itself the successor by merger to Bayou Steel Acquisition Corporation,
formerly a Louisiana corporation;
RIVER ROAD REALTY CORPORATION, a Louisiana corporation ("RRRC" or
----
"Mortgagor"), the Federal Employer Identification Number of which is
----------
_____________, represented herein by ___________________, its
________________, being hereunto duly authorized by virtue of resolutions
of the Board of Directors of said corporation, a certified copy of which is
annexed hereto and made a part hereof; and,
FIRST NATIONAL BANK OF COMMERCE, a national banking association with its
principal trust offices located in New Orleans, Louisiana (the "Trustee"),
-------
the Federal Employer Identification Number of which is __________,
appearing herein not in its corporate capacity but as Trustee as
hereinafter set forth, being represented herein by
_________________________________, its duly authorized
________________________,
who declared unto me, Notary, as follows:
-1-
<PAGE>
WHEREAS, BSC has authorized the creation and issuance of its ____% First
Mortgage Notes due 2001 in the aggregate principal amount of Seventy-Five
Million and No/100 Dollars ($75,000,000.00) (with any note or notes issued in
substitution, exchange or renewal of any and all thereof, the "Securities"),
----------
which Securities shall bear interest at the rate of __________ percent (____%)
and shall be due and payable on ____________, 2001;
WHEREAS, the Securities will be issued pursuant to the terms of that
certain Indenture dated as of ____________, 1994 between BSC and the Trustee, an
executed copy of which Indenture is annexed hereto as Exhibit "A" and made an
-----------
integral part hereof (as the same may hereafter be supplemented, amended,
extended or restated, the "Indenture");
---------
WHEREAS, the Securities will be issued in substantially the form thereof
set forth in Article II of the Indenture;
WHEREAS, the Trustee has accepted the trust established by the Indenture in
accordance with the terms thereof;
WHEREAS, RRRC is a wholly-owned subsidiary of BSC and is a Recourse
Subsidiary, as defined in the Indenture;
WHEREAS, Mortgagor desires to enter into this Mortgage and Collateral
Assignment of Leases (as the same may hereafter be supplemented, amended,
extended or restated, the "Mortgage") for the purpose of creating in favor of
--------
the Trustee and for the ratable benefit of the Holders, as defined in the
Indenture (collectively, the "Holders" and, individually, a "Holder") a mortgage
------- ------
and other liens on properties and interests of the Mortgagor located and to be
located within the State of Louisiana; and,
WHEREAS, by their acceptance of the Securities, the Holders will
irrevocably appoint the Trustee as the special attorney-in-fact for each one of
said Holders and vest the Trustee with full power to effect and enforce this
Mortgage for the benefit of all of said Holders, all in accordance with La.R.S.
9:5301 through 9:5307, and the Trustee hereby accepts such appointment;
NOW, THEREFORE, for the purposes of securing the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the unpaid principal of and interest on the
Securities and all other obligations and liabilities of BSC or of RRRC, or of
both, to the Trustee, the Collateral Agent (as defined in the Indenture) and the
Holders (including, without limitation, interest accruing after the maturity of
the Securities and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to BSC, whether or not a claim for post-filing or post-
petition interest is
-2-
<PAGE>
allowed in such proceeding and interest, to the extent permitted by law, on the
unpaid interest), whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Indenture, the Securities, this Mortgage, the
other Security Documents (as defined in the Mortgage) (including, without
limitation, any Subsidiary Guarantee and any Subsidiary Security Agreement, as
such terms are defined in the Indenture, to which RRRC is or becomes a party and
the Company Security Agreement, as defined in the Indenture) or any other
document made, delivered or given in connection therewith, in each case whether
on account of principal, interest, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of counsel
to the Trustee and the Collateral Agent that are required to be paid by BSC
pursuant to the terms of the Indenture or this Mortgage or any other Security
Document)( (as any or all thereof may hereafter be amended, modified, extended
or restated, collectively, the "Secured Obligations"), the Mortgagor does by
-------------------
these presents specially mortgage, unto and in favor of the Trustee, and, with
respect to the following clause (v), does hereby collaterally assign unto and in
favor of the Trustee, for the ratable benefit of the Holders, all of the
following described property located in the Parish of St. John the Baptist,
State of Louisiana (collectively, the "Mortgaged Property"):
------------------
i) Those certain tracts of land located in the Parish of St. John the
Baptist, Louisiana and legally described on Exhibit "B" attached hereto and made
-----------
a part hereof (the "Land");
----
ii) All buildings, structures, improvements and other
constructions of every nature whatsoever now or hereafter situated on the Land,
and all fixtures, machinery, appliances, apparatus and equipment, of every
nature whatsoever now owned or hereafter acquired by Mortgagor and attached to,
installed in, used or usable in connection with or incorporated in any of the
Land or the foregoing immovable property so as to become component parts
thereof, including all extensions, additions, improvements, betterments,
renewals, substitutions and replacements of or to any of the foregoing and all
of the right, title and interest of the Mortgagor in and to any of the foregoing
(the "Improvements");
------------
iii) All easements, servitudes, rights of way, strips and gores
of land, streets, ways, alleys, passages, sewer rights, waters, water courses,
water rights and powers, and all estates, rights, titles, interests, privileges,
liberties, tenements, hereditaments and appurtenances whatsoever, in any way
belonging, relating or appertaining to the Land or to the Improvements, or which
hereafter shall in any way belong, relate or be appurtenant thereto, whether now
owned or hereafter acquired by the Mortgagor, and the reversions, remainders,
rents, issues and profits thereof, and all the estate, right, title, interest,
property, possession,
-3-
<PAGE>
claim and demand whatsoever, at law as well as in equity, of the Mortgagor, in
and to the same (the "Appurtenant Rights") (the Land, the Improvements and the
------------------
Appurtenant Rights being sometimes herein collectively referred to as the
"Premises");
- ---------
iv) All rents, royalties, issues, profits, revenue, income and
other benefits from the Premises; provided, however, that permission is hereby
given to the Mortgagor, so long as no Default has occurred hereunder, to
collect, receive, take, use and enjoy such rents, royalties, issues, profits,
revenue, income and other benefits as they become due and payable, but not more
than one (1) month in advance of the scheduled dates for payment of each one
thereof;
v) All right, title and interest of the Mortgagor in, to and under any
and all leases now or hereafter on or affecting the Premises or any part
thereof, whether written or oral, and all agreements for use of the Premises
(collectively, the "Leases" and individually, a "Lease"), together with all
------ -----
security therefor and all moneys payable thereunder, including without
limitation, the present and continuing right to make claim for, collect, receive
and receipt for any of the rents, royalties, issues, profits, revenues, income
and other sums of money payable or receivable thereunder (except sums payable
directly by the lessee under any such Lease to a person other than the
Mortgagor) whether payable as rent or otherwise, to bring actions and
proceedings thereunder or for the enforcement thereof, and to do any and all
things which the Mortgagor or any lessor is or may become entitled to do under
such Leases; subject, however, (a) to the conditional permission hereinabove
given to Mortgagor to collect the rentals under any such Lease so long as no
Default shall exist hereunder, and (b) so long as no Default has occurred
hereunder, to the right of the Mortgagor to bring actions and proceedings
thereunder or for the enforcement thereof; and provided that the pledge and
assignment made hereby shall not impair or diminish any obligation of the
Mortgagor under such Leases, nor shall any such obligation be imposed upon the
Trustee;
vi) Subject to the provisions of the Indenture, all proceeds of
any and all of the Mortgaged Property, including without limitation, all
judgments, awards of damages and settlements hereafter made resulting from
condemnation proceedings or the taking of the Premises or any portion thereof
under the power of eminent domain, any proceeds of any policies of insurance
maintained with respect to all or any part of the Premises or proceeds of any
sale, option or contract to sell the Premises or any portion thereof; and the
Mortgagor hereby authorizes, directs and empowers the Trustee, at its option, on
behalf of Mortgagor, or the successors or assigns of Mortgagor, pursuant to the
terms of this Mortgage, and subject to the terms of the Indenture, to adjust,
compromise, claim, collect and receive such proceeds, to
-4-
<PAGE>
give proper receipts and acquittance therefor and, after deducting expenses of
collection, to apply the net proceeds upon the Securities as provided herein,
notwithstanding the fact that the same may not then be due and payable or that
the Securities are otherwise adequately secured;
vii) All right, title, interest, claim and demand of the
Mortgagor in, to and under any and all contracts and agreements entered into by
the Mortgagor at any time and from time to time in connection with the
construction, operation, management or leasing of the Premises, or any part
thereof; and,
viii) Any and all other property of every kind and nature from
time to time hereafter (by delivery or by writing of any kind) conveyed,
mortgaged, pledged, assigned, hypothecated or transferred as and for additional
security hereunder by the Mortgagor, or by anyone on behalf of the Mortgagor, to
the Trustee.
To have and to hold all of the Mortgaged Property unto the said Trustee,
its successor and assigns, until payment and performance in full of all of the
Secured Obligations; but in trust, nevertheless, for the security and benefit of
the aforesaid Holders. The Mortgaged Property shall remain so specially
mortgaged and collaterally assigned upon the terms herein set forth for the
equal and proportionate benefit, security and protection of all of the aforesaid
Holders without privilege, priority or distinction as to the lien or otherwise
of any of the Notes over any of the other Notes, all in accordance with
Louisiana Civil Code Article 3319 and La.R.S. 9:5301 through 9:5307.
This Mortgage is also granted by Mortgagor and accepted by the Trustee
pursuant to Louisiana Civil Code Article 3298 and is entitled, without
limitation of other applicable provisions of Louisiana law, to the benefits of
La.R.S. 9:5554 through 9:5557 and of Louisiana Civil Code Articles 3311, 3312
and 3319.
ARTICLE I
COVENANTS
---------
SECTION 1.1 Payment and Performance of Secured Obligations; Incorporation of
- ----------- ----------------------------------------------------------------
Indenture; Indenture Controlling; Defined Terms.
-----------------------------------------------
BSC and RRRC shall each pay when due all sums required under the Secured
Obligations to which each is a party or under which each is an obligor and shall
duly and punctually perform and observe all of the terms, provisions,
conditions, covenants and agreements on its part to be performed or observed as
provided in the Secured Obligations to which each is a party or under which each
is an obligor. Each and all of the terms, provisions,
-5-
<PAGE>
representations, warranties, conditions, covenants and agreements set forth in
the Indenture, and in each and every supplement thereto or amendment thereof
which may at any time or from time to time be executed and delivered by the
parties thereto or their successors and assigns, are incorporated herein by
reference to the same extent as though each and all of said terms, provisions,
representations, warranties, conditions, covenants and agreements were fully set
out herein. In the event of any conflict or inconsistency between the
provisions of this Mortgage and the provisions of the Indenture, the provisions
of the Indenture shall be deemed controlling, except with respect to those
provisions of this Mortgage which relate to the creation or enforcement of the
liens hereby granted. All capitalized terms not otherwise defined herein shall
have the meanings ascribed thereto in the Indenture.
Without limitation of anything contained in the immediately foregoing
paragraph, BSC hereby specifically covenants and agrees to be bound by all of
the covenants, agreements and undertakings contained in Articles VI, VII, X, XII
and XIII of the Indenture (in each case as any or all thereof may hereafter be
modified, amended or restated).
SECTION 1.2 Defense of Title.
- ----------- ----------------
If the interest of the Trustee in the Mortgaged Property, or any part
thereof, shall be endangered or shall be attacked, directly or indirectly, the
Mortgagor hereby authorizes the Trustee, at the Mortgagor's expense, to take all
necessary and proper steps for the defense of such title or interest, including
the employment of counsel, the prosecution or defense or litigation and the
compromise or discharge of claims and Liens made against such title or interest
in the Mortgaged Property. The Mortgagor will indemnify and hold the Trustee
harmless from and against any and all loss, cost, damage, liability or expense
incurred in protecting the interests of the Trustee hereunder in such an event,
including but not limited to, all court costs and reasonable attorneys' fees.
SECTION 1.3 Observance of Leases.
- ----------- --------------------
The Mortgagor expressly covenants and agrees that the Mortgagor shall not
cause or permit to exist any breach or default under the provisions of any
Lease.
SECTION 1.4 Trustee's Performance of Mortgagor's Obligations.
- ----------- ------------------------------------------------
Should Mortgagor fail to satisfy or perform in accordance with their
respective terms any of the covenants set forth in the Indenture or in this
Mortgage, the Trustee may, but shall not be required to, satisfy and perform the
same, including without limitation, the rights to rent, operate, and manage any
part or all
-6-
<PAGE>
of the Mortgaged Property and pay all operating costs and expenses, including
management fees, property taxes and insurance of every kind and nature in
connection therewith, so that the Mortgaged Property shall be operational and
useable for its intended purposes. All moneys paid, and all expenses paid or
incurred in connection therewith, including reasonable attorney's fees and other
moneys advanced by the Trustee to protect the Mortgaged Property and the lien
hereof, to rent, operate and manage the Mortgaged Property or to pay any such
operating costs and expenses thereof or to keep the Mortgaged Property
operational and useable for its intended purposes shall be secured by this
Mortgage, and shall become immediately due and payable on demand, and with
interest thereon at the rate or rates at the time in effect under the terms of
the Securities. Inaction of the Trustee shall never be considered as a waiver
of any right accruing to it on account of any Event of Default nor shall the
provisions of this Section or any exercise by the Trustee of any rights
hereunder prevent any Default from constituting an Event of Default. The
Trustee, in making any payment hereby authorized (a) relating to taxes, may do
so according to any bill, statement or estimate, without inquiry into the
validity of any tax, assessment, sale, forfeiture, tax Lien or title or claim
thereof; (b) for the purchase, discharge, compromise or settlement of any Lien,
may do so without inquiry as to the validity or amount of any claim for Lien
which may be asserted; and (c) in connection with the completion of
construction, furnishing or equipping of the Premises or the rental, operation
or management of the Premises or the payment of operating costs and expenses
thereof may do so in such amounts and to such Persons as the Trustee may deem
appropriate. Nothing contained herein shall be construed to require the Trustee
to advance or expend moneys for any purpose mentioned herein, or for any other
purpose.
SECTION 1.5 Restrictions on Transfer; Grants of Servitudes.
- ----------- ----------------------------------------------
The Mortgagor shall not cause or permit any conveyance, sale, assignment,
transfer, Lien or alienation of all or any part of the Mortgaged Property except
in accordance with the Indenture; provided, however, the Mortgagor shall have
the right, from time to time if no Default exists, without any release from or
consent by the Trustee, to grant servitudes, rights-of-way and easements over or
in respect of any portion of the Premises which servitudes, rights-of-way and
easements shall be superior to the lien of this Mortgage, provided that such
grant will not impair the usefulness of such portion of the Premises in the
conduct of the Mortgagor's business and will not be prejudicial to the interests
of the Holders. Subject to satisfaction of the conditions set forth in Section
___ of the Indenture, the Trustee shall, from time to time, execute written
instruments supplied to it by Mortgagor to subordinate the lien of this Mortgage
to such servitudes, rights-of-way and easements.
-7-
<PAGE>
ARTICLE II.
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
--------------------------------------
SECTION 2.1 Events of Default; Acceleration.
- ----------- -------------------------------
If an Event of Default, as defined in the Indenture, occurs and is
continuing, then and in every such case the Trustee by notice to BSC, or the
Holders of not less than twenty-five percent (25%) in principal amount of the
Outstanding Securities by notice to BSC and the Trustee, may declare all of the
principal of and premium, if any, and accrued interest on all of the Securities
to be due and payable immediately; provided, however, if an Event of Default
specified in clause (vii) or (viii) of Section 5.1 of the Indenture occurs, the
principal amount and accrued interest shall ipso facto become and be immediately
---- -----
due and payable on all Outstanding Securities without any declaration or other
act on the part of the Trustee or any Holder. Upon such declaration all of the
principal of and premium, if any, and accrued interest on the Securities shall
be due and payable immediately. The Holders of the majority in principal amount
of the Outstanding Securities by notice to BSC and the Trustee may rescind an
acceleration and its consequences in the manner set forth in the Indenture.
SECTION 2.2 Remedies.
- ----------- --------
In case an Event of Default shall occur and be continuing, (a) the Trustee
shall have all of the rights and remedies provided pursuant to the Indenture (in
each case as any or all thereof may be modified, amended or restated), but only
to the extent that the exercise of any such rights and remedies would not be
prohibited by the laws of the State of Louisiana, (b) the provisions of the
Indenture (in each case as any or all thereof may be modified, amended or
restated) shall apply to the exercise by the Trustee and by the Holders of their
respective rights and remedies under this Mortgage to the same extent as
aforesaid and (c) the Trustee shall, in general, have the right to:
(1) cause all or any part of the Mortgaged Property to be foreclosed
or seized and sold under executory or other legal process in a manner
provided for in Section 2.3 hereof or as provided by law;
(2) exercise any right, power or remedy provided by this Mortgage,
the Securities, the Indenture, the Security Documents or by law or in
equity or by any other document or instrument regulating, evidencing,
securing or guaranteeing any of the Securities; and,
-8-
<PAGE>
(3) take whatever action at law or in equity may appear necessary or
desirable to collect the amounts then due and thereafter to become due
under, or to enforce performance and observance of, any or all of the
Secured Obligations.
SECTION 2.3 Foreclosure and Sale.
- ----------- --------------------
If an Event of Default has occurred and is continuing and if the
Securities, or any thereof, have become due, whether by acceleration or
otherwise, and if BSC or RRRC has failed to pay to the Trustee all sums then due
and owing by it under the Securities and under the other Secured Obligations,
the Trustee shall have the right to seize and sell the Mortgaged Property by
executory or other legal process without demand, notice or putting in default,
all of which are hereby waived, and to foreclose the lien hereof, in accordance
with the laws of the State of Louisiana and to exercise any other remedies
provided by this Mortgage, or any which the Trustee may have at law, at equity
or otherwise. In any suit to foreclose the lien hereof, there shall be allowed
and included as additional indebtedness hereunder all expenditures and expenses
which may be paid or incurred by or on behalf of the Trustee for reasonable
attorney's fees, court costs, appraiser's fees, outlays for documentary and
expert evidence, stenographer's charges, publication costs and costs (which may
be estimated as to items to be expended after entry of the decree) of procuring
all such abstracts of title, title searches and examinations and similar data
and assurances with respect to title as the Trustee may deem reasonably
necessary either to prosecute such suit or to evidence to bidders at sales which
may be had pursuant to such decree the true conditions of the title to or the
value of the Premises. All expenditures and expenses of the nature mentioned in
this Section 2.3, and such other expenses and fees as may be incurred in the
protection of the Premises and rents and income therefrom and the maintenance of
the lien of this Mortgage, including the reasonable fees of any attorney
employed by the Trustee in any litigation or proceedings affecting this
Mortgage, the Secured Obligations or the Premises, including probate and
bankruptcy proceedings, or in preparation of the commencement or defense of any
proceedings or threatened suit or proceeding or otherwise in dealing
specifically therewith, shall be so much additional indebtedness secured hereby
and shall be immediately due and payable by the Mortgagor, with interest thereon
at the rate or rates then in effect under the Securities, until paid.
The Trustee may exercise the remedies hereunder with respect to any of the
Mortgaged Property, in whole or in part, and in such portions and in such order
as may be deemed advisable by the Trustee in its discretion, and any such action
shall not in anywise be considered as a waiver of any of the rights, benefits or
liens evidenced by this Mortgage.
-9-
<PAGE>
To the fullest extent the Mortgagor may legally do so, the Mortgagor agrees
that the Mortgagor will not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, extension or redemption, and the Mortgagor, to
the extent permitted by applicable law, hereby waives and releases all rights of
redemption, valuation, appraisement and stay of execution, in the event of any
sale by executory or other legal process and foreclosure of the liens hereby
created. If any law referred to in this paragraph and now in force, of which
the Mortgagor might take advantage despite this paragraph, shall hereafter be
repealed or cease to be in force, such law shall not thereafter be deemed to
preclude the application of this paragraph.
In the event of any sale of the Mortgaged Property, or any part thereof, in
any proceedings instituted to enforce this Mortgage, it is agreed that the
Mortgaged Property may be sold without appraisement to the highest bidder for
cash, the said Mortgagor hereby expressly waiving the benefit of any and all
appraisement thereof.
The Mortgagor hereby further expressly waives: (a) the benefit of
appraisement as provided in Louisiana Code of Civil Procedure Articles 2332,
2336, 2723 and 2724 and all other laws conferring the same; (b) the demand and
three (3) days' delay accorded by the Louisiana Code of Civil Procedure Articles
2639 and 2721; (c) the-three (3) days' delay provided by the Louisiana Code of
Civil Procedure Articles 2331 and 2722; and, (d) the benefit of the other
provisions of the Louisiana Code of Civil Procedure Articles 2331, 2722 and
2723; and the Mortgagor expressly agrees to the immediate seizure of the
Mortgaged Property in the event of suit hereon.
BSC hereby CONFESSES JUDGMENT in favor of the Trustee for the full amount
of principal and interest, and premium, if any, on the Securities, and BSC and
RRRC hereby CONFESS JUDGMENT in favor of the Trustee for all sums due and to
become due under all other Secured Obligations to which each is a party or under
which each is an obligor, for reasonable attorney's fees, and for any sums that
may be advanced during the life of this Mortgage for the payment of premiums of
insurance, taxes or amounts for the protection and preservation of this
Mortgage, notwithstanding that such amount may exceed the aggregate face amounts
of the Securities.
Subject to the terms of the Indenture, the Trustee or any one or more of
the Holders shall have the right to become the purchaser at any sale of the
Mortgaged Property hereunder and shall have the right to have credited on the
amount of its bid therefor all or any part of the Securities held by it or them
as of the date of such sale.
-10-
<PAGE>
All rights of action (including the right to file proof of claims) under
this Mortgage or under any of the Securities may be enforced by the Trustee
without the possession of any of the Securities or the production thereof in any
trial, or other proceedings relating thereto, and any such suit or proceeding
instituted by the Trustee shall be brought in its name as Trustee without the
necessity of joining any Holders as plaintiffs. Any recovery of judgment shall
be for the equal benefit of the Holders of the Outstanding Securities and all of
the Holders of the Outstanding Securities shall be entitled to participate pro
rata in the proceeds of the Mortgaged Property.
SECTION 1.4 Keeper.
- ----------- ------
Upon the institution of proceedings to effect seizure and sale under this
Mortgage or at any time thereafter, the court in which such proceedings are
filed may appoint a keeper of the Premises. Such appointment may be made either
before or after sale, without notice, without regard to solvency or insolvency
of the Mortgagor at the time of application for such keeper, and without regard
to the then value of the Premises. Pursuant to La.R.S. 9:5136, et seq., the
-- ---
Mortgagor and Trustee agree that the Trustee may be the keeper or may name a
keeper of the Premises at the time a seizure thereof is effected. Such keeper
shall have the power to collect the rents, issues and profits of the Premises
during the pendency of such foreclosure suit and in case of a sale and
deficiency, if any, as well as during any further times when the Mortgagor,
except for the intervention of such keeper, would be entitled to collection of
such rents, issues and profits, and such keeper shall have all other powers
which may be necessary or useful in such cases for the protection, possession,
control, management and operation of the Premises during the whole of said
period. The court may, from time to time, authorize the keeper to apply the net
income from the Premises in payment in whole or in part of: (a) the Securities
or the indebtedness secured by a decree foreclosing this Mortgage, or any tax,
special assessment, or other Lien which may be or become superior to the lien
hereof or of such decree, provided such application is made prior to the
foreclosure sale, or (b) the deficiency in case of a sale and deficiency. The
rights provided for by this Section 2.4 are in addition to those provided for by
the Indenture.
SECTION 2.5 Proceeds of Sale.
- ----------- ----------------
The proceeds of any foreclosure or sale of the Mortgaged Property, or any
portion thereof, shall by distributed and applied in accordance with the
Indenture.
-11-
<PAGE>
SECTION 2.6 Insurance During Foreclosure.
- ----------- ----------------------------
In the case of foreclosure of this Mortgage, and sale of the Mortgaged
Property, the court, in its decree of foreclosure and sale, may provide that the
mortgagee's clauses attached to each of the casualty insurance policies with
respect to the Premises may be cancelled and that the decree creditor may cause
a new loss clause to be attached to each one of said casualty insurance policies
making the loss thereunder payable to said decree creditor. In the event of
foreclosure and sale hereunder, the Trustee is hereby authorized, without the
consent of the Mortgagor, to assign any and all insurance policies to the
purchaser at the sale, or to take such other steps as the Trustee may deem
advisable to cause the interest of such purchaser to be protected by any of the
insurance policies without credit or allowance to the Mortgagor for prepaid
premiums thereon.
SECTION 2.7 Rights Cumulative.
- ----------- -----------------
Each right, power and remedy conferred herein or in the Indenture, or in
both, upon the Trustee is cumulative and in addition to every other right, power
or remedy, express or implied, now or hereafter provided by law, and each and
every right, power and remedy herein set forth or otherwise so existing may be
exercised from time to time as often and in such order as may be deemed
expedient to the Trustee.
ARTICLE III
TRUSTEE
-------
SECTION 3.1 Acceptance of the Trust.
- ----------- -----------------------
The Trustee hereby accepts the trust imposed upon it by this Mortgage, and
agrees to perform said trust and any duties required to be performed by it under
the terms of this Mortgage or under the terms of the Indenture, as the case may
be, as an ordinarily prudent Trustee under a corporate mortgage, but only upon
and subject to the express terms and conditions hereof and of the Indenture.
SECTION 3.2 Terms of the Trust.
- ----------- ------------------
The duties of the Trustee, the rights of the Trustee, its compensation,
right to indemnity, method of replacement and all other matters concerning the
Trustee shall be governed by the terms and conditions of the Indenture,
including but not limited to, particularly Article IX thereof.
-12-
<PAGE>
ARTICLE IV
MISCELLANEOUS
-------------
SECTION 4.1 Successors and Assigns.
- ----------- ----------------------
This Mortgage and each and every covenant, agreement and other provision
hereof shall be binding upon BSC and RRRC, as Mortgagor, and their respective
successors and assigns (including, without limitation, each and every record
owner from time to time of the Premises or any other person having an interest
therein), and shall inure to the benefit of the Trustee and its successors and
assigns. Wherever herein the term, "Trustee", is used, such reference shall be
deemed to include the Trustee from time to time of the Securities, whether so
expressed or not. Each such Trustee from time to time shall be bound by the
provisions hereof and shall have and enjoy all of the rights, privileges,
powers, options and benefits afforded hereunder, and may enforce any and all of
the terms and provisions hereof, as fully and to the same extent and with the
same effect as if such Trustee were herein by name specifically granted such
rights, privileges, powers, options and benefits and was herein by name
designated the Trustee.
SECTION 4.2 Covenants Run with Land; Successor Mortgagors.
- ----------- ---------------------------------------------
All of the covenants of this Mortgage shall run with the Land and be
binding on any successor owners of the Land. If the ownership of the Premises
or any portion thereof becomes vested in a Person other than the Mortgagor, the
Trustee may, without notice to the Mortgagor, deal with such successor or
successors in interest of the Mortgagor with reference to this Mortgage in the
same manner as with the Mortgagor without in any way releasing or discharging
the Mortgagor from its obligations hereunder.
SECTION 4.3 Exoneration of Successor Trustees.
- ----------- ---------------------------------
No successor to the rights, titles, interests, duties, discretions and
options of the Trustee hereunder shall have any liability for any acts or
omissions of any prior Trustee.
SECTION 4.4 After-Acquired Property; Further Assurances.
- ----------- -------------------------------------------
The Mortgagor will do, execute, acknowledge and deliver, or cause to be
done, executed, acknowledged and delivered, all such further acts, conveyances,
mortgages, security agreements and assurances as the Trustee shall, from time to
time, reasonably require for the better assuring, mortgaging, assigning,
hypothecating and confirming unto the Trustee all property mortgaged or
collaterally assigned hereby or property intended to be mortgaged or
collaterally assigned hereby, whether now owned by the Mortgagor or hereafter
acquired.
-13-
<PAGE>
SECTION 4.5 Governing Law; Invalidity of Certain Provisions.
----------- -----------------------------------------------
This Mortgage shall be construed and enforced according to the laws of
the State of Louisiana, notwithstanding its place of execution and without
reference to the conflicts of law principles of the State of Louisiana. If the
lien of this Mortgage is invalid or unenforceable as to any part of the
Mortgaged Property, the unsecured or partially secured portion of the Securities
shall be completely paid prior to the payment of the remaining and secured or
partially secured portion of the Securities, and all payments made on the
Securities, whether voluntary or under foreclosure or other enforcement action
or procedure, shall be considered to have been first paid on and applied to the
full payment of that portion of the Securities which is not secured or not fully
secured by the lien of this Mortgage.
SECTION 4.6 Notes Legal.
- ----------- -----------
BSC declares, represents, warrants, certifies and agrees that the
proceeds of the Securities will be used solely for the purposes specified in the
Indenture and that the Securities and all fees, charges and other payments made
or required to be made with respect thereto and under this Mortgage and the
Indenture are legal and do not violate any usury or other law of the State of
Louisiana. The Securities evidence business loans and do not, and when
disbursed will not, violate the provisions of the usury, consumer credit or
other laws of any state which may have jurisdiction.
SECTION 4.7 Inspection of Premises and Records.
- ----------- ----------------------------------
The Trustee and its representatives and agents shall have the right to
inspect the Premises and all books, records and documents relating thereto and
to the Mortgaged Property at all reasonable times following reasonable notice to
the Mortgagor, and access thereto shall be permitted for that purpose.
SECTION 4.8 Captions and Pronouns.
- ----------- ------------ --------
The captions and headings of the various Sections of this Mortgage are
for convenience of reference only and are not to be construed as confining or
limiting in any way the scope or intent of the provisions hereof. Whenever the
context requires or permits, the singular shall include the plural, the plural
shall include the singular, and the masculine, feminine and neuter shall be
freely interchangeable.
SECTION 4.9 Notices.
- ----------- -------
All notices, requests and demands to or upon the Mortgagor or the
Trustee to be effective shall be in writing (or by telex, fax or similar
electronic transfer confirmed in writing) and shall be
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<PAGE>
deemed to have been duly given or made (a) when delivered by hand or (b) if
given by mail, when deposited in the mails by certified mail, return receipt
requested, to the addresses provided below, or (c) if by telex, fax or similar
electronic transfer, when sent and receipt has been confirmed, addressed to the
Mortgagor or the Trustee at its address or transmission number for notices
provided below. The Mortgagor and the Trustee may change their addresses and
transmission numbers for notices by notice in the manner provided in this
Section.
(i) If to the Mortgagor:
Bayou Steel Corporation
P.O. Box 5000
River Road
La Place, Louisiana 70069
Attention: Howard M. Meyers
FAX No. ____________________
With a copy to:
Howard B. Myers, Esquire
RSR Steel Corporation
1111 West Mockingbird Lane
Dallas, Texas 75247
FAX No. 214/631-6146
(ii) If to the Trustee:
First National Bank of Commerce
210 Baronne Street
New Orleans, Louisiana 70112
Attention: Corporate Trust Department
FAX No. 504/561-7017
Any notice or communication to a Holder shall be mailed by first class mail
to his address shown on the Security Register kept by the Trustee. Failure to
mail a notice or communication to a Holder or any defect in it shall not affect
its sufficiency with respect to other Holders.
If the Mortgagor mails a notice or communication to any Holder, it shall
mail a copy to the Trustee at the same time.
-15-
<PAGE>
SECTION 4.10 Waiver of Certificates.
- ------------ ----------------------
The parties hereto waive production of all Mortgage and Conveyance
Certificates, Tax Research Certificates and all other Certificates with respect
to the Mortgaged Property and relieve and release me, Notary, and the surety on
my official bond from all liability in connection with failure to produce said
Certificates and to attach the same to this Mortgage.
SECTION 4.11 Maximum Amount Secured.
- ------------ ----------------------
Anything herein to the contrary notwithstanding, all amounts advanced by
the Trustee hereunder, including without limitation, for the payment of premiums
for insurance, taxes, assessments or other amounts for the preservation and
protection of the Mortgaged Property and the lien of this mortgage, and all sums
due or to become due under the Notes and the other Secured Obligations shall be
secured by this Mortgage in an aggregate amount not to exceed ONE HUNDRED FIFTY
MILLION AND NO/100 DOLLARS ($150,000,000.00).
SECTION 4.12 Preambles.
- ------------ ---------
The preambles of this Mortgage constitute an integral part hereof.
THUS DONE AND PASSED in Edgard, Louisiana, on the date hereinabove first
written, in the presence of the undersigned competent witnesses, who have
hereunto signed their names, together with said appearers and me, Notary, after
due reading of the whole.
WITNESSES: BAYOU STEEL CORPORATION
("BSC" AND "MORTGAGOR")
______________________________ BY: ______________________________
PRINTED NAME: ___________________ PRINTED NAME: _____________________
TITLE: ____________________________
______________________________ RIVER ROAD REALTY CORPORATION
("RRRC" AND "MORTGAGOR")
PRINTED NAME: ___________________
BY: ______________________________
PRINTED NAME:______________________
TITLE: ____________________________
-16-
<PAGE>
FIRST NATIONAL BANK OF COMMERCE,
AS TRUSTEE ("TRUSTEE")
BY: ______________________________
PRINTED NAME:______________________
TITLE: ____________________________
________________________________________
NOTARY PUBLIC
IN AND FOR ORLEANS PARISH, LOUISIANA
PRINTED NAME: __________________________
MY COMMISSION IS ISSUED FOR LIFE.
-17-
<PAGE>
EXHIBIT "A" TO
MORTGAGE AND COLLATERAL ASSIGNMENT OF LEASES
BY
BAYOU STEEL CORPORATION
AND
RIVER ROAD REALTY CORPORATION
IN FAVOR OF
FIRST NATIONAL BANK OF COMMERCE, AS TRUSTEE
____________________________________
INDENTURE
---------
-18-
<PAGE>
EXHIBIT "B" TO
MORTGAGE AND COLLATERAL ASSIGNMENT OF LEASES
BY
BAYOU STEEL CORPORATION
AND
RIVER ROAD REALTY CORPORATION
IN FAVOR OF
FIRST NATIONAL BANK OF COMMERCE, AS TRUSTEE
____________________________________
DESCRIPTION OF LAND
--------------------
-19-
<PAGE>
EXHIBIT 4.3
MORTGAGE, ASSIGNMENT OF RENTS
AND LEASES AND SECURITY AGREEMENT
from
BAYOU STEEL CORPORATION, Mortgagor
to
FIRST NATIONAL BANK OF COMMERCE,
as Trustee and Collateral Agent, Mortgagee
DATED AS OF ___________
<PAGE>
MORTGAGE, ASSIGNMENT OF
RENTS AND LEASES AND SECURITY AGREEMENT
---------------------------------------
THIS MORTGAGE, ASSIGNMENT OF RENTS AND LEASES AND SECURITY AGREEMENT,
dated as of _____________ __, 1994 is made by BAYOU STEEL CORPORATION, a
Delaware corporation ("Mortgagor"), whose address is River Road, La Place,
---------
Louisiana, 70069, to FIRST NATIONAL BANK OF COMMERCE, as Trustee (in such
capacity, the "Trustee") under the Indenture referred to below, as collateral
-------
agent ("Mortgagee"), whose address is __________________________. References to
---------
this "Mortgage" shall mean this instrument and any and all renewals,
--------
modifications, amendments, supplements, extensions, consolidations,
substitutions, spreaders and replacements of this instrument.
Background
----------
A. Mortgagor is the owner of the parcel(s) of real property described
on Schedule A attached (such real property, together with all of the buildings,
improvements, structures and fixtures now or subsequently located thereon (the
"Improvements"), being collectively referred to as the "Real Estate").
- ------------- -----------
B. The Mortgagor and Mortgagee are parties to that Indenture dated as
of __________ __, 1994 (as the same may be amended, modified or otherwise
supplemented from time to time, the "Indenture"; capitalized terms not defined
---------
herein shall have the meanings ascribed thereto in the Indenture) for the
benefit of Holders of ___% First Mortgage Notes due 2001 (the "Securities")
----------
issued by the Mortgagor.
C. It is a condition precedent to the purchase of the Securities from
the Mortgagor that the Mortgagor shall have executed and delivered this Mortgage
to Mortgagee for the ratable benefit of the Holders.
NOW, THEREFORE, in consideration of the premises and to induce the
Mortgagee to enter into the Indenture and to induce the Holders to purchase the
Securities from the Mortgagor, the Mortgagor hereby agrees with the Mortgagee,
for the ratable benefit of the Holders, as follows:
Granting Clauses
----------------
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Mortgagor agrees that to secure repayment of the
unpaid principal of and interest on the Securities and all other obligations and
liabilities of the Mortgagor to the Trustee, the Mortgagee and the Holders
(including, without limitation, interest accruing after the maturity of the
Securities and interest accruing after the filing of any petition in bankruptcy,
or the commencement of any
<PAGE>
2
insolvency, reorganization or like proceeding, relating to the Mortgagor,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding and interest, to the extent permitted by law, on the unpaid
interest), whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or in
connection with, the Indenture, the Securities, this Mortgage, the other
Security Documents or any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest, fees,
indemnities, costs, expenses or otherwise (including, without limitation, all
fees and disbursements of counsel to the Trustee and the Mortgagee that are
required to be paid by the Mortgagee pursuant to the terms of the Indenture or
this Mortgage or any other Security Document).
MORTGAGOR BARGAINS, SELLS, MORTGAGES, WARRANTS, CONVEYS, GRANTS, ASSIGNS,
TRANSFERS AND SETS OVER AND BY THESE PRESENTS DOES HEREBY BARGAIN, SELL,
MORTGAGE, WARRANT, CONVEY, GRANT, ASSIGN, TRANSFER AND SET OVER UNTO MORTGAGEE
FOR THE RATABLE BENEFIT OF THE HOLDERS AND HEREBY GRANTS TO MORTGAGEE FOR THE
RATABLE BENEFIT OF THE HOLDERS A CONTINUING SECURITY INTEREST IN AND TO ALL OF
THE FOLLOWING:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever of
Mortgagor, in possession or expectancy, in and to the Real Estate or any
part thereof;
(C) all right, title and interest of Mortgagor in, to and under all
easements, rights of way, gores of land, streets, ways, alleys, passages,
sewer rights, waters, water courses, water and riparian rights, development
rights, air rights, mineral rights and all estates, rights, titles,
interests, privileges, licenses, tenements, hereditaments and appurtenances
belonging, relating or appertaining to the Real Estate, and any reversions,
remainders, rents, issues, profits and revenue thereof and all land lying
in the bed of any street, road or avenue, in front of or adjoining the Real
Estate to the center line thereof;
(D) all of the fixtures, chattels, business machines, machinery,
apparatus, equipment, furnishings, fittings and articles of personal
property of every kind and nature whatsoever, and all appurtenances and
additions thereto and substitutions or replacements thereof (together with,
in each case, attachments, components, parts and accessories) currently
owned or subsequently acquired by Mortgagor and now or subsequently
attached to, or contained in or used or usable in any way in connection
with any operation or letting of the Real Estate, including but without
limiting the generality of the foregoing, all screens, awnings, shades,
blinds, curtains, draperies, artwork, carpets, rugs,
<PAGE>
3
storm doors and windows, furniture and furnishings, heating, electrical,
and mechanical equipment, lighting, switchboards, plumbing, ventilating,
air conditioning and air-cooling apparatus, refrigerating, and incinerating
equipment, escalators, elevators, loading and unloading equipment and
systems, stoves, ranges, laundry equipment, cleaning systems (including
window cleaning apparatus), telephones, communication systems (including
satellite dishes and antennae), televisions, computers, sprinkler systems
and other fire prevention and extinguishing apparatus and materials,
security systems, motors, engines, machinery, pipes, pumps, tanks,
conduits, appliances, fittings and fixtures of every kind and description
(all of the foregoing in this paragraph (D) being referred to as the
"Equipment");
----------
(E) all right, title and interest of Mortgagor in and to all
substitutes and replacements of, and all additions and improvements to, the
Real Estate and the Equipment, subsequently acquired by or released to
Mortgagor or constructed, assembled or placed by Mortgagor on the Real
Estate, immediately upon such acquisition, release, construction,
assembling or placement, including, without limitation, any and all
building materials whether stored at the Real Estate or offsite, and, in
each such case, without any further mortgage, conveyance, assignment or
other act by Mortgagor;
(F) all right, title and interest of Mortgagor in, to and under all
leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or occupancy
of the Real Estate or the Equipment or any part thereof, now existing or
subsequently entered into by Mortgagor and whether written or oral and all
guarantees of any of the foregoing (collectively, as any of the foregoing
may be amended, restated, extended, renewed or modified from time to time,
the "Leases"), and all rights of Mortgagor in respect of cash and
------
securities deposited thereunder and the right to receive and collect the
revenues, income, rents, issues and profits thereof, together with all
other rents, royalties, issues, profits, revenue, income and other benefits
arising from the use and enjoyment of the Mortgaged Property (as defined
below) (collectively, the "Rents");
-----
(G) all trade names, trade marks, logos, copyrights, good will and
books and records relating to or used in connection with the operation of
the Real Estate or the Equipment or any part thereof; all general
intangibles related to the operation of the Improvements now existing or
hereafter arising;
(H) all unearned premiums under insurance policies now or
subsequently obtained by Mortgagor relating to the Real
<PAGE>
4
Estate or Equipment and Mortgagor's interest in and to all proceeds of any
such insurance policies (including title insurance policies) including the
right to collect and receive such proceeds, subject to the provisions
relating to insurance generally set forth below; and all awards and other
compensation, including the interest payable thereon and the right to
collect and receive the same, made to the present or any subsequent owner
of the Real Estate or Equipment for the taking by eminent domain,
condemnation or otherwise, of all or any part of the Real Estate or any
easement or other right therein;
(I) all right, title and interest of Mortgagor in and to (i) all
contracts from time to time executed by Mortgagor or any manager or agent
on its behalf relating to the ownership, construction, maintenance, repair,
operation, occupancy, sale or financing of the Real Estate or Equipment or
any part thereof and all agreements relating to the purchase or lease of
any portion of the Real Estate or any property which is adjacent or
peripheral to the Real Estate, together with the right to exercise such
options and all leases of Equipment, (ii) all consents, licenses, building
permits, certificates of occupancy and other governmental approvals
relating to construction, completion, occupancy, use or operation of the
Real Estate or any part thereof and (iii) all drawings, plans,
specifications and similar or related items relating to the Real Estate;
(J) any and all monies now or subsequently on deposit for the payment
of real estate taxes or special assessments against the Real Estate or for
the payment of premiums on insurance policies covering the foregoing
property or otherwise on deposit with or held by Mortgagee as provided in
this Mortgage; all capital, operating, reserve or similar accounts held by
or on behalf of Mortgagor and related to the operation of the Mortgaged
Property, whether now existing or hereafter arising and all monies held in
any of the foregoing accounts and any certificates or instruments related
to or evidencing such accounts;
(K) all accounts and revenues arising from the operation of the
Improvements including, without limitation, (i) any right to payment now
existing or hereafter arising for rental of hotel rooms or other space or
for goods sold or leased or for services rendered, whether or not yet
earned by performance, arising from the operation of the Improvements or
any other facility on the Mortgaged Property and (ii) all rights to payment
from any consumer credit-charge card organization or entity including,
without limitation, payments arising from the use of the American Express
Card, the Visa Card, the Carte Blanche Card, the Mastercard or any other
credit card, including those now existing or hereafter created,
substitutions therefor, proceeds thereof (whether cash or non-cash, movable
or
<PAGE>
5
immovable, tangible or intangible) received upon the sale, exchange,
transfer, collection or other disposition or substitution thereof and any
and all of the foregoing and proceeds therefrom; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by Mortgagor and described in the foregoing
clauses (A) through (E) are collectively referred to as the "Premises", and
--------
those described in the foregoing clauses (A) through (L) are collectively
referred to as the "Mortgaged Property").
------------------
All of the Mortgaged Property hereinabove described, real, personal and
mixed, whether affixed or annexed to the Real Estate or not and all rights
hereby conveyed and mortgaged are intended so to be as a unit and are hereby
understood, agreed and declared, to the maximum extent permitted by law, to form
a part and parcel of the Real Estate and to be appropriated to the use of the
Real Estate, and shall be for the purposes of this Mortgage deemed to be real
estate and conveyed and mortgaged hereby; provided, however, as to any of the
property aforesaid which does not so form a part and parcel of the Real Estate
or does not constitute a "fixture" (as defined in the Uniform Commercial Code of
Illinois (the "Code")), this Mortgage is hereby deemed to also be a Security
----
Agreement under the Code for purposes of granting a security interest in such
property, which Mortgagor hereby grants to Mortgagee, as Secured Party (as
defined in the Code), as more particularly provided below in this Mortgage.
TO HAVE AND TO HOLD the Mortgaged Property and the rights and privileges
hereby mortgaged, together with the right to retain possession of the Mortgaged
Property after a default or Event of Default hereunder, unto Mortgagee, its
successors and assigns for the uses and purposes set forth, until the
Obligations are fully paid and performed.
Terms and Conditions
--------------------
Mortgagor further represents, warrants, covenants and agrees with
Mortgagee as follows:
1. Warranty of Title. Mortgagor warrants that Mortgagor has good title
-----------------
to the Real Estate in fee simple and good title to the rest of the Mortgaged
Property, subject only to the matters that are set forth in Schedule B of the
title insurance policy or policies being issued to Mortgagee to insure the lien
of this Mortgage (the "Permitted Exceptions") and Mortgagor shall warrant,
--------------------
defend and preserve such title and the lien of the Mortgage thereon against all
claims of all persons
<PAGE>
6
and entities. Mortgagor further warrants that it has the right to mortgage the
Mortgaged Property.
2. Payment and Performance of Obligations. Mortgagor shall pay the
--------------------------------------
Obligations at the times and places and in the manner specified in the Indenture
and shall perform all the Obligations.
3. Requirements. (a) Mortgagor shall promptly comply with, or cause
------------
to be complied with, and conform to all present and future laws, statutes,
codes, ordinances, orders, judgments, decrees, rules, regulations and
requirements, and irrespective of the nature of the work to be done, of each of
the United States of America, any State and any municipality, local government
or other political subdivision thereof and any agency, department, bureau,
board, commission or other instrumentality of any of them, now existing or
subsequently created (collectively, "Governmental Authority") which has
----------------------
jurisdiction over the Mortgaged Property and all covenants, restrictions and
conditions now or later of record which may be applicable to any of the
Mortgaged Property, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of any of the
Mortgaged Property. All present and future laws, statutes, codes, ordinances,
orders, judgments, decrees, rules, regulations and requirements of every
Governmental Authority applicable to Mortgagor or to any of the Mortgaged
Property and all covenants, restrictions, and conditions which now or later may
be applicable to any of the Mortgaged Property are collectively referred to as
the "Legal Requirements".
------------------
(b) From and after the date of this Mortgage, Mortgagor shall not by
act or omission permit any building or other improvement on any premises not
subject to the lien of this Mortgage to rely on the Premises or any part thereof
or any interest therein to fulfill any Legal Requirement, and Mortgagor hereby
assigns to Mortgagee any and all rights to give consent for all or any portion
of the Premises or any interest therein to be so used. Mortgagor shall not by
act or omission impair the integrity of any of the Real Estate as a single
zoning lot separate and apart from all other premises. Mortgagor represents
that each parcel of the Real Estate constitutes a legally subdivided lot, in
compliance with all subdivision laws and similar Legal Requirements. Any act or
omission by Mortgagor which would result in a violation of any of the provisions
of this subsection shall be void.
4. Payment of Taxes and Other Impositions. (a) Promptly when due,
--------------------------------------
Mortgagor shall pay and discharge all taxes of every kind and nature (including,
without limitation, all real and personal property, income, franchise,
withholding, transfer, gains, profits and gross receipts taxes), all charges for
any easement or agreement maintained for the benefit of any of the Mortgaged
Property, all general and special assessments, levies,
<PAGE>
7
permits, inspection and license fees, all water and sewer rents and charges and
all other public charges even if unforeseen or extraordinary, imposed upon or
assessed against or which may become a lien on any of the Mortgaged Property, or
arising in respect of the occupancy, use or possession thereof, together with
any penalties or interest on any of the foregoing (all of the foregoing are
collectively referred to as the "Impositions"). Upon request by Mortgagee,
-----------
Mortgagor shall deliver to Mortgagee (i) original or copies of receipted bills
and cancelled checks evidencing payment of such Imposition if it is a real
estate tax or other public charge and (ii) evidence acceptable to Mortgagee
showing the payment of any other such Imposition. If by law any Imposition, at
Mortgagor's option, may be paid in installments (whether or not interest shall
accrue on the unpaid balance of such Imposition), Mortgagor may elect to pay
such Imposition in such installments and shall be responsible for the payment of
such installments with interest, if any.
(b) Nothing herein shall affect any right or remedy of Mortgagee under
this Mortgage or otherwise, without notice or demand to Mortgagor, to pay any
Imposition after the date such Imposition shall have become due, and to add to
the Obligations the amount so paid, together with interest from the time of
payment at the Default Rate. Any sums paid by Mortgagee in discharge of any
Impositions shall be (i) a lien on the Premises secured hereby prior to any
right or title to, interest in, or claim upon the Premises subordinate to the
lien of this Mortgage, and (ii) payable on demand by Mortgagor to Mortgagee
together with interest at the Default Rate as set forth above.
(c) Mortgagor shall not claim, demand or be entitled to receive any
credit or credits toward the satisfaction of this Mortgage or on any interest
payable thereon for any taxes assessed against the Mortgaged Property or any
part thereof, and shall not claim any deduction from the taxable value of the
Mortgaged Property by reason of this Mortgage.
(d) Mortgagor shall have the right before any delinquency occurs to
contest or object in good faith to the amount or validity of any Imposition by
appropriate legal proceedings, but such right shall not be deemed or construed
in any way as relieving, modifying, or extending Mortgagor's covenant to pay any
such Imposition at the time and in the manner provided in this Section unless
(i) Mortgagor has given prior written notice to Mortgagee of Mortgagor's intent
so to contest or object to an Imposition, (ii) Mortgagor shall demonstrate to
Mortgagee's satisfaction that the legal proceedings shall operate conclusively
to prevent the sale of the Mortgaged Property, or any part thereof, to satisfy
such Imposition prior to final determination of such proceedings and (iii)
Mortgagor shall furnish a good and sufficient bond or surety as requested by and
reasonably satisfactory to Mortgagee in the amount of the Impositions which are
being contested plus any interest and penalty which may be imposed thereon and
which could become a
<PAGE>
8
lien against the Real Estate or any part of the Mortgaged Property.
(e) Upon written notice to Mortgagor, Mortgagee after an Event of
Default (as defined below) shall be entitled to require Mortgagor to pay monthly
in advance to Mortgagee the equivalent of 1/12th of the estimated annual
Impositions. Mortgagee may commingle such funds with its own funds and
Mortgagor shall not be entitled to interest thereon.
5. Insurance. (a) Mortgagor shall maintain or cause to be
---------
maintained on all of the Premises
(i) property insurance against loss or damage by fire, lightning,
windstorm, tornado, water damage, flood, earthquake and by such other
further risks and hazards as now are or subsequently may be covered by an
"all risk" policy or a fire policy covering "special" causes of loss. The
policy shall include building ordinance law endorsements and the policy
limits shall be automatically reinstated after each loss;
(ii) comprehensive general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language of such endorsement), covering all claims for personal injury,
bodily injury or death, or property damage occurring on, in or about the
Premises in an amount not less than $10,000,000 combined single limit with
respect to injury and property damage relating to any one occurrence plus
such excess limits as Mortgagee shall request from time to time;
(iii) when and to the extent required by Mortgagee, insurance against
loss or damage by any other risk commonly insured against by persons
occupying or using like properties in the locality or localities in which
the Real Estate is situated;
(iv) insurance against rent loss, extra expense or business
interruption (and/or soft costs, in the case of new construction), if
applicable, in amounts satisfactory to Mortgagee, but not less than one
year's gross rent or gross income;
(v) during the course of any construction or repair of Improvements,
comprehensive general liability insurance under a policy including the
"broad form CGL endorsement" (or which incorporates the language of such
endorsement), (including coverage for elevators and escalators, if any).
The policy shall include coverage for independent contractors and completed
operations. The completed operations coverage shall stay in effect for two
years after construction of any Improvements has been completed. The
policy shall provide coverage on an occurrence basis against
<PAGE>
9
claims for personal injury, including, without limitation, bodily injury,
death or property damage occurring on, in or about the Premises and the
adjoining streets, sidewalks and passageways, such insurance to afford
immediate minimum protection to a limit of not less than that required by
Mortgagee with respect to personal injury, bodily injury or death to any
one or more persons or damage to property;
(vi) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's
liability insurance) for all employees of Mortgagor engaged on or with
respect to the Premises in such amounts as are reasonably satisfactory to
Mortgagee, but in no event less than the limits established by law;
(vii) during the course of any construction, addition, alteration or
repair of the Improvements, builder's risk completed value form insurance
against "all risks of physical loss," including collapse, water damage,
flood and earthquake and transit coverage, during construction or repairs
of the Improvements, with deductible approved by Mortgagee, in nonreporting
form, covering the total value of work performed and equipment, supplies
and materials furnished (with an appropriate limit for soft costs in the
case of construction);
(viii) boiler and machinery property insurance covering pressure
vessels, air tanks, boilers, machinery, pressure piping, heating, air
conditioning and elevator equipment and escalator equipment, provided the
Improvements contain equipment of such nature, and insurance against rent,
extra expense, business interruption and soft costs, if applicable, arising
from any such breakdown, in such amounts as are reasonably satisfactory to
Mortgagee but not less than the lesser of $1,000,000 or 10% of the value of
the Improvements;
(ix) if any portion of the Premises are located in an area identified
as a special flood hazard area by the Federal Emergency Management Agency
or other applicable agency, flood insurance in an amount satisfactory to
Mortgagee, but in no event less than the maximum limit of coverage
available under the National Flood Insurance Act of 1968, as amended; and
(x) such other insurance in such amounts as Mortgagee may reasonably
request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or materially
amended without 30 days' prior written notice to Mortgagee, and (ii) with
respect to all property insurance, provide for deductibles not to exceed
<PAGE>
10
$25,000, contain a "Replacement Cost Endorsement" without any deduction made for
depreciation and with no co-insurance penalty (or attaching an agreed amount
endorsement satisfactory to Mortgagee), with loss payable solely to Mortgagee
(modified, if necessary, to provide that proceeds in the amount of replacement
cost may be retained by Mortgagee without the obligation to rebuild) as its
interest may appear, without contribution, under a "standard" or "New York"
mortgagee clause acceptable to Mortgagee and be written by insurance companies
having an A.M. Best Company, Inc. rating of A or higher and a financial size
category of not less than XII, or otherwise as approved by Mortgagee. Liability
insurance policies shall name Mortgagee as an additional insured and contain a
waiver of subrogation against Mortgagee; all such policies shall indemnify and
hold Mortgagee harmless from all liability claims occurring on, in or about the
Premises and the adjoining streets, sidewalks and passageways. The amounts of
each insurance policy and the form of each such policy shall at all times be
satisfactory to Mortgagee. Each policy shall expressly provide that any
proceeds which are payable to Mortgagee shall be paid by check payable to the
order of Mortgagee only and requiring the endorsement of Mortgagee only. If any
required insurance shall expire, be withdrawn, become void by breach of any
condition thereof by Mortgagor or by any lessee of any part of the Mortgaged
Property or become void or unsafe by reason of the failure or impairment of the
capital of any insurer, or if for any other reason whatsoever such insurance
shall become unsatisfactory to Mortgagee, Mortgagor shall immediately obtain new
or additional insurance satisfactory to Mortgagee. Mortgagor shall not take out
any separate or additional insurance which is contributing in the event of loss
unless it is properly endorsed and otherwise satisfactory to Mortgagee in all
respects.
(b) Mortgagor shall deliver to Mortgagee an original of each insurance
policy required to be maintained, or a certificate of such insurance acceptable
to Mortgagee, together with a copy of the declaration page for each such policy.
Mortgagor shall (i) pay as they become due all premiums for such insurance, (ii)
not later than 15 days prior to the expiration of each policy to be furnished
pursuant to the provisions of this Section, deliver a renewed policy or
policies, or duplicate original or originals thereof, marked "premium paid," or
accompanied by such other evidence of payment satisfactory to Mortgagee with
standard non-contributory mortgage clauses in favor of and acceptable to
Mortgagee. Upon request of Mortgagee, Mortgagor shall cause its insurance
underwriter or broker to certify to Mortgagee in writing that all the
requirements of this Mortgage governing insurance have been satisfied.
(c) If Mortgagor is in default of its obligations to insure or deliver
any such prepaid policy or policies, then Mortgagee, at its option and without
notice, may effect such insurance from year to year, and pay the premium or
premiums therefor, and Mortgagor shall pay to Mortgagee on demand such
<PAGE>
11
premium or premiums so paid by Mortgagee with interest from the time of payment
at the Default Rate and the same shall be deemed to be secured by this Mortgage
and shall be collectible in the same manner as the Obligations secured by this
Mortgage.
(d) Mortgagor promptly shall comply with and conform to (i) all
provisions of each such insurance policy, and (ii) all requirements of the
insurers applicable to Mortgagor or to any of the Mortgaged Property or to the
use, manner of use, occupancy, possession, operation, maintenance, alteration or
repair of any of the Mortgaged Property. Mortgagor shall not use or permit the
use of the Mortgaged Property in any manner which would permit any insurer to
cancel any insurance policy or void coverage required to be maintained by this
Mortgage.
(e) If the Mortgaged Property, or any part thereof, shall be destroyed
or damaged by fire or any other casualty, whether insured or uninsured, or in
the event any claim is made against Mortgagor for any personal injury, bodily
injury or property damage incurred on or about the Premises, Mortgagor shall
give immediate notice thereof to Mortgagee. If the Mortgaged Property is
damaged by fire or other casualty and the cost to repair such damage is less
than the lesser of (i) 5% of the replacement cost of the Improvements at the
affected Real Estate site and (ii) $100,000, then provided that no Event of
Default shall have occurred and be continuing, Mortgagor shall have the right to
adjust such loss, and the insurance proceeds relating to such loss may be paid
over to Mortgagor; provided that Mortgagor shall, promptly after any such
damage, repair all such damage regardless of whether any insurance proceeds have
been received or whether such proceeds, if received, are sufficient to pay for
the costs of repair. If the Mortgaged Property is damaged by fire or other
casualty, and the cost to repair such damage exceeds the above limit, or if an
Event of Default shall have occurred and be continuing, then Mortgagor
authorizes and empowers Mortgagee, at Mortgagee's option and in Mortgagee's sole
discretion, as attorney-in-fact for Mortgagor, to make proof of loss, to adjust
and compromise any claim under any insurance policy, to appear in and prosecute
any action arising from any policy, to collect and receive insurance proceeds
and to deduct therefrom Mortgagee's expenses incurred in the collection process.
Each insurance company concerned is hereby authorized and directed to make
payment for such loss directly to Mortgagee. Mortgagee shall have the right to
require Mortgagor to repair or restore the Mortgaged Property, and Mortgagor
hereby designates Mortgagee as its attorney-in-fact for the purpose of making
any election required or permitted under any insurance policy relating to repair
or restoration. The insurance proceeds or any part thereof received by
Mortgagee shall constitute Trust Moneys which shall be applied in accordance
with subsection 13.2(a) of the Indenture.
(f) In the event of foreclosure of this Mortgage or other transfer of
title to the Mortgaged Property in
<PAGE>
12
extinguishment of the Obligations, all right, title and interest of Mortgagor in
and to any insurance policies then in force shall pass to the purchaser or
grantee and Mortgagor hereby appoints Mortgagee its attorney-in-fact, in
Mortgagor's name, to assign and transfer all such policies and proceeds to such
purchaser or grantee.
(g) Upon written notice to Mortgagor, Mortgagee after an Event of
Default shall be entitled to require Mortgagor to pay monthly in advance to
Mortgagee the equivalent of 1/12th of the estimated annual premiums due on such
insurance. Mortgagee may commingle such funds with its own funds and Mortgagor
shall not be entitled to interest thereon.
(h) Mortgagor may maintain insurance required under this Mortgage by
means of one or more blanket insurance policies maintained by Mortgagor;
provided, however, that (A) any such policy shall specify, or Mortgagor shall
- -------- -------
furnish to Mortgagee a written statement from the insurer so specifying, the
maximum amount of the total insurance afforded by such blanket policy that is
allocated to the Premises and the other Mortgaged Property and any sublimits in
such blanket policy applicable to the Premises and the other Mortgaged Property,
(B) each such blanket policy shall include an endorsement providing that, in the
event of a loss resulting from an insured peril, insurance proceeds shall be
allocated to the Mortgaged Property in an amount equal to the coverages required
to be maintained by Mortgagor as provided above and (C) the protection afforded
under any such blanket policy shall be no less than that which would have been
afforded under a separate policy or policies relating only to the Mortgaged
Property.
6. Restrictions on Liens, Encumbrances, Sales and Transfers. In
--------------------------------------------------------
determining whether or not to enter into the transaction contemplated by the
Indenture, Mortgagee examined the creditworthiness of each person or entity
owning a direct or indirect interest in Mortgagor (each such person or entity, a
"Beneficial Owner"), found such credit-worthiness acceptable and relied and
----------------
continues to rely upon the same as a means of repayment of the Obligations.
Mortgagee has also evaluated the background and experience of each Beneficial
Owner in owning and operating property such as the Mortgaged Property, found
such matters acceptable and relied upon and continues to rely upon the same as a
means of maintaining the value of the Mortgaged Property which is the security
for the Obligations. Each Beneficial Owner is experienced in borrowing money in
sophisticated commercial loan transactions and in owning and operating property
such as the Mortgaged Property, was ably represented by a licensed attorney at
law in the negotiation and documentation of the transaction in connection with
which this Mortgage was given and bargained at arm's length and without duress
of any kind for all of the terms of such transaction, including this provision.
Mortgagor acknowledges that Mortgagee is entitled to conduct its business
activities, including the
<PAGE>
13
continuing extension of credit secured by this Mortgage, with parties of its own
choosing. Mortgagor, for itself and on behalf of each Beneficial Owner, further
acknowledges that any secondary or junior financing placed on the Mortgaged
Property (a) may divert funds that would otherwise be available for payment of
the Obligations, (b) could, if foreclosed, force Mortgagee to incur expenses to
protect its security, (c) would detract possession thereof with the intention of
selling the same and (d) would impair Mortgagee's right to accept a deed in lieu
of foreclosure or otherwise to take actions to further its economic interest
prior to foreclosure, because a foreclosure by Mortgagee would be required to
clear title to the Mortgaged Property of any such secondary or junior lien or
encumbrance. In accordance with the foregoing and for the purpose of (i)
protecting Mortgagee's security, both of repayment and of value in the Mortgaged
Property, (ii) giving Mortgagee the full benefit of its bargain and contract
with Mortgagor, and (iii) keeping the Mortgaged Property free of subordinate
financing liens, Mortgagor agrees that if the following provisions of this
paragraph should be deemed a restraint on alienation, that such provisions are
reasonable restraints.
(1) Except for the lien of this Mortgage, the Permitted Exceptions and
liens permitted pursuant to subsection 6.10 of the Indenture, Mortgagor shall
not further mortgage, nor otherwise encumber the Mortgaged Property nor create
or suffer to exist any lien, charge or encumbrance on the Mortgaged Property, or
any part thereof, whether superior or subordinate to the lien of this Mortgage
and whether recourse or non-recourse.
(2) Except as may be permitted pursuant to subsection 6.15 of the
Indenture, Mortgagor shall not sell, transfer, convey or assign all or any
portion of, or any interest in, the Mortgaged Property. Further, without the
prior written consent of Mortgagee in its sole discretion and except as may be
permitted by the Indenture, the ultimate beneficial ownership of Mortgagor shall
not be changed or altered, by sale, assignment, transfer, pledge foreclosure or
otherwise, from the ultimate beneficial ownership on the date hereof.
7. Relationship of Mortgagee and Mortgagor. Mortgagee shall in no
---------------------------------------
event be construed for any purpose to be a partner, joint venturer, agent or
associate of Mortgagor or of any beneficiary, tenant, subtenant, operator,
concessionaire or licensee of Mortgagor in the conduct of their respective
businesses, and without limiting the foregoing, Mortgagee shall not be deemed to
be such partner, joint venturer, agent or associate on account of Mortgagee
becoming a Mortgagee in possession or exercising any rights pursuant to this
Mortgage, any of the other Security Documents, or otherwise.
8. Maintenance; No Alteration; Inspection; Utilities. (a) Mortgagor
-------------------------------------------------
shall maintain or cause to be maintained all the Improvements in good condition
and repair and shall not commit or
<PAGE>
14
suffer any waste of the Improvements. Mortgagor shall repair, restore, replace
or rebuild promptly any part of the Premises which may be damaged or destroyed
by any casualty whatsoever. The Improvements shall not be demolished or
materially altered, nor any material additions built, without the prior written
consent of Mortgagee.
(b) Mortgagee and any persons authorized by Mortgagee shall have the
right to enter and inspect the Premises and the right to inspect all work done,
labor performed and materials furnished in and about the Improvements and the
right to inspect and make copies of all books, contracts and records of
Mortgagor relating to the Mortgaged Property.
(c) Mortgagor shall pay or cause to be paid when due all utility
charges which are incurred for gas, electricity, water or sewer services
furnished to the Premises and all other assessments or charges of a similar
nature, whether public or private, affecting the Premises or any portion
thereof, whether or not such assessments or charges are liens thereon.
9. Condemnation/Eminent Domain. Immediately upon obtaining knowledge
---------------------------
of the institution of any proceedings for the condemnation of the Mortgaged
Property, or any portion thereof, Mortgagor will notify Mortgagee of the
pendency of such proceedings. Mortgagor authorizes Mortgagee, at Mortgagee's
option and in Mortgagee's sole discretion, as attorney-in-fact for Mortgagor, to
commence, appear in and prosecute, in Mortgagee's or Mortgagor's name, any
action or proceeding relating to any condemnation of the Mortgaged Property, or
any portion thereof, and to settle or compromise any claim in connection with
such condemnation. If Mortgagee elects not to participate in such condemnation
proceeding, then Mortgagor shall, at its expense, diligently prosecute any such
proceeding and shall consult with Mortgagee, its attorneys and experts and
cooperate with them in any defense of any such proceedings. All awards and
proceeds of condemnation shall be assigned to Mortgagee to be applied in the
same manner as insurance proceeds, as provided above, and Mortgagor agrees to
execute any such assignments of all such awards as Mortgagee may request.
10. Leases. (a) Mortgagor shall not (i) execute an assignment or
------
pledge of any Lease relating to all or any portion of the Mortgaged Property
other than in favor of Mortgagee, or (ii) without the prior written consent of
Mortgagee, execute or permit to exist any Lease of any of the Mortgaged
Property.
(b) As to any Lease consented to by Mortgagee, Mortgagor shall:
(i) promptly perform all of the provisions of the Lease on the part
of the lessor thereunder to be performed;
<PAGE>
15
(ii) promptly enforce all of the provisions of the Lease on the part of
the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding arising under or in
any manner connected with the Lease or the obligations of Mortgagor as
lessor or of the lessee thereunder;
(iv) exercise, within 5 days after a request by Mortgagee, any right
to request from the lessee a certificate with respect to the status
thereof;
(v) simultaneously deliver to Mortgagee copies of any notices of
default which Mortgagor may at any time forward to or receive from the
lessee;
(vi) promptly deliver to Mortgagee a fully executed counterpart of the
Lease; and
(vii) promptly deliver to Mortgagee, upon Mortgagee's request, an
assignment of the Mortgagor's interest under such Lease.
(c) Mortgagor shall deliver to Mortgagee, within 10 days after a
request by Mortgagee, a written statement, certified by Mortgagor as being true,
correct and complete, containing the names of all lessees and other occupants of
the Mortgaged Property, the terms of all Leases and the spaces occupied and
rentals payable thereunder, and a list of all Leases which are then in default,
including the nature and magnitude of the default; such statement shall be
accompanied by credit information with respect to the lessees and such other
information as Mortgagee may request.
(d) All Leases entered into by Mortgagor after the date hereof, if any,
and all rights of any lessees thereunder shall be subject and subordinate in all
respects to the lien and provisions of this Mortgage unless Mortgagee shall
otherwise elect in writing.
(e) As to any Lease now in existence or subsequently consented to by
Mortgagee, Mortgagor shall not accept a surrender or terminate, cancel, rescind,
supplement, alter, revise, modify or amend such Lease or permit any such action
to be taken nor shall Mortgagor accept the payment of rent more than thirty (30)
days in advance of its due date.
(f) If any act or omission of Mortgagor would give any lessee under
any Lease the right, immediately or after lapse of a period of time, to cancel
or terminate such Lease, or to abate or offset against the payment of rent or to
claim a partial or total eviction, such lessee shall not exercise such right
until it has given written notice of such act or omission to Mortgagee and until
a reasonable period for remedying such act or omission
<PAGE>
16
shall have elapsed following the giving of such notice without a remedy being
effected.
(g) In the event of the enforcement by Mortgagee of any remedy under
this Mortgage, the lessee under each Lease shall, if requested by Mortgagee or
any other person succeeding to the interest of Mortgagee as a result of such
enforcement, attorn to Mortgagee or to such person and shall recognize Mortgagee
or such successor in interest as lessor under the Lease without change in the
provisions thereof; provided however, that Mortgagee or such successor in
interest shall not be: (i) bound by any payment of an installment of rent or
additional rent which may have been made more than 30 days before the due date
of such installment; (ii) bound by any amendment or modification to the Lease
made without the consent of Mortgagee or such successor in interest; (iii)
liable for any previous act or omission of Mortgagor (or its predecessors in
interest); (iv) responsible for any monies owing by Mortgagor to the credit of
such lessee or subject to any credits, offsets, claims, counterclaims, demands
or defenses which the lessee may have against Mortgagor (or its predecessors in
interest); (v) bound by any covenant to undertake or complete any construction
of the Premises or any portion thereof; or (vi) obligated to make any payment to
such lessee other than any security deposit actually delivered to Mortgagee or
such successor in interest. Each lessee or other occupant, upon request by
Mortgagee or such successor in interest, shall execute and deliver an instrument
or instruments confirming such attornment. In addition, Mortgagor agrees that
each Lease entered into after the date of this Mortgage shall include language
to the effect of subsections (d)-(g) of this Section; provided that the
provisions of such subsections shall be self-operative and any failure of any
Lease to include such language shall not impair the binding effect of such
provisions on any lessee under such Lease.
11. Further Assurances/Estoppel Certificates. To further assure
----------------------------------------
Mortgagee's rights under this Mortgage, Mortgagor agrees upon demand of
Mortgagee to do any act or execute any additional documents (including, but not
limited to, security agreements on any personalty included or to be included in
the Mortgaged Property and a separate assignment of each Lease in recordable
form) as may be required by Mortgagee to confirm the lien of this Mortgage and
all other rights or benefits conferred on Mortgagee. Mortgagor, within 5
business days after request, shall deliver, in form and substance satisfactory
to Mortgagee, a written statement, duly acknowledged, setting forth the amount
of the Obligations, and whether any offsets, claims, counterclaims or defenses
exist against the Obligations and certifying as to such other matters as
Mortgagee shall reasonably request.
12. Mortgagee's Right to Perform. If Mortgagor fails to perform any of
----------------------------
the covenants or agreements of Mortgagor, Mortgagee, without waiving or
releasing Mortgagor from any obligation or default under this Mortgage, may, at
any time (but
<PAGE>
17
shall be under no obligation to) pay or perform the same, and the amount or cost
thereof, with interest at the Default Rate, shall immediately be due from
Mortgagor to Mortgagee and the same shall be secured by this Mortgage and shall
be a lien on the Mortgaged Property prior to any right, title to, interest in or
claim upon the Mortgaged Property attaching subsequent to the lien of this
Mortgage. No payment or advance of money by Mortgagee under this Section shall
be deemed or construed to cure Mortgagor's default or waive any right or remedy
of Mortgagee.
13. Hazardous Material. (a) Neither Mortgagor nor, to the best
------------------
knowledge of Mortgagor, any other person has ever caused or permitted any
Hazardous Material (as defined below) to be placed, held, located or disposed of
on, under or at the Premises, or any part thereof, and the Premises have never
been used (whether by Mortgagor or, to the best knowledge of Mortgagor, by any
other person, including any tenant) as a dump site or storage (whether permanent
or temporary) site for any Hazardous Material.
(b) Mortgagor represents that (i) to the best of Mortgagor's knowledge,
upon due inquiry, the Premises are free of all Hazardous Material and (ii)
neither the Premises nor any site within the vicinity of the Premises is or has
been adversely affected by any Hazardous Material or is in violation of any
applicable Legal Requirement of any Governmental Authority regulating, relating
to, or imposing liability or standards of conduct concerning Hazardous Material.
Mortgagor shall submit to Mortgagee, prior to closing, a description of the
procedure followed by Mortgagor to comply with the terms of this subsection,
which procedure shall include the request, in writing, of the appropriate
Regional Office of the Federal Environmental Protection Administration and each
other appropriate Governmental Authority for any information relating to the
matters covered in this subsection.
(c) Mortgagor shall comply with any and all applicable Legal
Requirements governing the discharge and removal of Hazardous Material, shall
pay immediately when due the costs of removal of any Hazardous Material, and
shall keep the Premises free of any lien imposed pursuant to such Legal
Requirements. In the event Mortgagor fails to do so, after notice to Mortgagor
and the expiration of the earlier of (i) applicable cure periods hereunder, or
(ii) the cure period permitted under the applicable Legal Requirement, Mortgagee
may declare such failure an Event of Default or cause the Premises to be freed
from the Hazardous Material and the cost of the removal with interest at the
Default Rate shall immediately be due from Mortgagor to Mortgagee and the same
shall be added to the Obligations and be secured by this Mortgage. Mortgagor
further agrees not to release or dispose of any Hazardous Material at the
Premises without the express approval of Mortgagee and any such release or
disposal shall comply with all applicable Legal Requirements and any conditions
established by Mortgagee. In addition, Mortgagor agrees not to
<PAGE>
18
allow the manufacture, storage, transmission, presence or disposal of any
Hazardous Material over or upon the Premises. Mortgagee shall have the right at
any time to conduct an environmental audit of the Premises and Mortgagor shall
cooperate in the conduct of such environmental audit. Mortgagor shall give
Mortgagee and its agents and employees access to the Premises to remove
Hazardous Material. Mortgagor agrees to defend, indemnify and hold Mortgagee
free and harmless from and against all loss, costs, damage and expense
(including attorneys' fees and costs and consequential damages) Mortgagee may
sustain by reason of (i) the imposition or recording of a lien by any
Governmental Authority pursuant to any Legal Requirement relating to hazardous
or toxic wastes or substances or the removal thereof ("Hazardous Material
------------------
Laws"); (ii) claims of any private parties regarding violations of Hazardous
Material Laws; (iii) costs and expenses (including, without limitation,
attorneys' fees and fees incidental to the securing of repayment of such costs
and expenses) incurred by Mortgagor or Mortgagee in connection with the removal
of any such lien or in connection with Mortgagor's or Mortgagee's compliance
with any Hazardous Material Laws; and (iv) the assertion against Mortgagee by
any party of any claim in connection with Hazardous Material.
(d) For the purposes of this Mortgage, "Hazardous Material" means and
------------------
includes any hazardous, nuclear, toxic or dangerous waste, substance or material
defined as such in (or for purposes of) the Comprehensive Environmental
Response, Compensation, and Liability Act, any so-called "Superfund" or
"Superlien" law, or any other Legal Requirement regulating, relating to, or
imposing liability or standards of conduct concerning, any hazardous, nuclear,
toxic or dangerous waste, substance or material, as now or at any time in
effect.
(e) The foregoing indemnification shall be a recourse obligation of
Mortgagor and shall survive repayment of the Note, notwithstanding any
limitations on recourse which may be contained herein or in any Security
Documents or the delivery of any satisfaction, release or release deed,
discharge or deed of reconveyance, or the assignment of this Mortgage by
Mortgagee.
14. Asbestos. Mortgagor shall not install or permit to be installed in
--------
the Premises friable asbestos or any substance containing asbestos and deemed
hazardous by any Legal Requirement respecting such material, or any other
building material deemed to be harmful, hazardous or injurious by relevant Legal
Requirements and with respect to any such material currently present in the
Premises shall promptly either (a) remove any material which such Legal
Requirements deem harmful, hazardous or injurious and require to be removed or
(b) otherwise comply with such Legal Requirements, at Mortgagor's expense. If
Mortgagor shall fail to so remove or otherwise comply, Mortgagee may declare an
Event of Default and/or do whatever is necessary to eliminate such substances
from the Premises or otherwise comply with the applicable Legal Requirement, and
the costs thereof,
<PAGE>
19
with interest at the Default Rate, shall be immediately due from Mortgagor to
Mortgagee and the same shall be added to the Obligations and be secured by this
Mortgage. Mortgagor shall give Mortgagee and its agents and employees access to
the Premises to remove such asbestos or substances. Mortgagor shall defend,
indemnify, and save Mortgagee harmless from all loss, costs, damages and expense
(including attorneys' fees and costs and consequential damages) asserted or
proven against Mortgagee by any party, as a result of the presence of such
substances or any removal or compliance with such Legal Requirements. The
foregoing indemnification shall be a recourse obligation of Mortgagor and shall
survive repayment of the Note, notwithstanding any limitation on recourse which
may be contained herein or in any of the Security Documents or the delivery of
any satisfaction, release or release deed, discharge or deed of reconveyance, or
the assignment of this Mortgage by Mortgagee.
15. Events of Default. The occurrence of any one or more of the
-----------------
following events shall constitute an Event of Default:
(a) if an "Event of Default" (as defined in the Indenture) shall
occur;
(b) if any of the Mortgaged Property is damaged or destroyed by an
uninsured casualty and Mortgagor does not immediately provide funds for the
restoration of the damage caused by such casualty; or
(c) if Mortgagor shall further mortgage, pledge or otherwise encumber
the Mortgaged Property or any part thereof or any interest therein or
create or suffer to exist any lien, charge or other encumbrance on the
Mortgaged Property or any part thereof, whether superior or subordinate to
the lien of this Mortgage, whether recourse or non-recourse; or
(d) if Mortgagor shall (A) sell, transfer, convey or assign the
Mortgaged Property or any part thereof or any interest therein (by
operation of law or otherwise), or (B) lease any of the Mortgaged Property
without the prior written consent of Mortgagee.
16. Remedies. (a) Upon the occurrence of any Event of Default, in
--------
addition to any other rights and remedies Mortgagee may have pursuant to the
Security Documents, or as provided by law, and without limitation, (a) if such
event is an Event of Default described in subsections 8.1(vii) or 8.1(viii) of
the Indenture, automatically the Obligations immediately shall become due and
payable, and (b) if such event is any other Event of Default, by notice to
Mortgagor, Mortgagee may declare the Obligations to be immediately due and
payable. Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly
<PAGE>
20
waived. In addition, upon the occurrence of any Event of Default, Mortgagee may
immediately take such action, without notice or demand, as it deems advisable to
protect and enforce its rights against Mortgagor and in and to the Mortgaged
Property, including, but not limited to, the following actions, each of which
may be pursued concurrently or otherwise, at such time and in such manner as
Mortgagee may determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Mortgagee:
(i) Mortgagee may, to the extent permitted by applicable law, (A)
institute and maintain an action of mortgage foreclosure against all or any
part of the Mortgaged Property, (B) institute and maintain an action on the
Note, (C) sell all or part of the Mortgaged Property (Mortgagor expressly
granting to Mortgagee the power of sale), or (D) take such other action at
law or in equity for the enforcement of this Mortgage or any of the
Security Documents as the law may allow. Mortgagee may proceed in any such
action to final judgment and execution thereon for all sums due hereunder,
together with interest thereon at the Default Rate and all costs of suit,
including, without limitation, reasonable attorneys' fees and
disbursements. Interest at the Default Rate shall be due on any judgment
obtained by Mortgagee from the date of judgment until actual payment is
made of the full amount of the judgment.
(ii) Mortgagee may personally, or by its agents, attorneys and
employees and without regard to the adequacy or inadequacy of the Mortgaged
Property or any other collateral as security for the Obligations and
Obligations enter into and upon the Mortgaged Property and each and every
part thereof and exclude Mortgagor and its agents and employees therefrom
without liability for trespass, damage or otherwise (Mortgagor hereby
agreeing to surrender possession of the Mortgaged Property to Mortgagee
upon demand at any such time) and use, operate, manage, maintain and
control the Mortgaged Property and every part thereof. Following such
entry and taking of possession, Mortgagee shall be entitled, without
limitation, (x) to lease all or any part or parts of the Mortgaged Property
for such periods of time and upon such conditions as Mortgagee may, in its
discretion, deem proper, (y) to enforce, cancel or modify any Lease and (z)
generally to execute, do and perform any other act, deed, matter or thing
concerning the Mortgaged Property as Mortgagee shall deem appropriate as
fully as Mortgagor might do.
(iii) It is further agreed that if default be made in the payment of
any part of the Obligations, as an alternative to the right of foreclosure
for the full secured Obligations after acceleration thereof, Mortgagee
shall have the right to institute partial foreclosure proceedings with
respect to the portion of said Obligations so in default, as
<PAGE>
21
if under a full foreclosure, and without declaring the entire secured
Obligations due (such proceeding being hereinafter referred to as a
"partial foreclosure"), and provided that if a partial foreclosure sale is
consummated as provided herein, such sale may be made subject to the
continuing lien of this Mortgage for the unmatured portion of the secured
Obligations, but as to such unmatured part, this Mortgage, and the lien
hereof, shall remain in full force and effect just as though no partial
foreclosure sale had been made under the provisions of this Section.
Notwithstanding the filing of any partial foreclosure or entry of a decree
of sale therein, Mortgagee may elect at any time prior to a partial
foreclosure sale pursuant to such decree, to discontinue such partial
foreclosure and to accelerate the Obligations secured hereby by reason of
any uncured Event of Default upon which such partial foreclosure was
predicated or by reason of any other Events of Default, and proceed with
full foreclosure proceedings. It is further agreed that one or more
foreclosure sales may be made pursuant to partial foreclosures without
exhausting the right of full or partial foreclosure sale for any unmatured
part of the secured Obligations, it being the purpose to provide for a
partial foreclosure sale of the Obligations secured hereby without
exhausting the power to foreclose for any other part of the Obligations
whether matured at the time or subsequently maturing, and without
exhausting any right of acceleration and full foreclosure.
(b) The holder of this Mortgage, in any action to foreclose it, shall
be entitled to the appointment of a receiver. In case of a foreclosure sale,
the Real Estate may be sold, at Mortgagee's election, in one parcel or in more
than one parcel and Mortgagee is specifically empowered, (without being required
to do so, and in its sole and absolute discretion) to cause successive sales of
portions of the Mortgaged Property to be held.
(c) In the event of any breach of any of the covenants, agreements,
terms or conditions contained in this Mortgage, and notwithstanding to the
contrary any exculpatory or non-recourse language which may be contained herein,
Mortgagee shall be entitled to enjoin such breach and obtain specific
performance of any covenant, agreement, term or condition and Mortgagee shall
have the right to invoke any equitable right or remedy as though other remedies
were not provided for in this Mortgage.
17. Right of Mortgagee to Credit Sale. Upon the occurrence of any sale
---------------------------------
made under this Mortgage, whether made under the power of sale or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof.
In lieu of paying cash therefor, Mortgagee may make settlement for the purchase
price by crediting upon the Obligations or other
<PAGE>
22
sums secured by this Mortgage the net sales price after deducting therefrom the
expenses of sale and the cost of the action and any other sums which Mortgagee
is authorized to deduct under this Mortgage. In such event, this Mortgage, the
Note and documents evidencing expenditures secured hereby may be presented to
the person or persons conducting the sale in order that the amount so used or
applied may be credited upon the Obligations as having been paid.
18. Appointment of Receiver. If an Event of Default shall have
-----------------------
occurred and be continuing, Mortgagee as a matter of right and without notice to
Mortgagor, unless otherwise required by applicable law, and without regard to
the adequacy or inadequacy of the Mortgaged Property or any other collateral as
security for the Obligations and Obligations or the interest of Mortgagor
therein, shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers or other manager of the Mortgaged Property, and
Mortgagor hereby irrevocably consents to such appointment and waives notice of
any application therefor (except as may be required by law). Any such receiver
or receivers shall have all the usual powers and duties of receivers in like or
similar cases and all the powers and duties of Mortgagee in case of entry as
provided in this Mortgage, including, without limitation and to the extent
permitted by law, the right to enter into leases of all or any part of the
Mortgaged Property, and shall continue as such and exercise all such powers
until the date of confirmation of sale of the Mortgaged Property unless such
receivership is sooner terminated.
19. Extension, Release, etc. (a) Without affecting the lien or charge
------------------------
of this Mortgage upon any portion of the Mortgaged Property not then or
theretofore released as security for the full amount of the Obligations,
Mortgagee may, from time to time and without notice, agree to (i) release any
person liable for the Obligations, (ii) extend the maturity or alter any of the
terms of the Obligations or any guaranty thereof, (iii) grant other indulgences,
(iv) release or reconvey, or cause to be released or reconveyed at any time at
Mortgagee's option any parcel, portion or all of the Mortgaged Property, (v)
take or release any other or additional security for any obligation herein
mentioned, or (vi) make compositions or other arrangements with debtors in
relation thereto. If at any time this Mortgage shall secure less than all of
the principal amount of the Obligations, it is expressly agreed that any
repayments of the principal amount of the Obligations shall not reduce the
amount of the lien of this Mortgage until the lien amount shall equal the
principal amount of the Obligations outstanding.
(b) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect the lien of this Mortgage or any liens,
rights, powers or remedies of
<PAGE>
23
Mortgagee hereunder, and such liens, rights, powers and remedies shall continue
unimpaired.
(c) If Mortgagee shall have the right to foreclose this Mortgage,
Mortgagor authorizes Mortgagee at its option to foreclose the lien of this
Mortgage subject to the rights of any tenants of the Mortgaged Property. The
failure to make any such tenants parties defendant to any such foreclosure
proceeding and to foreclose their rights will not be asserted by Mortgagor as a
defense to any proceeding instituted by Mortgagee to collect the Obligations or
to foreclose the lien of this Mortgage.
(d) Unless expressly provided otherwise, in the event that ownership
of this Mortgage and title to the Mortgaged Property or any estate therein shall
become vested in the same person or entity, this Mortgage shall not merge in
such title but shall continue as a valid lien on the Mortgaged Property for the
amount secured hereby.
20. Security Agreement under Uniform Commercial Code. (a) It is the
------------------------------------------------
intention of the parties hereto that this Mortgage shall constitute a Security
Agreement within the meaning of the Codes. If an Event of Default shall occur
under this Mortgage, then in addition to having any other right or remedy
available at law or in equity, Mortgagee shall have the option of either (i)
proceeding under the Code and exercising such rights and remedies as may be
provided to a secured party by the Code with respect to all or any portion of
the Mortgaged Property which is personal property (including, without
limitation, taking possession of and selling such property) or (ii) treating
such property as real property and proceeding with respect to both the real and
personal property constituting the Mortgaged Property in accordance with
Mortgagee's rights, powers and remedies with respect to the real property (in
which event the default provisions of the Code shall not apply). If Mortgagee
shall elect to proceed under the Code, then five days' notice of sale of the
personal property shall be deemed reasonable notice and the reasonable expenses
of retaking, holding, preparing for sale, selling and the like incurred by
Mortgagee shall include, but not be limited to, attorneys' fees and legal
expenses. At Mortgagee's request, Mortgagor shall assemble the personal
property and make it available to Mortgagee at a place designated by Mortgagee
which is reasonably convenient to both parties.
(b) Mortgagor and Mortgagee agree, to the extent permitted by law, that:
(i) all of the goods described within the definition of the word "Equipment" are
or are to become fixtures on the Real Estate; (ii) this Mortgage upon recording
or registration in the real estate records of the proper office shall constitute
a financing statement filed as a "fixture filing" within the meaning of Sections
9-313 and 9-402 of the Code; (iii) Mortgagor is the record owner of the Real
Estate; and (iv) the addresses of Mortgagor and Mortgagee are as set forth on
the first page of this Mortgage.
<PAGE>
24
(c) Mortgagor, upon request by Mortgagee from time to time, shall
execute, acknowledge and deliver to Mortgagee one or more separate security
agreements, in form satisfactory to Mortgagee, covering all or any part of the
Mortgaged Property and will further execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered, any financing statement, affidavit,
continuation statement or certificate or other document as Mortgagee may request
in order to perfect, preserve, maintain, continue or extend the security
interest under and the priority of this Mortgage and such security instrument.
Mortgagor further agrees to pay to Mortgagee on demand all costs and expenses
incurred by Mortgagee in connection with the preparation, execution, recording,
filing and re-filing of any such document and all reasonable costs and expenses
of any record searches for financing statements Mortgagee shall reasonably
require. Mortgagor shall from time to time, on request of Mortgagee, deliver to
Mortgagee an inventory in reasonable detail of any of the Mortgaged Property
which constitutes personal property. If Mortgagor shall fail to furnish any
financing or continuation statement within 10 days after request by Mortgagee,
then pursuant to the provisions of the Code, Mortgagor hereby authorizes
Mortgagee, without the signature of Mortgagor, to execute and file any such
financing and continuation statements. The filing of any financing or
continuation statements in the records relating to personal property or chattels
shall not be construed as in any way impairing the right of Mortgagee to proceed
against any personal property encumbered by this Mortgage as real property, as
set forth above.
21. Assignment of Rents. Mortgagor hereby assigns to Mortgagee the
-------------------
Rents as further security for the payment of the Obligations and performance of
the Obligations, and Mortgagor grants to Mortgagee the right to enter the
Mortgaged Property for the purpose of collecting the same and to let the
Mortgaged Property or any part thereof, and to apply the Rents on account of the
Obligations. The foregoing assignment and grant is present and absolute and
shall continue in effect until the Obligations is paid in full, but Mortgagee
hereby waives the right to enter the Mortgaged Property for the purpose of
collecting the Rents and Mortgagor shall be entitled to collect, receive, use
and retain the Rents until the occurrence of an Event of Default under this
Mortgage; such right of Mortgagor to collect, receive, use and retain the Rents
may be revoked by Mortgagee upon the occurrence of any Event of Default under
this Mortgage by giving not less than five days' written notice of such
revocation to Mortgagor; in the event such notice is given, Mortgagor shall pay
over to Mortgagee, or to any receiver appointed to collect the Rents, any lease
security deposits, and shall pay monthly in advance to Mortgagee, or to any such
receiver, the fair and reasonable rental value as determined by Mortgagee for
the use and occupancy of the Mortgaged Property or of such part thereof as may
be in the possession of Mortgagor or any affiliate of Mortgagor, and upon
default in any such payment Mortgagor and any such affiliate will vacate and
surrender the
<PAGE>
25
possession of the Mortgaged Property to Mortgagee or to such receiver, and in
default thereof may be evicted by summary proceedings or otherwise. Mortgagor
shall not accept prepayments of installments of Rent to become due for a period
of more than one month in advance (except for security deposits and estimated
payments of percentage rent, if any).
22. Trust Funds. All lease security deposits of the Real Estate shall
-----------
be treated as trust funds not to be commingled with any other funds of
Mortgagor. Within 10 days after request by Mortgagee, Mortgagor shall furnish
Mortgagee satisfactory evidence of compliance with this subsection, together
with a statement of all lease security deposits by lessees and copies of all
Leases not previously delivered to Mortgagee, which statement shall be certified
by Mortgagor.
23. Additional Rights. The holder of any subordinate lien on the
-----------------
Mortgaged Property shall have no right to terminate any Lease whether or not
such Lease is subordinate to this Mortgage nor shall any holder of any
subordinate lien join any tenant under any Lease in any action to foreclose the
lien or modify, interfere with, disturb or terminate the rights of any tenant
under any Lease. By recordation of this Mortgage all subordinate lienholders
are subject to and notified of this provision, and any action taken by any such
lienholder contrary to this provision shall be null and void. Upon the
occurrence of any Event of Default, Mortgagee may, in its sole discretion and
without regard to the adequacy of its security under this Mortgage, apply all or
any part of any amounts on deposit with Mortgagee under this Mortgage against
all or any part of the Obligations. Any such application shall not be construed
to cure or waive any Default or Event of Default or invalidate any act taken by
Mortgagee on account of such Default or Event of Default.
24. Changes in Method of Taxation. In the event of the passage after
-----------------------------
the date hereof of any law of any Governmental Authority deducting from the
value of the Premises for the purposes of taxation any lien thereon, or changing
in any way the laws for the taxation of mortgages or debts secured thereby for
federal, state or local purposes, or the manner of collection of any such taxes,
and imposing a tax, either directly or indirectly, on mortgages or debts secured
thereby, the holder of this Mortgage shall have the right to declare the
Obligations due on a date to be specified by not less than 30 days' written
notice to be given to Mortgagor unless within such 30-day period Mortgagor shall
assume as an Obligation hereunder the payment of any tax so imposed until full
payment of the Obligations and such assumption shall be permitted by law.
25. Notices. All notices, requests, demands and other communications
-------
hereunder shall be given in the manner provided in the Indenture.
<PAGE>
26
26. No Oral Modification. This Mortgage may not be changed or
--------------------
terminated orally. Any agreement made by Mortgagor and Mortgagee after the date
of this Mortgage relating to this Mortgage shall be superior to the rights of
the holder of any intervening or subordinate lien or encumbrance.
27. Partial Invalidity. In the event any one or more of the provisions
------------------
contained in this Mortgage shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, but each shall be construed as if
such invalid, illegal or unenforceable provision had never been included.
Notwithstanding to the contrary anything contained in this Mortgage or in any
provisions of the Obligations or Security Documents, the obligations of
Mortgagor and of any other obligor under the Obligations or Security Documents
shall be subject to the limitation that Mortgagee shall not charge, take or
receive, nor shall Mortgagor or any other obligor be obligated to pay to
Mortgagee, any amounts constituting interest in excess of the maximum rate
permitted by law to be charged by Mortgagee.
28. Waiver of Right of Redemption and Other Rights. (a) Mortgagor and
----------------------------------------------
each Beneficial Owner hereby voluntarily and knowingly releases and waives any
and all rights to retain possession of the Mortgaged Property after the
occurrence of an Event of Default hereunder and any and all rights of redemption
from sale under any order or decree of foreclosure (whether full or partial),
pursuant to rights therein granted, as allowed under Section 125-1610(b) of the
Illinois Mortgage Foreclosure Law (Chapter 110, Sections 15-1101 et seq.,
-- ---
Illinois Revised Statutes), as amended from time to time, on its own behalf, on
behalf of all persons claiming or having an interest (direct or indirectly) by,
through or under each constituent of Mortgagor and on behalf of each and every
person acquiring any interest in the Mortgaged Property subsequent to the date
hereof, it being the intent hereof that any and all such rights or redemption of
each constituent of Mortgagor and all such other persons are and shall be deemed
to be hereby waived to the fullest extent permitted by applicable law or
replacement statute. Each constituent of Mortgagor shall not invoke or utilize
any such law or laws or otherwise hinder, delay, or impede the execution of any
right, power, or remedy herein or otherwise granted or delegated to the
Mortgagee, but shall permit the execution of every such right, power, and remedy
as though no such law or laws had been made or enacted.
(b) To the fullest extent permitted by law, Mortgagor waives the
benefit of all laws now existing or that may subsequently be enacted providing
for (i) any appraisement before sale of any portion of the Mortgaged Property,
(ii) any extension of the time for the enforcement of the collection of the
Obligations or the creation or extension of a period of redemption from any sale
made in collecting such debt and (iii) exemption of the Mortgaged Property from
attachment, levy or sale
<PAGE>
27
under execution or exemption from civil process. To the full extent Mortgagor
may do so, Mortgagor agrees that Mortgagor will not at any time insist upon,
plead, claim or take the benefit or advantage of any law now or hereafter in
force providing for any appraisement, valuation, stay, exemption, extension or
redemption, or requiring foreclosure of this Mortgage before exercising any
other remedy granted hereunder and Mortgagor, for Mortgagor and its successors
and assigns, and for any and all persons ever claiming any interest in the
Mortgaged Property, to the extent permitted by law, hereby waives and releases
all rights of redemption, valuation, appraisement, stay of execution, notice of
election to mature or declare due the whole of the secured indebtedness and
marshalling in the event of foreclosure of the liens hereby created.
29. Remedies Not Exclusive. Mortgagee shall be entitled to enforce
----------------------
payment of the Obligations and performance of the Obligations and to exercise
all rights and powers under this Mortgage or under any of the other Security
Documents or other agreement or any laws now or hereafter in force,
notwithstanding some or all of the Obligations and Obligations may now or
hereafter be otherwise secured, whether by mortgage, security agreement, pledge,
lien, assignment or otherwise. Neither the acceptance of this Mortgage nor its
enforcement, shall prejudice or in any manner affect Mortgagee's right to
realize upon or enforce any other security now or hereafter held by Mortgagee,
it being agreed that Mortgagee shall be entitled to enforce this Mortgage and
any other security now or hereafter held by Mortgagee in such order and manner
as Mortgagee may determine in its absolute discretion. No remedy herein
conferred upon or reserved to Mortgagee is intended to be exclusive of any other
remedy herein or by law provided or permitted, but each shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute. Every power or remedy given by any
of the Security Documents to Mortgagee or to which it may otherwise be entitled,
may be exercised, concurrently or independently, from time to time and as often
as may be deemed expedient by Mortgagee. In no event shall Mortgagee, in the
exercise of the remedies provided in this Mortgage (including, without
limitation, in connection with the assignment of Rents to Mortgagee, or the
appointment of a receiver and the entry of such receiver on to all or any part
of the Mortgaged Property), be deemed a "mortgagee in possession," and Mortgagee
shall not in any way be made liable for any act, either of commission or
omission, in connection with the exercise of such remedies.
30. Multiple Security. If (a) the Premises shall consist of one or
-----------------
more parcels, whether or not contiguous and whether or not located in the same
county, or (b) in addition to this Mortgage, Mortgagee shall now or hereafter
hold one or more additional mortgages, liens, deeds of trust or other security
(directly or indirectly) for the Obligations upon other property in the State in
which the Premises are located (whether or not
<PAGE>
28
such property is owned by Mortgagor or by others) or (c) both the circumstances
described in clauses (a) and (b) shall be true, then to the fullest extent
permitted by law, Mortgagee may, at its election, commence or consolidate in a
single foreclosure action all foreclosure proceedings against all such
collateral securing the Obligations (including the Mortgaged Property), which
action may be brought or consolidated in the courts of any county in which any
of such collateral is located. Mortgagor acknowledges that the right to
maintain a consolidated foreclosure action is a specific inducement to Mortgagee
to extend the Obligations, and Mortgagor expressly and irrevocably waives any
objections to the commencement or consolidation of the foreclosure proceedings
in a single action and any objections to the laying of venue or based on the
grounds of forum non conveniens which it may now or hereafter have. Mortgagor
----- --- ----------
further agrees that if Mortgagee shall be prosecuting one or more foreclosure or
other proceedings against a portion of the Mortgaged Property or against any
collateral other than the Mortgaged Property, which collateral directly or
indirectly secures the Obligations, or if Mortgagee shall have obtained a
judgment of foreclosure and sale or similar judgment against such collateral,
then, whether or not such proceedings are being maintained or judgments were
obtained in or outside the State in which the Premises are located, Mortgagee
may commence or continue foreclosure proceedings and exercise its other remedies
granted in this Mortgage against all or any part of the Mortgaged Property and
Mortgagor waives any objections to the commencement or continuation of a
foreclosure of this Mortgage or exercise of any other remedies hereunder based
on such other proceedings or judgments, and waives any right to seek to dismiss,
stay, remove, transfer or consolidate either any action under this Mortgage or
such other proceedings on such basis. Neither the commencement nor continuation
of proceedings to foreclose this Mortgage nor the exercise of any other rights
hereunder nor the recovery of any judgment by Mortgagee in any such proceedings
shall prejudice, limit or preclude Mortgagee's right to commence or continue one
or more foreclosure or other proceedings or obtain a judgment against any other
collateral (either in or outside the State in which the Premises are located)
which directly or indirectly secures the Obligations, and Mortgagor expressly
waives any objections to the commencement of, continuation of, or entry of a
judgment in such other proceedings or exercise of any remedies in such
proceedings based upon any action or judgment connected to this Mortgage, and
Mortgagor also waives any right to seek to dismiss, stay, remove, transfer or
consolidate either such other proceedings or any action under this Mortgage on
such basis. It is expressly understood and agreed that to the fullest extent
permitted by law, Mortgagee may, at its election, cause the sale of all
collateral which is the subject of a single foreclosure action at either a
single sale or at multiple sales conducted simultaneously and take such other
measures as are appropriate in order to effect the agreement of the parties to
dispose of and administer all collateral securing the Obligations
<PAGE>
29
(directly or indirectly) in the most economical and least time-consuming manner.
31. Expenses; Indemnification. (a) Mortgagor shall pay or reimburse
-------------------------
Mortgagee for all expenses incurred by Mortgagee before and after the date of
this Mortgage with respect to any and all transactions contemplated by this
Mortgage including without limitation, the preparation of any document
reasonably required hereunder or any amendment, modification, restatement or
supplement to this Mortgage, the delivery of any consent, non-disturbance
agreement or similar document in connection with this Mortgage or the
enforcement of any of Mortgagee's rights. Such expenses shall include, without
limitation, all title and conveyancing charges, recording and filing fees and
taxes, mortgage taxes, intangible personal property taxes, escrow fees, revenue
and tax stamp expenses, insurance premiums (including title insurance premiums),
title search and title rundown charges, brokerage commissions, finders' fees,
placement fees, court costs, surveyors', photographers', appraisers',
architects', engineers', consulting professional's, accountants' and attorneys'
fees and disbursements. Mortgagor acknowledges that from time to time Mortgagor
may receive statements for such expenses, including without limitation
attorneys' fees and disbursements. Mortgagor shall pay such statements promptly
upon receipt.
(b) If (i) any action or proceeding shall be commenced by Mortgagee
(including but not limited to any action to foreclose this Mortgage or to
collect the Obligations), or any action or proceeding is commenced to which
Mortgagee is made a party, or in which it becomes necessary to defend or uphold
the lien of this Mortgage (including, without limitation, any proceeding or
other action relating to the bankruptcy, insolvency or reorganization of any
Obligor), or in which Mortgagee is served with any legal process, discovery
notice or subpoena and (ii) in each of the foregoing instances such action or
proceeding in any manner relates to or arises out of this Mortgage or
Mortgagee's lending to Mortgagor or acceptance of a guaranty from a Guarantor of
the Obligations or of any of the Obligations or any of the transactions
contemplated by this Mortgage, then Mortgagor will immediately reimburse or pay
to Mortgagee all of the expenses which have been or may be incurred by Mortgagee
with respect to the foregoing (including reasonable counsel fees and
disbursements), together with interest thereon at the Default Rate, and any such
sum and the interest thereon shall be a lien on the Mortgaged Property, prior to
any right, or title to, interest in or claim upon the Mortgaged Property
attaching or accruing subsequent to the lien of this Mortgage, and shall be
deemed to be secured by this Mortgage. In any action or proceeding to foreclose
this Mortgage, or to recover or collect the Obligations, the provisions of law
respecting the recovering of costs, disbursements and allowances shall prevail
unaffected by this covenant.
<PAGE>
30
(c) Mortgagor shall indemnify and hold harmless Mortgagee and
Mortgagee's affiliates, and the respective directors, officers, agents and
employees of Mortgagee and its affiliates from and against all claims, damages,
losses and liabilities (including, without limitation, reasonable attorneys'
fees and expenses) arising out of or based upon any matter related to this
Mortgage, the Mortgaged Property or the occupancy, ownership, maintenance or
management of the Mortgaged Property by Mortgagor, including, without
limitation, any claims based on the alleged acts or omissions of any employee or
agent of Mortgagor. This indemnification shall be in addition to any other
liability which Mortgagor may otherwise have to Mortgagee.
32. Successors and Assigns. All covenants of Mortgagor contained in
----------------------
this Mortgage are imposed solely and exclusively for the benefit of Mortgagee
and its successors and assigns, and no other person or entity shall have
standing to require compliance with such covenants or be deemed, under any
circumstances, to be a beneficiary of such covenants, any or all of which may be
freely waived in whole or in part by Mortgagee at any time if in its sole
discretion it deems such waiver advisable. All such covenants of Mortgagor
shall run with the land and bind Mortgagor, the successors and assigns of
Mortgagor (and each of them) and all subsequent owners, encumbrancers and
tenants of the Mortgaged Property, and shall inure to the benefit of Mortgagee,
its successors and assigns. The word "Mortgagor" shall be construed as if it
read "Mortgagors" whenever the sense of this Mortgage so requires and if there
shall be more than one Mortgagor, the obligations of the Mortgagors shall be
joint and several.
33. No Waivers, etc. Any failure by Mortgagee to insist upon the
----------------
strict performance by Mortgagor of any of the terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter to insist upon the strict performance by Mortgagor of any and all of
the terms and provisions of this Mortgage to be performed by Mortgagor.
Mortgagee may release, regardless of consideration and without the necessity for
any notice to or consent by the holder of any subordinate lien on the Mortgaged
Property, any part of the security held for the obligations secured by this
Mortgage without, as to the remainder of the security, in anywise impairing or
affecting the lien of this Mortgage or the priority of such lien over any
subordinate lien.
34. Governing Law, etc. This Mortgage shall be governed by and
------------------
construed in accordance with the laws of the State of Illinois, except that
Mortgagor expressly acknowledges that by its terms the Indenture shall be
governed and construed in accordance with the laws of the State of New York,
without regard to principles of conflict of law, and for purposes of
consistency, Mortgagor agrees that in any in personam proceeding related to this
-- --------
Mortgage the rights of the parties to this
<PAGE>
31
Mortgage shall also be governed by and construed in accordance with the laws of
the State of New York governing contracts made and to be performed in that
State, without regard to principles of conflict of law.
35. Waiver of Trial by Jury. Mortgagor and Mortgagee each hereby
-----------------------
irrevocably and unconditionally waive trial by jury in any action, claim, suit
or proceeding relating to this Mortgage and for any counterclaim brought
therein. Mortgagor hereby waives all rights to interpose any counterclaim in
any suit brought by Mortgagee hereunder and all rights to have any such suit
consolidated with any separate suit, action or proceeding.
36. Certain Definitions. Unless the context clearly indicates a
-------------------
contrary intent or unless otherwise specifically provided herein, words used in
this Mortgage shall be used interchangeably in singular or plural form and the
word "Mortgagor" shall mean "each Mortgagor or any subsequent owner or owners of
the Mortgaged Property or any part thereof or interest therein," the word
"Mortgagee" shall mean "Mortgagee or any successor collateral agent to the
Mortgagee," the word "person" shall include any individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, or other entity, and the words "Mortgaged Property" shall include any
portion of the Mortgaged Property or interest therein. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa. The captions in this Mortgage are for
convenience or reference only and in no way limit or amplify the provisions
hereof.
37. Compliance with Illinois Mortgage Foreclosure Law.
-------------------------------------------------
(a) In the event that any provision in this Mortgage shall be
inconsistent with any provision of the Illinois Mortgage Foreclosure Law
(Chapter 110, Sections 15-1101 et seq., Illinois Revised Statutes), as
-- ---
amended from time to time (herein called the "Act"), the provisions of the
---
Act shall take precedence over the provisions of this Mortgage, but shall
not invalidate or render unenforceable any other provision of this Mortgage
that can be construed in a manner consistent with the Act.
(b) If any provision of this Mortgage shall grant to Mortgagee any
rights or remedies upon default by the Mortgagor which are more limited
than the rights that would otherwise be vested in Mortgagee under the Act
in the absence of said provision of this Mortgage, Mortgagee shall be
vested with the rights granted in the act to the full extent permitted by
law.
<PAGE>
32
(c) Without limiting the generality of the foregoing, all expenses
incurred by Mortgagee to the extent reimbursable under Section 15-1510 and
15-1512 of the Act, whether incurred before or after any decree or judgment
of foreclosure, and whether or not enumerated in this Mortgage, shall be
added to the Obligations secured by this Mortgage or by the judgment of
foreclosure.
38. Release Upon Payment and Discharge of Mortgagor's Obligations.
-------------------------------------------------------------
Mortgagee shall release this Mortgage and the lien hereof by proper instrument
upon payment and discharge of all Obligations secured hereby (including payment
of reasonable expenses incurred by Mortgagee in connection with the execution of
such release) and upon full and complete performance of all of the Obligations.
This Mortgage has been duly executed by Mortgagor on the date first
above written.
ATTEST: BAYOU STEEL CORPORATION
By: ______________________ By: ______________________
Name: Name:
Title: Title:
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the ____ day of _________, 1994, before me personally came
___________________________, to me known, who, being by me duly sworn, did
depose and say that [s]he resides at ___________________________________________
(insert full address, include street address, city and state); that [s]he is
a[n] [_________________] President of Bayou Steel Corporation, the corporation
described in and which executed the foregoing instrument; and that [s]he signed
[his][her] name thereto by authority of the board of directors of said
corporation.
-------------------------
Notary Public
[Notarial Stamp]
<PAGE>
Schedule A
----------
Description of the Premises
[Attach Legal Description of all parcels]
<PAGE>
EXHIBIT 4.4
MORTGAGE, ASSIGNMENT OF RENTS
AND LEASES AND SECURITY AGREEMENT
from
[SUBSIDIARY GUARANTOR], Mortgagor
to
FIRST NATIONAL BANK OF COMMERCE,
as Trustee and Collateral Agent, Mortgagee
DATED AS OF ___________
<PAGE>
MORTGAGE, ASSIGNMENT OF
RENTS AND LEASES AND SECURITY AGREEMENT
---------------------------------------
THIS MORTGAGE, ASSIGNMENT OF RENTS AND LEASES AND SECURITY AGREEMENT,
dated as of _____________ __, 199_ is made by [SUBSIDIARY GUARANTOR], a
_______________ corporation ("Mortgagor"), whose address is River Road, La
---------
Place, Louisiana, 70069, to FIRST NATIONAL BANK OF COMMERCE, as Trustee (in such
capacity, the "Trustee") under the Indenture referred to below, as collateral
-------
agent ("Mortgagee"), whose address is __________________________. References to
---------
this "Mortgage" shall mean this instrument and any and all renewals,
--------
modifications, amendments, supplements, extensions, consolidations,
substitutions, spreaders and replacements of this instrument.
Background
----------
A. Mortgagor is the owner of the parcel(s) of real property described
on Schedule A attached (such real property, together with all of the buildings,
improvements, structures and fixtures now or subsequently located thereon (the
"Improvements"), being collectively referred to as the "Real Estate").
- ------------- -----------
B. Mortgagor is a wholly owned subsidiary of Bayou Steel Corporation, a
Delaware corporation (the "Company") and is a Recourse Subsidiary (as defined in
-------
the Indenture referred to below).
C. The Company and Mortgagee are parties to that Indenture dated as of
__________ __, 1994 (as the same may be amended, modified or otherwise
supplemented from time to time, the "Indenture"; capitalized terms not defined
---------
herein shall have the meanings ascribed thereto in the Indenture) for the
benefit of Holders of ___% First Mortgage Notes due 2001 (the "Securities")
----------
issued by the Company.
D. It is a condition precedent to the purchase of the Securities from
the Company that the Mortgagor shall have (i) executed and delivered that
certain Guaranty of even date herewith in favor of Mortgagee and (ii) executed
and delivered this Mortgage to Mortgagee for the ratable benefit of the Holders
in order to secure Mortgagor's obligations under the Guaranty.
NOW, THEREFORE, in consideration of the premises and to induce the
Mortgagee to enter into the Indenture and to induce the Holders to purchase the
Securities from the Mortgagor, the Mortgagor hereby agrees with the Mortgagee,
for the ratable benefit of the Holders, as follows:
<PAGE>
2
Granting Clauses
----------------
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Mortgagor agrees that to secure all of
Mortgagor's obligations and liabilities under the Guaranty and all other
obligations and liabilities of the Mortgagor to the Trustee, the Mortgagee and
the Holders (including, without limitation, interest accruing after the maturity
of the Securities and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Mortgagor, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding and interest, to the extent
permitted by law, on the unpaid interest), whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Indenture, the
Securities, the Guaranty, this Mortgage, the other Security Documents or any
other document made, delivered or given in connection therewith, in each case
whether on account of principal, interest, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of counsel
to the Trustee and the Mortgagee that are required to be paid by the Mortgagee
pursuant to the terms of the Indenture, the Guaranty or this Mortgage or any
other Security Document).
MORTGAGOR BARGAINS, SELLS, MORTGAGES, WARRANTS, CONVEYS, GRANTS, ASSIGNS,
TRANSFERS AND SETS OVER AND BY THESE PRESENTS DOES HEREBY BARGAIN, SELL,
MORTGAGE, WARRANT, CONVEY, GRANT, ASSIGN, TRANSFER AND SET OVER UNTO MORTGAGEE
FOR THE RATABLE BENEFIT OF THE HOLDERS AND HEREBY GRANTS TO MORTGAGEE FOR THE
RATABLE BENEFIT OF THE HOLDERS A CONTINUING SECURITY INTEREST IN AND TO ALL OF
THE FOLLOWING:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever of
Mortgagor, in possession or expectancy, in and to the Real Estate or any
part thereof;
(C) all right, title and interest of Mortgagor in, to and under all
easements, rights of way, gores of land, streets, ways, alleys, passages,
sewer rights, waters, water courses, water and riparian rights, development
rights, air rights, mineral rights and all estates, rights, titles,
interests, privileges, licenses, tenements, hereditaments and appurtenances
belonging, relating or appertaining to the Real Estate, and any reversions,
remainders, rents, issues, profits and revenue thereof and all land lying
in the bed of any street, road or avenue, in front of or adjoining the Real
Estate to the center line thereof;
<PAGE>
3
(D) all of the fixtures, chattels, business machines, machinery,
apparatus, equipment, furnishings, fittings and articles of personal
property of every kind and nature whatsoever, and all appurtenances and
additions thereto and substitutions or replacements thereof (together with,
in each case, attachments, components, parts and accessories) currently
owned or subsequently acquired by Mortgagor and now or subsequently
attached to, or contained in or used or usable in any way in connection
with any operation or letting of the Real Estate, including but without
limiting the generality of the foregoing, all screens, awnings, shades,
blinds, curtains, draperies, artwork, carpets, rugs, storm doors and
windows, furniture and furnishings, heating, electrical, and mechanical
equipment, lighting, switchboards, plumbing, ventilating, air conditioning
and air-cooling apparatus, refrigerating, and incinerating equipment,
escalators, elevators, loading and unloading equipment and systems, stoves,
ranges, laundry equipment, cleaning systems (including window cleaning
apparatus), telephones, communication systems (including satellite dishes
and antennae), televisions, computers, sprinkler systems and other fire
prevention and extinguishing apparatus and materials, security systems,
motors, engines, machinery, pipes, pumps, tanks, conduits, appliances,
fittings and fixtures of every kind and description (all of the foregoing
in this paragraph (D) being referred to as the "Equipment");
---------
(E) all right, title and interest of Mortgagor in and to all
substitutes and replacements of, and all additions and improvements to, the
Real Estate and the Equipment, subsequently acquired by or released to
Mortgagor or constructed, assembled or placed by Mortgagor on the Real
Estate, immediately upon such acquisition, release, construction,
assembling or placement, including, without limitation, any and all
building materials whether stored at the Real Estate or offsite, and, in
each such case, without any further mortgage, conveyance, assignment or
other act by Mortgagor;
(F) all right, title and interest of Mortgagor in, to and under all
leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or occupancy
of the Real Estate or the Equipment or any part thereof, now existing or
subsequently entered into by Mortgagor and whether written or oral and all
guarantees of any of the foregoing (collectively, as any of the foregoing
may be amended, restated, extended, renewed or modified from time to time,
the "Leases"), and all rights of Mortgagor in respect of cash and
------
securities deposited thereunder and the right to receive and collect the
revenues, income, rents, issues and profits thereof, together with all
other rents, royalties, issues, profits, revenue, income and other benefits
arising
<PAGE>
4
from the use and enjoyment of the Mortgaged Property (as defined below)
(collectively, the "Rents");
-----
(G) all trade names, trade marks, logos, copyrights, good will and
books and records relating to or used in connection with the operation of
the Real Estate or the Equipment or any part thereof; all general
intangibles related to the operation of the Improvements now existing or
hereafter arising;
(H) all unearned premiums under insurance policies now or
subsequently obtained by Mortgagor relating to the Real Estate or Equipment
and Mortgagor's interest in and to all proceeds of any such insurance
policies (including title insurance policies) including the right to
collect and receive such proceeds, subject to the provisions relating to
insurance generally set forth below; and all awards and other compensation,
including the interest payable thereon and the right to collect and receive
the same, made to the present or any subsequent owner of the Real Estate or
Equipment for the taking by eminent domain, condemnation or otherwise, of
all or any part of the Real Estate or any easement or other right therein;
(I) all right, title and interest of Mortgagor in and to (i) all
contracts from time to time executed by Mortgagor or any manager or agent
on its behalf relating to the ownership, construction, maintenance, repair,
operation, occupancy, sale or financing of the Real Estate or Equipment or
any part thereof and all agreements relating to the purchase or lease of
any portion of the Real Estate or any property which is adjacent or
peripheral to the Real Estate, together with the right to exercise such
options and all leases of Equipment, (ii) all consents, licenses, building
permits, certificates of occupancy and other governmental approvals
relating to construction, completion, occupancy, use or operation of the
Real Estate or any part thereof and (iii) all drawings, plans,
specifications and similar or related items relating to the Real Estate;
(J) any and all monies now or subsequently on deposit for the payment
of real estate taxes or special assessments against the Real Estate or for
the payment of premiums on insurance policies covering the foregoing
property or otherwise on deposit with or held by Mortgagee as provided in
this Mortgage; all capital, operating, reserve or similar accounts held by
or on behalf of Mortgagor and related to the operation of the Mortgaged
Property, whether now existing or hereafter arising and all monies held in
any of the foregoing accounts and any certificates or instruments related
to or evidencing such accounts;
<PAGE>
5
(K) all accounts and revenues arising from the operation of the
Improvements including, without limitation, (i) any right to payment now
existing or hereafter arising for rental of hotel rooms or other space or
for goods sold or leased or for services rendered, whether or not yet
earned by performance, arising from the operation of the Improvements or
any other facility on the Mortgaged Property and (ii) all rights to payment
from any consumer credit-charge card organization or entity including,
without limitation, payments arising from the use of the American Express
Card, the Visa Card, the Carte Blanche Card, the Mastercard or any other
credit card, including those now existing or hereafter created,
substitutions therefor, proceeds thereof (whether cash or non-cash, movable
or immovable, tangible or intangible) received upon the sale, exchange,
transfer, collection or other disposition or substitution thereof and any
and all of the foregoing and proceeds therefrom; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by Mortgagor and described in the foregoing
clauses (A) through (E) are collectively referred to as the "Premises", and
--------
those described in the foregoing clauses (A) through (L) are collectively
referred to as the "Mortgaged Property").
------------------
All of the Mortgaged Property hereinabove described, real, personal and
mixed, whether affixed or annexed to the Real Estate or not and all rights
hereby conveyed and mortgaged are intended so to be as a unit and are hereby
understood, agreed and declared, to the maximum extent permitted by law, to form
a part and parcel of the Real Estate and to be appropriated to the use of the
Real Estate, and shall be for the purposes of this Mortgage deemed to be real
estate and conveyed and mortgaged hereby; provided, however, as to any of the
property aforesaid which does not so form a part and parcel of the Real Estate
or does not constitute a "fixture" (as defined in the Uniform Commercial Code of
Illinois (the "Code")), this Mortgage is hereby deemed to also be a Security
----
Agreement under the Code for purposes of granting a security interest in such
property, which Mortgagor hereby grants to Mortgagee, as Secured Party (as
defined in the Code), as more particularly provided below in this Mortgage.
TO HAVE AND TO HOLD the Mortgaged Property and the rights and privileges
hereby mortgaged, together with the right to retain possession of the Mortgaged
Property after a default or Event of Default hereunder, unto Mortgagee, its
successors and assigns for the uses and purposes set forth, until the
Obligations are fully paid and performed.
<PAGE>
6
Terms and Conditions
--------------------
Mortgagor further represents, warrants, covenants and agrees with
Mortgagee as follows:
1. Warranty of Title. Mortgagor warrants that Mortgagor has good title
-----------------
to the Real Estate in fee simple and good title to the rest of the Mortgaged
Property, subject only to the matters that are set forth in Schedule B of the
title insurance policy or policies being issued to Mortgagee to insure the lien
of this Mortgage (the "Permitted Exceptions") and Mortgagor shall warrant,
--------------------
defend and preserve such title and the lien of the Mortgage thereon against all
claims of all persons and entities. Mortgagor further warrants that it has the
right to mortgage the Mortgaged Property.
2. Payment and Performance of Obligations. Mortgagor shall pay the
--------------------------------------
Obligations at the times and places and in the manner specified in the Guaranty
and shall perform all the Obligations.
3. Requirements. (a) Mortgagor shall promptly comply with, or cause
------------
to be complied with, and conform to all present and future laws, statutes,
codes, ordinances, orders, judgments, decrees, rules, regulations and
requirements, and irrespective of the nature of the work to be done, of each of
the United States of America, any State and any municipality, local government
or other political subdivision thereof and any agency, department, bureau,
board, commission or other instrumentality of any of them, now existing or
subsequently created (collectively, "Governmental Authority") which has
----------------------
jurisdiction over the Mortgaged Property and all covenants, restrictions and
conditions now or later of record which may be applicable to any of the
Mortgaged Property, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of any of the
Mortgaged Property. All present and future laws, statutes, codes, ordinances,
orders, judgments, decrees, rules, regulations and requirements of every
Governmental Authority applicable to Mortgagor or to any of the Mortgaged
Property and all covenants, restrictions, and conditions which now or later may
be applicable to any of the Mortgaged Property are collectively referred to as
the "Legal Requirements".
------------------
(b) From and after the date of this Mortgage, Mortgagor shall not by
act or omission permit any building or other improvement on any premises not
subject to the lien of this Mortgage to rely on the Premises or any part thereof
or any interest therein to fulfill any Legal Requirement, and Mortgagor hereby
assigns to Mortgagee any and all rights to give consent for all or any portion
of the Premises or any interest therein to be so used. Mortgagor shall not by
act or omission impair the integrity of any of the Real Estate as a single
zoning lot separate and apart from all other premises. Mortgagor represents
<PAGE>
7
that each parcel of the Real Estate constitutes a legally subdivided lot, in
compliance with all subdivision laws and similar Legal Requirements. Any act or
omission by Mortgagor which would result in a violation of any of the provisions
of this subsection shall be void.
4. Payment of Taxes and Other Impositions. (a) Promptly when due,
--------------------------------------
Mortgagor shall pay and discharge all taxes of every kind and nature (including,
without limitation, all real and personal property, income, franchise,
withholding, transfer, gains, profits and gross receipts taxes), all charges for
any easement or agreement maintained for the benefit of any of the Mortgaged
Property, all general and special assessments, levies, permits, inspection and
license fees, all water and sewer rents and charges and all other public charges
even if unforeseen or extraordinary, imposed upon or assessed against or which
may become a lien on any of the Mortgaged Property, or arising in respect of the
occupancy, use or possession thereof, together with any penalties or interest on
any of the foregoing (all of the foregoing are collectively referred to as the
"Impositions"). Upon request by Mortgagee, Mortgagor shall deliver to Mortgagee
- ------------
(i) original or copies of receipted bills and cancelled checks evidencing
payment of such Imposition if it is a real estate tax or other public charge and
(ii) evidence acceptable to Mortgagee showing the payment of any other such
Imposition. If by law any Imposition, at Mortgagor's option, may be paid in
installments (whether or not interest shall accrue on the unpaid balance of such
Imposition), Mortgagor may elect to pay such Imposition in such installments and
shall be responsible for the payment of such installments with interest, if any.
(b) Nothing herein shall affect any right or remedy of Mortgagee under
this Mortgage or otherwise, without notice or demand to Mortgagor, to pay any
Imposition after the date such Imposition shall have become due, and to add to
the Obligations the amount so paid, together with interest from the time of
payment at the Default Rate. Any sums paid by Mortgagee in discharge of any
Impositions shall be (i) a lien on the Premises secured hereby prior to any
right or title to, interest in, or claim upon the Premises subordinate to the
lien of this Mortgage, and (ii) payable on demand by Mortgagor to Mortgagee
together with interest at the Default Rate as set forth above.
(c) Mortgagor shall not claim, demand or be entitled to receive any
credit or credits toward the satisfaction of this Mortgage or on any interest
payable thereon for any taxes assessed against the Mortgaged Property or any
part thereof, and shall not claim any deduction from the taxable value of the
Mortgaged Property by reason of this Mortgage.
(d) Mortgagor shall have the right before any delinquency occurs to
contest or object in good faith to the amount or validity of any Imposition by
appropriate legal proceedings, but such right shall not be deemed or construed
in
<PAGE>
8
any way as relieving, modifying, or extending Mortgagor's covenant to pay any
such Imposition at the time and in the manner provided in this Section unless
(i) Mortgagor has given prior written notice to Mortgagee of Mortgagor's intent
so to contest or object to an Imposition, (ii) Mortgagor shall demonstrate to
Mortgagee's satisfaction that the legal proceedings shall operate conclusively
to prevent the sale of the Mortgaged Property, or any part thereof, to satisfy
such Imposition prior to final determination of such proceedings and (iii)
Mortgagor shall furnish a good and sufficient bond or surety as requested by and
reasonably satisfactory to Mortgagee in the amount of the Impositions which are
being contested plus any interest and penalty which may be imposed thereon and
which could become a lien against the Real Estate or any part of the Mortgaged
Property.
(e) Upon written notice to Mortgagor, Mortgagee after an Event of
Default (as defined below) shall be entitled to require Mortgagor to pay monthly
in advance to Mortgagee the equivalent of 1/12th of the estimated annual
Impositions. Mortgagee may commingle such funds with its own funds and
Mortgagor shall not be entitled to interest thereon.
5. Insurance. (a) Mortgagor shall maintain or cause to be maintained
---------
on all of the Premises
(i) property insurance against loss or damage by fire, lightning,
windstorm, tornado, water damage, flood, earthquake and by such other
further risks and hazards as now are or subsequently may be covered by an
"all risk" policy or a fire policy covering "special" causes of loss. The
policy shall include building ordinance law endorsements and the policy
limits shall be automatically reinstated after each loss;
(ii) comprehensive general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language of such endorsement), covering all claims for personal injury,
bodily injury or death, or property damage occurring on, in or about the
Premises in an amount not less than $10,000,000 combined single limit with
respect to injury and property damage relating to any one occurrence plus
such excess limits as Mortgagee shall request from time to time;
(iii) when and to the extent required by Mortgagee, insurance against
loss or damage by any other risk commonly insured against by persons
occupying or using like properties in the locality or localities in which
the Real Estate is situated;
(iv) insurance against rent loss, extra expense or business
interruption (and/or soft costs, in the case of new construction), if
applicable, in amounts satisfactory to
<PAGE>
9
Mortgagee, but not less than one year's gross rent or gross income;
(v) during the course of any construction or repair of Improvements,
comprehensive general liability insurance under a policy including the
"broad form CGL endorsement" (or which incorporates the language of such
endorsement), (including coverage for elevators and escalators, if any).
The policy shall include coverage for independent contractors and completed
operations. The completed operations coverage shall stay in effect for two
years after construction of any Improvements has been completed. The
policy shall provide coverage on an occurrence basis against claims for
personal injury, including, without limitation, bodily injury, death or
property damage occurring on, in or about the Premises and the adjoining
streets, sidewalks and passageways, such insurance to afford immediate
minimum protection to a limit of not less than that required by Mortgagee
with respect to personal injury, bodily injury or death to any one or more
persons or damage to property;
(vi) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's
liability insurance) for all employees of Mortgagor engaged on or with
respect to the Premises in such amounts as are reasonably satisfactory to
Mortgagee, but in no event less than the limits established by law;
(vii) during the course of any construction, addition, alteration or
repair of the Improvements, builder's risk completed value form insurance
against "all risks of physical loss," including collapse, water damage,
flood and earthquake and transit coverage, during construction or repairs
of the Improvements, with deductible approved by Mortgagee, in nonreporting
form, covering the total value of work performed and equipment, supplies
and materials furnished (with an appropriate limit for soft costs in the
case of construction);
(viii) boiler and machinery property insurance covering pressure
vessels, air tanks, boilers, machinery, pressure piping, heating, air
conditioning and elevator equipment and escalator equipment, provided the
Improvements contain equipment of such nature, and insurance against rent,
extra expense, business interruption and soft costs, if applicable, arising
from any such breakdown, in such amounts as are reasonably satisfactory to
Mortgagee but not less than the lesser of $1,000,000 or 10% of the value of
the Improvements;
(ix) if any portion of the Premises are located in an area identified
as a special flood hazard area by the Federal Emergency Management Agency
or other applicable agency, flood insurance in an amount satisfactory to
<PAGE>
10
Mortgagee, but in no event less than the maximum limit of coverage
available under the National Flood Insurance Act of 1968, as amended; and
(x) such other insurance in such amounts as Mortgagee may reasonably
request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or materially
amended without 30 days' prior written notice to Mortgagee, and (ii) with
respect to all property insurance, provide for deductibles not to exceed
$25,000, contain a "Replacement Cost Endorsement" without any deduction made for
depreciation and with no co-insurance penalty (or attaching an agreed amount
endorsement satisfactory to Mortgagee), with loss payable solely to Mortgagee
(modified, if necessary, to provide that proceeds in the amount of replacement
cost may be retained by Mortgagee without the obligation to rebuild) as its
interest may appear, without contribution, under a "standard" or "New York"
mortgagee clause acceptable to Mortgagee and be written by insurance companies
having an A.M. Best Company, Inc. rating of A or higher and a financial size
category of not less than XII, or otherwise as approved by Mortgagee. Liability
insurance policies shall name Mortgagee as an additional insured and contain a
waiver of subrogation against Mortgagee; all such policies shall indemnify and
hold Mortgagee harmless from all liability claims occurring on, in or about the
Premises and the adjoining streets, sidewalks and passageways. The amounts of
each insurance policy and the form of each such policy shall at all times be
satisfactory to Mortgagee. Each policy shall expressly provide that any
proceeds which are payable to Mortgagee shall be paid by check payable to the
order of Mortgagee only and requiring the endorsement of Mortgagee only. If any
required insurance shall expire, be withdrawn, become void by breach of any
condition thereof by Mortgagor or by any lessee of any part of the Mortgaged
Property or become void or unsafe by reason of the failure or impairment of the
capital of any insurer, or if for any other reason whatsoever such insurance
shall become unsatisfactory to Mortgagee, Mortgagor shall immediately obtain new
or additional insurance satisfactory to Mortgagee. Mortgagor shall not take out
any separate or additional insurance which is contributing in the event of loss
unless it is properly endorsed and otherwise satisfactory to Mortgagee in all
respects.
(b) Mortgagor shall deliver to Mortgagee an original of each insurance
policy required to be maintained, or a certificate of such insurance acceptable
to Mortgagee, together with a copy of the declaration page for each such policy.
Mortgagor shall (i) pay as they become due all premiums for such insurance, (ii)
not later than 15 days prior to the expiration of each policy to be furnished
pursuant to the provisions of this Section, deliver a renewed policy or
policies, or duplicate
<PAGE>
11
original or originals thereof, marked "premium paid," or accompanied by such
other evidence of payment satisfactory to Mortgagee with standard non-
contributory mortgage clauses in favor of and acceptable to Mortgagee. Upon
request of Mortgagee, Mortgagor shall cause its insurance underwriter or broker
to certify to Mortgagee in writing that all the requirements of this Mortgage
governing insurance have been satisfied.
(c) If Mortgagor is in default of its obligations to insure or deliver
any such prepaid policy or policies, then Mortgagee, at its option and without
notice, may effect such insurance from year to year, and pay the premium or
premiums therefor, and Mortgagor shall pay to Mortgagee on demand such premium
or premiums so paid by Mortgagee with interest from the time of payment at the
Default Rate and the same shall be deemed to be secured by this Mortgage and
shall be collectible in the same manner as the Obligations secured by this
Mortgage.
(d) Mortgagor promptly shall comply with and conform to (i) all
provisions of each such insurance policy, and (ii) all requirements of the
insurers applicable to Mortgagor or to any of the Mortgaged Property or to the
use, manner of use, occupancy, possession, operation, maintenance, alteration or
repair of any of the Mortgaged Property. Mortgagor shall not use or permit the
use of the Mortgaged Property in any manner which would permit any insurer to
cancel any insurance policy or void coverage required to be maintained by this
Mortgage.
(e) If the Mortgaged Property, or any part thereof, shall be destroyed
or damaged by fire or any other casualty, whether insured or uninsured, or in
the event any claim is made against Mortgagor for any personal injury, bodily
injury or property damage incurred on or about the Premises, Mortgagor shall
give immediate notice thereof to Mortgagee. If the Mortgaged Property is
damaged by fire or other casualty and the cost to repair such damage is less
than the lesser of (i) 5% of the replacement cost of the Improvements at the
affected Real Estate site and (ii) $100,000, then provided that no Event of
Default shall have occurred and be continuing, Mortgagor shall have the right to
adjust such loss, and the insurance proceeds relating to such loss may be paid
over to Mortgagor; provided that Mortgagor shall, promptly after any such
damage, repair all such damage regardless of whether any insurance proceeds have
been received or whether such proceeds, if received, are sufficient to pay for
the costs of repair. If the Mortgaged Property is damaged by fire or other
casualty, and the cost to repair such damage exceeds the above limit, or if an
Event of Default shall have occurred and be continuing, then Mortgagor
authorizes and empowers Mortgagee, at Mortgagee's option and in Mortgagee's sole
discretion, as attorney-in-fact for Mortgagor, to make proof of loss, to adjust
and compromise any claim under any insurance policy, to appear in and prosecute
any action arising from any policy, to collect and receive insurance proceeds
and to deduct therefrom Mortgagee's expenses incurred in
<PAGE>
12
the collection process. Each insurance company concerned is hereby authorized
and directed to make payment for such loss directly to Mortgagee. Mortgagee
shall have the right to require Mortgagor to repair or restore the Mortgaged
Property, and Mortgagor hereby designates Mortgagee as its attorney-in-fact for
the purpose of making any election required or permitted under any insurance
policy relating to repair or restoration. The insurance proceeds or any part
thereof received by Mortgagee shall constitute Trust Moneys which shall be
applied in accordance with subsection 13.2(a) of the Indenture.
(f) In the event of foreclosure of this Mortgage or other transfer of
title to the Mortgaged Property in extinguishment of the Obligations, all right,
title and interest of Mortgagor in and to any insurance policies then in force
shall pass to the purchaser or grantee and Mortgagor hereby appoints Mortgagee
its attorney-in-fact, in Mortgagor's name, to assign and transfer all such
policies and proceeds to such purchaser or grantee.
(g) Upon written notice to Mortgagor, Mortgagee after an Event of
Default shall be entitled to require Mortgagor to pay monthly in advance to
Mortgagee the equivalent of 1/12th of the estimated annual premiums due on such
insurance. Mortgagee may commingle such funds with its own funds and Mortgagor
shall not be entitled to interest thereon.
(h) Mortgagor may maintain insurance required under this Mortgage by
means of one or more blanket insurance policies maintained by Mortgagor;
provided, however, that (A) any such policy shall specify, or Mortgagor shall
- -------- -------
furnish to Mortgagee a written statement from the insurer so specifying, the
maximum amount of the total insurance afforded by such blanket policy that is
allocated to the Premises and the other Mortgaged Property and any sublimits in
such blanket policy applicable to the Premises and the other Mortgaged Property,
(B) each such blanket policy shall include an endorsement providing that, in the
event of a loss resulting from an insured peril, insurance proceeds shall be
allocated to the Mortgaged Property in an amount equal to the coverages required
to be maintained by Mortgagor as provided above and (C) the protection afforded
under any such blanket policy shall be no less than that which would have been
afforded under a separate policy or policies relating only to the Mortgaged
Property.
6. Restrictions on Liens, Encumbrances, Sales and Transfers. In
--------------------------------------------------------
determining whether or not to enter into the transaction contemplated by the
Indenture, Mortgagee examined the creditworthiness of each person or entity
owning a direct or indirect interest in Mortgagor (each such person or entity, a
"Beneficial Owner"), found such credit-worthiness acceptable and relied and
----------------
continues to rely upon the same as a means of repayment of the Obligations.
Mortgagee has also evaluated the background and experience of each Beneficial
Owner in owning and
<PAGE>
13
operating property such as the Mortgaged Property, found such matters acceptable
and relied upon and continues to rely upon the same as a means of maintaining
the value of the Mortgaged Property which is the security for the Obligations.
Each Beneficial Owner is experienced in borrowing money in sophisticated
commercial loan transactions and in owning and operating property such as the
Mortgaged Property, was ably represented by a licensed attorney at law in the
negotiation and documentation of the transaction in connection with which this
Mortgage was given and bargained at arm's length and without duress of any kind
for all of the terms of such transaction, including this provision. Mortgagor
acknowledges that Mortgagee is entitled to conduct its business activities,
including the continuing extension of credit secured by this Mortgage, with
parties of its own choosing. Mortgagor, for itself and on behalf of each
Beneficial Owner, further acknowledges that any secondary or junior financing
placed on the Mortgaged Property (a) may divert funds that would otherwise be
available for payment of the Obligations, (b) could, if foreclosed, force
Mortgagee to incur expenses to protect its security, (c) would detract
possession thereof with the intention of selling the same and (d) would impair
Mortgagee's right to accept a deed in lieu of foreclosure or otherwise to take
actions to further its economic interest prior to foreclosure, because a
foreclosure by Mortgagee would be required to clear title to the Mortgaged
Property of any such secondary or junior lien or encumbrance. In accordance
with the foregoing and for the purpose of (i) protecting Mortgagee's security,
both of repayment and of value in the Mortgaged Property, (ii) giving Mortgagee
the full benefit of its bargain and contract with Mortgagor, and (iii) keeping
the Mortgaged Property free of subordinate financing liens, Mortgagor agrees
that if the following provisions of this paragraph should be deemed a restraint
on alienation, that such provisions are reasonable restraints.
(1) Except for the lien of this Mortgage, the Permitted Exceptions and
liens permitted pursuant to subsection 6.10 of the Indenture, Mortgagor shall
not further mortgage, nor otherwise encumber the Mortgaged Property nor create
or suffer to exist any lien, charge or encumbrance on the Mortgaged Property, or
any part thereof, whether superior or subordinate to the lien of this Mortgage
and whether recourse or non-recourse.
(2) Except as may be permitted pursuant to subsection 6.15 of the
Indenture, Mortgagor shall not sell, transfer, convey or assign all or any
portion of, or any interest in, the Mortgaged Property. Further, without the
prior written consent of Mortgagee in its sole discretion and except as may be
permitted by the Indenture, the ultimate beneficial ownership of Mortgagor shall
not be changed or altered, by sale, assignment, transfer, pledge foreclosure or
otherwise, from the ultimate beneficial ownership on the date hereof.
<PAGE>
14
7. Relationship of Mortgagee and Mortgagor. Mortgagee shall in no
---------------------------------------
event be construed for any purpose to be a partner, joint venturer, agent or
associate of Mortgagor or of any beneficiary, tenant, subtenant, operator,
concessionaire or licensee of Mortgagor in the conduct of their respective
businesses, and without limiting the foregoing, Mortgagee shall not be deemed to
be such partner, joint venturer, agent or associate on account of Mortgagee
becoming a Mortgagee in possession or exercising any rights pursuant to this
Mortgage, any of the other Security Documents, or otherwise.
8. Maintenance; No Alteration; Inspection; Utilities. (a) Mortgagor
-------------------------------------------------
shall maintain or cause to be maintained all the Improvements in good condition
and repair and shall not commit or suffer any waste of the Improvements.
Mortgagor shall repair, restore, replace or rebuild promptly any part of the
Premises which may be damaged or destroyed by any casualty whatsoever. The
Improvements shall not be demolished or materially altered, nor any material
additions built, without the prior written consent of Mortgagee.
(b) Mortgagee and any persons authorized by Mortgagee shall have the
right to enter and inspect the Premises and the right to inspect all work done,
labor performed and materials furnished in and about the Improvements and the
right to inspect and make copies of all books, contracts and records of
Mortgagor relating to the Mortgaged Property.
(c) Mortgagor shall pay or cause to be paid when due all utility
charges which are incurred for gas, electricity, water or sewer services
furnished to the Premises and all other assessments or charges of a similar
nature, whether public or private, affecting the Premises or any portion
thereof, whether or not such assessments or charges are liens thereon.
9. Condemnation/Eminent Domain. Immediately upon obtaining knowledge
---------------------------
of the institution of any proceedings for the condemnation of the Mortgaged
Property, or any portion thereof, Mortgagor will notify Mortgagee of the
pendency of such proceedings. Mortgagor authorizes Mortgagee, at Mortgagee's
option and in Mortgagee's sole discretion, as attorney-in-fact for Mortgagor, to
commence, appear in and prosecute, in Mortgagee's or Mortgagor's name, any
action or proceeding relating to any condemnation of the Mortgaged Property, or
any portion thereof, and to settle or compromise any claim in connection with
such condemnation. If Mortgagee elects not to participate in such condemnation
proceeding, then Mortgagor shall, at its expense, diligently prosecute any such
proceeding and shall consult with Mortgagee, its attorneys and experts and
cooperate with them in any defense of any such proceedings. All awards and
proceeds of condemnation shall be assigned to Mortgagee to be applied in the
same manner as insurance proceeds, as provided above, and Mortgagor agrees to
execute any such assignments of all such awards as Mortgagee may request.
<PAGE>
15
10. Leases. (a) Mortgagor shall not (i) execute an assignment or
------
pledge of any Lease relating to all or any portion of the Mortgaged Property
other than in favor of Mortgagee, or (ii) without the prior written consent of
Mortgagee, execute or permit to exist any Lease of any of the Mortgaged
Property.
(b) As to any Lease consented to by Mortgagee, Mortgagor shall:
(i) promptly perform all of the provisions of the Lease on the part
of the lessor thereunder to be performed;
(ii) promptly enforce all of the provisions of the Lease on the part
of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding arising under or in
any manner connected with the Lease or the obligations of Mortgagor as
lessor or of the lessee thereunder;
(iv) exercise, within 5 days after a request by Mortgagee, any right
to request from the lessee a certificate with respect to the status
thereof;
(v) simultaneously deliver to Mortgagee copies of any notices of
default which Mortgagor may at any time forward to or receive from the
lessee;
(vi) promptly deliver to Mortgagee a fully executed counterpart of the
Lease; and
(vii) promptly deliver to Mortgagee, upon Mortgagee's request, an
assignment of the Mortgagor's interest under such Lease.
(c) Mortgagor shall deliver to Mortgagee, within 10 days after a
request by Mortgagee, a written statement, certified by Mortgagor as being true,
correct and complete, containing the names of all lessees and other occupants of
the Mortgaged Property, the terms of all Leases and the spaces occupied and
rentals payable thereunder, and a list of all Leases which are then in default,
including the nature and magnitude of the default; such statement shall be
accompanied by credit information with respect to the lessees and such other
information as Mortgagee may request.
(d) All Leases entered into by Mortgagor after the date hereof, if any,
and all rights of any lessees thereunder shall be subject and subordinate in all
respects to the lien and provisions of this Mortgage unless Mortgagee shall
otherwise elect in writing.
<PAGE>
16
(e) As to any Lease now in existence or subsequently consented to by
Mortgagee, Mortgagor shall not accept a surrender or terminate, cancel, rescind,
supplement, alter, revise, modify or amend such Lease or permit any such action
to be taken nor shall Mortgagor accept the payment of rent more than thirty (30)
days in advance of its due date.
(f) If any act or omission of Mortgagor would give any lessee under
any Lease the right, immediately or after lapse of a period of time, to cancel
or terminate such Lease, or to abate or offset against the payment of rent or to
claim a partial or total eviction, such lessee shall not exercise such right
until it has given written notice of such act or omission to Mortgagee and until
a reasonable period for remedying such act or omission shall have elapsed
following the giving of such notice without a remedy being effected.
(g) In the event of the enforcement by Mortgagee of any remedy under
this Mortgage, the lessee under each Lease shall, if requested by Mortgagee or
any other person succeeding to the interest of Mortgagee as a result of such
enforcement, attorn to Mortgagee or to such person and shall recognize Mortgagee
or such successor in interest as lessor under the Lease without change in the
provisions thereof; provided however, that Mortgagee or such successor in
interest shall not be: (i) bound by any payment of an installment of rent or
additional rent which may have been made more than 30 days before the due date
of such installment; (ii) bound by any amendment or modification to the Lease
made without the consent of Mortgagee or such successor in interest; (iii)
liable for any previous act or omission of Mortgagor (or its predecessors in
interest); (iv) responsible for any monies owing by Mortgagor to the credit of
such lessee or subject to any credits, offsets, claims, counterclaims, demands
or defenses which the lessee may have against Mortgagor (or its predecessors in
interest); (v) bound by any covenant to undertake or complete any construction
of the Premises or any portion thereof; or (vi) obligated to make any payment to
such lessee other than any security deposit actually delivered to Mortgagee or
such successor in interest. Each lessee or other occupant, upon request by
Mortgagee or such successor in interest, shall execute and deliver an instrument
or instruments confirming such attornment. In addition, Mortgagor agrees that
each Lease entered into after the date of this Mortgage shall include language
to the effect of subsections (d)-(g) of this Section; provided that the
provisions of such subsections shall be self-operative and any failure of any
Lease to include such language shall not impair the binding effect of such
provisions on any lessee under such Lease.
11. Further Assurances/Estoppel Certificates. To further assure
----------------------------------------
Mortgagee's rights under this Mortgage, Mortgagor agrees upon demand of
Mortgagee to do any act or execute any additional documents (including, but not
limited to, security agreements on any personalty included or to be included in
the
<PAGE>
17
Mortgaged Property and a separate assignment of each Lease in recordable form)
as may be required by Mortgagee to confirm the lien of this Mortgage and all
other rights or benefits conferred on Mortgagee. Mortgagor, within 5 business
days after request, shall deliver, in form and substance satisfactory to
Mortgagee, a written statement, duly acknowledged, setting forth the amount of
the Obligations, and whether any offsets, claims, counterclaims or defenses
exist against the Obligations and certifying as to such other matters as
Mortgagee shall reasonably request.
12. Mortgagee's Right to Perform. If Mortgagor fails to perform any of
----------------------------
the covenants or agreements of Mortgagor, Mortgagee, without waiving or
releasing Mortgagor from any obligation or default under this Mortgage, may, at
any time (but shall be under no obligation to) pay or perform the same, and the
amount or cost thereof, with interest at the Default Rate, shall immediately be
due from Mortgagor to Mortgagee and the same shall be secured by this Mortgage
and shall be a lien on the Mortgaged Property prior to any right, title to,
interest in or claim upon the Mortgaged Property attaching subsequent to the
lien of this Mortgage. No payment or advance of money by Mortgagee under this
Section shall be deemed or construed to cure Mortgagor's default or waive any
right or remedy of Mortgagee.
13. Hazardous Material. (a) Neither Mortgagor nor, to the best
------------------
knowledge of Mortgagor, any other person has ever caused or permitted any
Hazardous Material (as defined below) to be placed, held, located or disposed of
on, under or at the Premises, or any part thereof, and the Premises have never
been used (whether by Mortgagor or, to the best knowledge of Mortgagor, by any
other person, including any tenant) as a dump site or storage (whether permanent
or temporary) site for any Hazardous Material.
(b) Mortgagor represents that (i) to the best of Mortgagor's knowledge,
upon due inquiry, the Premises are free of all Hazardous Material and (ii)
neither the Premises nor any site within the vicinity of the Premises is or has
been adversely affected by any Hazardous Material or is in violation of any
applicable Legal Requirement of any Governmental Authority regulating, relating
to, or imposing liability or standards of conduct concerning Hazardous Material.
Mortgagor shall submit to Mortgagee, prior to closing, a description of the
procedure followed by Mortgagor to comply with the terms of this subsection,
which procedure shall include the request, in writing, of the appropriate
Regional Office of the Federal Environmental Protection Administration and each
other appropriate Governmental Authority for any information relating to the
matters covered in this subsection.
(c) Mortgagor shall comply with any and all applicable Legal
Requirements governing the discharge and removal of Hazardous Material, shall
pay immediately when due the costs of removal of any Hazardous Material, and
shall keep the Premises
<PAGE>
18
free of any lien imposed pursuant to such Legal Requirements. In the event
Mortgagor fails to do so, after notice to Mortgagor and the expiration of the
earlier of (i) applicable cure periods hereunder, or (ii) the cure period
permitted under the applicable Legal Requirement, Mortgagee may declare such
failure an Event of Default or cause the Premises to be freed from the Hazardous
Material and the cost of the removal with interest at the Default Rate shall
immediately be due from Mortgagor to Mortgagee and the same shall be added to
the Obligations and be secured by this Mortgage. Mortgagor further agrees not
to release or dispose of any Hazardous Material at the Premises without the
express approval of Mortgagee and any such release or disposal shall comply with
all applicable Legal Requirements and any conditions established by Mortgagee.
In addition, Mortgagor agrees not to allow the manufacture, storage,
transmission, presence or disposal of any Hazardous Material over or upon the
Premises. Mortgagee shall have the right at any time to conduct an
environmental audit of the Premises and Mortgagor shall cooperate in the conduct
of such environmental audit. Mortgagor shall give Mortgagee and its agents and
employees access to the Premises to remove Hazardous Material. Mortgagor agrees
to defend, indemnify and hold Mortgagee free and harmless from and against all
loss, costs, damage and expense (including attorneys' fees and costs and
consequential damages) Mortgagee may sustain by reason of (i) the imposition or
recording of a lien by any Governmental Authority pursuant to any Legal
Requirement relating to hazardous or toxic wastes or substances or the removal
thereof ("Hazardous Material Laws"); (ii) claims of any private parties
-----------------------
regarding violations of Hazardous Material Laws; (iii) costs and expenses
(including, without limitation, attorneys' fees and fees incidental to the
securing of repayment of such costs and expenses) incurred by Mortgagor or
Mortgagee in connection with the removal of any such lien or in connection with
Mortgagor's or Mortgagee's compliance with any Hazardous Material Laws; and (iv)
the assertion against Mortgagee by any party of any claim in connection with
Hazardous Material.
(d) For the purposes of this Mortgage, "Hazardous Material" means and
------------------
includes any hazardous, nuclear, toxic or dangerous waste, substance or material
defined as such in (or for purposes of) the Comprehensive Environmental
Response, Compensation, and Liability Act, any so-called "Superfund" or
"Superlien" law, or any other Legal Requirement regulating, relating to, or
imposing liability or standards of conduct concerning, any hazardous, nuclear,
toxic or dangerous waste, substance or material, as now or at any time in
effect.
(e) The foregoing indemnification shall be a recourse obligation of
Mortgagor and shall survive repayment of the Note, notwithstanding any
limitations on recourse which may be contained herein or in any Security
Documents or the delivery of any satisfaction, release or release deed,
discharge or deed of reconveyance, or the assignment of this Mortgage by
Mortgagee.
<PAGE>
19
14. Asbestos. Mortgagor shall not install or permit to be installed in
--------
the Premises friable asbestos or any substance containing asbestos and deemed
hazardous by any Legal Requirement respecting such material, or any other
building material deemed to be harmful, hazardous or injurious by relevant Legal
Requirements and with respect to any such material currently present in the
Premises shall promptly either (a) remove any material which such Legal
Requirements deem harmful, hazardous or injurious and require to be removed or
(b) otherwise comply with such Legal Requirements, at Mortgagor's expense. If
Mortgagor shall fail to so remove or otherwise comply, Mortgagee may declare an
Event of Default and/or do whatever is necessary to eliminate such substances
from the Premises or otherwise comply with the applicable Legal Requirement, and
the costs thereof, with interest at the Default Rate, shall be immediately due
from Mortgagor to Mortgagee and the same shall be added to the Obligations and
be secured by this Mortgage. Mortgagor shall give Mortgagee and its agents and
employees access to the Premises to remove such asbestos or substances.
Mortgagor shall defend, indemnify, and save Mortgagee harmless from all loss,
costs, damages and expense (including attorneys' fees and costs and
consequential damages) asserted or proven against Mortgagee by any party, as a
result of the presence of such substances or any removal or compliance with such
Legal Requirements. The foregoing indemnification shall be a recourse
obligation of Mortgagor and shall survive repayment of the Note, notwithstanding
any limitation on recourse which may be contained herein or in any of the
Security Documents or the delivery of any satisfaction, release or release deed,
discharge or deed of reconveyance, or the assignment of this Mortgage by
Mortgagee.
15. Events of Default. The occurrence of any one or more of the
-----------------
following events shall constitute an Event of Default:
(a) if an "Event of Default" (as defined in the Indenture) shall
occur;
(b) if any of the Mortgaged Property is damaged or destroyed by an
uninsured casualty and Mortgagor does not immediately provide funds for the
restoration of the damage caused by such casualty; or
(c) if Mortgagor shall further mortgage, pledge or otherwise encumber
the Mortgaged Property or any part thereof or any interest therein or
create or suffer to exist any lien, charge or other encumbrance on the
Mortgaged Property or any part thereof, whether superior or subordinate to
the lien of this Mortgage, whether recourse or non-recourse; or
<PAGE>
20
(d) if Mortgagor shall (A) sell, transfer, convey or assign the
Mortgaged Property or any part thereof or any interest therein (by
operation of law or otherwise), or (B) lease any of the Mortgaged Property
without the prior written consent of Mortgagee.
16. Remedies. (a) Upon the occurrence of any Event of Default, in
--------
addition to any other rights and remedies Mortgagee may have pursuant to the
Security Documents, or as provided by law, and without limitation, (a) if such
event is an Event of Default described in subsections 8.1(vii) or 8.1(viii) of
the Indenture, automatically the Obligations immediately shall become due and
payable, and (b) if such event is any other Event of Default, by notice to
Mortgagor, Mortgagee may declare the Obligations to be immediately due and
payable. Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
In addition, upon the occurrence of any Event of Default, Mortgagee may
immediately take such action, without notice or demand, as it deems advisable to
protect and enforce its rights against Mortgagor and in and to the Mortgaged
Property, including, but not limited to, the following actions, each of which
may be pursued concurrently or otherwise, at such time and in such manner as
Mortgagee may determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Mortgagee:
(i) Mortgagee may, to the extent permitted by applicable law, (A)
institute and maintain an action of mortgage foreclosure against all or any
part of the Mortgaged Property, (B) institute and maintain an action on the
Note, (C) sell all or part of the Mortgaged Property (Mortgagor expressly
granting to Mortgagee the power of sale), or (D) take such other action at
law or in equity for the enforcement of this Mortgage or any of the
Security Documents as the law may allow. Mortgagee may proceed in any such
action to final judgment and execution thereon for all sums due hereunder,
together with interest thereon at the Default Rate and all costs of suit,
including, without limitation, reasonable attorneys' fees and
disbursements. Interest at the Default Rate shall be due on any judgment
obtained by Mortgagee from the date of judgment until actual payment is
made of the full amount of the judgment.
(ii) Mortgagee may personally, or by its agents, attorneys and
employees and without regard to the adequacy or inadequacy of the Mortgaged
Property or any other collateral as security for the Obligations and
Obligations enter into and upon the Mortgaged Property and each and every
part thereof and exclude Mortgagor and its agents and employees therefrom
without liability for trespass, damage or otherwise (Mortgagor hereby
agreeing to surrender possession of the Mortgaged Property to Mortgagee
upon demand at any such time) and use, operate, manage, maintain
<PAGE>
21
and control the Mortgaged Property and every part thereof. Following such
entry and taking of possession, Mortgagee shall be entitled, without
limitation, (x) to lease all or any part or parts of the Mortgaged Property
for such periods of time and upon such conditions as Mortgagee may, in its
discretion, deem proper, (y) to enforce, cancel or modify any Lease and (z)
generally to execute, do and perform any other act, deed, matter or thing
concerning the Mortgaged Property as Mortgagee shall deem appropriate as
fully as Mortgagor might do.
(iii) It is further agreed that if default be made in the payment of
any part of the Obligations, as an alternative to the right of foreclosure
for the full secured Obligations after acceleration thereof, Mortgagee
shall have the right to institute partial foreclosure proceedings with
respect to the portion of said Obligations so in default, as if under a
full foreclosure, and without declaring the entire secured Obligations due
(such proceeding being hereinafter referred to as a "partial foreclosure"),
and provided that if a partial foreclosure sale is consummated as provided
herein, such sale may be made subject to the continuing lien of this
Mortgage for the unmatured portion of the secured Obligations, but as to
such unmatured part, this Mortgage, and the lien hereof, shall remain in
full force and effect just as though no partial foreclosure sale had been
made under the provisions of this Section. Notwithstanding the filing of
any partial foreclosure or entry of a decree of sale therein, Mortgagee may
elect at any time prior to a partial foreclosure sale pursuant to such
decree, to discontinue such partial foreclosure and to accelerate the
Obligations secured hereby by reason of any uncured Event of Default upon
which such partial foreclosure was predicated or by reason of any other
Events of Default, and proceed with full foreclosure proceedings. It is
further agreed that one or more foreclosure sales may be made pursuant to
partial foreclosures without exhausting the right of full or partial
foreclosure sale for any unmatured part of the secured Obligations, it
being the purpose to provide for a partial foreclosure sale of the
Obligations secured hereby without exhausting the power to foreclose for
any other part of the Obligations whether matured at the time or
subsequently maturing, and without exhausting any right of acceleration and
full foreclosure.
(b) The holder of this Mortgage, in any action to foreclose it, shall
be entitled to the appointment of a receiver. In case of a foreclosure sale,
the Real Estate may be sold, at Mortgagee's election, in one parcel or in more
than one parcel and Mortgagee is specifically empowered, (without being required
to do so, and in its sole and absolute discretion) to cause successive sales of
portions of the Mortgaged Property to be held.
<PAGE>
22
(c) In the event of any breach of any of the covenants, agreements,
terms or conditions contained in this Mortgage, and notwithstanding to the
contrary any exculpatory or non-recourse language which may be contained herein,
Mortgagee shall be entitled to enjoin such breach and obtain specific
performance of any covenant, agreement, term or condition and Mortgagee shall
have the right to invoke any equitable right or remedy as though other remedies
were not provided for in this Mortgage.
17. Right of Mortgagee to Credit Sale. Upon the occurrence of any sale
---------------------------------
made under this Mortgage, whether made under the power of sale or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof.
In lieu of paying cash therefor, Mortgagee may make settlement for the purchase
price by crediting upon the Obligations or other sums secured by this Mortgage
the net sales price after deducting therefrom the expenses of sale and the cost
of the action and any other sums which Mortgagee is authorized to deduct under
this Mortgage. In such event, this Mortgage, the Note and documents evidencing
expenditures secured hereby may be presented to the person or persons conducting
the sale in order that the amount so used or applied may be credited upon the
Obligations as having been paid.
18. Appointment of Receiver. If an Event of Default shall have
-----------------------
occurred and be continuing, Mortgagee as a matter of right and without notice to
Mortgagor, unless otherwise required by applicable law, and without regard to
the adequacy or inadequacy of the Mortgaged Property or any other collateral as
security for the Obligations and Obligations or the interest of Mortgagor
therein, shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers or other manager of the Mortgaged Property, and
Mortgagor hereby irrevocably consents to such appointment and waives notice of
any application therefor (except as may be required by law). Any such receiver
or receivers shall have all the usual powers and duties of receivers in like or
similar cases and all the powers and duties of Mortgagee in case of entry as
provided in this Mortgage, including, without limitation and to the extent
permitted by law, the right to enter into leases of all or any part of the
Mortgaged Property, and shall continue as such and exercise all such powers
until the date of confirmation of sale of the Mortgaged Property unless such
receivership is sooner terminated.
19. Extension, Release, etc. (a) Without affecting the lien or charge
------------------------
of this Mortgage upon any portion of the Mortgaged Property not then or
theretofore released as security for the full amount of the Obligations,
Mortgagee may, from time to time and without notice, agree to (i) release any
person liable for the Obligations, (ii) extend the maturity or alter any of the
terms of the Obligations or any guaranty thereof, (iii)
<PAGE>
23
grant other indulgences, (iv) release or reconvey, or cause to be released or
reconveyed at any time at Mortgagee's option any parcel, portion or all of the
Mortgaged Property, (v) take or release any other or additional security for any
obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Mortgage shall secure
less than all of the principal amount of the Obligations, it is expressly agreed
that any repayments of the principal amount of the Obligations shall not reduce
the amount of the lien of this Mortgage until the lien amount shall equal the
principal amount of the Obligations outstanding.
(b) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect the lien of this Mortgage or any liens,
rights, powers or remedies of Mortgagee hereunder, and such liens, rights,
powers and remedies shall continue unimpaired.
(c) If Mortgagee shall have the right to foreclose this Mortgage,
Mortgagor authorizes Mortgagee at its option to foreclose the lien of this
Mortgage subject to the rights of any tenants of the Mortgaged Property. The
failure to make any such tenants parties defendant to any such foreclosure
proceeding and to foreclose their rights will not be asserted by Mortgagor as a
defense to any proceeding instituted by Mortgagee to collect the Obligations or
to foreclose the lien of this Mortgage.
(d) Unless expressly provided otherwise, in the event that ownership
of this Mortgage and title to the Mortgaged Property or any estate therein shall
become vested in the same person or entity, this Mortgage shall not merge in
such title but shall continue as a valid lien on the Mortgaged Property for the
amount secured hereby.
20. Security Agreement under Uniform Commercial Code. (a) It is the
------------------------------------------------
intention of the parties hereto that this Mortgage shall constitute a Security
Agreement within the meaning of the Code. If an Event of Default shall occur
under this Mortgage, then in addition to having any other right or remedy
available at law or in equity, Mortgagee shall have the option of either (i)
proceeding under the Code and exercising such rights and remedies as may be
provided to a secured party by the Code with respect to all or any portion of
the Mortgaged Property which is personal property (including, without
limitation, taking possession of and selling such property) or (ii) treating
such property as real property and proceeding with respect to both the real and
personal property constituting the Mortgaged Property in accordance with
Mortgagee's rights, powers and remedies with respect to the real property (in
which event the default provisions of the Code shall not apply). If Mortgagee
shall elect to proceed under the Code, then five days' notice of sale of the
personal property shall be deemed reasonable notice and the reasonable expenses
of retaking, holding, preparing for sale,
<PAGE>
24
selling and the like incurred by Mortgagee shall include, but not be limited to,
attorneys' fees and legal expenses. At Mortgagee's request, Mortgagor shall
assemble the personal property and make it available to Mortgagee at a place
designated by Mortgagee which is reasonably convenient to both parties.
(b) Mortgagor and Mortgagee agree, to the extent permitted by law, that:
(i) all of the goods described within the definition of the word "Equipment" are
or are to become fixtures on the Real Estate; (ii) this Mortgage upon recording
or registration in the real estate records of the proper office shall constitute
a financing statement filed as a "fixture filing" within the meaning of Sections
9-313 and 9-402 of the Code; (iii) Mortgagor is the record owner of the Real
Estate; and (iv) the addresses of Mortgagor and Mortgagee are as set forth on
the first page of this Mortgage.
(c) Mortgagor, upon request by Mortgagee from time to time, shall
execute, acknowledge and deliver to Mortgagee one or more separate security
agreements, in form satisfactory to Mortgagee, covering all or any part of the
Mortgaged Property and will further execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered, any financing statement, affidavit,
continuation statement or certificate or other document as Mortgagee may request
in order to perfect, preserve, maintain, continue or extend the security
interest under and the priority of this Mortgage and such security instrument.
Mortgagor further agrees to pay to Mortgagee on demand all costs and expenses
incurred by Mortgagee in connection with the preparation, execution, recording,
filing and re-filing of any such document and all reasonable costs and expenses
of any record searches for financing statements Mortgagee shall reasonably
require. Mortgagor shall from time to time, on request of Mortgagee, deliver to
Mortgagee an inventory in reasonable detail of any of the Mortgaged Property
which constitutes personal property. If Mortgagor shall fail to furnish any
financing or continuation statement within 10 days after request by Mortgagee,
then pursuant to the provisions of the Code, Mortgagor hereby authorizes
Mortgagee, without the signature of Mortgagor, to execute and file any such
financing and continuation statements. The filing of any financing or
continuation statements in the records relating to personal property or chattels
shall not be construed as in any way impairing the right of Mortgagee to proceed
against any personal property encumbered by this Mortgage as real property, as
set forth above.
21. Assignment of Rents. Mortgagor hereby assigns to Mortgagee the
-------------------
Rents as further security for the payment of the Obligations and performance of
the Obligations, and Mortgagor grants to Mortgagee the right to enter the
Mortgaged Property for the purpose of collecting the same and to let the
Mortgaged Property or any part thereof, and to apply the Rents on account of the
Obligations. The foregoing assignment and grant is present and absolute and
shall continue in effect until the
<PAGE>
25
Obligations is paid in full, but Mortgagee hereby waives the right to enter the
Mortgaged Property for the purpose of collecting the Rents and Mortgagor shall
be entitled to collect, receive, use and retain the Rents until the occurrence
of an Event of Default under this Mortgage; such right of Mortgagor to collect,
receive, use and retain the Rents may be revoked by Mortgagee upon the
occurrence of any Event of Default under this Mortgage by giving not less than
five days' written notice of such revocation to Mortgagor; in the event such
notice is given, Mortgagor shall pay over to Mortgagee, or to any receiver
appointed to collect the Rents, any lease security deposits, and shall pay
monthly in advance to Mortgagee, or to any such receiver, the fair and
reasonable rental value as determined by Mortgagee for the use and occupancy of
the Mortgaged Property or of such part thereof as may be in the possession of
Mortgagor or any affiliate of Mortgagor, and upon default in any such payment
Mortgagor and any such affiliate will vacate and surrender the possession of the
Mortgaged Property to Mortgagee or to such receiver, and in default thereof may
be evicted by summary proceedings or otherwise. Mortgagor shall not accept
prepayments of installments of Rent to become due for a period of more than one
month in advance (except for security deposits and estimated payments of
percentage rent, if any).
22. Trust Funds. All lease security deposits of the Real Estate shall
-----------
be treated as trust funds not to be commingled with any other funds of
Mortgagor. Within 10 days after request by Mortgagee, Mortgagor shall furnish
Mortgagee satisfactory evidence of compliance with this subsection, together
with a statement of all lease security deposits by lessees and copies of all
Leases not previously delivered to Mortgagee, which statement shall be certified
by Mortgagor.
23. Additional Rights. The holder of any subordinate lien on the
-----------------
Mortgaged Property shall have no right to terminate any Lease whether or not
such Lease is subordinate to this Mortgage nor shall any holder of any
subordinate lien join any tenant under any Lease in any action to foreclose the
lien or modify, interfere with, disturb or terminate the rights of any tenant
under any Lease. By recordation of this Mortgage all subordinate lienholders
are subject to and notified of this provision, and any action taken by any such
lienholder contrary to this provision shall be null and void. Upon the
occurrence of any Event of Default, Mortgagee may, in its sole discretion and
without regard to the adequacy of its security under this Mortgage, apply all or
any part of any amounts on deposit with Mortgagee under this Mortgage against
all or any part of the Obligations. Any such application shall not be construed
to cure or waive any Default or Event of Default or invalidate any act taken by
Mortgagee on account of such Default or Event of Default.
<PAGE>
26
24. Changes in Method of Taxation. In the event of the passage after
-----------------------------
the date hereof of any law of any Governmental Authority deducting from the
value of the Premises for the purposes of taxation any lien thereon, or changing
in any way the laws for the taxation of mortgages or debts secured thereby for
federal, state or local purposes, or the manner of collection of any such taxes,
and imposing a tax, either directly or indirectly, on mortgages or debts secured
thereby, the holder of this Mortgage shall have the right to declare the
Obligations due on a date to be specified by not less than 30 days' written
notice to be given to Mortgagor unless within such 30-day period Mortgagor shall
assume as an Obligation hereunder the payment of any tax so imposed until full
payment of the Obligations and such assumption shall be permitted by law.
25. Notices. All notices, requests, demands and other communications
-------
hereunder shall be given in the manner provided in the Indenture.
26. No Oral Modification. This Mortgage may not be changed or
--------------------
terminated orally. Any agreement made by Mortgagor and Mortgagee after the date
of this Mortgage relating to this Mortgage shall be superior to the rights of
the holder of any intervening or subordinate lien or encumbrance.
27. Partial Invalidity. In the event any one or more of the provisions
------------------
contained in this Mortgage shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, but each shall be construed as if
such invalid, illegal or unenforceable provision had never been included.
Notwithstanding to the contrary anything contained in this Mortgage or in any
provisions of the Obligations or Security Documents, the obligations of
Mortgagor and of any other obligor under the Obligations or Security Documents
shall be subject to the limitation that Mortgagee shall not charge, take or
receive, nor shall Mortgagor or any other obligor be obligated to pay to
Mortgagee, any amounts constituting interest in excess of the maximum rate
permitted by law to be charged by Mortgagee.
28. Waiver of Right of Redemption and Other Rights. (a) Mortgagor and
----------------------------------------------
each Beneficial Owner hereby voluntarily and knowingly releases and waives any
and all rights to retain possession of the Mortgaged Property after the
occurrence of an Event of Default hereunder and any and all rights of redemption
from sale under any order or decree of foreclosure (whether full or partial),
pursuant to rights therein granted, as allowed under Section 125-1610(b) of the
Illinois Mortgage Foreclosure Law (Chapter 110, Sections 15-1101 et seq.,
-- ---
Illinois Revised Statutes), as amended from time to time, on its own behalf, on
behalf of all persons claiming or having an interest (direct or indirectly) by,
through or under each constituent of Mortgagor and on behalf of each and every
person acquiring any interest in the Mortgaged Property subsequent to the date
hereof, it being
<PAGE>
27
the intent hereof that any and all such rights or redemption of each constituent
of Mortgagor and all such other persons are and shall be deemed to be hereby
waived to the fullest extent permitted by applicable law or replacement statute.
Each constituent of Mortgagor shall not invoke or utilize any such law or laws
or otherwise hinder, delay, or impede the execution of any right, power, or
remedy herein or otherwise granted or delegated to the Mortgagee, but shall
permit the execution of every such right, power, and remedy as though no such
law or laws had been made or enacted.
(b) To the fullest extent permitted by law, Mortgagor waives the
benefit of all laws now existing or that may subsequently be enacted providing
for (i) any appraisement before sale of any portion of the Mortgaged Property,
(ii) any extension of the time for the enforcement of the collection of the
Obligations or the creation or extension of a period of redemption from any sale
made in collecting such debt and (iii) exemption of the Mortgaged Property from
attachment, levy or sale under execution or exemption from civil process. To
the full extent Mortgagor may do so, Mortgagor agrees that Mortgagor will not at
any time insist upon, plead, claim or take the benefit or advantage of any law
now or hereafter in force providing for any appraisement, valuation, stay,
exemption, extension or redemption, or requiring foreclosure of this Mortgage
before exercising any other remedy granted hereunder and Mortgagor, for
Mortgagor and its successors and assigns, and for any and all persons ever
claiming any interest in the Mortgaged Property, to the extent permitted by law,
hereby waives and releases all rights of redemption, valuation, appraisement,
stay of execution, notice of election to mature or declare due the whole of the
secured indebtedness and marshalling in the event of foreclosure of the liens
hereby created.
29. Remedies Not Exclusive. Mortgagee shall be entitled to enforce
----------------------
payment of the Obligations and performance of the Obligations and to exercise
all rights and powers under this Mortgage or under any of the other Security
Documents or other agreement or any laws now or hereafter in force,
notwithstanding some or all of the Obligations and Obligations may now or
hereafter be otherwise secured, whether by mortgage, security agreement, pledge,
lien, assignment or otherwise. Neither the acceptance of this Mortgage nor its
enforcement, shall prejudice or in any manner affect Mortgagee's right to
realize upon or enforce any other security now or hereafter held by Mortgagee,
it being agreed that Mortgagee shall be entitled to enforce this Mortgage and
any other security now or hereafter held by Mortgagee in such order and manner
as Mortgagee may determine in its absolute discretion. No remedy herein
conferred upon or reserved to Mortgagee is intended to be exclusive of any other
remedy herein or by law provided or permitted, but each shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute. Every power or remedy given by any
of the Security
<PAGE>
28
Documents to Mortgagee or to which it may otherwise be entitled, may be
exercised, concurrently or independently, from time to time and as often as may
be deemed expedient by Mortgagee. In no event shall Mortgagee, in the exercise
of the remedies provided in this Mortgage (including, without limitation, in
connection with the assignment of Rents to Mortgagee, or the appointment of a
receiver and the entry of such receiver on to all or any part of the Mortgaged
Property), be deemed a "mortgagee in possession," and Mortgagee shall not in any
way be made liable for any act, either of commission or omission, in connection
with the exercise of such remedies.
30. Multiple Security. If (a) the Premises shall consist of one or
-----------------
more parcels, whether or not contiguous and whether or not located in the same
county, or (b) in addition to this Mortgage, Mortgagee shall now or hereafter
hold one or more additional mortgages, liens, deeds of trust or other security
(directly or indirectly) for the Obligations upon other property in the State in
which the Premises are located (whether or not such property is owned by
Mortgagor or by others) or (c) both the circumstances described in clauses (a)
and (b) shall be true, then to the fullest extent permitted by law, Mortgagee
may, at its election, commence or consolidate in a single foreclosure action all
foreclosure proceedings against all such collateral securing the Obligations
(including the Mortgaged Property), which action may be brought or consolidated
in the courts of any county in which any of such collateral is located.
Mortgagor acknowledges that the right to maintain a consolidated foreclosure
action is a specific inducement to Mortgagee to extend the Obligations, and
Mortgagor expressly and irrevocably waives any objections to the commencement or
consolidation of the foreclosure proceedings in a single action and any
objections to the laying of venue or based on the grounds of forum non
----- ---
conveniens which it may now or hereafter have. Mortgagor further agrees that if
- ----------
Mortgagee shall be prosecuting one or more foreclosure or other proceedings
against a portion of the Mortgaged Property or against any collateral other than
the Mortgaged Property, which collateral directly or indirectly secures the
Obligations, or if Mortgagee shall have obtained a judgment of foreclosure and
sale or similar judgment against such collateral, then, whether or not such
proceedings are being maintained or judgments were obtained in or outside the
State in which the Premises are located, Mortgagee may commence or continue
foreclosure proceedings and exercise its other remedies granted in this Mortgage
against all or any part of the Mortgaged Property and Mortgagor waives any
objections to the commencement or continuation of a foreclosure of this Mortgage
or exercise of any other remedies hereunder based on such other proceedings or
judgments, and waives any right to seek to dismiss, stay, remove, transfer or
consolidate either any action under this Mortgage or such other proceedings on
such basis. Neither the commencement nor continuation of proceedings to
foreclose this Mortgage nor the exercise of any other rights hereunder nor the
recovery of any judgment by Mortgagee in any such proceedings shall
<PAGE>
29
prejudice, limit or preclude Mortgagee's right to commence or continue one or
more foreclosure or other proceedings or obtain a judgment against any other
collateral (either in or outside the State in which the Premises are located)
which directly or indirectly secures the Obligations, and Mortgagor expressly
waives any objections to the commencement of, continuation of, or entry of a
judgment in such other proceedings or exercise of any remedies in such
proceedings based upon any action or judgment connected to this Mortgage, and
Mortgagor also waives any right to seek to dismiss, stay, remove, transfer or
consolidate either such other proceedings or any action under this Mortgage on
such basis. It is expressly understood and agreed that to the fullest extent
permitted by law, Mortgagee may, at its election, cause the sale of all
collateral which is the subject of a single foreclosure action at either a
single sale or at multiple sales conducted simultaneously and take such other
measures as are appropriate in order to effect the agreement of the parties to
dispose of and administer all collateral securing the Obligations (directly or
indirectly) in the most economical and least time-consuming manner.
31. Expenses; Indemnification. (a) Mortgagor shall pay or reimburse
-------------------------
Mortgagee for all expenses incurred by Mortgagee before and after the date of
this Mortgage with respect to any and all transactions contemplated by this
Mortgage including without limitation, the preparation of any document
reasonably required hereunder or any amendment, modification, restatement or
supplement to this Mortgage, the delivery of any consent, non-disturbance
agreement or similar document in connection with this Mortgage or the
enforcement of any of Mortgagee's rights. Such expenses shall include, without
limitation, all title and conveyancing charges, recording and filing fees and
taxes, mortgage taxes, intangible personal property taxes, escrow fees, revenue
and tax stamp expenses, insurance premiums (including title insurance premiums),
title search and title rundown charges, brokerage commissions, finders' fees,
placement fees, court costs, surveyors', photographers', appraisers',
architects', engineers', consulting professional's, accountants' and attorneys'
fees and disbursements. Mortgagor acknowledges that from time to time Mortgagor
may receive statements for such expenses, including without limitation
attorneys' fees and disbursements. Mortgagor shall pay such statements promptly
upon receipt.
(b) If (i) any action or proceeding shall be commenced by Mortgagee
(including but not limited to any action to foreclose this Mortgage or to
collect the Obligations), or any action or proceeding is commenced to which
Mortgagee is made a party, or in which it becomes necessary to defend or uphold
the lien of this Mortgage (including, without limitation, any proceeding or
other action relating to the bankruptcy, insolvency or reorganization of any
Obligor), or in which Mortgagee is served with any legal process, discovery
notice or subpoena and (ii) in each of the foregoing instances such action or
proceeding
<PAGE>
30
in any manner relates to or arises out of this Mortgage or Mortgagee's lending
to Mortgagor or acceptance of a guaranty from a Guarantor of the Obligations or
of any of the Obligations or any of the transactions contemplated by this
Mortgage, then Mortgagor will immediately reimburse or pay to Mortgagee all of
the expenses which have been or may be incurred by Mortgagee with respect to the
foregoing (including reasonable counsel fees and disbursements), together with
interest thereon at the Default Rate, and any such sum and the interest thereon
shall be a lien on the Mortgaged Property, prior to any right, or title to,
interest in or claim upon the Mortgaged Property attaching or accruing
subsequent to the lien of this Mortgage, and shall be deemed to be secured by
this Mortgage. In any action or proceeding to foreclose this Mortgage, or to
recover or collect the Obligations, the provisions of law respecting the
recovering of costs, disbursements and allowances shall prevail unaffected by
this covenant.
(c) Mortgagor shall indemnify and hold harmless Mortgagee and
Mortgagee's affiliates, and the respective directors, officers, agents and
employees of Mortgagee and its affiliates from and against all claims, damages,
losses and liabilities (including, without limitation, reasonable attorneys'
fees and expenses) arising out of or based upon any matter related to this
Mortgage, the Mortgaged Property or the occupancy, ownership, maintenance or
management of the Mortgaged Property by Mortgagor, including, without
limitation, any claims based on the alleged acts or omissions of any employee or
agent of Mortgagor. This indemnification shall be in addition to any other
liability which Mortgagor may otherwise have to Mortgagee.
32. Successors and Assigns. All covenants of Mortgagor contained in
----------------------
this Mortgage are imposed solely and exclusively for the benefit of Mortgagee
and its successors and assigns, and no other person or entity shall have
standing to require compliance with such covenants or be deemed, under any
circumstances, to be a beneficiary of such covenants, any or all of which may be
freely waived in whole or in part by Mortgagee at any time if in its sole
discretion it deems such waiver advisable. All such covenants of Mortgagor
shall run with the land and bind Mortgagor, the successors and assigns of
Mortgagor (and each of them) and all subsequent owners, encumbrancers and
tenants of the Mortgaged Property, and shall inure to the benefit of Mortgagee,
its successors and assigns. The word "Mortgagor" shall be construed as if it
read "Mortgagors" whenever the sense of this Mortgage so requires and if there
shall be more than one Mortgagor, the obligations of the Mortgagors shall be
joint and several.
33. No Waivers, etc. Any failure by Mortgagee to insist upon the
----------------
strict performance by Mortgagor of any of the terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter
<PAGE>
31
to insist upon the strict performance by Mortgagor of any and all of the terms
and provisions of this Mortgage to be performed by Mortgagor. Mortgagee may
release, regardless of consideration and without the necessity for any notice to
or consent by the holder of any subordinate lien on the Mortgaged Property, any
part of the security held for the obligations secured by this Mortgage without,
as to the remainder of the security, in anywise impairing or affecting the lien
of this Mortgage or the priority of such lien over any subordinate lien.
34. Governing Law, etc. This Mortgage shall be governed by and
------------------
construed in accordance with the laws of the State of Illinois, except that
Mortgagor expressly acknowledges that by its terms the Indenture and the
Guaranty shall be governed and construed in accordance with the laws of the
State of New York, without regard to principles of conflict of law, and for
purposes of consistency, Mortgagor agrees that in any in personam proceeding
-- --------
related to this Mortgage the rights of the parties to this Mortgage shall also
be governed by and construed in accordance with the laws of the State of New
York governing contracts made and to be performed in that State, without regard
to principles of conflict of law.
35. Waiver of Trial by Jury. Mortgagor and Mortgagee each hereby
-----------------------
irrevocably and unconditionally waive trial by jury in any action, claim, suit
or proceeding relating to this Mortgage and for any counterclaim brought
therein. Mortgagor hereby waives all rights to interpose any counterclaim in
any suit brought by Mortgagee hereunder and all rights to have any such suit
consolidated with any separate suit, action or proceeding.
36. Certain Definitions. Unless the context clearly indicates a
-------------------
contrary intent or unless otherwise specifically provided herein, words used in
this Mortgage shall be used interchangeably in singular or plural form and the
word "Mortgagor" shall mean "each Mortgagor or any subsequent owner or owners of
the Mortgaged Property or any part thereof or interest therein," the word
"Mortgagee" shall mean "Mortgagee or any successor collateral agent to the
Mortgagee," the word "person" shall include any individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, or other entity, and the words "Mortgaged Property" shall include any
portion of the Mortgaged Property or interest therein. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa. The captions in this Mortgage are for
convenience or reference only and in no way limit or amplify the provisions
hereof.
<PAGE>
32
37. Compliance with Illinois Mortgage Foreclosure Law.
-------------------------------------------------
(a) In the event that any provision in this Mortgage shall be
inconsistent with any provision of the Illinois Mortgage Foreclosure Law
(Chapter 110, Sections 15-1101 et seq., Illinois Revised Statutes), as
-- ---
amended from time to time (herein called the "Act"), the provisions of the
---
Act shall take precedence over the provisions of this Mortgage, but shall
not invalidate or render unenforceable any other provision of this Mortgage
that can be construed in a manner consistent with the Act.
(b) If any provision of this Mortgage shall grant to Mortgagee any
rights or remedies upon default by the Mortgagor which are more limited
than the rights that would otherwise be vested in Mortgagee under the Act
in the absence of said provision of this Mortgage, Mortgagee shall be
vested with the rights granted in the act to the full extent permitted by
law.
(c) Without limiting the generality of the foregoing, all expenses
incurred by Mortgagee to the extent reimbursable under Section 15-1510 and
15-1512 of the Act, whether incurred before or after any decree or judgment
of foreclosure, and whether or not enumerated in this Mortgage, shall be
added to the Obligations secured by this Mortgage or by the judgment of
foreclosure.
38. Release Upon Payment and Discharge of Mortgagor's Obligations.
-------------------------------------------------------------
Mortgagee shall release this Mortgage and the lien hereof by proper instrument
upon payment and discharge of all Obligations secured hereby (including payment
of reasonable expenses incurred by Mortgagee in connection with the execution of
such release) and upon full and complete performance of all of the Obligations.
This Mortgage has been duly executed by Mortgagor on the date first
above written.
ATTEST: [SUBSIDIARY GUARANTOR]
By: ______________________ By: ______________________
Name: Name:
Title: Title:
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the ____ day of _________, 1994, before me personally came
___________________________, to me known, who, being by me duly sworn, did
depose and say that [s]he resides at ___________________________________________
(insert full address, include street address, city and state); that [s]he is
a[n] [_________________] President of [Subsidiary Guarantor], the corporation
described in and which executed the foregoing instrument; and that [s]he signed
[his][her] name thereto by authority of the board of directors of said
corporation.
-------------------------
Notary Public
[Notarial Stamp]
<PAGE>
Schedule A
----------
Description of the Premises
[Attach Legal Description of all parcels]
<PAGE>
EXHIBIT 4.5
Security Agreement
Between
Bayou Steel Corporation
And
First National Bank of Commerce,
as Collateral Agent
___________ __, 1994
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Defined Terms.......................................... 1
1.1 Definitions...................................... 1
1.2 Other Definitional Provisions.................... 4
2. Grant of Security Interest............................. 4
3. Representations and Warranties......................... 5
3.1 Title; No Other Liens............................ 5
3.2 Perfected First Priority Liens................... 6
3.3 Equipment........................................ 6
3.4 Chief Executive Office........................... 6
3.5 Farm Products.................................... 6
4. Covenants.............................................. 6
4.1 Delivery of Instruments and Chattel Paper........ 6
4.2 Marking of Records............................... 6
4.3 Maintenance of Insurance......................... 6
4.4 Payment of Obligations........................... 7
4.5 Maintenance of Perfected Security Interest;
Further Documentation............................ 7
4.7 Further Identification of Collateral............. 8
4.8 Notices.......................................... 8
5. Provisions Relating to Contracts....................... 8
5.1 Company Remains Liable under Contracts........... 8
5.2 Communication With Contracting Parties........... 8
5.3 Representations and Warranties................... 9
5.4 Covenants........................................ 9
6. Provisions Relating to Patents and Trademarks.......... 10
6.1 Representations and Warranties................... 10
6.2 Covenants........................................ 11
-i-
<PAGE>
Page
----
7. Provisions Relating to Vehicles........................ 12
7.1 Representation and Warranty...................... 12
7.2 Covenants........................................ 12
8. Asset Sales and Receipt of Net Insurance Proceeds...... 12
9. Remedies............................................... 13
9.1 Code Remedies.................................... 13
9.2 Deficiency....................................... 13
10. Applicable Provisions of the Indenture................. 14
11. Collateral Agent's Appointment as Attorney-in-Fact;
CollateralAgent's Performance of Company's
Obligations....................................... 14
11.1 Powers........................................... 14
11.2 Performance by Collateral Agent of Company's
Obligations................................... 15
11.3 Company's Reimbursement Obligation............... 15
11.4 Ratification; Power Coupled With An Interest..... 15
12. Duty of Collateral Agent.............................. 16
13. Execution of Financing Statements..................... 16
14. Authority of Collateral Agent......................... 16
15. Indemnity............................................. 16
15.1 Indemnity........................................ 16
15.2 Survival......................................... 17
15.3 Reimbursements................................... 17
16. Notices............................................... 17
17. Severability.......................................... 18
18. Amendments in Writing; No Waiver; Cumulative Remedies. 18
18.1 Amendments in Writing............................ 18
18.2 No Waiver by Course of Conduct................... 18
18.3 Remedies Cumulative.............................. 18
-ii-
<PAGE>
Page
----
19. Section Headings...................................... 18
20. Successors and Assigns................................ 18
21. GOVERNING LAW......................................... 18
22. Submission To Jurisdiction; Waivers................... 19
23. Special Louisiana Provisions.......................... 19
-iii-
<PAGE>
Exhibit A
DRAFT
12/29/93
FORM OF COMPANY SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of ____________, 1994, made by BAYOU STEEL
CORPORATION, a Delaware corporation (the "Company") in favor of FIRST NATIONAL
BANK OF COMMERCE, as trustee (in such capacity, the "Trustee") under the
Indenture dated as of _________ __, 1994, between the Trustee and the Company
(as amended, supplemented or otherwise modified from time to time, the
"Indenture"), and as collateral agent (in such capacity and together with any
successors in such capacity, the "Collateral Agent") for the benefit of the
Holders of ___% First Mortgage Notes due 2001 (the "Securities") issued by the
Company.
W I T N E S S E T H :
-------------------
WHEREAS, the Company is the owner of the Collateral (as hereinafter
defined); and
WHEREAS, it is a condition precedent to the purchase of the Securities from
the Company that the Company shall have executed and delivered this Agreement to
the Collateral Agent for the ratable benefit of the Holders.
NOW, THEREFORE, in consideration of the premises and to induce the Trustee
to enter into the Indenture and to induce the Holders to purchase the
Securities, the Company hereby agrees with the Collateral Agent, for the ratable
benefit of the Holders, as follows:
1. Defined Terms.
-------------
1.1 Definitions. (a) Unless otherwise defined herein, terms defined in
-----------
the Indenture and used herein shall have the meanings given to them in the
Indenture and the following terms which are defined in the Uniform Commercial
Code in effect in the State of New York on the date hereof are used herein as so
defined: Chattel Paper, Documents, Equipment, Farm Products, Fixtures, General
Intangibles and Instruments.
(b) The following terms shall have the following meanings:
"Agreement" means this Security Agreement, as the same may be amended,
modified or otherwise supplemented from time to time.
<PAGE>
2
"Bank Security Agreement" means the Security Agreement dated as of
June 28, 1993, as amended and restated through November 23, 1993, between
the Company and Chemical Bank, as agent for the Lenders party to the Credit
Facility.
"Code" means the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Collateral" has the meaning specified in Section 2 of this
Agreement.
"Contracts": the contracts and agreements listed in Schedule 1
attached hereto, as the same may be amended, modified or otherwise
supplemented from time to time, including, without limitation, (a) all
rights of the Company to receive moneys due and to become due to it
thereunder or in connection therewith, (b) all rights of the Company to
damages arising out of or for breach or default in respect thereof and (c)
all rights of the Company to perform and exercise all remedies thereunder.
"Contractual Obligation" means, as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of the
property owned by it is bound.
"Net Insurance Proceeds" has the meaning specified in Section 4.3 of
this Agreement.
"Obligations" means the collective reference to the unpaid principal
of and interest on the Securities and all other obligations and liabilities
of the Company to the Trustee, the Collateral Agent and the Holders
(including, without limitation, interest accruing after the maturity of the
Securities and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding and interest, to
the extent permitted by law, on the unpaid interest), whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with,
the Indenture, the Securities, this Agreement, the other Security Documents
or any other document made, delivered or given in connection therewith, in
each case whether on account of principal, interest, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Trustee and the Collateral Agent that are
required to be paid by the Company pursuant to the terms of the Indenture
or this Agreement or any other Security Document).
<PAGE>
3
"Patent License" means all agreements, whether written or oral,
providing for the grant by or to the Company of any right to manufacture,
use or sell any invention covered by a Patent, including, without
limitation, any thereof referred to in Schedule 2 hereto.
----------
"Patents" means (a) all letters patent of the United States or any
other country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in Schedule 2 hereto, and (b) all
----------
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any thereof referred to in Schedule 2
----------
hereto.
"Proceeds" and "Products" shall have the meaning ascribed to such
terms in the Code and shall include in any event (i) whatever is received
upon any collection, exchange, sale or other disposition or refinancing of
any of the Collateral and any property into which any of the Collateral is
converted (whether cash or non-cash proceeds), (ii) any and all proceeds of
any insurance, indemnity, warranty or guarantee payable to the Company from
time to time with respect to any of the Collateral, (iii) any and all
payments (in any form whatsoever) made or due and payable to the Company
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by
any governmental authority (or any person acting under color of
governmental authority) and (iv) any and all other amounts from time to
time paid or payable under or in connection with any of the Collateral.
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other governmental authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Trade Secrets" means any proprietary information, process or system
now or hereafter created which is within the possession of the Company,
including, without limitation, manufacturing processes or methods, all
formulae, processes, compounds, drawings, designs, blueprints, surveys,
reports, manuals, and operating standards relating to or used in the
operating standards relating to or used in the operation of the Company's
business, rights in works of authorship, and contract rights relating to
computer software programs, in whatever form created or maintained.
"Trademark License" means any agreement, written or oral, providing
for the grant by or to the Company of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule 3
----------
hereto.
<PAGE>
4
"Trademarks": (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, or
otherwise, including, without limitation, any thereof referred to in
Schedule 3 hereto, and (b) all renewals thereof.
----------
"Tulsa Mortgage" means the Mortgage, Security Agreement and Financing
Statement dated January 9, 1991, between the Company and Hibernia National
Bank, as amended and restated through November 22, 1993, entered into in
connection with the Tulsa Facility.
"Vehicles" means all cars, trucks, trailers, construction and earth
moving equipment and other vehicles covered by a certificate of title law
of any state and, in any event including, without limitation, the vehicles
listed on Schedule 4 hereto and all tires and other appurtenances to any of
----------
the foregoing.
1.2 Other Definitional Provisions. (a) The words "hereof," "herein"
-----------------------------
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and section and paragraph references are to this Agreement unless
otherwise specified.
(b) All references to the Collateral Agent shall be deemed to include
a reference to the Trustee, and the reverse thereof shall similarly apply.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Grant of Security Interest. As collateral security for the
--------------------------
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Company hereby
grants to the Collateral Agent for the ratable benefit of the Holders a security
interest in all of the following property now owned or at any time hereafter
acquired by the Company or in which the Company now has or at any time in the
future may acquire any right, title or interest (collectively, the
"Collateral"):
(a) all Chattel Paper;
(b) all Contracts;
(c) all Documents;
<PAGE>
5
(d) all Equipment (including certain [bearings, rolls, guides and
stores] that are classified on the balance sheet of the Company as
inventory);
(e) all General Intangibles;
(f) all Instruments;
(g) all Patents;
(h) all Patent Licenses;
(i) all Trade Secrets;
(j) all Trademarks;
(k) all Trademark Licenses;
(l) all Vehicles;
(m) Fixtures;
(n) all books and records pertaining to the Collateral; and
(o) to the extent not otherwise included, all Proceeds and Products
of any and all of the foregoing.
Notwithstanding the foregoing, the Collateral shall not be deemed to include (i)
"Accounts Receivable" and "Inventory", and the "Proceeds" thereof, as each of
such terms is defined in the Bank Security Agreement and (ii) "Mortgaged
Premises," as such term is defined in the Tulsa Mortgage.
3. Representations and Warranties. The Company hereby represents
------------------------------
and warrants that:
3.1 Title; No Other Liens. Except for the security interest granted
---------------------
to the Collateral Agent for the ratable benefit of the Holders pursuant to this
Agreement and the other Liens permitted to exist on the Collateral pursuant to
the Indenture, the Company owns each item of the Collateral free and clear of
any and all Liens or claims of others. No security agreement, financing
statement or other public notice with respect to all or any part of the
Collateral is on file or of record in any public office, except such as have
been filed in favor of the Collateral Agent, for the ratable benefit of the
Holders, pursuant to this Agreement or as are permitted pursuant to the
Indenture.
<PAGE>
6
3.2 Perfected First Priority Liens. The security interests granted
------------------------------
pursuant to this Agreement (a) constitute perfected security interests in the
Collateral in favor of the Collateral Agent, for the ratable benefit of the
Holders, (b) are prior to all other Liens on the Collateral in existence on the
date hereof except for Liens permitted to exist pursuant to the Indenture, and
(c) are enforceable as such against (1) all creditors of and purchasers from the
Company and (2) any Person having any interest in the real property where any of
the Equipment is located.
3.3 Equipment. The Equipment is kept at the locations listed on
---------
Schedule 6 hereto.
3.4 Chief Executive Office. The Company's chief executive office and
----------------------
chief place of business is located at P.O. Box 5000, River Road, LaPlace,
Louisiana 70069.
3.5 Farm Products. None of the Collateral constitutes, or is the
-------------
Proceeds of, Farm Products.
4. Covenants. The Company covenants and agrees with the Collateral
---------
Agent that, from and after the date of this Agreement until this Agreement is
terminated and the security interests created hereby are released:
4.1 Delivery of Instruments and Chattel Paper. If any amount payable
-----------------------------------------
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Collateral Agent, duly indorsed in a manner
satisfactory to the Collateral Agent, to be held as Collateral pursuant to this
Agreement.
4.2 Marking of Records. The Company will mark its books and records
------------------
pertaining to the Collateral to evidence this Agreement and the security
interests created hereby.
4.3 Maintenance of Insurance. (a) The Company will maintain, with
------------------------
financially sound and reputable companies, insurance policies (1) insuring the
Equipment, Fixtures and Vehicles against loss by fire, explosion, theft and such
other casualties as may be reasonably satisfactory to the Collateral Agent and
(2) insuring the Company, the Collateral Agent and the Holders against liability
for personal injury and property damage relating to such Equipment, Fixtures and
Vehicles, such policies to be in such form and amounts and having such coverage
as may be reasonably satisfactory to the Collateral Agent, with losses payable
to the Company and the Collateral Agent ("Net Insurance Proceeds").
<PAGE>
7
(b) All such insurance shall (1) provide that no cancellation, material
reduction in amount or material change in coverage thereof shall be effective
until at least 30 days after receipt by the Collateral Agent of written notice
thereof, (2) name the Collateral Agent as the insured party and (3) be
reasonably satisfactory in all other respects to the Collateral Agent.
(c) The Company shall deliver to the Collateral Agent a report of a
reputable insurance broker with respect to such insurance during the month of
[February] in each calendar year and such supplemental reports with respect
thereto as the Collateral Agent may from time to time reasonably request.
4.4 Payment of Obligations. The Company will pay and discharge or
----------------------
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of the Company and
such proceedings do not involve any material danger of the sale, forfeiture or
loss of any of the Collateral or any interest therein.
4.5 Maintenance of Perfected Security Interest; Further
---------------------------------------------------
Documentation. (a) The Company shall maintain the security interest created by
- -------------
this Agreement as a first, perfected security interest subject only to Liens
permitted to exist pursuant to the Indenture and shall defend such security
interest against claims and demands of all Persons whomsoever.
(b) At any time and from time to time, upon the written request of
the Collateral Agent and at the sole expense of the Company, the Company will
promptly and duly execute and deliver such further instruments and documents and
take such further action as the Collateral Agent may reasonably request for the
purpose of obtaining or preserving the full benefits of this Agreement and of
the rights and powers herein granted, including, without limitation, the filing
of any financing or continuation statements under the Uniform Commercial Code in
effect in any jurisdiction with respect to the security interests created
hereby.
4.6 Changes in Locations, Name, etc. The Company will not:
--------------------------------
(a) permit any of the Equipment to be kept at a location other than
those listed on Schedule 6 hereto; or
(b) change the location of its chief executive office and chief place
of business from that specified in subsection 34; or
<PAGE>
8
(c) change its name, identity or corporate structure to such an extent
that any financing statement filed by the Collateral Agent in connection
with this Agreement would become seriously misleading, unless it shall have
given the Collateral Agent at least 30 days' prior written notice of such
change.
4.7 Further Identification of Collateral. The Company will furnish
------------------------------------
to the Collateral Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Collateral Agent may reasonably request, all in
reasonable detail.
4.8 Notices. The Company will advise the Collateral Agent promptly,
-------
in reasonable detail, at their respective addresses set forth in the Indenture
of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Indenture) on, or claim asserted against, any of the
Collateral; and
(b) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5. Provisions Relating to Contracts.
--------------------------------
5.1 Company Remains Liable under Contracts. Anything herein to the
--------------------------------------
contrary notwithstanding, the Company shall remain liable under each of the
Contracts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms and
provisions of each Contract. Neither the Collateral Agent nor any Holder shall
have any obligation or liability under any Contract by reason of or arising out
of this Agreement or the receipt by the Collateral Agent or any such Holder of
any payment relating to such Contract pursuant hereto, nor shall the Collateral
Agent or any Holder be obligated in any manner to perform any of the obligations
of the Company under or pursuant to any Contract, to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party under any Contract, to
present or file any claim, to take any action to enforce any performance or to
collect the payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.
5.2 Communication With Contracting Parties. The Collateral Agent in
--------------------------------------
its own name or in the name of others may communicate with parties to the
Contracts to verify with them to the Collateral Agent's satisfaction the
existence, amount and terms of any Contracts.
5.3 Representations and Warranties. (a) No consent of any party
------------------------------
(other than the Company) to any Contract is required, or purports to be
required, in connection with the execution, delivery and performance of this
Agreement.
<PAGE>
9
(b) Each Contract is in full force and effect and constitutes a valid
and legally enforceable obligation of the parties thereto, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
(c) No consent or authorization of, filing with or other act by or in
respect of any governmental authority is required in connection with the
execution, delivery, performance, validity or enforceability of any of the
Contracts by any party thereto other than those which have been duly obtained,
made or performed, are in full force and effect and do not subject the scope of
any such Contract to any material adverse limitation, either specific or general
in nature.
(d) Neither the Company nor (to the best of the Company's knowledge)
any other party to any Contract is in default or is likely to become in default
in the performance or observance of any of the terms thereof.
(e) The Company has fully performed all its obligations under each
Contract.
(f) The right, title and interest of the Company in, to and under
each Contract are not subject to any defense, offset, counterclaim or claim
which would materially adversely affect the value of such Contract as
Collateral, nor have any of the foregoing been asserted or alleged against the
Company as to any Contract.
(g) The Company has delivered to the Collateral Agent a complete and
correct copy of each Contract, including all amendments, supplements and other
modifications thereto.
(h) No amount payable to the Company under or in connection with any
Contract is evidenced by any Instrument or Chattel Paper which has not been
delivered to the Collateral Agent.
(i) None of the parties to any Contracts is a governmental authority.
5.4 Covenants. (a) The Company will perform and comply in all
---------
material respects with all its obligations under the Contracts and all its other
Contractual Obligations relating to the Collateral.
(b) The Company will not amend, modify, terminate or waive any
provision of any Contract in any manner which could reasonably be expected to
materially adversely affect the value of such Contract as Collateral.
<PAGE>
10
(c) The Company will not fail to exercise promptly and diligently
each and every material right which it may have under each Contract (other than
any right of termination).
(d) The Company will not fail to deliver to the Collateral Agent a
copy of each material demand, notice or document received by it relating in any
way to any Contract.
(e) In any suit, proceeding or action brought by the Collateral Agent
or any Holder under any Contract for any sum owing thereunder, or to enforce any
provisions of any Contract, the Company will save, indemnify and keep the
Collateral Agent and such Holder harmless from and against all expense, loss or
damage suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction or liability whatsoever of the obligor thereunder, arising out of a
breach by the Company of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to or in favor of such
obligor or its successors from the Company.
6. Provisions Relating to Patents and Trademarks.
---------------------------------------------
6.1 Representations and Warranties. (a) Schedule 2 hereto includes
------------------------------
all Patents and Patent Licenses owned by the Company in its own name as of the
date hereof.
(b) Schedule 3 hereto includes all Trademarks and Trademark Licenses
owned by the Company in its own name as of the date hereof.
(c) To the best of the Company's knowledge, each Patent and Trademark
is valid, subsisting, unexpired, enforceable and has not been abandoned.
(d) Except as set forth in either Schedule 2 or Schedule 3, none of
such Patents and Trademarks is the subject of any licensing or franchise
agreement.
(e) No holding, decision or judgment has been rendered by any
governmental authority which would limit, cancel or question the validity of any
Patent or Trademark.
(f) No action or proceeding is pending (1) seeking to limit, cancel
or question the validity of any Patent or Trademark, or (2) which, if adversely
determined, would have a material adverse effect on the value of any Patent or
Trademark.
6.2 Covenants. (a) The Company (either itself or through licensees)
---------
will, except with respect to any Trademark that the Company shall reasonably
determine is of negligible economic value to it, (1) continue to use each
Trademark on each and every trademark class of goods applicable to its current
line as reflected in its current catalogs, brochures and price lists in order to
maintain such Trademark in full force free from any claim of abandonment for
non-use, (2) maintain as in the past the quality of
<PAGE>
11
products and services offered under such Trademark, (3) employ such Trademark
with the appropriate notice of registration, (4) not adopt or use any mark which
is confusingly similar or a colorable imitation of such Trademark unless the
Collateral Agent, for the ratable benefit of the Holders, shall obtain a
perfected security interest in such mark pursuant to this Agreement, and (5) not
(and not permit any licensee or sublicensee thereof to) do any act or knowingly
omit to do any act whereby any Trademark may become invalidated.
(b) The Company will not, except with respect to any Patent that the
Company shall reasonably determine is of negligible economic value to it, do any
act, or omit to do any act, whereby any Patent may become abandoned or
dedicated.
(c) The Company will notify the Collateral Agent immediately if it
knows, or has reason to know, that any application or registration relating to
any Patent or Trademark may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the United States
Patent and Trademark Office or any court or tribunal in any country) regarding
the Company's ownership of any Patent or Trademark or its right to register the
same or to keep and maintain the same.
(d) Whenever the Company, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Patent or Trademark with the United States Patent and Trademark Office or
any similar office or agency in any other country or any political subdivision
thereof, the Company shall report such filing to the Collateral Agent within
five Business Days after the last day of the fiscal quarter in which such filing
occurs. Upon request of the Collateral Agent, the Company shall execute and
deliver any and all agreements, instruments, documents, and papers as the
Collateral Agent may request to evidence the Collateral Agent's security
interest in any Patent or Trademark and the goodwill and general intangibles of
the Company relating thereto or represented thereby;
(e) The Company will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, or any similar office or agency in any other country or
any political subdivision thereof, to maintain and pursue each application (and
to obtain the relevant registration) and to maintain each registration of the
Patents and Trademarks, including, without limitation, filing of applications
for renewal, affidavits of use and affidavits of incontestability.
(f) In the event that any Patent or Trademark included in the
Collateral is infringed, misappropriated or diluted by a third party, the
Company shall promptly notify the Collateral Agent after it learns thereof and
shall, unless the Company shall reasonably determine that such Patent or
Trademark is of negligible economic value to the Company which determination the
Company shall promptly report to the Collateral Agent, promptly sue for
infringement, misappropriation or dilution, to seek injunctive relief where
appropriate and to recover any and all damages for such
<PAGE>
12
infringement, misappropriation or dilution, or take such other actions as the
Company shall reasonably deem appropriate under the circumstances to protect
such Patent or Trademark.
7. Provisions Relating to Vehicles.
-------------------------------
7.1 Representation and Warranty. Schedule 4 is a complete and
---------------------------
correct list of all Vehicles owned by the Company.
7.2 Covenants.
---------
(a) The Company will maintain each Vehicle in good operating
condition, ordinary wear and tear and immaterial impairments of value and damage
by the elements excepted, and will provide all maintenance, service and repairs
necessary for such purpose.
(b) No Vehicle shall be removed from the state which has issued the
certificate of title therefor for a period in excess of 30 days.
(c) With respect to any Vehicles acquired by the Company subsequent
to the date hereof, within five days after the date of acquisition thereof, all
applications for certificates of title indicating the Collateral Agent's first
priority security interest in the Vehicle covered by such certificate, and any
financing statement or other necessary documentation, shall be filed in each
office in each jurisdiction which the Collateral Agent shall deem advisable to
perfect its security interests in the Vehicles, including, but not limited to
the Department of Public Safety and Corrections- Office of Motor Vehicles of the
State of Louisiana.
8. Asset Sales and Receipt of Net Insurance Proceeds. All cash,
-------------------------------------------------
checks, instruments and other Proceeds of the Collateral from Asset Sales or
otherwise, including Net Insurance Proceeds, shall be held by the Company in
trust for the Collateral Agent and the Holders, segregated from the other funds
of the Company, and shall, immediately upon receipt by the Company, be turned
over to the Collateral Agent in the exact form received by the Company (duly
indorsed by the Company to the Collateral Agent, if required) and held by the
Collateral Agent in a Collateral Account maintained under the sole dominion and
control of the Collateral Agent. All proceeds while held by the Collateral
Agent in a Collateral Account (or by the Company in trust for the Collateral
Agent and the Holders) shall continue to be held as collateral security for all
the Obligations and shall not constitute payment thereof until applied as
provided in subsection 9.1.
9. Remedies.
--------
9.1 Code Remedies. Subject to the provisions of Article VIII of the
-------------
Indenture, if an Event of Default shall occur and be continuing, the Collateral
Agent on behalf of the Holders may exercise, in addition to all other rights and
remedies granted
<PAGE>
13
to it in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the Code. Without limiting the generality of the foregoing, the
Collateral Agent without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by law
referred to below) to or upon the Company or any other Person (all and each of
which demands, defenses, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Collateral Agent or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Collateral Agent shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in the Company, which right or equity is hereby waived or
released. The Company further agrees, at the Collateral Agent's request, to
assemble the Collateral and make it available to the Collateral Agent at places
which the Collateral Agent shall reasonably select, whether at the Company's
premises or elsewhere. The Collateral Agent shall apply the net proceeds of any
such collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral, in the manner set forth in Section 8.6 of the
Indenture. To the extent permitted by applicable law, the Company waives all
claims, damages and demands it may acquire against the Collateral Agent arising
out of the exercise by them of any rights hereunder. If any notice of a proposed
sale or other disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least 10 days before such sale
or other disposition.
9.2 Deficiency. The Company shall remain liable for any deficiency
----------
if the proceeds of any sale or other disposition of the Collateral are
insufficient to pay the Obligations and the fees and disbursements of any
attorneys employed by the Collateral Agent to collect such deficiency.
10. Applicable Provisions of the Indenture. Section 12.3 through 12.10
--------------------------------------
of the Indenture is hereby incorporated by reference into this Agreement and
made a part of the same as if set forth herein. To the extent, if any, that the
provisions of this Agreement are inconsistent with the provisions of Section
12.3 through 12.10 of the Indenture, the provisions of the Indenture shall
prevail.
<PAGE>
14
11. Collateral Agent's Appointment as Attorney-in-Fact; Collateral
--------------------------------------------------------------
Agent's Performance of Company's Obligations.
- --------------------------------------------
11.1 Powers. The Company hereby irrevocably constitutes and appoints
------
the Collateral Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Company and in the name of the
Company or in its own name, from time to time in the Collateral Agent's
discretion, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement, and, without limiting the generality of the foregoing, the
Company hereby gives the Collateral Agent the power and right, on behalf of the
Company, without notice to or assent by the Company, to do the following:
(a) in the case of any Collateral, at any time when any Event of
Default shall have occurred and is continuing, in the name of the Company
or its own name, or otherwise, to take possession of and indorse and
collect any checks, drafts, notes, acceptances or other instruments for the
payment of moneys due with respect to any Collateral and to file any claim
or to take any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by the Collateral Agent for the purpose of
collecting any and all such moneys due with respect to any Collateral
whenever payable;
(b) in the case of any Patents or Trademarks, to execute and deliver
any and all agreements, instruments, documents, and papers as the
Collateral Agent may request to evidence the Collateral Agent's security
interest in any Patent or Trademark and the goodwill and general
intangibles of the Company relating thereto or represented thereby;
(c) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, to effect any repairs or any insurance
called for by the terms of this Agreement and to pay all or any part of the
premiums therefor and the costs thereof;
(d) to execute, in connection with any Asset Sale permitted by
Section 6.15 of the Indenture or otherwise provided for in Section 9
hereof, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(e) upon the occurrence and during the continuance of any Event of
Default, (1) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Collateral Agent or as the Collateral Agent
shall direct; (2) to ask or demand for, collect, receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any Collateral; (3) to sign
and indorse any invoices, freight or
<PAGE>
15
express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications, notices and other documents in
connection with any of the Collateral; (4) to commence and prosecute any
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any portion thereof and to
enforce any other right in respect of any Collateral; (5) to defend any
suit, action or proceeding brought against the Company with respect to any
Collateral; (6) to settle, compromise or adjust any such suit, action or
proceeding and, in connection therewith, to give such discharges or
releases as the Collateral Agent may deem appropriate; (7) to assign any
Patent or Trademark (along with the goodwill of the business to which any
such Patent or Trademark pertains), throughout the world for such term or
terms, on such conditions, and in such manner, as the Collateral Agent
shall in its sole discretion determine; and (8) generally, to sell,
transfer, pledge and make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though the Collateral
Agent were the absolute owner thereof for all purposes, and to do, at the
Collateral Agent's option and the Company's expense, at any time, or from
time to time, all acts and things which the Collateral Agent deems
necessary to protect, preserve or realize upon the Collateral and the
Collateral Agent's security interests therein and to effect the intent of
this Agreement, all as fully and effectively as the Company might do.
11.2 Performance by Collateral Agent of Company's Obligations. If the
--------------------------------------------------------
Company fails to perform or comply with any of its agreements contained herein,
the Collateral Agent, at its option, but without any obligation so to do, may
perform or comply, or otherwise cause performance or compliance, with such
agreement.
11.3 Company's Reimbursement Obligation. The expenses of the
----------------------------------
Collateral Agent incurred in connection with actions undertaken as provided in
this Section, together with interest thereon at a rate per annum equal to __%
from the date of payment by the Collateral Agent to the date reimbursed by the
Company, shall be payable by the Company to the Collateral Agent on demand.
11.4 Ratification; Power Coupled With An Interest. The Company hereby
--------------------------------------------
ratifies all that said attorneys shall lawfully do or cause to be done by virtue
hereof. All powers, authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until this Agreement is terminated
and the security interests created hereby are released.
12. Duty of Collateral Agent. The Collateral Agent's sole duty with
------------------------
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the Code or otherwise, shall be to
deal with it in the same manner as the Collateral Agent deals with similar
property for its own account. Neither the Collateral Agent nor any of its
respective directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Company or any other Person or to take any
<PAGE>
16
other action whatsoever with regard to the Collateral or any part thereof. The
powers conferred on the Collateral Agent hereunder are solely to protect the
Collateral Agent's interests in the Collateral and shall not impose any duty
upon the Collateral Agent to exercise any such powers. The Collateral Agent
shall be accountable only for amounts that it actually receives as a result of
the exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Company for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
13. Execution of Financing Statements. Pursuant to Section 9-402 of
---------------------------------
the Code, the Company authorizes the Collateral Agent to file financing
statements with respect to the Collateral without the signature of the Company
in such form and in such filing offices as the Collateral Agent reasonably
determines appropriate to perfect the security interests of the Collateral Agent
under this Agreement. A carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
14. Authority of Collateral Agent. The Company acknowledges that the
-----------------------------
rights and responsibilities of the Collateral Agent under this Agreement with
respect to any action taken by the Collateral Agent or the exercise or non-
exercise by the Collateral Agent of any option, voting right, request, judgment
or other right or remedy provided for herein or resulting or arising out of this
Agreement shall, as between the Collateral Agent and the Holders be governed by
the Indenture and by such other agreements with respect thereto as may exist
from time to time among them, but, as between the Collateral Agent and the
Company, the Collateral Agent shall be conclusively presumed to be acting as
agent for the Holders with full and valid authority so to act or refrain from
acting, and the Company shall be under no obligation, or entitlement, to make
any inquiry respecting such authority.
15. Indemnity.
---------
15.1 Indemnity. (a) The Company agrees to indemnify, pay and hold
---------
harmless the Collateral Agent and the officers, directors, employees, agents and
affiliates of the Collateral Agent (collectively called the "Indemnitees") from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs (including, without
limitation, settlement costs), expenses or disbursements of any kind or nature
whatsoever (including, without limitation, the reasonable fees and disbursements
of counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
such Indemnitee shall be designated a party thereto), which may be imposed on,
incurred by, or asserted against that Indemnitee, in any manner relating to or
arising out of this Agreement, the Indenture or the Securities arising in any
action relating to, directly or indirectly, the Collateral or the subject of
this Agreement (including without limitation, any misrepresentation by the
Company in this Agreement (the "indemnified liabilities"); provided that the
--------
Company shall have no obligation to an Indemnitee hereunder with respect to
indemnified liabilities if it has been determined by a final decision (after
all
<PAGE>
17
appeals and the expiration of time to appeal) by a court of competent
jurisdiction that such indemnified liability arose from the negligence or
willful misconduct of that Indemnitee. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the Company
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all indemnified
liabilities incurred by the Indemnitees or any of them.
(b) The Company agrees to pay, and to save the Collateral Agent
harmless from, any and all liabilities, costs and expenses (including, without
limitation, legal fees and expenses) (1) with respect to, or resulting from any
delay in paying, any and all excise, sales or other taxes which may be payable
or determined to be payable with respect to any of the Collateral, (2) with
respect to, or resulting from, any delay in complying with any Requirement of
Law applicable to any of the Collateral and (3) in connection with any of the
transactions contemplated by this Agreement.
15.2 Survival. The obligations of the Company contained in this
--------
Section 15 shall survive the termination of this Agreement and the discharge of
the Company's other obligations under this Agreement.
15.3 Reimbursements. Any amounts paid by any Indemnitee as to which
--------------
such Indemnitee has the right to reimbursement shall constitute Obligations
secured by the Collateral.
16. Notices. All notices, requests and demands to or upon the
-------
Collateral Agent or the Company to be effective shall be in writing (or by
telex, fax or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (a) when delivered by hand or (b) if
given by mail, when deposited in the mails by certified mail, return receipt
requested, or (c) if by telex, fax or similar electronic transfer, when sent and
receipt has been confirmed, addressed to the Collateral Agent or the Company at
its address or transmission number for notices provided in Section 1.5 of the
Indenture. The Collateral Agent and the Company may change their addresses and
transmission numbers for notices by notice in the manner provided in this
Section.
17. Severability. Any provision of this Agreement which is prohibited
------------
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
<PAGE>
18
18. Amendments in Writing; No Waiver; Cumulative Remedies.
-----------------------------------------------------
18.1 Amendments in Writing. None of the terms or provisions of this
---------------------
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Company and the Collateral Agent in
accordance with the provisions of the Indenture.
18.2 No Waiver by Course of Conduct. Neither the Collateral Agent or
------------------------------
any Holder shall by any act (except by a written instrument pursuant to
subsection 181 hereof), delay, indulgence, omission or otherwise be deemed to
have waived any right or remedy hereunder or to have acquiesced in any Default
or Event of Default or in any breach of any of the terms and conditions hereof.
No failure to exercise, nor any delay in exercising, on the part of the
Collateral Agent or any Holder, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the Collateral
Agent or the Holders of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Collateral Agent or
the Holders would otherwise have on any future occasion.
18.3 Remedies Cumulative. The rights and remedies herein provided are
-------------------
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
19. Section Headings. The section and subsection headings used in
----------------
this Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
20. Successors and Assigns. This Agreement shall be binding upon the
----------------------
successors and assigns of the Company and shall inure to the benefit of the
Collateral Agent and its successors and assigns.
21. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
-------------
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
22. Submission To Jurisdiction; Waivers. The Company hereby
-----------------------------------
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement to which it is a party, or for
recognition and enforcement of any judgement in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of New York,
the courts of the United States of America for the Southern District of New
York, and appellate courts from any thereof;
<PAGE>
19
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Company at its address set forth in Section 1.5 of the Indenture or at such
other address of which the Collateral Agent shall have been notified
pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this subsection any special, exemplary, punitive or consequential
damages.
23. Special Louisiana Provisions. Insofar as the validity or
----------------------------
perfection of the security interest hereunder or the remedies hereunder are
governed by the laws of the State of Louisiana, the Company agrees as follows:
(a) For purposes of Louisiana executory process, the Company
acknowledges the Obligations secured hereby, whether now existing or to
arise hereafter, and confesses judgment thereon if not paid when due. Upon
the occurrence of an Event of Default and at any time thereafter so long as
the same shall be continuing, and in addition to all other rights and
remedies granted the Collateral Agent hereunder, it shall be lawful for and
the Company hereby authorizes the Collateral Agent without making a demand
or putting the Company in default, a putting in default being expressly
waived, to cause all and singular the Collateral to be seized and sold
after due process of law, the Company waiving the benefit of any and all
laws or parts of laws relative to appraisement of property seized and sold
under executory process or other legal process, and consenting that the
Collateral be sold without appraisement, either in its entirety or in lots
or parcels, as the Collateral Agent may determine, to the highest bidder
for cash or on such other terms as the plaintiff in such proceedings may
direct. In addition, the Collateral Agent shall have all of the rights and
remedies available to it under this Security Agreement or under the
Louisiana Commercial Laws (Louisiana Revised Statutes, Title 10), then in
effect, and under Chapter 9 of the Louisiana Commercial Laws, then in
effect (La. R.S. 10:9-101 et seq.).
(b) The Company hereby waives:
<PAGE>
20
(i) the benefit of appraisement provided for in Articles
2332, 2336, 2723 and 2724 of the Louisiana Code of Civil Procedure and
all other laws conferring the same;
(ii) the demand and three (3) days notice of demand as
provided in Articles 2639 and 2721 of the Louisiana Code of Civil
Procedure;
(iii) the notice of seizure provided by Articles 2293 and
2721 of the Louisiana Code of Civil Procedure; and
(iv) the three (3) days delay provided for in Articles 2331
and 2722 of the Louisiana Code of Civil Procedure.
(c) The Company expressly authorizes and agrees that the Collateral
Agent shall have the right to appoint a keeper of the Collateral pursuant
to the terms and provisions of La. R.S. 9:5136.
IN WITNESS WHEREOF, the undersigned has caused this Security Agreement
to be duly executed and delivered as of the date first above written.
BAYOU STEEL CORPORATION
By:____________________________
Name:_______________________
Title:________________________
<PAGE>
Schedule 1
----------
CONTRACTS
<PAGE>
Schedule 2
----------
PATENTS AND PATENT LICENSES
<PAGE>
Schedule 3
----------
TRADEMARKS AND TRADEMARK LICENSES
<PAGE>
Schedule 4
----------
VEHICLES
<PAGE>
Schedule 5
----------
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
-------------------------------
[List each office where a financing statement is to be filed]*
Patent and Trademark Filings
----------------------------
[List all filings]
Other Actions
-------------
[Describe other actions to be taken]
* Note that perfection of security interests in patents and trademarks
generally requires filings under the UCC in the jurisdictions where filings
would be made if the patents and trademarks were general intangibles, as well as
filings in the U.S Copyright Office and the U.S. Patent & Trademark Office.
<PAGE>
Schedule 6
----------
EQUIPMENT
Item Location
---- --------
<PAGE>
EXHIBIT 4.6
Subsidiary Security Agreement
Between
-----------------------------
And
First National Bank of Commerce,
as Collateral Agent
___________ __, 1994
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Defined Terms.......................................... 1
1.1 Definitions....................................... 1
1.2 Other Definitional Provisions..................... 4
2. Grant of Security Interest............................. 4
3. Representations and Warranties......................... 5
3.1 Title; No Other Liens............................. 5
3.2 Perfected First Priority Liens.................... 6
3.3 Inventory and Equipment........................... 6
3.4 Chief Executive Office............................ 6
3.5 Farm Products..................................... 6
4. Covenants.............................................. 6
4.1 Delivery of Instruments and Chattel Paper......... 6
4.2 Marking of Records................................ 6
4.3 Maintenance of Insurance.......................... 6
4.4 Payment of Obligations............................ 7
4.5 Maintenance of Perfected Security Interest;
Further Documentation........................... 7
4.7 Further Identification of Collateral.............. 8
4.8 Notices........................................... 8
5. Provisions Relating to Accounts........................ 8
5.1 Company Remains Liable Under Accounts............. 8
5.2 Analysis of Accounts.............................. 8
5.3 Collections on Accounts........................... 9
5.4 Representations and Warranties.................... 9
5.5 Covenants......................................... 9
6. Provisions Relating to Contracts....................... 10
6.1 Company Remains Liable under Contracts............ 10
6.2 Communication With Contracting Parties............ 11
6.3 Representations and Warranties.................... 11
6.4 Covenants......................................... 12
-i-
<PAGE>
Page
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7. Provisions Relating to Patents and Trademarks.......... 12
7.1 Representations and Warranties.................... 12
7.2 Covenants......................................... 13
8. Provisions Relating to Vehicles........................ 14
8.1 Representation and Warranty....................... 14
8.2 Covenants......................................... 14
9. Remedies............................................... 15
9.1 Notice to Account Debtors and Contract Parties.... 15
9.2 Proceeds to be Turned Over To Collateral Agent.... 15
9.3 Application of Proceeds........................... 15
9.4 Code Remedies..................................... 15
9.5 Deficiency........................................ 16
10. Applicable Provisions of the Indenture................. 16
11. Collateral Agent's Appointment as Attorney-in-Fact;
Collateral Agent's Performance of Company's
Obligations............................................ 17
11.1 Powers............................................ 17
11.2 Performance by Collateral Agent of Company's
Obligations ...................................... 18
11.3 Company's Reimbursement Obligation................ 18
11.4 Ratification; Power Coupled With An Interest...... 18
12. Duty of Collateral Agent............................... 18
13. Execution of Financing Statements...................... 19
14. Authority of Collateral Agent.......................... 19
15. Indemnity.............................................. 19
15.1 Indemnity......................................... 19
15.2 Survival.......................................... 20
15.3 Reimbursements.................................... 20
16. Notices................................................ 20
17. Severability........................................... 20
-ii-
<PAGE>
Page
----
18. Amendments in Writing; No Waiver; Cumulative Remedies.. 21
18.1 Amendments in Writing............................. 21
18.2 No Waiver by Course of Conduct.................... 21
18.3 Remedies Cumulative............................... 21
19. Section Headings....................................... 21
20. Successors and Assigns................................. 21
21. GOVERNING LAW.......................................... 21
22. Submission To Jurisdiction; Waivers.................... 21
23. Special Louisiana Provisions........................... 22
-iii-
<PAGE>
Exhibit _
DRAFT
12/29/93
FORM OF SUBSIDIARY SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of ____________, 1994, made by
____________________________________________, a __________ corporation
(the "Company") in favor of FIRST NATIONAL BANK OF COMMERCE, as trustee (in such
capacity, the "Trustee") under the Indenture dated as of _________ __, 1994 (as
amended, supplemented or otherwise modified from time to time, the "Indenture")
between the Trustee and Bayou Steel Corporation (the "Parent") as collateral
agent (in such capacity and together with any successors in such capacity, the
"Collateral Agent") and for the benefit of Holders of ___% First Mortgage Notes
due 2001 (the "Securities") issued by the Parent.
W I T N E S S E T H :
-------------------
WHEREAS, the Company is the owner of the Collateral (as hereinafter
defined); and
WHEREAS, it is a condition precedent to the purchase of the Securities from
the Parent that the Company shall have executed and delivered this Agreement to
the Collateral Agent for the ratable benefit of the Holders.
NOW, THEREFORE, in consideration of the premises and to induce the Trustee
to enter into the Indenture and to induce the Holders to purchase the
Securities, the Company hereby agrees with the Collateral Agent, for the ratable
benefit of the Holders, as follows:
1. Defined Terms.
-------------
1.1 Definitions. (a) Unless otherwise defined herein, terms defined in
-----------
the Indenture and used herein shall have the meanings given to them in the
Indenture and the following terms which are defined in the Uniform Commercial
Code in effect in the State of New York on the date hereof are used herein as so
defined: Chattel Paper, Documents, Equipment, Farm Products, Fixtures, General
Intangibles, Instruments and Inventory.
<PAGE>
2
(b) The following terms shall have the following meanings:
"Accounts": all accounts receivable, book debts, notes, drafts,
instruments, documents, acceptances and other forms of obligations now
owned or hereafter received or acquired by or belonging or owing to the
Company whether arising out of goods sold by it or services rendered by it
or from any other transaction, whether or not the same includes the sale of
goods or performance of services by the Company (including, without
limitation, any such obligation which might be characterized as an account,
general intangible or chattel paper under the Code) and all of the
Company's rights in, to and under all sales orders now owned or hereafter
received or acquired by it for goods or services, and all of the Company's
rights to any goods represented by any of the foregoing (including returned
or repossessed goods and unpaid sellers' rights), and all moneys due or to
become due to the Company under all contracts for the sale of goods and/or
the performance of services by it (whether or not yet earned by performance
on the part of the Company) or in connection with any other transaction,
now in existence or hereafter arising, including, without limitation, the
right to receive the proceeds of said sales order and contracts, and all
collateral security and guarantees of any kind given by any Person with
respect to any of the foregoing.
"Agreement" means this Security Agreement, as the same may be amended,
modified or otherwise supplemented from time to time.
"Code" means the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Collateral" has the meaning specified in Section 2 of this
Agreement.
"Contracts": the contracts and agreements listed in Schedule 1
attached hereto, as the same may be amended, modified or otherwise
supplemented from time to time, including, without limitation, (a) all
rights of the Company to receive moneys due and to become due to it
thereunder or in connection therewith, (b) all rights of the Company to
damages arising out of or for breach or default in respect thereof and (c)
all rights of the Company to perform and exercise all remedies thereunder.
"Contractual Obligation" means, as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of the
property owned by it is bound.
"Net Insurance Proceeds" has the meaning specified in Section 4.3 of
this Agreement.
<PAGE>
3
"Obligations" means the due and punctual payment and performance by
the Company of all its obligations and liabilities, absolute or contingent,
liquidated or unliquidated, now existing or hereafter incurred under,
arising out of and in connection with the Subsidiary Guarantee.
"Patent License" means all agreements, whether written or oral,
providing for the grant by or to the Company of any right to manufacture,
use or sell any invention covered by a Patent, including, without
limitation, any thereof referred to in Schedule 2 hereto.
----------
"Patents" means (a) all letters patent of the United States or any
other country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in Schedule 2 hereto, and (b) all
----------
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any thereof referred to in Schedule 2
----------
hereto.
"Proceeds" and "Products" shall have the meaning ascribed to such
terms in the Code and shall include in any event (i) whatever is received
upon any collection, exchange, sale or other disposition or refinancing of
any of the Collateral and any property into which any of the Collateral is
converted (whether cash or non-cash proceeds), (ii) any and all proceeds of
any insurance, indemnity, warranty or guarantee payable to the Company from
time to time with respect to any of the Collateral, (iii) any and all
payments (in any form whatsoever) made or due and payable to the Company
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by
any Governmental Authority (or any person acting under color of
Governmental Authority) and (iv) any and all other amounts from time to
time paid or payable under or in connection with any of the Collateral.
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other governmental authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Subsidiary Guarantee" means the Guarantee dated as of ____________
between _________________ and the Collateral Agent in favor of the Holders,
as the same may be amended, supplemented or otherwise modified from time to
time.
"Trade Secrets" means any proprietary information, process or system
now or hereafter created which is within the possession of the Company,
including, without limitation, manufacturing processes or methods, all
<PAGE>
4
formulae, processes, compounds, drawings, designs, blueprints, surveys,
reports, manuals, and operating standards relating to or used in the
operating standards relating to or used in the operation of the Company's
business, rights in works of authorship, and contract rights relating to
computer software programs, in whatever form created or maintained.
"Trademark License" means any agreement, written or oral, providing
for the grant by or to the Company of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule 3
----------
hereto.
"Trademarks": (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, or
otherwise, including, without limitation, any thereof referred to in
Schedule 3 hereto, and (b) all renewals thereof.
----------
"Vehicles" means all cars, trucks, trailers, construction and earth
moving equipment and other vehicles covered by a certificate of title law
of any state and, in any event including, without limitation, the vehicles
listed on Schedule 4 hereto and all tires and other appurtenances to any of
----------
the foregoing.
1.2 Other Definitional Provisions. (a) The words "hereof," "herein"
-----------------------------
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and section and paragraph references are to this Agreement unless
otherwise specified.
(b) All references to the Collateral Agent shall be deemed to include
a reference to the Trustee, and the reverse thereof shall similarly apply.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Grant of Security Interest. As collateral security for the
--------------------------
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Company hereby
grants to the Collateral Agent for the ratable benefit of the Holders a security
interest in all of the following property now owned or at any time hereafter
acquired by the Company or in which the Company now has or at any time in the
future may acquire any right, title or interest (collectively, the
"Collateral"):
<PAGE>
5
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Documents;
(e) all Equipment;
(f) all General Intangibles;
(g) all Instruments;
(h) all Inventory;
(i) all Patents;
(j) all Patent Licenses;
(k) all Trade Secrets;
(l) all Trademarks;
(m) all Trademark Licenses;
(n) all Vehicles;
(o) Fixtures;
(p) all books and records pertaining to the Collateral; and
(q) to the extent not otherwise included, all Proceeds and Products
of any and all of the foregoing.
3. Representations and Warranties. The Company hereby represents
------------------------------
and warrants that:
3.1 Title; No Other Liens. Except for the security interest granted
---------------------
to the Collateral Agent for the ratable benefit of the Holders pursuant to this
Agreement and the other Liens permitted to exist on the Collateral pursuant to
the Indenture, the Company owns each item of the Collateral free and clear of
any and all Liens or claims of others. No security agreement, financing
statement or other public notice with respect to all or any part of the
Collateral is on file or of record in any public
<PAGE>
6
office, except such as have been filed in favor of the Collateral Agent, for the
ratable benefit of the Holders, pursuant to this Agreement or as are permitted
pursuant to the Indenture.
3.2 Perfected First Priority Liens. The security interests granted
------------------------------
pursuant to this Agreement (a) constitute perfected security interests in the
Collateral in favor of the Collateral Agent, for the ratable benefit of the
Holders, (b) are prior to all other Liens on the Collateral in existence on the
date hereof except for Liens permitted to exist pursuant to the Indenture, and
(c) are enforceable as such against (1) all creditors of and purchasers from the
Company (except purchasers of Inventory in the ordinary course of business) and
(2) any Person having any interest in the real property where any of the
Equipment is located.
3.3 Inventory and Equipment. The Inventory and Equipment is kept at
-----------------------
the locations listed on Schedule 6 hereto.
3.4 Chief Executive Office. The Company's chief executive office and
----------------------
chief place of business is located at ___________________________.
3.5 Farm Products. None of the Collateral constitutes, or is the
-------------
Proceeds of, Farm Products.
4. Covenants. The Company covenants and agrees with the Collateral
---------
Agent that, from and after the date of this Agreement until this Agreement is
terminated and the security interests created hereby are released:
4.1 Delivery of Instruments and Chattel Paper. If any amount payable
-----------------------------------------
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Collateral Agent, duly indorsed in a manner
satisfactory to the Collateral Agent, to be held as Collateral pursuant to this
Agreement.
4.2 Marking of Records. The Company will mark its books and records
------------------
pertaining to the Collateral to evidence this Agreement and the security
interests created hereby.
4.3 Maintenance of Insurance. (a) The Company will maintain, with
------------------------
financially sound and reputable companies, insurance policies (1) insuring the
Inventory, Equipment, Fixtures and Vehicles against loss by fire, explosion,
theft and such other casualties as may be reasonably satisfactory to the
Collateral Agent and (2) insuring the Company, the Collateral Agent and the
Holders against liability for personal injury and property damage relating to
such Inventory, Equipment, Fixtures and Vehicles, such policies to be in such
form and amounts and having such coverage as may be reasonably satisfactory to
the Collateral Agent, with losses payable to the Company and the Collateral
Agent ("Net Insurance Proceeds").
<PAGE>
7
(b) All such insurance shall (1) provide that no cancellation, material
reduction in amount or material change in coverage thereof shall be effective
until at least 30 days after receipt by the Collateral Agent of written notice
thereof, (2) name the Collateral Agent as the insured party and (3) be
reasonably satisfactory in all other respects to the Collateral Agent.
(c) The Company shall deliver to the Collateral Agent a report of a
reputable insurance broker with respect to such insurance during the month of
[February] in each calendar year and such supplemental reports with respect
thereto as the Collateral Agent may from time to time reasonably request.
4.4 Payment of Obligations. The Company will pay and discharge or
----------------------
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of the Company and
such proceedings do not involve any material danger of the sale, forfeiture or
loss of any of the Collateral or any interest therein.
4.5 Maintenance of Perfected Security Interest; Further
---------------------------------------------------
Documentation. (a) The Company shall maintain the security interest created by
- -------------
this Agreement as a first, perfected security interest subject only to Liens
permitted to exist pursuant to the Indenture and shall defend such security
interest against claims and demands of all Persons whomsoever.
(b) At any time and from time to time, upon the written request of
the Collateral Agent and at the sole expense of the Company, the Company will
promptly and duly execute and deliver such further instruments and documents and
take such further action as the Collateral Agent may reasonably request for the
purpose of obtaining or preserving the full benefits of this Agreement and of
the rights and powers herein granted, including, without limitation, the filing
of any financing or continuation statements under the Uniform Commercial Code in
effect in any jurisdiction with respect to the security interests created
hereby.
4.6 Changes in Locations, Name, etc. The Company will not:
--------------------------------
(a) permit any of the Inventory or Equipment to be kept at a location
other than those listed on Schedule 6 hereto; or
(b) change the location of its chief executive office and chief place
of business from that specified in subsection 3.4; or
<PAGE>
8
(c) change its name, identity or corporate structure to such an extent
that any financing statement filed by the Collateral Agent in connection
with this Agreement would become seriously misleading, unless it shall have
given the Collateral Agent at least 30 days' prior written notice of such
change.
4.7 Further Identification of Collateral. The Company will furnish
------------------------------------
to the Collateral Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Collateral Agent may reasonably request, all in
reasonable detail.
4.8 Notices. The Company will advise the Collateral Agent promptly,
-------
in reasonable detail, at their respective addresses set forth in the Indenture
of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Indenture) on, or claim asserted against, any of the
Collateral; and
(b) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5. Provisions Relating to Accounts.
-------------------------------
5.1 Company Remains Liable Under Accounts. Anything herein to the
-------------------------------------
contrary notwithstanding, the Company shall remain liable under each of the
Accounts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account. Neither the Collateral Agent nor
any Holder shall have any obligation or liability under any Account (or any
agreement giving rise thereto) by reason of or arising out of this Agreement or
the receipt by the Collateral Agent of any payment relating to such Account
pursuant hereto, nor shall the Collateral Agent or any Holder be obligated in
any manner to perform any of the obligations of the Company under or pursuant to
any Account (or any agreement giving rise thereto), to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto), to present or file any claim, to take any action
to enforce any performance or to collect the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or times.
5.2 Analysis of Accounts. The Collateral Agent shall have the right
--------------------
to make test verifications of the Accounts in any manner and through any medium
that it reasonably considers advisable, and the Company shall furnish all such
assistance and information as the Collateral Agent may require in connection
with such test verifications. At any time and from time to time, upon the
Collateral
<PAGE>
9
Agent's request and at the expense of the Company, the Company shall cause
independent public accountants or others satisfactory to the Collateral Agent to
furnish to the Collateral Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts. The Collateral Agent in
its own name or in the name of others may communicate with account debtors on
the Accounts to verify with them to the Collateral Agent's satisfaction the
existence, amount and terms of any Accounts.
5.3 Collections on Accounts. (a) The Collateral Agent hereby
-----------------------
authorizes the Company to collect the Accounts, subject to the Collateral
Agent's direction and control, and the Collateral Agent may curtail or terminate
said authority at any time after the occurrence and during the continuance of an
Event of Default. If required by the Collateral Agent at any time after the
occurrence and during the continuance of an Event of Default, any payments of
Accounts, when collected by the Company, (1) shall be forthwith (and, in any
event, within two Business Days) deposited by the Company in the exact form
received, duly indorsed by the Company to the Collateral Agent if required, in a
Collateral Account maintained under the sole dominion and control of the
Collateral Agent, subject to withdrawal by the Collateral Agent only as provided
in subsection 103, and (2) until so turned over, shall be held by the Company in
trust for the Collateral Agent and the Holders, segregated from other funds of
the Company.
(b) Each such deposit of Proceeds of Accounts shall be accompanied by
a report identifying in reasonable detail the nature and source of the payments
included in the deposit.
(c) At the Collateral Agent's request, the Company shall deliver to
the Collateral Agent all original and other documents evidencing, and relating
to, the agreements and transactions which gave rise to the Accounts, including,
without limitation, all original orders, invoices and shipping receipts.
5.4 Representations and Warranties. (a) No amount payable to the
------------------------------
Company under or in connection with any Account is evidenced by any Instrument
or Chattel Paper which has not been delivered to the Collateral Agent.
(b) The place where the Borrower keeps its records concerning the
Accounts is ________________________________________________________.
(c) None of the obligors on any Accounts is a governmental authority.
5.5 Covenants. (a) The amount represented by the Company to the
---------
Collateral Agent from time to time as owing by each account debtor or by all
account debtors in respect of the Accounts will at such time be the correct
amount actually owing by such account debtor or debtors thereunder.
<PAGE>
10
(b) The Company will not amend, modify, terminate or waive any
agreement giving rise to an Account in any manner which could reasonably be
expected to materially adversely affect the value of such Account as Collateral.
(c) The Company will not fail to exercise promptly and diligently
each and every material right which it may have under each agreement giving rise
to an Account (other than any right of termination).
(d) The Company will not fail to deliver to the Collateral Agent a
copy of each material demand, notice or document received by it relating in any
way to any agreement giving rise to an Account.
(e) Other than in the ordinary course of business as generally
conducted by the Company over a period of time, the Company will not grant any
extension of the time of payment of any of the Accounts, compromise, compound or
settle the same for less than the full amount thereof, release, wholly or
partially, any Person liable for the payment thereof, or allow any credit or
discount whatsoever thereon.
(f) The Company will not remove its books and records from the
location specified in paragraph 5.4(b).
(g) In any suit, proceeding or action brought by the Collateral Agent
under any Account for any sum owing thereunder, or to enforce any provisions of
any Contract, the Company will save, indemnify and keep the Collateral Agent
harmless from and against all expense, loss or damage suffered by reason of any
defense, setoff, counterclaim, recoupment or reduction or liability whatsoever
of the account debtor thereunder, arising out of a breach by the Company of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor of such account debtor or its
successors from the Company.
6. Provisions Relating to Contracts.
--------------------------------
6.1 Company Remains Liable under Contracts. Anything herein to the
--------------------------------------
contrary notwithstanding, the Company shall remain liable under each of the
Contracts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms and
provisions of each Contract. Neither the Collateral Agent nor any Holder shall
have any obligation or liability under any Contract by reason of or arising out
of this Agreement or the receipt by the Collateral Agent or any such Holder of
any payment relating to such Contract pursuant hereto, nor shall the Collateral
Agent or any Holder be obligated in any manner to perform any of the obligations
of the Company under or pursuant to any Contract, to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance
<PAGE>
11
by any party under any Contract, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
6.2 Communication With Contracting Parties. The Collateral Agent in
--------------------------------------
its own name or in the name of others may communicate with parties to the
Contracts to verify with them to the Collateral Agent's satisfaction the
existence, amount and terms of any Contracts.
6.3 Representations and Warranties. (a) No consent of any party
------------------------------
(other than the Company) to any Contract is required, or purports to be
required, in connection with the execution, delivery and performance of this
Agreement.
(b) Each Contract is in full force and effect and constitutes a valid
and legally enforceable obligation of the parties thereto, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
(c) No consent or authorization of, filing with or other act by or in
respect of any governmental authority is required in connection with the
execution, delivery, performance, validity or enforceability of any of the
Contracts by any party thereto other than those which have been duly obtained,
made or performed, are in full force and effect and do not subject the scope of
any such Contract to any material adverse limitation, either specific or general
in nature.
(d) Neither the Company nor (to the best of the Company's knowledge)
any other party to any Contract is in default or is likely to become in default
in the performance or observance of any of the terms thereof.
(e) The Company has fully performed all its obligations under each
Contract.
(f) The right, title and interest of the Company in, to and under
each Contract are not subject to any defense, offset, counterclaim or claim
which would materially adversely affect the value of such Contract as
Collateral, nor have any of the foregoing been asserted or alleged against the
Company as to any Contract.
(g) The Company has delivered to the Collateral Agent a complete and
correct copy of each Contract, including all amendments, supplements and other
modifications thereto.
<PAGE>
12
(h) No amount payable to the Company under or in connection with any
Contract is evidenced by any Instrument or Chattel Paper which has not been
delivered to the Collateral Agent.
(i) None of the parties to any Contracts is a governmental authority.
6.4 Covenants. (a) The Company will perform and comply in all
---------
material respects with all its obligations under the Contracts and all its other
Contractual Obligations relating to the Collateral.
(b) The Company will not amend, modify, terminate or waive any
provision of any Contract in any manner which could reasonably be expected to
materially adversely affect the value of such Contract as Collateral.
(c) The Company will not fail to exercise promptly and diligently
each and every material right which it may have under each Contract (other than
any right of termination).
(d) The Company will not fail to deliver to the Collateral Agent a
copy of each material demand, notice or document received by it relating in any
way to any Contract.
(e) In any suit, proceeding or action brought by the Collateral Agent
or any Holder under any Contract for any sum owing thereunder, or to enforce any
provisions of any Contract, the Company will save, indemnify and keep the
Collateral Agent and such Holder harmless from and against all expense, loss or
damage suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction or liability whatsoever of the obligor thereunder, arising out of a
breach by the Company of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to or in favor of such
obligor or its successors from the Company.
7. Provisions Relating to Patents and Trademarks.
---------------------------------------------
7.1 Representations and Warranties. (a) Schedule 2 hereto includes
------------------------------
all Patents and Patent Licenses owned by the Company in its own name as of the
date hereof.
(b) Schedule 3 hereto includes all Trademarks and Trademark Licenses
owned by the Company in its own name as of the date hereof.
(c) To the best of the Company's knowledge, each Patent and Trademark
is valid, subsisting, unexpired, enforceable and has not been abandoned.
(d) Except as set forth in either Schedule 2 or Schedule 3, none of
such Patents and Trademarks is the subject of any licensing or franchise
agreement.
<PAGE>
13
(e) No holding, decision or judgment has been rendered by any
governmental authority which would limit, cancel or question the validity of any
Patent or Trademark.
(f) No action or proceeding is pending (1) seeking to limit, cancel
or question the validity of any Patent or Trademark, or (2) which, if adversely
determined, would have a material adverse effect on the value of any Patent or
Trademark.
7.2 Covenants. (a) The Company (either itself or through licensees)
---------
will, except with respect to any Trademark that the Company shall reasonably
determine is of negligible economic value to it, (1) continue to use each
Trademark on each and every trademark class of goods applicable to its current
line as reflected in its current catalogs, brochures and price lists in order to
maintain such Trademark in full force free from any claim of abandonment for
non-use, (2) maintain as in the past the quality of products and services
offered under such Trademark, (3) employ such Trademark with the appropriate
notice of registration, (4) not adopt or use any mark which is confusingly
similar or a colorable imitation of such Trademark unless the Collateral Agent,
for the ratable benefit of the Holders, shall obtain a perfected security
interest in such mark pursuant to this Agreement, and (5) not (and not permit
any licensee or sublicensee thereof to) do any act or knowingly omit to do any
act whereby any Trademark may become invalidated.
(b) The Company will not, except with respect to any Patent that the
Company shall reasonably determine is of negligible economic value to it, do any
act, or omit to do any act, whereby any Patent may become abandoned or
dedicated.
(c) The Company will notify the Collateral Agent immediately if it
knows, or has reason to know, that any application or registration relating to
any Patent or Trademark may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the United States
Patent and Trademark Office or any court or tribunal in any country) regarding
the Company's ownership of any Patent or Trademark or its right to register the
same or to keep and maintain the same.
(d) Whenever the Company, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Patent or Trademark with the United States Patent and Trademark Office or
any similar office or agency in any other country or any political subdivision
thereof, the Company shall report such filing to the Collateral Agent within
five Business Days after the last day of the fiscal quarter in which such filing
occurs. Upon request of the Collateral Agent, the Company shall execute and
deliver any and all agreements, instruments, documents, and papers as the
Collateral Agent may request to evidence the Collateral Agent's security
interest in any Patent or Trademark and the goodwill and general intangibles of
the Company relating thereto or represented thereby;
<PAGE>
14
(e) The Company will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, or any similar office or agency in any other country or
any political subdivision thereof, to maintain and pursue each application (and
to obtain the relevant registration) and to maintain each registration of the
Patents and Trademarks, including, without limitation, filing of applications
for renewal, affidavits of use and affidavits of incontestability.
(f) In the event that any Patent or Trademark included in the
Collateral is infringed, misappropriated or diluted by a third party, the
Company shall promptly notify the Collateral Agent after it learns thereof and
shall, unless the Company shall reasonably determine that such Patent or
Trademark is of negligible economic value to the Company which determination the
Company shall promptly report to the Collateral Agent, promptly sue for
infringement, misappropriation or dilution, to seek injunctive relief where
appropriate and to recover any and all damages for such infringement,
misappropriation or dilution, or take such other actions as the Company shall
reasonably deem appropriate under the circumstances to protect such Patent or
Trademark.
8. Provisions Relating to Vehicles.
-------------------------------
8.1 Representation and Warranty. Schedule 4 is a complete and
---------------------------
correct list of all Vehicles owned by the Company.
8.2 Covenants. (a) The Company will maintain each Vehicle in good
---------
operating condition, ordinary wear and tear and immaterial impairments of value
and damage by the elements excepted, and will provide all maintenance, service
and repairs necessary for such purpose.
(b) No Vehicle shall be removed from the state which has issued the
certificate of title therefor for a period in excess of 30 days.
(c) With respect to any Vehicles acquired by the Company subsequent
to the date hereof, within five days after the date of acquisition thereof, all
applications for certificates of title indicating the Collateral Agent's first
priority security interest in the Vehicle covered by such certificate, and any
financing statement or other necessary documentation, shall be filed in each
office in each jurisdiction which the Collateral Agent shall deem advisable to
perfect its security interests in the Vehicles, including, but not limited to
the Department of Public Safety and Corrections- Office of Motor Vehicles of the
State of Louisiana.
<PAGE>
15
9. Remedies.
--------
9.1 Notice to Account Debtors and Contract Parties. Upon the request
----------------------------------------------
of the Collateral Agent at any time after the occurrence and during the
continuance of an Event of Default, the Company shall notify account debtors on
the Accounts and parties to the Contracts that the Accounts and the Contracts
have been assigned to the Collateral Agent for the ratable benefit of the
Holders and that payments in respect thereof shall be made directly to the
Collateral Agent.
9.2 Proceeds to be Turned Over To Collateral Agent. In addition to
----------------------------------------------
the rights of the Collateral Agent and the Holders specified in subsection 5.3
with respect to payments of Accounts, if an Event of Default shall occur and be
continuing all Proceeds, including Net Insurance Proceeds, received by the
Company consisting of cash, checks and other near-cash items shall be held by
the Company in trust for the Collateral Agent and the Holders, segregated from
other funds of the Company, and shall, forthwith upon receipt by the Company, be
turned over to the Collateral Agent in the exact form received by the Company
(duly indorsed by the Company to the Collateral Agent, if required) and held by
the Collateral Agent in a Collateral Account maintained under the sole dominion
and control of the Collateral Agent. All Proceeds while held by the Collateral
Agent in a Collateral Account (or by the Company in trust for the Collateral
Agent and the Holders) shall continue to be held as collateral security for all
the Obligations and shall not constitute payment thereof until applied as
provided in subsection 9.3.
9.3 Application of Proceeds. At such intervals as may be agreed upon
-----------------------
by the Company and the Collateral Agent, or, if an Event of Default shall have
occurred and be continuing, at any time at the Collateral Agent's election, the
Collateral Agent may apply all or any part of Proceeds held in any Collateral
Account in payment of the Obligations in such order as the Collateral Agent may
elect, and any part of such funds which the Collateral Agent elects not so to
apply and deems not required as collateral security for the Obligations shall be
paid over from time to time by the Collateral Agent to the Company or to
whomsoever may be lawfully entitled to receive the same. Any balance of such
Proceeds remaining after the Obligations shall have been paid in full shall be
paid over to the Company to whomsoever may be lawfully entitled to receive the
same.
9.4 Code Remedies. If an Event of Default shall occur and be
-------------
continuing, the Collateral Agent, on behalf of the Holders may exercise, in
addition to all other rights and remedies granted to them in this Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Collateral Agent, without demand
of performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon the
Company or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize
<PAGE>
16
upon the Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, at any exchange,
broker's board or office of the Collateral Agent or elsewhere upon such terms
and conditions as it may deem advisable and at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. The Collateral Agent or any Holder shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, free
of any right or equity of redemption in the Company, which right or equity is
hereby waived or released. The Company further agrees, at the Collateral
Agent's request, to assemble the Collateral and make it available to the
Collateral Agent at places which the Collateral Agent shall reasonably select,
whether at the Company's premises or elsewhere. The Collateral Agent shall
apply the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the
Collateral Agent and the Holders hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Obligations, in such order as the Collateral Agent may elect, and only
after such application and after the payment by the Collateral Agent of any
other amount required by any provision of law, including, without limitation,
Section 9-504(1)(c) of the Code, need the Collateral Agent account for the
surplus, if any, to the Company. To the extent permitted by applicable law, the
Company waives all claims, damages and demands it may acquire against the
Collateral Agent or any Holder arising out of the exercise by them of any rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition.
9.5 Deficiency. The Company shall remain liable for any deficiency
----------
if the proceeds of any sale or other disposition of the Collateral are
insufficient to pay the Obligations and the fees and disbursements of any
attorneys employed by the Collateral Agent or any Holder to collect such
deficiency.
10. Applicable Provisions of the Indenture. Section 12.3 through
--------------------------------------
12.10 of the Indenture is hereby incorporated by reference into this Agreement
and made a part of the same as if set forth herein. To the extent, if any, that
the provisions of this Agreement are inconsistent with the provisions of Section
12.3 through 12.10 of the Indenture, the provisions of the Indenture shall
prevail.
<PAGE>
17
11. Collateral Agent's Appointment as Attorney-in-Fact; Collateral
--------------------------------------------------------------
Agent's Performance of Company's Obligations.
- --------------------------------------------
11.1 Powers. The Company hereby irrevocably constitutes and appoints
------
the Collateral Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Company and in the name of the
Company or in its own name, from time to time in the Collateral Agent's
discretion, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement, and, without limiting the generality of the foregoing, the
Company hereby gives the Collateral Agent the power and right, on behalf of the
Company, without notice to or assent by the Company, to do the following:
(a) in the case of any Collateral, at any time when any Event of
Default shall have occurred and is continuing, in the name of the Company
or its own name, or otherwise, to take possession of and indorse and
collect any checks, drafts, notes, acceptances or other instruments for the
payment of moneys due with respect to any Collateral and to file any claim
or to take any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by the Collateral Agent for the purpose of
collecting any and all such moneys due with respect to any Collateral
whenever payable;
(b) in the case of any Patents or Trademarks, to execute and deliver
any and all agreements, instruments, documents, and papers as the
Collateral Agent may request to evidence the Collateral Agent's security
interest in any Patent or Trademark and the goodwill and general
intangibles of the Company relating thereto or represented thereby;
(c) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, to effect any repairs or any insurance
called for by the terms of this Agreement and to pay all or any part of the
premiums therefor and the costs thereof;
(d) to execute, in connection with any Asset Sale permitted by
Section 6.15 of the Indenture or otherwise provided for in Section ?
hereof, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(e) upon the occurrence and during the continuance of any Event of
Default, (1) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Collateral Agent or as the Collateral Agent
shall direct; (2) to ask or demand for, collect, receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any
<PAGE>
18
time in respect of or arising out of any Collateral; (3) to sign and
indorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications,
notices and other documents in connection with any of the Collateral; (4)
to commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the Collateral or
any portion thereof and to enforce any other right in respect of any
Collateral; (5) to defend any suit, action or proceeding brought against
the Company with respect to any Collateral; (6) to settle, compromise or
adjust any such suit, action or proceeding and, in connection therewith, to
give such discharges or releases as the Collateral Agent may deem
appropriate; (7) to assign any Patent or Trademark (along with the goodwill
of the business to which any such Patent or Trademark pertains), throughout
the world for such term or terms, on such conditions, and in such manner,
as the Collateral Agent shall in its sole discretion determine; and (8)
generally, to sell, transfer, pledge and make any agreement with respect to
or otherwise deal with any of the Collateral as fully and completely as
though the Collateral Agent were the absolute owner thereof for all
purposes, and to do, at the Collateral Agent's option and the Company's
expense, at any time, or from time to time, all acts and things which the
Collateral Agent deems necessary to protect, preserve or realize upon the
Collateral and the Collateral Agent's security interests therein and to
effect the intent of this Agreement, all as fully and effectively as the
Company might do.
11.2 Performance by Collateral Agent of Company's Obligations. If the
--------------------------------------------------------
Company fails to perform or comply with any of its agreements contained herein,
the Collateral Agent, at its option, but without any obligation so to do, may
perform or comply, or otherwise cause performance or compliance, with such
agreement.
11.3 Company's Reimbursement Obligation. The expenses of the
----------------------------------
Collateral Agent incurred in connection with actions undertaken as provided in
this Section, together with interest thereon at a rate per annum equal to __%
from the date of payment by the Collateral Agent to the date reimbursed by the
Company, shall be payable by the Company to the Collateral Agent on demand.
11.4 Ratification; Power Coupled With An Interest. The Company hereby
--------------------------------------------
ratifies all that said attorneys shall lawfully do or cause to be done by virtue
hereof. All powers, authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until this Agreement is terminated
and the security interests created hereby are released.
12. Duty of Collateral Agent. The Collateral Agent's sole duty with
------------------------
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the Code or otherwise, shall be to
deal with it in the same manner as the Collateral Agent deals with similar
property for its own account. Neither the Collateral Agent nor any of its
respective directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon any
<PAGE>
19
of the Collateral or for any delay in doing so or shall be under any obligation
to sell or otherwise dispose of any Collateral upon the request of the Company
or any other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof. The powers conferred on the Collateral Agent
hereunder are solely to protect the Collateral Agent's interests in the
Collateral and shall not impose any duty upon the Collateral Agent to exercise
any such powers. The Collateral Agent shall be accountable only for amounts
that it actually receives as a result of the exercise of such powers, and
neither it nor any of its officers, directors, employees or agents shall be
responsible to the Company for any act or failure to act hereunder, except for
their own gross negligence or willful misconduct.
13. Execution of Financing Statements. Pursuant to Section 9-402 of
---------------------------------
the Code, the Company authorizes the Collateral Agent to file financing
statements with respect to the Collateral without the signature of the Company
in such form and in such filing offices as the Collateral Agent reasonably
determines appropriate to perfect the security interests of the Collateral Agent
under this Agreement. A carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
14. Authority of Collateral Agent. The Company acknowledges that the
-----------------------------
rights and responsibilities of the Collateral Agent under this Agreement with
respect to any action taken by the Collateral Agent or the exercise or non-
exercise by the Collateral Agent of any option, voting right, request, judgment
or other right or remedy provided for herein or resulting or arising out of this
Agreement shall, as between the Collateral Agent and the Holders be governed by
the Indenture and by such other agreements with respect thereto as may exist
from time to time among them, but, as between the Collateral Agent and the
Company, the Collateral Agent shall be conclusively presumed to be acting as
agent for the Holders with full and valid authority so to act or refrain from
acting, and the Company shall be under no obligation, or entitlement, to make
any inquiry respecting such authority.
15. Indemnity.
---------
15.1 Indemnity. (a) The Company agrees to indemnify, pay and hold
---------
harmless the Collateral Agent and the officers, directors, employees, agents and
affiliates of the Collateral Agent (collectively called the "Indemnitees") from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs (including, without
limitation, settlement costs), expenses or disbursements of any kind or nature
whatsoever (including, without limitation, the reasonable fees and disbursements
of counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
such Indemnitee shall be designated a party thereto), which may be imposed on,
incurred by, or asserted against that Indemnitee, in any manner relating to or
arising out of this Agreement, the Indenture, the Subsidiary Guarantee or the
Securities arising in any action relating to, directly or indirectly, the
Collateral or the subject of this Agreement (including without limitation, any
<PAGE>
20
misrepresentation by the Company in this Agreement (the "indemnified
liabilities"); provided that the Company shall have no obligation to an
--------
Indemnitee hereunder with respect to indemnified liabilities if it has been
determined by a final decision (after all appeals and the expiration of time to
appeal) by a court of competent jurisdiction that such indemnified liability
arose from the negligence or willful misconduct of that Indemnitee. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, the Company shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all indemnified liabilities incurred by the Indemnitees or any
of them.
(b) The Company agrees to pay, and to save the Collateral Agent
harmless from, any and all liabilities, costs and expenses (including, without
limitation, legal fees and expenses) (1) with respect to, or resulting from any
delay in paying, any and all excise, sales or other taxes which may be payable
or determined to be payable with respect to any of the Collateral, (2) with
respect to, or resulting from, any delay in complying with any Requirement of
Law applicable to any of the Collateral and (3) in connection with any of the
transactions contemplated by this Agreement.
15.2 Survival. The obligations of the Company contained in this
--------
Section 15 shall survive the termination of this Agreement and the discharge of
the Company's other obligations under this Agreement.
15.3 Reimbursements. Any amounts paid by any Indemnitee as to which
--------------
such Indemnitee has the right to reimbursement shall constitute Obligations
secured by the Collateral.
16. Notices. All notices, requests and demands to or upon the
-------
Collateral Agent or the Company to be effective shall be in writing (or by
telex, fax or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (a) when delivered by hand or (b) if
given by mail, when deposited in the mails by certified mail, return receipt
requested, or (c) if by telex, fax or similar electronic transfer, when sent and
receipt has been confirmed, addressed to the Collateral Agent at its address or
transmission number for notices provided in Section 1.5 of the Indenture or to
the Company at the address set forth below its signature. The Collateral Agent
and the Company may change their addresses and transmission numbers for notices
by notice in the manner provided in this Section.
17. Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
<PAGE>
21
18. Amendments in Writing; No Waiver; Cumulative Remedies.
-----------------------------------------------------
18.1 Amendments in Writing. None of the terms or provisions of this
---------------------
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Company and the Collateral Agent in
accordance with the provisions of the Indenture.
18.2 No Waiver by Course of Conduct. Neither the Collateral Agent or
------------------------------
any Holder shall by any act (except by a written instrument pursuant to
subsection 18.1 hereof), delay, indulgence, omission or otherwise be deemed to
have waived any right or remedy hereunder or to have acquiesced in any Default
or Event of Default or in any breach of any of the terms and conditions hereof.
No failure to exercise, nor any delay in exercising, on the part of the
Collateral Agent or any Holder, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the Collateral
Agent or the Holders of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Collateral Agent or
the Holders would otherwise have on any future occasion.
18.3 Remedies Cumulative. The rights and remedies herein provided are
-------------------
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
19. Section Headings. The section and subsection headings used in
----------------
this Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
20. Successors and Assigns. This Agreement shall be binding upon the
----------------------
successors and assigns of the Company and shall inure to the benefit of the
Collateral Agent and its successors and assigns.
21. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
-------------
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
22. Submission To Jurisdiction; Waivers. The Company hereby
-----------------------------------
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement to which it is a party, or for
recognition and enforcement of any judgement in respect thereof, to the
non-exclusive
<PAGE>
22
general jurisdiction of the Courts of the State of New York, the courts of
the United States of America for the Southern District of New York, and
appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Company at its address set forth in Section 1.5 of the Indenture or at such
other address of which the Collateral Agent shall have been notified
pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this subsection any special, exemplary, punitive or consequential
damages.
[23. Special Louisiana Provisions. Insofar as the validity or
----------------------------
perfection of the security interest hereunder or the remedies hereunder are
governed by the laws of the State of Louisiana, the Company agrees as follows:
(a) For purposes of Louisiana executory process, the Company
acknowledges the Obligations secured hereby, whether now existing or to
arise hereafter, and confesses judgment thereon if not paid when due. Upon
the occurrence of an Event of Default and at any time thereafter so long as
the same shall be continuing, and in addition to all other rights and
remedies granted the Collateral Agent hereunder, it shall be lawful for and
the Company hereby authorizes the Collateral Agent without making a demand
or putting the Company in default, a putting in default being expressly
waived, to cause all and singular the Collateral to be seized and sold
after due process of law, the Company waiving the benefit of any and all
laws or parts of laws relative to appraisement of property seized and sold
under executory process or other legal process, and consenting that the
Collateral be sold without appraisement, either in its entirety or in lots
or parcels, as the Collateral Agent may determine, to the highest bidder
for cash or on such other terms as the plaintiff in such proceedings may
direct. In addition, the Collateral Agent shall have all of the rights and
remedies available to it under this Security
<PAGE>
23
Agreement or under the Louisiana Commercial Laws (Louisiana Revised
Statutes, Title 10), then in effect, and under Chapter 9 of the Louisiana
Commercial Laws, then in effect (La. R.S. 10:9-101 et seq.).
(b) The Company hereby waives:
(i) the benefit of appraisement provided for in Articles
2332, 2336, 2723 and 2724 of the Louisiana Code of Civil Procedure and
all other laws conferring the same;
(ii) the demand and three (3) days notice of demand as
provided in Articles 2639 and 2721 of the Louisiana Code of Civil
Procedure;
(iii) the notice of seizure provided by Articles 2293 and
2721 of the Louisiana Code of Civil Procedure; and
(iv) the three (3) days delay provided for in Articles 2331
and 2722 of the Louisiana Code of Civil Procedure.
(c) The Company expressly authorizes and agrees that the Collateral
Agent shall have the right to appoint a keeper of the Collateral pursuant
to the terms and provisions of La. R.S. 9:5136.]
IN WITNESS WHEREOF, the undersigned has caused this Security Agreement
to be duly executed and delivered as of the date first above written.
[NAME OF SUBSIDIARY]
By:____________________________
Name:_______________________
Title:______________________
Address:_______________________
_______________________________
_______________________________
Telex:_________________________
Fax: _________________________
<PAGE>
Schedule 1
----------
CONTRACTS
<PAGE>
Schedule 2
----------
PATENTS AND PATENT LICENSES
<PAGE>
Schedule 3
----------
TRADEMARKS AND TRADEMARK LICENSES
<PAGE>
Schedule 4
----------
VEHICLES
<PAGE>
Schedule 5
----------
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
-------------------------------
[List each office where a financing statement is to be filed]/*/
Patent and Trademark Filings
----------------------------
[List all filings]
Other Actions
-------------
[Describe other actions to be taken]
- -----------------
/*/ Note that perfection of security interests in patents and trademarks
generally requires filings under the BELOW in the jurisdictions where filings
would be made if the patents and trademarks were general intangibles, as well as
filings in the U.S Copyright Office and the U.S. Patent & Trademark Office.
<PAGE>
Schedule 6
----------
INVENTORY AND EQUIPMENT
Item Location
---- --------
<PAGE>
EXHIBIT 4.7
INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT dated as of ______ __, 1994, between FIRST
NATIONAL BANK OF COMMERCE ("FNBC"), as trustee (in such capacity, the "Trustee")
under the Indenture dated as of ________ __, 1994 (as amended, supplemented or
otherwise modified from time to time, the "Indenture") between the and Bayou
Steel Corporation (the "Company") and as collateral agent (in such capacity, the
"Collateral Agent") under certain of the Security Documents (as defined in the
Indenture) (FNBC, in its capacities as Trustee and Collateral Agent, shall be
referred to herein as the "Trustee"), and CHEMICAL BANK, a New York banking
corporation, as agent (in such capacity, the "Bank Agent") under the Credit
Agreement dated as of June 28, 1989 as amended and restated through November 23,
1993, among the Company, the lenders listed therein (the "Banks") and the Bank
Agent (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"). FNBC and the Bank Agent are each hereinafter sometimes
referred to individually as a "Collateral Agent" and collectively as the
"Collateral Agents".
The Banks will make loans (collectively, the "Revolving Loans") to the
Company, secured principally by accounts receivable arising in the ordinary
course of business, inventory and the proceeds thereof, as more particularly
described in the Security Agreement, dated as of June 28, 1989, as amended and
restated through November 23, 1993 (as amended, supplemented or otherwise
modified from time to time, the "Bank Security Agreement"), between the Company
and the Bank Agent for the benefit of the Banks. The Credit Agreement and the
Bank Security Agreement are collectively referred to herein as the "Loan
Agreements". The Company issued $75,000,000 __% First Mortgage Notes due 2001
(the "Securities") under the Indenture. The Securities are secured by the
Indenture and the Security Documents (excluding this Intercreditor Agreement)
(the "First Mortgage Note Security Documents"). The Indenture and the First
Mortgage Note Security Documents are collectively referred to herein as the
"FNBC Security Documents."
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the parties hereto hereby agree as follows:
1. Description of Collateral; Priorities in Collateral.
----------------------------------------------------
(a) The Bank Agent's security interest in the following described
collateral in which it is granted a security interest pursuant to the Loan
Agreements shall take priority over any right, title or interest of the Trustee,
if any, in or to the following collateral: the Company's Accounts Receivable,
Inventory and Proceeds in Accounts Receivable and Inventory, as such terms are
defined in the Loan Agreements and below:
(i) "Accounts Receivable" shall mean all Accounts (as defined in the
Bank Security Agreement), and all rights in any returned goods, together
with all rights, titles, securities and guarantees with respect thereto,
including any rights to
<PAGE>
2
stoppage in transit, replevin, reclamation and resales, and all related
security interests, liens and pledges, whether voluntary or involuntary;
provided, that Accounts Receivable shall in no event include Accounts
arising other than from the sale of Inventory in the ordinary course of
business.
(ii) "Inventory" shall mean all merchandise intended for sale by the
Company, or consumed in the Company's business, together with all raw
materials, including, without limitation, scrap, billets, shapes,
additives, alloys, fluxes, electrodes and refractories, whether now owned
or hereafter acquired or arising, and all such property the sale or other
disposition of which has given rise to Accounts and which has been returned
to, repossessed or stopped in transit by or on behalf of the Company,
except for the following (as to which the Trustee shall have priority):
all properties, rights and interests that the Company has granted the
Trustee a security interest in pursuant to the FNBC Security Documents,
including, without limitation, bearings, rolls, guides and stores that
relate to machinery and equipment in which the Trustee has a security
interest pursuant to the FNBC Security Documents; all licenses, franchises,
permits, patents, patent rights, all formulae, processes, compounds,
drawings, designs, blueprints, surveys, reports, manuals, and operating
standards, relating to or used in the operation of the Company's business;
all trade secret rights, rights in works of authorship, and contract rights
relating to computer software programs, in whatever form created or
maintained; and all Proceeds and Proceeds (as such terms are defined in the
FNBC Security Documents) of all the foregoing excepted properties, rights
and interests as to which the Trustee has priority.
Notwithstanding the foregoing, the Bank Agent shall have the right to the
use of any collateral described in the foregoing exceptions to the extent
that such use is reasonably necessary to sell Inventory or to collect, sell
or otherwise dispose of Accounts Receivables.
(iii) "Proceeds" shall mean, subject to the exceptions in favor of the
Trustee set forth in clause (ii) above, any consideration received from the
sale, exchange, lease or other disposition of any asset or property that
constitutes Accounts Receivable, Inventory or Proceeds of such property,
any value received as a consequence of the possession of any Accounts
Receivable, Inventory or Proceeds thereof and any payment received from any
insurer or other person or entity as a result of the destruction, loss,
theft, damage or other involuntary conversion of whatever nature of any
asset or property which constitutes Accounts Receivable, Inventory or its
Proceeds.
(b) The Trustee's security interest in all the collateral subject to
the FNBC Security Documents (except collateral with respect to which the Bank
Agent has priority pursuant to Paragraph 1(a) above) shall take priority over
any right, title or interest of the Bank Agent, if any, in or to such
collateral.
<PAGE>
3
2. Agreements With Respect to Collateral.
-------------------------------------
(a) The Bank Agent shall not exercise any right or remedy or assert
any claim with respect to collateral as to which the Trustee has priority under
Paragraph 1(b) and the Trustee will not exercise any right or remedy, or assert
any claim with respect to collateral as to which the Bank Agent has priority
under Paragraph 1(a).
(b) If either Collateral Agent shall receive any proceeds or other
amounts payable with respect to any collateral (including, without limitation,
any proceeds of a sale, foreclosure, loss, damage or otherwise with respect to
such collateral), which collateral, pursuant hereto, is subject to a prior
security interest in favor of the other Collateral Agent, the Collateral Agent
receiving such proceeds shall promptly remit the same to the other Collateral
Agent.
(c) Each of the Collateral Agents will, upon request of the other,
from time to time execute and deliver or cause to be executed and delivered such
further instruments and do and cause to be done such further acts as may be
necessary or proper to carry out more effectively the provisions of this
Agreement, provided that the Trustee need only execute or furnish such documents
as the Trustee is required to furnish under the FNBC Security Documents.
(d) The Trustee will send to the Bank Agent a copy of each notice of
default it sends to Noteholders pursuant to Section 9.2 of the Indenture.
(e) The Trustee agrees that, at any time when it has physical
possession or control of the premises subject to the FNBC Security Documents or
any collateral in which the Bank Agent has a security interest, it will at all
times allow the Bank Agent the right, as the cost, risk and expense of the Bank
Agent and so long as such right is exercised in a manner which does not damage
the collateral in which the Trustee has a security interest or interfere with
the other operations or the other business of the Company, to enter such
premises for the purpose of repossessing, removing, selling or preparing for
shipment any Inventory which is subject to the Bank Agent's security interest.
In addition, the Trustee will allow the Bank Agent to store any such collateral
or take the actions referred to in the preceding sentence on the Company's
premises for up to six months after the date, if ever, on which the Trustee
gains physical possession or control of said premises. The rights of the Bank
Agent enumerated in this Paragraph (e) are effective notwithstanding any default
of the Company under the Indenture or any other agreement relating thereto
between the Trustee and the Company.
3. Applicability of Priorities. The priorities provided for in
---------------------------
Section 1 of this Agreement shall apply:
(a) without regard to the time or order of attachment or perfection
of the security interests and other liens to secure either the Revolving
Loans or the Securities, and without regard to the giving or failure to
give notice of the acquisition of any such security interest or lien; and
<PAGE>
4
(b) with respect to the relative priority and attachment of the security
interests and liens perfected by any party hereto, or with respect to the
attachment of such security interests or liens to the proceeds of the
collateral in question or to the proceeds of the proceeds thereof,
notwithstanding anything to the contrary in the provisions of the Uniform
Commercial Code or the Bankruptcy Code of 1978, as amended, or any state
bankruptcy or creditors act, and notwithstanding the giving or failure to
give notice of the acquisition or expected acquisition of any property or
security interest.
4. Notice of Default. Each Collateral Agent agrees that if it
------------------
declares the Company to be in default under its agreements, or makes demand for
payment of all obligations thereunder, such Collateral Agent will promptly
notify the other Collateral Agent of any such declaration.
5. No Effect on Others. This Agreement shall not affect the rights
--------------------
of the Collateral Agents relative to the rights of any other creditors of the
Company. Nothing in this Agreement shall be construed in any way to modify or
relieve the Company's obligations to perform its obligations under the Loan
Agreements or the FNBC Security Documents or to modify the obligations and
liabilities of the Company contained therein.
6. Confidentiality. Each of the Collateral Agents agrees to keep
----------------
confidential (and to cause its respective officers, directors, employees, agents
and representatives to keep confidential) all information, materials and
documents furnished to either Collateral Agent (the "Information").
Notwithstanding the foregoing, each Collateral Agent shall be permitted to
disclose Information (i) to such of its officers, directors, employees, agents
and representatives as need to know such Information in connection with its
participation in any of the Loan Agreements or FNBC Security Documents,
respectively; (ii) to the extent required by applicable laws and regulations or
by any subpoena or similar legal process, or requested by any governmental
agency or authority; (iii) to the extent such Information (A) becomes publicly
available other than as a breach of this Agreement or (B) becomes available to
such Collateral Agent on a non-confidential basis from a source other than the
other Collateral Agent; (iv) to the extent the other Collateral Agent shall have
consented to such disclosure in writing, or (v) as necessary in connection with
an assignment or participation contemplated by Sections 10.04(b) and 10.04(f) of
the Credit Agreement or as necessary in connection with Sections 9.10, 9.11 and
9.12 of the Indenture.
7. Amendments. The Bank Agent may amend the Loan Agreements, and
-----------
the Trustee may amend the FNBC Security Documents, without the consent of the
other Collateral Agent; provided, that for the purposes of this Agreement, the
capitalized terms contained in Paragraph 1(a) hereof shall have the meanings
given to them on the date of this Agreement; provided, however, that any
amendment to the Loan Agreements that adversely affects the interests of the
Trustee and any amendment to the FNBC Security Documents that adversely affects
the interests of the Banks shall not be effected without the consent of the
other Collateral Agent.
<PAGE>
5
8. Books and Records. In the event the Bank Agent elects to exercise
------------------
its right to remove the Company's books and records (whether pursuant to its
security interest therein or otherwise) it will do so only for the purpose of
copying such books and records, and it will return the originals for the benefit
of the Company (to the extent required under the Loan Agreements) or the
Trustee, as the case may be.
9. Miscellaneous.
--------------
(a) Notices. All notices, requests, demands and other communications
--------
required or permitted to be given hereunder shall be deemed to have been duly
given or made when delivered or telexed or if deposited in the United States
mail, three days after the day of deposit, first class postage prepaid,
addressed, in the case of the Bank Agent, as provided in the Loan Agreements
and, in the case of the Trustee, as provided in the Indenture, or to such other
address as such party may hereafter specify in a written notice to the other
parties named herein.
(b) Amendments and Successors. No agreement shall be effective to
--------------------------
amend, supplement or discharge in whole or in part this Agreement unless such
agreement is in writing, signed by the Collateral Agents. This Agreement shall
be binding upon and shall inure to the benefit of the successors and assigns of
the parties hereto.
(c) Severability. Any provision of this Agreement which is
-------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(d) Termination. This Agreement shall terminate upon the payment in
------------
full of all amounts outstanding under the Loan Agreements and other obligations
of the Company incurred thereunder or the payment in full of the Securities and
other obligations of the Company incurred thereunder.
(e) Headings. The headings in this Agreement are for convenience of
---------
reference only and shall not define or limit the terms thereof.
10. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
-------------
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11. Submission To Jurisdiction; Waivers. Each of the Collateral
-----------------------------------
Agents hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement to which it is a party, or for
recognition and
<PAGE>
6
enforcement of any judgement in respect thereof, to the non-exclusive
general jurisdiction of the Courts of the State of New York, the courts of
the United States of America for the Southern District of New York, and
appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(iii) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Collateral Agent at its address set forth in the Indenture or the Loan
Agreements, respectively, or at such other address of which the other
Collateral Agent shall have been notified pursuant hereto;
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(v) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this subsection any special, exemplary, punitive or consequential
damages.
<PAGE>
7
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers as of the date first above
written.
CHEMICAL BANK, as Agent
By___________________________
Title:
FIRST NATIONAL BANK OF COMMERCE,
as Trustee
By___________________________
Title:
<PAGE>
EXHIBIT 4.8
FORM OF SUBSIDIARIES GUARANTEE
SUBSIDIARIES GUARANTEE, dated as of ________ __, 1994 (as amended,
supplemented or otherwise modified from time to time, the "Subsidiaries
Guarantee"), by each of the corporations that are signatories hereto
(collectively the "Guarantors"; individually, a "Guarantor") in favor of FIRST
NATIONAL BANK OF COMMERCE, a Louisiana banking corporation, as collateral agent
(in such capacity and together with any successors in such capacity, the
"Collateral Agent") under the Indenture described below.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Bayou Steel Corporation, a Delaware corporation (the "Company") is
offering (the "Offering") $75,000,000 aggregate principal amount of ___% First
Mortgage Notes due 2003 (the "Securities");
WHEREAS, the Company is party to an Indenture dated as of ________ __,
1994, among the Company and the Collateral Agent in its capacity as trustee (in
such capacity, the "Trustee") thereunder (as amended, supplemented or otherwise
modified from time to time, the "Indenture");
WHEREAS, the Guarantors are wholly-owned subsidiaries of the Company;
WHEREAS, the Company and the Guarantors engage in related businesses and
each Guarantor will derive substantial direct and indirect benefit from the
Offering;
WHEREAS, the completion of the Offering is conditioned upon, among other
things, the execution and delivery by the Guarantors of this Guarantee;
NOW, THEREFORE, in consideration of the premises and to induce the Trustee
to enter into the Indenture, the Guarantors hereby agree with and for the
benefit of the Trustee as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms defined in
-------------
the Indenture and used herein shall have the meanings given to them in the
Indenture.
"Contractual Obligations" means, as to any Person, any provision of
-----------------------
any security issued by such Person or of any agreement, instrument or
undertaking to
<PAGE>
2
which such Person is a party or by which it or any of the property owned by
it is bound.
"Obligations" means the collective reference to the unpaid principal
-----------
of and interest on the Securities and all other obligations and liabilities
of the Company with respect to the Securities (including, without
limitation, interest accruing at the then applicable rate provided in the
Securities after the maturity of the Securities and interest accruing at
the then applicable rate provided in the Securities after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Company, whether or not
a claim for post-filing or post-petition interest is allowed in such
proceeding and, to the extent permitted by law, interest accruing on unpaid
interest), whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Indenture, Security Documents, Securities or
any other document made, delivered or given in connection therewith,
whether on account of principal, interest, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Trustee or the Collateral Agent that are
required to be paid by the Company or the Guarantor pursuant to the terms
of the Indenture, the Subsidiary Guarantee or the other Security Documents.
"Requirement of Law" means, as to any Person, the Certificate of
------------------
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other governmental authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
(b) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Guarantee shall refer to this Guarantee as a whole and
not to any particular provision of this Guarantee, and section and paragraph
references are to this Guarantee unless otherwise specified.
(b) All references to the Collateral Agent shall be deemed to include a
reference to the Trustee, and the reverse thereof shall similarly apply.
(c) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
2. Guarantee. (a) Subject to the provisions of paragraph 2, each of the
---------
Guarantors hereby, jointly and severally, unconditionally and irrevocably,
guarantees to the Collateral Agent, for the ratable benefit of the Holders and
their respective successors, indorsees, transferees and assigns, the prompt and
complete payment and
<PAGE>
3
performance by the Company when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations.
(b) Anything herein or in any other Security Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Security Documents shall in no event exceed the amount which can be
guaranteed by such Guarantor under applicable federal and state laws relating to
the insolvency of debtors.
(c) Each Guarantor further agrees to pay any and all expenses (including,
without limitation, all fees and disbursements of counsel) which may be paid or
incurred by the Collateral Agent or any Holder in enforcing, or obtaining advice
of counsel in respect of, any rights with respect to, or collecting, any or all
of the Obligations and/or enforcing any rights with respect to, or collecting
against, such Guarantor under this Guarantee. This Guarantee shall remain in
full force and effect until the Obligations are paid in full.
(d) Each Guarantor agrees that the Obligations may at any time and from
time to time exceed the amount of the liability of such Guarantor hereunder
without impairing this Guarantee or affecting the rights and remedies of the
Collateral Agent or any Holder hereunder.
(e) No payment or payments made by the Company, any of the Guarantors, any
other guarantor or any other Person or received or collected by the Trustee or
the Collateral Agent from the Company, any of the Guarantors, any other
guarantor or any other Person by virtue of any action or proceeding or any set-
off or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Guarantor hereunder which
shall, notwithstanding any such payment or payments other than payments made by
such Guarantor in respect of the Obligations or payments received or collected
from such Guarantor in respect of the Obligations, remain liable for the
Obligations up to the maximum liability of such Guarantor hereunder until the
Obligations are paid in full.
(f) Each Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Trustee or the Collateral Agent on
account of its liability hereunder, it will notify the Collateral Agent in
writing that such payment is made under this Guarantee for such purpose.
3. Right of Contribution. Each Guarantor hereby agrees that to the extent
---------------------
that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder who has not paid its
proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and
<PAGE>
4
conditions of Section 5 hereof. The provisions of this Section shall in no
respect limit the obligations and liabilities of any Guarantor to the Trustee,
the Collateral Agent and the Holders, and each Guarantor shall remain liable to
the Trustee, the Collateral Agent and the Holders for the full amount guaranteed
by such Guarantor hereunder.
4. Right of Set-off. Upon the occurrence of any Event of Default, each
----------------
Guarantor hereby irrevocably authorizes each Holder at any time and from time to
time without notice to such Guarantor or any other Guarantor, any such notice
being expressly waived by each Guarantor, to set-off and appropriate and apply
any and all deposits (general or special, time or demand, provisional or final),
in any currency, and any other credits, indebtedness or claims, in any currency,
in each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Holder to or for the credit or the
account of such Guarantor, or any part thereof in such amounts as such Holder
may elect, against and on account of the obligations and liabilities of such
Guarantor to such Holder hereunder and claims of every nature and description of
such Holder against such Guarantor, in any currency, whether arising hereunder,
under the Indenture, the Securities, any Security Documents or otherwise, as
such Holder may elect, whether or not the Trustee, the Collateral Agent or any
Holder has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. The Collateral Agent and
each Holder shall notify such Guarantor promptly of any such set-off and the
application made by the Collateral Agent or such Holder, provided that the
--------
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Collateral Agent and each Holder under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Collateral Agent or such Holder
may have.
5. No Subrogation. Notwithstanding any payment or payments made by any of
--------------
the Guarantors hereunder or any set-off or application of funds of any of the
Guarantors by any Holder, no Guarantor shall be entitled to be subrogated to any
of the rights of the Trustee, the Collateral Agent or any Holder against the
Company or any other Guarantor or any collateral security or guarantee or right
of offset held by any Holder for the payment of the Obligations, nor shall any
Guarantor seek or be entitled to seek any contribution or reimbursement from the
Company or any other Guarantor in respect of payments made by such Guarantor
hereunder, until all amounts owing to the Trustee, the Collateral Agent and the
Holders by the Company on account of the Obligations are paid in full. If any
amount shall be paid to any Guarantor on account of such subrogation rights at
any time when all of the Obligations shall not have been paid in full, such
amount shall be held by such Guarantor in trust for the Trustee, the Collateral
Agent and the Holders, segregated from other funds of such Guarantor, and shall,
forthwith upon receipt by such Guarantor, be turned over to the Collateral Agent
in the exact form received by such Guarantor (duly indorsed by such Guarantor to
the Collateral Agent, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as the Collateral Agent may
determine.
<PAGE>
5
6. Amendments, etc. with respect to the Obligations; Waiver of Rights.
------------------------------------------------------------------
Each Guarantor shall remain obligated hereunder notwithstanding that, without
any reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Obligations made
by the Collateral Agent or any Holder may be rescinded by such party and any of
the Obligations continued, and the Obligations, or the liability of any other
party upon or for any part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the Collateral Agent or any
Holder, and the Indenture, the Securities and the other Security Documents and
any other documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the
Collateral Agent (or the Holders, as the case may be) may deem advisable from
time to time, and any collateral security, guarantee or right of offset at any
time held by the Collateral Agent or any Holder for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. Neither
the Collateral Agent nor any Holder shall have any obligation to protect,
secure, perfect or insure any Lien at any time held by it as security for the
Obligations or for this Guarantee or any property subject thereto. When making
any demand hereunder against any of the Guarantors, the Collateral Agent or any
Holder may, but shall be under no obligation to, make a similar demand on the
Company or any other Guarantor or guarantor, and any failure by the Collateral
Agent or any Holder to make any such demand or to collect any payments from the
Company or any such other Guarantor or guarantor or any release of the Company
or such other Guarantor or guarantor shall not relieve any of the Guarantors in
respect of which a demand or collection is not made or any of the Guarantors not
so released of their several obligations or liabilities hereunder, and shall not
impair or affect the rights and remedies, express or implied, or as a matter of
law, of the Collateral Agent or any Holder against any of the Guarantors. For
the purposes hereof "demand" shall include the commencement and continuance of
any legal proceedings.
7. Guarantee Absolute and Unconditional. Each Guarantor waives any and
------------------------------------
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Collateral Agent or any
Holder upon this Guarantee or acceptance of this Guarantee, the Obligations, and
any of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon this
Guarantee; and all dealings between the Company and any of the Guarantors, on
the one hand, and the Collateral Agent and the Holders, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon this Guarantee. Each Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Company or any of the Guarantors with respect to the Obligations. Each
Guarantor understands and agrees that this Guarantee shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity, regularity or enforceability of the Indenture, any Security or
any other Security Document, any of the Obligations or
<PAGE>
6
any other collateral security therefor or guarantee or right of offset with
respect thereto at any time or from time to time held by the Collateral Agent or
any Holder, (b) any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be asserted by
the Company against the Collateral Agent or any Holder, or (c) any other
circumstance whatsoever (with or without notice to or knowledge of the Company
or such Guarantor) which constitutes, or might be construed to constitute, an
equitable or legal discharge of the Company for the Obligations, or of such
Guarantor under this Guarantee, in bankruptcy or in any other instance. When
pursuing its rights and remedies hereunder against any Guarantor, the Collateral
Agent and any Holder may, but shall be under no obligation to, pursue such
rights and remedies as it may have against the Company or any other Person or
against any collateral security or guarantee for the Obligations or any right of
offset with respect thereto, and any failure by the Collateral Agent or any
Holder to pursue such other rights or remedies or to collect any payments from
the Company or any such other Person or to realize upon any such collateral
security or guarantee or to exercise any such right of offset, or any release of
the Company or any such other Person or any such collateral security, guarantee
or right of offset, shall not relieve such Guarantor of any liability hereunder,
and shall not impair or affect the rights and remedies, whether express, implied
or available as a matter of law, of the Collateral Agent and the Holders against
such Guarantor. This Guarantee shall remain in full force and effect and be
binding in accordance with and to the extent of its terms upon each Guarantor
and the successors and assigns thereof, and shall inure to the benefit of the
Collateral Agent and the Holders, and their respective successors, indorsees,
transferees and assigns, until all the Obligations and the obligations of each
Guarantor under this Guarantee shall have been satisfied by payment in full.
8. Reinstatement. This Guarantee shall continue to be effective, or be
-------------
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Collateral Agent or any Holder upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Company or any Guarantor, or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Company or any Guarantor or any substantial
part of its property, or otherwise, all as though such payments had not been
made.
9. Payments. Each Guarantor hereby guarantees that payments hereunder
--------
will be paid to the Collateral Agent without set-off or counterclaim in U.S.
Dollars at the office of the Collateral Agent located at
_______________________________.
10. Representations and Warranties. Each Guarantor hereby represents and
------------------------------
warrants that:
(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power and
<PAGE>
7
authority and the legal right to own and operate its property, to lease the
property it operates and to conduct the business in which it is currently
engaged;
(b) it has the corporate power and authority and the legal right to
execute and deliver, and to perform its obligations under, this Guarantee, and
has taken all necessary corporate action to authorize its execution, delivery
and performance of this Guarantee;
(c) this Guarantee constitutes a legal, valid and binding obligation of
such Guarantor enforceable in accordance with its terms, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting the enforcement of creditors' rights
generally, general equitable principles and an implied covenant of good faith
and fair dealing;
(d) the execution, delivery and performance of this Guarantee will not
violate any provision of any Requirement of Law or Contractual Obligation of
such Guarantor and will not result in or require the creation or imposition of
any Lien on any of the properties or revenues of such Guarantor pursuant to any
Requirement of Law or Contractual Obligation of the Guarantor;
(e) no consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority and no consent of any other
Person (including, without limitation, any stockholder or creditor of such
Guarantor) is required in connection with the execution, delivery, performance,
validity or enforceability of this Guarantee;
(f) no litigation, investigation or proceeding of or before any arbitrator
or governmental authority is pending or, to the knowledge of such Guarantor,
threatened by or against such Guarantor or against any of its properties or
revenues (1) with respect to this Guarantee or any of the transactions
contemplated hereby, (2) which could have a material adverse effect on the
business, operations, property or financial or other condition of such
Guarantor;
(g) it has good record and marketable title in fee simple to, or a valid
leasehold interest in, all its real property, and good title to, or a valid
leasehold interest in, all its other property, and none of such property is
subject to any Lien of any nature whatsoever except such as are disclosed in the
balance sheet referred to in paragraph 10 hereof and Liens relating to the
Tulsa Facility;
(h) it has filed or caused to be filed all tax returns which, to its
knowledge, are required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of its
property by any governmental authority (other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP
<PAGE>
8
have been provided on the books of such Guarantor); no tax Lien has been filed,
and, to the knowledge of such Guarantor, no claim is being asserted, with
respect to any such tax, fee or other charge.
(i) The balance sheets of such Guarantor as at September 30, 1993 and
September 30, 1992 and the related statements of income and of cash flows for
the fiscal years ended on each such date, certified by a Responsible Officer,
copies of which have heretofore been furnished to the Collateral Agent, are
complete and correct and present fairly the financial condition of such
Guarantor as at such dates, and the results of its operations and its cash flow
for the fiscal years then ended. The unaudited balance sheet of such Guarantor
as at December 31, 1993 and the related unaudited statement of income and of
cash flow for the three-month period ended on such date, certified by a
Responsible Officer, copies of which have heretofore been furnished to the
Collateral Agent, are complete and correct and present fairly the financial
condition of such Guarantor as at such date, and the results of its operations
and its cash flow for the three-month period then ended (subject to normal year-
end audit adjustments). All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as disclosed
therein). At the date of the most recent balance sheet referred to above, such
Guarantor had no material contingent liability or liability for taxes, or any
long-term lease or unusual forward or long-term commitment, including, without
limitation, any interest rate or foreign currency swap or exchange transaction
or other financial derivative, which is not reflected in the foregoing
statements or in the notes thereto. During the period from December 31, 1993,
to and including the date hereof there has been no sale, transfer or other
disposition by such Guarantor of any material part of its business or property
and no purchase or other acquisition of any business or property (including any
capital stock of any other Person) material in relation to the financial
condition of such Guarantor at December 31, 1993.
11. Authority of Collateral Agent. Each Guarantor acknowledges that the
-----------------------------
rights and responsibilities of the Collateral Agent under this Guarantee with
respect to any action taken by the Collateral Agent or the exercise or non-
exercise by the Collateral Agent of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Guarantee shall, as between the Collateral Agent and the Holders, be governed by
the Indenture and by such other agreements with respect thereto as may exist
from time to time among them, but, as between the Collateral Agent and such
Guarantor, the Collateral Agent shall be conclusively presumed to be acting as
agent for the Holders with full and valid authority so to act or refrain from
acting, and no Guarantor shall be under any obligation, or entitlement, to make
any inquiry respecting such authority.
12. Notices. All notices, requests and demands to or upon the Collateral
-------
Agent, any Holder or any Guarantor to be effective shall be in writing (or by
telex, fax or
<PAGE>
9
similar electronic transfer confirmed in writing) and shall be deemed to have
been duly given or made (1) when delivered by hand or (2) if given by mail, when
deposited in the mails by certified mail, return receipt requested, or (3) if by
telex, fax or similar electronic transfer, when sent and receipt has been
confirmed, addressed as follows:
(a) if to the Collateral Agent, at its address or transmission number for
notices provided in subsection 1.5 of the Indenture; and
(b) if to the Holders, by the means described in Section 1.6 of the
Indenture; and
(c) if to any Guarantor, at its address or transmission number for notices
set forth under its signature below.
The Collateral Agent and each Guarantor may change its address and
transmission numbers for notices by notice in the manner provided in this
Section.
13. Counterparts. This Guarantee may be executed by one or more of the
------------
Guarantors on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the counterparts of this Guarantee signed by all the Guarantors shall be
lodged with the Collateral Agent.
14. Severability. Any provision of this Guarantee which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
15. Integration. This Guarantee represents the agreement of each
-----------
Guarantor with respect to the subject matter hereof and there are no promises or
representations by the Collateral Agent or any Holder relative to the subject
matter hereof not reflected herein.
16. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of
-----------------------------------------------------
the terms or provisions of this Guarantee may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by each Guarantor
and the Collateral Agent; provided, that any provision of this Guarantee may be
--------
waived by the Collateral Agent and the Holders in a letter or agreement executed
by the Collateral Agent.
(b) Neither the Collateral Agent nor any Holder shall by any act (except
by a written instrument pursuant to paragraph 16(a) hereof), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default or in any breach of any of
the terms and
<PAGE>
10
conditions hereof. No failure to exercise, nor any delay in exercising, on the
part of the Collateral Agent or any Holder, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Collateral Agent or any Holder of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy which
the Collateral Agent or such Holder would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
17. Section Headings. The section headings used in this Guarantee are for
----------------
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
18. Successors and Assigns. This Guarantee shall be binding upon the
----------------------
successors and assigns of each Guarantor and shall inure to the benefit of the
Collateral Agent and the Holders and their successors and assigns.
19. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
-------------
PARTIES UNDER THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
20. Submission To Jurisdiction; Waivers. Each Guarantor hereby
-----------------------------------
irrevocably and unconditionally:
(1) submits for itself and its property in any legal action or
proceeding relating to this Guarantee to which it is a party, or for
recognition and enforcement of any judgement in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of New York,
the courts of the United States of America for the Southern District of New
York, and appellate courts from any thereof;
(2) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(3) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Guarantor at its
<PAGE>
11
address set forth below its signature line or at such other address of
which the Collateral Agent shall have been notified pursuant hereto;
(4) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(5) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this subsection any special, exemplary, punitive or consequential
damages.
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to
be duly executed and delivered by its duly authorized officer as of the day and
year first above written.
[NAME OF SUBSIDIARY GUARANTOR] [NAME OF SUBSIDIARY GUARANTOR]
By _______________________ By __________________________
Title _______________________ Title __________________________
Address of Notices: Address for Notices:
__________________________________ __________________________________
__________________________________ __________________________________
Telex: ___________________________ Telex: ___________________________
Fax: ___________________________ Fax: ___________________________
<PAGE>
EXHIBIT 4.9
RELEASE OF FEDERAL
INCOME TAX OWNERSHIP AND AGREEMENT
DATED JANUARY __, 1994
1. First National Bank of Commerce, a national banking association
(the "Trustee"), is trustee under the Indenture dated January __, 1994 (as
amended, supplemented or otherwise modified from time to time, the "Indenture")
between the Trustee and Bayou Steel Corporation, a Delaware corporation (the
"Company"), for the benefit of Holders (as defined in the Indenture). Pursuant
to a Security Agreement, dated January __, 1994 (as amended, supplemented or
otherwise modified from time to time, the "Security Agreement") from the Company
to the Trustee, the Company has granted to the Trustee for the benefit of the
Holders a valid and perfected security interest in, inter alia, certain
equipment (the "Equipment") which is the subject of a safe harbor lease (the
"TBT Lease") dated November 11, 1981, between the Company and Amoco Tax Leasing
I Corporation, a Delaware corporation (the "Tax Lessor"). As used herein, the
term "Temporary Regulations" means the temporary U.S. Income Tax Regulations as
in effect on the date of this Release (the "Effective Date") promulgated under
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended (the "Code")
as in effect on the date on which the TBT Lease was entered into. Capitalized
terms not otherwise defined herein shall have the meaning given to them in the
Indenture. All references to the Trustee shall include a reference to the
Collateral Agent.
2. In connection with the Company's transfer to the Tax Lessor of the
tax benefits associated with the Equipment pursuant to the TBT Lease, and solely
in connection with said transfer, the Trustee, upon the request and at the
direction of the Holders, hereby releases the United States Federal income tax
ownership of the
<PAGE>
2
Equipment from the security interest and lien to be created by the Indenture or
the Security Agreement in and upon the Equipment and the TBT Lease, if any. The
Trustee, upon the request and at the direction of the Holders, hereby further
agrees to execute any and all documents which may reasonably be requested by the
Company, Voest-Alpine A.G., former owner of the Company (which together with
Voest-Alpine International Corporation shall be referred to as "Voest-Alpine"),
or Meyers to effect or confirm such release set forth in the preceding sentence,
provided that the Trustee shall be reimbursed by the Company, Voest-Alpine or
Meyers, as the case may be, on demand, for all charges and costs on an after-tax
basis (including attorneys' fees), if any, incurred in connection with the
execution of any such documents (all such documents to be prepared by the
Company).
The release set forth in this paragraph 2 is given solely for the
purpose of complying with Section 5c.168(f)(8)-2(a)(6) of the Temporary
Regulations. Without limiting the generality of the foregoing, said release
shall in no manner be construed as a release, in whole or in part, of the
security interest and lien to be created by the Indenture or the Security
Agreement in favor of the Trustee in and upon the Equipment, and any obligations
the payment or performance of which are secured by the Indenture or the Security
Agreement shall in no way be affected by said release. The Trustee hereby
agrees to execute a confirmation, at the request and expense of Voest-Alpine
(and the Company is hereby deemed to join in any such request), that the Trustee
consents to any request made by Voest-Alpine or the Tax Lessor in connection
with the giving of notice of the Tax Lessor's Federal income tax ownership to
any judicial or administrative body having jurisdiction over any
<PAGE>
3
Supervised Proceeding (as hereinafter defined) and to the debtor in possession
of all or any portion of the Equipment or the TBT Lease or to any trustee,
receiver or similar person who shall have been appointed by a court in
connection with any such Supervised Proceeding, that (a) the Equipment not be
sold or assigned in any manner which would result in a "disqualifying event"
within the meaning of Section 5c.168(f)(8)-8(b) of the Temporary Regulations,
except to the extent that such a "disqualifying event" would result from any
abandonment, mothballing, scrapping or retirement of all or any portion of the
Equipment and, (b) that the court or administrative body having jurisdiction
over such Supervised Proceeding (as hereinafter defined) and the debtor in
possession of all or any portion of the Equipment or the TBT Lease, or any
trustee, receiver or similar person appointed by the court or administrative
body, provide a copy of the notice of the Tax Lessor's Federal income tax
ownership to any Transferee (as hereinafter defined) of the interest of the
Company in all or any portion of the Equipment or the TBT Lease prior to the
consummation of any sale or assignment of such interest.
3. The Trustee agrees that in all instances where it acts to exercise
and/or enforce its rights and/or remedies under applicable law, the Indenture,
the Security Agreement and/or any other document with respect to all or a
portion of the Equipment or the TBT Lease, except in circumstances where the
Trustee acts in connection with the sale or assignment of the interest of the
Company in all or any portion of the Equipment or any TBT Lease in a bankruptcy,
liquidation, receivership, a court-supervised foreclosure, or in any similar
proceeding for the relief or protection of insolvent debtors in Federal or State
court (each of said proceedings is
<PAGE>
4
herein referred to as a "Supervised Proceeding"), the Trustee shall give at
least ten (10) days' prior written notice to Voest-Alpine and Meyers of a
proposed sale or assignment of the interest of the Company in the TBT Lease or
all or any portion of the Equipment, and the Trustee shall not proceed with such
proposed sale or assignment prior to the expiration of such ten (10) days. Upon
written request of Voest-Alpine or Meyers given within such 10-day period to the
Trustee accompanied by an indemnity agreement of Voest-Alpine or Meyers or a
financially-solvent third party to the Trustee, which agreement, in the sole
opinion of the Trustee, shall be adequate for the fees, costs, and out-of-pocket
expenses of the Trustee and shall be held harmless on an after-tax basis, in
connection with the sale or assignment of the interest of the Company in all or
any portion of the Equipment or the TBT Lease, the Trustee shall not proceed
with such proposed sale or assignment without complying with the following
requirements (it being understood that none of the following requirements shall
have any effect upon or bind the Trustee if any action is taken in connection
with any Supervised Proceeding involving the interest of the Company in all or
any portion of the Equipment or the TBT Lease):
(i) The Trustee shall have received an opinion of counsel (the
counsel to be selected by the Trustee, with the approval of Company not to
be unreasonably withheld, the "Counsel's Opinion") to the effect that the
Equipment will be "section 38 property" (as said term is defined in Section
48(a) of the Code and the U.S. Income Tax Regulations promulgated
thereunder, both as in effect on the Effective Date) in the hands of the
proposed purchaser or assignee (such proposed purchaser or assignee is
<PAGE>
5
hereinafter referred to as the "Transferee"), except to the extent that the
Equipment may not so qualify due to the intent of the Transferee to
abandon, mothball, scrap or retire all or any portion of the Equipment,
which opinion may be based, without independent investigation, upon a
certificate signed and delivered by the Transferee, or by a partner or an
authorized officer thereof, setting forth the manner and circumstances in
which the Equipment will be employed by the Transferee and further
containing, to the extent necessary to prevent the portion of Equipment
from ceasing to qualify as "section 38 property" as defined in section
48(a) of the Code and the U.S. Income Tax Regulations promulgated
thereunder, both as in effect on the Effective Date, the following
representations:
(a) that the Equipment will not be used outside of the United
States;
(b) that the Transferee is not an organization which has applied
for or been granted exemption or is otherwise exempt from Untied
States Federal income taxes pursuant to any provision of the Code, as
in effect on the Effective Date;
(c) that the Transferee is not the United States, any state or
political subdivision thereof, any possession of the United States, or
any agency or instrumentality of any of the foregoing or;
(d) that the Transferee is not a foreign government, any
international organization or any agency or instrumentality of any of
the foregoing;
<PAGE>
6
(ii) The Trustee shall further have received a Counsel's Opinion
to the effect that the Transferee is not a foreign person within the
meaning of section 5c.168(f)(8)-6(b)(4) of the Temporary Regulations, which
opinion may be based, without independent investigation, upon a certificate
signed and delivered by the Transferee, or by a partner or an authorized
officer thereof, representing that the Transferee is one of the following:
(a) a citizen or resident of the Untied States; or
(b) a partnership among corporations created or organized in the
United states or under the law of any State thereof; or
(c) a corporation created or organized in the United States or
under the law of any state thereof; and
(iii) The Transferee shall have executed and delivered to the
Trustee an agreement whereby:
(a) The Transferee shall have (1) consented to take the Equipment
subject to the TBT Lease, within the meaning of Section 5c.168(f)(8)-2
of the Temporary Regulations only and not for any other purpose (the
Company remaining exclusively liable under all provisions of the TBT
Lease), (2) agreed to furnish to the Tax Lessor its written consent to
such effect within 60 days following the transfer of the TBT Lease or
all or any portion of the Equipment to such Transferee, (3) agreed to
file the statement with its United States Federal income tax return
for the Transferee's taxable year in which the transfer occurs, which
statement is contemplated by Section 5c.168(f)(8)-2(a)(5) of the
Temporary
<PAGE>
7
Regulations, and (4) agreed to furnish to the Tax Lessor any
information with respect to the Transferee that would be necessary to
enable the Tax Lessor to file a complete and accurate statement with
its United States Federal income tax return for the Tax Lessor's
taxable year in which the transfer occurs, which statement is
contemplated by Section 5c.168(f)(8)-2(a)(5) of the Temporary
Regulations; and
(b) The Transferee shall have agreed in writing not to make any
transfer of its interest in all or a portion of the Equipment or the
TBT Lease unless it shall have obtained opinions of counsel and a
written agreement from any person to whom the Transferee shall
transfer its interest in all or a portion of the Equipment or the TBT
Lease, which opinion and agreement conforms with the provisions of
subparagraphs (i), (ii) and (iii) of this paragraph 3, but relating to
such transfer (it being understood that for purposes of this paragraph
3, all references to a "Transferee" refer to each subsequent
transferee in connection with any transfer by any such subsequent
transferee).
It is recognized and understood by and between the parties hereto that
since the opinions referred to in this paragraph 3 will be based upon law in
effect on the Effective Date, and the certificates and agreements of the
Transferee or any subsequent transferee, there is no assurance that a sale or
assignment made in accordance with the provisions of this paragraph 3 will not
result in a "disqualifying event" within the meaning of Section 5c.168(f)(8)-
8(b) of the Temporary Regulations or other loss or recapture of the tax benefits
conveyed to the Tax Lessor.
<PAGE>
8
A Counsel's Opinion, addressed to the Trustee, to the effect that the
foregoing provisions of this paragraph 3 have been complied with shall
conclusively establish such compliance for the purposes hereof.
Any act or failure to act by the Trustee in connection with the
requirements of this paragraph 3 shall in no event serve as the basis for any
claim by the Company, any Holder or any other party having a security interest
in or Lien upon the interest of any of the aforementioned persons in the
Equipment or their successors or assigns, including, but not limited to, a claim
that such interest in the Equipment was sold, assigned or otherwise disposed of
in a commercially unreasonable manner.
The fees and expenses relating to all Counsel's Opinion shall be the
sole responsibility of the Company.
4. It is agreed and understood that neither (a) any Holder, the
Collateral or any other security or collateral for the Securities nor (b) except
as a result of gross negligence or wilful misconduct, the Trustee shall have any
obligation, be in any manner responsible, or be in any manner available for
recovery of damages to the Company, the Tax Lessor, Voest-Alpine or Meyers or
the Transferee or any successors or assigns of any of the foregoing solely as a
result of any act or failure to act by any such person in connection with this
Release. Without limiting the generality of the foregoing, under no
circumstances shall the Trustee (except as a result of gross negligence or
wilful misconduct), any portion of the Collateral or any other collateral for
the Securities, or any Holder be liable or be available for the recovery of
damages to the Company, Voest-Alpine, Meyers, the Tax Lessor, or any
<PAGE>
9
Transferee in respect of any loss to the Tax Lessor, Voest-Alpine, Meyers, the
Company, the Transferee or any other person of any tax benefits anticipated in
connection with the TBT Lease or any indemnifications executed in connection
therewith, and neither (a) except as a result of gross negligence or wilful
misconduct, the Trustee, nor (b) any Holder, the Collateral or any other
collateral for the Securities shall be liable to the Company, the Tax Lessor,
Voest-Alpine, Meyers, or any Transferee, or their successors or assigns, for any
loss, cost, damage, liability or expense incurred by any of them relating to the
TBT Lease or all or any portion of the Equipment, whether of the kind set forth
in the TBT Lease or otherwise. Nothing in this section 4 shall preclude any
person from seeking injunctive relief to prevent the violation of any terms of
this Release or to compel compliance with the provisions of this Release.
5. This Release shall be effective only with respect to the TBT Lease.
The Company hereby covenants and agrees that they shall not enter into any
amendment to or modification of Section 2(b) or 3(a) of the TBT Lease.*
6. The Trustee will not request or direct any person to take any
action on behalf of the Trustee which the Trustee is not permitted to take
hereunder.
7. Any notice to Voest-Alpine or Meyers provided for in the TBT Lease
shall be given to Voest-Alpine or Meyers at its or his address set forth below
or at
- ----------------------
* Such sections shall be those sections of the TBT Lease which provide,
in effect, that the Tax Lessor acquires ownership of the Equipment under
the TBT Lease for Federal income tax purposes only and that the TBT
Lease shall not be construed as causing a transfer of title to or
possession of such Equipment or creating a lease of such Equipment for
any other purpose. This footnote shall remain in the executed
counterpart of this Release.
<PAGE>
10
such other address as Voest-Alpine or Meyers shall have furnished in writing to
the Trustee. Copies of all notices to Voest-Alpine shall be also sent to
_________________________ Attention: ____________________. Any notice to the
Company as provided for in this Release shall be given to such person at the
address set forth in the Indenture. Any notice to the Trustee provided for in
this Release shall be given to it at the address set forth below or at such
other address as it shall have furnished to the other parties hereto in writing.
8. Nothing in this Release shall be construed to give any person other
than the Holders, Voest-Alpine, Meyers, the Company, or any successors or
assigns of any of the foregoing, any right, remedy or claim under or in respect
of any provision hereof. This Release is not intended to confer any benefit on
the Tax Lessor or any of its affiliates.
9. This Release shall be governed by the laws of the State of New
York.
10. Any notice required hereunder shall be in writing, shall be (i)
delivered by hand or by overnight courier or similar delivery service, in each
case against receipt or (ii) mailed by registered or certified mail (air mail in
the case of notices to Voest-Alpine), return receipt requested, postage prepaid.
Notices effected pursuant to clause (i) shall be effective upon receipt and
notices effected pursuant to clause (ii) shall be effective on the third
calendar day following mailing of such notice.
<PAGE>
11
IN WITNESS WHEREOF, the parties hereto have caused this Release to be
executed by their duly authorized officers as of the day, month and year first
above written.
FIRST NATIONAL BANK OF COMMERCE,
as Trustee
By______________________________________
Title:
BAYOU STEEL CORPORATION
By______________________________________
Title:
VOEST-ALPINE A.G.
By:_____________________________________
Title:
Address: ______________________________
______________________________
______________________________
<PAGE>
EXHIBIT 10.7
December 16, 1992
PRIVATE & CONFIDENTIAL
- ----------------------
Mr. Howard M. Meyers
Chairman of the Board,
President, and Chief Executive Officer
Bayou Steel Corporation
P.O. Box 5000
River Road
LaPlace, LA 70068
Dear Howard:
This letter sets forth the terms and conditions of the agreement between
Patricof & Co. Capital Corp. ("Patricof") and Bayou Steel Corporation ("Bayou"
or the "Company") pursuant to which Patricof will, for a period of twelve months
from the date of the execution of this letter, act as the exclusive financial
advisor to and agent of Bayou with respect to the possible acquisition or other
combination of Athlone Industries, Inc.'s ("Athlone") wholly-owned subsidiary,
Green River Steel Corporation ("Green River") by the Company or an affiliate of
the Company (the "Acquisition"). Should Bayou choose to pursue an acquisition
or other combination of Athlone, Bayou agrees to enter into a separate agreement
with Patricof in the form of Patricof's letter of November 24, 1992.
In its capacity as financial advisor, Patricof will assist Bayou in (i)
continuing the conversations with Athlone and its advisor, Morgan Stanley & Co.
which Patricof as initiated and brought to our attention; (ii) developing and
evaluating financial and operating information on Green River; (iii) valuing
Green River; (iv) recommending a negotiating strategy and assisting in
negotiations with Athlone; (v) identifying and accomplishing the other steps
necessary to the consummation of the Acquisition (the "Engagement"); and (vi) to
such other investment banking services respecting the Acquisition as Bayou may
request.
<PAGE>
At the request of Bayou, MMG Placement Corp. will enter into a separate
agreement under which MMG Placement Corp. will assist Bayou in privately placing
the debt and equity securities required to finance the Acquisition. If so
retained, MMG Placement Corp. will: (i) review background information prepared
by Bayou; (ii) recommend a structure for the financing; (iii) identify potential
corporate and/or institutional investors to participate in the financing; (iv)
assist Bayou in preparing descriptive material for the purpose of soliciting
investors for the financing; and (v) assist in negotiations with investors.
In consideration of Patricof's services, Bayou agrees to pay Patricof a
retainer of twenty-five thousand dollars ($25,000)/1/ payable upon execution of
this agreement. These retainers will be fully creditable against the Success
Fee payable to Patricof.
Contemporaneously with the closing of the Acquisition, Bayou shall pay
Patricof cash success fee (the "Success Fee") in the amount of at least four
hundred thousand dollars ($400,000).
The Company shall reimburse Patricof for its reasonable travel expenses and
other out-of-pocket expenses (at Patricof's cost) incurred in performance of the
services hereunder following Patricof's submission to Bayou of an invoice
reasonably itemizing such expenses, including the cost of placing tombstone
advertisements announcing the Acquisition.
The engagement hereunder may be terminated by the Company or Patricof at
any time upon __________ written notice to the other, provided that Patricof
shall be entitled to the retainers and reimbursement of expenses in accordance
with this letter through the date of termination; and provided, further, that
-------- -------
Patricof shall, nevertheless, be entitled to be paid the Success Fee if the
Acquisition is effected within 12 months following the date of termination.
Patricof will treat as confidential all non-public information concerning
Bayou or Athlone which may come into its possession or be developed by it in the
course of this engagement. Bayou shall not make any public disclosure of any
advice rendered or conclusions presented by Patricof without Patricof's prior
written consent.
The Company agrees to indemnify and hold Patricof harmless in accordance
with Exhibit A hereto, which is
- -----------------------
/1/ $5- 10,000 payable as of 12/18/92 and the balance to be paid if activity
significantly continues. Such fees will be paid promptly on billing.
2
<PAGE>
incorporated herein by reference and which shall survive the termination of this
agreement.
This agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to agreements made and to be performed
within such State. Any suits, claims, causes of action, or disputes arising
under this agreement shall be brought in the courts of the State of Ne York or
in the United States District Court for the Southern District of New York.
This agreement is the sole and entire agreement between the parties
pertaining to its subject matter and supersedes all prior agreements,
representations and understandings of the parties. No modifications of this
agreement shall be binding unless agreed to in writing by Patricof and the
Company. This agreement shall be binding on and shall inure to the benefit of
the successors and assigns of the parties hereto provided that neither this
agreement nor any of Patricof's rights, undertakings or obligations hereunder
may be assigned by Patricof without the prior written consent of Bayou and any
purported assignment without such consent is void.
Kindly indicate your assent to the terms and conditions of our
understanding by signing and returning a copy of this letter, the other copy of
which is for your files. We look forward to working with you.
Very truly yours,
PATRICOF & CO. CAPITAL CORP.
Robert B. Machinist
President
AGREED AND ACCEPTED
THIS DAY OF DECEMBER, 1992
-----
BAYOU STEEL CORPORATION
___________________________
Howard M. Meyers
Chairman of the Board,
President, and Chief Executive Officer
3
<PAGE>
EXHIBIT A
Bayou Steel Corporation or any affiliate of Bayou in existence or to be
formed ("the Company") agrees to indemnify and hold harmless Patricof & Co.
Capital Corp and MMG ("Patricof") and affiliates, directors, officers, agents
and employees, and each other person controlling Patricof or any of its
affiliates within the meaning of either Section 15 of the Securities Act of
1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as
amended, (collectively, the "Indemnified Parties") from and against all losses,
claims, damages or liabilities resulting from any claim, lawsuit or other
proceeding by any person to which any such Indemnified Party may become subject
which is related to or arises out of work undertaken by Patricof as part of the
Engagement herein, and will reimburse any Indemnified Party hereunder for all
reasonable expenses (including reasonable counsel fees) incurred by such
Indemnified Party in connection with investigating or defending any such claim.
Notwithstanding the foregoing, the Company shall not be liable to an
Indemnified Party in respect to any loss, claim, liability or expense to the
extent the same is determined, in a final judgment by a court of competent
jurisdiction, to have resulted primarily from the gross negligence, bad faith or
misconduct of any Indemnified Party.
In the event of the assertion against any Indemnified Party of any such
clam or the commencement of any such action or proceeding, the Company, after
written notice from the Indemnified Parties, shall assume the investigation and
the defense of such claim, action or proceeding with counsel of its choice at
its expense. Bayou will not be liable for any settlement made without its
written consent respecting any claim against the Indemnified Parties.
If for any reason the foregoing indemnification is unavailable to any
Indemnified Party or insufficient to hold such Indemnified Party harmless as
contemplated herein then the Indemnifying Party shall contribute to the amount
paid or payable by the Indemnified Party as a result of such loss, claim,
liability or expense in such proportion as is appropriate to reflect not only
the relative benefits received by the Company on the one hand, and the
Indemnified Parties, as the case may be, on the other hand, but also the
relative fault of the Company and any Indemnified Party, as the case may be, as
well as any other relevant equitable considerations, provided, however, that the
foregoing shall not apply in the event that it is determined by final judgment
of a court of competent jurisdiction that the loss, claim, liability or expense
resulted primarily from the gross negligence, bad faith or misconduct of any
Indemnified Party.
<PAGE>
EXHIBIT 10.14
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement"), dated as of January 9, 1991, is made
between Bayou Steel Corporation ("Borrower") and Hibernia National Bank
("Lender"), who agree as follows:
ARTICLE 1
GENERAL TERMS
Section 1.1 Terms Defined Above. As used in this Agreement, the terms
-------------------
"Agreement", "Borrower" and "Lender" shall have the meanings indicated above.
Section 1.2 Certain Definitions. As used in this Agreement, the
-------------------
following terms shall have the meanings indicated, unless the context otherwise
requires:
"Business Day" shall mean a day other than a Saturday, Sunday or
legal holiday for commercial banks in New Orleans, Louisiana.
"Capital Lease" shall mean any lease that is required to be
capitalized under generally accepted accounting principles.
"Closing Date" shall mean the date on which the Note is executed
and delivered by the Borrower to the Lender and funds are advanced by the
Lender to the Borrower pursuant to this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Collateral" shall mean the property described in the Collateral
Documents as security for the Indebtedness.
"Collateral Documents" shall mean collectively the documents
required by the Lender to obtain the security interest in the Collateral,
as described in Article 3 hereof.
"Credit Agreement" shall mean the Credit Agreement dated as of June
28, 1989 among the Borrower, Chemical Bank, as Agent, and Chemical Bank and
the Lenders, relating to the Borrower's revolving credit notes.
"Current Assets" shall mean with respect to any Person at any date,
the aggregate amount of all assets of such Person which would be classified
as current assets on
<PAGE>
such date, computed and calculated in accordance with generally accepted
accounting principles.
"Current Liabilities" shall mean with respect to any Person ar any
date, the aggregate amount of all liabilities of such Person (including tax
and other proper accruals) which would be classified as current liabilities
at such date, computed and calculated in accordance with generally accepted
accounting principles, but for purposes of this Agreement, excluding the
current portion of long-term Debt.
"Debt" of any Person shall mean, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits
or advances of any kind, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (c) all obligations of
such Person upon which interest charges are customarily paid, (d) all
obligations of such Person under conditional sale or other title retention
agreements relating to property or assets purchased by such Person, (e) all
obligations of such Person issued or assumed as the deferred purchase price
of property or services (except current accounts payable arising in the
ordinary course of business), (f) all indebtedness of others secured by (or
for which the holder of such indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on property owned or acquired by
such Person, whether or not the obligations secured thereby have been
assumed, (g) all guarantees by such Person of indebtedness of others, (h)
all Capital Lease obligations of such Person, (i) all protection
agreements, foreign currency exchange agreements or other interest or
exchange rate hedging arrangements and (j) all obligations of such Person
as an account party in respect of letters of credit and bankers'
acceptances. The Debt of any Person shall include the Debt of any
partnership in which such person is a general partner.
"Default" shall mean the occurrence of any of the events specified in
Article 8 hereof, which upon notice or lapse of time or both would
constitute an Event of Default.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that is a member of a group of which the Borrower is a member
and which is treated as a single employer under Section 414 of the Code.
"Event of Default" shall mean the occurrence of any of the events
specified in Article 8 hereof, provided that any
2
<PAGE>
requirement for notice or lapse of time or any other condition precedent
has been satisfied.
"Financial Officer" shall mean the chairman, chief executive officer,
president, chief financial officer, principal accounting manager, treasurer
or controller of the Borrower or any Subsidiary.
"Governmental Authority" shall mean any federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Lien" shall mean with respect to any asset, (i) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (ii) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such
asset and (iii) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"Loan" shall mean the Loan described in Article 2 hereof.
"Loan Documents" shall mean this Agreement, the Note and the
Collateral Documents.
"Material Adverse Effect" shall mean (i) a materially adverse effect
on the business, assets, operations, or financial condition of the Borrower
and its Recourse Subsidiaries taken as a whole, (ii) a material impairment
of the ability of the Borrower or any Subsidiary to perform any of its
obligations under any Loan Document to which it is or will be a party or
(iii) a material impairment of the rights of or benefits available to the
Lender under the Loan Documents.
"Non-Recourse Obligations" shall mean Debt of a Non-Recourse
Subsidiary where (a) neither the Borrower nor any Subsidiary (other than
such Non-Recourse Subsidiary): (i) provides any guarantee or credit support
for such Debt (including any undertaking, guaranty, indemnity, agreement or
instrument which would constitute such Debt, (b) the holders of such Debt
expressly waive any recourse which they may have, in law, equity or
otherwise, whether based on misrepresentation, control, ownership or
otherwise, to the Borrower and any Subsidiary (other than such Non-Recourse
Subsidiary) and (c) no default with respect to such Debt (including any
rights which the holder thereof may have to take enforcement action against
such Non-Recourse Subsidiary) would permit (upon notice, lapse of time or
both) any holder of any other Debt of the Borrower or any
3
<PAGE>
Subsidiary (other than such Non-Recourse Subsidiary) to declare a default
on such other Debt or cause the payment thereof to be accelerated or
payable prior to its stated maturity.
"Non-Recourse Subsidiaries" shall mean a special purpose Subsidiary of
the Borrower or any of its Subsidiaries formed to acquire securities or
assets of a third party and which (i) has no Obligations other than Non-
Recourse Obligations and (ii) does not, directly or indirectly, own any
Obligations, stock or securities of, and has no investment in, the Borrower
or any Recourse Subsidiary.
"Note" shall mean the promissory note described in Article 2 hereof.
"Obligations" shall mean any and all amounts, liabilities and/or
obligations owing from time to time by the Borrower to the Lender or any
transferee thereof pursuant to the Loan Documents, and whether such
amounts, liabilities or obligations be liquidated or unliquidated, now
existing or hereafter arising.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof, or
any other form of entity.
"Plan" shall mean any Person or plan (other than a multi-employer
plan) subject to Title IV of ERISA and maintained by the Borrower or any
Subsidiary, or any such plan to which the Borrower or any Subsidiary is
required to contribute on behalf of its employees.
"Reportable Event" shall mean any reportable event as defined in
Section 4043(b) of ERISA or the regulations issued thereunder with respect
to a Plan subject to the provisions of ERISA (other than a plan maintained
by an ERISA Affiliate which is considered an ERISA Affiliate only pursuant
to subsection (m) or (o) of Section 414 of the Code).
"Recourse Subsidiaries" shall mean any Subsidiary that is not a Non-
Recourse Subsidiary.
4
<PAGE>
"Senior Indebtedness" shall mean the indebtedness of the Borrower
pursuant to (i) the Senior Secured Indenture and (ii) the Credit Agreement.
"Senior Secured Indenture" shall mean the Indenture dated September 5,
1986, between the Borrower and First National Bank of Commerce, as Trustee,
relating to the Borrower's senior secured notes due 1998, and the Real and
Chattel Mortgage and Collateral Assignment of Leases dated September 5,
1986, between the Borrower and First National Bank of Commerce, as Trustee,
as amended, and as the notes issued pursuant thereto may be heretofore,
have been and may hereafter be modified, renewed, substituted, replaced or
reissued.
"Subordinated Indebtedness" shall mean, with respect to the Borrower,
Debt subordinated in right of payment to the monetary obligations of the
Borrower under the Credit Agreement and this Agreement upon terms described
in Schedule I hereto which by its terms shall not mature or be subject to
----------
any prepayment, repurchase or any amortization of principal prior to the
maturity date of the Note.
"Subsidiary" shall mean any corporation, partnership, association or
other business entity (i) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary
voting power or more than 50% of the general partnership interests are, at
the time any determination is being made, owned, controlled or held by the
Borrower or by the Borrower and one or more Subsidiaries of the Borrower,
or (ii) which is, at the time any determination is made, otherwise
controlled by the Borrower or one or more Subsidiaries of the Borrower or
by the Borrower and one or more Subsidiaries of the Borrower.
"Tangible Net Worth" shall mean with respect to any Person at any time
(i) the sum of such Person's capital stock, capital in excess of par or
stated value of shares of its capital stock, retained earnings and any
other account principals which, in accordance with generally accepted
accounting principles, constitutes stockholders' equity, less (ii) treasury
stock and any minority interest in Subsidiaries, less (iii) the amount of
all assets reflected as goodwill, patents, research and development and all
other assets required to be classified as intangibles in accordance with
generally accepted accounting principles and less (iv) the amount of any
writeup in the value of any asset above the cost or depreciated cost
thereof to such Person.
Section 1.3 Accounting Terms. Unless otherwise specified herein, all
----------------
accounting terms or financial terms used
5
<PAGE>
herein shall be interpreted and construed, all accounting determinations
hereunder shall be made, and all financial statements required to be delivered
hereunder shall be prepared in accordance with generally accepted accounting
principles as in effect from time to time, on a basis consistent (except for
changes approved by independent public accountants for the Borrower) with the
most recent audited financial statements of the Borrower.
ARTICLE 2
THE CREDIT
Section 2.1 Commitment to Lend. Subject to and upon the terms and
------------------
conditions contained in this Agreement, and relying on the representations and
warranties contained in this Agreement, on the Closing Date the Lender agrees to
make a loan to the Borrower in the principal amount of $1,680,000. The loan is
represented by a promissory note in the principal amount of $1,680,000, payable
to the order of the Lender. The principal shall be payable as set forth in the
Note. Interest on the Note shall accrue and be payable as set forth in the
Note. The Note shall mature on December 31, 2000.
Section 2.2 Business Days. If the date for any payment, prepayment or
-------------
commitment fee payment hereunder falls on a day which is not a Business Day,
then for all purposes of this Agreement the same shall be deemed to have fallen
on the next following Business Day, and such extension of time shall in such
case be included in the computation of payments of interest or commitment fee,
as the case may be.
Section 2.3 Payments. The Borrower shall make each payment at the
--------
time and place set forth in the Note.
Section 2.4 Use of Proceeds. The Borrower shall use the proceeds of
---------------
the Loan solely to finance the construction of leasehold improvements consisting
of a 63,000 square foot warehouse building, including all equipment and other
leasehold improvements, located at the Tulsa Port of Catoosa, Oklahoma.
ARTICLE 3
SECURITY FOR THE OBLIGATIONS
Section 3.1 Security. The Loan shall be secured by a Mortgage,
--------
Security Agreement and Financing Statement executed by the Borrower granting a
mortgage and security interest in (i) the leasehold interest of the Borrower in
20 acres at the Tulsa Port of Catoosa, Oklahoma, (ii) the leasehold improvements
constructed
6
<PAGE>
by the Borrower thereon and (iii) all equipment and general intangibles located
on or relating to such leasehold and improvements, but excluding in each case
"inventory" as defined in Exhibit C of the Credit Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement, the Borrower
represents and warrants to the Lender that as of the Closing Date:
Section 4.1 Borrower's Existence. The Borrower is a corporation duly
--------------------
organized, legally existing and in good standing under the laws of the State of
Delaware and is duly qualified as a foreign corporation in Oklahoma, Louisiana
and all other jurisdictions wherein the property it owns or the business it
transacts make such qualification necessary.
Section 4.2 Names of Borrower. The Borrower has never done business
-----------------
under any name other than the name of the Borrower set forth above, except that
from May 26, 1988 to August 3, 1988, the Borrower's name was Bayou Steel
Corporation (of LaPlace) and that on July 19, 1988, the Borrower merged with
Bayou Steel Corporation (of LaPlace).
Section 4.3 Borrower's Power and Authorization. The Borrower is duly
----------------------------------
authorized and empowered to execute, deliver and perform the Loan Documents
executed by it. All corporate action on the part of the Borrower requisite for
the due creation and execution of this Agreement, the Note and Collateral
Documents have been duly and effectively taken.
Section 4.4 Review of Documents; Binding Obligations. The Borrower has
----------------------------------------
reviewed the Loan Documents with staff counsel for the Borrower and has had the
opportunity to discuss the provisions thereof with the Lender prior to
execution. This Agreement, the Note and the Collateral Documents constitute
valid and binding obligations of the Borrower enforceable in accordance with
their terms (except that enforcement may be subject to any applicable
bankruptcy, insolvency or similar laws generally affecting the enforcement of
creditors' rights).
Section 4.5 No Legal Bar or Resultant Lien. The Loan Documents do not
------------------------------
and will not violate any provisions of the Borrower's articles of incorporation
or bylaws, will not violate any contract, agreement, law, regulation, order,
injunction, judgment, decree or writ to which the Borrower is subject, and will
not result in the creation or imposition of any Lien upon
7
<PAGE>
any property of the Borrower other than as contemplated by this Agreement.
Section 4.6 No Consent. The Borrower's execution, delivery and
----------
performance of the Loan Documents do not require the consent or approval of any
other Person, including without limitation any regulatory authority or
governmental body of the United States or any state thereof or any political
subdivision of the United States or any state thereof.
Section 4.7 Financial Condition. All financial statements of the
-------------------
Borrower delivered to Lender fairly present the financial condition and results
of operations of the Borrower, and the financial statements have been prepared
in accordance with generally accepted accounting principles consistently applied
(except as noted in the auditors' unqualified opinion) throughout the periods
involved, and there are no contingent liabilities not disclosed thereby which
would adversely affect the financial condition of Borrower. Since the close of
the period covered by the latest financial statement delivered to Lender with
respect to Borrower, there has been no material adverse change in the assets,
liabilities, or financial condition of Borrower. No event has occurred
(including, without limitation, any litigation or administrative proceedings)
and no condition exists or, to the knowledge of Borrower, is threatened, which
(i) might render Borrower unable to perform its obligations under this
Agreement, the Note or the Collateral Documents, or (ii) would constitute a
Default hereunder, or (iii) might adversely affect the financial condition of
the Borrower or the validity or priority of the lien of the Collateral
Documents.
Section 4.8 Taxes and Governmental Charges. The Borrower has filed all
------------------------------
tax returns and reports required to be filed and have paid all taxes,
assessments, fees and other governmental charges levied upon it or upon their
respective property or income which are due and payable, or have provided
adequate reserves for the payment thereof, except for taxes which are being
contested in good faith and for which adequate reserves have been provided.
Section 4.9 Defaults. The Borrower is not in default under the Senior
--------
Indebtedness or any other indenture, mortgage, deed of trust, agreement or other
instrument to which the Borrower is a party or by which it is bound, where such
default would reasonably be expected to result in a Material Adverse Effect.
Section 4.10 Margin Stock. None of the proceeds of the Loan proceeds
------------
will be used for the purpose of, and the Borrower is not engaged in the business
of extending credit for the purpose of, purchasing or carrying any "margin
stock" as defined in Regulation U of the Board of Governors of the Federal
8
<PAGE>
Reserve System (12 C.F.R. Part 221), or for the purpose of reducing or retiring
any indebtedness which was originally incurred to purchase or carry a margin
stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of said Regulation U. The Borrower is not
engaged principally, or as one of the Borrower's important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stocks.
Section 4.11 Utility or Investment Company. The
-----------------------------
Borrower is not engaged in the generation, transmission, or distribution and
sale of electric power; transportation, distribution and sale through a local
distribution system of
natural or other gas for domestic, commercial, industrial, or other use;
ownership or operation of a pipeline for the transmission or sale of natural or
other gas, crude oil or petroleum products to other pipeline companies,
refineries, local distribution systems, municipalities, or industrial consumers;
provision of telephone or telegraph service to others; production, transmission,
or distribution and sale of steam or water; operation of a railroad; or
provision of sewer service to others. The Borrower is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
Section 4.12 Compliance with the Law. The Borrower (i) is not in
-----------------------
violation of any law, judgment, decree, order, ordinance, or governmental rule
or regulation to which the Borrower or any of its property is subject; and (ii)
has not failed to obtain any license, permit, franchise or other governmental
authorization necessary to the ownership of any of its property or the conduct
of its business; in each case, which violation or failure could reasonably be
anticipated to result in a Material Adverse Effect.
Section 4.13 ERISA. The Borrower is in compliance in all material
-----
respects with the applicable provisions of ERISA, and no Reportable Event has
occurred with respect to any Plan of the Borrower.
Section 4.14 Other Information. All information, reports, papers and
-----------------
data given to the Lender by the Borrower pursuant to this Agreement and in
connection with the Borrower's application for the Loan are accurate and correct
in all material respects. No information, exhibit or report furnished by the
Borrower to the Lender in connection with the negotiation of this Agreement
contains any material misstatement of fact or fails to state a material fact or
any fact necessary to make the statement contained therein not materially
misleading.
Section 4.15 Title to Collateral. The Borrower has good and
-------------------
merchantable leasehold title to the Collateral, free of all liens and
encumbrances except those created in favor of the
9
<PAGE>
Lender and those permitted by this Agreement. Furthermore, the Borrower has not
heretofore conveyed or agreed to convey or encumber any Collateral in any way,
except in favor of the Lender, or as permitted herein.
Section 4.16 Environmental Matters. No friable asbestos, or any
---------------------
substance containing asbestos deemed hazardous by federal or state regulations
on the date of this Agreement, has been installed in any Collateral constituting
immovable (real) property. Such property and the Borrower are not in violation
of or subject to any existing, pending, or threatened investigation or inquiry
by any Governmental Authority or to any remedial obligations under any
applicable laws pertaining to health or the environment (hereinafter sometimes
collectively called "Applicable Environmental Laws"), including without
limitation the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986 (as amended, hereinafter called "CERCLA"), the Resource Conservation and
Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the
Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid Waste
Amendments of 1984 (as amended, hereinafter called "RCRA"). The Borrower has
not obtained and is not required to obtain any permits, licenses or similar
authorizations to construct, occupy, operate or use any buildings, improvements,
fixtures and equipment forming a part of such property by reason of any
Applicable Environmental Laws. To the Borrower's knowledge, no hazardous
substances or solid wastes have been disposed of or otherwise released on or to
such property. The terms "hazardous substance" and "release" as used in this
Agreement shall have the meanings specified in CERCLA, and the terms "solid
waste" and "disposal" (or "disposed") shall have the meanings specified in RCRA.
Section 4.17 Governmental Requirements. Any Collateral constituting
-------------------------
immovable property is in compliance with all current governmental requirements
affecting such property, including, without limitation, all current zoning and
land use regulations, building codes and all restrictions and requirements
imposed by applicable governmental authorities with respect to the construction
of any improvements on such property and the contemplated use of such property.
Section 4.18 Continuing Accuracy. All of the representations and
-------------------
warranties contained in this Article or elsewhere in this Agreement shall be
true as of the Closing Date, and Borrower shall promptly notify Lender of any
event which would render any of said representations and warranties untrue or
misleading in any material respect.
10
<PAGE>
ARTICLE 5
AFFIRMATIVE COVENANTS
Unless the Lender's prior written consent to the contrary is obtained,
the Borrower will at all times comply with the covenants contained in this
Article 5, from the date hereof and for so long as any of the Obligations is
outstanding.
Section 5.1 Performance of Obligations. The Borrower will repay the
--------------------------
Obligations according to the reading, tenor and effect of the Note and this
Agreement. The Borrower will do and perform every act required of it by this
Agreement, the Note or the Collateral Documents at the time or times and in the
manner specified.
Section 5.2 Existence; Businesses and Properties. The Borrower shall
------------------------------------
do or cause to be done all things necessary to obtain, preserve, renew, extend
and keep in full force and effect its rights, licenses, permits, franchises,
authorizations, patents, copyrights, trademarks and trade names material to the
conduct of its business; maintain and operate such business in substantially the
manner in which it is presently conducted and operated; comply in all material
respects with all applicable laws, rules, regulations and orders of any
Governmental Authority, whether now in effect or hereafter enacted, the failure
to comply with which would have a Material Adverse Effect; and at all times
maintain and preserve all property material to the conduct of such business and
keep such property in good repair, working order and condition and from time to
time make, or cause to be made, all needful and proper repairs, renewals,
additions, improvements and replacements thereto necessary in order that the
business carried on in connection therewith may be properly conducted at all
times.
Section 5.3 Insurance. The Borrower shall keep the Collateral
---------
adequately insured at all times by financially sound and reputable insurers to
the extent and in the manner required by the Collateral Documents, and in
addition, the Borrower shall maintain such other insurance, to such extent and
against such risks, including fire and other risks insured against by extended
coverage, as is customary with companies in the same or similar businesses,
including public liability insurance against claims for personal injury or death
or property damage occurring upon, in, about or in connection with the use of
any properties owned, occupied or controlled by it; and maintain such other
insurance as may be required by law.
Section 5.4 Obligations and Taxes. The Borrower shall pay and
---------------------
discharge promptly all taxes, assessments and governmental charges or levies
imposed upon Borrower's income or profits or in respect of the Collateral to the
extent and in the
11
<PAGE>
manner required by the Collateral Documents, and in addition, the Borrower shall
pay all lawful claims for labor, materials and supplies or otherwise which, if
unpaid, might give rise to a Lien upon the Collateral, provided that payment and
discharge shall not be required with respect to any such tax, assessment,
charge, or levy so long as the validity or amount thereof shall be contested in
good faith by appropriate proceedings or where the failure to pay such tax,
assessment, charge, levy or claim would not (i) have a Material Adverse Effect
on the business, assets, operations or financial condition of the Borrower and
the Recourse Subsidiaries taken as a whole or (ii) result in the imposition of
any Lien on the Collateral securing a material amount in favor of any party
entitling such party to priority of payment over the Obligations, and the
Borrower shall have set aside on its books adequate reserves with respect
thereto.
Section 5.5 Financial Statements, Reports, etc. The Borrower will
----------------------------------
furnish to the Lender:
(a) Annual Reports - within 120 days after the end of each fiscal
--------------
year, the consolidated and consolidating (which shall include the Non-
Recourse Subsidiaries) balance sheets and related statements of income
and changes in cash flows, showing the financial condition of the
Borrower and the Subsidiaries as of the close of such fiscal year and
the results of its operations and the operations of such Subsidiaries
during such year, all audited by Arthur Andersen & Co. or other
independent public accountants of recognized national standing
acceptable to the Lender and accompanied by an opinion of such
accountants (which shall not be qualified in any material respect) to
the effect that such consolidated financial statements fairly present
the financial condition and results of operations of the Borrower on a
consolidated basis in accordance with generally accepted accounting
principles consistently applied (except as otherwise noted in the
auditors' opinion);
(b) Quarterly Reports - within 45 days after the end of each of
-----------------
the first three fiscal quarters of each fiscal year, the consolidated
and consolidating balance sheets (which shall include the Non-Recourse
Subsidiaries) and related statements of income and changes in cash
flows, showing the financial condition of the Borrower and the
Subsidiaries as of the close of such fiscal quarter and the results of
its operations and the operations of such Subsidiaries during such
fiscal quarter and then elapsed portion of the fiscal year, all
certified by a Financial Officer as fairly presenting the financial
condition and results of operation of the Borrower on a consolidated
basis in
12
<PAGE>
accordance with generally accepted accounting principles consistently
applied, subject to normal year-end adjustments;
(c) Certificates of Compliance - concurrently with any delivery
--------------------------
of financial statements under (a) or (b) above, a certificate of the
accounting firm or Financial Officer opining on or certifying such
statements (which certificate, when furnished by an accounting firm,
may be limited to accounting matters and disclaim responsibility for
legal interpretations) (i) certifying that no Event of Default or
Default has occurred or, if such an Event of Default or Default has
occurred, specifying the nature and extent thereof and any corrective
action taken or proposed to be taken with respect thereto and (ii)
setting forth computations in reasonable detail satisfactory to the
Lender demonstrating compliance with the covenants contained in
Section 6.5 hereof;
(d) Other Information - promptly after the same become publicly
-----------------
available, copies of all periodic and other reports, proxy statements
and other materials filed by the Borrower with the Securities and
Exchange Commission, or any Governmental Authority succeeding to any
or all the functions of said Commission, or with any national
securities exchange, or distributed to its shareholders, as the case
may be, and promptly, from time to time, such other information
regarding the operations, business affairs and financial condition of
the Borrower or any Subsidiary, or compliance with the terms of this
Agreement as the Lender may reasonably request.
Section 5.6 Litigation and Other Notices. The Borrower shall furnish
----------------------------
to the Lender prompt written notice of the following: (i) any Event of Default
or Default, specifying the nature and extent thereof and the corrective action
(if any) proposed to be taken with respect thereto; (ii) the filing or
commencement of, or any threat or notice of intention of any Person to file or
commence, any action, suit or proceeding, whether at law or in equity or by or
before any Governmental Authority, against the Borrower or any Subsidiary
thereof which, if adversely determined, could reasonably be expected to result
in a Material Adverse Effect; and (iii) any development that has resulted in, or
could reasonably be expected to result in, a Material Adverse Effect.
Section 5.7 ERISA. (i) In the case of the Borrower and each
-----
Subsidiary, the Borrower shall itself, and shall cause each Subsidiary to,
comply in all material respects with the applicable provisions of ERISA and (ii)
furnish to the Lender
13
<PAGE>
(A) as soon as possible, and in any event within 30 days after any Financial
Officer of the Borrower or any ERISA Affiliate either knows or has reason to
know that any Reportable Event has occurred that alone or together with any
other Reportable Event could reasonably be expected to result in liability of
the Borrower to the PBGC in any aggregate amount exceeding $1,000,000, a
statement of a Financial Officer setting forth details as to such Reportable
Event and the action proposed to be taken with respect thereto, together with a
copy of the notice, if any, of such Reportable Event given to the PBGC, (B)
promptly after receipt thereof, a copy of any notice the Borrower or any ERISA
Affiliate may receive from the PBGC relating to the intention of the PBGC to
terminate any Plan or Plans (other than a Plan maintained by an ERISA Affiliate
which is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Sec-tion 412 of the Code) or to appoint a trustee to administer any Plan or
Plans, (C) within 20 days after the due date for filing with the PBGC pursuant
to Section 412(n) of the Code of a notice of failure to make a required
installment or other payment with respect to a Plan, a statement of a Financial
Officer setting forth details as to such failure and the action proposed to be
taken with respect thereto, together with a copy of such notice given to the
PBGC and (D) promptly and in any event within 30 days after receipt thereof by
the Borrower or any ERISA Affiliate from the sponsor of a multiemployer Plan, a
copy of each notice received by the Borrower or any ERISA Affiliate from the
sponsor of a multiemployer Plan, a copy of each notice received by the Borrower
or any ERISA Affiliate concerning the imposition of withdrawal liability or a
determination that a multiemployer Plan is, or is expected to be, terminated or
in reorganization, in each case within the meaning of Title IV of ERISA.
Section 5.8 Further Assurances. The Borrower will promptly (and in no
------------------
event later than 30 days after written notice from the Lender is received) cure
any defects in the creation, execution and delivery of this Agreement, the Note
or the Collateral Documents. The Borrower will promptly execute and deliver to
the Lender upon request all such other and further documents, agreements and
instruments in compliance with or accomplishment of the covenants and agreements
of the Borrower in this Agreement, the Note or in the Collateral Documents or to
further evidence and more fully describe the Collateral, or to correct any
omissions in the Collateral Documents, or more fully state the security
obligations set out herein or in any of the Collateral Documents, or to perfect,
protect or preserve any Liens created pursuant to any of the Collateral
Documents, or to make any recordings, to file any notices, or obtain any
consents as may be necessary or appropriate in connection with the transactions
contemplated by this Agreement.
Section 5.9 Reimbursement of Expenses. The Borrower will pay all
-------------------------
reasonable legal fees incurred by the Lender in
14
<PAGE>
connection with the preparation of the Loan Documents. The Borrower will, upon
request promptly reimburse the Lender for all amounts expended, advanced or
incurred by the Lender to satisfy any obligation of the Borrower under this
Agreement, or to protect the Collateral or to collect the Obligations, or to
enforce the rights of the Lender under the Loan Documents, which amounts may
include all court costs, attorneys' fees, fees of auditors and accountants, and
investigation expenses reasonably incurred by the Lender in connection with any
such matters, together with interest at the Prime Rate plus one and three-
fourths percent (1.75%) from the date that the same is expended, advanced or
incurred by the Lender until the date of reimbursement to the Lender.
Section 5.10 Accounts and Records. The Borrower will keep books of
--------------------
record and accounts in which true and correct entries will be made as to all
material matters of all dealings or transactions in relation to its business and
activities, in accordance with generally accepted accounting principles,
consistently applied except for changes in accounting principles or practices
with which the independent public accountants for Borrower concur.
Section 5.11 Right of Inspection. The Borrower will permit any
-------------------
officer, employee or agent of the Lender to visit and inspect any of the
property of the Borrower, examine the books of record and accounts of the
Borrower, take copies and extracts therefrom, and discuss the affairs, finances
and accounts of the Borrower with the Borrower's officers, accountants and
auditors, all at such reasonable times and on reasonable notice and as often as
the Lender may reasonably desire.
Section 5.12 Indemnification. The Borrower will indemnify the Lender
---------------
and hold the Lender harmless from any and all liabilities, obligations, losses,
damages, penalties, claims, actions, suits, costs and expenses of whatever kind
or nature which may be imposed on, incurred by or asserted at any time against
the Lender in any way relating to, or arising in connection with, the use or
occupancy of any of the Collateral.
Section 5.13 Environmental Indemnity. (a) The Borrower shall defend,
-----------------------
indemnify and hold Lender and its directors, officers, agents and employees
harmless from and against all claims, demands, causes of action, liabilities,
losses, costs and expenses (including, without limitation, costs of suit,
reasonable attorneys' fees and fees of expert witnesses) arising from or in
connection with (i) the presence on or under all property constituting immovable
(real) property of any hazardous substances or solid wastes (as defined in
Section 4.16 of this Agreement), or any releases or discharges of any hazardous
substances or solid wastes on, under or from such property, or (ii) any activity
carried on or undertaken on or off
15
<PAGE>
such property, by Borrower or any officers, employees, agents, contractors or
subcontractors of Borrower, or any third persons acting by or for the Borrower
at any time occupying or present on such property, in connection with the
handling, use, generation, manufacture, treatment, removal, storage,
decontamination, clean-up, transport or disposal of any hazardous substances or
solid wastes at any time located or present on or under such property. The
foregoing indemnity shall further apply to any residual contamination on or
under such property, or affecting any natural resources, and to any
contamination of any property or natural resources arising in connection with
the generation, use, handling, storage, transport or disposal of any such
hazardous substances or solid wastes, and irrespective of whether any of such
activities were or will be undertaken in accordance with applicable laws,
regulations, codes and ordinances. The foregoing indemnity shall not apply to
any contamination of such property created after the Lender acquires such
property as a result of foreclosure, execution on judgment or deed in lieu of
foreclosure.
(b) The Borrower shall observe and comply with all laws, ordinances,
orders, decrees, rules and regulations of all federal and state governments
relating to environmental matters with respect to the Collateral, including
without limitation, the removal on or under all property constituting immovable
(real) property of any hazardous substances or solid wastes (as defined
elsewhere in this Agreement).
(c) The provisions of the Collateral Documents relating to
environmental compliance shall apply to the Collateral.
Section 5.14 Deposit Accounts. The Borrower will establish one or more
----------------
deposit accounts with the Lender and will maintain a deposit relationship with
the Lender for so long as any part of the Obligations is outstanding.
ARTICLE 6
NEGATIVE COVENANTS
Unless the Lender's prior written consent to the contrary is obtained,
the Borrower will at all times comply with the covenants contained in this
Article 6, from the date hereof and for so long as any part of the Obligations
is outstanding.
Section 6.1 Nature of Business. The Borrower will not permit any
------------------
material change to be made in the character of its business and business
activities reasonably related thereto as carried on at the date hereof.
16
<PAGE>
Section 6.2 Mergers and Consolidations. The Borrower will not merge
--------------------------
into or consolidate with any other Person, or permit any other Person to merge
into or consolidate with it, or sell, transfer, lease or otherwise dispose of
(in one transaction or in a series of transactions) all or any substantial part
of its assets (whether now owned or hereafter acquired) or any capital stock of
any Recourse Subsidiary, or purchase, lease or otherwise acquire (in one
transaction or a series of transactions) all or any substantial part of the
assets of any other Person, except that (i) the Borrower and any Recourse
Subsidiary may purchase and sell inventory in the ordinary course of business,
(ii) if at the time thereof and immediately after giving effect thereto no Event
of Default or Default shall have occurred and be continuing (A) any wholly-owned
Recourse Subsidiary may merge into the Borrower in a transaction in which the
Borrower is the Surviving corporation and (B) any wholly-owned Recourse
Subsidiary may merge into or consolidate with any other wholly-owned Recourse
Subsidiary in a transaction in which the surviving entity is a wholly-owned
Recourse Subsidiary and no Person other than the Borrower or a wholly-owned
Subsidiary receives any consideration and (iii) another Person may merge into or
consolidate with the Borrower if (A) the Borrower is the surviving entity, (B)
the Lender consents to such merger or consolidation, (C) at the time thereof and
immediately after giving effect thereto, no Event of Default or Default shall
have occurred and be continuing and (D) at the time thereof and immediately
after giving effect thereto the Borrower is in compliance with the provisions of
the Articles 4, 5 and 6 hereof and two financial officers of the Borrower
provide certificates of compliance therewith to the Lender.
Section 6.3 ERISA Compliance. The Borrower will not at any time permit
----------------
any Plan maintained by it to engage in any "prohibited transaction" as such term
is defined in Section 4975 of the Code; incur any "accumulated funding
deficiency" as such term is defined in Section 302 of ERISA; or terminate any
such Plan in a manner which could result in the imposition of a Lien on the
property of the Borrower pursuant to Section 4068 of ERISA.
Section 6.4 Liens. The Borrower will not create, incur, assume or
-----
permit to exist any Lien on any of the Collateral, except for the ground lease
described in the Collateral Documents, Liens in favor of the Lender to secure
the Obligations of the Borrower to the Lender under this Agreement, and Liens
shown on the title insurance policy covering the Collateral.
Section 6.5 Financial Covenants. The Borrower shall not itself, or
-------------------
cause or permit any subsidiary to:
17
<PAGE>
(a) Current Ratio. In the case of the Borrower and its Recourse
-------------
Subsidiaries, permit the ratio of Current Assets to Current
Liabilities, computed on a consolidated basis, at any time to be less
than 1.50 to 1.00.
(b) Tangible Net Worth. In the case of the Borrower and its
------------------
Recourse Subsidiaries, fail at any time to maintain a Tangible Net
Worth, computed on a consolidated basis, of at least $60,000,000.
(c) Debt to Worth. In the case of the Borrower and its Recourse
-------------
Subsidiaries, permit the ratio of total Senior Indebtedness to the sum
of Tangible Net Worth plus total Subordinated Indebtedness, computed
in each case on a consolidated basis, at any time to exceed 1.75 to
1.00.
Section 6.6 Amendment of Certain Agreements. The Borrower shall not
-------------------------------
amend or modify the Senior Secured Indenture, the Credit Agreement, or any notes
issued pursuant thereto without the prior written consent of the Lender if such
amendment or modification would have a Material Adverse Effect on the interest
of the Lender under this Agreement.
ARTICLE 7
CONDITIONS OF LENDING
Section 7.1 Conditions of Lending. The obligation of the Lender to
---------------------
make the Loan is subject to the accuracy of each and every representation and
warranty of the Borrower contained in this Agreement, and to the delivery and
receipt of the following on or before the Closing Date:
(a) Agreement. A duly executed counterpart of this Agreement
---------
signed by all the parties hereto.
(b) Note. The duly executed Note signed by the Borrower.
----
(c) Collateral Documents. Duly executed counterparts or
--------------------
originals of the Collateral Documents.
(d) Articles of Incorporation and Good Standing. Articles of
-------------------------------------------
incorporation and certificate of good standing of the Borrower issued
by the Secretary of State of the State of Delaware and certificates of
qualification to do business and good standing in Oklahoma and
Louisiana issued by the Secretaries of State of Oklahoma and
Louisiana.
18
<PAGE>
(e) Corporate Certificate. A certificate of the secretary of the
---------------------
Borrower (i) setting forth resolutions of its board of directors in
form and substance satisfactory to the Lender with respect to the
authorization of the Loan Documents; (ii) attaching copies of the
articles of incorporation and bylaws of the Borrower, (iii) stating
the Federal tax identification number, and (iv) setting forth the
officers and representatives authorized to sign such instruments.
(f) Fees. Commitment fee of $16,800.
----
(g) Opinion. A favorable opinion of the General Counsel of the
-------
Borrower in form and substance satisfactory to the Lender and Lender's
counsel.
(h) Miscellaneous. For the Collateral consisting of immovable
-------------
property, (i) a survey of the property showing all improvements
thereon and servitudes appertaining thereto; (ii) an environmental
questionnaire relating to the property in form and substance
satisfactory to the Lender; (iii) a title insurance commitment
(followed by a policy) insuring the leasehold mortgage on the property
and otherwise in form and substance satisfactory to the Lender; (iv)
multi-peril hazard insurance commitment (followed by a policy)
concerning the improvements on the property for the full replacement
value thereof; (v) flood insurance application (followed by policy) if
the property is in a special flood hazard area in the maximum amount
available; (vi) copies of all leases, servitudes and restrictions
applicable to the property; (vii) a building or occupancy permit for
the construction of the improvements on the property; (viii) a cost
breakdown of the construction of the improvements on the property; and
(ix) an estoppel certificate from the City of Tula, Rodgers County
Port Authority satisfactory to the Lender.
(i) Appraisal. A MAI appraisal in form and substance
---------
satisfactory to the Lender indicating that the Collateral has a value
of not less than $2,100,000.
19
<PAGE>
ARTICLE 8
DEFAULT
Section 8.1 Events of Default. Any of the following events shall be
-----------------
considered an "Event of Default" as that term is used herein:
(a) Principal and Interest Payments. The Borrower fails to make
-------------------------------
payment when due of any principal or interest installment on the Note,
any commitment fee or any other Obligations to the Lender, and such
failure continues for 10 calendar days.
(b) Representations and Warranties. Any representation or
------------------------------
warranty contained in the Loan Documents proves to have been incorrect
in any material respect as of the date thereof; or any representation,
statement (including financial statements), certificate or data
furnished or made to the Lender by the Borrower under the Loan
Documents proves to have been false or misleading in any material
adverse respect as of the date when such were made, deemed made or
furnished.
(c) Covenants. The Borrower defaults in the due observance or
---------
performance of any covenant, condition or agreement contained in the
Loan Documents (other than a default under Subsections (a) and (b)
hereof), and such default shall continue unremedied for a period of 30
days; provided, however, that if the Lender has actual knowledge of
the occurrence of a default specified in this Subsection (c) and the
Borrower does not have knowledge of such occurrence, the 30-day period
shall begin on the date on which the Lender sends notice of such
default to the Borrower.
(d) Involuntary Bankruptcy or Receivership Proceedings. A
--------------------------------------------------
receiver, conservator, liquidator or trustee of the Borrower, or of
any of its property is appointed by order or decree of any court or
agency or supervisory authority having jurisdiction; or an order for
relief is entered against the Borrower, under the Federal Bankruptcy
Code; or the Borrower is adjudicated bankrupt or insolvent; or any
material portion of the Collateral is sequestered by court order and
such order remains in effect for more than 30 days after the Borrower
obtains knowledge thereof; or a petition is filed against the Borrower
under any state, reorganization, arrangement, insolvency, readjustment
of debt, dissolution, liquidation or receivership law of any
jurisdiction, whether now or hereafter in effect, and such petition is
not dismissed within 60
20
<PAGE>
days. This paragraph (d) shall not be applicable to any Non-Recourse
Subsidiary.
(e) Voluntary Petitions. The Borrower files a case under the
-------------------
Federal Bankruptcy Code or seeking relief under any provision of any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction, whether now
or hereafter in effect, or consents to the filing of any case or
petition against it under any such law.
(f) Assignments for Benefit of Creditors. The Borrower makes an
------------------------------------
assignment for the benefit of its creditors, or admits in writing its
inability to pay its debts generally as they become due, or consents
to the appointment of a receiver, trustee or liquidator of the
Borrower or of all or any part of its property.
(g) Attachment. A writ or warrant of attachment or any similar
----------
process shall be issued by any court against all or any material
portion of the Collateral, and such writ or warrant of attachment or
any similar process is not released or bonded within 30 days after its
entry.
(h) Condemnation. Either (i) all of the Collateral or (ii) such
------------
a substantial portion as precludes the Borrower from using the
remaining Collateral to substantially the same extent as the use of
the Collateral on the Closing Date is condemned or expropriated under
power of eminent domain by any legally constituted governmental
authority.
(i) Ground Lease. The Borrower defaults in the payment of any
------------
amounts or the performance of any covenants contained in the lease of
the property from the The City of Tulsa-Rodgers County Port Authority
and either (i) the grace periods provided in Section 6.2 of the
aforesaid lease have expired or (ii) prior to the expiration of such
grace periods, the Borrower ceases diligent efforts to cure such
default.
Section 8.2 Remedies. (a) Upon the happening of any Event of Default
--------
specified in the preceding Section (other than Subsection (d) or (e) thereof),
the Lender may by written notice to the Borrower declare the entire principal
amount of all Obligations then outstanding including interest accrued thereon to
be immediately due and payable without presentment, demand, protest, notice of
protest or dishonor or other notice of default of any kind, all of which are
hereby expressly waived by the Borrower.
21
<PAGE>
(b) Upon the happening of any Event of Default specified in Subsection
(d) or (e) of the preceding Section, the entire principal amount of all
Obligations then outstanding including interest accrued thereon shall, without
notice or action by the Lender, be immediately due and payable without
presentment, demand, protest, notice of protest or dishonor or other notice of
default of any kind, all of which are hereby expressly waived by the Borrower.
Section 8.3 Set-Off. Upon the occurrence of any Event of Default, the
-------
Lender shall have the right to set-off any funds of the Borrower in the
possession of the Lender (other than funds in payroll, trust or employee benefit
accounts) against any amounts then due by the Borrower to the Lender pursuant to
the Agreement.
ARTICLE 9
MISCELLANEOUS
Section 9.1 Notices. Any notice or demand which, by provision of this
-------
Agreement, is required or permitted to be given or served by the Lender to or on
the Borrower shall be deemed to have been sufficiently given and served for all
purposes (if mailed) five Business Days after being deposited, postage prepaid,
in the United States Mail, registered or certified mail, or (if delivered by
express courier) on the date of receipt, or (if delivered in person) on the date
of receipt, in each case addressed (until another address or addresses is given
in writing by Borrower to Lender) as follows:
Bayou Steel Corporation
River Road - P.O. Box 5000
LaPlace, Louisiana 70069
Attention: Richard J. Gonzalez
General Manager, Finance and
Data Processing
with a copy to
Bayou Steel Corporation
1111 West Mockingbird Lane
Dallas, Texas 75247
Attention: Howard B. Myers, General Counsel
Any notice or demand which, by any provision of this Agreement, is
required or permitted to be given or served by Borrower to or on Lender shall be
deemed to have been
22
<PAGE>
sufficiently given and served for all purposes (if mailed) five Business Days
after being deposited, postage prepaid, in the United States Mail, registered or
certified mail, or (if delivered by express courier) on the date of receipt, or
(if delivered in person) on the date of receipt, in each case addressed (until
another address or addresses are given in writing by Lender to Borrower) as
follows:
Hibernia National Bank
P.O. Box 61540
New Orleans, Louisiana 70161
or
313 Carondelet Street
New Orleans, Louisiana 70130
Attention: Manager, Commercial Loan Department
Section 9.2 Entire Agreement. This Agreement, the commitment letter of
----------------
the Lender in favor of the Borrower, dated August 21, 1990, the Note and the
Collateral Documents set forth the entire agreement of the Lender and the
Borrower with respect to the Obligations, and supersede all prior written or
oral understandings with respect thereto.
Section 9.3 Renewal, Extension or Rearrangement. All provisions of
-----------------------------------
this Agreement relating to the Note shall apply with equal force and effect to
each and all promissory notes or security instruments hereinafter executed which
in whole or in part represent a renewal, extension for any period, increase or
rearrangement of any part of the Note.
Section 9.4 Amendment. Neither this Agreement nor any provisions
---------
hereof may be changed, waived, discharged or terminated orally or in any manner
other than by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is sought.
Section 9.5 Invalidity. In the event that any one or more of the
----------
provisions contained in this Agreement, the Note, or the Collateral Documents
shall, for any reason, be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, the Note or the Collateral Documents.
Section 9.6 Survival of Agreements. All representations and
----------------------
warranties of the Borrower herein, and all
covenants and agreements herein not fully performed before the
effective date of this Agreement, shall survive such date.
Section 9.7 Waivers. No course of dealing on the part of the Lender,
-------
its officers, employees, or agents, nor any
23
<PAGE>
failure or delay by the Lender with respect to exercising any of its rights,
powers or privileges under this Agreement, the Note or the Collateral Documents
shall operate as a waiver thereof.
Section 9.8 Cumulative Rights. The rights and remedies of the Lender
-----------------
under the Loan Documents shall be cumulative, and the exercise or partial
exercise of any such right or remedy shall not preclude the exercise of any
other right or remedy.
Section 9.9 Time of the Essence. Time shall be deemed of the essence
-------------------
with respect to the performance of all of the terms, provisions and conditions
on the part of the Borrower and the Lender to be performed hereunder.
Section 9.10 Successors and Assigns; Participants. (a) Whenever in
------------------------------------
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Borrower or the Lender that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.
(b) This Agreement is for the benefit of the Lender and for such other
Person or Persons as may from time to time become or be the holders of any of
the Obligations, and this Agreement shall be transferrable and negotiable, with
the same force and effect and to the same extent as the Obligations may be
transferrable, it being understood that, upon the transfer or assignment by the
Lender of any of the Obligations, the legal holder of such Obligations shall
have all of the rights granted to the Lender under this Agreement upon notice of
such transfer to the Borrower.
(c) Borrower hereby recognizes and agrees that the Lender may, from
time to time, one or more times, transfer all or any portion of the Obligations
to one or more third parties. Such transfers may include, but are not limited
to, sales of participation interests in such Obligations in favor of one or more
third party lenders. Borrower specifically (i) consents to all such transfers
and assignments, waives any right to consent to any such transfers and
assignments as may be provided under applicable Louisiana law; (ii) agrees that
the purchaser of a participation interest in the Obligations will be considered
as the absolute owner of a percentage interest of such Obligations and that such
a purchaser will have all of the rights granted to the purchaser under any
participation agreement governing the sale of such a participation interest;
(iii) waives any right of offset that Borrower may have against the Lender
and/or any purchaser of such a participation interest in the Obligations to the
extent permitted by Section 8.3 hereof, and unconditionally agrees that either
the Lender or such a purchaser may enforce
24
<PAGE>
Borrower's Obligations under this Agreement, irrespective of the failure or
insolvency of the Lender or any such purchaser; (iv) agrees that any purchaser
of a participation interest in the Obligations may exercise any and all rights
of counter-claim, set-off, banker's lien and other liens with respect to any and
all monies owing to the Borrower; and (v) agrees that, upon any transfer of all
or any portion of the Obligations, the Lender may transfer and deliver any and
all collateral securing repayment of such Obligations to the transferee of such
Obligations and such collateral shall secure any and all of the Obligations in
favor of such a transferee, and after any such transfer has taken place, the
Lender shall be fully discharged from any and all future liability and
responsibility to Borrower with respect to such collateral, and the transferee
thereafter shall be vested with all the powers, rights and duties with respect
to such collateral.
Section 9.11 Relationship Between the Parties. The relationship
--------------------------------
between the Lender and the Borrower shall be solely that of lender and borrower,
and such relationship shall not, under any circumstances whatsoever, be
construed to be a joint venture, joint adventure, or partnership.
Section 9.12 Limitation of Liability. This Agreement, the Note and the
-----------------------
Collateral Documents, are executed by an officer of the Lender, and by
acceptance of the Loans, the Borrower agrees that for the payment of any claim
or the performance of any obligations hereunder resulting from any default by
the Lender, resort shall be had solely to the assets and property of the Lender,
and no shareholder, officer, employee or agent of the Lender shall be personally
liable therefor.
Section 9.13 Titles of Articles, Sections and Subsections. All titles
--------------------------------------------
or headings to articles, sections, subsections or other divisions of this
Agreement or the exhibits hereto are only for the convenience of the parties and
shall not be construed to have any effect or meaning with respect to the other
content of such articles, sections, subsections or other divisions, such other
content being controlling as to the agreement between the parties hereto.
Section 9.14 Singular and Plural. Words used herein in the singular,
-------------------
where the context so permits, shall be deemed to include the plural and vice
versa. The definitions of words in the singular herein shall apply to such
words when used in the plural where the context so permits and vice versa.
Section 9.15 Governing Law. This Agreement is, and the Note will be,
-------------
contracts made under and shall be construed in accordance with and governed by
the laws of the United States of America and the State of Louisiana.
25
<PAGE>
Section 9.16 Counterparts. This Agreement may be executed in two or
------------
more counterparts, and it shall not be necessary that the signatures of all
parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all of which together shall constitute one and
the same instrument, provided each party is provided with a copy of all duly
executed signatures of each party.
Section 9.17 Waiver of Jury Trial; Submission to Jurisdiction. (A) THE
------------------------------------------------
BORROWER AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO WHICH THE BORROWER AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY
WAY PERTAINING TO (I) THE NOTE, (II) THIS AGREEMENT, (III) THE COLLATERAL
DOCUMENTS OR (IV) THE PROPERTY. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER
CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH
ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO
THIS AGREEMENT. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE
BORROWER AND THE LENDER, AND THE BORROWER AND THE LENDER HEREBY REPRESENT THAT
NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE
BORROWER AND THE LENDER FURTHER REPRESENT THAT IT HAS BEEN REPRESENTED IN THE
SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL
COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL.
(B) THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE
STATE COURTS OF LOUISIANA AND THE FEDERAL COURTS IN LOUISIANA, AND AGREES THAT
ANY ACTION OR PROCEEDING ARISING OUT OF OR BROUGHT TO ENFORCE THE PROVISIONS OF
THE NOTE, THIS AGREEMENT AND/OR THE COLLATERAL DOCUMENTS MAY BE BROUGHT IN ANY
COURT HAVING SUBJECT MATTER JURISDICTION.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
BORROWER: BAYOU STEEL CORPORATION
- --------
By:________________________________
Name: Richard J. Gonzalez
Title: General Manager, Finance
and Data Processing
LENDER: HIBERNIA NATIONAL BANK
- ------
By:________________________________
Name: Spencer J. Gagnet
Title: Vice President
26
<PAGE>
SCHEDULE I
----------
DESCRIPTION OF SUBORDINATED INDEBTEDNESS
----------------------------------------
1. All indebtedness evidenced hereby ("Junior Indebtedness") shall, to
the extent and in the manner hereinafter set forth, be subordinated and subject
in right of payment to the prior payment in full of Superior Indebtedness. For
the purpose hereof, the term "Superior Indebtedness" shall mean all monetary
obligations of Bayou Steel Corporation (the "Borrower") under that certain Loan
Agreement dated January 9, 1991, between the Borrower and Hibernia National Bank
(the "Lender") (the "Loan Agreement"), as same may from time to time be amended,
and shall include, without limitation, any interest payable in respect of any
such obligation subsequent to the commencement of any proceeding against or with
respect to the Borrower under any chapter of the Bankruptcy Code, 11 U.S.C. (S)
101 et seq. (the "Bankruptcy Code"), regardless of whether or not the holder of
-- ---
such Superior Indebtedness would be entitled to receive dividends or payments
with respect to any such interest or any such proceeding.
2. No payment under Junior Indebtedness shall be made by the Borrower
unless full payment of amounts then due for principal of, premium, if any,
sinking funds, if any, and interest on Superior Indebtedness has been made or
duly provided for in money by the Borrower. No payment under Junior
Indebtedness shall be made by the Borrower if, at the time of such payment or
immediately after giving effect thereto, (i) there shall exist a default in the
payment of principal or mandatory prepayments of or premium, if any, sinking
funds, if any, interest or commitment or other fees or amounts with respect to
any Superior Indebtedness or (ii) there shall have occurred an event which
constitutes an Event of Default or any event that with notice or lapse of time
or both would constitute such an Event of Default (other than a default in the
payment of principal or mandatory prepayments of, or premium, if any, sinking
funds, if any, interest or commitment or other fees or amounts), with respect to
any Superior Indebtedness as such an Event of Default is defined in the Loan
Agreement under which the same is outstanding and such Event of Default or event
that with notice or lapse of time or both would constitute an Event of Default
referred to in clause (ii) above, (x) the Borrower may resume making payments
under Junior Indebtedness 180 days after any notice required to be given with
respect to such Event of Default or event pursuant to such Superior Indebtedness
has been given if (A) there has been no acceleration of the maturity of any
Superior Indebtedness and (b) such default is not at such time the subject of
any judicial proceeding and (y) only one notice of the kind referred to in
clause (x) above and relating
<PAGE>
to the same Event of Default or event shall be effective for the purposes hereof
in any twelve-month period.
3. Upon (i) any payment being required to be made by the Borrower under
the Junior Indebtedness upon any declaration of acceleration of the principal
amount thereof or (ii) any payment or distribution of assets of the Borrower of
any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding up or total or partial liquidation or
reorganization of the Borrower, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all principal,
premium, if any, and interest due or to become due upon, and all other amounts
arising from or in connection with, all Superior Indebtedness of the Borrower
shall first be paid in full, or payment thereof provided for in money, before
any payment is made under Junior Indebtedness; and upon any such declaration of
acceleration or dissolution or winding up or liquidation or reorganization any
distribution of assets of the Borrower of any kind or character, whether in
cash, property or securities, to which the holders of Junior Indebtedness would
be entitled except for the provisions hereof, shall be paid by the Borrower or
by any receiver, trustee in bankruptcy, liquidating trustee, agent or other
person making such payment or distribution, or by the holders of Junior
Indebtedness if received by them, directly to the holders of Superior
Indebtedness of the Borrower (pro rata to each such holder on the basis of the
respective amounts of such Superior Indebtedness held by such holder), or their
representatives to the extent necessary to pay all such Superior Indebtedness in
full, in money, after giving effect to any concurrent prepayment of distribution
to or for the benefit of the holders of such Superior Indebtedness, before any
payment or distribution is made to the holders of Junior Indebtedness. In
furtherance of the foregoing, but not by way of limitation thereof, in the event
that the Borrower shall file or have filed against it a petition under any
chapter of the Bankruptcy Code or be adjudicated a bankrupt thereunder, with the
result that the Borrower is excused from the obligation to pay all or any part
of the interest otherwise payable in respect of any Superior Indebtedness during
the period subsequent to the commencement of any such proceedings under the
Bankruptcy Code, each holder of Junior Indebtedness by his acceptance hereof
does hereby agree that all or such part of such interest, as the case may be,
shall be payable out of, and to that extent diminish and be at the expense of,
reorganization dividends or other distributions in respect of such Junior
Indebtedness.
4. In the event that any payment or distribution of assets of the
Borrower of any kind or character, whether in cash, property or securities, not
permitted by the foregoing shall be received by the holders of Junior
Indebtedness before all Superior indebtedness is paid in full, or provision made
for such
2
<PAGE>
payment, in accordance with its terms, such payment or distribution shall be
held in trust for the benefit of, and shall be paid over or delivered to, the
holders of such Superior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Superior Indebtedness may have been
issued or under which such instruments are pledged or issued, as their
respective interests may appear, for application to the payment of all Superior
Indebtedness remaining unpaid to the extent necessary to pay all such Superior
Indebtedness in full in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of such Superior
Indebtedness.
5. The provisions hereof are solely for the purpose of defining the
relative rights of the holders of Superior Indebtedness on the one hand and the
holders of Junior Indebtedness on the other hand, and nothing herein shall
impair, as between the Borrower and the holder of any Junior Indebtedness, the
obligations of the Borrower under Junior Indebtedness, which are unconditional
and absolute, nor shall anything herein prevent the holders of any Junior
Indebtedness from exercising all remedies otherwise permitted by applicable law
or hereunder upon default hereunder, all subject to the rights, if any,
hereunder of holders of Superior Indebtedness to receive cash, property or
securities otherwise payable or deliverable to the holders of Junior
Indebtedness.
6. Each holder of Junior Indebtedness by his acceptance hereof
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Superior
Indebtedness, whether such Superior Indebtedness was created or acquired before
or after the issuance of this Junior Indebtedness and such holder of Superior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and/or continuing to hold such Superior Indebtedness.
7. Subject to the payment in full of all Superior Indebtedness, the
holders of Junior Indebtedness shall be subrogated to the rights of the holders
of Superior Indebtedness to receive payments or distributions of assets of the
Borrower applicable to the Superior Indebtedness until the Junior Indebtedness
shall be paid in full, and no such payments or distributions to the holders of
Superior Indebtedness shall, as among the Borrower, its creditors other than the
holders of Superior Indebtedness and the holders of Junior Indebtedness, be
deemed to be a payment by the Borrower to or on account of the Junior
Indebtedness.
3
<PAGE>
EXHIBIT 10.16
MORTGAGE, SECURITY AGREEMENT AND FINANCING STATEMENT
----------------------------------------------------
A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY ALLOW
- -----------------------------------------------------------------------------
THE MORTGAGEE TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO COURT
- -------------------------------------------------------------------------------
IN A FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGOR UNDER THIS MORTGAGE.
- -------------------------------------------------------------------------
THIS MORTGAGE, SECURITY AGREEMENT AND FINANCING STATEMENT (the
"Mortgage") is made effective the 9th day of January, 1991, by BAYOU STEEL
CORPORATION, a Delaware corporation, having a notice address at River Road, Post
Office Box 5000, La Place, Louisiana 70068, Attention: General Manager, Finance
(the "Mortgagor"), in favor of HIBERNIA NATIONAL BANK, having a notice address
at Post Office Box 61540, New Orleans, Louisiana 70161 (the "Mortgagee").
WHEREAS, the Mortgagor is justly indebted to the Mortgagee in the sum of
ONE MILLION SIX HUNDRED EIGHTY THOUSAND DOLLARS ($1,680,000.00) with interest
thereon, according to the terms of a certain Promissory Note (the "Note")
bearing even date herewith, having a final maturity on December 31, 2000.
NOW, THEREFORE, to secure to the Mortgagee the payment of the aforesaid
indebtedness, with interest thereon, the payment of all other moneys required by
that certain Loan Agreement (the "Loan Agreement") between the Mortgagor and the
Mortgagee bearing even date herewith and the performance of the covenants and
agreements herein contained, the Mortgagor does hereby grant, bargain, sell,
convey and mortgage unto the Mortgagee and to the Mortgagee's successors and
assigns all of the Mortgagor's right, title, interest and estate in, to and
under that certain Lease Agreement (the "Ground Lease") between The City of
Tulsa-Rogers County Port Authority, an agency of the State of Oklahoma, as
lessor and the Mortgagor, as lessee, dated effective April 1, 1989, a memorandum
of which Ground Lease is recorded in Book 811 at Page 625 of the records of
Rogers County, Oklahoma, covering the real property located in Rogers County,
State of Oklahoma, described as follows:
A TRACT OF LAND THAT IS PART OF THE SE 1/4 OF SECTION-8, T-20-N, R-15-
E, ROGERS COUNTY, OKLAHOMA, SAID TRACT OF LAND BEING DESCRIBED AS
FOLLOWS, TO-WIT: STARTING AT THE NORTHWEST CORNER OF SAID SECTION-8;
THENCE DUE EAST 4261.55'; THENCE DUE SOUTH FOR 3928.19' TO THE "POINT
-----
OF BEGINNING" OF SAID TRACT OF LAND; THENCE S 32-39'-52" E FOR
------------
395.18'; THENCE S 38 DEGREES-28'-00" E FOR 489.10'; THENCE DUE WEST
FOR 1497.59'; THENCE DUE NORTH FOR 671.75'; THENCE S 84
DEGREES-18'-30" E FOR 0.00' TO A POINT OF CURVE; THENCE SOUTHEASTERLY,
EASTERLY, AND NORTHEASTERLY
<PAGE>
ALONG A CURVE TO THE LEFT, WITH A CENTRAL ANGLE OF 19 DEGREES-31'-30"
AND A RADIUS OF 1275.00', FOR 434.49' TO A POINT OF TANGENCY; THENCE N
76 DEGREES-10'-00" E ALONG SAID TANGENCY FOR 222.00' TO A POINT OF
CURVE; THENCE NORTHEASTERLY, EASTERLY, AND SOUTHEASTERLY ALONG A CURVE
TO THE RIGHT, WITH A CENTRAL ANGLE OF 21-08'-09" AND A RADIUS OF
225.00', FOR 83.00'; THENCE S 79 DEGREES-55'-0" E FOR 254.74' TO THE
"POINT OF BEGINNING" OF SAID TRACT OF LAND,CONTAINING 20.0023 ACRES;
------------------
together with all the tenements, hereditaments and appurtenances thereof
including, without implied limitation, all easement rights, rights to use wharf
cut areas, access to railroad trackage, connections to water, sanitary sewer and
drainage facilities, connections to telephone, electric and gas lines,
connections to streets and/or roads and all other rights to ingress, egress and
use granted to the Mortgagor by the Ground Lease or otherwise; all buildings and
other improvements now or hereafter constructed thereon; all fixtures,
equipment, machinery, apparatus and articles of personal property of every kind
and character now owned or hereafter acquired by the Mortgagor and now or
hereafter located in or used for the operation and maintenance of the aforesaid
improvements excluding "Inventory" and "Proceeds" as defined in Exhibit C to the
Credit Agreement (as defined in the Loan Agreement); and all general intangibles
and goods to become fixtures now owned or hereafter acquired by the Mortgagor
and used or useful in the construction, ownership, operation, management or
maintenance of the real property and improvements herein described, including,
without implied limitation, all leases, rents, royalties, insurance policies and
proceeds thereof, escrow accounts, condemnation awards and all future additions
to, replacements of, substitutions for and proceeds and products of any of the
foregoing items (all of which property is hereafter called the "Collateral").
The above described real estate, appurtenances, improvements and Collateral are
hereafter collectively called the "Mortgaged Premises" and are hereby declared
to be subject to the lien of this Mortgage as security for the payment of the
indebtedness herein described.
TO HAVE AND TO HOLD the Mortgaged Premises unto the Mortgagee and the
Mortgagee's successors and assigns, forever. The Mortgagor covenants that,
except for liens permitted by Section 6.4 of the Loan Agreement, the Mortgagor
is seized of a leasehold estate in the Mortgaged Premises, that the Mortgagor
has a good right to sell, convey and mortgage the same, that the Mortgaged
Premises are free and clear of all general and special taxes, liens, charges and
encumbrances of every kind and character and that the Mortgagor hereby warrants
and will forever defend the title thereto against the claims of all other
persons.
2
<PAGE>
1. Payment of Debt. If the Mortgagor pays the indebtedness herein
---------------
described and performs all other agreements contained in this Mortgage and the
other documents herein described, the Mortgagor will be entitled to request and
receive a release of this Mortgage.
2. Maintenance; Waste. With respect to the Mortgaged the Mortgagor
------------------
agrees: to keep the same in good condition and repair; to pay all general and
special taxes, assessments and other charges which might be levied or assessed
against the same as they become due and to furnish to the Mortgagee receipts
showing payment of any such taxes and assessments, if demanded; to pay all debts
for repair or improvements now existing or hereafter arising which might become
liens against the Mortgaged Premises; to comply with or cause to be complied
with all requirements of any governmental authority relating to the Mortgaged
Premises; to promptly repair, restore, replace or rebuild any part of the
Mortgaged Premises which might be damaged or destroyed by any casualty
whatsoever or which might be affected by any condemnation proceeding or exercise
of powers of eminent domain; and to promptly notify the Mortgagee of any damage
to the Mortgaged Premises in excess of One Hundred Thousand Dollars
($100,000.00). The Mortgagor further agrees that the Mortgagor will not: commit
or suffer to be committed any waste of the Mortgaged Premises: initiate, join
in or consent to any change in any private restrictive covenant, zoning
ordinance or other public or private restriction limiting or defining the uses
which can be made of the Mortgaged Premises or any part thereof; permit any lien
or encumbrance of any kind to accrue or remain against the Mortgaged Premises or
any part thereof (whether or not such lien or encumbrance takes precedence over
the lien of this Mortgage), except for liens permitted by Section 6.4 of the
Loan Agreement.
3. Insurance. The Mortgagor agrees to keep the Premises insured for the
---------
benefit of the Mortgagee against loss or damage by fire, lightning, windstorm,
hail, explosion, riot, riot attending a strike, civil commotion, aircraft,
vehicles and smoke and (when and to the extent insurance against war risks is
obtainable from the United States of America or an agency thereof) against war
risks, all in amounts approved by the Mortgagee not exceeding 100% of full
insurable value, and when and to the extent required by the Mortgagee, against
any other risk insured against by persons operating like properties in the
locality of the Mortgaged Premises. All insurance herein required shall be in
form and companies approved by the Mortgagee. Regardless of the types or
amounts of insurance required and approved by the Mortgagee, the Mortgagor will
assign to the Mortgagee all policies of insurance which insure against any loss
or damage to the Mortgaged Premises and will deliver certificates of insurance
for such policies, as Collateral and
3
<PAGE>
further security for the payment of the indebtedness secured by this Mortgage,
with loss payable to the Mortgagee pursuant to the Oklahoma standard mortgagee
clause. If the Mortgagee, by reason of such insurance, receives any money for
loss or damage, such amount may, at the option of the Mortgagee, be retained and
applied by the Mortgagee toward payment of the indebtedness hereby secured (but
only if an Event of Default has occurred and is continuing), or be paid over
wholly or in part to the Mortgagor for the repair of said buildings or for the
erection of new buildings in their place, or for any other purpose or object
satisfactory to the Mortgagee, but the Mortgagee shall not be obligated to see
to the proper application of any amount paid over to the Mortgagor. Not less
than ten (10) days prior to the expiration dates of each policy of insurance
required hereunder, the Mortgagor will deliver to the Mortgagee a renewal policy
or policies of insurance accompanied by evidence of premium payment satisfactory
to the Mortgagee. In the event of a foreclosure of this Mortgage, the purchaser
of the Mortgaged Premises shall succeed to all the rights of the Mortgagor,
including any right to unearned premiums, in and to all policies of insurance
assigned or delivered to the Mortgagee pursuant to the provisions of this
Mortgage.
4. Alterations. No building or other property now hereafter subject to
-----------
the lien of this Mortgage will be removed, demolished or materially altered
without the prior written consent of the Mortgagee, except that the Mortgagor
will have the right, without such consent, to remove from time to time such
Collateral as becomes worn or obsolete, provided that either: (a)
simultaneously with or prior to such removal, any such Collateral is replaced
with other Collateral of a value at least equal to that of the replaced
Collateral and free from any title retention device, security agreement or other
encumbrance, and by such removal or replacement, the Mortgagor will be deemed to
have subjected such Collateral to the lien of this Mortgage; or (b) any net cash
proceeds received from such disposition is promptly paid to the Mortgagee to be
applied to the last installments due on the indebtedness hereby secured, without
any charge for prepayment.
5. Default; Remedies. On the failure of the Mortgagor to pay any of
-----------------
the taxes, assessments, debts, liens or other charges as the same become due,
except for taxes which are being contested in good faith and for which adequate
reserves have been provided, or to insure the Mortgaged Premises or deliver the
policies of insurance as herein provided, or to perform any of the Mortgagor's
agreements herein contained, the Mortgagee is hereby authorized, at the
Mortgagee's option, to insure the Mortgaged Premises, or any part thereof, and
pay the costs of such insurance, and to pay such taxes, assessments, debts,
liens or other charges, or any part thereof, and to remedy the Mortgagor's
failure to perform hereunder and pay the costs associated
4
<PAGE>
therewith, and the Mortgagor agrees to refund on demand all sums so paid, with
interest thereon at a rate equal to three percent (3%) per annum in excess of
the interest rate stated in the Note; and any such sums so paid together with
interest thereon will become a part of the indebtedness hereby secured;
provided, however, that the retention of a lien hereunder for any sum so paid
will not constitute a waiver of subrogation or substitution which the Mortgagee
might otherwise have. On the occurrence of an Event of Default under the Loan
Agreement, the Mortgagee may either: (a) declare the principal of the Note, all
interest accrued thereon and all other sums hereby secured, without deduction
and without notice, to be immediately due, and the Mortgagee will be entitled to
foreclose this Mortgage by judicial proceeding; or (b) after any notice to the
Mortgagor required by the Oklahoma Power of Sale Mortgage Foreclosure Act,
declare the principal of the Note, all interest accrued thereon and all other
sums hereby secured, without deduction, to be immediately due, and the Mortgagee
will be entitled to foreclose this Mortgage by power of sale pursuant to the
provisions of the Oklahoma Power of Sale Mortgage Foreclosure Act ("OPSMFA").
The Mortgagor hereby confers on the Mortgagee and grants to the Mortgagee the
power to sell the Mortgaged Premises pursuant to the OPSMFA. On default, the
Mortgagee will be entitled to exercise all further and additional remedies as
might now or hereafter be accorded to the Mortgagee at law or in equity. Whether
the Mortgagee elects to foreclose this Mortgage by judicial proceeding or by
power of sale, the Mortgagee will, immediately on the occurrence of an Event of
Default (as defined in the Loan Agreement), be entitled to the possession of the
Mortgaged Premises and the rents and profits thereof, and will be entitled to
have a receiver appointed to take possession of the Mortgaged Premises without
notice (which notice the Mortgagor hereby waives) and without the obligation of
the Mortgagee to demonstrate cause for such appointment of a receiver,
notwithstanding anything contained in this Mortgage or any law heretofore or
hereafter enacted.
6. Taxes; Expenses. The Mortgagor agrees to pay any and all taxes which are
---------------
levied or assessed directly or indirectly against the Note, this Mortgage and
the indebtedness hereby secured, and further agrees to pay all expenses incurred
in connection with the creation of the indebtedness hereby secured, without
regard to any law which might be hereafter enacted imposing payment of the whole
or any part thereof on the Mortgagee. The additional amounts which might become
due hereunder will be regarded as part of the indebtedness secured by this
Mortgage. This paragraph will not apply to any amount to be paid under the
present Oklahoma real estate mortgage tax which the Mortgagee agrees to pay.
7. Expenses of Collection. If, and as often as, this Mortgage or the Note is
----------------------
placed in the hands of an attorney for collection, or to protect the priority or
validity of this Mortgage, or to
5
<PAGE>
prosecute or defend any suit affecting the Mortgaged Premises, or to enforce or
defend any of the Mortgagee's rights hereunder, the Mortgagor agrees to pay the
Mortgagee's reasonable attorney's fees, together with all court costs or other
disbursements relating to the Mortgaged Premises, which sums will be secured
hereby.
8. Appraisement. Appraisement of the Mortgaged Premises is hereby expressly
------------
waived, or not, at the option of the Mortgagee, such option to be exercised at
the time judgment is rendered in any judicial foreclosure proceeding, or at any
time prior thereto.
9. Sale in Parcels. In any sale under this Mortgage by virtue of judicial
---------------
proceedings or otherwise, the Mortgaged Premises may be sold in one parcel and
as an entirety or in such parcels, manner or order as the Mortgagee in the
Mortgagee's discretion may elect, and the Mortgagor waives any and all rights
which the Mortgagor might have to request that the Mortgaged Premises be sold in
one parcel or in separate parcels.
10. Condemnation Awards. The Mortgagor agrees that if at any time all or any
-------------------
portion of the Mortgaged Premises is taken under the power of eminent domain or
by transfer in lieu thereof, any payment received by reason thereof will be paid
directly to the Mortgagee and all or any portion of such award or payment, at
the option of the Mortgagee, will be applied to the indebtedness hereby secured
in payment of the last maturing installments of the indebtedness or paid over,
wholly or in part, to the Mortgagor for the purpose of altering, restoring or
rebuilding any part of the Mortgaged Premises which might have been altered,
damaged or destroyed as a result of any such taking or damage, or for any other
purpose or object satisfactory to the Mortgagee; provided that the Mortgagee
will not be obligated to see to the application of any amount paid over to the
Mortgagor. The Mortgagor immediately on obtaining knowledge of the institution
of any proceedings or negotiations for the condemnation of the Mortgaged
Premises, or any portion thereof, will notify the Mortgagee of the pendency of
such negotiations or proceedings. The Mortgagee will have the right to
participate in any such negotiations or proceedings, and the Mortgagor from time
to time will execute and deliver to the Mortgagee all instruments requested by
the Mortgagee to permit such participation.
11. Certificate. The Mortgagor agrees to certify to the Mortgagee or to any
-----------
proposed assignee of this Mortgage, the amount of principal and interest then
owing on this Mortgage and whether any offsets or defenses exist against the
indebtedness hereby secured, within thirty (30) days after the receipt of each
such request.
6
<PAGE>
12. Notice. Every provision for notice contained in this Mortgage will be
------
deemed fulfilled by written notice in accordance with the Loan Agreement.
13. Inspection; Management. The Mortgagee and any person authorized by the
----------------------
Mortgagee will have the right to enter and inspect the Mortgaged Premises at all
reasonable times during normal business hours. If, at any time after the
occurrence of an Event of Default under the Loan Agreement, the management or
maintenance of the Mortgaged Premises is determined by the Mortgagee to be
unsatisfactory, the Mortgagor agrees to employ, for the duration of such
default, as managing agent of the Mortgaged Premises, a person approved by the
Mortgagee.
14. Payment by Others. Any payment made in accordance with the terms of this
-----------------
Mortgage by any person at any time liable for the payment of the whole or any
part of the indebtedness now or hereafter secured by this Mortgage, or by any
subsequent owner of the Mortgaged Premises, or by any other person whose
interest in the Mortgaged Premises might be prejudiced in the event of a failure
to make such payment, or by any stockholder, officer or director of a
corporation or any partner of a partnership or trustee or beneficial owner of a
trust which at any time might be liable for such payment or owns or has an
interest in the Mortgaged Premises, will be deemed, as between the Mortgagee and
all such persons who at any time might be liable as aforesaid or own the
Mortgaged Premises, to have been made on behalf of the Mortgagor.
15. No Waiver. Any failure by the Mortgagee to insist on the strict
---------
performance by the Mortgagor of any of the terms and provisions hereof will not
be deemed to be a waiver of any of the terms and provisions hereof, and the
Mortgagee, notwithstanding any such failure, will have the right thereafter to
insist on the strict performance by the Mortgagor of any and all of the
provisions of this Mortgage to be performed by the Mortgagor. Neither the
Mortgagor nor any other person now or hereafter obligated for the payment of the
whole or any part of the indebtedness now or hereafter secured by this Mortgage
will be relieved of such obligation by reason of the failure of the Mortgagee to
comply with any request of the Mortgagor or of any other person so obligated to
take action to foreclose this Mortgage or otherwise enforce any of the
provisions of this Mortgage or of any obligations secured by this Mortgage, or
by reason of the release, regardless of consideration, of the whole or any part
of the security held for the indebtedness secured by this Mortgage, or by reason
of any agreement or stipulation between any subsequent owner or owners of the
Mortgaged Premises and the Mortgagee extending, from time to time, the time of
payment or modifying the terms of the Note or this Mortgage without first having
obtained the consent of the Mortgagor or such other person, and in the latter
event, the Mortgagor and all such other
7
<PAGE>
persons will continue to be liable to make such payments according to the terms
of any such agreement of extension or modification unless expressly released and
discharged in writing by the Mortgagee. Regardless of consideration, and
without the necessity for any notice to or consent by the holder of any
subordinate lien against the Mortgaged Premises, the Mortgagee may release the
obligation of anyone at any time liable for any of the indebtedness secured by
this Mortgage or any part of the security held for such indebtedness and may
from time to time extend the time of payment or otherwise modify the terms of
the Note and/or this Mortgage without, as to the security for the remainder
thereof, in any way impairing or affecting the lien of this Mortgage or the
priority of such lien as security for the payment of the indebtedness as it
might be so extended or modified, over any subordinate lien. The holder of any
subordinate lien will have no right to terminate any lease affecting the
Mortgaged Premises whether or not such lease is subordinate to this Mortgage.
The Mortgagee may resort for the payment of indebtedness hereby secured to any
other security therefor held by the Mortgagee in such order and manner as the
Mortgagee might elect from time to time.
16. Cumulative Remedies. The rights of the Mortgagee arising under the
-------------------
provisions of this Mortgage will be separate, distinct and cumulative and no
provisions will be in exclusion of any other provision. No act of the Mortgagee
will be construed as an election to proceed under any on provision to the
exclusion of any other provision, anything herein or otherwise to the contrary
notwithstanding.
17. Security Interest. This Mortgage is intended to constitute a security
-----------------
agreement and a financing statement (in accordance with 12A Okla. Stat. [1981]
(S) 9-402) with respect to the Collateral and all other property described
herein which is not a part of the real property described herein.
17.1 Assembly of Collateral. On default hereunder and acceleration of the
----------------------
indebtedness pursuant to the provisions hereof, the Mortgagee may at
the Mortgagee's discretion require the Mortgagor to assemble the
Collateral and make the Collateral available to the Mortgagee at the
Mortgaged Premises which is hereby designated a place reasonably
convenient to both parties.
17.2 Notice of Sale. The Mortgagee agrees to give the Mortgagor written
--------------
notice of the time and place of any public sale of any of the
Collateral or of the time after which any private sale or other
intended disposition thereof is to be made by sending notice to the
Mortgagor at least thirty (30) days before the time of
8
<PAGE>
the sale or other disposition, which provisions for notice the
Mortgagor agrees are reasonable.
17.3 Additional Documents. The Mortgagor will from time to time within ten
--------------------
(10) days after request by the Mortgagee, execute, acknowledge and
deliver any financing statement, renewal affidavit, certificate,
continuation statement, that the Mortgagee might request in order to
protect, preserve, continue, extend or maintain the security interest
under and the priority of this Mortgage and will, on demand, pay any
reasonable expenses incurred by the Mortgagee in the preparation,
execution and filing of any such documents.
18. Impound Accounts. Following the occurrence of an Event of Default (as
----------------
defined in the Loan Agreement), together with and in addition to each
installment of principal and interest payable under the terms of the Note, the
Mortgagor agrees to pay to the Mortgagee a pro rata portion of the taxes,
assessments and insurance premiums next to become due, as estimated by the
Mortgagee, so that the Mortgagee will have sufficient funds on hand to pay said
taxes, assessments and insurance premiums thirty (30) days before the maturity
date thereof. Any deficit in such payments will immediately be paid to the
Mortgagee by the Mortgagor. Moneys so held will not bear interest, and on
default, will be first applied by the Mortgagee to the payment of taxes,
assessments and insurance premiums with any balance remaining to be applied on
account of the indebtedness hereby secured. It will be the responsibility of
the Mortgagor to furnish the Mortgagee with bills in sufficient time to pay the
taxes and assessments before penalty attaches and the insurance premiums before
the policies lapse.
19. Mineral Interests. The Mortgagor agrees that the making of any oil, gas or
-----------------
mineral lease or the sale or conveyance of any mineral interest or right to
explore for minerals under, through or on the Mortgaged Premises or the
commencement of any exploration, drilling or mining activity on any part of the
Mortgaged Premises would impair the value of the Mortgaged Premises as security
for payment of the indebtedness hereby secured and that the Mortgagor will have
no right, power or authority to lease the Mortgaged Premises, or any part
thereof, for oil, gas or other mineral exploration, or to grant, assign or
convey any mineral interest of any nature, or the right to explore for oil, gas
and other mineral exploration, mining or development, without first obtaining
from the Mortgagee express written permission, which permission will not be
unreasonably withheld and not be valid until recorded. The Mortgagor further
agrees that if the Mortgagor makes any such lease or attempts to grant any such
mineral rights or if any other party commences any exploration, drilling or
mining activity on the Mortgaged Premises without such prior written permission,
then the Mortgagee will have the
9
<PAGE>
option, without notice, to declare the same to be a default hereunder and to
declare the indebtedness hereby secured immediately due. Whether or not the
Mortgagee consents to such lease or grant of mineral rights or mining activity,
the Mortgagee will receive the entire consideration to be paid to the Mortgagor
for such lease or grant of mineral rights or mining activity, with the same to
be applied in payment of the indebtedness hereby secured; provided, however,
that the acceptance of such consideration will in no way impair the lien of this
Mortgage on the entire Mortgaged Premises and all rights therein, including all
mineral rights.
20. Prohibited Acts. The Mortgagor will not: (a) sell (including, without
---------------
implied limitation, the execution of one or more installment sale contracts or
contracts for deed), convey, mortgage or otherwise transfer or encumber all or
any part of the Mortgaged Premises, except for transfers due to obsolescence,
replacement, repairs, renewals or otherwise in the ordinary course of business;
or (b) create or suffer to exist any security interest, chattel mortgage or
title retention device covering all or any part of the Collateral. The
occurrence of any of the aforesaid events without the Mortgagee's prior written
approval will constitute a default hereunder.
21. Leasehold Mortgage. The Mortgagor as lessee under the Ground Lease
------------------
covenants and agrees as follows:
21.1 Performance of Ground Lease. To promptly perform and observe or cause
---------------------------
to be performed and observed all of the terms, covenants and
conditions required to be performed and observed by the Mortgagor
under the Ground Lease and to do or cause to be done all things
necessary to preserve and keep unimpaired the Mortgagor's rights under
the Ground Lease; to promptly (in any event within thirty [30] days
after the occurrence thereof) notify the Mortgagee of the receipt of
any notice from the lessor under the Ground Lease claiming that the
Mortgagor is in default in the performance or observance of any of the
terms, covenants or conditions thereof to be performed or observed by
the Mortgagor; to cause a copy of each such notice from such lessor to
be promptly delivered to the Mortgagee; to correct or cause to be
corrected any such default within the time provided in the Ground
Lease for correction thereof by the Mortgagor.
21.2 Mortgagor's Estate. In the event the Mortgagor acquires the fee
------------------
simple title or any other estate or interest in the real estate
subject to the Ground Lease, such acquisition will not merge the
leasehold estate created by the Ground Lease, but such other estate or
interest will immediately become subject to
10
<PAGE>
the lien of this Mortgage, and the Mortgagor agrees to execute,
acknowledge and deliver any instruments which the Mortgagee might
reasonably request to accomplish the purposes hereof immediately on
the request of the Mortgagee therefor.
21.3 Option to Cure Default. On receipt by the Mortgagee from the lessor
----------------------
under the Ground Lease of any notice of default by the Mortgagor
thereunder, the Mortgagee may rely thereon and take any such action as
the Mortgagee deems necessary or desirable to cure such default, even
though the existence of such default or the nature thereof is
questioned or denied by the Mortgagor or by any party on behalf of the
Mortgagor. The Mortgagor hereby expressly grants to the Mortgagee the
absolute and immediate right to enter the premises subject to the
Ground Lease or any part thereof to such extent and as often as the
Mortgagee in its sole discretion deems necessary or desirable in order
to prevent or cure any such default by the Mortgagor.
21.4 No Modification. The Mortgagor will not surrender the leasehold
---------------
estate created by the Ground Lease, nor terminate nor cancel the
Ground Lease, and the Mortgagor will not, without the express written
consent of the Mortgagee, modify, change, supplement, alter or amend
the Ground Lease, either orally or in writing, and as security for the
payment of the indebtedness hereby secured and for the performance of
the covenants herein contained, the Mortgagor hereby assigns to the
Mortgagee all of the Mortgagor's rights and privileges as lessee under
the Ground Lease to terminate, cancel, modify, change, supplement,
alter amend the Ground Lease. Any such termination, cancellation,
modification, change, supplement, alteration, amendment of the Ground
Lease without the prior written consent thereto by the Mortgagee will
be void and of no force and effect. Notwithstanding this Section
21.4, (i) the Mortgagor will have unrestricted rights to negotiate a
renewal rent with the landlord under the Ground Lease, and (ii) so
long as no Event of Default (as defined in the Loan Agreement) has
occurred and is continuing, the Mortgagor may modify the Ground Lease
with the Mortgagee's prior written consent, which consent will not be
unreasonably withheld.
21.5 No Release. No release or forbearance of any of the Mortgagor's
----------
obligations under the Ground Lease, pursuant to the Ground Lease or
otherwise, will release the Mortgagor from any of the Mortgagor's
obligations under this Mortgage, including the Mortgagor's obligations
with respect
11
<PAGE>
to the payment of rent as provided in the Ground Lease and the
performance of all of the terms, provisions, covenants, conditions and
agreements contained in the Ground Lease to be performed by the
Mortgagor thereunder.
21.6 No Merger. Anything herein contained to the contrary notwithstanding,
---------
it is agreed that the leasehold interest of the Mortgagor under the
Ground Lease and the interest and estate of the fee owner and lessor
under the Ground Lease will at all times remain separate and apart and
retain their separate identities, and no merger of the leasehold
estate of the Mortgagor with the estate in fee of the owner and lessor
will result with respect to the Mortgagee or with respect to any
purchaser acquiring the Mortgaged Premises at any sale on foreclosure
of the leasehold estate encumbered by this Mortgage without the
written consent of the Mortgagee.
21.7 Ground Lease Extension. If the indebtedness of the Mortgagor herein
----------------------
described remains outstanding as of the first day of any period during
which the Mortgagor may exercise an option to renew and extend the
term of the Ground Lease, the Mortgagor will exercise such option in
accordance with the terms of the Ground Lease within five (5) days
after the initial option exercise date; provided, however, that the
Mortgagor may pay in full the indebtedness of the Mortgagor herein
described, in which case the Mortgagor will have no obligation
hereunder to extend the Ground Lease. If the Mortgagor fails to
exercise such option within five (5) days after the initial option
exercise date, the Mortgagor irrevocably grants to the Mortgagee the
option to exercise the option to extend the term of the Ground Lease
in the Mortgagor's name.
22. Subrogation. To the extent funds are advanced under the Note hereby
-----------
secured for the purpose of paying the indebtedness secured by any lien or
encumbrance having priority over the lien of this Mortgage, the Mortgagee will
be subrogated to any and all rights, superior titles, liens and equities owned
or claimed by the holder of such prior lien or encumbrance.
23. Governing Law. This Mortgage will be construed according to the internal
-------------
laws of the State of Oklahoma. All actions with respect to this Mortgage or the
other instruments securing payment of the Note may be instituted in the courts
of the State of Oklahoma sitting in Rogers County, Oklahoma, or the United
States District Court sitting in the Northern District of Oklahoma, as the
Mortgagee might elect, and by execution and delivery of this Mortgage, the
Mortgagor irrevocably and
12
<PAGE>
unconditionally submits to the jurisdiction (both subject matter and personal)
of each such court and irrevocably and unconditionally waives: (a) any
objection the undersigned might now or hereafter have to the venue in any of
such courts; and (b) any claim that any action or proceeding brought in any of
such courts has been brought in an inconvenient forum.
24. Future Advancements. This Mortgage will secure the payment of the Note,
-------------------
including any and all advancements made by the Mortgagee thereunder, and any and
all additional indebtedness of the Mortgagor to the Mortgagee incurred in
connection with the Mortgaged Premises or any improvements now or hereafter
located thereon, whether or not incurred or becoming payable under the
provisions hereof and whether as future advancements or otherwise, together with
any increases, renewals, modifications, rearrangements, consolidations or
extensions of the Note or other indebtedness.
25. Environmental Compliance. The Mortgagor agrees that the Mortgagor will not
------------------------
generate, manufacture, produce, store, release, discharge, or dispose of on,
under or about the Mortgaged Premises or transport to or from the Mortgaged
Premises, in violation of the applicable laws in each case, any Hazardous
Substance (as hereafter defined) or allow any other person to do so. The
Mortgagor agrees to keep and maintain the Mortgaged Premises in substantial
compliance with, and not to cause or permit the Mortgaged Premises to be in
violation of (except for violations which would have an immaterial effect), any
environmental Law (as hereafter defined). The Mortgagor agreed to give prompt
written notice to the Mortgagee of: (a) any proceeding or inquiry by any
governmental authority (including, without implied limitation, the Oklahoma
State Department of Health and the United States Environmental Protection
Agency) with respect to the presence of any Hazardous Substance on the Mortgaged
Premises or the migration thereof from or to other property; (b) all claims made
or threatened by any third party against the Mortgagor or the Mortgaged Premises
relating to any loss or injury resulting from any Hazardous Substance; and (c)
the Mortgagor's discovery of any occurrence or condition on the Mortgaged
Premises that could cause the Mortgaged Premises or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability or use
of the Mortgaged Premises under any Environmental Law. The Mortgagee will have
the right to join and participate in, as a party if the Mortgages so elects, any
legal proceedings or actions initiated in connection with any Environmental Law.
The Mortgagor agreed to protect, indemnify and hold harmless the Mortgagee, its
directors, officers, employees, successors and assigns against all loss, damage,
cost, expense or liability directly or indirectly arising out of or attributable
to the use, generation, manufacture, production, storage, release, discharge or
disposal of a Hazardous Substance on, under or about the
13
<PAGE>
Mortgaged Premises including without implied limitation the costs of any
required or necessary repair, cleanup or detoxification of the Mortgaged
Premises and the preparation and implementation of any closure, remedial or
other required plan. This indemnity will survive the release of this Mortgage
or the extinguishment of the lien by foreclosure or action in lieu thereof but
will not extend to any acts caused by the Mortgagee after its acquisition of the
Mortgaged Premises. In the event that any investigation, site monitoring,
containment, cleanup, removal, restoration or other remedial work of any kind or
nature (the "Remedial Work") is reasonably necessary or desirable under any
applicable local, state or federal law or regulation, any judicial order, or by
any governmental or nongovernmental entity or person because of, or in
connection with, the release of a Hazardous Substance on or into the air, soil,
groundwater, surface water or soil vapor at, on, about, under or within the
Mortgaged Premises (or any portion thereof), which caused immediate danger to
the public health or to property, the Mortgagor agrees to timely commence, or
cause to be commenced, and thereafter diligently prosecute or cause to be
prosecuted to completion, all such Remedial Work. All costs and expenses of
such Remedial Work will be paid by the Mortgagor including, without implied
limitation, the charges or such contractor(s) and consulting engineer(s), and
the Mortgagee's reasonable attorneys' fees and costs incurred in connection with
monitoring or review of such Remedial Work. In the event the Mortgagor fails to
timely commence, or cause to be commenced, or fails to diligently prosecute or
cause to be prosecuted to completion, such Remedial work, the Mortgagee may, but
will not be required to, cause such Remedial Work to be performed and all costs
and expenses thereof, or incurred in connection therewith, will become part of
the indebtedness hereby secured. The term "Environmental Laws" means any
federal, state or local law, statute, ordinance or regulation pertaining to
health, industrial hygiene or the physical conditions on, under or about the
Mortgaged Premises, including without implied limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") as
amended, 42 U.S.C. Sections 9601 et seq., and the Resource Conservation and
-- ---
Recovery Act of 1976 ("RCRA"), 42 U.S.C. Sections 6901 et seq. The term
-- ---
"Hazardous Substance" will include without implied limitation: (i) Those
substances included within the definitions or "hazardous substances," "hazardous
materials," "toxic substances" or "solid waste" in CERCLA, RCRA, and the
Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et seq., and in
-- ---
the regulations promulgated pursuant to said laws; (ii) those substances listed
in the United States Department of Transportation Table (49 CFR 172.101 and
amendments thereto) or by the Environmental Protection Agency (or any successor
agency) as hazardous substances (40 CFR Part 302 and amendments thereto); (iii)
such other substances, materials and wastes which are or become regulated under
applicable local, state or federal law, or which are classified as hazardous or
toxic under federal, state
14
<PAGE>
or local laws or regulations; and (iv) any material, waste or substance which is
asbestos, polychlorinated biphenyls, designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. (S)(S) 1251 et seq. or
listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. (S) 1317),
flammable explosives or radioactive MATERIALS
26. Mortgage as Assignment of Leases and Rents. Subject to and to the extent
------------------------------------------
permitted by Section 3.4 of the Ground Lease, and as additional and further
security for the payment of the indebtedness secured hereby, the Mortgagor
hereby grants, bargains, sells, conveys and assigns to the Mortgagee: all
leases, whether now existing or hereafter arising; all rents, receipts,
revenues, income, issues and profits now or hereafter payable to or received by
the Mortgagor thereunder, including, without implied limitation, minimum rent,
percentage rent, additional rent, reimbursements for taxes, insurance premiums,
maintenance or operating expenses; all guarantees of the performance of the
lessees thereunder; all of the Mortgagor's rights thereunder; all proceeds now
or hereafter payable to the Mortgagor under any policy of insurance against loss
of rents relating to the Mortgaged Premises; and all rights, claims and demands
which the Mortgagor might now or hereafter have against any tenant, subtenant,
assignee or other occupant of the Mortgaged Premises; together with full and
complete authority and right in the Mortgagee in case of default in payment of
the indebtedness hereby secured or any part thereof or failure to comply with
any of the terms and conditions of the Loan Agreement, the Note or this
Mortgage, to demand, collect, receive and receipt for such rents, income and
profits, to take possession of the Mortgaged Premises without having a receiver
appointed therefor, to rent and manage the same from time to time, and to apply
the net proceeds of such rents, income and profits in payment of the
indebtedness hereby secured until such indebtedness is paid in full or until
title is obtained through foreclosure, by exercise of the power of sale or
otherwise. The Mortgagee will not be obligated to perform or discharge any
obligation under any of the leases by reason of this assignment.
27. Construction. Wherever used in this Mortgage: the word "Mortgage" means
------------
"this instrument and all increases, extensions, modifications, renewals,
consolidations and amendments hereof"; the word "lease" means "any agreement
between the Mortgagor as lessor and any other person for the use, occupancy or
possession of all or any part of the Mortgaged Premises"; the words "Mortgaged
Premises" mean "the items of real and personal property now owned or hereafter
acquired by the Mortgagor to the extent described herein and ail future
additions to, increases of, replacements and substitutions for and proceeds and
products thereof"; the word "Mortgages" means "the person named herein as
Mortgagee or any subsequent holder or holders of this Mortgagee; the word
"Mortgagor" means "the then owner or owners of an
15
<PAGE>
interest in the Mortgaged Premises and such persons' legal representatives,
successors and permitted assigns"; the word "Note" means "the Promissory Note
described herein, payment of which is secured by this Mortgage and all
increases, extensions, modifications, renewals, consolidations and amendments
thereof"; and the word "person" means "any individual, corporation, partnership,
association, trust, joint venture or any government or agency or political
subdivision thereof." The paragraph headings of this Mortgage are included for
convenience in reference and are not intended to define, limit or modify the
terms of this Mortgage. If any provision of this Mortgage is held to be
invalid, illegal or unenforceable in any respect or application, for any reason,
such invalidity, illegality or unenforceability will not affect the other
provisions herein contained, and such other provisions will remain in full force
and effect. This Mortgage is intended to create rights between the Mortgagor
and the Mortgagee and is not intended to confer rights on any other person or to
constitute such person a third party beneficiary hereunder. This Mortgage will
be binding on the Mortgagor and all successors and permitted assigns of the
Mortgagor and will inure to the benefit of the Mortgagee and all successors and
assigns of the Mortgagee.
28. Amendment. This Mortgage cannot be changed except by an agreement in
---------
writing signed by the party against whom enforcement of the change is sought.
IN WITNESS WHEREOF, the Mortgagor has duly executed this instrument this
____ day of _______________, 1991, to be effective the date first above written.
BAYOU STEEL CORPORATION, a
Delaware corporation
By____________________________
Name:_______________________
Attorney-in-fact
(the "Mortgagor")
16
<PAGE>
ACKNOWLEDGEMENT
---------------
STATE OF LOUISIANA )
) SS:
PARISH OF ORLEANS )
This instrument was acknowledged before me on January __, 1991, by
_________________, Attorney-in-Fact of Bayou Steel Corporation, a Delaware
corporation.
(SEAL)
________________________________
Notary Public
My Commission is Issued for Life
17
<PAGE>
EXHIBIT 10.20
BAYOU STEEL CORPORATION
401(K) SAVINGS PLAN AND TRUST
<PAGE>
PREAMBLE
The purpose of this Plan and Trust is to provide, in accordance with its
provisions, a defined contribution plan providing retirement and other related
benefits for those employees (the Employees) of Bayou Steel Corporation (the
Employer) who are eligible to participate.
The Plan has been created with the intent that it qualifies for approval under
Sections 401 and 410 through 417 of the Internal Revenue Code (the Code). The
Trust has been created with the intent that it qualifies for approval under
Section 501 of the Code. It is further intended that the Plan comply with the
provisions of the Employee Retirement Income Security Act of 1974 as amended
(ERISA). In case of any ambiguity in the Plan's language, it will be
interpreted to accomplish the Plan's intent of qualifying under the Code and
complying with ERISA.
This Plan and Trust is created exclusively for the benefit of the eligible
Employees and their Beneficiaries. Neither the Employer, the Plan Administrator
nor the Trustee will apply or interpret the terms of the Plan in any manner that
permits discrimination in favor of Highly Compensated Employees. All Employees
under similar circumstances will be treated alike.
The undersigned Employer and Trustee hereby adopt this Plan and Trust to be
effective as of March 1, 1991, and agree to be bound by the terms and conditions
of the Plan and Trust.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
-----------
<S> <C>
ARTICLE 1 - DEFINITIONS 1-1
ARTICLE 2 - PARTICIPATION 2-1
ARTICLE 3 - PARTICIPANT ACCOUNTS 3-1
ARTICLE 4 - ACCOUNTING AND VALUATION 4-1
ARTICLE 5 - RETIREMENT BENEFITS 5-1
ARTICLE 6 - DEATH BENEFIT 6-1
ARTICLE 7 - LIMITATIONS ON BENEFITS 7-1
ARTICLE 8 - MISCELLANEOUS 8-1
ARTICLE 9 - ADMINISTRATION 9-1
ARTICLE 10 - AMENDMENT OR TERMINATION OF PLAN 10-1
ARTICLE 11 - TRUSTEE AND TRUST FUND 11-1
ARTICLE 12 - PROVISIONS RELATING TO EMPLOYER STOCK 12-1
</TABLE>
<PAGE>
ARTICLE 1
DEFINITIONS
As used in this document, unless otherwise defined or required by the context,
the following capitalized terms have the meanings set forth in this Article 1.
Some of the terms used in this document are not defined in Article 1, but for
convenience are defined as they are introduced in the text.
1.01 Account
-------
Account means a separate account maintained for each Participant
reflecting applicable contributions, applicable forfeitures, investment
income (loss) allocated to the account and distributions.
1.02 Accounting Date, Valuation Date
-------------------------------
The terms Accounting Date and Valuation Date are used interchangeably and
mean the last day of each Accounting Period.
1.03 Accounting Period, Valuation Period
-----------------------------------
The terms Accounting Period and Valuation Period are used interchangeably
and mean each of the 6-month periods which end on June 30th and December
31st of each year.
1.04 Accrued Benefit
---------------
A Participant's Accrued Benefit as of a given date means the total value
of his Accounts determined as of the Valuation Date immediately preceding
the date of determination plus any other amounts withheld from the
Participant's Compensation subsequent to such Valuation Date pursuant to a
Payroll Withholding Agreement. A Participant's Accrued Benefit will not
be reduced solely on account of any increase in such Participant's age or
service or on account of an amendment to the Plan.
A Participant's Vested Accrued Benefit means his Vested Percentage of that
portion of his Accrued Benefit which is subject to the Vesting Schedule
plus 100% of the remaining portion of his Accrued Benefit.
1.05 Beneficiary
-----------
Beneficiary means the person, persons, trust or other entity who is
designated to receive any amount payable upon the death of a Participant.
1.06 Cash-Out Distribution
---------------------
Cash-Out Distribution means, as described in Article 5, a distribution to
a Participant upon termination of employment of the portion of his Vested
Accrued Benefit which is subject to the Vesting Schedule.
1-1
<PAGE>
1.07 Code and ERISA
--------------
Code means the Internal Revenue Code of 1986, as it may be amended from
time to time, and all regulations issued thereunder. Reference to a
section of the Code includes that section and any comparable section or
sections of any future legislation that amends, supplements or supersedes
such section and any regulations issued thereunder.
ERISA means Public Law No. 93-406, the Employee Retirement Income Security
Act of 1974, as may be amended from time to time, and all regulations
issued thereunder. Reference to a section of ERISA includes that section
and any comparable section or sections of any future legislation that
amends, supplements or supersedes such section and any regulations issued
thereunder.
1.08 Compensation
------------
Except where otherwise specifically provided in this Plan, Compensation
means Aggregate Compensation as defined in Section 7.03(a).
Compensation also means any amounts contributed by the Employer or any
Related Employer on behalf of any Employee pursuant to a salary reduction
agreement which are not includible in the gross income of the Employee due
to Code Section 125, 402(a)(8), 402(h) or 403(b).
Notwithstanding the foregoing, for all purposes under this Plan,
Compensation in excess of $200,000 (as adjusted at the same time and in
the same manner as under Code Section 415(d)) will be disregarded.
1.09 Effective Date
--------------
The Effective Date of the Plan is March 1, 1991.
1.10 Eligible Employee Classification
--------------------------------
An Eligible Employee Classification is a classification of Employees, the
members of which are eligible to participate in the Plan. All
classifications are Eligible Employee Classifications other than Leased
Employees and any classification of Employees whose employment is covered
by a collectively-bargained agreement under which retirement benefits were
the subject of good-faith bargaining.
1.11 Eligible Participant
--------------------
An Eligible Participant is a Participant who meets one of the following
and is therefore eligible to share in the allocation of a contribution for
a given Accounting Period:
. is actively employed on the last day of the Accounting Period;
or
1-2
<PAGE>
. retires, dies or becomes disabled during the Accounting
Period.
1.12 Employee
--------
(a) In General
----------
An Employee is any person who is employed by the Employer or a
Participating Employer.
(b) Leased Employee
---------------
A Leased Employee means any person who, pursuant to an agreement
between the Employer or any Related Employer ("Recipient Employer")
and any other person ("leasing organization"), has performed services
for the Recipient Employer on a substantially full-time basis for a
period of at least one year and such services are of a type
historically performed by employees in the business field of the
Recipient Employer.
Any Leased Employee will be treated as an Employee of the Recipient
Employer; however, contributions or benefits provided by the leasing
organization which are attributable to the services performed for the
Recipient Employer will be treated as provided by the Recipient
Employer. If all Leased Employees constitute less than 20%; of the
Employer's non-highly-compensated workforce within the meaning of
Code Section 414(n)(l)(C)(ii), then the preceding sentence will not
apply to any Leased Employee if such Employee is covered by a money
purchase pension plan ("Safe Harbor Plan") which provides: (1) a
nonintegrated employer contribution rate of at least 10% of
compensation, (2) immediate participation, and (3) full and immediate
vesting.
Years of Service for purposes of eligibility to participate in the
Plan and Years of Service for purposes of determining a Participant's
Vested Percentage, include service by an Employee as a Leased
Employee.
1.13 Employer
--------
The Employer and Plan Sponsor is Bayou Steel Corporation, a Delaware
corporation. A Participating Employer is any organization which has
adopted this Plan and Trust in accordance with Section 8.07.
Predecessor Employer means Bayou Steel Corporation (of La Place), a
Louisiana Corporation. Service with a Predecessor Employer will be
included as Service with the Employer for all purposes under this Plan.
1-3
<PAGE>
1.14 Employment Commencement Date
----------------------------
The date an Employee first performs an Hour of Service for the Employer is
his Employment Commencement Date.
1.15 Entry Date
----------
Entry Date means the January 1st or July 1st which coincides with or next
follows the date that the eligibility requirements are met.
1.16 Fiscal Year
-----------
Fiscal Year means the taxable year of the Plan Sponsor. The Fiscal Year
of the Plan Sponsor is the 12-month period beginning October 1 and ending
September 30.
1.17 Forfeiture
----------
The term Forfeiture refers to that portion, if any, of a Participant's
Accrued Benefit which is in excess of his Vested Accrued Benefit following
the termination of the Participant's employment.
A Forfeiture is considered to occur as of the earlier of (a) the date of
the occurrence of the fifth of five consecutive One Year Breaks-in-Service
or (b) the date a Cash-Out Distribution occurs in accordance with the
provisions of Article 5.
1.18 Highly Compensated Definitions
------------------------------
(a) Compensation
------------
For purposes of this Section, Compensation means Aggregate
Compensation as defined in Section 7.03(a) plus amounts contributed
by the Employer pursuant to a salary reduction agreement which are
excludable from the gross income of the Employee under Code Sec-tion
125, 402(a)(8), 402(h) or 403(b). Compensation in excess of $200,000
(as adjusted by the Secretary of the Treasury under Code Section
415(d)) is disregarded.
(b) Determination Year
------------------
Determination Year means the Plan Year for which the determination of
who is Highly Compensated is being made.
(c) Family Member
-------------
Family Member means an Employee who is the spouse, a lineal ascendant
or descendant, or the spouse of a lineal ascendant or descendant of:
. a 5-percent Owner (within the meaning of Code Section 416(i))
of the Employer or any Related
1-4
<PAGE>
Employer who is an active or former Employee; or
. a Highly Compensated Employee who is one of the 10 most highly
compensated employees ranked on the basis of Compensation paid
by the Employer during the Determination Year or the Lookback
Year.
For purposes of this Section, the Family Member and the Highly Compensated
Employee will be considered one Employee. A Family Member's Compensation
and benefits will be aggregated with those of the Highly Compensated
Employee irrespective of whether the Family Member would otherwise be
treated as a Highly Compensated Employee or is in a category of Employees
which may be excluded in determining the number of Employees in the Top-
Paid Group.
If an Employee is required to be aggregated as a member of more than one
family group, all eligible employees who are members of those family
groups which include that employee will be aggregated as one family group.
For purposes of applying the compensation limit under Code Section
401(a)(17), a Family Member is subject to the single aggregate
compensation limit imposed on the Highly Compensated Employee if the
Family Member is either the Employee's spouse or is a lineal descendant
who has not attained the age of 19 by the end of the Plan Year.
(d) Highly Compensated Employee
---------------------------
Highly Compensated Employee means any individual who is a Highly
Compensated Active Employee or a Highly Compensated Former Employee within
the meaning of Code Section 414(q) and the regulations thereunder.
(e) Highly Compensated Active Employee
----------------------------------
Highly Compensated Active Employee means any individual who during the
Determination Year or the Lookback Year:
(1) Was at any time a 5-percent Owner (within the meaning of Code Section
416(i)) of the Employer or any Related Employer;
(2) Received Compensation from the Employer and all Related Employers in
excess of $75,000 (or any greater amount determined by regulations
issued by the Secretary of the Treasury under Code Section 415(d));
(3) Received Compensation from the Employer and all Related Employers in
excess of $50,000 (or any greater amount determined by regulations
issued by the
1-5
<PAGE>
Secretary of the Treasury under Code Section 415(d)) and was in the
Top-Paid Group of Employees; or
(4) Was an Officer of the Employer or any Related Employer (as that term
is defined in the regulations under Code Section 416(i)) and received
Compensation greater than 50% of the Defined Benefit Dollar Limit
described in Section 7.03(f) for the applicable year. For this
purpose, if no Officer received enough Compensation to be a Highly
Compensated Employee under the preceding sentence, the highest-paid
Officer will be treated as a Highly Compensated Employee. The
maximum number of Officers who will be treated as Highly Compensated
Active Employees under this paragraph is equal to 10% of all
Employees determined without regard to statutory or other exclusions,
subject to a minimum of 3 Employees and a maximum of 50 Employees.
No individual described in subparagraphs (2), (3) or (4) above will be
treated as a Highly Compensated Active Employee for the Determination Year
unless he (i) was a Highly Compensated Active Employee for the Lookback
Year or (ii) was among the 100 most highly compensated Employees of the
Employer and all Related Employers for the Determination Year.
(f) Highly Compensated Former Employee
----------------------------------
Highly Compensated Former Employee means any Former Employee who had a
Separation Year (within the meaning of Treasury Regulation Section
1.414(q)-IT Q&A-5) and was a Highly Compensated Active Employee for either
the Separation Year or any Determination Year ending on or after the
Employee's 55th birthday.
(g) Highly Compensated Group
------------------------
Highly Compensated Group means all Highly Compensated Employees.
(h) Lookback Year
-------------
Lookback Year means the 12-month period immediately preceding the
Determination Year.
(i) Non-Highly Compensated Employee
-------------------------------
Non-Highly Compensated Employee means an Employee who is neither a Highly
Compensated Employee nor a Family Member.
(j) Non-Highly Compensated Group
----------------------------
Non-Highly Compensated Group means all Non-Highly Compensated Employees.
1-6
<PAGE>
(k) Top-Paid Group
--------------
Top-Paid Group means those individuals who are among the top 20 percent of
Employees of the Employer and all Related Employers when ranked on the
basis of Compensation received during the year. In determining the number
of individuals in the Top-Paid Group (but not the identity of those
individuals), the following individuals will be excluded:
(1) Employees who have not completed 6 months of Service by the end of
the year. For this purpose, an Employee who has completed One Hour
of Service in any calendar month will be credited with one month of
Service;
(2) Employees who normally work fewer than 17-1/2 hours per week;
(3) Employees who normally work fewer than 6 months during any year. For
this purpose, an Employee who has worked on one day of a month is
treated as having worked for the whole month;
(4) Employees who have not reached age 21 by the end of the year;
(5) Nonresident aliens who received no earned income (which constitutes
income from sources within the United States) within the year from
the Employer or any Related Employer; and
(6) Employees covered by a collective bargaining agreement negotiated in
good faith between the employee representatives and the Employer or a
group of employers of which the Employer is a member if (i) 90% or
more of all employees of the Employer and all Related Employers are
covered by collective bargaining agreements, and (ii) this Plan
covers only Employees who are not covered under a collective
bargaining agreement.
1.19 Hour of Service
---------------
An Hour of Service means:
(a) Each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for the Employer. These hours will be
credited to the Employee for the computation period in which the
duties are performed;
(b) Each hour for which an Employee is paid, or entitled to payment, by
the Employer on account of a period of time during which no duties
are performed
1-7
<PAGE>
(irrespective of whether the employment relationship has terminated)
due to vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, military duty or leave of absence. No more than
501 Hours of Service will be credited under this paragraph for any
12-month period. Hours under this paragraph will be calculated and
credited pursuant to Section 2530.200b.2 of the Department of Labor
Regulations which are incorporated herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of damages,
is either awarded or agreed to by the Employer. The same Hours of
Service will not be credited both under paragraphs (a) or (b), as the
case may be, and under this paragraph (c). These hours will be
credited to the Employee for the computation period or periods to
which the award or agreement pertains rather than the computation
period in which the award, agreement or payment is made.
Hours of Service for all Employees will be determined on the basis of
actual hours for which an Employee is paid or is entitled to payment.
Hours of Service will be credited for employment with any Related Employer
or any Predecessor Employer. Hours of Service will be credited for any
individual considered an employee under Code Section 414(n) or 414(o) and
the regulations thereunder.
1.20 Investment Fund
---------------
An Investment Fund means any portion of the assets of the Trust Fund which
the Plan Administrator designates as an Investment Fund and for which the
Plan Administrator maintains a set of accounts separate from the remaining
assets of the Trust Fund.
(a) Specific Investment Fund means an Investment Fund which is designated
------------------------
as a Specific Investment Fund by the Plan Administrator in a manner
and form acceptable to the Trustee.
(b) General Investment Fund means all assets of the Trust Fund excluding
-----------------------
the assets of any Specific Investment Funds.
1.21 Leave of Absence
----------------
(a) Authorized Leave of Absence
---------------------------
An Authorized Leave of Absence means a period of time of one year or
less granted to an Employee by the Employer due to illness, injury,
temporary reduction in work force, educational leave or other
appropriate cause or due to military service during which the
1-8
<PAGE>
Employee's reemployment rights are protected by law, provided the
Employee returns to the service of the Employer on or before the
expiration of such leave, or in the case of military service, within
the time his reemployment rights are so protected. All Authorized
Leaves of Absence are granted or denied by the Employer in a uniform
and nondiscriminatory manner, treating Employees in similar
circumstances in a like manner.
(b) Maternity or Paternity Leave of Absence
---------------------------------------
A Maternity or Paternity Leave of Absence means, for Plan Years
beginning after December 31, 1984, an absence from work for any
period by reason of the Employee's pregnancy, birth of the Employee's
child, placement of a child with the Employee in connection with the
adoption of such child, or any absence for the purpose of caring for
such child for a period immediately following such birth or
placement. The Hours of Service credited for a Maternity or
Paternity Leave of Absence are those which would normally have been
credited but for such absence; in any case in which the Plan
Administrator is unable to determine such hours normally credited, 8
Hours of Service per day will be credited.
Solely for purposes of determining whether a One Year Break-in-Service has
occurred, a Participant who is absent from work on an Authorized Leave of
Absence or a Maternity or Paternity Leave of Absence will receive credit
for the Hours of Service which otherwise would have been credited to the
Participant but for such absence. The Hours of Service credited under
this paragraph will be credited in the Plan Year in which the absence
begins if such crediting is necessary to prevent a One Year Break-in-
Service in such Plan Year; otherwise, such Hours of Service will be
credited in the following Plan Year. No more than 501 Hours of Service
will be credited under this paragraph for any 12-month period. The Date
of Severance is the second anniversary of the date on which the absence
begins. The period between the initial date of absence and the first
anniversary of the initial date of absence is deemed to be a period of
Service. The period between the first and second anniversaries of the
initial date of absence is neither a period of Service nor a period of
severance.
1.22 Reserved
--------
1.23 Normal Retirement Age
---------------------
A Participant's Normal Retirement Age is age 65.
1-9
<PAGE>
1.24 Normal Retirement Date
----------------------
A Participant's Normal Retirement Date is the first day of the month which
coincides with or next follows the date on which the Participant attains
Normal Retirement Age.
A Participant's Early Retirement Date is the first day of the month which
coincides with or next follows the later of (a) the date on which the
Participant attains age 55 or (b) the date on which the Participant
completes 10 Years of Service.
1.25 One Year Break-in-Service
-------------------------
One Year Break-in-Service means any 365-day period following a
Participant's Date of Termination in which an Employee does not complete
at least one Hour of Service.
1.26 Participant
-----------
The term Participant means an Employee or former Employee who is eligible
to participate in this Plan and who is or who may become eligible to
receive a benefit of any type from this Plan or whose Beneficiary may be
eligible to receive any such benefit.
(a) Active Participant means a Participant who is currently an Employee
------------------
in an Eligible Employee Classification.
(b) Disabled Participant means a Participant who has terminated his
--------------------
employment with the Employer due to his Disability and who is
receiving or is entitled to receive benefits from the Plan.
(c) Retired Participant means a Participant who has terminated his
-------------------
employment with the Employer after meeting the requirements for his
Normal Retirement Date and who is receiving or is entitled to receive
benefits from the Plan.
(d) Vested Terminated Participant means a Participant who has terminated
-----------------------------
his employment with the Employer and who has a nonforfeitable right
to all or a portion of his or her Accrued Benefit and who has not
received a distribution of the value of his or her Vested Accrued
Benefit.
(e) Inactive Participant means a Participant who has (i) interrupted his
--------------------
status as an Active Participant without becoming a Disabled, Retired
or Vested Terminated Participant and (ii) has a non-forfeitable right
to all or a portion of his Accrued Benefit and
1-10
<PAGE>
has not received a complete distribution of his benefit.
(f) Former Participant means a Participant who has terminated his
------------------
employment with the Employer and who currently has no nonforfeitable
right to any portion of his or her Accrued Benefit.
1.27 Payroll Withholding Agreement
-----------------------------
If a written Payroll Withholding Agreement is required pursuant to the
provisions of Article 3, then each Participant who elects to participate
in the Plan will file such agreement on or before the first day of the
Contribution Period for which the agreement is applicable (or at some
other time as specified by the Plan Administrator). Such agreement will
be effective for each Contribution Period thereafter until modified or
amended.
The terms of such agreement will provide that the Participant agrees to
have the Employer withhold any whole percentage of his Compensation per
payroll period (or some other amount as allowed by the Plan Administrator
under rules applied on a uniform and nondiscriminatory basis), not to
exceed the limitations of Article 7. In consideration of such agreement,
the Employer will make a contribution to the Participant's proper
Account(s) on behalf of the Participant for each Contribution Period in an
amount equal to the total amount by which the Participant's Compensation
from the Employer was reduced during such Contribution Period pursuant to
the Payroll Withholding Agreement.
Notwithstanding the above, Payroll Withholding Agreements will be governed
by the following general guidelines:
(a) A Payroll Withholding Agreement will apply to each payroll period
during which an effective agreement is on file with the Employer.
Upon termination of employment, such agreement will become void.
(b) The Plan Administrator will establish and apply guidelines concerning
the frequency and timing of amendments or changes to Payroll
Withholding Agreements. Notwithstanding the foregoing, a Participant
may revoke his Payroll Withholding Agreement at any time and
discontinue all future withholding during the remainder of the
Contribution Period.
(c) The Employer may amend or revoke its Payroll Withholding Agreement
with any Participant at any time, if the Employer determines that
such revocation
1-11
<PAGE>
or amendment is necessary to insure that a Participant's Annual
Additions for any Plan Year will not exceed the limitations of
Article 7 or to insure that the requirements of Sections 401(k) and
401(m) of the Code have been satisfied with respect to the amount
which may be withheld and contributed on behalf of the Highly
Compensated Group.
(d) Except as provided above, a Payroll Withholding Agreement applicable
to any given Contribution Period once made, may not be revoked or
amended by the Participant or the Employer.
1.28 Plan, Plan and Trust, Trust
---------------------------
The terms Plan, Plan and Trust and Trust mean Bayou Steel Corporation
401(k) Savings Plan. The Plan Identification Number is 002. The Plan is
a profit sharing plan.
The term Predecessor Plan means any qualified plan previously established
and maintained by the Employer and to which this Plan is the successor.
1.29 Plan Administrator
------------------
The Plan Administrator is a committee of individuals appointed by the
Employer; such committee will be referred to as the Plan Committee.
1.30 Plan Year
---------
The Plan Year is the 12-month period beginning January 1 and ending
December 31 of each year the Plan is in effect. The Limitation Year
coincides with the Plan Year.
1.31 Reserved
--------
1.32 Qualified Election
------------------
Qualified Election means the designation of a specific Beneficiary other
than the Participant's Surviving Spouse. Such Qualified Election must be
in writing and must be consented to by the Participant's spouse. The
spouse's written consent to a Qualified Election must be witnessed by a
representative of the Plan Administrator or a notary public. Such consent
will not be required if the Participant establishes to the satisfaction of
the Plan Administrator that such written consent may not be obtained
because there is no spouse, the spouse cannot be located or other
circumstances that may be prescribed by Treasury Regulations. Any consent
necessary under this provision will be valid only with respect to the
spouse who signs the consent (or in the event of a deemed Qualified
Election, the designated spouse). Additionally, a revocation of a prior
Qualified Election may be made by a Participant without the consent of the
spouse at any time before the
1-12
<PAGE>
commencement of benefits; however, any Qualified Election which follows
such revocation must be in writing and must be consented to by the
Participant's spouse. The number of Qualified Elections or revocations of
such Qualified Elections will not be limited.
1.33 Related Employer
----------------
The terms Related Employer and Affiliated Employer are used
interchangeably and mean any other corporation, association, company or
entity on or after the Effective Date which is, along with the Employer, a
member of a controlled group of corporations (as defined in Code Section
414(b)), a group of trades or businesses which are under common control
(as defined in Code Section 414(c)), an affiliated service group (as
defined in Code Section 414(m)), or any organization or arrangement
required to be aggregated with the Employer by Treasury Regulations issued
under Code Section 414(o).
1.34 Required Beginning Date
-----------------------
A Participant's Required Beginning Date for the commencement of benefit
payments from the Plan is the April 1 immediately following:
. the later of 1989 or the calendar year in which he attains age
70-1/2 if he attains age 70-1/2 after December 31, 1987;
. the calendar year in which he attains age 70-1/2 if he is or
was a Five Percent Owner at any time during the Plan Year
ending with or within the calendar year in which he attains
age 66-1/2 or any later Plan Year; or
. the later of the calendar year in which he attains age 70-1/2
or the calendar year in which he retires for any other
Participant.
1.35 Surviving Spouse
----------------
Surviving Spouse means a deceased Participant's spouse who was married to
the Participant on the Participant's date of death. The Plan
Administrator and the Trustee may rely conclusively on a Participant's
written statement of his marital status. Neither the Plan Administrator
nor the Trustee is required at any time to inquire into the validity of
any marriage, the effectiveness of a common-law relationship or the claim
of any alleged spouse which is inconsistent with the Participant's report
of his marital status and the identity of his spouse.
1-13
<PAGE>
1.36 Top-Heavy Definitions
---------------------
(a) Aggregate Account
-----------------
Aggregate Account means, with respect to each Participant, the value
of all accounts maintained on behalf of the Participant, whether
attributable to Employer or Employee contributions, used to determine
Top-Heavy Plan status under the provisions of a defined contribution
plan. A Participant's Aggregate Account as of the Determination Date
will be the sum of:
. the balance of his Account(s) as of the most recent valuation
date occurring within a 12-month period ending on the
Determination Date (excluding any amounts attributable to
deductible voluntary employee contributions); plus
. contributions that would be allocated as of a date not later
than the Determination Date, even though those amounts are not
yet made or required to be made; plus
. any Plan Distributions made within the Plan Year that includes
the Determination Date or within the four preceding Plan
Years.
(b) Aggregation Group
-----------------
Aggregation Group means either a Required Aggregation Group or a
Permissive Aggregation Group as hereinafter determined.
(1) Required Aggregation Group
--------------------------
Each plan of the Employer in which a Key Employee is a
Participant, and each other plan of the Employer which enables
any plan in which a Key Employee participates to meet the
requirements of Code Section 401(a)(4) or 410, will be aggregated
and the resulting group will be known as a Required Aggregation
Group.
Each plan in the Required Aggregation Group will be considered a
Top-Heavy Plan if the Required Aggregation Group is a Top-Heavy
Group. No plan in the Required Aggregation Group will be
considered a Top-Heavy Plan if the Required Aggregation Group is
not a Top-Heavy Group.
1-14
<PAGE>
(2) Permissive Aggregation Group
----------------------------
The Employer may also include any other plan not required to be
included in the Required Aggregation Group, provided the
resulting group (to be known as a Permissive Aggregation Group),
taken as a whole, would continue to satisfy the provisions of
Code Sections 401(a)(4) and 410.
Only a plan that is part of the Required Aggregation Group will
be considered a Top-Heavy Plan if the Permissive Aggregation
Group is a Top-Heavy Group. No plan in the Permissive
Aggregation Group will be considered a Top-Heavy Plan if the
Permissive Aggregation Group is not a Top-Heavy Group.
Only those plans of the Employer in which the Determination Dates
fall within the same calendar year will be aggregated in order to
determine whether the plans are Top-Heavy Plans.
(c) Determination Date
------------------
Determination Date means the last day of the preceding Plan Year, or,
in the case of the first Plan Year, the last day of the first Plan
Year.
(d) Key Employee
------------
Key Employee means any Employee or former Employee (and his
Beneficiary) who, at any time during the Plan Year or any of the
preceding four Plan Years, is:
(1) A "Five Percent Owner" of the Employer. "Five Percent Owner"
means any person who owns (or is considered as owning within the
meaning of Code Section 318) more than 5% of the value of the
outstanding stock of the Employer or stock possessing more than
5% of the total combined voting power of all stock of the
Employer. If the Employer is not a corporation, Five Percent
Owner means any person who owns more than 5% of the capital or
profits interest in the Employer. In determining percentage
ownership hereunder, Related Employers will be treated as
separate Employers; or
(2) A "One Percent Owner" of the Employer having Compensation from
the Employer of more than $150,000. "One Percent Owner" means
any person who owns (or is considered as owning within the
meaning of Code Section 318) more than 1% of the value of the
outstanding stock of the Employer or stock possessing more than
1% of the total
1-15
<PAGE>
combined voting power of all stock of the Employer. If the
Employer is not a corporation, One Percent Owner means any person
who owns more than 1% of the capital or profits interest in the
Employer. ln determining percentage ownership hereunder, Related
Employers will be treated as separate Employers. However, in
determining whether an individual has Compensation of more than
$150,000, Compensation from each Related Employer will be taken
into account.
(3) One of the 10 Employees having Compensation not less than the
Defined Contribution Dollar Limit (as defined in Section 7.03(j)
for the Plan Year) who owns (or is considered as owning within
the meaning of Code Section 318) both greater than 1/2% interest
and the largest interests in all Employers required to be
aggregated under Code Sections 414(b),(c),(m) and (o);
(4) An officer (within the meaning of the regulations under Code
Section 416) of the Employer having Compensation greater than 50%
of the Defined Benefit Dollar Limit as defined in Section 7.03(f)
for the Plan Year:
For purposes of this Section, Compensation means Aggregate
Compensation as defined in Section 7.03(a) plus any amounts
contributed by the Employer pursuant to a salary reduction agreement
which are excludable from the gross income of the Employee under Code
Section 125, 402(a)(8), 402(h) or 403(b). Compensation in excess of
$200,000 (as adjusted by the Secretary of the Treasury under Code
Section 415(d)) will be disregarded.
(e) Non-Key Employee
----------------
Non-Key Employee means any Employee (and his Beneficiaries) who is
not a Key Employee.
(f) Plan Distributions
------------------
Plan distributions include distributions made before January 1, 1984,
and distributions under a terminated plan which, if it had not been
terminated, would have been required to be included in an aggregation
group. However, distributions made after the Valuation Date and
before the Determination Date are not included to the extent that
they are already included in the Participant's Single Sum Benefit as
of the Valuation Date.
1-16
<PAGE>
With respect to "unrelated" rollovers and plan-to-plan transfers
(those which are both initiated by an employee and made from a plan
maintained by one employer to a plan maintained by another employer),
if such a rollover or plan-to-plan transfer is made from this Plan,
it will be considered as a distribution for purposes of this Section.
If such a rollover or plan-to-plan transfer is made to this Plan, it
will not be considered as part of the Participant's Single Sum
Benefit. However, an unrelated rollover or plan-to-plan transfer
accepted before January 1, 1984, will be considered as part of the
Participant's Single Sum Benefit.
With respect to "related" rollovers and plan-to-plan transfers (those
which are either not initiated by an employee or are made from one
plan to another plan maintained by the same employer), if such a
rollover or plan-to-plan transfer is made from this Plan, it will not
be considered as a distribution for purposes of this Section. If
such a rollover or plan-to-plan transfer is made to this Plan, it
will be considered as part of the Participant's Single Sum Benefit.
(g) Present Value of Accrued Benefit
--------------------------------
In the case of the defined benefit plan, a Participant's Present
Value of Accrued Benefit, for Top-Heavy determination purposes, will
be determined using the following rules:
(1) The Present Value of Accrued Benefit will be determined as of the
most recent "Valuation Date" within a 12-month period ending on
the Determination Date.
(2) For the first Plan Year, the Present Value of Accrued Benefit
will be determined as if (A) the Participant terminated service
as of the Determination Date; or (B) the Participant terminated
service as of the Valuation Date, but taking into account the
estimated Present Value of Accrued Benefits as of the
Determination Date.
(3) For any other Plan Year, the Present Value of Accrued Benefit
will be determined as if the Participant terminated service as of
the Valuation Date.
(4) The Valuation Date must be the same date used for computing the
defined benefit plan minimum funding costs, regardless of whether
a calculation is performed that plan year.
1-17
<PAGE>
(5) A Participant's Present Value of Accrued Benefit as of a
Determination Date will be the sum of:
. the present value of his Accrued Benefit determined using the
actuarial assumptions which are specified below; plus
. any Plan Distributions made within the Plan Year that includes
the Determination Date or within the four preceding Plan
Years; plus
. any employee contributions, whether voluntary or mandatory.
However, amounts attributable to Qualified Voluntary Employee
Contributions, as defined in Code Section 219(e)(2) will not
be considered to be a part of the Participant's Present Value
of Accrued Benefit.
For purposes of this Section, the present value of a
Participant's Accrued Benefit will be determined using the
actuarial assumptions which are specified for Actuarial
Equivalent purposes; however the interest rate which is used will
be the lesser of the interest rate specified for Actuarial
Equivalent purposes or the "Applicable Interest Rate." The
Applicable Interest Rate is the rate or rates that would be used
by the Pension Benefit Guaranty Corporation for a trusteed
single-employer plan to value the Participant's (or
Beneficiary's) benefit (the "PBGC Rate") on the date of
distribution. If the present value using the PBGC Rate exceeds
$25,000, the Applicable Interest Rate is 120% of the PBGC Rate.
However, the use of 120% of the PBGC Rate will never result in a
present value less than $25,000.
(6) Solely for the purpose of determining if this Plan (or any other
plan included in a Required Aggregation Group of which this Plan
is a part) is Top-Heavy, the Accrued Benefit of any Employee
other than a Key Employee will be determined under
(A) the method, if any, that uniformly applies for accrual
purposes under all plans maintained by the Employer or any
Related Employer, or
(B) if there is no such method, as if the benefit accrued no
more rapidly than the slowest
1-18
<PAGE>
accrual rate permitted under the fractional accrual rate of
Code Section 411(b)(l)(C).
(h) Single Sum Benefit
------------------
The Single Sum Benefit for any Participant in a defined benefit
pension plan will be equal to his Present Value of Accrued Benefit.
The Single Sum Benefit for any Participant in a defined contribution
plan will be equal to his Aggregate Account.
(i) Top-Heavy Group
---------------
Top-Heavy Group means an Aggregation Group in which, as of the
Determination Date, the Single Sum Benefits of all Key Employees
under all plans included in the group exceeds 60% of a similar sum
determined for all Participants.
Super Top-Heavy Group means an Aggregation Group in which, as of the
Determination Date, the sum of (1) the Single Sum Benefits of all Key
Employees under all defined benefit plans included in the group, plus
(2) the Single Sum Benefit of all Key Employees under all defined
contribution plans included in the group exceeds 90% of a similar sum
determined for all Participants.
(j) Top-Heavy Plan
--------------
This Plan will be a Top-Heavy Plan for any Plan Year beginning after
December 31, 1983, in which, as of the Determination Date, the Single
Sum Benefits of all Key Employees exceed 60% of the Single Sum
Benefits of all Participants under this Plan.
This Plan will be a Super Top-Heavy Plan for any Plan Year beginning
after December 31, 1983, in which, as of the Determination Date, the
Single Sum Benefits of all Key Employees exceed 90% of the Single Sum
Benefits of all Participants under this Plan.
If any Participant is a Non-Key Employee for a given Plan Year, but
was a Key Employee for any prior Plan Year, the Participant's Single
Sum Benefit will not be taken into account for purposes of
determining whether this Plan is a Top-Heavy or Super Top-Heavy Plan
(or whether any Aggregation Group which includes this Plan is a Top-
Heavy or Super Top-Heavy Group).
If an individual has performed no services for the Employer at any
time during the 5-year period ending on the Determination Date, any
Single Sum Benefit of such individual will not be taken into account
for purposes of determining whether this Plan is a
1-19
<PAGE>
Top-Heavy or Super Top-Heavy Plan (or whether any Aggregation Group
which includes this Plan is a Top-Heavy Group or Super Top-Heavy
Group).
1.37 Trust Fund, Trust
-----------------
These terms mean the total cash, securities, real property, insurance
contracts and any other property held by the Trustee.
1.38 Trustee
-------
The Trustee is Hibernia National Bank or any successor Trustee.
1.39 Vested Percentage
-----------------
A Participant's Vested Percentage as of a given date will be that
percentage determined in accordance with the Vesting Schedule.
Notwithstanding the preceding, a Participant will be 100% vested upon
reaching the earlier of (a) his Normal Retirement Age or (b) the later of
the date upon which the Participant attains age 65 or reaches the 5th
anniversary of the date he commenced participation in the Plan.
1.40 Vesting Schedule
----------------
A Participant's Vested Percentage will be determined in accordance with
the following table:
Years of Service Vested Percentage
---------------- -----------------
Less than 1 Year 0%
1 Year 10%
2 Years 20%
3 Years 40%
4 Years 60%
5 Years 80%
6 Years or more 100%
1.41 Written Resolution
------------------
The terms Written Resolution and Written Consent are used interchangeably
and reflect decisions, authorizations, etc. by the Employer. A Written
Resolution will be evidenced by a resolution of the Board of Directors of
the Employer.
1.42 Years of Service
----------------
Years of Service are determined under the Elapsed Time Method. Under the
Elapsed Time Method, Years of Service are based upon an Employee's Elapsed
Time of employment irrespective of the number of hours actually worked
during such period; a Year of Service (including a fraction thereof) will
be credited for each completed 365 days of Elapsed Time which need not be
consecutive. The following
1-20
<PAGE>
terms are used in determining Years of Service under the Elapsed Time
Method:
(1) Date of Severance (Termination) - means the earlier of (A) the actual
date an Employee resigns, is discharged, dies or retires, or (B) the
first anniversary of the date an Employee is absent from work (with
or without pay) for any other reason, e.g., disability, vacation,
leave of absence, layoff, etc.
(2) Elapsed Time - means the total period of service which has elapsed
between a Participant's Employment Commencement Date and Date of
Termination including Periods of Severance where a One Year Break-in-
Service does not occur.
(3) Employment Commencement Date - means the date an Employee first
performs one Hour of Service for the Employer.
(4) One Year Break-in-Service - means any 365-day period following on
Employee's Date of Termination as defined above in which the Employee
does not complete at least one Hour of Service.
(5) Period of Severance - is the time between the actual Date of
Severance as defined above and the subsequent date, if any, on which
the Employee performs an Hour of Service.
All periods of employment will be aggregated including Periods of
Severance unless there is a One Year Break-in-Service.
1-21
<PAGE>
ARTICLE 2
PARTICIPATION
2.01 Participation
-------------
An Employee who is a member of an Eligible Employee Classification will
become eligible to participate in the Plan on the Entry Date which
coincides with or next follows the attainment of age 21 and the completion
of one Year of Service.
An Employee who is eligible to participate as of the Effective Date or as
of a given Entry Date will automatically become a Participant as of such
date.
2.02 Participation After Reemployment
--------------------------------
An Employee who has satisfied all of the eligibility requirements but
terminates employment prior to his Entry Date will participate in the Plan
immediately upon returning to the employ of the Employer.
A Participant or Former Participant who has terminated employment will
participate as an Active Participant in the Plan immediately upon
returning to the employ of the Employer.
2.03 Change in Employment Classification
-----------------------------------
In the event a Participant becomes ineligible to participate because he is
no longer a member of an Eligible Employee Classification, the Participant
will participate immediately upon his return to an Eligible Employee
Classification.
In the event an Employee who is not a member of an Eligible Employee
Classification becomes a member of such a classification, such Employee
will begin to participate immediately if he has satisfied the eligibility
requirements which are specified in Section 2.01.
2-1
<PAGE>
ARTICLE 3
ACCOUNTS
3.01 Employee Account
----------------
Employee Account means the Account of a Participant reflecting applicable
contributions, investment income or loss allocated thereto and
distributions. A Participant's Employee Account is 100% vested at all
times.
(a) Employee Contributions
----------------------
Each Participant will be entitled to make an Employee Contribution
each Accounting Period equal to a minimum of 1% of the Participant's
Compensation not to exceed 15% of the Participant's Compensation.
Such contribution will be designated as a percentage of Compensation
and will be equal to an even multiple of 1% or such other amount as
allowed by the Plan Administrator.
All Employee Contributions will be made pursuant to a Payroll
Withholding Agreement in accordance with Section 1.27.
All Employee Contributions are Elective Contributions within the
meaning of Section 4.05(a) and must satisfy the Nondiscrimination
Requirements of Section 4.05.
The maximum amount of Employee Contribution which can be made under
the Plan on behalf of any Participant during any calendar year will
be limited to that amount which would not constitute an Excess
Deferral as defined in Section 4.05. The Plan Administrator will
distribute any Excess Deferral, together with the income allocable to
it, to the Participant no later than April 15 of the calendar year
immediately following the year of the Excess Deferral. If a
Participant notifies the Plan Administrator before March 1 of any
calendar year that Excess Deferrals have been made on his account for
the previous calendar year by reason of participation in a Cash or
Deferred Arrangement maintained by another employer or employers, and
if the Participant requests that the Plan Administrator distribute a
specific amount to him on account of Excess Deferrals and certifies
under penalty of perjury before a Notary Public that the requested
amount is an Excess Deferral, the Plan Administrator will designate
the amount requested together with the income allocable to it as a
distribution of Excess deferrals and distribute such amount no later
than April 15 of that calendar year.
3-1
<PAGE>
The amount of Excess Deferrals that may be distributed will be
reduced by any Excess Contributions previously distributed. The
amount of income allocable to the Excess Deferral will be determined
in the manner described in Section 4.05.
All Employee Contributions will be treated as Plan Assets and subject
to the fiduciary requirements of this Plan and ERISA within the
period prescribed by 29 CFR Section 2510.3-102(a). The Employer will
deposit all Employee Contributions no later than 12 months after the
end of the Plan Year for which the contributions are made.
(b) Distributions
-------------
No distribution may be made from the Participant's Employee Account
or any account comprised of Matching Contributions or Non-elective
Contributions which are treated as Elective Contributions in
accordance with the provisions of Section 4.05(h) except under one of
the following circumstances:
. the Participant's retirement, death, disability or termination
of employment;
. the Participant's attaining the age of 59 1/2;
. the avoidance or alleviation of a Financial Hardship;
. the termination of this Plan without the establishment of a
successor plan within the meaning of Treasury Regulation
Section 1.401(k)-11(d)(ii)(B);
. the sale or other disposition by the Employer of at least 85
percent of the assets used by the Employer in a trade or
business to an unrelated corporation which does not maintain
the plan, but only if the Participant continues employment
with the corporation acquiring the assets and only if the
Employer continues to maintain this Plan; or
. the sale or other disposition by the Employer of its interest
in a subsidiary to an unrelated entity which does not maintain
the plan, but only if the Participant continues employment
with the subsidiary and only if the Employer continues to
maintain this Plan.
3-2
<PAGE>
This paragraph does not apply to distributions of Excess Deferrals or
Excess Contributions.
(c) Financial Hardship Withdrawals
------------------------------
A Participant may file with the Plan Administrator a written request
to withdraw, in order to avoid or alleviate a Financial Hardship, any
amount not to exceed that portion of his Employee Account which
represents his total Employee Contributions.
The Plan Administrator will allow Financial Hardship withdrawals only
if they are necessary to satisfy a Participant's immediate and heavy
financial need.
(l) Immediate and Heavy Financial Need
----------------------------------
A withdrawal will be deemed to be made due to an immediate heavy
financial need of the Participant if it is made because of:
. Medical expenses described in Code Section 213(d) incurred by
the Participant, his spouse or any of his dependents (as
defined in Code Section 152);
. Purchase (excluding mortgage payments) of a principal
residence for the Participant;
. Payment of tuition for the next semester or quarter of post-
secondary education for the Participant, his spouse, children
or dependents; or
. Prevention of the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the
Participant's principal residence.
(2) Necessary To Satisfy Financial Need
-----------------------------------
No withdrawal may exceed the amount necessary to satisfy the
Participant's immediate and heavy financial need. The Plan
Administrator will allow the withdrawal if it determines, after a
full review of the Participant's written request and evidence
presented by the Participant showing immediate and heavy
financial need as well as the Participant's lack of other
reasonably available resources, that the withdrawal is necessary
to satisfy the need. No withdrawal will be treated as necessary
to the extent it can be satisfied from other resources which are
reasonably available to the Participant, including those of the
Participant's spouse and minor children. A
3-3
<PAGE>
withdrawal will be treated as necessary to the extent the
Participant demonstrates to the satisfaction of the Plan
Administrator that the need cannot be relieved by any of the
following:
. Reimbursement or compensation by insurance or otherwise;
. Reasonable liquidation of assets to the extent the liquidation
would not itself cause an immediate and heavy financial need;
. Cessation of Employee Contributions or Employee Contributions
(as defined in Section 4.05(a)) or both under any plan
maintained by any employer;
. Other distributions or nontaxable (at the time of the loan)
loans from plans maintained by any employer;
. Borrowing from commercial sources on reasonable commercial
terms.
Unless the Plan Administrator has evidence to the contrary, it may
rely upon the Participant's affidavit or certificate under penalty of
perjury that the need cannot be relieved by any of the foregoing.
(3) Safe Harbor
-----------
The Plan Administrator will not allow any withdrawal until the
Participant has obtained all distributions, other than hardship
distributions, and all nontaxable loans currently available to the
Participant under all plans maintained by the Employer. Upon the
withdrawal of any portion of a Participant's Employee Account, the
Participant will become ineligible for any Elective Contribution to
this Plan or any other plan maintained by the Employer, or to make
any contribution to this Plan or any other plan maintained by the
Employer until the first day of the first Accounting Period which
begins not less than 12 months following the date of withdrawal. For
this purpose, the term "all other plans maintained by the Employer"
includes all qualified and nonqualified plans of deferred
compensation maintained by the Employer, other than the mandatory
employee contribution portion of a defined benefit plan, as well as
stock option, stock purchase and similar plans and a cash or deferred
arrangement that is part of a cafeteria plan within the meaning of
Code Section 125, but does not include health or welfare benefit
plans. Furthermore,
3-4
<PAGE>
the maximum amount of Employee Contributions which can be made under
the Plan on behalf of any Participant during the calendar year which
follows the calendar year in which the withdrawal was made will be
limited to the amount which would not be treated as an Excess
Deferral for that year reduced by the amount of Employee
Contributions made on behalf of the Participant in the calendar year
of withdrawal.
3.02 Company Matching Account
------------------------
Company Matching Account means the Account of a Participant reflecting
applicable contributions, forfeitures, investment income or loss allocated
thereto and distributions. A Participant's Company Matching Account is
subject to the Vesting Schedule.
Each Company Matching Account will be comprised of two sub-accounts, a
Company Matching Cash Account and a Company Matching Stock Account.
(a) Company Matching Contributions
------------------------------
Each Accounting Period, the Employer will, within the time prescribed
by law for making a deductible contribution, make a Company Matching
Contribution to each Eligible Participant's Company Matching Account
in an amount which is determined in accordance with this Section
subject to the limitations of Article 7.
The amount of Company Matching Contribution to be made to an Eligible
Participant's Company Matching Account is equal to 25% of that
portion of the Participant's Employee Contribution which is not in
excess of 4% of the Participant's Compensation. The 25% Matching
percentage may be increased or decreased at the discretion of the
Employer as evidenced by a Written Resolution.
All Company Matching Contributions are Matching Contributions within
the meaning of Section 4.05(a) and must satisfy the Nondiscrimination
Requirements of Section 4.05.
(b) Application of Forfeitures
--------------------------
Forfeitures from a Participant's Company Matching Account will be
used to reduce Company Matching Contributions in the Accounting
Period in which the Forfeitures are determined to occur.
(c) Withdrawals
-----------
A Participant may not withdraw any portion of his Company Matching
Account prior to the time when
3-5
<PAGE>
benefits otherwise become payable in accordance with the provisions
of Article 5.
(d) Transfers Between Cash and Stock Sub-Accounts
---------------------------------------------
Any portion of a Participant's Company Matching Cash Account which is
invested in Employer Stock will result in a decrease in the
Participant's Company Matching Cash Account in an amount equal to the
purchase price of the stock. At the same time, such investment in
Employer Stock will result in an increase in the number of shares of
Employer Stock which are held in the Participant's corresponding
Company Matching Stock Account.
Any repurchase of Employer Stock held in a Participant's Company
Matching Stock Account will result in a decrease in the number of
shares held in the Participant's Company Matching Stock Account. At
the same time, such a repurchase will result in an increase in the
value of the Participant's corresponding Company Matching Cash
Account in an amount equal to the number of repurchased shares
multiplied by the purchase price.
3.03 Rollover Account
----------------
Rollover Account means the Account of a Participant reflecting applicable
contributions, investment income or loss allocated thereto and
distributions. A Participant's Rollover Account is 100% vested at all
times.
(a) Rollover Contributions
----------------------
Rollover Contribution means a contribution to the Plan by a
Participant where such contribution is the result of a prior
distribution from an Individual Retirement Account, an Individual
Retirement Annuity or another qualified plan. Such prior
distribution must be a rollover amount described in Section 402(a)(5)
of the Code or a contribution described in Section 408(d)(3) of the
Code.
Each Employee who is a member of an Eligible Employee Classification,
regardless of whether he is a Participant in the Plan, will have the
right to make a Rollover Contribution of cash (or other property of a
form acceptable to the Plan Administrator and the Trustee) into the
Plan from another qualified plan. If the Employee is not a
Participant hereunder, his Rollover Account will constitute his
entire interest in the Plan. In no event will the existence of a
Rollover Account entitle the Employee to participate in any other
benefit provided by the Plan.
3-6
<PAGE>
If specifically provided for in a Written Resolution, Rollover
Contribution will also mean the amount of assets transferred,
pursuant to Section 10.05, to this Plan from another plan which is
qualified under Code Sections 401(a) and 501(a).
(b) Withdrawals
-----------
A Participant may withdraw all or any portion of his Rollover Account
subject to the limitations of this Section.
The amount of the total cash withdrawals from a Participant's
Rollover Account will be limited to the Rollover Contributions in
such Account (or the current market value thereof, whichever is less)
which have accumulated under the Plan for at least 24 months.
However, any Employee who has been a Participant for five or more
years may apply for all or any portion of his Rollover Account
regardless of the length of time such amount has accumulated.
3-7
<PAGE>
ARTICLE 4
ACCOUNTING AND VALUATION
4.01 General Powers of the Plan Administrator
----------------------------------------
The Plan Administrator will have the power to establish rules and
guidelines, which will be applied on a uniform and non-discriminatory
basis, as it deems necessary, desirable or appropriate with regard to
accounting procedures and to the timing and method of contributions to
and/or withdrawals from the Plan.
4.02 Accounting Procedure
--------------------
As of each Valuation Date, the Plan Administrator will determine from the
Trustee the fair market value of Trust assets and will, subject to the
provisions of this Article, determine the allocation of such value among
the Accounts of the Participants; in doing so, the Plan Administrator will
in the following order:
(A) Credit or charge, as appropriate, to the proper Accounts all
transfers, payments, forfeitures, withdrawals or other distributions
made to or from such Accounts during the current Accounting Period
that have not been previously credited or charged.
(b) Credit or charge, as applicable, each Account that is in existence on
the Valuation Date with its pro rata portion of the appreciation or
depreciation in the fair market value of the Trust Fund since the
prior Valuation Date. Such appreciation or depreciation will reflect
investment income, realized and unrealized gains and losses, other
investment transactions and expenses paid from the Trust Fund. Such
pro rata crediting or charging will be based upon the current amounts
of the Accounts as adjusted by the above step (a).
Each Participant's Company Matching Cash Account will be adjusted by
crediting it with cash dividends on Employer Stock held in the
Participant's corresponding Company Matching Stock Account, by
crediting it with its allocable share of any proceeds generated by
the sale of any Employer Stock from the Participant`s corresponding
Company Matching Stock Account and by debiting it for any payments on
purchases of Employer Stock or for any repayment of debt, including
principal and interest, incurred for the purchase of Employer Stock.
4-1
<PAGE>
Each Participant's Company Matching Stock Account will be adjusted by
crediting it with stock dividends on Employer Stock held in the
Participant's Company Matching Stock Account and crediting it with
its allocable share of Employer Stock purchased with monies from the
Participant's corresponding Company Matching Cash Account.
The Plan Administrator will establish the guidelines under which any
appreciation or depreciation is allocated to the various Accounts as
of the first Valuation Date for the Plan.
(c) Credit to the proper Accounts all contributions and reallocated
forfeitures which are to be credited for the current Accounting
Period.
4.03 Assumed Timing of Credits and Charges
-------------------------------------
Notwithstanding the provisions of Section 4.02, for purposes of
determining each Employee Account's pro rata portion of the appreciation
or depreciation in the fair market value of the Trust Fund under Section
4.02(b), contributions to each Employee Account are assumed to be made in
the middle of an Accounting Period.
4.04 Participant Direction of Investment
-----------------------------------
(a) Application of this Section
---------------------------
Subject to the provisions of this Section, each Participant will have
the right to direct the investment of the following Accounts among
the Specific Investment Funds which are made available by the Plan
Administrator:
. Employee Account
. Rollover Account
(b) General Powers of the Trustee
-----------------------------
The Trustee will have the power to establish rules and guidelines as
it deems necessary, desirable or appropriate with regard to the
directed investment of contributions in accordance with this Section.
Included in such powers, but not by way of limitation, are the
following powers and rights.
(1) To temporarily invest those contributions which are pending
directed investment in a Specific Investment Fund, in the General
Investment Fund or in some other manner as determined by the
Trustee.
4-2
<PAGE>
(2) To establish rules with regard to the transfer of all or any part
of the balance of an Account or Accounts of a given Participant
from one Investment Fund to another.
(3) To maintain any part of the assets of any Investment Fund in
cash, or in demand or short-term time deposits bearing a
reasonable rate of interest, or in a short-term investment fund
that provides for the collective investment of cash balances or
in other cash equivalents having ready marketability, including,
but not limited to, U.S. Treasury Bills, commercial paper,
certificates of deposit, and similar types of short-term
securities, as may be deemed necessary by the Trustee in its sole
discretion.
(c) Accounting
----------
The Plan Administrator will maintain a set of accounts for each
Investment Fund. The accounts of the Plan Administrator for each
Investment Fund will indicate separately the dollar amounts of all
contributions made to such Investment Fund by or on behalf of each
Participant from time to time. The Plan Administrator will compute
the net income from investments; net profits or losses arising from
the sale, exchange, redemption, or other disposition of assets, and
the pro rata share attributable to each Investment Fund of the
expenses of the administration of the Plan and Trust and will debit
or credit, as the case may be, such income, profits or losses, and
expenses to the unsegregated balance in each Investment Fund from
time to time. To the extent that the expenses of the administration
of the Plan and Trust are not directly attributable to a given
Investment Fund, such expenses, as of a given Valuation Date, will be
prorated among each Investment Fund; such allocation of expenses
will, in general, be performed in accordance with the guidelines
which are specified in this Article.
(d) Future Contributions
--------------------
Each Participant who elects to participate in the Plan will
designate, in writing, the particular percentage of those
contributions (which are subject to Participant direction of
investment) which is to be deposited in the various available
Investment Funds. Written designations will be made not later than
15 days before the first day of each Accounting Period (or at some
other time as specified by the Plan Administrator) and will be
effective for such Accounting Period and each Accounting Period
4-3
<PAGE>
thereafter until modified. Designations will be limited to multiples
of 10% (or such other reasonable increments as determined by the Plan
Administrator). If any Participant fails to make a designation by
the appropriate date, he will be deemed to have designated an
Investment Fund(s) as determined by the Plan Administrator.
(e) Change in Investment of Past Contributions
------------------------------------------
A Participant may file a written election with the Plan Administrator
to shift the aggregate amount or reasonable increments (as determined
by the Plan Administrator) of the balance of his existing Account or
Accounts which are subject to Participant direction of investment
among the various available Investment Funds as of the first day of
each Accounting Period (or such other time or times as determined by
the Plan Administrator). The form of such written election will be
specified by the Plan Administrator and will be filed not later than
20 days before the effective date of the shift (or at such other time
as determined by the Plan Administrator).
(f) Addition and Deletion of Specific Investment Funds
--------------------------------------------------
Specific Investment Funds may be made available from time to time by
the Trustee. Specific Investment Funds, as are from time to time
made available by the Trustee, may be deleted or added from time to
time by the Plan Administrator. The Plan Administrator will
establish guidelines for the proper administration of affected
Accounts when a Specific Investment Fund is added or deleted.
4.05 Nondiscrimination Requirements
------------------------------
(a) Definitions Applicable to the Nondiscrimination Requirements
------------------------------------------------------------
The following definitions apply to this Section:
(1) Aggregate Limit
---------------
With respect to a given Plan Year, Aggregate Limit means the
greater of the sum of [(A) + (B)] or the sum of [(C) + (D)]
where:
(A) is equal to 125% of the greater of DP or CP;
-------
(B) is equal to 2 percentage points plus the lesser of DP or CP,
------
not to exceed 2 times the lesser of DP or CP;
------
(C) is equal to 125% of the lesser of DP or CP;
------
4-4
<PAGE>
(D) is equal to 2 percentage points plus the greater of DP or
-------
CP, not to exceed 2 times the greater of DP or CP;
-------
DP represents the Deferral Percentage for the Non-highly
Compensated Group eligible under the Cash or Deferred
Arrangement for the Plan Year; and
CP represents the Contribution Percentage for the Non-highly
Compensated Group eligible under the plan providing for the
Employee Contributions or Employer Matching Contributions
for the Plan Year beginning with or within the Plan Year of
the Cash or Deferred Arrangement.
(2) Cash or Deferred Arrangement (CODA)
-----------------------------------
Cash or Deferred Arrangement means an arrangement which is part
of a plan satisfying the requirements of Code Section 401(a) and
the additional requirements of Code Section 401(k) and
regulations issued under that Section.
(3) Compensation
------------
For purposes of this Section, Compensation means Aggregate
Compensation as defined in Section 7.03(a) plus amounts
contributed by the Employer pursuant to a salary reduction
agreement which are excludable from the gross income of the
Employee under Code Section 125, 402(a)(8), 402(h) or 403(b).
Compensation in excess of $200,000 (as adjusted by the Secretary
of the Treasury under Code Section 415(d)) is disregarded.
Compensation received while an Employee is not eligible to
participate in the Plan is disregarded unless and until the
Internal Revenue Service requires that Compensation received by
an employee for the entire Plan Year be considered.
(4) Contribution Percentage
-----------------------
Contribution Percentage means, for any specified group, the
average of the ratios calculated (to the nearest one-hundredth of
one percent) separately for each Participant in the group, of the
amount of Employee Contributions and Matching Contributions which
are made by or on behalf of each Participant for a Plan Year to
each Participant's Compensation for the Plan Year.
For purposes of determining the Contribution Percentage, each
Employee who is eligible under
4-5
<PAGE>
the terms of the Plan to make or to have contributions made on
his behalf is treated as a Participant. The Contribution
Percentage of an eligible Employee who makes no Employee
Contribution and receives no Matching Contribution is zero.
For purposes of determining the Contribution Percentage of a
Participant who is a Highly Compensated Employee, the
Compensation of and all Employee Contributions and Matching
Contributions for the Participant include, in accordance with the
provisions of Section 4.05(d), the Compensation of and all
Employee Contributions and Matching Contributions for any Family
Member of the Participant.
The Contribution Percentage of a Participant who is a Highly
Compensated Employee for the Plan Year and who is eligible to
make Employee Contributions or receive an allocation of Matching
Contributions (including Elective Contributions and Non-elective
Contributions which are treated as Employee or Matching
Contributions for purposes of the Contribution Percentage Test)
allocated to his accounts under two or more plans which are
sponsored by the Employer will be determined as if the Employee
and Matching Contributions were made under a single plan. For
purposes of this paragraph, if a Highly Compensated Employee
participates in two or more such plans which have different Plan
Years, all plans ending with or within the same calendar year
will be treated as a single plan.
(5) Contribution Percentage Test
----------------------------
The Contribution Percentage Test is a test applied on a Plan Year
basis to determine whether a plan meets the requirements of Code
Section 401(m). The Contribution Percentage Test may be met by
either satisfying the General Contribution Percentage Test or the
Alternative Contribution Percentage Test.
The General Contribution Percentage Test is satisfied if the
Contribution Percentage for the Highly Compensated Group does not
exceed 125% of the Contribution Percentage for the Non-highly
Compensated Group.
The Alternative Contribution Percentage Test is satisfied if the
Contribution Percentage for the
4-6
<PAGE>
Highly Compensated Group does not exceed the lesser of:
. the Contribution Percentage for the Non-highly Compensated
Group plus 2 percentage points, or
. the Contribution Percentage for the Non-highly Compensated
Group multiplied by 2.0.
With respect to Plan Years which begin on or after January 1,
1989, if one or more Highly Compensated Employees of the Employer
or any Related Employer are eligible both in a Cash or Deferred
Arrangement and in a plan which provides for Employee
Contributions or Matching Contributions, the Contribution
Percentage Test is satisfied only if the sum of the Deferral
Percentage and the Contribution Percentage for the Highly
Compensated Group does not exceed the Aggregate Limit.
(6) Deferral Percentage
-------------------
Deferral Percentage means, for any specified group, the average
of the ratios calculated (to the nearest one-hundredth of one
percent) separately for each Participant in the group, of the
amount of Elective Contributions which are made on behalf of each
Participant for a Plan Year to each Participant's Compensation
for the Plan Year.
For purposes of determining the Deferral Percentage, each
Employee who is eligible under the terms of the Plan to have
contributions made on his behalf is treated as a Participant.
The Deferral Percentage of an eligible Employee who makes no
Elective Contribution is zero.
For purposes of determining the Deferral Percentage of a
Participant who is a Highly Compensated Employee, the
Compensation of and Elective Contributions for the Participant
include, in accordance with the provisions of Section 4.05(d),
the Compensation and all Elective Contributions for any Family
Member of the Participant.
The Deferral Percentage of a Participant who is a Highly
Compensated Employee for the Plan Year and who is eligible to
have Elective Contributions (including Non-elective Contributions
or Matching
4-7
<PAGE>
Contributions which are treated as Elective Contributions for
purposes of the Deferral Percentage Test) allocated to his
accounts under two or more Cash or Deferred Arrangements which
are maintained by the Employer will be determined as if the
Elective Contributions were made under a single Arrangement. For
purposes of this paragraph, if a Highly Compensated Employee
participates in two or more Cash or Deferred Arrangements which
have different Plan Years, all Cash or Deferred Arrangements
ending with or within the same calendar year will be treated as a
single Arrangement.
(7) Deferral Percentage Test
------------------------
The Deferral Percentage Test is a test applied on a Plan Year
basis to determine whether a plan meets the requirements of Code
Section 401(k). The Deferral Percentage Test may be met by
either satisfying the General Deferral Percentage Test or the
Alternative Deferral Percentage Test.
The General Deferral Percentage Test is satisfied if the Deferral
Percentage for the Highly Compensated Group does not exceed 125%
of the Deferral Percentage for the Non-highly Compensated Group.
The Alternative Deferral Percentage Test is satisfied if the
Deferral Percentage for the Highly Compensated Group does not
exceed the lesser of:
. the Deferral Percentage for the Non-highly Compensated Group
plus 2 percentage points, or
. the Deferral Percentage for the Non-highly Compensated Group
multiplied by 2.0.
With respect to Plan Years which begin on or after January 1,
1989, if one or more Highly Compensated Employees of the Employer
or any Related Employer are eligible both in a Cash or Deferred
Arrangement and in a plan which provides for Employee
Contributions or Matching Contributions, the Deferral Percentage
Test is satisfied only if the sum of the Deferral Percentage and
the Contribution Percentage for the Highly Compensated Group does
not exceed the Aggregate Limit.
4-8
<PAGE>
(8) Elective Contribution
---------------------
Elective Contribution means any contribution made by the Employer
to a Cash or Deferred Arrangement on behalf of and at the
election of an Employee. An Elective Contribution will be taken
into account for a given Plan Year only if:
. The Elective Contribution is allocated to the Participant's
Account as of a date within the Plan Year to which it
relates;
. The allocation is not contingent upon the Employee's
participation in the Plan or performance of services on any
date after the allocation date;
. The Elective Contribution is actually paid to the trust no
later than 12 months after the end of the Plan Year to which
the Elective Contribution relates; and
. The Elective Contribution relates to Compensation which
either (i) but for the Participant's election to defer,
would have been received by the Participant in the Plan Year
or (ii) is attributable to services performed by the
Participant in the Plan Year and, but for the Participant's
election to defer, would have been received by the
Participant within two and one-half months after the close
of the Plan Year.
(9) Elective Deferral
-----------------
Elective Deferral means the sum of the following:
. Any Elective Contribution to any Cash or Deferred
Arrangement to the extent it is not includible in the
Participant's gross income for the taxable year of
contribution;
. Any employer contribution to a simplified employee pension
as defined in Code Section 408(k) to the extent not
includable in the Participant's gross income for the taxable
year of contribution;
. Any employer contribution to an annuity contract under Code
Section 403(b) under a salary reduction agreement to the
extent not includable in the Participant's gross income for
the taxable year of contribution; plus
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<PAGE>
. Any employee contribution designated as deductible under a
trust described in Code Section 501(c)(18) for the taxable
year of contribution.
(10) Employee Contribution
---------------------
Employee Contribution means any contribution made by an Employee
to any plan maintained by the Employer or any Related Employer
which is other than an Elective Contribution and which is
designated or treated at the time of contribution as an after-
tax contribution. Employee Contributions include amounts
attributable to Excess Contributions which are recharacterized
as Employee Contributions.
(11) Excess Contribution
-------------------
Excess Contribution means, for each member of the Highly
Compensated Group, the amount of Elective Contribution which
exceeds the maximum contribution which could be made if the
Deferral Percentage Test were to be satisfied.
(12) Excess Aggregate Contribution
-----------------------------
Excess Aggregate Contribution means, for each member of the
Highly Compensated Group, the amount of Employee and Matching
Contributions which exceeds the maximum which could be made if
the Contribution Percentage Test were to be satisfied.
(13) Excess Deferral
---------------
Excess Deferral means, for a given calendar year, that amount by
which each Participant's total Elective Deferrals under all
plans of all employers exceed the dollar limit in effect under
Code Section 402(g) for the calendar year.
(14) Matching Contribution
---------------------
Matching Contribution means any contribution made by the
Employer to any plan maintained by the Employer or any Related
Employer which is based on an Elective Contribution or an
Employee Contribution together with any forfeiture allocated to
the Participant's Account on the basis of Elective
Contributions, Employee Contributions or Matching Contributions.
A Matching Contribution will be taken into account for a given
Plan Year only if:
4-10
<PAGE>
. The Matching Contribution is allocated to the Participant's
Account as of a date within the Plan Year to which it
relates;
. The allocation is not contingent upon the Employee's
participation in the Plan or performance of services on any
date after the allocation date;
. The Matching Contribution is actually paid to the trust no
later than 12 months after the end of the Plan Year to which
the Matching Contribution relates; and
. The Matching Contribution is based on an Elective or
Employee Contribution for the Plan Year.
For Plan Years beginning after 1988, a contribution or
allocation on behalf of a Non-Key Employee used to meet the
minimum contribution or benefit requirement of Code Section 416
is not treated as being based on Elective Contributions or
Employee Contributions and therefore is not treated as a
Matching Contribution.
(15) Non-Elective Contribution
-------------------------
Non-Elective Contribution means any Employer Contribution, other
than a Matching Contribution, which is 100% vested, that may
only be withdrawn or distributed under the conditions described
in Code Section 401(k)(2)(B)(i) (except clause (IV)), and with
respect to which the Employee may not elect to have the
contribution paid in cash in lieu of being contributed to the
Plan.
(b) Application of Deferral Percentage Test
---------------------------------------
All Elective Contributions, including any Elective Contributions
which are treated as Employee or Matching Contributions with respect
to the Contribution Percentage Test, must satisfy the Deferral
Percentage Test. Furthermore, any Elective Contributions which are
not treated as Employee or Matching Contributions with respect to the
Contribution Percentage Test must satisfy the Deferral Percentage
Test. The Plan Administrator will determine as soon as
administratively feasible after the end of the Plan Year whether the
Deferral Percentage Test has been satisfied. If the Deferral
Percentage Test is not satisfied, the Employer may elect to take an
additional contribution to the Plan on account of the Non-highly
Compensated Group. The
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<PAGE>
additional contribution will be treated as a Non-Elective
Contribution.
If the Deferral Percentage Test is not satisfied after any Non-
Elective Contributions, the Plan Administrator may, in its sole
discretion, recharacterize all or any portion of the Excess
Contribution of each Highly Compensated Employee as an Employee
Contribution. If so, the Plan Administrator will notify all affected
Participants and the Internal Revenue Service of the amount
recharacterized no later than the 15th day of the third month
following the end of the Plan Year in which the Excess Contribution
was made, and the amount recharacterized will be includable in each
affected Participant's gross income for the calendar year in which
the Plan Year began. With respect to the Plan Year for which the
Excess Contribution was made, the Plan Administrator will treat the
recharacterized amount as an Employee Contribution for purposes of
the Deferral Percentage Test and the Contribution Percentage Test and
for purposes of determining whether the Plan meets the requirements
of Code Section 401(a)(4), but not for any other purposes under this
Plan. Therefore, recharacterized amounts will remain subject to the
nonforfeiture requirements and distribution limitations which apply
to Elective Contributions.
If the Deferral Percentage Test is still not satisfied, then on or
before the close of the following Plan Year, the Plan Administrator
will distribute the Excess Contributions, together with allocable
income, to the affected Participants of the Highly Compensated Group
to the extent necessary to satisfy the Deferral Percentage Test.
Failure to do so will cause the Plan to not satisfy the requirements
of Code Section 401(a)(4) for the Plan Year for which the Excess
Contribution was made and for all subsequent Plan Years for which the
Excess Contribution remains uncorrected.
The amount of Excess Contributions to be recharacterized or
distributed will be reduced by any Excess Deferrals previously
distributed.
(c) Application of Contribution Percentage Test
-------------------------------------------
Employee Contributions and Matching Contributions, disregarding any
Matching Contributions which are treated as Elective Contributions
with respect to the Deferral Percentage Test, must satisfy the
Contribution Percentage Test. The Plan Administrator will determine
as soon as administratively feasible
4-12
<PAGE>
after the end of the Plan Year whether the Contribution Test has been
satisfied. If the Contribution Percentage Test is not satisfied, the
Employer may elect to make an additional contribution to the Plan for
the benefit of the Non-Highly Compensated Group. The additional
contribution will be treated as a Non-Elective Contribution.
If the Contribution Percentage Test is still not satisfied, then on
or before the close of the following Plan Year, the Plan
Administrator will, to the extent necessary to satisfy the
Contribution Percentage Test, distribute the vested portion of Excess
Aggregate Contributions (together with allocable income) and forfeit
the nonvested portion of Excess Aggregate Contributions to the
affected Participants of the Highly Compensated Group. Failure to do
so will cause the Plan to not satisfy the requirements of Code
Section 401(a)(4) for the Plan Year for which the Excess Aggregate
Contribution was made and for all subsequent Plan Years for which the
Excess Aggregate Contribution remains uncorrected.
(d) Family Aggregation
------------------
The Deferral Percentage or the Contribution Percentage (the "Relevant
Percentage") for any Highly compensated Employee who is subject to
the family aggregation rules of Section 1.18(c) will be determined by
combining the Elective Contributions, Employee Contributions,
Matching Contribution, amounts treated as Elective or Matching
Contributions and Compensation of all the eligible Family Members.
The determination and correction of Excess Contributions and Excess
Aggregate Contributions of a Highly Compensated Employee whose
Relevant Percentage is determined under the family aggregation rules
is accomplished by reducing the Relevant Percentage as provided for
in Sections 4.05(b) and 4.05(c) and Excess Contributions or Excess
Aggregate Contributions for the family group are allocated among the
Family Members whose contributions were combined to determine the
Relevant Percentage in proportion to the Elective Contributions or
Non-Elective and Matching Contributions of each Family Member.
For all purposes under this Section, the contributions and
compensation of eligible Family Members who are not Highly
Compensated Employees without regard to family aggregation are
disregarded when determining the Relevant Percentage for the Non-
highly Compensated Group.
4-13
<PAGE>
(e) Reduction of Excess Amounts
---------------------------
The total Excess Contribution or total Excess Aggregate Contribution
will be reduced in a manner so that the Deferral Percentage or the
Contribution Percentage (Relevant Percentage) of the affected
Participant(s) with the highest Relevant Percentage will first be
lowered to a point not less than the level of the affected
Participant(s) with the next highest Relevant Percentage. If further
overall reductions are required to satisfy the relevant test, each of
the above Participants' (or groups of Participants') Relevant
Percentage will be lowered to a point not less than the level of the
affected Participant(s) with the next highest Relevant Percentage,
and so on continuing until sufficient total reductions have occurred
to achieve satisfaction of the relevant test.
(f) Priority of Reductions
----------------------
The Plan Administrator will determine the method and order of
correcting Excess Contributions and Excess Aggregate Contributions.
The method of correcting Excess Contributions and Excess Aggregate
Contributions must meet the requirements of Code Section 401(a)(4).
The determination of whether a rate of Matching Contribution
discriminates under Code Section 401(a)(4) will be made after making
any corrective distributions of Excess Deferrals, Excess
Contributions and Excess Aggregate Contributions.
(g) Income
------
The income allocable to any Excess Contribution or Excess Aggregate
Contribution made to a given Account for a given Plan Year will be
equal to the total income allocated to the Account for the Plan Year,
multiplied by a fraction, the numerator of which is the amount of the
Excess Contribution or Excess Aggregate Contribution and the
denominator of which is the closing balance of the Account decreased
(or increased) by the amount of income (or losses) allocated to the
Account for the Plan Year.
The income allocable to the Excess Contribution or Excess Aggregate
Contribution for the period between the end of the Plan Year for
which the determination is being made and the date on which the
Excess Contribution or the Excess Aggregate Contribution is
distributed to the Participant will be equal to 10% of the income
allocable to the Excess Contribution or the Excess Aggregate
Contribution for the Plan Year, multiplied by the number of calendar
months which have
4-14
<PAGE>
elapsed since the end of the Plan Year for which the determination is
being made. For the purpose of determining the number of calendar
months which have elapsed, a distribution which occurs on or before
the 15th day of the month will be treated as having been made on the
last day of the preceding month and a distribution which occurs after
the 15th day of the month will be treated as having been made on the
last day of the current month.
Income includes all earnings and appreciation, including interest,
dividends, rents, royalties, gains from the sale of property, and
appreciation in the value of stocks, bonds, annuity and life
insurance contracts and other property, regardless of whether the
appreciation has been realized.
(h) Treatment as Elective Contributions
-----------------------------------
The Plan Administrator may, in its discretion, treat all or any
portion of Non-Elective Contributions or Matching Contributions or
both, whether to this Plan or to any other qualified plan which has
the same Plan Year and is maintained by the Employer or a Related
Employer, as Elective Contributions for purposes of satisfying the
Deferral Percentage Test if they meet all of the following
requirements:
. The Non-Elective and Matching Contributions are 100% vested
from the time they are contributed to the Plan, and they are
subject to the same distribution and withdrawal restrictions
as Elective Contributions from the time they are contributed
to the Plan;
. The Non-Elective Contributions and Matching Contributions are
allocated to the Participant as of a date within the Plan
Year, the allocation is not contingent on the Employee's
participation in the Plan or performance of services on any
date after the allocation date, and the contribution is
actually paid by the Employer no later than 12 months after
the end of the Plan Year to which the contribution relates;
. All Non-Elective Contributions, including those treated as
Elective Contributions for purposes of the Deferral Percentage
Test, satisfy the requirements of Code Section 401(a)(4);
. Any Non-Elective Contributions which are not treated as
Elective Contributions for purposes
4-15
<PAGE>
of the Deferral Percentage Test or as Matching Contributions
for purposes of the Contribution Percentage Test satisfy the
requirements of Code Section 401(a)(4);
. The treatment of Non-Elective Contributions as Elective
Contributions for purposes of the Deferral Percentage Test
does not increase the spread between the Deferral Percentage
for the Highly Compensated Group and the Deferral Percentage
for the Non-highly Compensated Group.
. Any Matching Contributions which are not treated as Elective
Contributions for purposes of the Deferral Percentage Test
satisfy the requirements of Code Section 401(m);
. The Non-Elective Contributions and Matching Contributions
which are treated as Elective Contributions for purposes of
the Deferral Percentage Test are not taken into account in
determining whether any other contributions or benefits
satisfy Code Section 401(a)(4) and are not taken into account
in determining whether any Employee Contributions or other
Matching Contributions satisfy Code Section 401(m); and
. The Plan Year requirements of Treasury Regulation 1.401(k)-
l(b)(3)(ix) are met.
(i) Treatment as Matching Contributions
-----------------------------------
The Plan Administrator may, in its discretion, treat all or any
portion of Non-Elective Contributions or Elective Contributions or
both, whether to this Plan or to any other qualified plan which has
the same Plan Year and is maintained by the Employer or a Related
Employer, as Matching Contributions for purposes of satisfying the
Contribution Percentage Test if they meet all of the following
requirements:
. The Non-Elective Contributions are allocated to the
Participant as of a date within the Plan Year, and the
Elective Contributions satisfy the requirements of Treasury
Regulation Section 1.401(k)-1(b)(6);
. All Non-Elective Contributions, including those treated as
Matching Contributions for purposes of the Contribution
Percentage Test, satisfy the requirements of Code Section
401(a)(4);
4-16
<PAGE>
. Any Non-Elective Contributions which are not treated as
Elective Contributions for purposes of the Deferral Percentage
Test or as Matching Contributions for purposes of the
Contribution Percentage Test satisfy the requirements of Code
Section 401(a)(4);
. The treatment of Non-Elective Contributions as Matching
Contributions for purposes of the Contribution Percentage Test
does not increase the spread between the Contribution
Percentage for the Highly Compensated Group and the
Contribution Percentage for the Non-highly Compensated Group.
. All Elective Contributions, including those treated as
Matching Contributions for purposes of the Contribution
Percentage Test, satisfy the requirements of Code Section
401(k)(3);
. Any Elective Contributions which are not treated as Matching
Contributions for purposes of the Contribution Percentage Test
satisfy the requirements of Code Section 401(k)(3);
. The Non-Elective Contributions and Elective Contributions
which are treated as Matching Contributions for purposes of
the Contribution Percentage Test are not taken into account in
determining whether any other contributions or benefits
satisfy Code Sections 401(a)(4) or 401(k)(3); and
. The Plan Year requirements of Treasury Regulation 1.401(m)-
l(b)(2)(viii) are met.
(j) Aggregation of Plans
--------------------
(1) Elective Contributions
----------------------
If the Employer or a Related Employer sponsors one or more other
plans which include a Cash or Deferred Arrangement, the Employer
may elect to treat any two or more of such plans as an aggregated
single plan for purposes of satisfying Code Sections 401(a)(4),
401(k) and 410(b). The Cash of Deferred Arrangements included in
such aggregated plans will be treated as a single Arrangement for
purposes of this Section.
If the Employer maintains two or more plans which are treated as
an aggregated single plan for purposes of Code Section 401(a)(4)
or 410(b), all
4-17
<PAGE>
Cash or Deferred Arrangements which are included in such plans
will be treated as an aggregated single Arrangement for purposes
of this Section.
For purposes of this Section, contributions and allocations under
the portion of a plan described in Code Section 4975(e)(7) (an
ESOP) may not be aggregated with the portion of a plan not
described in Code Section 4975(e)(7) (a non-ESOP) for purposes of
determining whether the ESOP or non-ESOP satisfies the
requirements of this Section and Code Sections 401(a)(4), 401(k)
and 410(b).
For Plan Years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Code Section 401(k) only if they
have the same Plan Year.
(2) Employee and Matching Contributions
-----------------------------------
If the Employer or a Related Employer sponsors one or more other
plans to which Employee Contributions or Matching Contributions
are made, the Employer may elect to treat any two or more of such
plans as an aggregated single plan for purposes of satisfying
Code Sections 401(a)(4), 401(m) and 410(b). Such aggregated
plans will be treated as a single Arrangement for purposes of
this Section.
If the Employer maintains two or more plans which are treated as
an aggregated single plan for purposes of Code Section 401(a)(4)
or 410(b), all Employee Contributions and Matching Contributions
which are made to such plans will be treated as an aggregated
single plan for purposes of this Section.
For purposes of this Section, contributions and allocations under
the portion of a plan described in Code Section 4975(e)(7) (an
ESOP) may not be aggregated with the portion of a plan not
described in Code Section 4975(e)(7) (a non-ESOP) for purposes of
determining whether the ESOP or non-ESOP satisfies the
requirements of this Section and Code Sections 401(a)(4), 401(m)
and 410(b).
For Plan Years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Code Section 401(m) only if they
have the same Plan Year.
4-18
<PAGE>
ARTICLE 5
RETIREMENT BENEFITS
5.01 Valuation of Accounts
---------------------
For purposes of this Article, the value of a Participant's Accrued Benefit
will be determined as of the Valuation Date coincident with or immediately
preceding the date that benefits are to be distributed.
5.02 Normal Retirement
-----------------
After an Active Participant reaches his Normal Retirement Date, he may
elect to retire. Upon such retirement he will become a Retired
Participant and his Accrued Benefit will become distributable to him. A
Participant's Accrued Benefit will become nonforfeitable no later than the
date upon which he attains his Normal Retirement Age. The form of benefit
payment will be governed by the provisions of Section 5.05.
5.03 Disability Retirement
---------------------
In the event of a Participant's termination due to Disability, he will be
entitled to begin to receive a distribution of his Accrued Benefit which
will become nonforfeitable as of his date of termination. The form of
benefit payment will be governed by the provisions of Section 5.05.
Disability means the determination by the Plan Administrator that a
Participant is unable by reason of any medically determinable physical or
mental impairment to perform the usual duties of his employment or of any
other employment for which he is reasonably qualified based upon his
education, training and experience.
5.04 Termination of Employment
-------------------------
(a) In General
----------
If a Participant's employment terminates for any reason other than
retirement, death, or disability, his Vested Accrued Benefit will
become distributable to him as of the Valuation Date which coincides
with or next follows his date of termination of employment (or as of
such earlier date as determined by the Plan Administrator in a
uniform and nondiscriminatory manner). The form of benefit payment
will be governed by the provisions of Section 5.05.
(b) Cash-Out Distribution
---------------------
If a Participant terminates employment and receives distribution
equal to the Vested Percentage of his Accounts which are subject to
the Vesting Schedule
5-1
<PAGE>
(such Accounts are hereinafter referred to as Employer Contribution
Accounts), a Cash-Out Distribution will be deemed to have occurred if
the following conditions are met:
(1) The Participant was less than 100% vested in his Employer
Contribution Accounts; and
(2) The entire distribution is made before the last day of the second
Plan Year following the Plan Year in which the Participant
terminated employment.
(c) Restoration of Employer Contribution Accounts
---------------------------------------------
If, following the date of a Cash-Out Distribution, a Participant
returns to an Eligible Employee Classification prior to incurring 5
consecutive One Year Breaks-in-Service, then the Participant will
have the right to repay to the Trustee, within 5 years after his
return date, the portion of the Cash-Out Distribution which was
attributable to his Employer Contribution Accounts which were less
than 100% vested in order to restore such Accounts to their value as
of the date of the Cash-Out Distribution.
The Plan Administrator will restore an eligible Participant's
Employer Contribution Accounts as of the Valuation Date coincident
with or immediately following the complete repayment of the Cash-Out
Distribution. To restore the Participant's Employer Contribution
Accounts, the Plan Administrator, to the extent necessary, will,
under rules and guidelines applied in a uniform and nondiscriminatory
manner, allocate to the Participant's Employer Contribution Accounts:
. First, the amount, if any, of Forfeitures which would
otherwise be allocated under Article 3;
. Second, the amount, if any, of the Trust Fund net income or
gain for the Accounting Period.
To the extent the amounts available for restoration for a particular
Accounting Period are insufficient to enable the Plan Administrator
to make the required restoration, the Employer will contribute such
additional amount as is necessary to enable the Plan Administrator to
make the required restoration. The Plan Administrator will not take
into account the allocation under this Section in applying the
limitation on allocations under Article 7.
5-2
<PAGE>
Until the Plan Administrator restores a Participant's Employer
Contribution Accounts, the Trustee will invest any amount the
Participant has repaid in a segregated account maintained solely for
that Participant. The Trustee will invest the amount in the
Participant's segregated account in an interest-bearing savings
account, time deposit, or similar type of account. Until commingled
with the balance of the Trust Fund on the date the Plan Administrator
restores the Participant's Employer Contribution Accounts, the
Participant's segregated account will remain a part of the Trust, but
it alone will share in any income it earns and it alone will bear any
expense or loss it incurs.
(d) Non-Vested Participant
----------------------
If a Participant who is 0% vested in his Employer Contribution
Accounts terminates employment, a Cash.Out Distribution will be
deemed to have occurred as of the Participant's date of termination
of employment.
If the Participant subsequently returns to an Eligible Employee
Classification prior to incurring five consecutive One Year Breaks-
in-Service, then the Participant will immediately become entitled to
a complete restoration of his Employer Contribution Accounts as of
the Valuation Date coincident with or next following his date of re-
employment. Such restoration will be made in accordance with the
provisions of Section 5.04(c).
5.05 Form of Benefit Payment
-----------------------
The Plan Administrator will direct the Trustee to make the payment of any
benefit provided under this Plan upon the event giving rise to such
benefit within the time prescribed by this Article. The form of benefit
will be a lump sum payment.
If a Participant's Vested Accrued Benefit is in excess of $3,500, any
payment of benefits prior to the Participant's Normal Retirement Date will
be subject to the Participant's written consent. If the value of his
Vested Accrued Benefit at the time of any distribution exceeds $3,500, the
value of his Vested Accrued Benefit at any later time will be deemed to
also exceed $3,500.
5.06 Commencement of Benefit
-----------------------
(a) General
-------
All distributions required under this Section will be determined and
made in accordance with the regulations
5-3
<PAGE>
issued under Code Section 401(a)(9), including those dealing with
minimum distribution requirements.
Unless the Participant elects otherwise in writing, payment of
benefits will begin no later than the 60th day after the close of the
Plan Year during which the latest of the following events occurs:
. the earlier of the Participant's normal retirement age as
defined in Code Section 411(a)(8) or the Participant's 65th
birthday;
. the 10th anniversary of the Participant's first participation
in the Plan; or
. the Participant's termination of service with the Employer.
Failure of the Participant (or the Participant's spouse, if
applicable) to consent to immediate distribution of benefits when
they are payable before the Participant has attained the later of age
62 or normal retirement age will be treated as an election to defer
commencement until that age for purposes of Code Section 401(a)(14).
(b) Mandatory Distribution to Participant
-------------------------------------
Notwithstanding the foregoing, payment of Participant's benefits must
begin no later than his Required Beginning Date. A Participant's
benefits must either be distributed in the calendar year which
contains his Required Beginning Date or must be paid over a period
not exceeding one of the following periods:
(1) the lifetime of the Participant;
(2) the lifetime of the last survivor of the Participant and the
Participant's designated Beneficiary;
(3) the life expectancy of the Participant; or
(4) the joint life and last survivor expectancy of the
Participant and the Participant's designated Beneficiary.
(c) Mandatory Distribution to Beneficiaries
---------------------------------------
If the Participant dies after distribution of his or her interest has
begun, the remaining portion of such interest will continue to be
distributed at least as
5-4
<PAGE>
rapidly as under the method of distribution being used before the
Participant's death.
If the Participant dies before distribution of his or her interest
begins, the Participant's entire interest will be distributed no
later than five years after the Participant's death except to the
extent that an election is made to receive distributions as follows:
. if any portion of the Participant's interest is payable to a
non-spouse designated Beneficiary, such portion may be
distributed in substantially equal installments over the
lifetime or life expectancy of the designated Beneficiary.
Such distributions must commence no later than one year after
the Participant's death;
. if any portion of the Participant's interest is payable to the
Participant's spouse, such portion may be distributed in
substantially equal installments over the lifetime or life
expectancy of the spouse. Such distribution must commence no
later than the date on which the Participant would have
attained age 70-1/2, and, if the spouse dies before payments
begin, later distributions will be made as if the spouse had
been the Participant.
(d) Additional Rules
----------------
For purposes of this Section, life expectancies are to be computed by
the use of the return multiples contained in Section 1.72-9 of the
Income Tax Regulations. Life expectancy of the Participant and the
surviving spouse will be recalculated annually; however, the life
expectancy any other designated Beneficiary will be calculated at the
time payment first begins without further recalculation.
For purposes of this Section, any amount paid to a child of
the Participant will be treated as if it had been paid to the
surviving spouse if the amount becomes payable to the surviving
spouse when the child reaches the age of majority.
5-5
<PAGE>
ARTICLE 6
DEATH BENEFIT
6.01 Valuation of Accounts
---------------------
For purposes of this Article, the value of a Participant's Accrued Benefit
will be determined as of the Valuation Date coincident with or immediately
preceding the date that benefits are to be distributed.
6.02 Death Benefit
-------------
In the event of the death of a Participant prior to the date on which he
receives a complete distribution of his benefit under the Plan, the
Participant's Beneficiary will be entitled to receive the value of the
Participant's Accrued Benefit.
6.03 Designation of Beneficiary
--------------------------
Each Participant will be given the opportunity to designate a Beneficiary
or Beneficiaries, and from time to time the Participant may file with the
Plan Administrator a new or revised designation on the form provided by
the Plan Administrator. If a Participant is married, any designation of a
Beneficiary other than the Participant's spouse must be consented to by
the Participant's spouse pursuant to a Qualified Election.
If a Participant dies without designating a Beneficiary, or if the
Participant is predeceased by all designated Beneficiaries and contingent
Beneficiaries, the Plan Administrator will distribute all benefits which
are payable in the event of the Participant's death in the following
manner and to the first of the following (who are listed in order of
priority) who survive the Participant by at least 30 days:
. All to the Participant's Surviving Spouse;
. Equally among the then living children of the Participant (by
birth or adoption);
. Among the Participant's then living lineal descendants, by right
of representation; or
. The Participant's estate.
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<PAGE>
ARTICLE 7
LIMITATIONS ON BENEFITS
7.01 Limitation on Annual Additions
------------------------------
The amount of the Annual Addition which may be allocated under this Plan
to any Participant's Account as of any Valuation Date will not exceed the
Defined Contribution Limit (based upon his Aggregate Compensation up to
such Valuation Date) reduced by the sum of any allocations of annual
additions made to Participant's Accounts under this Plan as of any
preceding Valuation Date within the Limitation Year.
If the Annual Addition under this Plan on behalf of a Participant is to be
reduced as of any Valuation Date as a result of the next preceding
paragraph, the reduction will be, to the extent required, effected by
first reducing Participant contributions (which increase the annual
addition), then Forfeitures (if any), and then Employer contributions to
be allocated under this Plan on behalf of the Participant as of the
Valuation Date.
Any necessary reduction will be made as follows:
(a) The amount of the reduction consisting of nondeductible Participant
contributions will be paid to the Participant as soon as
administratively feasible.
(b) The amount of the reduction consisting of any other Participant
contributions will be paid to the Participant as soon as
administratively feasible.
(c) The amount of the reduction consisting of Forfeitures will be
allocated and reallocated to other Accounts in accordance with the
Plan formula for allocating Forfeitures to the extent that such
allocations do not cause the additions to any other Participant's
Accounts to exceed the lesser of the Defined Contribution Limit or
any other limitation provided in the Plan.
(d) The amount of the reduction consisting of Employer contributions will
be allocated and reallocated to other Accounts in accordance with the
Plan formula for Employer Contributions to the extent that such
allocations do not cause the additions to any other Participant's
Accounts to exceed the lesser of the Defined Contribution Limit or
any other limitation provided in the Plan.
7-1
<PAGE>
(e) To the extent that the reductions described in paragraph (d) cannot
be allocated to other Participant's Accounts, the reductions will be
allocated to a suspense account as Forfeitures and held therein until
the next succeeding Valuation Date on which Forfeitures could be
applied under the provisions of the Plan. All amounts held in a
suspense account must be applied as Forfeitures before any additional
contributions, which would constitute annual additions, may be made
to the Plan. If the Plan terminates, the suspense account will
revert to the Employer to the extent it may not be allocated to any
Participant's Accounts.
(f) If a suspense account is in existence at any time during a Limitation
Year pursuant to this Section, it will not participate in the
allocation of the Trust Fund's investment gains and losses.
7.02 Where Employer Maintains Another Qualified Plan
-----------------------------------------------
(a) Where Employer Maintains Another Qualified Defined Contribution Plan
--------------------------------------------------------------------
If the Employer maintains this Plan and one or more other qualified
defined contribution plans, one or more welfare benefit funds (as
defined in Code Section 419(e)), or one or more individual medical
accounts (as defined in Code Section 415(1)(2)), all of which are
referred to in this Article 7 as "qualified defined contribution
plans," the annual additions allocated under this Plan to any
Participant's Accounts will be limited in accordance with the
allocation provisions of this Section 7.02(a).
The amount of the Annual Additions which may be allocated under this
Plan to any Participant's Accounts as of any Valuation Date will not
exceed the Defined Contribution Limit (based upon Aggregate
Compensation up to the allocation date) reduced by the sum of any
allocations of Annual Additions made to the Participant's Accounts
under this Plan and any other qualified defined contribution plans
maintained by the Employer as of any earlier Valuation Date within
the Limitation Year.
If a Valuation Date of this Plan coincides with a Valuation Date of
any other plan described in the above paragraph, the amount of Annual
Additions to be allocated on behalf of a Participant under this Plan
as of such date will be an amount equal to the product of the amount
described in the next preceding
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<PAGE>
paragraph multiplied by a fraction (not to exceed 1.0), the numerator
of which is the amount to be allocated under this Plan without regard
to this Article during the Limitation Year and the denominator of
which is the amount that would otherwise be allocated on this
Valuation Date under all plans without regard to this Article 7.
If the Annual Addition under this Plan on behalf of a Participant is
to be reduced as of any Valuation Date as a result of the next
preceding two paragraphs, the reduction will be, to the extent
required, effected by first reducing Participant contributions (which
increase the annual addition), then Forfeitures (if any), and then
any Employer contributions, to be allocated under this Plan on behalf
of the Participant as of the Valuation Date.
If as a result of the first four paragraphs of this Section 7.02 the
allocation of additions is reduced, the reduction will be treated in
the manner described in the third paragraph of Section 7.01.
(b) Where Employer Maintains a Qualified Defined
Benefit Plan
--------------------------------------------
(1) In General
----------
If the Employer maintains (or has ever maintained), in addition
to this Plan, one or more qualified defined benefit plans, then
for any Limitation Year, the sum of the Defined Benefit Plan
Fraction and the Defined Contribution Plan Fraction will not
exceed 1.0. If, in any Limitation Year, the sum of the Defined
Benefit Plan Fraction and the Defined Contribution Plan Fraction
for a Participant would exceed 1.0 without adjustment to the
amount of the annual benefit that can be paid to the Participant
under the defined benefit plan, then the amount of annual benefit
that would otherwise be paid to the Participant under the defined
benefit plan will be reduced to the extent necessary to reduce
the sum of the Defined Benefit Plan Fraction and the Defined
Contribution Plan Fraction for the Participant to 1.0.
(2) Transition Rule under TRA '86
-----------------------------
If a plan was in existence on May 6, 1986, the numerator of the
Defined Contribution Plan Fraction will be reduced (to not less
than zero) as prescribed by the Secretary of the Treasury by
subtracting the amount required to decrease the
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<PAGE>
sum of the Defined Contribution Plan Fraction plus the Defined
Benefit Plan Fraction to 1.0. Such amount is determined (as of
the first day of the first Limitation Year beginning on or after
January 1, 1987) as the product of:
(A) The amount by which, without this adjustment, the sum of the
Defined Contribution Plan Fraction plus the Defined Benefit
Plan fraction exceeds 1.0, multiplied by
(B) The denominator of the Defined Contribution Plan Fraction,
as computed through the last Limitation Year beginning
before January 1, 1987, disregarding any changes in the
terms and conditions of the plan after May 5, 1986.
This subparagraph applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of
Code Section 415 for all Limitation Years beginning before
January 1, 1987.
(3) Transition Rule under TEFRA
---------------------------
In the case of a plan which met the limitation of Section 415 of
the Code for the last Limitation Year beginning before January 1,
1983, the numerator of the Defined Contribution Plan Fraction
will be reduced (to not less than zero) as prescribed by the
Secretary of the Treasury by subtracting the amount required to
decrease the sum of the Defined Contribution Plan Fraction plus
the Defined Benefit Plan Fraction to 1.0. Such amount is
determined (as of the first day of the first Limitation Year
beginning on or after January 1, 1983) as the product of:
(A) The amount by which, without this adjustment, the sum of the
Defined Contribution Plan Fraction plus the Defined Benefit
Plan Fraction exceeds 1.0, multiplied by
(B) The denominator of the Defined Contribution Plan Fraction,
as computed through the last Limitation Year beginning
before January 1, 1983.
7.03 Definitions Applicable to Article 7
-----------------------------------
(a) Aggregate Compensation
----------------------
Aggregate Compensation means a Participant's earned income, wages,
salaries, and fees for professional
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<PAGE>
services, and other amounts received for personal services actually
rendered in the course of employment with the employer maintaining
the plan (including, but not limited to, commissions paid to
salesmen, compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips and bonuses), and
excluding the following:
. Employer contributions to a plan of deferred compensation which
are not included in the employee's gross income for the taxable
year in which contributed or employer contributions under a
simplified employee pension plan to the extent the contributions
are deductible by the employee, or any distributions from a plan
of deferred compensation;
. Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the
employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
. Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
. Other amounts which received special tax benefits, or
contributions made by the employer (whether or not under a salary
reduction agreement) toward the purchase of an annuity described
in Code Section 403(b) (whether or not the amounts are actually
excludable from the gross income of the employee).
Aggregate Compensation excludes any amounts contributed by the
Employer or any Related Employer on behalf of any Employee pursuant
to a salary reduction agreement which are not includable in the gross
income of the Employee due to Code Section 125, 402(a)(8), 402(h) or
403(b).
Aggregate Compensation in excess of $200,000 (as adjusted at the same
time and in the same manner as under Code Section 415(d)) is
disregarded.
Aggregate Compensation for any Limitation Year is the Aggregate
Compensation actually paid or includable in gross income in such
year.
(b) Allocation Date, Valuation Date
-------------------------------
These terms are used interchangeably and mean the date with respect
to which all or a portion of employer
7-5
<PAGE>
contributions, employee contributions or forfeitures or both are
allocated to participant accounts under a defined contribution plan.
(c) Annual Additions
----------------
For Plan Years beginning after December 31, 1986, Annual Additions
are the sum of the following amounts allocated to any defined
contribution plan maintained by the Employer (including voluntary
contributions to any defined benefit plan maintained by the Employer)
on behalf of a Participant for a Limitation Year:
. All Employee and Employer contributions;
. All reallocated forfeitures;
. Amounts allocated after March 31, 1984, to an individual medical
account, as defined in Code Section 415(1)(2) which is part of a
pension or annuity plan maintained by the Employer, and amounts
derived from contributions paid or accrued after December 31,
1985, in taxable years ending after that date, which are
attributable to post-retirement medical benefits required by Code
Section 401(h)(6) to be allocated to the separate account of a
Key Employee under a welfare benefit plan (as defined in Code
Section 419(e)) maintained by the Employer.
Contributions or forfeitures will be treated as Annual Additions
regardless of whether they constitute Excess Deferrals, Excess
Contributions or Excess Aggregate Contributions within the meaning of
the regulations under Code Section 401(k) or 401(m) and regardless of
whether they are corrected through distribution or
recharacterization. The Annual Addition for any Limitation Year
beginning before January 1, 1987, will not be recomputed to treat all
Employee contributions as Annual Additions.
(d) Annual Benefit
--------------
Annual Benefit means a benefit payable annually in the form of a
straight life annuity (with no ancillary benefits) under a plan to
which employees do not contribute and under which no rollover
contributions are made.
(e) Defined Benefit Compensation Limit
----------------------------------
The Defined Benefit Compensation Limit is equal to 100% of the
Participant's average Aggregate Compensation for the three
consecutive calendar years (or other twelve consecutive month periods
adopted by
7-6
<PAGE>
the Employer pursuant to a Written Resolution and applied on a
uniform and consistent basis) of service during which the Participant
had the greatest Aggregate Compensation.
Where the annual benefit is payable to a Participant in a form other
than a straight life annuity or a Qualified Joint and Survivor
Annuity, the Defined Benefit Compensation Limit will be the Actuarial
Equivalent of a straight life annuity beginning at the same age. No
adjustment is required for the following: pre-retirement disability
benefits, pre-retirement death benefits and post-retirement medical
benefits. For purposes of this paragraph, the interest rate used in
adjusting the Defined Benefit Compensation Limit will be the greater
of (1) 5%, or (2) the post-retirement interest rate specified in the
plan for Actuarial Equivalent purposes.
Where the annual benefit is payable to a Participant who has fewer
than 10 years of service with the Employer or any Related or
Predecessor Employer, the Defined Benefit Compensation Limit will be
multiplied by a fraction, the numerator of which is the Participant's
number of years of service with the Employer or Related or
Predecessor Employer, and the denominator of which is 10.
With regard to a Participant who has separated from service with a
nonforfeitable right to an Accrued Benefit, the Defined Benefit
Compensation Limit will be adjusted effective January 1 of each
Calendar year. For any Limitation Year beginning after the
separation occurs, the Defined Benefit Compensation Limit will be
equal to the Defined Benefit Compensation Limit which was applicable
to the Participant in the Limitation Year in which he separated from
service multiplied by a fraction, the numerator of which is the
Defined Benefit Dollar Limit for the Limitation Year in which the
Defined Benefit Compensation Limit is being adjusted and the
denominator of which is the Defined Benefit Dollar Limit for the
Limitation Year in which the Participant separated from service.
(f) Defined Benefit Dollar Limit
----------------------------
The Defined Benefit Dollar Limit is equal to $90,000 for calendar
years 1984 through 1987. As of January 1, 1988 and as of January 1
of each subsequent calendar year, the dollar limitation (described in
Code Section 415(b)(1)(A)) as determined by the Secretary of the
Treasury for that calendar year will become effective as the Defined
Benefit Dollar Limit
7-7
<PAGE>
for the calendar year. For calendar years between 1976 and 1983, the
Defined Benefit Dollar Limit is $75,000 as adjusted by the Secretary
of the Treasury under Code Section 415(d) for that calendar year.
The Defined Benefit Dollar limit for a calendar year applies to
Limitation Years ending with or within that calendar year.
Where the annual benefit is payable to a Participant in a form other
than a straight life annuity or a Qualified Joint and Survivor
Annuity, the Defined Benefit Dollar Limit will be the Actuarial
Equivalent of a straight life annuity beginning at the same age. No
adjustment is required for the following: pre-retirement disability
benefits, pre-retirement death benefits, and post-retirement medical
benefits. For purposes of this paragraph, the interest rate used for
adjusting the Defined Benefit Dollar Limit will be the greater of (1)
5%, or (2) the post-retirement interest rate specified for Actuarial
Equivalent purposes.
Where the annual benefit is payable to a Participant who has fewer
than 10 years of participation in the Plan, the Defined Benefit
Dollar Limit will be multiplied by a fraction, the numerator of which
is the participant's number of years (or part thereof) of
participation in the Plan, and the denominator of which is 10. To
the extent provided by the Secretary of the Treasury, this paragraph
will be applied to each change in the benefit structure of the Plan.
For a benefit commencing before a Participant's Social Security
Retirement Age but at or after age 62, the Defined Benefit Dollar
Limit will be adjusted in a manner which is consistent with the
reduction for old-age insurance benefits commencing before Social
Security Retirement Age under the Social Security Act. The reduction
will be 5/9 of 1% for each of the first 36 months and 5/12 of 1% for
each additional month (up to 24 months) by which benefits commence
before the month of the Participant's Social Security Retirement Age.
The Defined Benefit Dollar Limit for a benefit commencing before age
62 will be adjusted to the Actuarial Equivalent of the Defined
Benefit Dollar Limit for a benefit commencing at age 62 based on an
interest rate equal to the greater of (1) 5%, or (2) the interest
rate specified in the plan for determining actuarial equivalence for
early retirement.
7-8
<PAGE>
For a benefit commencing after a Participant's Social Security
Retirement Age, the Defined Benefit Dollar Limit will be adjusted to
the actuarial equivalent of the Defined Benefit Dollar Limit for a
benefit commencing at the Participant's Social Security Retirement
Age. For purposes of this paragraph, the interest rate used for
adjusting the Defined Benefit Dollar Limit will be the lesser of (1)
5%, or (2) the interest rate specified in the plan for determining
actuarial equivalence for early retirement.
(g) Defined Benefit Limit
---------------------
The Defined Benefit Limit is the lesser of the Defined Benefit Dollar
Limit or the Defined Benefit Compensation Limit.
(h) Defined Benefit Plan Fraction Denominator
-----------------------------------------
The Defined Benefit Plan Fraction Denominator with respect to any
Participant is the lesser of (1) the product of the Defined Benefit
Dollar Limit multiplied by 1.25, or (2) the product of the Defined
Benefit Compensation Limit multiplied by 1.4. However, for purposes
of determining the Defined Benefit Plan Fraction Denominator, "years
of service with the Employer or any Related or Predecessor Employer"
will be substituted for "years of participation in the Plan" wherever
it appears in Section 7.03(f).
(i) Defined Benefit Plan Fraction
-----------------------------
The Defined Benefit Plan Fraction is a fraction determined as of the
close of a Limitation Year, the numerator of which is the Projected
Annual Benefit payable to a Participant under this Plan and the
denominator of which is the Defined Benefit Fraction Denominator. If
a Participant has participated in more than one defined benefit plan
maintained by the Employer, the numerator of the Defined Benefit Plan
Fraction is the sum of the projected annual benefits payable to the
Participant under all of the defined benefit plans, whether or not
terminated.
(j) Defined Contribution Limit
--------------------------
The Defined Contribution Limit for a given Limitation Year is equal
to the lesser of (1) the Defined Contribution Compensation Limit,
which is 25% of Aggregate Compensation applicable to the Limitation
Year, or (2) the Defined Contribution Dollar Limit, which, for
calendar years after 1983, is the greater of $30,000 or one-fourth of
the Defined Benefit Dollar Limit for the Limitation Year, and for
calendar years between 1976 and 1983, is one-third of the Defined
Benefit Dollar Limit. If a short Limitation Year is
7-9
<PAGE>
created because of an amendment changing the Limitation Year to a
different 12 consecutive month period, the Defined Contribution
Dollar Limit is multiplied by a fraction, the numerator of which is
equal to the number of months in the short Limitation Year and the
denominator of which is 12.
(k) Defined Contribution Plan Fraction
----------------------------------
The Defined Contribution Plan Fraction is a fraction determined as of
the close of a Limitation Year, the numerator of which is the sum of
the Annual Additions to the Participant's Accounts under all defined
contribution plans of the Employer for the current and all prior
Limitation Years and the denominator of which is the sum of the
Annual Additions which would have been made for the Participant for
the current and all prior Limitation Years (for all prior years of
service with the Employer or any predecessor Employer) if in each
Limitation Year the Annual Additions equaled the lesser of (1) the
product of the Defined Contribution Compensation Limit for the
Limitation Year multiplied by 1.4, or (2) the product of the Defined
Contribution Dollar Limit for the Limitation Year multiplied by 1.25.
The aggregate amount in the numerator of this fraction due to years
beginning before January 1, 1976 may not exceed the aggregate amount
in the denominator of this fraction for all such years.
For purposes of this Section 7.03(k), the Annual Addition for any
Limitation Year beginning before January 1, 1987 will not be
recomputed to treat all Employee contributions as Annual Additions.
(l) Employer
--------
The Employer is the Employer that adopts this Plan together with all
Related Employers. For this purpose, the definition of Related
Employer in Section 1.33 of this Plan is modified by Code Section
415(h).
(m) Limitation Year
---------------
The Limitation Year will be the 12 consecutive month period which is
specified in Section 1.30 of this Plan and which is adopted for all
qualified plans maintained by the Employer pursuant to a Written
Resolution adopted by the Employer. In the event of a change in the
Limitation Year, the additional limitations of Treasury Regulation
Section 1.415-2(b)(4)(iii) will also apply.
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<PAGE>
(n) Projected Annual Benefit
------------------------
For purposes of this Section, a Participant's Projected Annual
Benefit is equal to the annual benefit to which a Participant in a
defined benefit Plan would be entitled under the terms of the plan
based on the following assumptions:
.The Participant will continue employment until reaching normal
retirement age as determined under the terms of the plan (or
current age, if that is later);
. The Participant's compensation for the Limitation Year under
consideration will remain the same for all future years;
. All other relevant factors used to determine benefits under the
plan for the Limitation Year under consideration will remain
constant for all future Limitation Years; and
. The benefits resulting from any Participant Contributions or
Rollover Contributions are disregarded.
(o) Social Security Retirement Age
------------------------------
Social Security Retirement Age means age 65 for a Participant born
before January 1, 1938; age 66 for a Participant born after December
31, 1937, but before January 1, 1955; and age 67 for a Participant
born after December 31, 1954.
7.04 Effect of Top-Heavy Status
--------------------------
(a) General
-------
Notwithstanding the provisions of Section 7.03, "1.0" will be
substituted for "1.25" wherever it appears in Sections 7.03(h) and
7.03(k) for any Limitation Year in which the Plan is found to be Top-
Heavy for the Plan Year which coincides with or ends within such
Limitation Year.
(b) Non-application
---------------
Section 7.04(a) will not apply for any Limitation Year in which, for
the Plan Year which coincides with or ends within such Limitation
Year, (1) the Plan is not determined to be Super Top-Heavy and (2)
for any Non-Key Employee who is a Participant in both this Plan and a
defined benefit plan maintained by the Employer or a Related
Employer, the annual allocation of Employer contributions plus
Forfeitures under this
7-11
<PAGE>
Plan is not less than 7.5% of the Non-Key Employee's Aggregate
Compensation.
7-12
<PAGE>
ARTICLE 8
MISCELLANEOUS
8.01 Employment Rights of Parties Not Restricted
-------------------------------------------
The adoption and maintenance of this Plan will not be deemed a contract
between the Employer and any Employee. Nothing in this Plan will give any
Employee or Participant the right to be retained in the employ of the
Employer or to interfere with the right of the Employer to discharge any
Employee or Participant at any time, nor will it give the Employer the
right to require any Employee or Participant to remain in its employ, or
to interfere with any Employee's or Participant's right to terminate his
employment at any time.
8.02 Alienation
----------
(a) General
-------
No person entitled to any benefit under this Plan will have any right
to sell, assign, transfer, hypothecate, encumber, commute, pledge,
anticipate or otherwise dispose of his interest in the benefit, and
any attempt to do so will be void. No benefit under this Plan will
be subject to any legal process, levy, execution, attachment or
garnishment for the payment of any claim against such person.
(b) Exceptions
----------
Section 8.02(a) will not apply to the extent a Participant or
Beneficiary is indebted to the Plan under the provisions of the Plan.
At the time a distribution is to be made to or for a Participant's or
Beneficiary's benefit, the portion of the amount distributed which
equals the indebtedness will be withheld by the Trustee to apply
against or discharge the indebtedness. Before making a payment,
however, the Participant or Beneficiary must be given written notice
by the Plan Administrator that the indebtedness is to be so paid in
whole or part from his Participant's Accrued Benefit. If the
Participant or Beneficiary does not agree that the indebtedness is a
valid claim against his Vested Accrued Benefit, he will be entitled
to a review of the validity of the claim in accordance with
procedures established by the Plan Administrator.
Section 8.02(a) will not apply to a qualified domestic relations
order (QDRO) as defined in Code Section 414(p), and those other
domestic relations orders permitted to be so treated by the Plan
Administrator under the provisions of the Retirement Equity Act of
8-1
<PAGE>
1984. The Plan Administrator will establish a written procedure to
determine the qualified status of domestic relations orders and to
administer distributions under such qualified orders. Further, to
the extent provided under a QDRO, a former spouse of a Participant
will be treated as the spouse or Surviving Spouse for all purposes
under the Plan. Where, however, because of a QDRO, more than one
individual is to be treated as a Surviving Spouse, the total amount
to be paid in the form of a Qualified Survivor Annuity or the
survivor portion of a Qualified Joint and Survivor Annuity may not
exceed the amount that would be paid if there were only one Surviving
Spouse. All rights and benefits, including elections, provided to a
Participant under this Plan will be subject to the rights afforded to
any alternate payee as such term is defined in Code Section 414(p).
8.03 Qualification of Plan
---------------------
The Employer will have the sole responsibility for obtaining and retaining
qualification of the Plan under the Code with respect to the Employer's
individual circumstances.
8.04 Construction
------------
To the extent not pre-empted by ERISA, this Plan will be construed
according to the laws of the state of Louisiana. Words used in the
singular will include the plural, the masculine gender will include the
feminine, and vice versa, whenever appropriate.
8.05 Named Fiduciaries
-----------------
(a) Allocation of Functions
-----------------------
The authority to control and manage the operation and administration
of the Plan and Trust created by this instrument will be allocated by
the Employer and the Plan Administrator. The Employer is the Named
Fiduciary with respect to the Plan and Trust as provided for by
Section 402(a)(2) of ERISA. The Employer reserves the right to
allocate the various responsibilities for the present execution of
the functions of the Plan, other than the Trustees' responsibilities.
Any person or group of persons may serve in more than one fiduciary
capacity with regard to the Plan.
(b) Responsibilities of the Employer
--------------------------------
The Employer, in its capacity as a Named Fiduciary, will have only
the following authority and responsibility:
8-2
<PAGE>
. To appoint or remove the Plan Administrator and furnish the
Trustee with certified copies of any resolutions of the
Employer with regard thereto;
. To appoint and remove the Trustee;
. To appoint a successor Trustee or additional Trustees;
. To communicate information to the Plan Administrator and the
Trustee as needed for the proper performance of the duties of
each;
. To appoint an investment manager (or to refrain from such
appointment), to monitor the performance of the investment
manager so appointed, and to terminate such appointment (more
than one investment manager may be appointed and in office at any
time); and
. To establish and communicate to the Trustee a funding policy for
the Plan.
(c) Limitation on Obligations of Named Fiduciaries
----------------------------------------------
No Named Fiduciary will have authority or responsibility to deal with
matters other than as delegated to it under this Plan or by operation
of law. A Named Fiduciary will not in any event be liable for breach
of fiduciary responsibility or obligation by another fiduciary
(including Named Fiduciaries) if the responsibility or authority of
the act or omission deemed to be a breach was not within the scope of
the Named Fiduciary's authority or delegated responsibility.
(d) Standard of Care and Skill
--------------------------
The duties of each fiduciary will be performed with the care, skill,
prudence and diligence under the circumstances then prevailing that a
prudent person acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of like character
and with like objectives.
8.06 Status of Insurer
-----------------
The term Insurer refers to any legal reserve life insurance company
licensed to do business in the state within which the Employer maintains
its principal office. The Insurer will file such returns, keep such
records, make such reports and supply such information as required by
applicable law or regulation. The Insurer will not be required to take
any action contrary to the provisions of
8-3
<PAGE>
its policies or contracts, nor will the Insurer be liable or responsible
for the legal effects of any provision of the Plan. Payment in accordance
with the terms and conditions of its Policies and Contracts will fully
discharge the liability of the Insurer thereunder.
8.07 Adoption and Withdrawal by Other Organizations
----------------------------------------------
(a) Procedure for Adoption
----------------------
Subject to the provisions of this Section 8.07, any organization now
in existence or hereafter formed or acquired, which is not already a
Participating Employer under this Plan and which is otherwise legally
eligible may, in the future, with the consent and approval of the
Employer, by formal Written Resolution (referred to in this Section
as an Adoption Resolution), adopt the Plan and Trust hereby created
for all or any classification of persons in its employment and
thereby, from and after the specified effective date, become a
Participating Employer under this Plan. Such consent will be
effected by and evidenced by a formal designation Written Resolution
of the Employer. The Adoption Resolution may contain such specific
changes and variations in Plan terms and provisions applicable to the
adopting Participating Employer and its Employees as may be
acceptable to the Employer and the Trustee. However, the sole,
exclusive right of any other amendment of whatever kind or extent to
the Plan is reserved to the Employer. The Adoption Resolution will
become, as to the adopting organization and its Employees, a part of
this Plan as then amended or thereafter amended. It will not be
necessary for the adopting organization to sign or execute the
original or then amended Plan and Trust Agreement or any future
amendment to the Plan and Trust Agreement. The effective date of the
Plan for the adopting organization will be that stated in the
Adoption Resolution and from and after such effective date the
adopting organization will assume all the rights, obligations and
liabilities as a Participating Employer under this Plan. The
administrative powers of and control by the Employer as provided in
the Plan, including the sole right of amendment and of appointment
and removal of the Plan Administrator and the Trustee, will not be
diminished by reason of the participation of the adopting
organization in the Plan.
(b) Withdrawal
----------
Any Participating Employer may withdraw from the Plan at any time,
without affecting the Employer or other Participating Employers not
withdrawing, by complying
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with the provisions of the Plan. A withdrawing Participating
Employer may arrange for the continuation by itself or its successor
of this Plan in separate forms for its own employees, with such
amendments, if any, as it may deem proper, and may arrange for
continuation of the Plan by merger with an existing plan and transfer
of plan assets. The Employer may, it its absolute discretion,
terminate a Participating Employer's participation at any time when
in its judgment the Participating Employer fails or refuses to
discharge its obligations under the Plan.
(c) Adoption Contingent Upon Initial and Continued Qualifications
--------------------------------------------------------------
The adoption of this Plan by an organization as provided is hereby
made contingent and subject to the condition precedent that said
adopting organization meets all the statutory requirements for
qualified plans, including, but not limited to, Sections 401(a) and
501(a) of the Internal Revenue Code for its Employees. If the Plan
or the Trust, in its operation, becomes disqualified, for any reason,
as to the adopting organization and its Employees, the portion of the
Plan assets allocable to them will be segregated as soon as is
administratively feasible, pending either the prompt (1)
requalification of the Plan as to the organization and its employees
to the satisfaction of the Internal Revenue Service so as not to
affect the continued qualified status thereof as to other Employers,
(2) withdrawal of the organization from this Plan and a continuation
by itself or its successor of its plan separately from this Plan, or
by merger with another existing plan, with a transfer of its said
segregated portion of Plan assets, or (3) termination of the Plan as
to itself and its Employees.
8.08 Employee Contributions
----------------------
Employer contributions made to the Plan and Trust are made and will be
held for the sole purpose of providing benefits to Participants and their
Beneficiaries.
In no event will any contribution made by the Employer to the Plan and
Trust or income therefrom revert to the Employer except as provided in
Section 7.01(e) or as provided below.
(a) Any contribution made to the Plan and Trust by the Employer because
of a mistake of fact may be returned to the Employer within one year
of such contribution.
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(b) Notwithstanding any other provision of the Plan and Trust, if the
Internal Revenue Service determines initially that the Plan, as
adopted by the Employer, does not qualify under applicable sections
of the Code and applicable Treasury Department Regulations, and the
Employer does not wish to amend this Plan and Trust so that it does
qualify, the value of all assets will be distributed by the Trustee
to the Employer within one year after the date such initial
qualification is denied. Thereafter, the Employer's participation in
this Plan and Trust will be considered rescinded and of no force or
effect.
(c) Any contribution made by the Employer will be conditioned on the
deductibility of such contribution and may be refunded to the
Employer, to the extent the contribution is determined not to be
deductible, within one year after such determination is made.
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<PAGE>
ARTICLE 9
ADMINISTRATION
9.01 Plan Administrator
------------------
The Plan Administrator will have the responsibility for the general
supervision and administration of the Plan and will be a fiduciary of the
Plan. The Employer may, by Written Resolution, appoint one or more
individuals to serve as Plan Administrator. If the Employer does not
appoint an individual or individuals as Plan Administrator, the Employer
will function as Plan Administrator. The Employer may at any time, with
or without cause, remove an individual as Plan Administrator or substitute
another individual therefor.
9.02 Powers and Duties of the Plan Administrator
-------------------------------------------
The Plan Administrator will be charged with and will have delegated to it
the power, duty, authority and discretion to interpret and construe the
provisions of this Plan, to determine its meaning and intent and to make
application thereof to the facts of any individual case; to determine in
its discretion the rights and benefits of Participants or the eligibility
of Employees; to give necessary instructions and directions to the Trustee
and the Insurer as herein provided or as may be requested by the Trustee
and the Insurer from time to time; and to generally direct the
administration of the Plan according to its terms. All decisions of the
Plan Administrator in matters properly coming before it according to the
terms of this Plan, and all actions taken by the Plan Administrator in the
proper exercise of its administrative powers, duties and responsibilities,
will be final and binding upon all Employees, Participants and
Beneficiaries and upon any person having or claiming any rights or
interest in this Plan. The Employer and the Plan Administrator will make
and receive any reports and information, and retain any records necessary
or appropriate to the administration of this Plan or to the performance of
duties hereunder or to satisfy any requirements imposed by law. In the
performance of its duties, the Plan Administrator will be entitled to rely
on information duly furnished by any Employee, Participant or Beneficiary
or by the Employer or Trustee.
9.03 Actions of the Plan Administrator
---------------------------------
The Plan Administrator may adopt such rules as it deems necessary,
desirable or appropriate with respect to the conduct of its affairs and
the administration of the Plan. Whenever any action to be taken in
accordance with the terms of the Plan requires the consent or approval of
the Plan Administrator, or whenever an interpretation is to be
9-1
<PAGE>
made of the terms of the Plan, the Plan Administrator will act in a
uniform and non-discriminatory manner, treating all Employees and
Participants in similar circumstances in a like manner. If the Plan
Administrator is a group of individuals, all of its decisions will be made
by a majority vote. The Plan Administrator will have the authority to
employ one or more persons to render advice or services with regard to the
responsibilities of the Plan Administrator, including but not limited to
attorneys, actuaries, and accountants. Any persons employed to render
advice or services will have no fiduciary responsibility for any
ministerial functions performed with respect to this Plan.
9.04 Reliance on Plan Administrator and Employer
-------------------------------------------
Until the Employer gives notice to the contrary, the Trustee and any
persons employed to render advice or services will be entitled to rely on
the designation of Plan Administrator that has been furnished to them. In
addition, the Trustee and any persons employed to render advice or
services will be fully protected in acting upon the written directions and
instructions of the Plan Administrator made in accordance with the terms
of this Plan. If the Plan Administrator is a group of individuals, unless
otherwise specified, any one of such individuals will be authorized to
sign documents on behalf of the Plan Administrator and such authorized
signatures will be recognized by all persons dealing with the Plan
Administrator. The Trustee and any persons employed to render advice or
services may take cognizance of any rules established by the Plan
Administrator and rely upon them until notified to the contrary. The
Trustee and any persons employed to render advice or services will be
fully protected in taking any action upon any paper or document believed
to be genuine and to have been properly signed and presented by the Plan
Administrator, Employer or any agent of the Plan Administrator acting on
behalf of the Plan Administrator.
9.05 Reports to Participants
-----------------------
The Plan Administrator will report in writing to a Participant his Accrued
Benefit under the Plan and the Vested Percentage of such benefit when the
Participant terminates his employment or requests such a report in writing
from the Plan Administrator. To the extent required by law or regulation,
the Plan Administrator will annually furnish to each Participant, and to
each Beneficiary receiving benefits, a report which fairly summarizes the
Plan's most recent report.
9-2
<PAGE>
9.06 Bond
----
The Plan Administrator and other fiduciaries of the Plan will be bonded to
the extent required by ERISA or other applicable law. No additional bond
or other security for the faithful performance of any duties under this
Plan will be required.
9.07 Compensation of Plan Administrator
----------------------------------
The Compensation of the Plan Administrator will be left to the discretion
of the Employer; no person who is receiving full pay from the Employer
will receive compensation for services as Plan Administrator. All
reasonable and necessary expenses incurred by the Plan Administrator in
supervising and administering the Plan will be paid from the Plan assets
by the Trustee at the direction of the Plan Administrator to the extent
not paid by the Employer.
9.08 Claims Procedure
----------------
The Plan Administrator will make all determinations as to the rights of
any Employee, Participant, Beneficiary or other person under the terms of
this Plan. Any Employee, Participant or Beneficiary, or person claiming
under them, may make claim for benefit under this Plan by filing written
notice with the Plan Administrator setting forth the substance of the
claim. If a claim is wholly or partially denied, the claimant will have
the opportunity to appeal the denial upon filing with the Plan
Administrator a written request for review within 60 days after receipt of
notice of denial. In making an appeal the claimant may examine pertinent
Plan documents and may submit issues and comments in writing. Denial of a
claim or a decision on review will be made in writing by the Plan
Administrator delivered to the claimant within 60 days after receipt of
the claim or request for review, unless special circumstances require an
extension of time for processing the claim or review, in which event the
Plan Administrator's decision must be made as soon as possible thereafter
but not beyond an additional 60 days. If no action on an initial claim is
taken within 120 days, the claims will be deemed denied for purposes of
permitting the claimant to proceed to the review stage. The denial of a
claim or the decision on review will specify the reasons for the denial or
decision and will make reference to the pertinent Plan provisions upon
which the denial or decision is based. The denial of a claim will also
include a description of any additional material or information necessary
for the claimant to perfect the claim and an explanation of the claim
review procedure herein described. The Plan Administrator will serve as
an agent for service of legal process with respect to the Plan unless the
Employer, through written resolution, appoints another agent.
9-3
<PAGE>
If a Participant or Beneficiary is entitled to a distribution from the
Plan, the Participant or Beneficiary will be responsible for providing the
Plan Administrator with his current address. If the Plan Administrator
notifies the Participant or Beneficiary by registered mail (return receipt
requested) at his last known address that he is entitled to a distribution
and also notifies him of the provisions of this paragraph, and the
Participant or Beneficiary fails to claim his benefits under the Plan or
provide his current address to the Plan Administrator within one year
after such notification, the distributable amount will be forfeited and
used to reduce the cost of the Plan. If the Participant or Beneficiary is
subsequently located, such benefit will be restored.
9.09 Liability of Fiduciaries
------------------------
The Plan Administrator or the Employer may purchase insurance to provide
indemnification for the Plan Administrator, the Employer and any Employees
against liability or losses occurring by reason of act or omission in
their capacity as fiduciaries or agents for the Plan. Except for a breach
of fiduciary responsibility due to gross negligence or willful misconduct,
the Plan Administrator will not incur any individual liability for any
decision, act, or failure to act hereunder. The Plan Administrator may
engage agents to assist it and may engage legal counsel who may be counsel
for the Employer. The Plan Administrator will not be responsible for any
action taken or omitted to be taken on the advice of counsel.
If there is more than one person serving as a fiduciary in any capacity
(for example, Co-Trustees), each will use reasonable care to prevent the
other or others from committing a breach of this Plan. Nothing contained
in this Section will preclude any agreement allocating specific
responsibilities or obligations among the co-fiduciaries provided that the
agreement does not violate any of the terms and provisions of this Plan.
In those instances where any duties have been allocated between co-
fiduciaries, a fiduciary will not be liable for any loss resulting to the
Plan arising from any act or omission on the part of another co-fiduciary
to whom responsibilities or obligations have been allocated except under
the following circumstances:
. If he participates knowingly in, or knowingly undertakes to conceal,
an act or omission of a co-fiduciary knowing the act or omission is a
breach; or
9-4
<PAGE>
. If by his failure to comply with his specific responsibilities which
give rise to his status as a fiduciary, he has enabled the other
fiduciary to commit a breach; or
. If he has a knowledge of a breach by a co-fiduciary, unless he makes
reasonable efforts under the circumstances to remedy the breach.
9.10 Expenses of Administration
--------------------------
The Employer does not and will not guarantee the Plan assets against loss.
The Employer may in its sole discretion, but will not be obligated to, pay
the ordinary expenses of establishing the Plan, including the fees of
consultants, accountants and attorneys in connection therewith. The
Employer may, in its sole discretion (but will not be obligated to), pay
other costs and expenses of administering the Plan, the taxes imposed upon
the Plan, if any, and the fees, charges or commissions with respect to the
purchase and sale of Plan assets. Unless paid by the Employer, such costs
and expenses, taxes (if any), and fees, charges and commissions will be a
charge upon Plan assets and deducted by the Trustee.
9.11 Distribution Authority
----------------------
If any person entitled to receive payment under this Plan is a minor,
declared incompetent or is under other legal disability, the Plan
Administrator may, in its sole discretion, direct the Trustee to:
. Distribute directly to the person entitled to the payment;
. Distribute to the legal guardian or, if none, to a parent of the
person entitled to payment or to a responsible adult with whom the
person entitled to payment maintains his residence;
. Distribute to a custodian for the person entitled to payment under
the Uniform Gifts to Minors Act if permitted by the laws of the state
in which the person entitled to payment resides; or
. Withhold distribution of the amount payable until a court of
competent jurisdiction determines the rights of the parties thereto
or appoints a guardian of the estate of the person entitled to
payment.
If there is any dispute, controversy or disagreement between any
Beneficiary or person and any other person as to who is entitled to
receive the benefits payable under this Plan, or if the Plan Administrator
is uncertain as to
9-5
<PAGE>
who is entitled to receive benefits, or if the Plan Administrator is
unable to locate the person who is entitled to benefits, the Plan
Administrator may with acquittance interplead the funds into a court of
competent jurisdiction in the judicial district in which the Employer
maintains its principal place of business and, upon depositing the funds
with the clerk of the court, be released from any further responsibility
for the payment of the benefits. If it is necessary for the Plan
Administrator to retain legal counsel or incur any expense in determining
who is entitled to receive the benefits, whether or not it is necessary to
institute court action, the Plan Administrator will be entitled to
reimbursement from the benefits for the amount of its reasonable costs,
expenses and attorneys' fees incurred.
9-6
<PAGE>
ARTICLE 10
AMENDMENT OR TERMINATION OF PLAN
10.01 Right of Employer to Amend or Terminate
---------------------------------------
The Employer reserves the right to alter, amend, revoke or terminate this
Plan. No amendment will deprive any Participant or Beneficiary of any
vested right nor will it reduce the present value (determined upon an
actuarial equivalent basis) of any Accrued Benefit to which he is then
entitled with respect to Employer contributions previously made, except
as may be required to maintain the Plan as a qualified plan under the
Code. No amendment will change the duties or responsibilities of the
Trustee without its express written consent thereto.
A plan amendment which has the effect of (a) eliminating or reducing an
early retirement benefit or a retirement-type subsidy, or (b) eliminating
an option benefit form, will, with respect to benefits attributable to
service before the amendment be treated as reducing Accrued Benefits. In
the case of a retirement-type subsidy, the preceding sentence will apply
only with respect to a Participant who satisfies (either before or after
the amendment) the preamendment conditions for the subsidy. In general,
a retirement-type subsidy is a subsidy that continues after retirement
but does not include a disability retirement benefit, a medical benefit,
a social security supplement, a pre-retirement death benefit, or a plan
shutdown benefit (that does not continue after retirement).
A minimum Accrued Benefit value will apply if this Plan is or becomes a
successor to a profit sharing plan, a defined contribution pension plan,
a target benefit plan, or a defined benefit pension plan which was fully
insured, or any plan under which the accrued benefit of a Participant was
determined as a lump sum or account balance. The actuarial equivalent
value of a Participant's Accrued Benefit will not be less than the
actuarial equivalent value of his Accrued Benefit on the Effective Date
of the Plan.
10.02 Allocation of Assets Upon Termination of Plan
---------------------------------------------
If this Plan is revoked or terminated (in whole or in part) or if
contributions are completely discontinued the Accounts of all affected
Participants will become non-forfeitable. The Employer will then arrange
for allocation of all assets among Participants so affected by the total
or partial termination in accordance with the requirements of all
applicable law and the regulations and requirements of the Internal
Revenue Service. All
10-1
<PAGE>
allocated amounts will be retained in the Plan to the credit of the
individual Participants until distribution as directed by the Employer.
Distribution to Participants may be in the form of cash or other Plan
assets or partly in each.
10.03 Exclusive Benefit
-----------------
At no time will any part of the principal or income of the Plan assets be
used or diverted for purposes other than the exclusive benefit of
Participants in the Plan and their Beneficiaries, nor may any portion of
the Plan assets revert to the Employer except as provided in Sections
7.01(e) and 8.08.
10.04 Failure to Qualify
------------------
Notwithstanding any of the foregoing provisions, if this Plan, upon
adoption by the Employer, is submitted to the Internal Revenue Service
which then determines that the Plan as initially adopted by the Employer
is not a qualified plan under the Code, the Employer may elect to
terminate this Plan by giving written notice thereof. Such termination
will have the same effect as if the Plan were never adopted, all policies
and contracts will be cancelled, and all contributions, to the extent
recoverable from the Trustee, will be returned to their source. If any
amendment to this Plan is submitted to the Internal Revenue Service
within the period allowed under Code Section 401(b) which then determines
that the Plan as amended is not a qualified plan under the Code, the
Employer may cancel or modify any or all provisions of the amendment
retroactive to the effective date of the amendment in order to maintain
the qualified status of the Plan, whereupon written notice thereof will
be furnished to all affected Employees, Participants and Beneficiaries.
10.05 Mergers, Consolidations or Transfers of Plan Assets
---------------------------------------------------
In the event this Plan is merged or consolidated with another plan which
is qualified under Code Sections 401(a) (and 501(a) if applicable), or in
the event of a transfer of the assets or liabilities of this Plan to
another plan which is qualified under Code Sections 401(a) (and 501(a) if
applicable), the benefit which each Participant would be entitled to
receive under the successor plan or other plan if it were terminated
immediately after the merger, consolidation or transfer will be equal to
or greater than the benefit which the Participant would have received
immediately before the merger, consolidation or transfer if this Plan had
then terminated.
Any transfer of assets and/or liabilities to (or from) this Plan from (or
to) another plan qualified under Code Sections 401(a) (and 501(a) if
applicable) will be
10-2
<PAGE>
evidenced by a Written Resolution by the Plan Sponsor of each affected
plan which specifically authorizes such transfer of assets and/or
liabilities.
Any transfer of assets to this Plan will be allowed under the provisions
of this Section if such transferred assets are not required to be paid in
the form of a qualified joint & survivor annuity or a qualified survivor
annuity in accordance with Code Section 401(a)(11).
10.06 Effect of Plan Amendment on Vesting Schedule
--------------------------------------------
No amendment to the Vesting Schedule will deprive a Participant of his
nonforfeitable right to his Vested Accrued Benefit as of the date of the
amendment. Further, if the Vesting Schedule of the Plan is amended, or
if the Plan is amended in any way that directly or indirectly affects the
computation of a Participant's non-forfeitable percentage, each
Participant with at least 3 Years of Service as of the last day of the
election period described below may elect, within a reasonable period
after the adoption of the amendment, to have his Vested Percentage
computed under the Plan without regard to such amendment. The period
during which such election may be made will commence with the date the
amendment is adopted and will end 60 days after the latest of:
(a) the date the amendment is adopted;
(b) the date the amendment becomes effective; or
(c) the date the Participant is issued written notice of the amendment
by the Employer.
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<PAGE>
ARTICLE 11
TRUSTEE AND TRUST FUND
11.01 Acceptance of Trust
-------------------
The Trustee, by signing this Agreement, accepts this Trust and agrees to
perform the duties of the Trustee in accordance with the terms and
conditions set forth herein.
11.02 Trust Fund
----------
(a) Purpose and Nature
------------------
This Plan is specifically designed to invest the Employer Matching
Contribution in employer securities. The Employer and the Trustee
will establish and maintain a Trust Fund for purposes of providing a
means of accumulating the assets necessary to provide the benefits
which become payable under the Plan. The Trustee will receive, hold
and invest all contributions made by the Employer and the
Participants, including the investment earnings thereon. The Trust
Fund arising from such contributions and earnings will consist of
all assets held by the Trustee under the Plan and Trust. All
benefits payable under the Plan will be paid by the Trustee from the
Trust Fund.
Any person having any claim under the Plan will look solely to the
assets of the Trust Fund for satisfaction. In no event will the
Plan Administrator, the Employer, any Employees, any director or
officer of the Employer or any agents of the Employer or the Plan
Administrator be liable in their individual capacities to any person
whomsoever, under the provisions of this Plan and Trust, except as
provided by law.
The Trust Fund will be used and applied only in accordance with the
provisions of the Plan and Trust, to provide the benefits thereof,
and no part of the corpus or income of the Trust Fund will be used
for, or diverted to, purposes other than for the exclusive benefit
of the Participants or their Beneficiaries entitled to benefits
under the Plan, except to the extent specifically provided elsewhere
herein.
(b) Investments
-----------
The Trustee will invest the Trust Fund in accordance with the
investment policy for the Trust Fund considering the fiduciary
requirements of law, the objectives of the Plan, and the liquidity
needs of the Plan. Any other provisions of the Plan which may
11-1
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conflict with the requirement to invest Employer Matching
Contributions in employer securities will be governed by the
requirement to invest Employer Matching Contributions in employer
securities.
(c) Investment Policy
-----------------
The Employer (or the Plan Administrator) will have the right to
periodically provide the Trustee with a written investment policy
which, in consideration of the needs of the Plan, sets forth the
investment objectives, policies, and guidelines which the Employer
judges to be appropriate and prudent.
If a written investment policy is not so provided, then the Trustee
will set forth the investment policy for the Plan. In doing so, the
Trustee may consult with the Employer (or the Plan Administrator) to
secure information with regard to Employer investment objectives and
general investment policy.
(d) Operation of Trust Fund
-----------------------
The Trust Fund will be maintained in accordance with the accounting
requirements of the Plan. No Participant will have any right to any
specific asset or any specific portion of the Trust Fund prior to
distribution of benefits. Withdrawals from the Trust Fund will be
made to provide benefits to Participants and Beneficiaries in the
amounts specified by the Plan, and to pay expenses authorized by the
Plan Administrator.
(e) Employer Direction of Investment
--------------------------------
The Employer will have the right to direct the Trustee with respect
to the investment and reinvestment of assets comprising the Trust
Fund. The Trustee and the Employer (or the Plan Administrator) will
execute a letter of agreement as a part of this Plan containing such
conditions, limitations and other provisions they deem appropriate
before the Trustee will follow any Employer direction with respect
to the investment or reinvestment of any part of the Trust Fund.
11.03 Receipt of Contributions
------------------------
The Trustee will be accountable to the Employer for the funds contributed
to it, but will have no duty to see that the contributions received
comply with the provisions of the Plan. The Trustee will not be
obligated to collect any contributions from the Employer or the
Participants.
11-2
<PAGE>
11.04 Powers of the Trustee
---------------------
Subject to the provisions and limitations contained elsewhere in this
Plan, the Trustee will have full discretion and authority with regard to
the investment of the Trust Fund; however, the Trustee will, to the
extent practical, invest 100% of the amounts represented by Company
Matching Accounts in Employer Stock.
The Trustee will coordinate its investment policy with Plan financial
needs as communicated to it by the Plan Administrator. The Trustee is
authorized and empowered, but not by way of limitation, with the
following powers, rights and duties:
(a) To invest any part or all of the Trust Fund in any common or
preferred stocks, open-end or closed-end mutual funds, United States
retirement plan bonds, corporate bonds, debentures, convertible
debentures, commercial paper, U.S. Treasury bills, book entry
deposits with the United States Federal Reserve Bank or System,
Master Notes or similar arrangements sponsored by the Trustee or any
other financial institution as permitted by law, improved or
unimproved real estate situated in the United States, mortgages,
notes or other property of any kind, real or personal, as a prudent
man would so invest under like circumstances with due regard for the
purposes of this Plan. Any investment made or retained by the
Trustee in good faith will be proper but must be of a kind
constituting a diversification considered by law suitable for trust
investments;
(b) To maintain any part of the assets of the Trust Fund in cash, or in
demand or short-term time deposits bearing a reasonable rate of
interest (including demand or short-term time deposits of or with
the Trustee), or in a short-term investment fund or in other cash
equivalents having ready marketability, including, but not limited
to, U.S. Treasury Bills, commercial paper, certificates of deposit
(including such certificates of deposit of or with the Trustee), and
similar types of short-term securities, as may be deemed necessary
by the Trustee in its sole discretion;
(c) To manage, sell, contract to sell, grant options to purchase,
convey, exchange, transfer, abandon, improve. repair, insure, lease
for any term even though commencing in the future or extending
beyond the term of the Trust, and otherwise deal with all property,
real or personal, in such manner, for such
11-3
<PAGE>
considerations and on such terms and conditions as the Trustee will
decide;
(d) To credit and distribute the Trust as directed by the Plan
Administrator or any agent of the Plan Administrator. The Trustee
will not be obliged to inquire as to whether any payee or
distributee is entitled to any payment or whether the distribution
is proper or within the terms of the Plan, or as to the manner of
making any payment or distribution. The Trustee will be accountable
only to the Plan Administrator for any payment or distribution made
by it in good faith on the order or direction of the Plan
Administrator or any agent of the Plan Administrator;
(e) To borrow money, assume indebtedness, extend mortgages and encumber
by mortgage or pledge;
(f) To compromise, contest, arbitrate, or abandon claims and demands, in
its discretion;
(g) To have with respect to the Trust all of the rights of an individual
owner, including the power to give proxies, to participate in any
voting trusts, mergers, consolidations or liquidations, and to
exercise or sell stock subscriptions or conversion rights;
(h) To hold any securities or other property in the name of the Trustee
or its nominee, or in another form as it may deem best, with or
without disclosing the trust relationship;
(i) To perform any and all other acts in its judgment necessary or
appropriate for the proper and advantageous management, investment
and distribution of the Trust;
(j) To retain any funds or property subject to any dispute without
liability for the payment of interest, and to decline to make
payment or delivery of the funds or property until final
adjudication is made by a court of competent jurisdiction;
(k) To file all tax forms or returns required of the Trustee;
(l) To begin, maintain or defend any litigation necessary in connection
with the administration of the Plan, except that the Trustee will
not be obligated to or
11-4
<PAGE>
required to do so unless indemnified to its satisfaction; and
(m) To keep any or all of the Trust property at any place or places
within the United States or abroad, or with a depository or
custodian at such place or places; provided, however, that the
Trustee may not maintain the indicia of ownership of any assets of
the Plan outside the jurisdiction of the District Courts of the
United States, except as may be expressly authorized in U.S.
Treasury or U.S. Department of Labor regulations.
11.05 Investment in Common or Collective Trust Funds
----------------------------------------------
Notwithstanding the provisions of Section 11.04, the Employer
specifically authorizes the Trustee to invest all or any portion of the
assets comprising the Trust Fund in any common or collective trust fund
which at the time of the investment provides for the pooling of the
assets of plans qualified under Code Section 401(a). The authorization
applies only if such common or collective trust fund: (a) is exempt from
taxation under Code Section 584 or 501(a); (b) if exempt under Code
Section 501(a), expressly limits participation to pension and profit
sharing trusts which are exempt under Code Section 501(a) by reason of
qualifying under Code Section 401(a); (c) prohibits that part of its
corpus or income which equitably belongs to any participating trust from
being used for or diverted to any purposes other than for the exclusive
benefit of the Employees or their Beneficiaries who are entitled to
benefits under such participating trust; (d) prohibits assignment by
participating trust of any part of its equity or interest in the group
trust; and (e) the sponsor of the group trust created or organized the
group trust in the United States and maintains the group trust at all
times as a domestic trust in the United States. The provisions of the
common or collective trust fund agreement, as amended by the Trustee from
time to time, are by this reference incorporated within this Plan and
Trust. The provisions of the common or collective trust fund will govern
any investment of Plan assets in that fund. This provision constitutes
the express permission required by Section 408(b)(8) of ERISA.
11.06 Investment in Insurance Company Contracts
-----------------------------------------
The Trustee may invest any portion of the Trust Fund in a deposit
administration, guaranteed investment or similar type of investment
contract (hereinafter referred to as Contract); provided, however, that
no such Contract may provide for an optional form of benefit which would
not be provided for under the provisions hereof. The Trustee
11-5
<PAGE>
will be the complete and absolute owner of Contracts held in the Trust
Fund.
The Trustee may convert from one form to another any Contract held in the
Trust Fund; designate any mode of settlement; sell or assign any Contract
held in the Trust Fund; surrender for cash any Contract held in the Trust
Fund; agree with the insurance company issuing any Contract to any
release, reduction, modification or amendment thereof; and, without
limitation of any of the foregoing, exercise any and all of the rights,
options and privileges that belong to the absolute owner of any Contract
held in the Trust Fund that are granted by the terms of any such Contract
or by the terms of this Agreement.
The Trustee will hold in the Trust Fund the proceeds of any sale,
assignment or surrender of any Contract held in the Trust Fund and any
and all dividends and other payments of any kind received in respect to
any Contract held in the Trust Fund.
No insurance company which may issue any Contract based upon the
application of the Trustee will be responsible for the validity of this
Plan, be required to look into the terms of this Plan, be required to
question any act of the Plan Administrator or the Trustee hereunder or be
required to verify that any action of the Trustee is authorized by this
Plan. If a conflict should arise between the terms of the Plan and any
such Contract, the terms of the Plan will govern.
11.07 Fees and Expenses from Fund
---------------------------
The Trustee will be entitled to receive reasonable annual compensation as
may be mutually agreed upon from time to time between the Employer and
the Trustee. The Trustee will pay all expenses reasonably incurred by it
in its administration and investment of the Trust Fund from the Trust
Fund unless the Employer pays the expenses. No person who is receiving
full pay from the Employer will receive compensation for services as
Trustee.
11.08 Records and Accounting
----------------------
The Trustee will keep full and complete records of the administration of
the Trust Fund which the Employer and the Plan Administrator may examine
at any reasonable time. As soon as practical after the end of each Plan
Year and at such other reasonable times as the Employer may direct, the
Trustee will prepare and deliver to the Employer and the Plan
Administrator an accounting of the administration of the Trust, including
a report on the valuation of all
11-6
<PAGE>
assets of the Trust Fund, such valuation to be based upon the fair market
value on the valuation date.
11.09 Distribution Directions
-----------------------
If no one claims a payment or distribution made from the Trust, the
Trustee will notify the Plan Administrator and will dispose of the
payment in accordance with the subsequent direction of the Plan
Administrator.
11.10 Third Party
-----------
No person dealing with the Trustee will be obliged to see to the proper
application of any money paid or property delivered to the Trustee, or to
inquire whether the Trustee has acted pursuant to any of the terms of the
Plan. Each person dealing with the Trustee may act upon any notice,
request or representation in writing by the Trustee, or by the Trustee's
duly authorized agent, and will not be liable to any person whomsoever in
so doing. The certification of the Trustee that it is acting in
accordance with the Plan will be conclusive in favor of any person
relying on the certification.
11.11 Professional Agents
-------------------
The Trustee may employ and pay from the Trust Fund reasonable
compensation to agents, attorneys, accountants and other persons to
advise the Trustee as in its opinion may be necessary. The Trustee may
delegate to any agent, attorney, accountant or other person selected by
it any non-Trustee power or duty vested in it by the Plan; the Trustee
may act or refrain from acting on the advice or opinion of any agent,
attorney, accountant or other person so selected.
11.12 Valuation of Trust
------------------
The Trustee will value the Trust Fund as of the last day of each Plan
Year to determine the fair market value of the Trust, and the Trustee
will value the Trust Fund on such other date(s) as may be necessary to
carry out the provisions of the Plan.
11.13 Liability of Trustee
--------------------
The Trustee will be liable only for the safeguarding and administration
of the assets of this Trust Fund in accordance with the provisions hereof
and any amendments hereto and no other duties or responsibilities will be
implied. The Trustee will not be required to pay any interest on funds
paid to or deposited with it or to its credit under the provisions of
this Trust, unless pursuant to a written agreement between the Employer
and the Trustee. The Trustee will not be responsible for the adequacy of
the Trust Fund to meet and discharge any liabilities under the Plan and
will not be required to
11-7
<PAGE>
make any payment of any nature except from funds actually received as
Trustee. The Trustee may consult with legal counsel (who may be legal
counsel for the Employer) selected by the Trustee and will be fully
protected for any action taken, suffered or omitted in good faith in
accordance with the opinion of said legal counsel. It will not be the
duty of the Trustee to determine the identity or mailing address of any
Participant or any other person entitled to benefits hereunder, such
identity and mailing addresses to be furnished by the Employer, the Plan
Administrator or an agent of the Plan Administrator. The Trustee will be
under no liability in making payments in accordance with the terms of
this Plan and the certification of the Plan Administrator or an agent of
the Plan Administrator who has been granted such powers by the Plan
Administrator.
Except to the extent required by any applicable law, no bond or other
security for the faithful performance of duty hereunder will be required
of the Trustee.
11.14 Removal or Resignation and Successor Trustee
--------------------------------------------
A Trustee may resign at any time upon giving 30 days' prior written
notice to the Employer or, with the consent of the Employer, a Trustee
may resign with less than 30 days' prior written notice.
The Employer may remove a Trustee by giving at least 30 days' prior
written notice to the Trustee.
Upon the removal or resignation of a Trustee, the Employer will appoint
and designate a successor Trustee which will be one or more individual
successor Trustees or a corporate Trustee organized under the laws of the
United States or of any state thereof with authority to accept and
execute trusts. Any successor Trustee must accept and acknowledge in
writing its appointment as a successor Trustee before it can act in such
capacity.
Title to all property and records or true copies of such records
necessary to the current operation of the Trust Fund held by the Trustee
hereunder will vest in any successor Trustee acting pursuant to the
provisions hereof, without the execution or filing of any further
instrument. Any resigning or removed Trustee will execute all
instruments and do all acts necessary to vest such title in any successor
Trustee of record. Each successor Trustee will have, exercise and enjoy
all the powers, both discretionary and ministerial, herein conferred upon
his predecessor. No successor Trustee will be obligated to examine the
accounts, records and acts of any previous Trustee or Trustees, and each
successor Trustee in no way
11-8
<PAGE>
or manner will be responsible for any action or omission to act on the
part of any previous Trustee.
Any corporation which results from any merger, consolidation or purchase
to which the Trustee may be a party, or which succeeds to the trust
business of the Trustee, or to which substantially all the trust assets
of the Trustee may be transferred, will be the successor to the Trustee
hereunder without any further act or formality with like effect as if the
successor Trustee had originally been named Trustee herein; and in any
such event it will not be necessary for the Trustee or any successor
Trustee to give notice thereof to any person, and any requirement,
statutory or otherwise, that notice will be given is hereby waived.
11.15 Appointment of Investment Manager
---------------------------------
One or more Investment Managers may be appointed by the Employer (or the
Plan Administrator) to exercise full investment management authority with
respect to all or a portion of the Trust assets. Authorized payment of
the fees and expenses of the Investment Manager(s) may be made from the
Trust assets. For purposes of this agreement, any Investment Manager so
appointed will, during the period of his appointment, possess fully and
absolutely those powers, rights and duties of the Trustee (to the extent
delegated by the Employer or the Plan Administrator) with respect to the
investment or reinvestment of that portion of the Trust assets over which
the Investment Manager has investment management authority. The
Investment Manager must be one of the following:
(a) Registered as an investment advisor under the Investment Advisors
Act of 1940;
(b) A bank, as defined in the Investment Advisors Act of 1940; or
(c) An insurance company qualified to manage, acquire or dispose of such
Plan assets under the laws of more than one state.
Any Investment Manager will acknowledge in writing to the Employer or the
Plan Administrator and to the Trustee that he or it is a fiduciary with
respect to the Plan. During any period of time when the Investment
Manager is so appointed and serving, and with respect to those assets in
the Plan over which the Investment Manager exercises investment
management authority, the Trustee's responsibility will be limited to
holding such assets as a custodian, providing accounting services,
disbursing
11-9
<PAGE>
benefits as authorized, and executing such investment instructions only
as directed by the Investment Manager. The Trustee will not be
responsible for any acts or omissions of the Investment Manager. Any
certificates or other instruments duly signed by the Investment Manager
(or the authorized representative of the Investment Manager), purporting
to evidence any instruction, direction or order of the Investment Manager
with respect to the investment of those assets of the Plan over which the
Investment Manager has investment management authority, will be accepted
by the Trustee as conclusive proof thereof. The Trustee will also be
fully protected in acting in good faith upon any notice, instruction,
direction, order, certificate, opinion, letter, telegram or other
document believed by the Trustee to be genuine and from the Investment
Manager (or the authorized representative of the Investment Manager).
The Trustee will not be liable for any action taken or omitted by the
Investment Manager or for any mistakes of judgment or other action made,
taken or omitted by the Trustee in good faith upon direction of the
Investment Manager.
11.16 Loans to Participants
---------------------
The Plan Administrator may authorize the Trustee to lend on a
nondiscriminatory basis to a Participant an amount from the Plan as
specified herein; provided, a reasonable rate of interest will be charged
on the loan, the loan will be secured by the Participant's Vested Accrued
Benefit in the Plan, and provision for repayment will be made. All loans
will be subject to the approval of the Plan Administrator which will
investigate each application for a loan. The Plan Administrator will
prescribe such rules as may be necessary to provide guidelines as to
under which circumstances and for what purpose loans will be permitted.
In addition to any additional rules and regulations as the Plan
Administrator may adopt all loans will comply with the following terms
and conditions:
(a) Only Active and Inactive Participants will be eligible to apply for
a loan. Each application for a loan will be made in writing to the
Plan Administrator, whose action thereon will be final.
(b) Each loan will be made against collateral being the assignment of
the borrower's entire right, title and interest in and to the Trust
Fund, supported by the borrower's promissory note for the amount of
the loan, including interest payable to the order to the Trustee,
and any additional security deemed necessary to adequately secure
the Loan. If a person fails to
11-10
<PAGE>
make a required payment within 90 days of the due date set forth in
the loan agreement, the loan will be in default. There will be no
foreclosure against a Participant's Accrued Benefit prior to his
becoming entitled to a distribution of benefits in accordance with
the terms of this Plan. All loans will become due and payable in
full upon the termination of a Participant's employment. If a
Participant with an outstanding loan terminates employment and
becomes entitled to a distribution of benefits from the Plan, then
the outstanding balance of the unpaid loan plus any accrued interest
thereon will be deducted from the amount of otherwise distributable
benefits and the Participant's promissory note will be distributed
to the Participant.
(c) The principal repayment will be amortized over the fixed life of a
loan with installments of principal and interest to be paid not less
often than quarterly. The period of repayment for each loan will be
arrived at by mutual agreement between the Plan Administrator and
the borrower, but in no event will such period exceed a reasonable
period of time. The period of repayment will in no event exceed 5
years unless the loan is to be used to acquire, construct,
reconstruct or substantially rehabilitate any dwelling unit which,
within a reasonable period of time, is to be used as a principal
residence of the Participant or a member of the family (spouse,
brother, sister, ancestor, or lineal descendants) of the
Participant.
(d) The minimum amount of any loan is equal to $1,000.
(e) The maximum amount of any loan is such that when the amount of the
loan is added to the outstanding balance of all other loans made to
the Participant from the Plan (and any other plans maintained by the
Employer or any Related Employer) the total does not exceed the
lesser of:
(1) 50% of the participant's Vested Accrued Benefit; or
(2) $50,000, reduced by the amount, if any, of the highest balance
of all outstanding loans to the Participant during the one-year
period ending on the day prior to the day on which the loan in
question is made.
(f) Each loan will bear interest at a rate equal to the prime rate which
is published in the Wall Street
11-11
<PAGE>
Journal as being representative of the base rate on corporate loans
at large U.S. money center commercial banks on the date on which the
loan is made, plus 2 percentage points.
(g) A Participant may apply for a loan no more frequently than once per
year.
(h) Each loan will require the Participant (and, if the Participant is
married, the Participant's spouse) to consent to the loan and the
possible reduction in the Participant's Accrued Benefit. Such
consent must be made in writing within the 90-day period before the
making of the loan.
(i) No loan will be permitted to a Participant in a year in which he is
either an Owner-Employee or Shareholder-Employee as defined in Code
Section 4975(d).
11-12
<PAGE>
ARTICLE 12
PROVISIONS RELATING TO EMPLOYER STOCK
12.01 Investment in Employer Stock
----------------------------
(a) Type of Employer Stock
----------------------
The Trustee will, to the extent practical, invest 100% of that
portion of the Trust Fund represented by Employer Matching Accounts
in Bayou Steel Corporation Class A Common Stock (Employer Stock)
which includes treasury stock which has been purchased by the
Employer.
(b) Purchase Price
--------------
The Trustee will purchase the Employer Stock at the public trading
price determined at the time of the purchase regardless of whether
such stock is purchased from the Employer or on the open market.
12.02 Voting Rights
-------------
(a) In General
----------
Voting of the Employer Stock held in the Trust Fund will be carried
out by the Trustee. Each Participant will be entitled to direct the
Trustee as to the manner in which the Participant's shares of
Employer Stock held in the Trust Fund and allocated to such
Participant's Accounts are voted with respect to all matters
requiring shareholder approval. Any shares of stock in the Trust
Fund which are allocated to Participants who fail to give
instructions to the Trustee will be voted by the Trustee in its sole
and absolute discretion. The Plan Administrator may establish such
rules and guidelines as it deems appropriate to properly effect the
provisions of this Section.
(b) Tender Offers
-------------
Notwithstanding any other provision in this Plan and Trust to the
contrary, the Trustee may, with respect to all Employer Stock held
in the Trust, accept or reject, in its sole and absolute discretion,
the terms of any tender offer and, accordingly, tender Employer
Stock held by the Trustee under the Trust in accordance with the
terms and provisions of any tender offer, or not tender said
Employer stock, as determined in the Trustee's sole and absolute
discretion. In the event of such tendering of Employer Stock, all
cash received from the tendering and all future Employer Matching
Contributions will be invested by the Trustee (in other than
Employer
12-1
<PAGE>
Stock) in accordance with the provisions of Article 11 and the Plan
Administrator will promptly provide the Trustee with a written
investment policy with respect to such investments.
12.03 Partial Diversification of Investments
--------------------------------------
A Qualified Participant may elect within the Diversification Election
Interval to direct the Trustee on the investment of: (a) not more than
25% of his Company Matching Stock Account balance at the end of the Plan
Year (reduced by amounts previously diversified) during the first 5 years
of his Qualified Election Period; and (b) not more than 50% of his
Company Matching Stock Account balance at the end of the Plan Year
(reduced by amounts previously diversified) during the 6th year of his
Qualified Election Period.
The Trustee will complete the diversification of a Qualified
Participant's investment in accordance with a Qualified Participant's
Election no later than 90 days after the close of the Diversification
Election Interval. The Trustee will satisfy this requirement: (a) by
distributing to the Participant an amount equal to the amount for which
the Participant elected diversification; or (b) by substituting for the
amount of the Employer Stock for which the Participant elected
diversification an equivalent amount of other assets, according to the
Participant's investment direction based on at least three investment
options consistent with applicable Treasury regulations.
For purposes of this Section, the following definitions apply:
. "Qualified Participant" means any Employee who has completed at
least 10 years of participation under the Plan and has attained age
55.
. "Qualified Election Period" means the six Plan Year Period beginning
with the Plan Year which follows the Plan Year in which the
Participant becomes a Qualified Participant.
. "Diversification Election Interval" means the span of 90 days
commencing with the first day of each Plan Year within a Qualified
Election Period.
12.04 Securities and Exchange Commission Approval
-------------------------------------------
The Employer may request an interpretative letter from the Securities and
Exchange Commission stating that the transfers of Employer Stock
contemplated hereunder do not involve transactions requiring a
registration of such
12-2
<PAGE>
Employer Stock under the Securities Act of 1933. In the event that a
favorable interpretative letter is not obtained, the Employer reserves
the right to amend the Plan and Trust retroactively to its Effective Date
in order to obtain a favorable interpretative letter or to terminate the
Plan.
12-3
<PAGE>
IN WITNESS WHEREOF, this instrument has been executed by the duly authorized and
empowered officers of the Employer, this ______ day of ______________, 1991.
WITNESSES: Bayou Steel Corporation
____________________________ By:_________________________
Richard J. Gonzalez
____________________________ General Manager, Finance
The Trustee agrees to serve as Trustee under the terms of this instrument.
WITNESSES: Hibernia National Bank
____________________________ By:_________________________
____________________________
12-4
<PAGE>
A C K N O W L E D G M E N T
---------------------------
STATE 0F LOUISIANA
PARISH OF
BEFORE ME, the undersigned authority, a Notary Public duly qualified in
and for the State and Parish aforesaid, on this _____ day of ______________,
1991, personally came and appeared:
_________________
who declared that he is the authorized representative of Bayou Steel
Corporation, a Delaware corporation (the "Corporation"), and that he executed
the Bayou Steel Corporation 401(k) Savings Plan and Trust, effective March 1,
1991, on behalf of the Corporation, freely and voluntarily and for the purposes
and considerations therein set forth, and that he was duly authorized to do so.
______________________________
Print Name:___________________
Title:________________________
____________________________
Notary Public
<PAGE>
A C K N O W L E D G M E N T
---------------------------
STATE OF LOUISIANA
PARISH OF
BEFORE ME, the undersigned authority, a Notary Public duly qualified in
and for the State and Parish aforesaid, on this _____ day of ______________,
1991, personally came and appeared:
HIBERNIA NATIONAL BANK: (the "Bank"), represented herein by
_______________, its duly authorized
________________________________________,
who acknowledged that he executed the Bayou Steel Corporation 401(k) Savings
Plan and Trust effective March 1, 1991, on behalf of the Bank as Trustee, freely
and voluntarily and for the purposes and considerations therein set forth, and
that he was duly authorized to do so.
HIBERNIA NATIONAL BANK
BY____________________________
____________________________
Notary Public
<PAGE>
EXHIBIT 12
BAYOU STEEL CORPORATION
COMPUTATION OF RATIO OF ADJUSTED EARNINGS TO NET INTEREST EXPENSE
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income ($6,154) ($1,352) ($4,571) $243 $8,056 $23,331 $3,188
Add: Provision (Benefit)
for Income Taxes -- -- -- (116) 281 237 --
------- ------- ------- ------- -------- ------- -------
($6,154) ($1,352) ($4,571) $127 $8,337 $23,568 $3,188
Add:
Interest Expense ($8,261) ($8,977) ($8,821) ($9,514) ($11,131) ($9,639) ($9,445)
Interest Income $193 $486 $638 $1,850 $1,540 $649 $61
Depreciation ($4,158) ($3,977) ($3,472) ($3,646) ($3,260) ($3,107) ($2,374)
Amortization ($458) ($332) ($331) ($330) ($360) ($406) ($402)
------- ------- ------- ------- -------- ------- -------
Earnings Before Inter-
est, Taxes, Depreciation
& Amortization
(EBITDA) $6,530 $11,448 $7,415 $11,767 $21,548 $36,071 $15,348
======= ======= ======= ======= ======== ======= =======
Adjustments to EBITDA
A. Strike $4,349 -- -- -- -- -- --
B. Rust -- ($401) $1,088 $985 -- -- --
C. Extraordinary Gain &
Cumulative Effect of
Accounting Change ($585) -- -- $1,572 -- -- --
------- ------- ------- ------- -------- ------- -------
Total Adjustments $3,764 ($401) $1,088 $2,557 $0 $0 $0
Adjusted EBITDA $10,294 $11,047 $8,503 $14,324 $21,548 $36,071 $15,348
======= ======= ======= ======= ======== ======= =======
Net Interest Expense
Interest Expense ($8,261) ($8,977) ($8,821) ($9,514) ($11,131) ($9,639) ($9,445)
Capitalized Interest ($115) ($107) ($264) ($173) ($468) ($206) $0
Interest Income $193 $486 $638 $1,850 $1,540 $649 $61
------- ------- ------- ------- -------- ------- -------
Net Interest Expense ($8,183) ($8,598) ($8,447) ($7,837) ($10,059) ($9,196) ($9,384)
======= ======= ======= ======= ======== ======= =======
Ratio of Adjusted EBITDA
to Net Interest Expense 1.26 1.28 1.01 1.83 2.14 3.92 1.64
======= ======= ======= ======= ======== ======= =======
Pro Forma Net Interest
Expense ($8,163)
=======
Ratio of Adjusted EBITDA
to Net Interest Expense 1.26
=======
</TABLE>
<PAGE>
EXHIBIT 12
BAYOU STEEL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989 1988 1987
------- ------- ------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from con-
tinuing operations be-
fore provision for in-
come taxes per state-
ment of income (loss) ($6,739) ($1,352) ($4,571) $1,699 $8,337 $23,568 $3,188
Add: Fixed Charges
Interest Expense ($8,261) ($8,977) ($8,821) ($9,514) ($11,131) ($9,639) ($9,445)
Amortization ($458) ($332) ($331) ($330) ($360) ($406) ($402)
------- ------- ------- -------- -------- -------- -------
Earnings as adjusted $1,980 $7,957 $4,581 $11,543 $19,828 $33,613 $13,035
======= ======= ======= ======== ======== ======== =======
Fixed Charges
Interest Expense ($8,261) ($8,977) ($8,821) ($9,514) ($11,131) ($9,639) ($9,445)
Capitalized Interest ($115) ($107) ($264) ($173) ($468) ($206) $0
Interest Income ($458) ($332) ($331) ($330) ($360) ($406) ($402)
------- ------- ------- -------- -------- -------- -------
Total Fixed Charges ($8,834) ($9,416) ($9,416) ($10,017) ($11,959) ($10,251) ($9,847)
======= ======= ======= ======== ======== ======== =======
Ratio of Earnings to
Fixed Charges 0.22 0.85 0.49 1.15 1.66 3.28 1.32
======= ======= ======= ======== ======== ======== =======
Deficiency ($6,854) ($1,459) ($4,835) N/A N/A N/A N/A
======= ======= ======= ======== ======== ======== =======
</TABLE>
<PAGE>
EXHIBIT 23.1
[LETTER HEAD OF ARTHUR ANDERSEN & CO.]
As independent public accountant, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of Amendment No.1
of the Bayou Steel Corporation Form S-1 registration statement.
New Orleans, Louisiana /s/ Arthur Andersen & Co.
January 14, 1994
<PAGE>
EXHIBIT 25
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
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(B)(2)__________
FIRST NATIONAL BANK OF COMMERCE
(Exact name of trustee as specified in its charter)
N/A 72-0269760
--------------------------- ------------------
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a Identification No.)
U.S. National Bank)
210 BARONNE STREET
NEW ORLEANS, LOUISIANA 70112
---------------------- ------------------
(Address of principal (Zip Code)
executive offices)
FIRST NATIONAL BANK OF COMMERCE
210 Baronne Street
New Orleans, Louisiana 70112
Telephone: 504-561-1610
(Name, address and telephone number of agent for service)
BAYOU STEEL CORPORATION
(Exact name of obligor as specified in its charter)
LOUISIANA 72-0244480
---------------------------- ------------------
(State or other (I.R.S. Employer
jurisdiction of incorporation Identification No.)
or organization)
P.O. BOX 5000, RIVER ROAD
LAPLACE, LOUISIANA 70069
--------------------------- ------------------
(Address of principal (Zip Code)
executive offices)
-----------------------------------------------
FIRST MORTGAGE NOTES DUE 2001
(Title of Indenture Securities)
<PAGE>
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.
Comptroller of the Currency, Washington D. C.
Federal Deposit Insurance Corporation, Washington, D. C.
The Board of Governors of the Federal Reserve System, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with obligor and underwriters. If the obligor or any
------------------------------------------
underwriter for the obligor is an affiliate of the trustee, describe such
affiliation.
No such affiliation exists.
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 incorporation of the trustee as now
in effect.
** 2. A copy of the certificate of authority of the trustee to
commence business.
** 3. A copy of the certificate of authorization of the trustee to
exercise corporate trust powers issued by the Board of Governors of
the Federal Reserve System under date of May 20, 1933.
* 4. A copy of the existing bylaws of the trustee.
5. Not applicable.
6. The consent of the trustee required by Section 321(b) of the
Act.
7. A copy of the latest report of condition of the trustee
published pursuant to law or to requirements of its
supervising or examining authority.
- ---------------
* Incorporated by reference to Exhibit bearing the same Exhibit number
submitted with the trustee's Form T-1 (File No. 22-20536).
** Incorporated by reference to Exhibit bearing the same Exhibit number
submitted with the trustee's Form T-1 (File No. 2-32069).
-1-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 as
amended to November 15, 1990, the trustee, First National Bank of Commerce, a
national banking association 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 New Orleans, and State of Louisiana on the 10th
day of January, 1994.
FIRST NATIONAL BANK OF COMMERCE
/s/ Denis L. Milliner
By:__________________________________
Name: Denis L. Milliner
Title: Vice President and
Trust Officer
-2-
<PAGE>
Consent of Trustee Required by Section 321(b)
of the Trust Indenture Act of 1939
In connection with the Indenture referred to in the Form T-1 of even
date herewith between Bayou Steel Corporation and First National Bank of
Commerce in New Orleans, as Trustee pursuant to Section 321(b) of the Trust
Indenture Act of 1939 as amended to November 15, 1990, hereby consents that
reports of examinations by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request thereof.
Dated as of January 10, 1994
FIRST NATIONAL BANK OF COMMERCE
/s/ Denis L. Milliner
By_____________________________
Name: Denis L. Milliner
Title: Vice President and
Trust Officer
