UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 33-22603
BAYOU STEEL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 72-1125783
(State of incorporation) (I.R.S. Employer
Identification No.)
RIVER ROAD, P.O. BOX 5000, LAPLACE, LOUISIANA 70069
(Address of principal executive offices)
(Zip Code)
(504) 652-4900
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS SHARES OUTSTANDING AT MARCH 31, 1996
- ------------------------------------ ------------------------------------
Class A Common Stock, $.01 par value 10,613,380
Class B Common Stock, $.01 par value 2,271,127
Class C Common Stock, $.01 par value 100
----------
12,884,607
==========
<PAGE>
BAYOU STEEL CORPORATION
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
------
Item 1. Financial Statements
Consolidated Balance Sheets --
March 31, 1996 and
September 30, 1995 ............................. 3
Consolidated Statements of Income
(Loss) -- Three Months and Six Months
Ended March 31, 1996 and 1995 ................. 5
Consolidated Statements of Cash
Flow -- Six Months Ended March
31, 1996 and 1995 .............................. 6
Notes to Financial Statements ................... 7
Item 2. Management's Discussion and Analysis
Results of Operations ........................... 12
Liquidity and Capital Resources ................. 15
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K ................ 19
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
BAYOU STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED) (AUDITED)
MARCH 31, SEPTEMBER 30,
1996 1995
------------- -------------
CURRENT ASSETS:
Cash and temporary cash investments . $ -- $ 10,521,664
Receivables, net of allowance for
doubtful accounts of $564,754 in
1996 and $567,970 in 1995 ......... 23,649,898 21,921,347
Inventories ......................... 78,208,180 67,694,741
Prepaid expenses .................... 974,886 257,405
------------- -------------
Total current assets ............. 102,832,964 100,395,157
------------- -------------
PROPERTY, PLANT AND EQUIPMENT:
Land ................................ 3,790,398 3,790,398
Machinery and equipment ............. 103,661,590 102,582,968
Plant and office building ........... 19,405,645 18,929,288
------------- -------------
126,857,633 125,302,654
Less-Accumulated depreciation ....... (36,632,553) (33,652,607)
------------- -------------
Net property, plant and equipment 90,225,080 91,650,047
OTHER ASSETS ........................... 4,492,884 5,030,961
------------- -------------
Total assets ..................... $ 197,550,928 $ 197,076,165
============= =============
The accompanying notes are an integral part of these consolidated statements.
Page 3
<PAGE>
BAYOU STEEL CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(UNAUDITED) (AUDITED)
MARCH 31, SEPTEMBER 30,
1996 1995
------------ ------------
CURRENT LIABILITIES:
Current maturities of long-term debt .... $ 506,445 $ 613,483
Accounts payable ........................ 21,037,513 22,188,484
Accrued liabilities ...................... 2,979,262 3,675,716
Line-of-credit .......................... 4,000,000 --
Accrued dividends on redeemable
preferred stock ....................... -- 616,249
------------ ------------
Total current liabilities ............ 28,523,220 27,093,932
------------ ------------
LONG-TERM DEBT ............................. 85,070,800 85,137,665
------------ ------------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK ................. 12,451,632 12,239,173
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value -
Class A ............................... 106,134 106,134
Class B ............................... 22,711 22,711
Class C ............................... 1 1
------------ ------------
Total common stock ................... 128,846 128,846
Paid-in capital ......................... 47,769,034 47,769,034
Retained earnings ....................... 23,607,396 24,707,515
------------ ------------
Total stockholders' equity ........... 71,505,276 72,605,395
------------ ------------
Total liabilities & common
stockholders' equity .............. $197,550,928 $197,076,165
============ ============
The accompanying notes are an integral part of these consolidated statements.
Page 4
<PAGE>
BAYOU STEEL CORPORATION
CONSOLIDATED STATEMENT OF INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
SECOND QUARTER ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
----------------------------------- -----------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES .............................. $ 52,145,001 $ 49,521,950 $ 93,307,994 $ 93,373,735
COST OF SALES .......................... 48,497,843 42,578,342 85,605,747 79,801,414
------------ ------------ ------------ ------------
GROSS PROFIT ........................... 3,647,158 6,943,608 7,702,247 13,572,321
SG&A ................................... 1,544,004 1,140,446 3,091,084 2,310,580
NON-PRODUCTION
STRIKE EXPENSES ..................... 326,432 291,183 671,093 550,200
------------ ------------ ------------ ------------
OPERATING INCOME ....................... 1,776,722 5,511,979 3,940,070 10,711,541
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest expense .................... (2,147,371) (1,853,518) (4,280,609) (3,770,878)
Interest income ..................... 23,137 144,902 129,817 264,503
Miscellaneous ....................... 368,192 78,389 406,650 133,116
------------ ------------ ------------ ------------
1,756,042 (1,630,227) (3,744,142) (3,373,259)
------------ ------------ ------------ ------------
INCOME BEFORE TAXES .................... 20,680 3,881,752 195,928 7,338,282
PROVISION FOR
INCOME TAXES ........................ -- 38,817 -- 73,382
------------ ------------ ------------ ------------
NET INCOME ............................. 20,680 3,842,935 195,928 7,264,900
DIVIDENDS ACCRUED AND
ACCRETION ON
PREFERRED STOCK ..................... (649,980) -- (1,295,987) --
------------ ------------ ------------ ------------
INCOME (LOSS)
APPLICABLE TO
COMMON AND COMMON
EQUIVALENT SHARES ................... $ (629,300) $ 3,842,935 $ (1,100,059) $ 7,264,900
============ ============ ============ ============
AVERAGE NUMBER
OF COMMON AND
COMMON EQUIVALENT
SHARES OUTSTANDING .................. 13,707,030 12,884,607 13,707,030 12,884,607
============ ============ ============ ============
INCOME (LOSS)
APPLICABLE TO
COMMON AND COMMON
EQUIVALENT SHARE .................... $ (0.05) $ 0.30 $ (0.08) $ 0.56
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 5
<PAGE>
BAYOU STEEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
MARCH 31,
----------------------------
1996 1995
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income ..................................... $ 195,928 $ 7,264,900
Depreciation ............................... 2,979,913 2,561,505
Amortization ............................... 563,078 323,875
Provision for losses on accounts
receivable ............................... (44,574) 94,769
Changes in working capital:
(Increase) in receivables ................ (1,683,977) (2,005,366)
(Increase) in inventories ................ (10,513,439) (4,571,992)
(Increase) in prepaid expenses ........... (717,481) (1,711,047)
(Decrease) increase in accounts
payable ................................. (1,150,971) 1,824,449
(Decrease) increase in accrued
liabilities ............................. (699,454) 1,393,385
------------ -----------
Net cash (used in) provided
by operations ........................ (11,070,977) 5,174,478
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Addition of property, plant
and equipment ............................ (1,554,979) (5,080,284)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line-of-credit ............ 4,000,000 --
Payments of long-term debt ................. (173,903) (144,162)
(Increase) in other assets ................. (25,000) (512,766)
Payments of dividends on preferred stock ... (1,696,805) --
------------ -----------
Net cash provided by (used in)
financing activities ................. 2,104,292 (656,928)
------------ -----------
NET (DECREASE) IN CASH AND
CASH EQUIVALENTS ........................... (10,521,664) (562,734)
CASH AND CASH EQUIVALENTS,
beginning balance .......................... 10,521,664 8,903,413
------------ -----------
CASH AND CASH EQUIVALENTS,
ending balance ............................. $ -- $ 8,340,679
============ ===========
The accompanying notes are an integral part of these consolidated statements.
Page 6
<PAGE>
BAYOU STEEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
1) BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). Certain information and note disclosures normally
included in annual financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to those
rules and regulations. Although Bayou Steel Corporation (the "Company") believes
that disclosures made are adequate to ensure that information presented is not
misleading, it is suggested that these consolidated financial statements be read
in conjunction with the consolidated financial statements and notes thereto
included in the Company's latest annual report, Form 10-K, filed with the SEC on
December 14, 1995 under File Number 33-22603.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements present fairly the Company's financial position as of March
31, 1996 and September 30, 1995 and the results of its operations for the
three-month and six-month periods ended March 31, 1996 and 1995 and the cash
flow statements for the six-month periods ended March 31, 1996 and 1995.
The accompanying financial statements include the consolidated accounts of
Bayou Steel Corporation ("BSC") and Bayou Steel Corporation (Tennessee) ("BSCT")
(collectively referred to herein as the "Company") after elimination of all
significant intercompany accounts and transactions.
The results of operations for the six-month periods ended March 31, 1996
and 1995 are not necessarily indicative of the results for the full year.
2) INVENTORIES
Inventories as of March 31, 1996 and September 30, 1995 consisted of the
following:
(UNAUDITED) (AUDITED)
MARCH 31, SEPTEMBER 30,
1996 1995
------------ ------------
Scrap steel ........................ $ 6,810,968 $ 4,964,364
Billets ............................ 8,063,354 6,357,640
Finished product ................... 47,604,064 42,541,400
LIFO adjustments ................... (3,410,341) (4,741,268)
------------ ------------
$ 59,068,045 $ 49,122,136
Mill rolls, operating
supplies and other ............... 19,140,135 18,572,605
------------ ------------
$ 78,208,180 $ 67,694,741
============ ============
The inventory valuations are based on LIFO estimates of year-end levels
and prices. The actual LIFO inventories will not be known until year-end
quantities and indices are determined.
Shapes, billets, scrap steel, and certain production supplies are pledged
as collateral against the Company's line-of-credit.
Page 7
3) PROPERTY, PLANT AND EQUIPMENT
Capital expenditures for normal operations totaled $1.6 million and $5.1
million during the six-month periods ended March 31, 1996 and 1995,
respectively. As of March 31, 1996, the estimated costs to complete authorized
projects under construction or contract amounted to $1.0 million.
Betterments, improvements, and additions on property, plant and equipment
are capitalized at cost. Interest during construction of significant additions
is capitalized. There was no interest capitalized for the six-month period ended
March 31, 1996. Interest of $122,000 was capitalized during the six-month period
ended March 31, 1995. Interest of $394,000 was capitalized during the fiscal
year ended September 30, 1995.
4) OTHER ASSETS
Other assets consist of financing costs associated with the issuance of
long-term debt, redeemable preferred stock and warrants, and the Company's
revolving line of credit (see Notes 5, 6 and 8) which are being amortized over
the lives of the related transaction. Amortization expense was $563,000 and
$324,000 for the six-month periods ended March 31, 1996 and 1995. Amortization
expense was $893,000 for the fiscal year ended September 30, 1995.
5) LONG-TERM DEBT
Long-term debt of the Company as of March 31, 1996 and September 30, 1995
included the following:
MARCH 31, SEPTEMBER 30,
1996 1995
------------ ------------
First Mortgage Notes (see below) ......... $ 75,000,000 $ 75,000,000
Term Loan (see below) .................... 10,000,000 10,000,000
Other notes payables ..................... 577,245 751,148
------------ ------------
Less-current maturities .................. (506,445) (613,483)
------------ ------------
$ 85,070,800 $ 85,137,665
============ ============
On June 20, 1995, the Company entered into a five-year term loan agreement
of $10 million for the Company's wholly owned subsidiary, BSCT. The term loan,
partially secured by the Company's accounts receivable, bears interest on a
sliding scale based on the quarterly leverage ratio which is defined
indebtedness divided by earnings before interest, taxes, depreciation and
amortization ("EBITDA"). Based on the second quarter leverage ratio, BSCT will
accrue at LIBOR plus 2.25% or approximately 8% at current rates. As of March 31,
1996, BSCT accrued interest at a rate of 7.62%. Term loan interest is payable
quarterly. Principal payments are due quarterly beginning June 30, 1997.
On March 3, 1994, the Company issued $75 million of the 10.25% Notes. The
principal is due on March 1, 2001. As of March 31, 1996 and 1995, the Company
accrued interest at a rate of 10.25%.
6) SHORT-TERM DEBT
On June 20, 1995, the Company entered into an amendment and restatement of
its revolving line-of-credit agreement which will be used for general corporate
purposes. The terms of the amended and restated agreement call for available
borrowings up to $45 million, including outstanding letters of credit using a
borrowing base of receivables and inventory. Based on these criteria, the net
amount available as of March 31, 1996 was $31.5 million. The agreement is
secured by inventory and accounts receivable at interest rates on a sliding
scale
Page 8
based on the quarterly leverage ratio which is defined indebtedness divided by
EBITDA. Based on the second quarter leverage ratio, the Company will accrue at
LIBOR plus 2.25% or approximately 8% at current rates.
There was $4.0 million borrowed under the line as of March 31, 1996. The
maximum amount outstanding during the three-month and six-month periods ended
March 31, 1996 was $4.9 million. The average borrowings were $1,129,000 and
$564,000 for the three-month and six-month periods ended March 31, 1996,
respectively. The weighted average interest rate was 8.55% for the second fiscal
quarter and six-month period ended March 31, 1996.
7) TAXES
As of September 30, 1995, for tax purposes, the Company had net operating
loss carryforwards ("NOLs") of approximately $316.1 million and $289.6 million
available to offset against regular tax and alternative minimum tax,
respectively.
The NOLs will expire in varying amounts through fiscal 2009. A substantial
portion of the available NOLs, approximately $200 million, expires by fiscal
2000. In addition, the Company has $12.4 million of future tax benefits
attributable to its tax benefit lease which expires in 1997 and which may, to
the extent of taxable income in the year such tax benefit is produced, be
utilized prior to the NOLs.
8) PREFERRED STOCK AND WARRANTS
On June 20, 1995, the Company completed the issuance and sale of preferred
stock and warrants to purchase common stock for $15 million. The Company issued
15,000 shares of its redeemable preferred stock and warrants to purchase six
percent of the Company's Common Stock (or 822,422 Class A shares) at a nominal
amount. The Company valued the 15,000 shares of preferred stock sold at
$12,121,520, after deducting $2,878,480 for the market value of the warrants
issued.
The holders of the preferred stock are entitled to receive quarterly
dividends at a rate of 14.5% per annum. The Company intends to declare and pay
quarterly dividends on the preferred stock unless prohibited by covenants in the
revolving line-of-credit and the 10.25% Notes. If a quarterly dividend payment
is not made by the end of a quarter, the rate will increase by 3%. In addition,
the holders have a right to additional warrants in the event that any two
consecutive quarterly payments are missed or other defined events take place.
Depending on the Company's results in the third fiscal quarter, the Company may
not be able to declare and pay the dividend. As of March 31, 1996, the Company
accrued dividends at a rate of 14.5%.
The carrying amount of the preferred stock will increase by periodic
accretion of the difference between the fair value of the stock at the date of
issuance and the redemption value from 1995 through the mandatory redemption
date based on the interest method. The terms of the stock purchase agreement
impose certain financial covenants which are generally related to covenants in
the revolving line-of-credit or the 10.25% Notes.
9) COMMON STOCKHOLDERS' EQUITY
Common stock and common stock equivalents as of March 31, 1996 consisted
of:
Page 9
CLASS A CLASS B CLASS C
---------- --------- -------
Authorized .......................... 24,271,127 4,302,347 100
Outstanding, at end of
quarter ........................... 13,707,030 2,271,127 100
Average outstanding for
quarter ........................... 13,707,030 2,271,127 100
10) EARNINGS PER SHARE
Earnings per common and common equivalent share are calculated based upon
the weighted average number of common and common equivalent shares outstanding
during the three-month and the six-month periods ended March 31, 1996 and 1995.
In connection with the issuance of redeemable preferred stock on June 20, 1995
as discussed in Note 8, the Company reserved 822,422 shares of its Class A
Common Stock for issuance upon exercise of the outstanding warrants at a nominal
exercise price. These warrants are considered common stock equivalents in
calculating earnings per common and common equivalent share for the quarter and
six-month period ended March 31, 1996. The actual shares, including equivalents,
outstanding for the quarter and six-month periods ended March 31, 1996 were
13,707,030. Actual common shares outstanding for the quarter and six-month
periods ended March 31, 1995 were 12,884,607.
11) MISCELLANEOUS
Miscellaneous for the six-month periods ended March 31, 1996 and 1995
included the following:
MARCH 1996 MARCH 1995
---------- ----------
Discounts earned ......................... $122,146 $ 51,513
Provision for bad debts .................. 3,275 (94,769)
Other .................................... 281,229 176,372
-------- ---------
$406,650 $ 133,116
======== =========
12) COMMITMENTS AND CONTINGENCIES
STRIKE
On March 21, 1993, the United Steelworkers of America Local 9121 (the
"Union") initiated a strike against the Company. The strike is ongoing. Over the
last 24 months, there has been one formal negotiating session in November of
1995. 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 negative material effect on the Company's results.
The Union has filed charges with the National Labor Relations Board (the
"NLRB") alleging that the Company has violated the National Labor Relations Act
(the "NLRA") relating to its bargaining conduct. The Company believes it has
meritorious defenses to these charges, has responded timely to all charges, and
believes that it has negotiated in good faith with the Union. An unfavorable
decision by the NLRB, however, should not materially affect the Company.
In conjunction with the acquisition of the assets of Tennessee Valley
Steel Corporation ("TVSC"), the Union filed a charge with the NLRB alleging that
the Company has violated the NLRA relating to its failure to hire certain
individuals, who were former employees of TVSC, at BSCT. The Regional Director
Page 10
of the NLRB has issued a complaint and scheduled a hearing before an
administrative law judge on June 10, 1996. The Company believes it has
meritorious defenses to these charges.
The Union's corporate campaign against the Company continues on many
different fronts. The Union recently appealed to the states of Louisiana and
Tennessee to take away tax exemptions/grants from the Company; neither attempt
was successful. The Union also attempted to disrupt the Company's activities to
secure permanent financing for the acquisition of the assets of TVSC and the
10.25% Notes. The Company expects similar activities to continue.
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 solid 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 at its Louisiana facility to address
previously contaminated sites. Also, the Company is not designated as a
Potential Responsible Party ("PRP") under the Superfund legislation. At March
31, 1996, the Company has accrued a loss contingency for environmental matters.
TVSC had entered into a Consent Agreement and Order (the "Voluntary
Consent Order") under the Tennessee Department of Environmental and
Conservation's voluntary clean-up program. The Company, in acquiring the assets
of TVSC, has entered into a similar Voluntary Consent Order. Estimates indicate
that the cost for remediating the affected areas range from $1.0 million to $2.0
million. The purchase agreement between the Company and TVSC provided for $2.0
million of the purchase price to be held in escrow and applied to costs incurred
by the Company for remediation under the Voluntary Consent Order (with an
additional $1.0 million to be held in escrow for one year for such costs and
other costs resulting from a breach of TVSC's representation and warranties in
the agreement). If during the remedial investigation significantly more
extensive or more toxic contamination is found, then costs could be greater than
those estimated, and to the extent these costs exceeded funds escrowed by TVSC,
the Company would be liable.
The U.S. Public Interest Research Group ("USPIRG") filed a lawsuit in
Louisiana against the Company for alleged violations of an environmental
regulation. The Company believes it has meritorious defenses to these charges.
OTHER
The Company does not provide any post-employment or post-retirement
benefits to its employees.
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 effect its financial
position.
Page 11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATION
The Company earned $0.02 million before dividends and accretion on
preferred stock in the second quarter of fiscal 1996 compared to a net income of
$3.8 million for the comparable period of fiscal 1995. During the first six
months of fiscal 1996, the Company earned $0.2 million before dividends and
accretion on preferred stock compared to earnings of $7.3 million for the same
period of last year. The reduction in the Company's results was due to three
significant factors. First, due to its start-up, Bayou Steel Corporation
(Tennessee) ("Tennessee") ("BSCT") had a loss of $2.2 million for the second
quarter and $3.9 million for the six month period. Second, the metal margin (the
difference between the selling price and raw material ("scrap") cost) decreased
6.7% for the second quarter and 3.2% for the first six months of fiscal 1996
primarily due to declining sales prices; this reduced earnings by $1.6 million
in the second quarter and $1.0 million for the six month period as compared to
the prior year periods. Third, the prices of certain supply items and energy
increased significantly at the Louisiana facility ("BSCL") ("Louisiana"),
resulting in additional expenses of $1.6 million for the second quarter and $2.1
million for the six month period as compared to prior year.
The following table sets forth shipment and sales data for the periods
indicated.
THREE MONTHS ENDED
MARCH 31,
--------------------------
1996 1995
-------- --------
Net Sales (in thousands) ................... $ 52,145 $ 49,522
Shape Shipment Tons ........................ 151,658 135,263
Shape Selling Price Per Ton ................ $ 338 $ 360
Billet Shipment Tons ....................... 199 1,807
Billet Selling Price Per Ton ............... $ 240 $ 223
SIX MONTHS ENDED
MARCH 31,
--------------------------
1996 1995
-------- --------
Net Sales (in thousands) ................... $ 93,308 $ 93,374
Shape Shipment Tons ........................ 264,651 252,118
Shape Selling Price Per Ton ................ $ 345 $ 356
Billet Shipment Tons ....................... 1,908 10,919
Billet Selling Price Per Ton ............... $ 249 $ 235
A. SALES
Net sales increased in the second quarter of fiscal 1996 by 5.3% or $2.6
million compared to the same period of fiscal 1995. The increase was the result
of an increase in shape shipments from the Tennessee facility. This was
partially offset by a $22 per ton decrease in the shape selling price. Net sales
for the six month period was approximately the same compared to the same period
of fiscal 1995. While the overall shape tons shipped increased for the
comparable six month period, the overall shape selling price and billet
shipments decreased.
SHAPES - Shape shipments of 151,658 tons in the second quarter of fiscal
1996 increased by 12.1%. The 136,043 tons shipped out of the Louisiana facility
was approximately the same for comparative periods. Shipments from the Tennessee
facility were 15,615 tons during this quarter. Shape shipments for the six month
Page 12
period of fiscal 1996 increased by 5.0%. During the first quarter of fiscal
1996, the Company experienced a slowing economy and the effects of severe
weather conditions which affected the Company's ability to ship. The backlog of
orders at March 31, 1996 for the Company was 11% less than a year earlier and
26% higher than the prior quarter. The decrease in backlog from a year earlier
was directly related to steel service centers (the Company's primary customers)
lowering inventory levels from a year ago. With mill stocks being more readily
available and pricing instability, steel service centers are buying on an
as-needed basis to maintain lower levels of inventory and to minimize their risk
with the uncertainty in the market while still satisfying their customers. The
increase in backlog in the three month period ended March 31, 1996 is due to
increases in demand and the additional orders for the Tennessee facility's
product line. Shipments are expected to increase in the third quarter of fiscal
1996 compared to the second quarter of fiscal 1996 due to the additional product
line from the Tennessee facility and the increased seasonal demand from the
steel service centers during the spring.
Shape prices decreased in the second quarter of fiscal 1996 compared to
the same period of fiscal 1995 by $22 per ton or 6.1%. Shape prices for the six
month period decreased by $11 per ton or 3.1%. Prices decreased in the first and
second quarter of fiscal 1996 as a result of additional capacity being shifted
into the Company's product line, excess inventories at certain minimills, and
imports in the Southwest. Several competitors, although not all, have announced
a price increase effective in the third fiscal quarter.
BILLETS - Shipments of billets, the Company's semi-finished product,
decreased 1,608 tons in the second quarter of fiscal 1996 and 9,011 tons for the
six month period compared to the same periods of fiscal 1995 due to lack of
availability of billets for sale. With the high productivity of the Louisiana
rolling mill, there were no excess billets to sell. The Company also began
supplying billets to its newly acquired rolling mill in Tennessee late in fiscal
1995, thereby reducing the availability of billets to sell in the open market.
In addition, the Company has been purchasing billets on the open market at
competitive prices for the remaining needs of the Tennessee rolling mill. The
Company will continue to supply all of its Louisiana's rolling mill billet
requirements. Depending on market conditions, the Company may sell billets on an
occasional and selective basis to domestic and export customers while purchasing
additional billets for Tennessee.
B. COST OF GOODS SOLD
Cost of goods sold was 93.0% and 91.7% of sales for the second quarter and
first six months of fiscal 1996 compared to 86.0% and 85.5% of sales for the
same periods of fiscal 1995, respectively. The increases in cost of goods sold
as a percent of sales were due to the high production cost associated with
beginning operations at Tennessee, price increases of alloys, certain supply
items, and energy which affected conversion costs (the cost to convert raw
materials into shapes), and selling prices of the finished product decreasing
more than the cost of scrap.
The major component of cost of goods sold is scrap. Scrap cost in the
second quarter and first six months of fiscal 1996 decreased $7 and $5 per ton,
respectively, compared to the same periods last year. The scrap cost decrease
was not as great as the shape price decrease of $22 and $11 per ton,
respectively, compared to the same periods last year. This resulted in
significantly lower metal margins.
Additives, alloys and flux ("AAF"), another component of cost of goods
sold, increased by 29% and 24% in the second quarter and first six months of
fiscal 1996, respectively, compared to the same period of fiscal 1995 primarily
due to price increases. These price increases for the second quarter and the six
month period of fiscal 1996 were approximately $4 and $3 per billet ton
produced,
Page 13
respectively. An anti-dumping suit against foreign producers utilized by the
Company and its competitors resulted in high duties on imported AAF. Also
contributing to the higher prices is the increase in domestic demand due to high
steel-making capacity utilization. This general market condition affects the
Company and its competition.
Another significant portion of cost of goods sold is conversion cost,
which include labor, energy, maintenance materials and supplies used to convert
raw materials into billets and billets into shapes. Conversion cost per ton for
the Louisiana facility in the second quarter and the first six months of fiscal
1996 compared to the same period of fiscal 1995 increased by 6.0% and 8.3% per
ton, respectively. The major increases in conversion cost were due to price
increases for electrodes, power and natural gas which accounted for
approximately $8 and $6 per rolled ton produced for the second quarter and first
six months of fiscal 1996, respectively. Also, contributing to the higher cost
was the running of the second furnace during the first quarter. Due to the
impact of the second furnace learning curve and the recent favorable change in
billet availability in the market place, the Company returned to a one furnace
operation during the first fiscal quarter of 1996. The other furnace serves as a
back-up for major expected and unexpected outages. The one-furnace operation and
recently completed capital projects have led to improved operating efficiencies.
In March, the melt shop productivity, power consumption, and electrode
consumption were the best in the history of the Company. Also, in March, the
rolling mill's productivity and tons produced were the best in the Company's
history. Offsetting some of the increases in cost were several non-reoccurring
adjustments of approximately $0.7 million resulting from the favorable
settlement of a lawsuit, resolution of some issues with a regulatory agency, and
anticipated recovery of a property loss through insurance.
In July 1995, Tennessee started operating its rolling mill. As expected,
the learning curve associated with new and refurbished equipment combined with
an inexperienced work force caused the production tons to be low and the
conversion cost per ton to be high. Also, the selling price for the Tennessee
facility's product have decreased significantly since the acquisition in April
1995 due to a weakening market and market penetration. Consequently, the
Tennessee facility's loss amounted to $2.2 million and $3.9 million for the
second quarter and first six months of fiscal 1996, respectively. During the
early third quarter, the Tennessee rolling mill productivity and tons produced
have improved significantly compared to the second quarter; as a result,
production costs should be lower. However, the Company expects Tennessee to
report a loss in the third quarter of fiscal 1996.
C. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expenses increased in the second
quarter and first six months of fiscal 1996 compared to the same periods of the
last fiscal year by $404,000 and $781,000, respectively, due to additional
administrative and amortization of financing expenses related to the acquisition
of the Tennessee facility.
D. NON-PRODUCTION STRIKE EXPENSES
Strike-related expenses increased by $35,000 and $121,000 for the second
quarter and the first six months of fiscal 1996, respectively, compared to the
same periods of fiscal 1995. Strike expenses were primarily security coverage
and legal advice on both strike issues and the on-going corporate campaign of
the United Steelworkers of America (the "Union"). For the first six months of
fiscal 1996, the Company's strike-related expenses averaged approximately
$112,000 per month mainly due to increases in legal services related to the
Racketeer Influenced Corrupt Organization Act suit the Company filed against the
Union. Non-production strike expenses are expected to increase in the third
quarter by approximately $120,000 due to increased litigation.
Page 14
E. OTHER INCOME (EXPENSE)
Interest expense increased in the second quarter and first six months of
fiscal 1996 compared to the same period of fiscal 1995 due to the $10 million
term loan for the financing of the Tennessee facility and borrowing under the
line-of-credit. Interest income decreased in the second quarter and first six
months of fiscal 1996 compared to the same periods of last year due to lower
cash balances available to invest. Miscellaneous income increased for the second
quarter and first six months of fiscal 1996 compared to the same periods of
fiscal 1995 due to the sale of scrapped materials during the second quarter of
fiscal 1996.
F. NET INCOME
The Company's results before dividends and accretion on preferred stock
were $3.8 million and $7.1 million less in the second quarter and first six
months of fiscal 1996, respectively, compared to the same period of fiscal 1995.
The primary reasons for the reductions in earnings are start-up losses of the
Tennessee facility, reduced metal margins, and price increases for alloys,
certain supply items, and energy. Without the impact of Tennessee, earnings were
$2.2 million and $4.1 million for the second quarter and first six months of
fiscal 1996, respectively, compared to $3.8 million and $7.3 million for the
same period of 1995.
LIQUIDITY AND CAPITAL RESOURCES
A. CASH AND WORKING CAPITAL
The Company ended the second quarter with current assets exceeding current
liabilities by a ratio of 3.61 to 1.00. Working capital increased by $1.0
million to $74.3 million during the six months ended March 31, 1996.
In the first six months of fiscal 1996, cash used by operations was $11.0
million. Accounts payable decreased by $1.2 million as capital project spending
decreased at the end of the second quarter. Accounts receivable increased to
support the increased sales activity towards the end of the second quarter.
Inventories also increased by $10.5 million as most of Tennessee's production
went into inventory, as billet purchases increased for Tennessee, and as
Louisiana's finished goods increased as a result of high productivity levels.
B. CAPITAL EXPENDITURES
Capital expenditures amounted to $1.6 million in the first six months of
fiscal 1996. The Company does not expect to make substantial investments in
capital during the third fiscal quarter of 1996.
C. FINANCING
On June 20, 1995, the Company completed the issuance and sale of 15,000
shares of redeemable preferred stock, par value $0.01 per share ("Preferred
Stock"), and warrants to purchase, at a nominal exercise price, six percent of
the Company's common stock for $15 million. The Preferred Stock is mandatorily
redeemable by the Company seven years after issuance and requires the payment of
quarterly dividends, at a rate of 14.5% per annum or $2.2 million per year. The
Company intends to declare and pay quarterly dividends on the preferred stock
unless prohibited by covenants in the revolving line of credit and the 10.25%
Notes. The Company declared two and paid three quarterly dividends in fiscal
1996, one of which relates to the dividend declared in the fourth fiscal quarter
of 1995. If a quarterly dividend payment is not made by the end of a quarter,
the rate will increase by 3%. In addition, the holders have a right to
additional warrants in the event that any two consecutive quarterly payments are
Page 15
missed or other defined events take place. Depending on the Company's results in
the third fiscal quarter, the Company may not be able to declare and pay the
dividend.
Simultaneously with the sale of the preferred stock and warrants, the
Company entered into a five-year term loan agreement of $10 million for the
Company's wholly owned subsidiary, BSCT. The proceeds received from the term
loan were used to repay the loan outstanding under the Company's revolving
credit facility which had been incurred to acquire substantially all of the
assets of Tennessee Valley Steel Corporation ("TVSC"). The term loan is
partially secured by the Company's accounts receivable and inventory. The term
loan agreement calls for quarterly principal payments beginning on June 30,
1997. The term loan bears interest on a sliding scale based on the quarterly
leverage ratio which is defined as indebtedness divided by earnings before
interest, taxes, depreciation, and amortization ("EBITDA"). Based on the second
quarter leverage ratio, the Company will accrue at LIBOR plus 2.25% or
approximately 8% at current rates.
On June 20, 1995, the Company amended and restated its revolving
line-of-credit agreement which will be used for general corporate purposes. The
terms call for available borrowings up to $45 million, including outstanding
letters of credit using a borrowing base of BSCL's receivables and inventory.
Based on these criteria, the net amount available as of March 31, 1996, was
$31.5 million. The five year revolving line-of-credit bears interest on a
sliding scale based on the quarterly leverage ratio which is defined as
indebtedness divided by EBITDA. The terms of the loan agreement impose certain
restrictions on the Company, the most significant of which require the Company
to maintain a minimum interest coverage ratio and limit the incurrence of
certain indebtedness. The Company borrowed $4.0 million under it's
line-of-credit during the second fiscal quarter. The Company does not anticipate
any difficulties in obtaining another secured line-of-credit upon the expiration
of the current line-of-credit in fiscal 2000.
All of the $75 million 10.25% Notes are classified as long-term debt.
There are no principal payments due on the 10.25% Notes until maturity in 2001.
The Company intends to refinance the 10.25% Notes on or before the maturity date
in 2001. The Indenture under which the Notes are issued ("the Indenture")
contains covenants which restrict the Company's ability to incur additional
indebtedness and to make dividend payments. Under the Indenture, the Company may
not incur additional indebtedness or pay dividends unless its Interest Expense
Coverage Ratio for the trailing 12 months would be greater than 2.00 to 1.00
after giving effect to such incurrence. As of March 31, 1996, the Interest
Expense Coverage Ratio was slightly above 2.0.
The Company believes that current cash balances, internally generated
funds, the credit facility, and additional purchase money mortgages are adequate
to meet the foreseeable short-term and long-term liquidity needs. If additional
funds are required to accomplish long-term expansion of its production facility
or significant acquisitions, the Company believes funding can be obtained from a
secondary equity offering or additional indebtedness.
There are no financial obligations with respect to post-employment or
post-retirement benefits.
OTHER COMMENTS
STRIKE
See "Notes to the Financial Statements" for a description of the Strike.
Page 16
ENVIRONMENTAL AND SAFETY
See "Notes to the Financial Statements" for a description of the Company's
environmental and safety issues.
OTHER
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.
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.
Page 17
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on April 23,
1996, at which the following matters were brought before and voted upon by the
shareholders:
1. The election of four (4) Class A and four (4) Class B Board of
Directors, each to serve until the next annual meeting of stockholders
and that the following Class A (total number of shares outstanding
10,613,380) and Class B (total number of shares outstanding 2,271,127)
Director nominees received the following number of votes cast:
CLASS A FOR WITHHELD
------- --- --------
John A. Canning, Jr. 9,501,962 57,933
Lawrence E. Golub 9,501,962 57,933
Jeffrey P. Sangalis 9,502,083 57,817
Stanley S. Shuman 9,501,962 57,933
CLASS B FOR WITHHELD
------- --- --------
Melvyn N. Klein 2,271,127 0
Albert P. Lospinoso 2,271,127 0
Howard M. Meyers 2,271,127 0
Jerry M. Pitts 2,271,127 0
2. Ratification of the appointment of Arthur Andersen LLP as auditors of
the Company for the fiscal year ending September 30, 1996. The total
Class A and Class B shares outstanding were 12,884,507. The detail for
the vote is as follows:
FOR AGAINST ABSTAIN
--- ------- -------
11,746,227 61,621 18,480
3. Amendment to Certificate of Incorporation to provide for board
representation for the holder of the Series A Redeemable Preferred
Stock. The total Class A and Class B shares outstanding were
12,884,507. The detail for the vote is as follows:
FOR AGAINST ABSTAIN
--- ------- -------
9,995,534 87,210 64,391
Page 18
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 - Third Restated Certificate of Incorporation of the
Company (filed with the March 31, 1996 10-Q and
incorporated by reference herein).
3.2 - Restated By-Laws of the Company (filed with the March
31, 1996 10-Q and incorporated by reference herein).
(b) Reports on Form 8-K
None were filed during the second quarter of fiscal year 1996.
Page 19
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BAYOU STEEL CORPORATION
By /s/ RICHARD J. GONZALEZ
Richard J. Gonzalez
Vice President, Chief Financial Officer,
Treasurer, and Secretary
Date: May 8, 1996
Page 20
RESTATED EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
BAYOU STEEL CORPORATION
We, the undersigned, Jerry M. Pitts and Richard J. Gonzalez, being
respectively the President and Secretary of Bayou Steel Corporation (the
"Corporation"), a corporation organized and existing under the laws of the State
of Delaware, do hereby certify as follows:
FIRST: The name of the Corporation is Bayou Steel Corporation and
the original Certificate of Incorporation was filed with the Secretary of State
of the State of Delaware on May 26, 1988 under the name "Bayou Steel Corporation
(Of LaPlace)."
SECOND: Pursuant to Section 245 of the Delaware General Corporation
Law, this Restated Certificate of Incorporation was duly adopted by the Board of
Directors of the Corporation and only restates and integrates and does not
further amend the provisions of the Corporation's Restated Certificate of
Incorporation as theretofore amended or supplemented (except for the deletion of
provisions intentionally omitted in reliance upon Section 245(c) thereof) and
there is no discrepancy between those provisions and the provisions of the
Restated Certificate of Incorporation.
THIRD: The text of the Restated Certificate of Incorporation shall
read as follows:
1. NAME. The name of the Corporation is:
BAYOU STEEL CORPORATION
2. REGISTERED OFFICE AND REGISTERED AGENT. The address of the
Corporation's registered office in Delaware is Corporation Trust Center, 1209
Orange Street, Wilmington, New Castle County, Delaware 19801. The Corporation
Trust Company is the Corporation's registered agent at that address.
3. PURPOSE. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the
Delaware General Corporation Law.
4. NUMBER OF SHARES. The total number of shares which the
Corporation shall have authority to issue, the number of shares of each class,
and the par value of each share of each class are as follows:
1
The aggregate number of shares which the Corporation shall have
authority to issue is 38,573,574 divided as follows:
NAME OF CLASS NUMBER OF SHARES PAR VALUE
------------- ---------------- ---------
Series Preferred Stock 10,000,000 $.01
Class A Common Stock 24,271,127 $.01
Class B Common Stock 4,302,347 $.01
Class C Common Stock 100 $.01
5. DESIGNATION OF CLASSES; RELATIVE RIGHTS, ETC. A statement of the
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of the shares of each class is as follows:
5.1 DEFINITIONS.
"Acquisition Agreement" shall mean the Acquisition Agreement dated
as of June 16, 1986, as amended, among Bayou Steel Corporation, Bayou Steel
Acquisition Corporation, Voest-Alpine International Corporation, La Place
Corporation and Voest-Alpine A.G.
"Amoco Tax Lease Agreements" shall mean the four "safe harbor lease"
Agreements dated November 11, 1981 and December 11, 1981 between Amoco Tax
Leasing I Corporation and the Corporation.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Common Stock" shall refer collectively to each of the Class A
Common Stock, the Class B Common Stock and the Class C Common Stock of the
Corporation.
"Consolidated Net Worth" shall mean the excess of (i) all assets of
the Corporation and its Subsidiaries computed and consolidated in accordance
with generally accepted accounting principles, less (ii) the sum of all
liabilities of the Corporation and its Subsidiaries, computed and consolidated
in accordance with generally accepted accounting principles.
"Designated Director" shall have the meaning ascribed to it in
Article 5.2.3(c).
"Employment Agreement" shall mean the Employment Agreement dated
September 5, 1986 from the Corporation to Howard M. Meyers as in effect on
September 5, 1986.
2
"Entity" shall mean and include any corporation, person or other
entity and any other entity with which it or its "affiliate" or "associate" (as
defined below) has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or disposing of stock
of the Corporation, or which is its "affiliate" or "associate" as those terms
are defined in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended, together with the successors and
assigns of such persons in any merger or consolidation of such persons or the
sale of all or substantially all of such persons' assets.
"Fair Market Value" of the Class A Common Stock shall mean the
average of the daily closing prices of the Class A Common Stock for 15
consecutive trading days commencing 20 trading days before the date of such
computation. The closing price is the last reported sale price on the principal
national securities exchange on which the Class A Common Stock is listed or, if
the Class A Common Stock is not listed on any national securities exchange, the
NASDAQ National Market System, or, if the Class A Common Stock is not designated
for trading on the NASDAQ National Market System, the average of the closing bid
and asked prices as reported on NASDAQ or, if not so reported, as furnished by
the National Quotation Bureau Incorporated. In the absence of such a quotation,
the Company shall determine the current market price on a reasonable and
appropriate basis of the average of the daily closing prices for 15 consecutive
trading days commencing 20 trading days before the date of such computation.
"Permanent Disability" and "Permanently Disabled" shall mean such
physical or mental disability or incapacity of Howard M. Meyers which has
substantially prevented him or will substantially prevent him from performing
his duties as Chief Executive Officer of the Corporation for more than a total
of 150 days during any 365-day period as determined by unanimous or majority
vote of a panel of medical practitioners consisting of one person selected by a
majority of directors elected by holders of Class A Common Stock and one person
selected by a majority of directors elected by holders of Class B Common Stock
and, if the foregoing two persons cannot agree, a third person mutually
acceptable to a majority of both classes of directors (the "Panel"), which Panel
may be convened at any time by a majority of directors elected by either the
holders of Class A Common Stock or Class B Common Stock and, in the event Howard
M. Meyers is deemed Permanently Disable, then thereafter the Panel may be
convened to review such determination by a majority of directors elected by
either the holders of Class A Common Stock or Class B Common Stock at any time
or by Howard M. Meyers once every 90 calendar days; provided that any fees for
such panel need only be paid by the Corporation once every 12 months.
3
"Preferred Stock Purchase Agreement" shall mean the Preferred Stock
and Warrant Purchase Agreement between Bayou Steel Corporation and Rice Partners
II, L.P., dated June 20, 1995, as amended from time to time.
"Removal for Cause" shall mean the removal of Howard M. Meyers as
Chief Executive Officer of the Corporation for "Cause" as defined in paragraph 9
of the Employment Agreement and only upon the affirmative vote of the holders of
a majority of shares of Class A Common stock, voting as a class, regardless of
whether the Employment Agreement is in effect at any given time.
"Senior Note Indenture" shall mean the Indenture dated
September 5, 1986 between Bayou Steel Acquisition Corporation and
First National Bank of Commerce.
"Series A Preferred Stockholder" shall mean Rice Partners
II, L.P. and any successors or assigns to its rights under the
Preferred Stock Purchase Agreement.
"Series Preferred Stock" shall mean the Series Preferred
Stock of the Corporation.
"Subsidiary" shall mean a corporation of which a majority of the
capital stock having voting power under ordinary circumstances to elect a
majority of the board of directors is owned by the Corporation, the Corporation
and one or more Subsidiaries, or one or more Subsidiaries.
5.2 CLASS A COMMON STOCK.
5.2.1 DIVIDENDS. The holders of the outstanding shares of Class A
Common Stock shall be entitled to receive dividends as and when declared by the
Board of Directors out of funds legally available therefor in amounts per share
declared for the Class B Common Stock and Class C Common Stock; provided that
dividends shall be declared or funds set aside for payment on the Class A Common
Stock only if dividends are declared or funds set aside for payment concurrently
on the Class B Common Stock and Class C Common Stock; and, provided further that
no dividends or other distribution in any given fiscal year of the Corporation
shall be declared or funds set aside for payment thereof on the Class A Common
Stock until any preferred dividend or other distribution for such fiscal year
shall have been declared and funds set aside with respect to any shares of
Series Preferred Stock outstanding.
5.2.2 CONVERSION. The holders of the outstanding Class A Common
Stock will not be entitled to convert such shares into any other class of stock
of the Corporation.
4
5.2.3 VOTING RIGHTS.
(a) GENERAL. Subject to the provisions of this Certificate of
Incorporation relating to class voting, the holders of the Class A Common Stock
shall be entitled to one vote per share on all matters other than the election
of directors, voting together with the holders of the Class B Common Stock and
Class C Common Stock and not as a separate class.
(b) RIGHT TO ELECT DIRECTORS. The holders of the Class A Common
Stock shall have the right at any annual meeting or other meeting of
stockholders called for the purpose of electing directors, subject to the
provisions of Article 5.2.3(d) hereof, solely to vote for and elect, as a class,
that number of directors which, rounded to the nearest whole number, represents
40% of the number of directors then comprising the Board of Directors and to
remove such directors with or without cause at any time and to fill all
vacancies in such directorships; provided, however, that as long as the Class A
Common Stock is listed on the American Stock Exchange and in order to maintain
such listing, then from and after the time that the number of outstanding shares
of Class B Common Stock is less than 12.5% of the aggregate number of
outstanding shares of Common Stock, in addition to the foregoing right to elect
the number of directors as set forth above, the Class A Common Stock will vote
as one class with the Class B Common Stock for the election of the remaining
directors comprising the Board of Directors, with the Class B Common Stock
having ten votes per share and the Class A Common Stock having one vote per
share. Notwithstanding the foregoing, however, from and after the resignation
(provided, however, that the expiration of the term of the Employment Agreement
shall not, in and of itself, be deemed a resignation), or Removal for Cause or
retirement of Howard M. Meyers as Chief Executive Officer of the Corporation, or
death or Permanent Disability of Howard M. Meyers (except with respect to the
cessation of Permanent Disability pursuant to Article 5.3.3(a)(i) hereof), or
such time as more than 1,362,676 shares (as such number may be adjusted from
time to time under Article 5.5(a)) of Class B Common Stock have been converted
into Class A Common Stock, the holders of the outstanding Class A Common Stock
shall be entitled to one vote per share in the election of directors of the
Corporation, voting together with the holders of the Class B Common Stock and
the Class C Common Stock, each of which shall have one vote per share, and not
as a separate class, subject to any rights of the Series A Preferred Stockholder
to elect directors as provided in the Preferred Stock Purchase Agreement.
(c) THE DESIGNATION OF DESIGNATED DIRECTOR. For any election (i) at
which the holders of the Class A Common Stock have the right to vote for and
elect, as a class, five directors, one director so elected by the holders of the
Class A Common Stock, and
5
(ii) at which the holders of the Class A Common Stock and Class B Common Stock
no longer elect directors separately by class, one director so elected, shall be
designated by the Nominating Committee of the Board of Directors as the
Designated Director ("Designated Director").
(d) EFFECT OF SERIES A PREFERRED STOCKHOLDER RIGHTS. If the Series A
Preferred Stockholder delivers a written notice to the Corporation of its intent
to elect one director to the Board of Directors pursuant to Section 4.16 of the
Preferred Stock Purchase Agreement at a time that it is entitled to give such
notice, then, in accordance with Article 9, the Board of Directors, if it does
not already consist of thirteen directors, shall immediately be increased to
thirteen directors and, if the holders of the Class A Common Stock and Class B
Common Stock are still electing directors separately by class, the number of
directors to be elected by the Class A Common Stock shall be five, the number of
directors to be elected by the Class B Common Stock shall be seven and the
number of directors to be elected by the Series A Preferred Stockholder shall be
one. If the Series A Preferred Stockholder delivers an additional notice to the
Corporation of its intent to elect a second director to the Board of Directors
(the "Second Director") pursuant to Section 4.16 of the Stock Purchase Agreement
at a time that it is entitled to give such notice, and if the holders of the
Class A Common Stock and Class B Common Stock are still electing directors
separately by class, the number of directors to be elected by the Class A Common
Stock shall be four, the number of directors to be elected by the Class B Common
Stock shall be seven and the number of directors to be elected by the Series A
Preferred Stockholder shall be two. Any director so elected by the Series A
Preferred Stockholder shall hold office until the next annual meeting, unless
such director's term expires before such meeting in accordance with Article
5.2.3(f) hereof. During the term(s) of any such director(s), the Series A
Preferred Stockholder shall also have the right solely to remove any such
director(s) with or without cause at any time and to fill all vacancies in such
directorships, except as provided in Article 5.2.3(f) hereof.
(e) TERM OF THE DESIGNATED DIRECTOR; ELECTION OF DIRECTOR(S) BY
SERIES A PREFERRED STOCKHOLDER. In the event that the Corporation receives
written notice from the Series A Preferred Stockholder, at a time that does not
coincide with an annual meeting, that the Series A Preferred Stockholder wishes
to elect its Second Director pursuant to Section 4.16 of the Preferred Stock
Purchase Agreement at a time when the Series A Preferred Stockholder is entitled
to give such notice, the term of the Designated Director shall expire. Within
seven days of receipt of this written notice, the Board shall take the necessary
action to fill the vacancy created by the expiration of the term of the
Designated Director with the nominee of the Series A Preferred Stockholder.
6
(f) END OF TERM OF A DIRECTOR ELECTED BY THE SERIES A PREFERRED
STOCKHOLDER; FILLING OF VACANCY. If, in accordance with Section 4.16 of the
Preferred Stock Purchase Agreement, the Series A Preferred Stockholder ceases to
be entitled to elect any director(s) who is (are) currently holding office, the
Corporation shall deliver written notice of such development to the Series A
Preferred Stockholder, and the term(s) of such director(s) will immediately and
automatically expire. The first vacancy created by such expiration may be filled
by the unanimous vote of the remaining directors elected by the holders of the
Class A Common Stock, and the second vacancy may be filled by the unanimous vote
of the remaining directors elected by the holders of the Class B Common Stock
(or, in each case, by a majority of the entire Board of Directors if directors
are no longer elected by class). The director so appointed to replace the Series
A Preferred Stockholder's Second Director will be considered the Designated
Director and will be subject to the provisions of Article 5.2.3(e) hereof.
5.3 CLASS B COMMON STOCK.
5.3.1 DIVIDENDS. The holders of the outstanding shares of Class B
Common Stock shall be entitled to receive dividends as and when declared by the
Board of Directors out of funds legally available therefor in amounts per share
equal to the amounts per share declared for the Class A Common Stock and Class C
Common Stock; provided that dividends shall be declared or funds set aside for
payment on the Class B Common Stock only if dividends are declared or funds set
aside for payment concurrently on the Class A Common Stock and Class C Common
Stock; and, provided further that no dividends or other distribution in any
given fiscal year of the Corporation, shall be declared or funds set aside for
payment on the Class B Common Stock until any preferred dividend or distribution
for such fiscal year shall have been declared and funds set aside with respect
to any shares of Series Preferred Stock outstanding.
5.3.2 CONVERSION.
(a) The holder of any share or shares outstanding of Class B Common
Stock shall have the right, at the holder's option, to convert all or any
portion of such shares into fully paid and nonassessable shares of Class A
Common Stock at any time and from time to time, at the rate of one share of
Class A Common Stock for one share of Class B Common stock (the "Class B
Conversion Rate").
(b) The Class B Common Stock shall be convertible at the principal
office of the Corporation into fully paid and nonassessable shares of Class A
Common Stock at the Class B Conversion Rate.
7
(c) In order to convert shares of Class B Common Stock into shares
of Class A Common Stock pursuant to the right of conversion set forth in Article
5.3.2(a), the holder thereof shall surrender the certificate or certificates
representing Class B Common Stock, duly endorsed to the Corporation or in blank,
at the principal office of the Corporation and shall give written notice to the
Corporation that such holder elects to convert the same, stating in such notice
the number of shares such holder desires to convert and name or names in which
such holder wishes the certificate or certificates representing shares of Class
A Common Stock to be issued. The Corporation shall, within ten business days,
deliver at said office or other place to such holder of Class B Common Stock, or
to such holder's nominee or nominees, a certificate or certificates for the
number of shares of Class A Common Stock to which such holder shall be entitled
as aforesaid. Shares of Class B Common Stock shall be deemed to have been
converted as of the date of the surrender of such shares for conversion as
provided above, and the person or persons entitled to receive the shares of
Class A Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Class A Common Stock
on such date. Upon conversion of only a portion of the number of shares covered
by a certificate representing shares of Class B Common Stock surrendered for
conversion, the Corporation shall issue and deliver to, or upon written order
of, the holder of the certificate so surrendered for conversion, at the expense
of the Corporation, a new certificate covering the number of shares of Class B
Common Stock representing the unconverted portion of the certificate so
surrendered, which new certificates shall entitle the holder thereof to the
rights of the shares of Class B Common Stock represented thereby to the same
extent as if the certificate theretofore covering such unconverted shares had
not been surrendered for conversion.
(d) The issuance of certificates for shares of Class A Common Stock
upon the conversion of shares of Class B Common Stock shall be made without
charge to the converting stockholder for the original issue or transfer tax in
respect of the issuance of such certificates and any such tax shall be paid by
the Corporation.
(e) In case the Corporation shall effect a reorganization, shall
merge with or consolidate into another corporation, or shall sell, transfer or
otherwise dispose of all or substantially all of its property, assets or
business and, pursuant to the terms of such reorganization, merger,
consolidation or disposition of assets, shares of stock or other securities,
property or assets of the Corporation, successor or transferee or an affiliate
thereof or cash are to be received by or distributed to the holders of Class A
Common Stock, then each holder of Class B Common Stock shall be given a written
notice from the Corporation
8
informing each holder of the terms of such reorganization, merger,
consolidation, or distribution of assets and of the record date thereof for any
distribution pursuant thereto, at least ten days in advance of such record date,
and each holder of Class B Common Stock shall have the right thereafter to
receive, upon conversion of such Class B Common Stock, the number of shares of
stock or other securities, property or assets of the Corporation, successor or
transferee or affiliate thereof or cash receivable upon or as a result of such
reorganization, merger, consolidation or disposition of assets which a holder of
that number of shares of Class A Common Stock equal to the Class B Conversion
Rate immediately prior to such event would be entitled to receive, multiplied by
the number of shares of Class B Common Stock as may be converted. The provisions
of this subparagraph (e) shall similarly apply to successive reorganizations,
mergers, consolidations or dispositions of assets.
(f) If a state of facts shall occur which, without being
specifically controlled by the provisions of this Article 5.3, would not fairly
protect the conversion rights of the Class B Common Stock in accordance with the
essential intent that Class A Common Stock and Class B Common Stock be
equivalent except for the distinction in voting rights as provided in this
Certificate of Incorporation, then the Board of Directors of the Corporation
shall make an adjustment in the application of such provisions, in accordance
with such essential intent, so as to protect such conversion rights.
(g) The Corporation shall, so long as any of the Class B Common
Stock remains outstanding, reserve and keep available out of its authorized and
unissued Class A Common Stock, solely for the purpose of effecting the
conversion of the Class B Common Stock, such number of shares of Class A Common
Stock as shall from time to time be sufficient to effect the conversion of all
shares of the Class B Common Stock, then outstanding. The Corporation shall from
time to time increase its authorized Class A Common Stock and take such other
action as may be necessary to permit the issuance from time to time of the
shares of Class A Common Stock, as fully paid and nonassessable shares, upon the
conversion of the Class B Common Stock, as herein provided.
5.3.3 VOTING RIGHTS.
(a) GENERAL. (i) Subject to the provisions of this Certificate of
Incorporation relating to class voting, the holders of the Class B Common Stock
shall be entitled to the number of votes per share on all matters other than the
election of directors, voting together with the holders of outstanding shares of
Class A Common Stock and Class C Common Stock, as would entitle such holders to
cast, in the aggregate, 60% of the total number of
9
votes therefor; provided, that as long as the Class A Common Stock is listed on
the American Stock Exchange and if necessary to maintain the listing of the
Class A Common Stock on the American Stock Exchange or if at any time the
holders of Class B Common Stock shall be entitled to cast more than ten votes
for every one of the Class A Common Stock, then the Class B Common Stock shall
be entitled to no more than ten votes per share. Notwithstanding the foregoing,
from and after the resignation (provided, however, that the expiration of the
term of the Employment Agreement shall not, in and of itself, be deemed a
resignation), or Removal for Cause or retirement of Howard M. Meyers as Chief
Executive Officer of the Corporation or the death or Permanent Disability of
Howard M. Meyers, or such time as more than 1,362,676 shares (as such number may
be adjusted from time to time under Article 5.5(a)) of Class B Common Stock have
been converted into Class A Common Stock, the holders of the outstanding Class B
Common Stock shall be entitled to one vote per share on all matters other than
the election of directors voting together with the holders of the Class A Common
Stock and Class C Common Stock and not as a separate class; provided, that if at
any time within five years after Howard M. Meyers is deemed Permanently
Disabled, the Panel determines that Howard M. Meyers is not Permanently
Disabled, the holders of Class B Common Stock shall then be entitled to the
votes per share described in the first sentence of this Article 5.3.3(a)(i).
(ii) The holders of the shares of Class B Common Stock shall be
entitled to vote on, as a class, and the approval of the holders of a majority
of such shares of Class B Common Stock shall be required for, (A) any merger,
consolidation or reorganization of the Corporation with or into another
corporation in which the Corporation is not the surviving entity in such merger,
consolidation or reorganization (other than a merger or reorganization of the
Corporation for the purpose of reincorporation in another state which does not
adversely affect the rights of holders of Class B Common Stock), (B) any
dissolution or liquidation by dividend or otherwise of the Corporation, (C) any
sale, assignment, or other disposition of (other than a sale, assignment or
disposition of (r) property subject to an Amoco Tax Lease Agreement or (s) any
Amoco Tax Lease Agreement, occurring by reason of action taken pursuant to a
mortgage or similar security instrument placed on (i) the property subject to
the Amoco Tax Lease Agreements or (ii) any Amoco Tax Lease Agreement) the
Corporation's interest in (1) any property that is subject to an Amoco Tax Lease
Agreement or (2) any Amoco Tax Lease Agreement, unless (a) such sale,
assignment, or other disposition fully complies with the terms of the applicable
Amoco Tax Lease Agreement, the provisions of Section 168(f)(8) of the Code, as
in effect on the dates on which the Amoco Tax Lease Agreements were entered
into, and the U.S. Income Tax Regulations promulgated thereunder from time to
time (whether in temporary, proposed, or
10
final form (the "Regulations")), and (b) any purchaser, assignee, or transferee
of any such interest agrees in writing prior to such sale, assignment or other
disposition (x) to take such property subject to the applicable Amoco Tax Lease
Agreement within the meaning of Section 5c.168(f)(8)-2 of the Regulations, (y)
to take any action, including the filing of any statement with its Federal
income tax return or the furnishing of any written consent or statement to any
person, necessary in order to preserve the character of the applicable Amoco Tax
Lease Agreement as a lease for United States Federal income tax purposes in
accordance with Section 168(f)(8) of the Code as in effect on the dates on which
the Amoco Tax Lease Agreements were entered into (in each case under this clause
as provided in Section 168(f)(8) of the Code, as in effect on the dates on which
the Amoco Tax Lease Agreements were entered into, or the Regulations promulgated
thereunder from time to time) and (z) to comply fully with each undertaking
agreed to by Bayou Steel Acquisition Corporation in Sections 7.9(f), 7.9(g),
7.9(h), 7.9(j), 7.9(k), 7.9(l), 7.9(m), 7.9(n), 7.5(b), 7.5(c) and 7.6 of the
Acquisition Agreement as if such purchaser, assignee or transferee were therein
named. The voting requirements of this Article 5.3.3(a)(ii) shall apply whether
or not the Corporation is insolvent. Additionally, no voting rights shall be
conferred upon the holders of any bonds, debentures or other obligations issued
by the Corporation or any other person which would adversely affect the rights
of the holders of the Class B Common Stock in any respect. The provisions of
this Article 5.3.3(a)(ii) shall not require a shareholder vote in connection
with the granting of any mortgage or other security interest pursuant to or in
connection with the Senior Note Indenture.
(b) RIGHT TO ELECT DIRECTORS. The holders of the Class B Common
Stock shall have the right at any annual meeting or other meeting of
stockholders called for the purpose of electing directors, subject to the
provisions of Article 5.2.3(d), solely to vote for and elect, as a class, that
number of directors which, rounded to the nearest whole number, represents 60%
of the number of directors then comprising the Board of Directors and to remove
such directors with or without cause and to fill all vacancies in such
directorships; provided, however, that as long as the Class A Common Stock is
listed on the American Stock Exchange and in order to maintain such listing,
then from and after the time that the number of outstanding shares of Class B
Common Stock is less than 12.5% of the aggregate number of outstanding shares of
Common Stock, the Class B Common Stock will vote as one class with the Class A
Common Stock for the election of the number of directors set forth above, with
the Class B Common Stock having ten votes per share and Class A Common Stock
having one vote per share. Notwithstanding the foregoing, however, from and
after the resignation (provided, however, that the expiration of the term of the
Employment Agreement shall not, in and of itself, be deemed a
11
resignation), or Removal for Cause or retirement of Howard M. Meyers as Chief
Executive Officer of the Corporation, or death or Permanent Disability of Howard
M. Meyers (except with respect to the cessation of Permanent Disability pursuant
to Article 5.3.3(a)(i) above) or such time as more than 1,362,676 shares (as
such number may be adjusted from time to time under Article 5.5(a)), of Class B
Common Stock have been converted into Class A Common Stock, the holders of the
outstanding Class B Common Stock shall be entitled to one vote per share, voting
together with the holders of the Class A Common Stock and the Class C Common
Stock and not as a separate class, in the election of all directors of the
Corporation, subject to any rights of the Series A Preferred Stockholder to
elect directors as provided in the Preferred Stock Purchase Agreement. The
foregoing rights of the holders of the Class B Common Stock to elect directors,
as a class, are modified by and subject to the provisions of Article 5.4.3(c).
5.4 CLASS C COMMON STOCK.
5.4.1 DIVIDENDS. The holders of the outstanding shares of Class C
Common Stock shall be entitled to receive dividends as and when declared by the
Board of Directors out of funds legally available therefor in amounts per share
equal to the amounts per share declared for the Class A Common Stock and Class B
Common Stock; provided that dividends shall be declared or funds set aside for
the payment on the Class C Common Stock only if dividends are declared and funds
set aside concurrently on the Class A Common Stock and Class B Common Stock.
5.4.2 CONVERSION. The holders of the outstanding shares of Class C
Common Stock will not be entitled to convert such shares into any other class of
stock of the Corporation. No holder of shares of any other class of stock of the
Corporation or any obligations of the Corporation or any other person shall have
or may be given the right to convert such shares of stock or obligations into
shares of Class C Common Stock.
5.4.3 VOTING RIGHTS.
(a) Subject to the provisions of this Certificate of Incorporation
relating to class voting and article 5.4.3(c) hereof, the holders of the Class C
Common Stock shall be entitled to one vote per share voting together with the
holders of the Class A Common Stock and the Class B Common Stock and not as a
separate class, unless otherwise required by law.
(b) The holders of the shares of Class C Common Stock shall be
entitled to vote on, as a class, and the approval of 100% of the holders of such
shares of Class C Common Stock shall be required for (i) any merger,
consolidation or reorganization of the
12
Corporation with or into another corporation in which the Corporation is not the
surviving entity in such merger, consolidation or reorganization (other than a
merger or reorganization of the Corporation for the purpose of reincorporation
in another state which does not adversely affect the rights of the holders of
the Class C Common Stock), (ii) any dissolution or liquidation by dividend or
otherwise of the Corporation, (iii) any sale, assignment, or other disposition
of (other than a sale, assignment or disposition of (a) property subject to an
Amoco Tax Lease Agreement or (b) any Amoco Tax Lease agreement, occurring by
reason of action taken pursuant to a mortgage or similar security instrument
placed on (r) the property subject to the Amoco Tax Lease agreements or (s) any
Amoco Tax Lease Agreement) the Corporation's interest in (A) any property that
is subject to an Amoco Tax Lease Agreement or (B) any Amoco Tax Lease Agreement,
unless (1) such sale, assignment, or other disposition fully complies with the
terms of the applicable Amoco Tax Lease Agreement, the provisions of Section
168(f)(8) of the Code, as in effect on the dates on which the Amoco Tax Lease
Agreements were entered into, and the Regulations promulgated thereunder from
time to time, and (2) any purchaser, assignee, or transferee of any such
interest agrees in writing prior to such sale, assignment or other disposition
(x) to take such property subject to the applicable Amoco Tax Lease Agreement
within the meaning of Section 5c.168(f)(8)-2 of the Regulations, (y) to take any
action, including the filing of any statement with its Federal income tax return
or the furnishing of any written consent or statement to any person, necessary
in order to preserve the character of the applicable Amoco Tax Lease agreement
as a lease for United States Federal income tax purposes in accordance with
Section 168(f)(8) of the Code, as in effect on the dates on which the Amoco Tax
Lease Agreements were entered into (in each case under this clause as provided
in Section 168(f)(8) of the Code, as in effect on the dates on which the Amoco
Tax Lease Agreements were entered into, or the Regulations promulgated
thereunder from time to time) and (z) to comply fully with each undertaking
agreed to by Bayou Steel Acquisition Corporation in Sections 7.9(f), 7.9(g),
7.9(h), 7.9(j), 7.9(k), 7.9(l), 7.9(m), 7.9(n), 7.5(b), 7.5(c) and 7.6 of the
Acquisition Agreement as if such purchaser, assignee or transferee were therein
named, and (iv) any amendment to this Certificate of Incorporation that would
increase the number of authorized shares of Class C Common Stock, modify Article
5.4 in any way or adversely affect the rights of the holders of Class C Common
Stock in any respect. The voting requirements of this Article 5.4.3(b) shall
apply whether or not the Corporation is insolvent. Additionally, no voting
rights shall be conferred upon the holders of any bonds, debentures or other
obligations issued by the Corporation or any other person which would adversely
affect the rights of the holders of the Class C Common Stock in any respect. The
provisions of this Article 5.4.3(b) shall not require
13
a shareholder vote in connection with the granting of any mortgage or other
security interest pursuant to or in connection with the Senior Note Indenture.
(c) If any corporation or affiliated group, as defined in Section
338(h)(5) of the Code, or any comparable provision of any superseding Federal
tax statute, and the Regulations promulgated thereunder from time to time (a
"Third Party Purchaser") acquires directly or indirectly through any other
entity, person, agent, or nominee, by any means (including, but not limited to,
a redemption of shares of the stock of the Corporation held by any other person)
any share or shares of the stock of the Corporation which, when aggregated with
all other shares of the stock of the Corporation held by such Third Party
Purchaser, would, but for this Article 5.4.3(c), allow such Third Party
Purchaser to possess, directly or indirectly, in the aggregate at least that
percentage of the Total Combined Voting Power (as defined below) which is equal
to the percentage determined by subtracting two percentage points from the
Minimum Percentage (as defined below), then, and for so long as possession of
such percentage is maintained, the outstanding shares of Class C Common Stock
shall, in the aggregate, automatically possess that percentage of that Total
Combined Voting Power which is equal to the sum of one percent plus the
difference between 100 percent and the Minimum Percentage, such increase in
voting power to become effective simultaneously with the acquisition by such
Third Party Purchaser of any share or shares of the stock of the Corporation
which, when aggregated with all other shares of the stock of the Corporation
held by such Third Party Purchaser, would allow such Third Party Purchaser to
possess, directly or indirectly, in the aggregate at least two percentage points
less than the Minimum Percentage of the Total Combined Voting Power. Possession
of such percentage of Total Combined Voting Power by the holders of the Class C
Common Stock shall mean with respect to the election of directors that (i) if
the holders of the shares of Class A Common Stock, Class B Common Stock and
Class C Common Stock have, at the time of any election of directors, the right
to elect the entire Board of Directors voting together and not as separate
classes, the holders of the Class C Common Stock shall be entitled to cast the
percentage of votes in such election as is equal to the sum of one percent plus
the difference between 100 percent and the Minimum Percentage and (ii) if Class
A Common Stock, Class B Common Stock or Preferred Stock have, at the time of any
election of directors, the right to elect, by class vote, any directors of the
Corporation, the holders of the Class C Common Stock shall have the sole right
to vote for and elect, as a class, one percent plus the difference between 100
percent and the Minimum Percentage of the number of directors of the Corporation
(rounded up to the nearest whole number) and to remove such directors with or
without cause at any time and to fill all vacancies in such directorship and, if
required to permit such election, the number of directors which the
14
holders of the Class B Common Stock are entitled to elect as a class pursuant to
Article 5.3.3(b) shall be reduced to the extent necessary. Such right of the
Class C Common Stock to elect directors as a class shall be eliminated upon the
effectiveness of any registration statement relating to the Class A Common Stock
under the Federal securities laws. Additionally, such right of the Class C
Common Stock to elect directors, as a class, shall be eliminated and such
increased voting power shall be reduced to the number of votes to which such
shares of Class C Common Stock otherwise would be entitled but for this Article
5.4.3(c) upon the occurrence of any of the following events, but only for so
long as the circumstances or agreements contemplated by such event exist or are
fully complied with by such Third Party Purchaser:
(i) such Third Party Purchaser enters into a written agreement with
the holders of the then outstanding shares of Class C Common Stock (x) not to
make an election pursuant to Section 338 of the Code, or any comparable
provision of any superseding Federal tax statute, and the Regulations
promulgated thereunder (the "Section 338 Election") with respect to the
Corporation, (y) not to, and to cause the Corporation not to, take or fail to
take any action if the taking of such action or the failure to take such action
would result in a deemed Section 338 Election pursuant to Section 338(e) or (f)
of the Code, or any comparable provision of any superseding Federal tax statute,
and the Regulations promulgated thereunder, and (z) to file with the Internal
Revenue Service, at the request of the holders of the then outstanding shares of
Class C Common Stock, any and all documents evidencing its decision (A) not to
make a Section 338 Election, including, but not limited to, a "protective
carryover election," as defined in Section 1.338-4T(f)(6) of the Regulations,
and (B) not to, and to cause the Corporation not to, take, or fail to take, any
action if the taking of such action or failure to take such action would result
in a deemed Section 338 Election, or
(ii) such Third Party Purchaser furnishes to the holders of the then
outstanding shares of Class C Common Stock an irrevocable letter of credit, for
a term ending December 31, 2003, in favor of such holders and reasonably
satisfactory in form and substance to such holders, issued by a U.S. financial
institution that is acceptable to such holders in an amount at least sufficient,
in the reasonable opinion of such holders, to reimburse them on a net after-tax
basis for any payments any or all of them would be required to make to any party
pursuant to any or both of the letters dated November 11, 1981 and December 7,
1981, respectively, to Amoco Tax Leasing I Corporation from Voest-Alpine A.G.,
Voest-Alpine International Corporation, and certain other corporations, or any
successor or substitute letter thereto, as a result of a Section 338 Election
being made, or deemed made, by such Third Party Purchaser with respect to the
Corporation, or
15
(iii) at any time after the last date on which a Section 338
Election may be made, or deemed made, with respect to the Corporation as a
result of a "qualified stock purchase," as defined in Section 338(d)(3) of the
Code, or any comparable provision of any superseding Federal tax statute, of the
stock of the Corporation, which purchase occurs during the term of any of the
Amoco Tax Lease Agreements.
The "Minimum Percentage" shall be the percentage of the Total Combined Voting
Power of all classes of stock of a corporation entitled to vote that is required
under Section 338(d)(3)(A) of the code for purposes of a "qualified stock
purchase" as defined in said Section.
The "Total Combined Voting Power" shall be the total combined voting power of
all classes of stock of the Corporation entitled to vote as determined in the
manner provided in Section 338 of the Code, or any comparable provision of any
superseding Federal tax statute.
5.5 RELATIVE RIGHTS OF CLASS A COMMON STOCK AND CLASS B COMMON
STOCK. (a) The Corporation shall not (i) declare or pay to the holders of Class
A Common Stock or Class B Common Stock a dividend or other distribution payable
in stock or securities of the Corporation, (ii) subdivide the outstanding shares
of Class A Common Stock or Class B Common Stock into a greater number of shares
of Class A Common Stock or Class B Common Stock, (iii) combine the outstanding
shares of Class A Common Stock or Class B Common Stock into a lesser number of
shares, or (iv) issue by reclassification of its shares of Class A Common Stock
or Class B Common Stock any shares of the Corporation, unless, in each case, the
Corporation shall effect concurrently an equivalent dividend, distribution,
subdivision, combination or reclassification with respect to Class A Common
Stock and Class B Common Stock.
(b) Except as permitted by Article 5.5(a), the Corporation shall not
issue additional shares of Class A Common Stock for any reason unless it offers
to the holders of Class B Common Stock the right to purchase all or any part of
such additional shares of Class B Common Stock, in such amount as to maintain
after the issuance the ratio that the number of shares of Class B Common Stock
bears to the aggregate number of shares of Common Stock outstanding immediately
prior to the issuance of the shares of Class A Common Stock, for such
consideration per share equal to the fair market value of the consideration per
share being paid for the Class A Common Stock being issued. If such
consideration is other than cash, the Corporation shall determine the fair
market value thereof, which determination shall be final and conclusive.
16
(c) No additional shares of Class B Common Stock shall be issued
except in order to satisfy the adjustment requirements of this Article 5.5.
5.6 SERIES PREFERRED STOCK. The Board of Directors of the
Corporation, with the approval of all of the directors elected by the holders of
each of the Class A Common Stock and the Class B Common Stock (or only a
majority of the entire Board of Directors if directors are no longer elected by
class), is authorized, subject to the limitations prescribed by law or this
Certificate of Incorporation and the provisions of this Article 5.6, to provide
for the issuance from time to time in one or more series of any number of shares
of Series Preferred Stock, and, by filing a certificate pursuant to the Delaware
General Corporation Law, to establish the number of shares to be included in
each such series, and to fix the designation, relative rights, preferences,
qualifications and limitations of the shares of each such series. The authority
of the Board of Directors with respect to each series shall include, but not be
limited to, determination of the following:
(i) The number of shares constituting that series and the
distinctive designation of that series;
(ii) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, and whether
they shall be payable in preference to, or in another relation to, the dividends
payable on any other class or classes or series of stock;
(iii) Whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of such voting rights;
(iv) Whether that series shall have conversion or exchange
privileges, and, if so, the terms and conditions of such conversion or exchange,
including provision for adjustment of the conversion or exchange rate in such
events as the Board of Directors shall determine;
(v) Whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption, including the manner of
selecting shares for redemption if less than all shares are to be redeemed, the
date or dates upon or after which they shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(vi) Whether that series shall be entitled to the benefit of a
sinking fund to be applied to the purchase or redemption of shares of that
series, and, if so, the terms and amounts of such sinking fund;
17
(vii) The right of the shares of that series to the benefit of
conditions and restrictions upon the creation of indebtedness of the Corporation
or any Subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of dividends
or the making of other distributions on, and the purchase, redemption or other
acquisition by the Corporation or any Subsidiary of any outstanding stock of the
Corporation;
(viii) The right of the shares of that series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and whether such rights shall be in preference to, or in another
relation to, the comparable rights of any other class of classes or series of
stock; and
(ix) Any other relative, participating, optional or other special
rights, qualifications, limitations or restrictions of that series.
Shares of any series of Series Preferred Stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of stock of
any other class or classes shall have the status of authorized and unissued
shares of Series Preferred Stock of the same series and may be reissued as a
part of the series of which they were originally a part or may be reclassified
and reissued as part of a new series of Series Preferred Stock to be created by
resolution(s) of the Board of Directors or as part of any other series of Series
Preferred Stock, all subject to the conditions and the restrictions on issuance
set forth in the resolution(s) adopted by the Board of Directors providing for
the issue of any series of Series Preferred Stock.
5.7 SPECIAL MEETINGS OF STOCKHOLDERS TO ELECT DIRECTORS. As promptly
as practicable after the time when (i) the holders of the Class B Common Stock
become entitled to only one vote per share, voting together as one class with
the holders of the Class A and Class C Common Stock, or (ii) a Panel
determination of Howard M. Meyers' Permanent Disability is made pursuant to
Article 5.3.3(a)(i), a special meeting of the stockholders shall be called for
the purpose of electing new directors. At that time, or as soon as permitted by
applicable law, the terms of the office of the directors then in office shall
terminate and new directors shall be elected in accordance with the provisions
of this Certificate of Incorporation.
5.8 AMENDMENT TO CERTIFICATE OF INCORPORATION. Any amendment to this
Certificate of Incorporation which would adversely affect the rights of any
class of stock of the Corporation shall require the affirmative vote of holders
of a majority of shares of stock of such class, voting as a single class.
18
5.9 RESTRICTIONS ON TRANSFERS OF CLASS A COMMON STOCK
AND CLASS B COMMON STOCK.
(a) Any attempted sale, transfer, assignment, conveyance, pledge or
other disposition of any share of the Corporation's Class A or Class B Common
Stock or any option to purchase such Class A or Class B Common Stock (or similar
right described in Sections 382(k)(6)(B) or 382(1) of the Code and the
regulations thereunder) to any person (a "Person," which term shall have the
meaning set forth in Section 2(2) of the Securities Act of 1933, as amended) who
directly or indirectly, beneficially owns (as determined pursuant to Rules 13d-3
and 13d-5 under the Securities Exchange Act of 1934, as amended), or, as a
result of such attempted disposition, would beneficially own, or whose shares
would be attributed pursuant to the applicable attribution provisions of the
Code to any Person who would so directly or indirectly beneficially own, after
giving effect to the applicable attribution provisions of the Code, 5% or more
of the fair market value of the Corporation's Class A Common Stock outstanding
shall be null and void AB INITIO insofar as it purports to transfer ownership of
any shares that would cause the transferee to attain such 5% ownership level 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 Corporation's Class A
Common Stock prior to the attempted disposition, the entire attempted
disposition shall be null and void AB INITIO.
(b) Nothing contained in Article 5.9(a) shall prevent an otherwise
valid transfer if the transferee obtains the written approval of all of the
directors elected by the holders of each of the Class A Common Stock and Class B
Common Stock (or only a majority of the entire Board of Directors if directors
are no longer elected by class) and, except to the extent the Board of Directors
of the Corporation in its discretion waives the requirement, provides the
Corporation with an opinion of reputable tax counsel satisfactory to the
Corporation and its tax counsel that the transfer shall not result in the
application of any tax law limitation on the use of the Corporation's losses or
other tax attributes. Notwithstanding the foregoing, Article 5.9(a) shall not
apply to (i) the issuance of shares of Common Stock in the merger of Bayou Steel
Corporation (of La Place), a Louisiana corporation, into the Corporation,
provided that any increase in the ownership of Common Stock by Persons who
receive such shares in the merger is subject thereto; (ii) any transfer of
shares of Class B Common Stock in accordance with clause (i) Article 6(a)
hereof; (iii) any issuance of shares of Common Stock to the shareholders of RSR
Steel Corporation in a merger with the Corporation or in connection with the
sale of all or substantially all of the assets of RSR Steel Corporation to the
Corporation, provided that all of the Class B Common Stock of the Corporation
(and no other stock of
19
the Corporation) is owned by RSR Steel Corporation, that the issuance of such
shares shall not result in the application of any tax law limitation on the use
of the Corporation's losses or other tax attributes, that any increase in the
ownership of Common Stock by persons who receive such shares pursuant to the
merger over the amount of stock held by RSR Steel Corporation at the time of the
merger is subject thereto and that any other increase in the ownership of Common
Stock by persons who receive such shares is subject thereto; and (iv) any
conversion of Class B Common Stock into shares of Class A Common Stock pursuant
to the provisions of Article 5.3.2 hereof to the extent that the shares of Class
A Common Stock received upon conversion are owned by the same Person who
effected the conversion.
(c) No employee or agent, including any independent transfer agent
or registrar, of the Corporation shall be permitted to record any attempted or
purported transfer made in violation of this Article 5.9 and no intended
transferee of shares of Common Stock of the Corporation attempted to be
transferred in violation of this Article 5.9 shall be recognized as a holder of
such shares for any purpose whatever, including, but not limited to, the right
to vote such shares of capital stock of the Corporation or to receive dividends
or other distributions in respect thereof, if any. Any such intended transferee
shall be deemed to have appointed the Corporation as attorney-in-fact, with full
power of substitution and full power and authority, in the name and on behalf of
the intended transferee, to sell, assign and transfer the shares of Common Stock
of the Corporation attempted to be transferred in violation of this Article 5.9,
and to do all lawful acts and execute all documents deemed necessary or
advisable to effect such sale, assignment and transfer, in an arm's length
transaction, to another Person; provided that the sale, assignment and transfer
to such other Person does not violate the provisions of this Article 5.9. The
Corporation shall apply the proceeds of any such sale first, to pay the expenses
of the sale; second, to pay the intended transferee on whose behalf the shares
were sold, an amount equal to (i) the sum of the intended transferee's cost of
such shares (inclusive of brokerage fees and expenses), plus interest on such
cost at the then minimum rate of interest which would prevent interest on a
non-interest bearing obligation from being imputed by the Internal Revenue
Service, less the amount of any dividends or other distributions inadvertently
paid to said intended transferee in respect of such shares, or (ii) the balance
of such proceeds, whichever is less; and, third, the balance of such proceeds,
if any, shall be paid to the Corporation. The Corporation shall take all
appropriate legal action to enforce the provisions of this Article 5.9 in every
case where there has been an attempted or purported transfer made in violation
hereof. In taking any action hereunder, the Corporation, and its directors,
officers and agents, will be fully protected in relying upon any
20
notice, paper or other document reasonably believed by the Corporation or any
such person to be genuine and sufficient, and, to the extent permitted by law,
in no event shall the Corporation, or any of its directors, officers or agents
be liable for any act performed or omitted to be performed hereunder in the
absence of gross negligence or willful misconduct. The Corporation and its
directors, officers and agents may consult with counsel in connection with its
duties hereunder and, to the extent permitted by law, each shall be fully
protected by any act taken, suffered or permitted in good faith in accordance
with the advice of such counsel.
(d) The by-laws of the Corporation shall make appropriate provisions
to effectuate the requirements of this Article 5.9.
(e) All certificates evidencing ownership of shares of Common Stock
of the Corporation shall bear a conspicuous legend as follows:
"THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS SET FORTH IN
THE CERTIFICATE OF INCORPORATION OF THE CORPORATION, A COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE CORPORATION'S PRINCIPAL PLACE OF BUSINESS
LOCATED AT RIVER ROAD (P.O. BOX 5000), LA PLACE, LOUISIANA 70068."
(f) The restrictions on transfers set forth in this Article 5.9
shall remain in effect until December 31, 2003.
(g) The restrictions on transfer set forth in this Article 5.9 do
not apply to the Class C Common Stock and do not and are not intended to affect
the Class C Common Stock in any way.
6. RESTRICTIONS ON TRANSFER OF CLASS B COMMON STOCK. (a) Except for
transfers (i) to or for the benefit of any direct or indirect beneficial holder
of the Class B Common Stock or the immediate family (such term having the
meaning of closer than second cousin) of any such stockholder so long as such
direct or indirect beneficial holder or its immediate family retains all the
attributes of such direct or indirect beneficial ownership of such Class B
Common Stock or (ii) approved by the holders of 75% of the then outstanding
Class A Common Stock, shares of Class B Common Stock are not transferable except
as provided in Article 6(b).
(b) Shares of Class B Common Stock are transferable only upon
conversion of such shares into Class A Common Stock and provided no acceleration
of any indebtedness of the Corporation shall occur solely as a result of such
conversion and transfer. Notwithstanding the foregoing, in any sale transaction
or series of
21
related transactions which result in more than 1,362,676 (as such number may be
adjusted from time to time under Article 5.5(a)) of the Class B Common Stock
being converted into Class A Common Stock where the highest consideration per
share of Class A Common Stock received in such transaction(s) exceeds the fair
market value of a share of Class A Common Stock, the entity which acquires the
shares of Class A Common Stock shall give a written undertaking to the
Corporation that if, within 24 months after such sale, such entity makes a
public tender offer or other proposal to acquire all or any portion of the
remaining Class A Common Stock, the consideration to be paid by such entity
shall not be less than the highest consideration per share paid in such Class A
Common Stock transaction. In computing the amount of consideration to be offered
to holders of Class A Common Stock pursuant to this Article 6(b), all amounts to
be paid to, or value to be received by, the transferor in connection with such
transfer shall be included.
7. MERGERS AND ACQUISITIONS; SALES AND PURCHASES OF PROPERTY;
ISSUANCE OF SHARES; AND AMENDMENTS TO CERTIFICATE OF INCORPORATION. (a) Subject
to the provisions of Articles 5.3.3(a)(ii) and 5.4.3(b), without the consent of
holders of Common Stock having 80% or more of the number of votes that may be
cast for all matters other than the election of directors, voting together as
one class, the Corporation shall not (A) merge with or into another corporation,
other than a direct or indirect Subsidiary of the Corporation, (B) acquire
assets of any other person the amount of which exceeds 20% of the Corporation's
Consolidated Net Worth prior to the acquisition, except in the case of capital
expenditures or inventory in the ordinary course of business, unless all of the
directors elected by holders of each of the Class A Common Stock and Class B
Common Stock (or only a majority of the entire Board of Directors if directors
are no longer elected by class), shall have approved of the matter, (C) dispose
of assets of the Corporation the amount of which exceeds 20% of the
Corporation's Consolidated Net Worth, other than in the ordinary course of
business, (D) purchase any equity interest (or any interest convertible into an
equity interest) in any corporation or partnership, the amount of which exceeds
20% of the Corporation's Consolidated Net Worth prior to the acquisition, unless
all of the directors elected by holders of each of the Class A Common Stock and
Class B Common Stock (or only a majority of the entire Board of Directors if
directors are no longer elected by class) shall have approved of the matter, or
(E) amend the Certificate of Incorporation. The Corporation shall not issue or
sell or permit the issuance or sale of, or grant any right to subscribe for or
to purchase any options for the purchase of any shares of stock or other equity
interest (or any interest convertible into an equity interest) in the
Corporation, unless all of the directors elected by holders of each of the Class
A Common Stock and Class B Common Stock (or only a majority of the entire Board
of Directors if directors are no longer elected by class) have approved.
22
(b) Subject to the provisions of Articles 5.3.3(a)(ii) and 5.4.3(b),
but notwithstanding any other provision of this Certificate of Incorporation, no
stockholder consent shall be required for (i) the Corporation to grant any
mortgages, pledges, assignments for security purposes, or other security
interests affecting all or any part of the Corporation's property, or (ii) the
transfer of title to the Corporation's property resulting from the enforcement
of such security rights.
8. SPECIAL MEETING OF STOCKHOLDERS. In addition to the special
meetings of stockholders which may be held pursuant to Article 5.7 hereof,
special meetings of stockholders of the Corporation may be called by holders of
Common Stock having 10% or more of the number of votes that may be cast for all
matters other than the election of directors.
9. NUMBER OF DIRECTORS. The Board of Directors shall consist of a
minimum of seven and a maximum of thirteen directors, with the number to be set
by a vote of the majority of the entire Board of Directors of the Corporation;
provided, however, that at any time when (i) the Series A Preferred Stockholder
has the right to elect at least one director and (ii) the Corporation receives
written notice from the Series A Preferred Stockholder stating that the Series A
Preferred Stockholder wishes to enforce its rights under Section 4.16 of the
Preferred Stock Purchase Agreement to elect one or more directors, the Board of
Directors, if it does not already at the time of the receipt of the notice
consist of thirteen directors, will immediately and automatically be increased
to thirteen directors, with the holders of the Class A Common Stock and the
Class B Common Stock thereafter being entitled to elect such number of directors
as is provided by Article 5.2.3(d).
10. ACQUISITION AGREEMENT, EMPLOYMENT AGREEMENT AND OTHER
AGREEMENTS. The Acquisition Agreement, the Employment Agreement, the Amoco Tax
Lease Agreements and the letters dated November 11, 1981 and December 7, 1981,
respectively, to Amoco Tax Leasing I Corporation from Voest-Alpine A.G.,
Voest-Alpine International Corporation, and certain other corporations, shall be
kept on file at the offices of the Corporation and made available to the
stockholders for their inspection during normal business hours.
11. ELECTION OF DIRECTORS. The election of the Board of
Directors need not be by written ballot.
12. REMOVAL OF CHIEF EXECUTIVE OFFICER. During the term
of the Employment Agreement, the Chief Executive Officer may be
removed only for "Cause" as defined in paragraph 9 of the
Employment Agreement, and upon the mechanism provided in the
Employment Agreement. After the term of the Employment Agreement,
the Chief Executive Officer may be removed (a) without cause by the
23
affirmative vote of a majority of the directors of the Corporation or (b) for
"Cause" as defined in paragraph 9 of the Employment Agreement and upon the
mechanism provided in the Employment Agreement.
13. INDEMNIFICATION.
(a) The Corporation shall indemnify to the fullest extent permitted
by Section 145 of the Delaware General Corporation Law, as amended from time to
time, each person that such Section grants the Corporation the power to
indemnify.
(b) No director shall be personally liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director for any act or omission occurring subsequent to the date when this
provision becomes effective, except that such director may be liable (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
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
14. BY-LAWS. The Board of Directors shall have the
power to make, alter or repeal the By-laws of the Corporation.
FOURTH: This Restated Certificate of Incorporation
shall be effective upon its filing with the Secretary of State of
Delaware pursuant to Section 103 of the Delaware General
Corporation Law.
Bayou Steel Corporation has caused this certificate to be signed by
Jerry M. Pitts, its President, and attested by Richard J. Gonzalez, its
Secretary, this day of April, 1996.
/s/ JERRY M. PITTS
Jerry M. Pitts, President and
Chief Operation Officer
Attest: /s/ RICHARD J. GONZALEZ
Richard J. Gonzalez, Secretary
24
RESTATED BY-LAWS EXHIBIT 3.2
OF
BAYOU STEEL CORPORATION
a Delaware Corporation
(as Amended through April 23, 1996)
ARTICLE I
MEETINGS OF STOCKHOLDERS
1.1 ANNUAL MEETING. The annual meeting of stockholders shall be held
no later than five months after the end of the Corporation's fiscal year, or as
soon thereafter as practicable, and shall be held at a place and time determined
by the board of directors (the "Board").
1.2 SPECIAL MEETING. Special meetings of the stockholders may be
called by resolution of the Board or by the chairman of the board or the chief
executive officer and shall be called by the chief executive officer or
secretary upon the written request (stating the purpose or purposes of the
meeting) of any two of the directors then in office or the holders of 10% of the
aggregate voting power. As used in these by-laws, the term "aggregate voting
power" means the total number of votes cast by stockholders for all matters
other than the election of directors of the Corporation and other than matters
as to which a class vote is applicable. Only business related to the purposes
set forth in the notice of the meeting may be transacted at a special meeting.
1.3 PLACE AND TIME OF MEETINGS. Meetings of the stockholders may be
held in or outside Delaware at the place and time specified by the Board or the
directors or shareholders requesting the meeting.
1.4 NOTICE OF MEETINGS; WAIVER OF NOTICE. Written notice of each
meeting of stockholders shall be given to each stockholder entitled to vote at
the meeting, except that (a) it shall not be necessary to give notice to any
stockholder who submits a signed waiver of notice before or after the meeting,
and (b) no notice of an adjourned meeting need be given except when required
under Section 1.5 of these by-laws or by law. Each notice of a meeting shall be
given, personally or by mail, not less than ten nor more than sixty days before
the meeting, or if such meeting shall be scheduled to occur after the redemption
of the Preferred Stock, not less than thirty nor more than sixty days before the
meeting, and shall state the time and place of the meeting, and unless it is the
annual meeting, shall state at whose direction or request the meeting is called
and the purposes for which it is called. If mailed, notice shall be considered
given when mailed to
1
a stockholder at his address on the Corporation's records. The attendance of any
stockholder at a meeting, without protesting at the beginning of the meeting
that the meeting is not lawfully called or convened, shall constitute a waiver
of notice by him.
1.5 QUORUM. At any meeting of stockholders, the presence in person
or by proxy of the holders of shares of stock having a majority of the aggregate
voting power shall constitute a quorum for the transaction of any business. In
the absence of a quorum, a majority in voting interest of those present or, if
no stockholders are present, any officer entitled to preside at or to act as
secretary of the meeting, may adjourn the meeting until a quorum is present. At
any adjourned meeting at which a quorum is present any action may be taken which
might have been taken at the meeting as originally called. No notice of an
adjourned meeting need be given if the time and place are announced at the
meeting at which the adjournment is taken except that, if adjournment is for
more than thirty days or if, after the adjournment, a new record date is fixed
for the meeting, notice of the adjourned meeting shall be given pursuant to
Section 1.4.
1.6 VOTING; PROXIES. Each holder of outstanding shares of Class A
Common Stock, Class B Common Stock, Class C Common Stock and Cumulative
Preferred Stock and any other authorized and outstanding class of stock shall be
entitled to the number of votes per share, if any, and shall vote in the manner
provided in the Certificate of Incorporation. Corporate action to be taken by
stockholder vote shall be authorized by a majority of the votes cast at a
meeting of stockholders, except as otherwise provided by law, by the Certificate
of Incorporation or by Section 1.8 of these by-laws. Directors shall be elected
in the manner provided in Section 2.1 of these by-laws. Voting need not be by
ballot unless requested by a stockholder at the meeting or ordered by the
chairman of the meeting. Each stockholder entitled to vote at any meeting of
stockholders or to express consent to or dissent from corporate action in
writing without a meeting may authorize another person to act for him by proxy.
Every proxy must be signed by the stockholder or his attorney-in-fact. No proxy
shall be valid after three years from its date unless it provides otherwise.
1.7 LIST OF STOCKHOLDERS. Not less than ten days prior to the date
of any meeting of stockholders, the secretary of the Corporation shall prepare a
complete list of stockholders entitled to vote at the meeting, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in his name. For a period of not less than ten days prior to
the meeting, the list shall be available during ordinary business hours for
inspection by any stockholder for any purpose germane to the meeting. During
this period, the list shall be kept at a place within the city where the meeting
is to be held. The list shall also be available for inspection by stockholders
at the time and place of the meeting.
2
1.8 ACTION BY CONSENT WITHOUT A MEETING. Any action required or
permitted to be taken at any meeting of stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voting. Prompt notice of the taking of any such
action shall be given to those stockholders who did not consent in writing.
ARTICLE II
BOARD OF DIRECTORS
2.1 NUMBER, QUALIFICATION, ELECTION AND TERM OF DIRECTORS. The
business of the Corporation shall be managed by the Board, which shall consist
of not less than the number of directors provided for in the Certificate of
Incorporation, as determined by resolution of the Board. Directors shall be
elected at each annual meeting of stockholders and at such other times as
provided in the Certificate of Incorporation, in the manner provided in the
Certificate of Incorporation and shall hold office until the next annual meeting
of stockholders, unless otherwise provided in the Certificate of Incorporation,
and until the election and qualification of their respective successors, subject
to the provisions of Section 2.9.
2.2 QUORUM AND MANNER OF ACTING. A majority of the directors then in
office shall constitute a quorum for the transaction of business at any meeting.
Action of the Board shall be authorized by the vote of a majority of the
directors present at the time of the vote if there is a quorum, unless otherwise
provided by law, the Certificate of Incorporation or these by-laws. In the
absence of a quorum, a majority of the directors present may adjourn any meeting
from time to time until a quorum is present.
2.3 PLACE OF MEETINGS. Meetings of the Board may be
held in or outside Delaware.
2.4 ANNUAL AND REGULAR MEETINGS. Annual meetings of the Board, for
the election of officers and consideration of other matters, shall be held
either (a) without notice immediately after the annual meeting of stockholders
and at the same place, or (b) as soon as practicable after the annual meeting of
stockholders, on notice as provided in Section 2.6 of these by-laws. Regular
meetings of the Board shall be held not less than four times per annum. Regular
meetings of the Board may be held without notice at such times and places as the
Board determines. If the day fixed for a regular meeting is a legal holiday, the
meeting shall be held on the next business day.
3
2.5 SPECIAL MEETINGS. Special meetings of the Board may
be called by the chairman of the board, chief executive officer or
by any two of the directors.
2.6. NOTICE OF MEETINGS; WAIVER OF NOTICE. Notice of the time and
place of each special meeting of the Board, and of each annual meeting not held
immediately after the annual meeting of stockholders and at the same place,
shall be given to each director by mailing it to him at his residence or usual
place of business at least three days before the meeting, or by delivering,
telephoning or telegraphing it to him at least two days before the meeting.
Notice of a special meeting shall also state the purpose(s) for which the
meeting is called. Notice need not be given to any director who submits a signed
waiver of notice before or after the meeting or who attends the meeting without
protesting at the beginning of the meeting the transaction of any business
because the meeting was not lawfully called or convened. Notice of any adjourned
meeting need not be given, other than by announcement at the meeting at which
the adjournment is taken.
2.7 BOARD OR COMMITTEE ACTION WITHOUT A MEETING. Any action required
or permitted to be taken by the Board or by any committee of the Board may be
taken without a meeting if all of the members of the Board or of the committee
consent in writing to the adoption of a resolution authorizing the action. The
resolution and the written consents by the members of the Board or the committee
shall be filed with the minutes of the proceedings of the Board or of the
committee.
2.8. PARTICIPATION IN BOARD OR COMMITTEE MEETINGS BY CONFERENCE
TELEPHONE. Any or all members of the Board or of any committee of the Board may
participate in a meeting of the Board or of the committee by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at the meeting.
2.9 RESIGNATION AND REMOVAL OF DIRECTORS. Any director may resign at
any time by delivering his resignation in writing to the chief executive officer
or secretary of the Corporation, to take effect at the time specified in the
resignation; the acceptance of a resignation, unless required by its terms,
shall not be necessary to make it effective. Any or all of the directors may be
removed at any time, either with or without cause, in the manner provided by
applicable law or by the Certificate of Incorporation.
2.10 VACANCIES. Any vacancy in the Board, including one created by
an increase in the number of directors, may be filled for the unexpired term in
the manner provided in the Certificate of Incorporation.
4
2.11 COMPENSATION. Subject to Section 3.2, directors shall receive
such compensation as the Board determines, together with reimbursement of their
reasonable expenses in connection with the performance of their duties. A
director may also be paid for serving the Corporation, its affiliates or
subsidiaries in other capacities.
ARTICLE III
COMMITTEES
3.1 EXECUTIVE COMMITTEE. The Board, by resolution adopted by a
majority of the entire Board, may designate an Executive Committee of one or
more directors which shall have all the powers and authority of the Board,
except as otherwise provided in the resolution or by applicable law. The members
of the Executive Committee shall serve at the pleasure of the Board. All action
of the Executive Committee shall be reported to the Board at its next meeting.
3.2 COMPENSATION COMMITTEE. The Board shall designate a Compensation
Committee of one or more directors who shall not be officers or employees of the
Corporation. The Compensation Committee shall establish compensation payable to
directors and executive officers of the Corporation as well as any loans or
advances by the Corporation to such persons.
3.3 NOMINATING COMMITTEES. The Board shall designate a Class A
Nominating Committee of all of the current directors who have been elected by
the holders of Class A Common Stock (or otherwise designated as Class A Common
Stock directors) and not officers or employees of the Corporation, and service
on such committee shall be voluntary and discretionary for each director. The
Board may designate a Class B Nominating Committee of one or more directors, who
shall be directors elected by the holders of the Class B Common Stock or
otherwise designated as Class B Common Stock directors. The Class A and Class B
Nominating Committees shall nominate persons for election as directors by the
holders of Class A Common Stock and Class B Common Stock, respectively, at the
annual meeting of stock holders.
3.4 OTHER COMMITTEES. The Board, by resolution adopted by a majority
of the entire Board, may designate other committees of directors of one or more
directors, including but not limited to an Audit committee, which shall serve at
the Board's pleasure and have such powers and duties as the Board determines.
3.5 RULES APPLICABLE TO COMMITTEES. The Board may
designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of
any member of a committee, the member(s) present at a meeting of
5
the committee and not disqualified, whether or not a quorum, may unanimously
appoint another director to act at the meeting in place of the absent or
disqualified member. All action of a committee shall be reported to the Board at
its next meeting. Each committee shall adopt rules of procedure and shall meet
as provided by those rules or by resolutions of the Board.
ARTICLE IV
OFFICERS
4.1 NUMBER; SECURITY. The executive officers of the Corporation
shall be the chairman of the board, one or more vice chairmen, the chief
executive officer, the president, one or more vice presidents (including an
executive vice president, if the Board so determines), a secretary and a
treasurer. Any two or more offices may be held by the same person. The Board may
require any officer, agent or employee to give security for the faithful
performance of his duties.
4.2 ELECTION; TERM OF OFFICE. The executive officers of the
Corporation shall be elected annually by the Board and each such officer shall
hold office until the next annual meeting of the Board and until the election of
his successor, subject to the provisions of Section 4.4.
4.3 SUBORDINATE OFFICERS. The Board may appoint subordinate officers
(including assistant secretaries and assistant treasurers), agents or employees,
each of whom shall hold office for such period and have such powers and duties
as the Board determines. The Board may delegate to any executive officer or to
any committee the power to appoint and define the powers and duties of any
subordinate officers, agents or employees.
4.4 RESIGNATION AND REMOVAL OF OFFICERS. Any officer may resign at
any time by delivering his resignation in writing to the president or secretary
of the Corporation, to take effect at the time specified in the resignation; the
acceptance of a resignation, unless required by its terms, shall not be
necessary to make it effective. Except as provided in the Certificate of
Incorporation, any officer appointed by the Board or appointed by an executive
officer or by a committee may be removed by the Board either with or without
cause, and in the case of an officer appointed by an executive officer or by a
committee, by the officer or committee who appointed him.
4.5 VACANCIES. A vacancy in any office may be filled for the
unexpired term in the manner prescribed in Sections 4.2 and 4.3 of these by-laws
for election or appointment to the office.
6
4.6 CHAIRMAN OF THE BOARD. The chairman of the board shall preside
at all meetings of the Board and of the stockholders and shall have such powers
and duties as the Board assigns to him.
4.7 CHIEF EXECUTIVE OFFICER. The chief executive officer of the
Corporation shall have general supervision over the business of the Corporation
and shall have such other powers and duties as the Board assigns to him.
4.8 PRESIDENT. Subject to the control of the chief executive
officer, the president of the Corporation shall have such powers as the chief
executive officer assigns to him.
4.9 VICE PRESIDENT. Each vice president shall have such
powers and duties as the Board or the chief executive officer
assigns to him.
4.10 TREASURER. The treasurer shall be the chief financial officer
of the Corporation and shall be in charge of the Corporation's books and
accounts. Subject to the control of the Board, he shall have such other powers
and duties as the Board or the chief executive officer assigns to him.
4.11 SECRETARY. The secretary shall be the secretary of, and keep
the minutes of, all meetings of the Board and of the stockholders, shall be
responsible for giving notice of all meetings of stockholders and of the Board,
and shall keep the seal and, when authorized by the Board, apply it to any
instrument requiring it. Subject to the control of the Board, he shall have such
powers and duties as the Board or the chief executive officer assigns to him. In
the absence of the secretary from any meeting, the minutes shall be kept by the
person appointed for that purpose by the presiding officer.
4.12 SALARIES. The Board may fix the officers' salaries, if any, or
it may authorize the chief executive officer to fix the salary of any other
officer.
ARTICLE V
SHARES
5.1 CERTIFICATES. Subject to requirements prescribed by law and the
Certificate of Incorporation, the Corporation's shares shall be represented by
certificates in the form approved by the Board. Each certificate shall be signed
by the chairman of the Board, the president or a vice president and by the
secretary or an assistant secretary, or the treasurer or an assistant treasurer,
and shall be sealed with the Corporation's seal or a facsimile of the seal.
Whenever a certificate is countersigned by a transfer
7
agent, one or both of the officers' or assistant officers' signature and the
seal may be in facsimile, engraved or printed. In case any officer or assistant
officer whose signature appears on any share certificate shall have ceased to be
such because of death, resignation or otherwise, before the certificate is
issued, it may be issued by the Corporation with the same effect as if he had
not ceased to be such at the date of its issue. So long as the restrictions set
forth in Article 5.9 of the Certificate of Incorporation shall not have lapsed,
all share certificates for shares of common stock shall bear a conspicuous
legend as follows:
"THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO
RESTRICTIONS PURSUANT TO ARTICLE 5.9 OF THE CERTIFICATE OF
INCORPORATION OF THE CORPORATION, A COPY OF WHICH IS AVAILABLE FOR
INSPECTION AT THE CORPORATIONS'S PRINCIPAL PLACE OF BUSINESS LOCATED
AT 138 HIGHWAY 3217, LAPLACE, LA 70068."
If the Corporation is authorized to issue shares of more than one class, it
shall be stated on the face or back of all certificates that the Corporation
will furnish to any shareholder, upon request and without charge, a full or
summary statement of the designations, preferences, limitations, and relative
rights of the shares of each class authorized to be issued and, if the
Corporation is authorized to issue any preferred or special class in a series,
the variations in the relative rights and preferences between the shares of each
such series so far as the same have been fixed and determined, and the authority
of the Board of Directors to fix and determine the relative rights and
preferences of subsequent series.
5.2 SHARE REGISTER. All certificates representing shares shall be
registered in the share register as they are issued, and those of the same class
or series shall be consecutively numbered. Subject to Article 5.9 of the
Certificate of Incorporation and Section 5.4 hereof, the Corporation shall be
entitled to treat the registered holder of any share(s) as the holder thereof in
fact and law and shall not be bound to recognize any equitable or other claim
to, or interest in, such share(s) on the part of any other person, whether or
not it shall have express or other notice thereof, save as otherwise expressly
provided by statute.
5.3 TRANSFERS. Subject to Article 5.9 of the Certificate of
Incorporation and Section 5.4 hereof, shares of the Corporation shall be
transferred only on its books upon the surrender to the Corporation or its
transfer agent of the share certificate(s) therefor duly endorsed by the person
named therein, or accompanied by proper evidence of succession, assignment or
authority to transfer such shares; provided, no transfers of shares shall be
made while the books of the Corporation are closed against
8
transfers as hereinafter provided in these by-laws. Subject to Section 5.4
hereof, upon transfer the surrendered certificate(s) shall be canceled, a new
certificate or certificates shall be issued to the person entitled thereto, and
the transaction shall be recorded upon the books of the Corporation.
5.4 RESTRICTIONS ON TRANSFER. In addition to the restrictions in
Article 5.9 of the Certificate of Incorporation, transfers of shares may be
restricted in any lawful manner by law, by the Certificate of Incorporation, or
by contract if a copy of the contract is filed with the Corporation, provided
that notice of the restrictions shall be typed or printed conspicuously on the
share certificate. The secretary shall enforce the restrictions of Article 5.9
of the Certificate of Incorporation. In so doing, the secretary shall determine
ownership of stock of the Corporation in accordance with all rules relating to
direct, indirect or constructive ownership of stock under Section 382 of the
Internal Revenue Code of 1986 (including, without limitation, the rules under
Section 382(1)(3) entitled "Operating Rules Relating to Ownership of Stock"), as
the same may be amended from time to time, and the secretary may seek, and rely
upon, the advice of counsel in order to attribute stock ownership. If the
secretary determines that an attempted transfer violates or would violate
Article 5.9 of the Certificate of Incorporation, any such transfer, unless
otherwise authorized by the Board of Directors in accordance with such Article
5.9, shall be null and void AB INITIO. Except as authorized by the secretary in
accordance with the procedures set forth above, no employee or agent of the
Corporation shall be permitted to record any attempted or purported transfer and
no intended transferee of shares of common stock of the Corporation in any
attempted or purported transfer shall be recognized as a shareholder of the
Corporation for any purpose whatever except as provided in Article 5.9.
5.5 LOST,DESTROYED OR MUTILATED CERTIFICATES. The Board of Directors
may direct a new share certificate to be issued in place of any share
certificate theretofore issued by the Corporation and claimed to have been lost,
destroyed or mutilated, upon the claimant's furnishing an affidavit of the facts
and, if required by the Board of Directors, a bond of indemnity in such amount
or in open penalty and in such form, with such surety thereon, as the Board may
approve for the protection of the Corporation and its officers and agents.
5.6 DETERMINATION OF STOCKHOLDERS OF RECORD. The Board may fix, in
advance, a date as the record date for the determination of stockholders
entitled to notice of or to vote at any meeting of the stockholders, or to
express consent to or dissent from any proposal without a meeting, or to receive
payment of any dividend or the allotment of any rights, or for the purpose of
any other action. The record date may not be more than sixty or less than ten
days before the date of the meeting or more than sixty days before any other
action. 9
ARTICLE VI
MISCELLANEOUS
6.1 SEAL. The Board shall adopt a corporate seal, which shall be in
the form of a circle and shall bear the Corporation's name and the year and
state in which it was incorporated.
6.2 FISCAL YEAR. The Board may determine the Corporation's fiscal
year. Until changed by the Board, the Corporation's fiscal year shall be
October 1 through September 30.
6.3 VOTING OF SHARES IN OTHER CORPORATIONS. Shares in other
corporations which are held by the Corporation may be represented and voted by
the chairman of the board, the president or a vice president of this
Corporation, by proxy or proxies appointed by one of them, or by any person
appointed by the Board.
6.4 AMENDMENTS. By-laws may be amended, repealed or adopted by the
Board. Additionally, any amendment or repeal of Sections 3.3, 4.7 or this
Section 6.4 shall be by unanimous vote of the Board.
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM BAYOU STEEL CORPORATION CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED
STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 23,649,898
<ALLOWANCES> 564,754
<INVENTORY> 78,208,180
<CURRENT-ASSETS> 102,832,964
<PP&E> 126,857,633
<DEPRECIATION> 36,632,553
<TOTAL-ASSETS> 197,550,928
<CURRENT-LIABILITIES> 28,523,220
<BONDS> 85,070,800
<COMMON> 128,846
12,451,632
0
<OTHER-SE> 71,376,430
<TOTAL-LIABILITY-AND-EQUITY> 197,550,928
<SALES> 52,145,001
<TOTAL-REVENUES> 52,145,001
<CGS> 48,497,843
<TOTAL-COSTS> 48,497,843
<OTHER-EXPENSES> 1,800,616
<LOSS-PROVISION> (44,574)
<INTEREST-EXPENSE> 2,147,371
<INCOME-PRETAX> (629,300)
<INCOME-TAX> 0
<INCOME-CONTINUING> (629,300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (629,300)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
